Today the financial community was focused quite a bit on the action of Ireland’s finance minister – Mr. Lenihan. Using a court order, he authorized further government investment of 3.7 billion euros (approx. $4.8 billion) into the Allied Irish Banks (Ticker: AIB).  This takes the government ownership of the bank to approx. 93%!

While performing this operation, Mr. Lenihan told the press –

1. The markets don’t have confidence in the Irish banks.

2. This was a last resort measure.

3. The Bank of Ireland and Irish Life and Permanent are still seeking funds from the markets.  If they fail to raise capital, the government will move to increase their funding in those institutions as well.

4.  The Irish taxpayer and the National Pension Reserve Fund – will get a return on AIB “in time”.

5. We (Irish taxpayer) will have to wait for a number of years while the bank is turned around and we will then have a solid investment in it.

The idea that the Irish taxpayer may not lose money on this deal is perhaps what put a bottom in on the Bank of Ireland (IRE) stock at $2.20/share, as it appeared ready to slide further into the abyss.

Allied Irish Banks (AIB) stock closed down below a buck today at 96 cents – down approx. -12%.

The Bank of Ireland (IRE) stock gave up 14 cents and closed today at $2.39/share – down approx. -5.5%.

When a finance minister says publicly that the markets do not have confidence in the country’s banks, it is quite remarkable to see one of those bank stocks withstand that type of pressure and close down a relatively modest -5.5%.   Talk about a torpedo… Can it get much worse than that? …The answer is … Yes – So we are careful.

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