John FitzGerald writes in today’s @IrishTimes that Ireland and the other former “PIIGS” dealt with their debt problems a decade ago. 🔹But there is another side to that history which Ireland still has not properly confronted. 🔹Substantial parts of the banking system’s liquidity problem were hidden — and we now know that part of the cost of repairing it was quietly transferred onto SMEs and mortgage holders? 🔹In April, this issue reached Westminster. 🔹A Westminster Hall debate examined the hidden-credit-line scandal: that banks attached undisclosed derivative credit liabilities to SME lending, weakening borrowers’ credit positions and, when rates collapsed, helping push viable businesses into covenant breach, restructuring and insolvency. 🔹That is not a minor footnote to the financial crisis. It raises a fundamental question about how bank balance sheets were repaired. 🔹Then look at Irish mortgage holders. 🔹The Tracker Mortgage Examination ultimately identified tens of thousands of affected customers and hundreds of millions of euro in redress and compensation. 🔹Subsequent enforcement findings established prolonged overcharging, contractual and regulatory breaches and, in some cases, the loss of family homes and other properties. 🔹So perhaps we need to reconsider what we mean when we say Ireland “dealt with” its debt. 🔹We know about the visible bailout: taxpayers recapitalised banks and sovereign debt exploded. 🔹But there was another, much less visible transfer. 🔹SMEs stripped of businesses and assets. 🔹Mortgage holders overcharged and pushed into arrears. 🔹Property lost. 🔹Credit withdrawn. 🔹Borrowers deleveraged. 🔹Banks repaired. 🔹If hidden liquidity shortfalls were being plugged partly through value extracted from customers, economically that resembles a covert bail-in of the real economy, without ever being called one. 🔹The critical question is therefore not simply how quickly Ireland reduced its sovereign debt. It is: 🔹Where did the money used to repair the banks actually come from? 🔹Debt can be repaid. 🔹Losses can be recognised. 🔹But losses can also be transferred. 🔹Until Ireland traces the hidden liquidity shortfalls through the banks, the SME derivative/credit-line exposures, mortgage overcharging, enforcement and asset disposals, I do not believe we have established the complete economic cost of the banking crisis — or who ultimately paid it. 🔹Senan Allen accepted the seriousness of my Protected Disclosures in August 2015 - until in early September, he did an about turn. At whose behest? and why? @Wftproof @stevemiddi1 @ArturNadol7566 irishtimes.com/business/econ…