The Debt Justice Action (DJA) campaign, of which I am a part, has just lodged an application with the Guinness Book of Records to recognise Ireland as having the world’s most expensive ever bank bailout.
A video accompanying the application can be viewed below. The satirical intent behind the project is well captured by DJA member Diarmuid O’Flynn: “We’ve had a difficult few years here in Ireland. Between the collapse of the banking system; Jedward at the Eurovision; and 1-6 at home to Germany, our reputation on the world stage is in tatters. That may be about to change”.
Supporters of the campaign are being urged to send the video to all TDs under the slogan of ‘credit where credit is due’. As development educator Vicky Donnelly puts it, “we should not forget to acknowledge those in positions of power, like TDs and Ministers and the Irish Central Bank – none of this would be possible without them.” In fact, the group inaugurated their bid last week with a presentation of flowers and a card to Patrick Honohan, governor of the Irish Central Bank, who personally accepted the tokens in honour of the invaluable role played by that institution in the world record attempt.
Now all of this is obviously tongue in cheek, but serious points are being made also, one of which is the responsibility of politicians and senior civil servants for the mess we are in. A small number of bankers are facing criminal charges (the cases are proceeding at a snail’s pace) but not one person responsible for regulation (or the lack of it) has been called to account. In fact, in many cases they have been rewarded.
Take the example of Kevin Cardiff, as documented by the Cantillon columnist in the Irish Times of 26 November 2011. According to that column, a strange thing happened over the St Patrick’s weekend in March 2006. The Revenue Commissioners decided they were going to levy stamp duty on the purchase of company stocks using so-called ‘contracts for difference’ (CFDs). CFDs allow people to buy shares in a company while only paying a fraction of the cost up-front, borrowing the rest and betting that a rising share price will allow a handy profit to be made – because under the contract the seller agrees to pay the buyer the difference between the current value of the share and the value when the contract comes to an end. This is how Sean Quinn built up his huge stake in Anglo Irish Bank.
The Irish financial sector went ballistic over Revenue’s actions and took their grievances to Mr Cardiff, then working in the tax policy section of the Department of Finance. Cardiff listened sympathetically and wrote a note to his Minister (Brian Cowen at the time) saying that the proposed change “was causing consternation in the market for Irish shares” and that the suffering sector would be forced to move its business to London or elsewhere if Dublin continued to squeeze the life out of it. Cowen took his official’s advice and scrapped Revenue’s proposal. On 30 March Tom Healy, chairman of the Irish Stock Exchange wrote to Cardiff as follows: “Kevin, I would like to thank you for getting the CFD problem resolved. We had the very clear impression that you were the one who fixed it. I will contact you soon to propose lunch”.
Now it is entirely possible that Quinn would still have built up his ultimately catastrophic shareholding in Anglo even if the stamp duty on CFDs had been kept in place and that the state (in the form of Anglo’s successor the Irish Bank Resolution Corporation) would still be pursuing Quinn for money he owes us (on the grounds that we now own Anglo). But it is also possible that the duty would at least have slowed this form of speculation and spared us some of the costs we are now bearing. So, overall, this was probably not a particularly good call by Cardiff. Not that he personally lost out as a result: doubtless he had a nice lunch with Mr Healy, but his more tangible reward was to be made head of the Department of Finance, in which capacity he advised on the economy-wrecking bank guarantee of September 2008. Again, this did not derail his glittering career and in 2011 the Fine Gael-Labour government nominated him as Irish representative to the European Court of Auditors, a position he ultimately secured despite understandable reservations on the part of some European Parliamentarians.
This saga tells us a number of important things. One is the intimate links between the Irish financial sector and the senior civil servants who were supposed to be regulating it (not pandering to its demands), links that remain institutionalised today. Another is the aforementioned impunity, or even reward, enjoyed by those who screwed up at the top decision-making levels. Even the much criticised former Financial Regulator, Pat Neary, got a pay-off of €630,000 when he was forced to retire in January 2009 – and a pension on top of that of €143,000 a year; this for a man whose idea of regulating the sector was to say that he operated on the basis of “mutual trust between ourselves and the industry”.
But another thing the Cardiff debacle tells us is this: the current government is perfectly happy to go along with protecting and promoting those who helped wreck our economy. And one reason for that is that the intimate links that bind together bankers, politicians and senior civil servants were not, and are not, confined to one political party. Consider the case of current Minister for the Environment Phil Hogan (also the Minister for Not Housing Travellers). He personally received ‘soft’ loans of almost €900,000 from the head of the Irish Nationwide Building Society Michael Fingleton. Fingleton gave Hogan the wherewithal to buy a house in Dublin 4 and a luxury apartment in Portugal with loans to initially be repaid on an interest-only basis and, in the case of one of the deals, very little of the paperwork one might normally expect. So do you think Hogan is now going to be pushing his cabinet colleagues to launch a serious investigation into the roots of the Irish banking crash? When he benefited personally from the reckless lending practices that sowed the seeds of disaster?
The Irish financial, political and civil service elite got us into a terrible economic mess. But they have not been made to pay for their sins of commission or omission. Nor are they even now being held to account by the media (never mind the courts). Instead, they are allowed to make deeply misleading statements and get away with them; for example, ministers are now routinely claiming that the Anglo promissory note of €3.06 billion was not paid in March of this year, when in fact it was paid in full. The Government borrowed the €3.06 billion from Nama. Following this, Nama passed this debt to Bank of Ireland, so now, instead of owing €3.06 billion as a promissory note, which might easily have been written off, the state owes the same amount to Bank of Ireland in the form of a sovereign bond, which is much harder to write off. And this is the type of disastrous ‘deal’ the government is now seeking for the entirety of this illegitimate debt.
Going back to the world record attempt, the only comparable bank-related record listed by Guinness concerns the removal of $70 million from the Banco Central in Brazil in 2005. In that case, people removed large sums of cash from a bank, whereas the money in Ireland’s record-breaking attempt has been going in the opposite direction. What the two records do have in common is that the money has yet to be recovered and the culprits remain at large, not alone showing no remorse whatsoever but continuing to actively scam the general public. We have let them away with it for far too long.
Above German Finance Minister Wolfgang Schauble
Ahead of today’s visit to Dublin by German finance minister Wolfgang Schäuble, German officials said retooling the emergency loans to the defunct bank was more politically palatable than transferring Irish legacy bank debt to the European Stability Mechanism (ESM) bailout fund.
Irish officials indicated yesterday that Minister for Finance Michael Noonan would concentrate in today’s talks on the promissory note – issued to pay depositors and creditors of Anglo Irish Bank and, later, Irish Nationwide – and would return to the legacy debt issue when there was more promise of political progress.
Mr Schäuble will hold talks with Mr Noonan and Minister for Public Expenditure Brendan Howlin ahead of a joint press conference. Both sides played down expectations of substantial progress today, ahead of Thursday’s talks in Berlin between Taoiseach Enda Kenny and German chancellor Angela Merkel.
“On the promissory notes it’s difficult to say anything in public as, officially speaking, this is European Central Bank territory,” said a German political source.
“A promissory note deal wouldn’t change the actual amount of debt,” said another official, “but would turn it into a 40-year mortgage.”
The promissory note obligations, an IOU issued to stabilise Anglo Irish Bank, have been the subject of ongoing technical discussions with the ECB.