Ever restless, after a few years Fingleton was ready for a more radical change of direction as the Dairy Disposal Company slowed down. The organisation controlled a third of the dairy industry and employed about two thousand people. ‘I anticipated its inevitable end,’ said Fingleton. ‘So it proved, and I left on a wing and a prayer to Nigeria.’
It was 1969, and the conflict in Biafra was two years old. Nigerian politics and the system of short-cuts and favours required to get things done was not unlike that in Ireland. Fingleton used his financial expertise to do the books for Irish missionaries while gaining a reputation as a ‘doer’.
In 1971 he came home, determined to get stuck into business. ‘By the time I had come back things had run their course in Nigeria and it gave me a quiet satisfaction to know that I’d contributed all I could,’ he mused in his Strategy interview.
But Fingleton told the Irish Press journalist Eoghan Corry that his time in Nigeria acted against him when he tried to get back into the often insular and conservative world of Irish business in the 1970s. ‘Fingleton swears that one prominent businessman told him in an interview that he could not have any business ethic,’ Corry wrote, ‘as he was now a Communist Third World groupie.’
He managed to get a job with the electrical firm ACEC, a subsidiary of Westinghouse Group, a giant transnational corporation. While he worked with the company as a management and corporate accountant in Waterford he hankered after a return to Dublin. An advertisement in the Irish Times that read ‘Commercial organisation seeks secretary’ was to change everything.
In 1972 Fingleton got the job, in a tiny organisation called the Irish Industrial Building Society, previously the Irish Industrial Benefit Building Society. Fingleton was not even a home-owner, and his knowledge of building societies, he admitted, was only ‘peripheral’, but the job offered an opportunity to return to Dublin.
When he joined it the society had assets of £2½ million and employed five people. In Fingleton’s first year a profit of £12,000 was recorded. In the 1960s he delighted in recalling that he had applied for a mortgage from a rival firm, the Educational Building Society, but had been turned down by its stuffy officials as he had no record of deposits with them.
In 1973 Fingleton married Eileen McCarroll, who he had met before he went to Nigeria. She was a secondary school teacher and, Fingleton told Strategy, ‘a traditionalist.’ In interviews he would stress his credentials as a family man. ‘Despite my fairly high profile, five nights out of seven I’m at home.’
He added to his qualifications by being called to the bar in the same year as his marriage. The following year he bought his first house, in Leopardstown, Co. Dublin, with a mortgage from his new employer.
Fingleton became a relentless worker in the hitherto sleepy society. He appeared to have few vices—they would mainly come later—and was known only to enjoy a game of golf in Woodbrook Golf Club at Bray, where he played off a handicap of fifteen. His powerful character quickly began to influence the small society, which held meetings every Tuesday evening to discuss strategy. Steadily, his determined character took control. At one of these meetings he convinced the society to expand outside Dublin city and county for the first time. Until 1969 statutory restrictions had prevented it from doing so, but in early 1974 Fingleton gave the society the confidence to think bigger.
A clever marketer, he realised that the society needed to change its name to reflect its ambitions. At his second attempt he managed to convince the members, by a margin of three votes, to support a change, and in 1975 Irish Nationwide Building Society was born.
The choice of name was not only linked to the company’s geographical ambitions but also perhaps gave the impression that it was connected to the Nationwide Building Society in Britain, a much bigger and more credible organisation. Later, when it did expand into Britain, Nationwide would become annoyed at the similarity of the Irish society’s name—and at its radically different business model of lending to developers.
These objections were shrugged off by Fingleton. ‘They certainly tried to stop us, but we felt it was a good strong name and that it reflected us,’ he said. The similar name he would in later years dismiss as just a coincidence. In 1983 the society bought the Garda Building Society, the first in a series of small acquisitions.
Fingleton and his wife had two sons and two daughters. ‘The books balanced on that,’ he said. Their father’s wealth ensured that they all went to the best private schools, though he was anxious to make sure they received their early education in ordinary schools. ‘I’m a great believer in national schools—they give a broader education and the children mix with all classes,’ he told Strategy. Would his younger daughter, Eileen, go on to a private school? ‘I’m not sure,’ he said. ‘Eileen’s extremely independent, and I’m certain she’ll have a say as to where she goes.’
A snapshot of his children’s education given by the banker in 1988 reveals a family on the way up, living in a nice house in Leopardstown and mixing with the upper echelons of Co. Dublin society. Ann, the eldest, was a fifteen-year-old in Holy Child Convent School, while William, a year younger, went to Gonzaga College, a progressive Jesuit school whose famous past pupils include Michael McDowell, the former Minister for Justice, and Peter Sutherland, chairman of Goldman Sachs and a former Attorney-General. Eileen, aged ten, and Michael junior, aged six, were at the time in Foxrock National School.
Fingleton was keen to position Irish Nationwide as a contender. When the prestigious number 1 O’Connell Street came on the market he stopped at nothing to get it. The building, on the corner of O’Connell Street and Eden Quay, had little architectural merit. The original building was that of Hopkins and Hopkins, watchmakers and jewellers, which was destroyed in the 1916 Rising. The building that replaced it in 1922, however, had one great potential benefit: signage on the city’s main thoroughfare.
