dewdrop, I raised this issue soon after the scheme was announced.
What is absolutely guaranteed to happen is that in the run up to the expiration of the guarantee we will see a full scale institutional "run" on one or more of the banks. Why would you leave any money with a bank which is about to lose it's guarantee and you suspect is dodgy in any way? This will immediately force the renewal of the scheme or a bank collapse. The government is likely to chicken out again and go for the former storing up the big explosion for after the subsequent election exacerbating the ultimate cost to the tax payer. This plan wasn't thought through at all.
Even the initial cheerleaders in the media for the scheme seem to have turned against it. Remember when D McWilliams and the Dept of Finance were unofficially bickering about who should get the credit for this masterpiece? Well now even McWilliams is saying it's misguided. Reading the Sunday papers, the nationalistic hubris and enthusiasm which dominated the media in the week after the plan was announced has been replaced by a more intelligent - and as a result more negative - appraisal of the plan.
The banks' share prices are less than half of what the were subsequent to the announcement of plan. I don't like saying "I told you so" but I stated clearly in my earlier posts that the plan would do nothing for share prices and that they would continue to slide as the fundamental problem was a balance sheet issue.
I read today that Anglo is planning to
raise 3 billion in a bond issue by wrapping their dodgy loans in our/the government's guarantee. In the mean time, Moody's are downgrading some Anglo-Irish debt despite the guarantee.
Neary has taken a lot of stick and rightly so in my opinion. He must think we are stupid to believe that the banks have 36 billion of equity when the markets are saying it's 6 billion.