So, we have arrived at the moment of truth..NAMA is to reveal the price it will pay and the banking system will end up in government hands, according to the professional professors, the insider winkers, the usually well informad media commentators and the bewildered of RTE.

Well, I think they’re wrong. I’m sticking my neck out like an idiot, I suppose, but, in the midst of all the panic- share prices today are down c. 20% !- one should take a minute or two to calmly consider the realities: the last thing the State- and the citizens- need is majority-or substantial minority control of the two main banks. We simply can’t afford it !

The inevitable result of “nationalisation” is “re-privatisation sometime; and, at that time, who would buy the banks from the Government? Who could? The traditional investors in our banks- the 150,000 Irish resident individuals, of older age and simply looking for dividends as pension supplements- would have been wiped out and, if not dead, or in State-nursing homes, still suffering the bitter taste of savings lost investing in banks. No Irish corporations or institutions would have both the strategic benefit and the financial means to buy large stakes in the banks. The reality is that our main banks–and with them, control over all Irish owned deposits- would have to be passed over to foreigners. At that stage, we might as well throw away all pretence to economic sovereignty.

Admittedly the new Central Banl governor, Pat Honohan, made some very silly comments a few weeks ago, indicating that it is almost government policy to wipe out local shareholders and sell off our major economic assets. But he seems to have taken the foot out of his mouth in recent weeks.

In any case, I believe that Brian Lenihan and his advisors and top officials have a more sensible view of the importance of our banking system and of what is required from NAMA. And they would also realise that a move into State control would cause an immediate drainage of deposits from the system which could not be replaced by any government actions or guarantees and which would be a burden our economy could not support

Therefore, the right price for assets going to NAMA from the two main banks is the price at which the assets can later be sold for, subject to the maximum which the banks can afford while staying independently controlled in the private sector. This price, which may be around 30% discount on original assets values, is affordable by our nation- because its totally financed by the banks and it comes with an indemnity against loss provided by the banks, in effect. It is the price at which the banks will be able to raise capital privately- assuming some forebearance from Pat Honohan in the matter of unnecessariily early achievement of new stringent capital ratios- which most international banks cannot achieve in the short term anyway- and at which they can finance necessary activities in the rejuvenation of our economy

Aided by the likely positive change in the near future in the accounting rules pertaining to banks’ impaired assets – which will greatly help to diminish the impact on banks’ capital of residential mortgages losses- our two main banks will recover their relatively strong position over the next 2-3 years. The outcome for the nation will be far better than what we would achieve through (partial) nationalisation. And as for shareholders, don’t follow the herd but be strong now…have faith in Lenihan and look forward to a doubling of the share prices in AIB/BOI over the next few months. Indeed, shareholders should take up a rights issue, particularly if the banks could offer exactly the same terms on which they permitted the State to get in a year or so ago.