Professor William Black:

It was, in soccer parlance, the most destructive own goal in history. The Government, as everyone knows, guaranteed. This is the consequence in large part of truly terrible anti-regulation. If the regulators tell the Government, there is no problem here, there are no losses and it is a temporary liquidity problem but if it does not act within the next 12 ours, the entire system will melt down, what is it likely to do? If those are the facts as presented to you, it becomes very likely that you will do a guarantee. Giving an unlimited guarantee with no reliable facts turned a banking crisis into a fiscal crisis - not just any fiscal crisis, but clearly one that would crush Ireland. On top of that, Ireland guaranteed not just unsecured claims, it guaranteed subordinated debt.

Subordinated debt is subordinated so that it will constitute capital, so that it will be at loss. The entire theory of why, under Basel II, it was tier-2 capital is because it would be lost. Those concerned made a deal, a contract deal. The deal was that if this bank cannot pay because it is insolvent, we get wiped out entirely, so in recompense we get a much higher interest rate. They got their interest rate. They are supposed to die and are supposed to be concerned with risk capital, and they got bailed out. I never understood this. Even with all the bad information they got from the regulators, and obviously from the banks because the banks had to file statements - all of those statements for the covered banks were hopelessly false - and even if you relied on that falsity and on the regulators, who were disasters, you would never, ever bail out the subordinated debt holders. They did not bail out every subordinated debt holder but bailed out the great bulk of them. To my knowledge, nobody else does that. That is why I said "the worst in history".