In the long term might it be a good thing for the State to own the banks?

R

RMCF

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When I hear the doom and gloom stories about nationalizing the banks, I always wonder would it not be a good thing in the long run?

After all, banks generally make huge profits, don't they? At least they did all the years of my life until the last 2 years. Surely in the next decade, after a few rough years, they will be a great source of income for the taxpayer.

Am I right?
 
If there was a clean slate that would be true.

We'll never know the true worth of AIB or BOI as the share price is reflecting the probability of state bail out.

If we look at Irish Life, the insurance arm is worth about €2bn. Adding PTSB in and the entire company is worth €1.2bn less ! This is probably the only fair valuation you'll get on an Irish bank as PTSB in not directly expected to benefit from any state involvement.

Now, consider the fact that PTSB never got into the commercial development scene and you start to get an understanding of the fact that AIB, BOI, Anglo, EBS and INBS have a negative value of tens of billions as a best estimate
 
RMCF said:
After all, banks generally make huge profits, don't they? At least they did all the years of my life until the last 2 years. Surely in the next decade, after a few rough years, they will be a great source of income for the taxpayer.
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Based on the Irish state's history of running any organisation you can guarantee that a state bank would fail. The easiest way to recoup money is to tax bank profits sky high, and executives salaries to boot and to bring in laws that prevent companies from awarding themselves salary increases etc by taxing them to the hilt. Company law should be changed so salary and benefits are based on good performance and where shareholders or an actual independant body decide on levels of renumeration.

This of course is never going to happen.
 
What happens long term if the banks do return to profitability and tidy up their loan books? I presume the Govt at some stage down the line will look to offload their shares, therefore there is a chance at some stage in the future that the state might get some of it's moeny back.
 
I don't think that any of the mainstream parties support the long term nationalisation of the banks. Though many parties and people believe in the short-term nationalisation.

We live in a socialist/capitalist state - not a communist state.
The majority believe in free enterprise and competition.

State run banks would mean political interference in lending decisions and generally less innovation and investment.

We need a private, profitable, well regulated banking sector. The fact that we have had recent bank failures should not encourage us to make matters worse by long-term nationalisation.
 
Whatever about nationalising the existing banks, there should, of course, be a state-owned bank, to provide basic current and deposit account services, loans, foreign currency and mortgages. It should be run on a break-even basis, for the benefit of the customers, the people of Ireland. A well resourced Financial regulator, answerable to the Oireachtas, would take care of political influence, or undue influence from employees and their friends and families.

BoI and AIB could transform themselves into merchant banks if they want to and if they want to continue to provide retail banking, good luck to them.

The very notion that a private sector bank such as BoI or AIB can borrow money at one rate and lend it on at a higher rate and make enormous profits for the benefits of the shareholders is a total nonsense. (And don't get me started on Anglo Irish Fianna Fail Bank!)
 
Brendan said:
The majority believe in free enterprise and competition.
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They do where it works but recent experience suggests otherwise. I'd agree that effective regulation is the way to go but the notion that the market sorts everything has been shown to be bogus - a message that's hopefully remembered.
 
Not a good thing. We all know what our politicians are like. In no time, the senior positions in the banks will be filled with unqualified party hacks and will be giving out loans as political favours under terms and conditions which no doubt will cost the State a fortune.

Politicians running banks = bankruptcy for the country.
 
Bronte said:
Based on the Irish state's history of running any organisation you can guarantee that a state bank would fail. The easiest way to recoup money is to tax bank profits sky high, and executives salaries to boot and to bring in laws that prevent companies from awarding themselves salary increases etc by taxing them to the hilt. Company law should be changed so salary and benefits are based on good performance and where shareholders or an actual independant body decide on levels of renumeration.

This of course is never going to happen.
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Sounds good in theory but in reality you would find it hard to attract staff with contracts like those. Alot of the contracts with guaranteed bonuses where written up to attract staff during the boom others are just industry standard. Which you may change now but when competition starts up again it would be changed back.
 
csirl said:
Not a good thing. We all know what our politicians are like. In no time, the senior positions in the banks will be filled with unqualified party hacks and will be giving out loans as political favours under terms and conditions which no doubt will cost the State a fortune.

Politicians running banks = bankruptcy for the country.
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I think that's where we are at now?
 
csirl said:
Not a good thing. We all know what our politicians are like. In no time, the senior positions in the banks will be filled with unqualified party hacks and will be giving out loans as political favours under terms and conditions which no doubt will cost the State a fortune.

Politicians running banks = bankruptcy for the country.
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And that would be worse..........how?
 
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