Borrowing A Great Idea

While the U.S. Presidential candidates are trumpeting an increase in deposit insurance for American banks, the Irish have picked up on that very idea. If it's good enough to warrant an expansion of coverage, why, it's got to be good to have coverage in the first place.

Brian Lenihan, Minister of Finance, assured everyone in the Dail that he wasn't looking to create soft landings for incompetent bankers. He's only trying to instill some confidence in Irish banking and protect Irish depositors.

Under new legislation, if he believes that a bank merger would prevent a collapse, he can allow it, and the competition law will take a back seat. If he finds that a bank is making risky loans, he can raise their insurance premiums, not unlike your man who's had numerous traffic accidents having to pay more for his motor vehicle coverage.

This notion of a government guaranteeing deposits is all the rage in Europe now, to the point that non-Irish banks operating in Ireland are asking the government to guarantee their deposits as well. Sure everyone will want to do their banking at an insured institution, so who'd be entrusting their hard-earned coin to the likes of the Bank of Scotland?

Over in England, the saving public is being reminded that AIB and Anglo Irish Bank operate within their borders and if you want your deposit insured, you'd do well to open an account in an Irish firm. How's that for irony? Once the poor man of Europe, now Ireland's about to become the banking capital of the EU if other countries don't follow Ireland's lead.

Eamon Gilmore, leader of the Labour Party, is arguing in the Dail today, hoping to score a few political points by ensuring that bank executives don't benefit financially, in a Golden Parachute sort of way. Pat Rabbitte, who used to run Labour, is also not keen on the new legislation. As he points out, the U.S. plan to buy up 700 billion dollars worth of toxic loans represents only 5% of that nation's GNP. Mr. Lenihan's plan to insure Irish deposits is equivalent to 200% of Ireland's GNP. And, as in the States, there's complaints about a mere minister being given broad powers.

But how can anyone argue against a plan that's alarmed European bankers? It's all the rage in the EU, this deposit insurance craze. Ireland, long a province, is a trend-setting nation once again.