Brian is listening and took David's Advice

In the small hours of last Sunday morning David McWilliams, one of the brightest young analysts and commentators in Ireland, posted a new article on his website.

This article made a bold, but very sensible statement: To get out of the current financial crisis the Irish State should go solo - without waiting for models from other countries - and give a full 100% guarantee for all deposits and loans of Irish banks.

"The only option is to guarantee 100 per cent of all depositors/creditors in the Irish banking system. This guarantee does not extend to shareholders who will have to live with the losses they have suffered. However, it applies to everyone else," McWilliams wrote as the essence of his long and learned article. The complete text can be found on David McWilliams' website under 'Articles' at http://www.davidmcwilliams.ie/

I was probably one of the first people who read this article, right after it was posted online. And I happened also to be the first to leave a comment, at 4:04 am on that Sunday morning.

Then I took the liberty to send a copy of the article to Taoiseach Brian Cowen, Minister for Finance Brian Lenihan and a couple of other ministers who - in my opinion - are able to think for themselves.
Knowing that there was a cabinet meeting scheduled for later that Sunday, I hoped that they might read David’s article beforehand and - maybe - be wise enough to take his advice.

Of course I have no way of knowing if my little initiative helped, if they did read the article before the cabinet meeting, and if it influenced them.

However, the government announcement Minister for Finance Brian Lenihan (left) has made today is exactly what McWilliams advised to do and asked for.

So one could well come to the conclusion that one of the Brians (Lenihan & Cowen) - or someone else in the government - is listening to sound advice. Which means there is some hope after all for Ireland and our economy

Following the biggest drop in share prices the Irish market has ever seen - the ISEQ fell by 13% in one day yesterday, and the especially troubled bank shares dropped between 30% and 45% - this morning's announcement has brought some confidence and stability back to the Dublin stock exchange.

It is early days yet, and the massive financial crisis of the western world is far from over. It will probably even get worse, in particular for the USA, which are now caught in the fast downward spiral all collapsing empires in history have encountered after they overreached themselves and overspent on military adventures and senseless luxuries.

But Ireland might this time get away with only one black eye - metaphorically speaking - if nothing else in our country goes badly wrong.

Following David McWilliams' advice, the government has shown a strong position of leadership and the guarantee of our money by the State is good news for all of us, regardless of wealth and position.

In contrast to programmes initiated elsewhere, this is neither a nationalisation (like the British government's take-over of Northern Rock) nor a bail-out (as attempted by the US administration for Wall Street and rejected by the US Congress yesterday).

This is indeed - as David suggested - an Irish solution for an Irish problem.

The government guarantees the money we have in the banks 100%, but only for two years and not for free. The banks will be charged a fee for this high grade of security (the amount of which is not known yet), so the government creates some extra income for itself. That's rather clever.

And the guarantee is not given willy-nilly to just everyone who happens to have a branch office on the Emerald Isle. Only the six Irish-owned banks will receive the full guarantee, and that is not more than fair. They are: Allied Irish Bank, Bank of Ireland, Anglo-Irish Bank, Irish Life & Permanent, which owns permanent tsb, Irish Nationwide Building Society and the EBS (Educational Building Society).

For all details of the new guarantee rules, and how it affects all banks operating in Ireland, have a look here: http://www.itsyourmoney.ie/index.jsp?1nID=93&2nID=100&nID=153&aID=620

Specific subsidiaries that may be approved by the government following consultations with the Central Bank and the Financial Regulator are also covered under the guarantee.
It also includes all money borrowed by Irish banks from other financial institutions and the statement from the Department of Finance says that all deposits, bonds and debts will now be covered by the State.

Pessimists are already crying 'blue murder' from the roof tops and predict the eventual end of the Republic of Ireland in total state bankruptcy and under a cloud of shame and chaos. Well, in a theoretical way this is quite possible, as much as it is possible that an asteroid falls onto Ireland and makes us all perish in a giant puff of smoke. But realistically you have a better chance to win the Lotto jackpot or even the top prize in the Euro-Millions lottery.

Our bankers - and a lot more so those in the USA - might have been reckless and very greedy in recent years, but they are neither complete fools nor suicidal. So they will recognise what a great and rare gift Brian Lenihan - on the advice of David McWilliams and with backing of Brian Cowen - has bestowed on them. By now they have also realised that they made terrible mistakes, and that they will not have a third chance should they blow this one. So I am with David McWilliams on this, and confident that it will work.

With a little bit luck (of the Irish) thrown in, it might even attract extra money from abroad and perhaps lead to another period of growth and prosperity. By this evening the government will have introduced the necessary legislation in Dáil Éireann, and I can say that I will sleep a lot more sound and confident tonight.

A well-known proverb advises that one should stop digging when finding oneself in a hole. This is - translated into financial terms - exactly what David McWilliams advised on Sunday and Brian Lenihan did today. In fact, it is even a bit more than that. The government is not only telling the banks to stop digging, it is declaring the hole to be a building site.

If we all keep a cool head and use common sense, look out for each other and stick together at all times - hard and easy - the future will be bright again for Ireland in years to come. I am not the kind of person who bestows praise easily, and I have very few heroes. But I want to say today that there is always hope and a future as long as we have people like David McWilliams on the Emerald Isle.

The Emerald Islander