Recapitalisation - This is for the country, not the banks

THE country’s two main banks, if all goes to plan, will be recapitalised in the coming days.

Yesterday America moved to marshal an all but unimaginable $2 trillion to lubricate credit markets, protect jobs and revive their economy.

Our Government is expected to invest a relatively modest €7 billion in the Bank of Ireland and AIB with similar objectives in mind.

This will be the fifth major state intervention in our banks since the economic tsunami began to gather pace. With each intervention the stakes are raised.

Though this is an ever-changing situation it is difficult to stress how important it is that recapitalisation has an impact on the whole economy, not just on the banks’ tattered and plundered books.

The stakes are indeed high. Labour’s Joan Burton has warned of a “lost decade” if the bad debts situation at the banks is not confronted honestly. Fine Gael’s Richard Bruton warned that recapitalisation may leave taxpayers “dangerously exposed to massive bad debts”.

It is unlikely that we will ever be made fully aware of the process between government and the banks that brought us to this sorry point.

We have been asked to accept that the right decisions are being reached and that our money will be used to best advantage. This is asking a good deal more than is acceptable or prudent, especially as we have been sold far to many pigs in pokes already.

Despite the international situation a great proportion of our difficulties are homegrown. They are rooted in the greed and amoral behaviour of too many Irish bankers facilitated by the failure of our politicians to ensure that our bantamweight regulatory system was remotely fit for purpose or even awake.

This imbalance of power is especially worrying as, apparently, as late as Monday Finance Minister Brian Lenihan was trying to reach an agreement with the banks on cutting executive pay and bonuses. In the scheme of things the figures are irrelevant but the significance of the intervention cannot be overestimated. It shows who is in charge and that actions have consequences.

That these discussions were not finalised a long time ago is in contrast to the situation in Britain where bank chiefs yesterday apologised for their role in the crisis. Sacked bosses at bailed-out banks Royal Bank of Scotland (RBS) and HBOS said they were “profoundly sorry” and admitted they underestimated the extent of the financial crisis while being grilled by a Commons Treasury Select Committee.

How the recapitalisation package is finalised is hugely important but there is one overriding principle that must be established and imposed ruthlessly. Recapitalisation is for the country, not the banks. Any action or individual who hinders that objective must be removed immediately and face the severest censure.