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Geithner Killed Plan for Irish to Haircut Their Debt

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05/07/2011 08:52 PM
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Geithner Killed Plan for Irish to Haircut Their Debt
Yves Smith reports on an op-ed in the Irish Times, written by the Irish economist Morgan Kelly, which includes this gem:
Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way.

Got that? The Irish were going to do the sane thing and, for all practical purposes, declare bankruptcy and start life all over. Geithner nixed the deal, which did nothing but protect the banskters and will end up costing Irish and global taxpayers.

more [link to www.economicpolicyjournal.com]