Banking collapse economist was 'just spouting off'
Morgan Kelly, the UCD economist who rocked the market earlier this week when he said Irish banks may have to be nationalised, has dismissed his own comments as "just spouting off".
Professor Kelly's comments formed the basis of an article in the Daily Telegraph last Tuesday and a lead article in the Irish Daily Mail on Wednesday.
He said: "We are going to see banks on life support with very big bail-outs. The precedent for this is what happened in the Nordic countries in the early 1990s when they had to take over the banks. We may have to do something similar.''
Following the article, Mr Kelly was contacted by Barry O'Connell, an analyst at banking giant UBS, who was compiling his own research on Irish banks. According to the e-mail exchange, which has been seen by Irish Independent Business, Mr O'Connell said: "I read the Telegraph article referring to your research today and was wondering if it would be possible to receive a copy of the piece."
Mr Kelly's response was: "I was just spouting off: I have not had a chance to work on it systematically. The best analysis by far of Irish banks is the report by Ross Curran of UBS."
When contacted by Irish Independent Business about his original comments Mr Kelly said: "I am not interested in discussing Irish banks right now."
Contacted subsequently in relation to the e-mail exchange where he dismisses his own comments, Professor Kelly said: "Who wudda thunk it: my e-mails in print. Celebrity at last!"
Mr Kelly was not alone in dismissing his comments. Jim Power of Friends First described them as "ridiculous" pointing out that Irish banks are very well capitalised.
By contrast, in Norway a sharp oil price fall in the beginning of 1986 led to a run on the Norwegian krone and a devaluation of that currency. Private business and individuals responded by concentrating on debt repayments instead of spending, prompting Norway's greatest recession since the end of the second World War. The resultant loan losses wiped out the capital of many banks.