Fingleton bought the building from under the nose of Ulster Bank by not letting them know he planned to bid for it. Four hours of haggling with the trustees of Hopkins and Hopkins, ensured Fingleton had the keys of the building for £160,000. He erected a big Irish Nationwide sign with individually mounted back-lit letters, ugly but impossible to miss.
The society began to open branches around the country, but it also used agents—usually local businessmen, retired sports people or auctioneers—who acted as feeders for the society. The branches and agencies, often sharing premises with auctioneers, extended the society’s reach nationally while keeping costs down. By 1984 it had twenty full branches and 110 agencies.
Fingleton set about raising the profile of the society to reflect its new outward focus. He hadn’t the money to compete directly against the bigger banks, so he began strategically sponsoring sports events. He was always careful to stand in the centre of photographs, so that there was little chance of being cut out of the picture if it was trimmed.
On the day he opened the O’Connell Street branch Fingleton grandly announced that men and women would be treated equally when they applied for mortgages. He was lauded as a result by the media as a radical. He courted journalists and senior newspaper executives by offering them mortgages at a time when working in the media was looked down upon by lenders. The veteran journalist and editor Paul Drury, who now works with the Irish Daily Mail, recalls that when he started as a junior reporter in the Irish Independent in the early 1970s the pubs used to close early on Christmas Eve, but there were was an open door for journalists to attend Fingleton’s head office Christmas party. ‘We used to head up a back stairs and into Fingleton’s office. There were loads of journalists there and we were sitting on crates of beer. Fingleton didn’t really participate or engage, he would just sit at his desk, a big oval-shaped business desk, and watch everything.’
At that time journalists attending a drinks party in the office of a bank’s chief executive was completely unheard of. As Drury says, ‘you would never even get a bank chief executive down the end of a phone, never mind have a dr
ink in his office.’ Fingleton made himself available directly to journalists. He would take a call even from junior reporters and give them a comment if they wished. They loved him for it.
At the same time Fingleton had a tremendous ability to pick up secrets and to attract confidences from all sorts of characters. He would occasionally leak one of these to a favourite journalist, further ingratiating himself. By 1980 he had become the ‘go-to’ person for Ireland’s building society industry any time there was a cut in interest rates or any development that might affect them. The late Des Crowley recalled in the Sunday Business Post in 2002 that ‘one Christmas during the 1980s when Irish Nationwide’s Michael Fingleton was at the height of his popularity with the media, he sent journalists a Christmas card portraying himself as Santa Claus.’
Fingleton told the Irish Times in 1991:
In the days when other financial institutions refused to talk to the press, I saw it as part of my role. We were a small society which wanted to grow and we felt PR and publicity could play an important part in increasing the public’s awareness of us. I didn’t mind being quoted by name. I made myself available for comment when others did not and I have always been forthright in my views about our industry.
‘Always ready with a quote’ was how Ted Harding described him in an article in the Sunday Business Post in 1994. ‘He became the self-appointed spokesperson for a stuffy sector in which the society bosses did not condescend to address reporters.’
Damien Kiberd, founding editor of the Sunday Business Post, recalls regularly bumping into Fingleton about town or at GAA matches.
He was well got, everybody knew him. He was a friendly devil. He took me to lunch in the Shelbourne once … We went to the dining room and it was all very posh. Very nice. He went up to pay the bill. There was a woman there. He shook her by the cheek and said, ‘How are you, girlie?’ I was just shocked. I thought, You can’t do that, but he did!
At this time Fingleton claimed that building societies were democratic and that members were free to be elected to their board, unlike, say, state boards or PLCs, which were much more difficult to get onto. ‘Just because people don’t get enough votes to get elected to the board they shouldn’t blame the societies,’ he said, a remark that years later, when the society faced regular rebellions, would prove prescient.
As unofficial spokesperson for the building societies, Fingleton campaigned hard for them to be allowed to compete with banks: lending to builders, offering mortgage services, and selling insurance, shares and foreign exchange. ‘Most building societies are losing money on mortgages, the margins are too tight. They have to pay more for their money. They have to generate income by other activities in the money markets. The government should release us from bondage.’
At the same time that Fingleton called for more freedom for his society, he had already developed a harsh reputation for pursing borrowers who fell into arrears. He told Eoghan Corry:
We protect people from themselves. Very often people are afraid to come in to discuss their problems with you. Very often it can all be settled amicably and they can get themselves out of a situation, whereas if they fall four months behind they tend to say, ah, sure I have come this far, there’s no getting out of it now.
Brazenly, he said it often worked out for the best that borrowers lost their home, as the society sometimes returned money to them, even if they had been forced to emigrate, when it sold the house later for more than their debts.
Chapter 3
A GLIMPSE OF THE BIG MONEY
The 1990s kicked off in a very inglorious way for Irish business. The corporate world was plunged into a series of financial scandals and grubby business deals. The early 1990s saw the Beef Tribunal, following the collapse of Larry Goodman and Goodman International and allegations of malpractice against the beef industry. The privatisation of Greencore had seen secret share dealings going on behind the scenes, linked to a senior executive of the group.
