State 'squandering' money - Stiglitz

 

Nobel Prize-winning economist Joseph Stiglitz said the Government is "squandering" public money with its plan to establish the National Assets Management Agency (Nama).

Minister for Finance Minister Brian Lenihan said last month the Government will spend €54 billion buying up loans with a face value of €77 billion. The current market value of the loans is some €47 billion.

The €7 billion difference takes into account the properties' "long-term economic value", Mr Lenihan said.

"The Irish Government is squandering large amounts of money to bail out banks," Mr Stiglitz said at conference in Dublin today. "There's a sort of a view that there's no alternative."

That view is "nonsense", Mr Stiglitz said. "The rule of capitalism says that when firms can't pay what they owe, they go bankrupt."

"It's a massive transfer of money from the public to bankers," he said today.

Mr Stiglitz, a professor at Columbia University in New York, told RTÉ's Prime Timelast night that overpaying for the loans was "criminal".

Fine Gael finance spokesman Richard Bruton welcomed the intervention of Prof Stiglitz.

"Together with George Soros, Professor Stiglitz is one of the prominent advocates of Fine Gael's 'good bank' solution to fixing the banks. He joins financier Dermot Desmond, commentator David McWilliams, and Michael O'Sullivan of Credit Suisse Private Bank, among others," Mr Bruton said.

"The approach outlined by Professor Stiglitz leaves the risk and responsibility for working out toxic developer loans with the bankers who made them, and the investors who funded them, while also ensuring that a cleansed and healthy banking system is ready to restart lending.

"There is still an opportunity to ditch the massive Nama gamble and adopt Fine Gael's safer and more effective solution to fixing the banks by setting up a National Recovery Bank," Mr Bruton added.