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Ireland's Bad-Bank Transactions


Watching and waiting for the public's reaction.

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community.

As Minyans may know, Ireland, with its outsized financial services industry, has been at the forefront of the socialization of credit losses coming out of its banks.

Yesterday, the Irish government announced details of its first bad-bank transaction. Under the terms, the state will pay €54 billion to take over bank debt worth €77 billion.

Per the Irish finance minister, market value of the loans was about €47 billion, €7 billion below the price being paid by the government.

Per the Irish Times, "the Minister has decided to add [the] extra €7 billion to the value of the assets, to reflect what he and his advisers believe is a more accurate reflection of their value."

I'd call it a dilution-less capital infusion outright subsidy.

Given the trouble that the Dutch government just got into from the EU for "over paying" on a pool of ING (ING) US mortgages, it should be interesting to see what happens here.

More interesting still will be the public reaction.
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