John Glackin, a Dublin solicitor, was appointed High Court inspector to get to the bottom of a complex series of transactions surrounding the sale of the Johnston, Mooney and O’Brien site in Ballsbridge, Dublin. The controversy saw Michael Smurfit step aside as chairman of Telecom Éireann and the financier Dermot Desmond face heavy criticism in the inspector’s final report for his part in the controversy.
There were few reasons, however, to think that the small world of building societies would be completely turned upside-down in the years ahead. As the new decade began it would have seemed to most people involved in Dublin’s relatively small financial services scene that building societies would find the next ten years slightly more exciting than the dull decade that was ending.
This could not have been further from the truth. The 1990s would see the end of the family dynasties behind some of the building societies. It would also see a major expansion of financial institutions as international financial services became more integrated. Several building societies would disappear, while two of the biggest, Irish Permanent and First National, would be floated on the stock market.
The 1990s would also see the first phase of Ireland’s economic boom and the beginning of one of Europe’s biggest post-war property bubbles. All this presented a huge opportunity for building societies, which would ride the Celtic Tiger till it dropped.
But the Ireland of the opening years of the 1990s was quite different from the country that greeted the new millennium ten years later. Corporate scandals and corporate collapses, such as Guinness Peat Aviation and Goodman International, were not the only financial action of the early 1990s. The currency crisis in late 1992 had caused havoc on international markets and threatened the country’s entire economic stability.
For building societies the 1980s hadn’t been too bad. In general, the little club of building societies had grown its share of the mortgage market and tried to beat the banks where it could. The decade had seen massive interest rates, high unemployment and an exchequer crisis. But despite these setbacks, building societies used their nimble size, flexibility and at times aggressive commercialism to rub the banks up the wrong way.
The building societies used to sit down informally together to discuss interest rates. Then they would troop down to the office of the Minister for the Environment, who had responsibility for building societies, and have a more formal meeting with him. If a decision was made to lower rates, the press would have been tipped off in advance and the minister would emerge from the meeting and inform the assembled journalists that he was delighted to announce that building society mortgage rates were going to be cut.
Fingleton had brought a shrewd commercial and consumer head to the building society sector. He was ambitious for the society and kept publicly complaining about the disadvantages the societies faced when competing with the banks. The banks in turn complained bitterly that the building societies benefited from special tax treatment.
Spats between the banks and the societies over commercial advantage or disadvantage dominated the mortgage landscape in the 1980s. Fingleton led the charge for the mutual societies. Banks complained that deposit customers of building societies were not paying enough tax; building societies complained that legislation allowed the banks to subsidise their mortgage rates from other profitable activities. The building societies argued that under section 28 of the Finance Act (1976) the banks had a tax advantage, which allowed them to subsidise their mortgage rate by a few percentage points. In return the banks argued that they paid 50 per cent corporation tax, compared with the societies’ 35 per cent.
The societies did not have to disclose individual accounts but paid a composite rate of tax on their total deposits; this meant that deposits in building societies were taxed at a lower rate than in banks. In the early 1980s the government decided to pursue some of the ‘hot money’ hidden in building societies. In 1982 Fingleton said that ‘we should recognise the national paranoia and suspicion about taxation. It’s better that this money should pay some tax th
an leave the country.’
Fingleton complained at every opportunity that mutuals needed to be given greater commercial freedom, including the ability to offer more services to customers, such as chequebooks and insurance products.
The banks were clearly rattled. The societies were doing well. It prompted Bank of Ireland to make a bid for the ICS Building Society in the mid-1980s. This had the unique status of being a mutual listed on the stock exchange. Fingleton was very critical of this deal being allowed to go ahead, but it did.
Shortly before the 1987 general election, which saw Fianna Fáil returned to power, its leader, Charles Haughey, announced that if elected he would ensure that all financial institutions competed freely, and that building societies could expand their operations.
Meanwhile Fingleton was determined to close the gap any way he could. In 1987 he reintroduced what were known as tiered mortgages, under a different guise, which the government had outlawed the previous year. Fingleton had cleverly found a new way of getting around the ban. The Minister for the Environment, Pádraig Flynn, summed up the attitude at the time. ‘It is clearly an attempt to circumvent Section 4 of the 1986 Building Societies Act … I have to admire the skill with which these people can drive a coach and four through hastily passed legislation: the 1986 legislation had the right idea but it was riddled with loopholes.’
Eventually, at the end of the decade, the new Building Societies Act (1989) was supposed to deal with the anomalies between banks and mutuals. It was a comprehensive piece of legislation aimed at enabling the societies to grow and thrive while updating and consolidating a lot of older, scattered pieces of legislation. But the act contained one clause that would prove to be a massive thorn in the side of Michael Fingleton. While it enabled building societies to ‘demutualise’, it placed a restriction on what could happen afterwards. Where a building society demutualised by, for example, floating on the stock exchange, a single shareholder could not own more than 15 per cent of the company for five years. It essentially meant that, once demutualised, building societies could not be taken over or controlled by another company or financial institution for five years.
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