Debate on the banking crisis

Madam, - I had the privilege of delivering the Feasta annual lecture in Dublin last Wednesday on the subject of the current "…

Madam, - I had the privilege of delivering the Feasta annual lecture in Dublin last Wednesday on the subject of the current "credit crash", immediately after an introduction by Richard Douthwaite which outlined the unique virulence of the problems faced by the Irish financial system.

It is becoming increasingly clear that central banks globally are impotent in the face of what is a solvency problem, rather than a liquidity problem.

The conventional solution is for national treasuries to make good the losses of banks by recapitalising them. That could have been sufficient if it were only banks that were in trouble, but the fact is that there is a largely unseen continuing haemorrhage of losses in the vast "shadow banking system" of money market funds and hedge funds which underpinned the greater part of the vast credit bubble created by banks in recent years.

I believe the cure for the continuing property finance haemorrhage does not lie in further transfusions of taxpayers' money by treasuries but rather in the creation of new classes of "quasi-equity" to replace secured debt. By simply "unitising" property rentals within frameworks of partnership and trust law Ireland may create a new generation of property investment vehicles ideal as a safe haven for pension investors still reeling from losses in both equity and debt markets.

READ MORE

In other words - a "debt/equity swap" on a national scale. - Yours, etc,

CHRIS COOK,

Grange East,

Linlithgow,

Scotland.