POLITICAL control of the country's banks creates a real danger that "gombeen" politicians will use their new powers to reward supporters by forgiving mortgages and lending money, UCD academic Morgan Kelly warned over the weekend.
He also claimed the Government needed to fire two-thirds of all bank workers if the banks were to become profitable again.
The State's ownership of large parts of the banking system created "vistas of patronage that Charles Haughey wouldn't have been able to dream of", Prof Morgan told the Hubert Butler Memorial Lecture in Kilkenny.
The State has almost full control of Allied Irish, Anglo Irish, Irish Nationwide, EBS and Irish Life & Permanent and is the largest shareholder in Bank of Ireland.
Ownership of the banks gives politicians a say over who will see their mortgages forgiven and who will be evicted.
"You might do well to join Fine Gael. You might find that a party card with a low number is a big asset," the professor told a packed St Canice's Cathedral, which hosted the event as part of the Kilkenny Arts Festival on Saturday evening.
Mr Kelly predicted that the inability of some people to repay mortgages might soon lead to organised opposition to repayment and the emergence of some "Michael Davitt figure" who would resist evictions like the 19th century nationalist agrarian agitator who founded the Land League.
The campaign could even lead to paramilitary organisations which would act like Robin Hood to prevent people from being forced to leave their homes, he speculated.
It was the foolish decision of Allied Irish and Bank of Ireland to follow the lead given by Anglo Irish and lend to developers that ruined the economy, he said.
Mr Kelly predicted that banks wouldn't be sold any time soon because they were too expensive to operate. While the entire banking sector should cost around €1.5bn a year to operate for a country of Ireland's size, the cost of running Bank of Ireland and AIB alone come to €4.5bn.
Without massive cuts in staff numbers -- he claimed that banking institutions needed to fire two-thirds of workers -- the banks were now likely to remain "loss-making, gold-plated semi-states".
He also forecast that banks faced further enormous losses from mortgages with 10,000 buy-to-let mortgages worth around €11bn not likely to be repaid.
This calculation is one of the reasons why he believes the national debt will be between €240bn and €250bn by 2015. The official estimate is €200bn.
A further problem for banks is that they have been tricked by developers into lending money. "There seems to be a large amount of fraud going on," he said.
The UCD academic also said the Government had to raise taxes on the highly paid, and that the best paid must take a pay cut. "I deserve a pay cut," he said.