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Irish academics criticise government over banks

A group of leading academics criticised the Irish government's plans to deal with a banking crisis yesterday, calling for temporary nationalisation of the system, not the creation of a "bad bank".
In an emergency budget last week, Finance Minister Brian Lenihan announced a National Asset Management Agency (NAMA) to take over the property and development loans on the books of the banks.
The "toxic" assets with a book value of up to 90 billion euros [118 billion dollars] would be transferred to the semi-state NAMA at an "appropriate discount".
But writing in the Irish Times, 20 economists said they "disagree strongly" with Lenihan that the "bad bank" option would produce a superior outcome to nationalisation.
"Our banks have made an enormous quantity of bad loans, mainly to property developers."
They said the government is "badly underestimating the scale of losses at our banks, and as such may end up substantially overpaying for bad assets."
The economists said: "We believe that the correct action to take now is nationalisation of the banking system, or at least that part of it that is of systemic importance."
The argued: "We do not make this recommendation from any ideological position. In normal circumstances, none of us would recommend a nationalised banking system.
"However, these are far from normal times".
The economists say that once "cleaned up, recapitalised, reorganised with new managerial structures, and potentially rebranded," the banks should return to private ownership.
The government has already nationalised Anglo Irish Bank, one of six banks and building societies covered by a two-year unlimited guarantee scheme.
Ireland is currently investing seven billion euros to recapitalise the country's two biggest lenders, Allied Irish and Bank of Ireland.