Thomas Molloy: Today's 'final figure' for cost of the Anglo mess is anything but definitive
Published 30/09/2010 | 05:00
"ALL the king's horses and all the king's men couldn't put Humpty together again."
Central Bank governor Patrick Honohan will become the latest of the king's men to try to put Anglo Irish back together again today when he announces a range of possible costs to bailout the bank.
But not even a man with the governor's knowledge and credibility will be able to tell us the cost of fixing the broken bank because he does not yet know how the bank will be rescued or what will happen to its assets.
The governor's decision to present the public with a range of costs from a baseline scenario upwards is an admission that nailing the final cost of Anglo's bailout just isn't possible. The question is whether he should have tried at all.
Everybody connected with Anglo Irish has been guilty of the most extraordinary wishful thinking over the past few years.
Management, the regulator and the Department of Finance: all of them have been suckered.
The only organisation that appears to have any scepticism when it comes to Anglo is the European Commission which has rejected at least two rescue plans and could well reject the next one.
Without the details of the new plan, it is difficult to understand how anybody can calculate the eventual cost but the calculations are made even more difficult by the fact that the end cost depends on the future direction of the Irish property market, currency fluctuations and the cost of borrowing.
Nobody, not even the Central Bank, can confidently predict any of these variables so any forecast must be tentative.
This is not to dismiss the value of predictions which all depend on variables but it makes a nonsense of the Government's claims that it would provide citizens and the markets with a final and definitive bill for Anglo's bailout.
Despite this, or perhaps because of it, the Government is also rumoured to be set to announce a further capital injection into Allied Irish Banks today, a move that will distract us and could effectively nationalise that bank by bringing the State's ownership above 50pc.
Such a move will doubtless be presented as an 'investment' but with a market capitalisation of little over €500m, Allied Irish is of almost no value any more. Kicked out of the benchmark Stoxx Europe 600 Index last month, the bank is only the 17th largest company trading on the Dublin stock exchange despite the €3.5bn which the taxpayer "invested" in the bank last year -- a sum that would be enough to buy seven AIBs today.
Any further investment, whether it comes today or later in the year, is likely to place some kind of floor under AIB's sliding share price but will leave the Government's plans to maintain an independent banking sector in tatters.
The markets are unlikely to regard the bank as anything other than government controlled because that will be the de facto position.
The interesting question will be how long such a bank will be able to resist political meddling as companies and individuals scream for a relaxation of the banks' present lending policies.