Should NAMA mean the end of the State Guarantee?

Hadn’t really thought about how the State Guarantee might be affected by the set up of NAMA before reading this article by David McWilliams. … te-bailout

Sorta makes a lot of sense to me. here’s the central point of his argument:

“Having both the NAMA and the guarantee gives absolutely no incentive for the banks to get their house in order. To rectify this dilemma at the heart of monetary policy and to make sure we don’t end up with a zombie banking system, now that the NAMA has been set up, the State has got to rescind the guarantee. It should limit the guarantee to depositors. The debt holders will be okay so long as the banks don’t go bust, which they shouldn’t with the NAMA in place. The State has no business using our money to bail out or protect in any way the equity or subordinated debt holders.”

It’s pretty obvious really - if NAMA is there to take all the rubbish out, then why should there be any need for the state (ie: the taxpayer) to still be guaranteeing the banks to the tune of 450 billion. I mean come on, 90 billion’s bad enough…!

I rather suspect it’s impossible to now rescind the guarantee, the best we can hope for is it to expire on the stated date.

As for zombie banks, so long as half country is still of the “we have to get the banks lending again” and “we need to get property prices back up” NAMA practically guarantees that’s what we’ll get.

Discussed here