Why Basle III wouldnt have helped Ireland

nbyslog.blogspot.com/2010/10/ana … -have.html

Trichet is playing a ruthless game, and Ireland may well be its first victim.

The soothing balm was still pouring forth from Dublin yesterday. ‘Ireland will recover quickly’ wrote Danny McCoy in the FT at the weekend; an interesting surname with which to be making such hopeful forecasts, and Danny- boy is indeed the DG of Ireland’s CBI equivalent. Had Danni Minogue written the piece, its delusion and amateurish analysis would be understandable: as it was, desperation prevailed and no doubt the unreal McCoy was pressured into writing something supportive.

My own view is that most commentators have missed the real game going on behind the scenes of the Irish crisis. The crisis is real enough, but the unwillingness of either Brussels or Bankfurt to tackle it is the giveaway to what the Slog suspects is really going on here.

It’s worth noting for starters what the fairly obvious agenda is behind Basle III - viz, the survival of sovereign Executives at worst, and certainty that their cost of borrowing stays low. (It’s also another reason for ZIRP, as we’ve noted before: all Governments overspend - even German governments: it goes with the territory. Ergo, “let’s keep the cost of profligacy down, guys”.)

The banks, by contrast, don’t like BIII because it’s based on ‘once bitten twice shy’ from those who bailed out the mad folks. But even now, after it has finally gotten through relatively unscathed by banker whingeing, it is still woefully weak in key areas. It wouldn’t have helped Lehman (where JP Morgan hanging onto weekend money liquidity was the key issue) and it wouldn’t have stopped the Irish disaster either: only the most pedantic, infant playground system involving a teacher standing next to every kid could stop idiots lending six times the gdp, and other eejits taking it. It’s the species, stupid.

Also - it needs saying, as many are getting forgetful about this - Basle III would’ve been about as welcome as a rusty blade at a circumcision in the ‘free money, as much as you want’ culture created and nurtured by both Brussels and its central bank for eurozone members…