I want to tell you a little about a friend of mine. He's got a PhD in economics and has been lecturing for years. From time-to-time I say to him: "Can I ask you a dumb question?" He always replies with a wry smile "Answering dumb questions is practically my job description." We had one of our chats last night:

ME:

I keep hearing:"Strong banks are essential to our economy." But surely, they should be saying: "A strong banking system is essential to our economy." The 1st statement leads us towards bank rescues and nationalisations. While the 2nd gives us more options.

My friend the economist:

Yes that is more accurate. In fact, I was studying in Finland in 1992 as a series of banking collpases swept across the Nordic countries. Many of the possible options were tested with varying success. Go on..

ME:

Well, I don't know if this option was available in the past... Why not establish 2 brand new internet-only banks in Ireland. And capitalise them with the €15bn. For that, you get 2 new banks. Each starting with a clean sheet. Free to borrow. Free to lend. The advantages are you get a banking system. You avoid nationalisation. You embrace pure competition. And no money gets thrown into a black hole.

Economist:

Yes. Pure internet banking wasn't an option in 1992. It could constitute a banking system. Such new banks would be able and eager to lend. The old banks could continue to deal with cash. But if they do crash..?

ME:

If a physical branch network is important. Co-opt the post office network. Or the credit union network. If internet access is important. Support internet cafes. Such an approach would be a snug fit with the government's policy of support rural Ireland and the roll out of the national broadband scheme...

Economist:

Sounds like it could work. But you know the old joke "If you want 4 opinions. Ask 2 economists"

So that's it. My dumb question to you is "Why not?" I'm hoping you can help me understand our options a little bit better.