Bacon: Toxic bank set to become ‘Celtic Chernobyl’

THE architect of NAMA has warned that scandal-ridden Anglo Irish Bank is set to become Ireland’s “Celtic Chernobyl” because of vast amounts of toxic property loans that cannot be transferred to the agency.

Economist Dr Peter Bacon has said that large amounts of untouchable property loans which will remain in Anglo will dump the taxpayer with an even bigger bill to bail out the bank.

Dr Bacon, who advised the Government on setting up the agency, said: “There is a large property investment portfolio that is not eligible as I understand it, to go into NAMA and that resides to a significant degree, with Anglo. So the Anglo story is going to continue. I don’t think it’s at an end.”

Speaking on Newstalk’s the Breakfast Show, he agreed there was “a deep suspicion that the toxicity of the Anglo story” was not over yet.

The Government agreed this week to pump another €8.3bn into Anglo on top of the €4bn already used to prop up the bank’s bad loan books. However, Finance Minister Brian Lenihan also admitted the state-owned bank could need another €10bn in taxpayer funds to stay afloat.

But a large property investment portfolio in Anglo would not be transferred into NAMA, said Dr Bacon, and this scenario would leave the country with a “a bigger bill,” he warned.

“All I know is that it is becoming a Celtic Chernobyl,” added the economist.

Dr Bacon said if more information was released into the public domain about Anglo’s future, it could clarify whether it was better to close down Anglo rather than keep it going with taxpayer’s money.

“Nobody has the information to make the judgment which you rightly point out is cost-effective. And that is that question now – what is the most cost effective solution? Can you wind it down or must you keep it going in the interests of the tax-payer. I think the brute answer to that question is ‘we don’t know’. There are judgments there presumably based on the least worst option and that is to continue.

“The quantitative analysis underpinning that, I don’t think has gone into the public domain. Until it does, and gets scrutinised and people can put their finger into the wound so to speak, you’re not going to get any kind of consensus around what should happen to it.”

Dr Bacon said overall bankers “had been in denial” and that they had “not been forthcoming with all the facts”.