I’m quite glad I’m not an Irish taxpayer, or I’d be very pissed off indeed today. Details are beginning to emerge about the reasons why the Irish government stepped in to offer an unconditional guarantee for the liabilities of Irish banks at the beginning of the crisis – a decision which really has had very unpleasant consequences indeed for the Irish economy. Three fact stand out. First – that perhaps the most urgent precipitating factor seems to have been the unfortunate fact that no-one wanted to lend money to Anglo Irish Bank. From an “advice memo”:http://www.oireachtas.ie/documents/committees30thdail/pac/reports/documentsregruarantee/document3.pdf by Merrill-Lynch to the government

bq. However, liquidity for some could run out in days rather than weeks. Anglo Irish has recently approached the Central Bank with a proposal to create a new funding facility that the Central Bank would accept commercial mortgage assets in exchange for cash. Anglo are rapidly approaching the point where they have exhausted all possible sources of liquidity available via the market or their ECB eligible collateral is close to being fully utilized.
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