We Haven't Learned From Ireland's Financial Crisis

02/07/2011 05:12 am ET | Updated May 25, 2011
  • The New York Times

Put simply, by allowing our biggest banks to become even bigger -- and more leveraged -- the government is taking on a large contingent fiscal liability. Whatever you think of current fiscal policy -- and whatever the outcome of the current debate over taxes and spending in the U.S. -- remember this: by all standard balance sheet measures, Ireland was running responsible fiscal policy over the past decade. But the implicit liabilities of the Irish state were ballooning out of control, in direct proportion to the size of the biggest Irish banks. Three banks failed and this has taken down the entire Irish economy.

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