‘Punish the banks’ was popular politics but lousy economics

THE deplorable economic situation illustrates an important principle.

In any operation you can have only one aim, it must be achievable and it must be maintained. If you try to have more than one, your aims conflict and none of them will be achieved.

If, when the crisis first broke, the aim had been to minimise the cost to the taxpayer, then Anglo Irish Bank should have been allowed to fail and the only guarantees given to it should have been to deposit holders up to a maximum of €100,000.