Stiglitz: It’s criminal for NAMA to overpay for loans

NOBEL Prize-winning economist Joseph Stiglitz said it would be criminal for NAMA to pay above the odds for impaired loans.

The “principle of overpaying banks for loans is criminal”, he said last night when asked about the NAMA plan.

The winner of the 2001 Nobel Prize in economics warned that the global economy could suffer a “double dip”, an exaggerated recovery which would then give way to another slide.

“I’m very worried about what is likely to happen in 2011 rather than in 2010,” he said in a Prime Time interview on RTÉ.

The former World Bank chief economist and adviser to former US President Bill Clinton said because of the uncertainties, people in the US are not hiring, unemployment is very high and foreclosures are likely to remain high.

A sharp critic of bank bail out policies, Mr Stiglitz said these tend to aggravate crises.

“There are other ways of doing it – which is playing by the rules of capitalism.

“Which means when you can’t pay your debts, the share holders lose everything, the bond holders become the new shareholders and if that does not fill in the hole in the losses of the banks, then because the Government is going to provide deposit insurance, it becomes the owner.

“Then it [the Government] quickly sells it, or as quickly as it can, because when you have trauma like this you may not be able to do it quickly, but the joke is we call that ‘pre-privatisation’,” he said.

In the US he expects unemployment to keep rising and that should be the main focus for policy makers.

A study by the ESRI has predicted that 35,000 people will be unable to pay their mortgages by next year.

The Labour Party has called for the establishment of a “home protection commission” which will identify in the short term a range of options for families faced with the threat of home repossession.

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