I don’t venture too far into banking issues, because I don’t know terribly much about them. Of course, I’d expect bankers to take the same cautious stance toward insurance. Or department stores. Or golf courses.
But then I wouldn’t be considering Anglo Irish Bank, one of the bidders for Quinn Insurance, the Irish insurer whose growth and flameout engulfed the conglomerate empire of Sean Quinn. The insurer is being sold by the government in a slow-motion bidding process, with the bank competing against (or seeking a partnership bid with) Liberty Mutual, Aviva, Allianz and other insurers.
The bank sees running the insurer for a while as the best way to recover €2.4 billion the larger Quinn Group owes it. Ditto Arnotts, a major Irish retailer. And this blog post (via Paul Krugman) gathers all the pies the bank has plunged fingers into: golf courses, farm machinery, etc.
I’ll show my age a bit and say that back in my day, banks lent money, and if the loan failed, they got the security and sold it – fast, heeding the wisdom of no less an expert than my mother, who often proclaimed that “If banks sold anything but money, they’d go broke.”
The theory today seems to be that the bank can run these myriad companies profitably, revive their outstanding loan payments, then sell, spared from writing off the loan. I am glad bankers are better retailers than the typical retailer, better at insurance than the typical insurance company, and better at golf course management than golf course managers, etc. Given the results, they stand to be no worse than they were as bankers.