Wednesday, May 11, 2011

What not to do

Wall Street Journal --

Yet Spanish officials are anxious to avoid a situation in which they take over a bank, or purchase banks' bad assets, as Ireland has done. Ireland's National Asset Management Agency bought commercial-real-estate assets at severe discounts, forcing steep markdowns across the sector and creating further capital holes that had to be filled largely with taxpayer money.

Gradually people are realizing that Ireland wrote the book on the worst possible way of handling a banking crisis.

UPDATE 17 MAY: 2nd news article --

"I think, very rightly, the government [of Spain] has no intention of creating a bad bank," said Luis Arenzana, managing partner of Shelter Island Capital Management in Madrid. "The case of Ireland proves it's a terrible idea."

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