Oireachtas Joint and Select Committees
Wednesday, 28 January 2015
Committee of Inquiry into the Banking Crisis
Context Phase
Professor Edward Kane:
Yes, I do so because banks and regulators are not forced to recognise the value of the support, quarter by quarter, that taxpayers provide. This is only recognised when we have this disastrous situation when it is suddenly recognised all at once. The problem then seems too big to do anything about other than, as the Deputy stated, provide blanket guarantees. However, anything that is blanket or without conditions makes no sense. One must impose conditions whatever one does. For example, one can require that a bank cannot grow any more or make new loans or certain types of new loans for a while. The idea of stepping in and guaranteeing everything just worsens the incentives.
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