Bini Smaghi at it again

13 April, 2011

In today’s FT our “friend” from the ECB, Lorenzo Bini Smaghi,  is saying that Irish taxpayers shouldn’t complain if they have to bear heavy burdens which arose from failures in local financial regulation.   This is the same tune we have heard him singing before: ‘Ireland’s meltdown is the outcome of the policies of its elected politicians’

Just because it’s true doesn’t mean he has to keep rubbing it in….

There has developed a popular theme (meme?) in Ireland of late: namely that Germany, France and other countries must share the pain with us because it was their banks that lent boatloads of money to our banks to throw at property developers.

It certainly suits the Irish case (and character) to maintain that others must share responsibility, and only the very hard-hearted (which no doubt includes Lorenzo) would see no merit whatsoever in that argument.

But it’s a bit like the argument as to whether a bar owner bears any responsibility if he keeps selling drink to a clearly inebriated customer who then smashes himself up in a drink-driving car accident.  Is the drinker fully to blame, or does the bar owner have any legal (or moral) liability? 

In most States of the USA, under what are known as dram shop laws, a bar that lets an obviously drunk customer drive away can be held financially responsible for damage caused by that customer.   The principle has yet to be established, or legislated for, in Ireland.

Nevertheless, perhaps the Irish taxpayer should mount a lawsuit against the ECB to establish that they share responsibility for the damage caused by the Irish Government’s and Irish banks’ fiscal drink-driving.  If it would shut Lorenzo up, it might be worth a try.

One Response to “Bini Smaghi at it again”

  1. And, what about holding the Basel Committee accountable?

    Lorenzo Bini Smaghi argues that since countries like Ireland took decisions aimed at ensuring a more benign environment for their financial sectors, and thereby had representation, “Ireland’s taxpayers must take their share of the pain” April 13.

    What on earths is he talking about? This crisis resulted 99 percent because the Basel Committee diluted the basic capital requirements for banks by arbitrarily establishing some minimalistic risk-weights based on the information provided by the credit rating agencies, even though this information had already been cleared for in the market. What representation did Ireland have in such foolish decisions of a global rule setting body?

    Mr Bini talks also about “accountability” and I just have to ask him where there is any sign of the Basel Committee being held accountable. From what we see, after failing so utterly with Basel II, they are now happily proceeding to dig us even deeper into the ground with Basel III as if nothing happened with their principal regulatory paradigm.

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