The Bankers
Page 26
McCarthy’s report was more a conditioning process, intended to soften the nation up for the draconian December Budget which posed the next political hurdle for Lenihan. The minister had to herd his left-leaning coalition partners, his own backbenchers, the farmers and the trade unions, and above all he needed to stiffen the resolve of his own wobbly cabinet colleagues.
The report of the Commission on Taxation, which was published on 7 September, had a similar purpose: to alert the nation that tougher taxes were on the agenda. There was no doubt that Lenihan had the stomach for the battle ahead; his main problem was his colleagues, none of whom had held office in difficult times. All had been accustomed to donating annual handouts to a grateful electorate. Among their number was the Taoiseach Brian Cowen, a long-time devotee of social partnership – a concept with which Lenihan was impatient in his crusade to remedy the nation’s finances.
During those 2009 summer months many government ministers were invisible; others, like Cowen himself, often appeared paralysed. All were publicly committed to NAMA, but they left it to Lenihan to make the running. NAMA was unpopular. NAMA was complicated. Lenihan appeared to be the only minister on top of the brief.
The Finance Minister stuck doggedly to his guns, unshakeable in his belief in NAMA. He constantly insisted that it was not a bailout for the builders. He was right. It was a bailout for the bankers.
Fine Gael’s woolly counter-proposals gained little backing. Indeed, two of their most distinguished former leaders, Garret FitzGerald and Alan Dukes, backed the Fianna Fáil approach. Support from such unlikely quarters gave Fianna Fáil heart, but in early autumn – just as the government launched a massive public relations campaign to convince doubters that NAMA was imperative – their coalition partners suddenly threw a few shapes. The Greens demanded legislative concessions that would cause the banks to bear more of the risk associated with NAMA. Lenihan granted his coalition colleagues this and other modest changes, including the removal over a two-year period of the bank directors appointed before 2008, a windfall tax on property developers, a pledge to make lobbying the state property agency a criminal offence, and a reduction in NAMA’s borrowing limits from €10 billion to €5 billion. The Greens in turn made hay, grandstanding on the Leinster House plinth, gloating in front of the cameras about their dilution of the Bill.
A week earlier, on 3 September, the minister had signalled his flexibility on the NAMA proposals when, needing to replace John Hurley as governor of the Central Bank, he broke with long tradition and failed to appoint the secretary of the Department of Finance to the post. Instead, he thrust greatness on an academic, Professor Patrick Honohan of Trinity College Dublin, who had been harshly critical of the performance of banking regulators in Ireland during the bubble period. More recently Honohan had played a key role in the NAMA debate, proposing a risk-sharing mechanism for NAMA that seems to have influenced the measure adopted in the final NAMA Bill.
Many of the concessions claimed by the Greens were cosmetic. The basic shape of the package remained the same. The banks were safe. So were the bankers.
But the builders were far from safe.
On the very day that Lenihan was publishing his amended NAMA legislation, Liam Carroll’s fortunes were again hitting the buffers down in the Four Courts.
Judge Frank Clarke dismissed yet another of Carroll’s attempts to duck the liquidator. Echoing the words of his High Court colleague Peter Kelly, Clarke described the business plan put forward by Carroll’s counsel as existing ‘at the further end of optimism’.
All the oligarchs had been rooting for Carroll, whose forecasts for the recovery of his companies were spiritually akin to the controversial idea that NAMA should pay more for bad loans than they were currently worth; but by the time Clarke gave him the thumbs down the NAMA train had left the station. The legislative timetable suggested that the new state asset agency would be in operation by Christmas. Bankers, mandarins, builders, stockbrokers, accountants and auctioneers were onside.
The public, however, was not onside – opinion polls showed that NAMA was unpopular and that Fianna Fáil’s public support was at an all-time low. Why had Fianna Fáil, the party with an unerring instinct for the Irish people’s sentiments – a grassroots movement to its fingertips – lined up alongside the pillars of official Ireland against the popular will?
One reason was the determination of the Minister for Finance himself, who seems genuinely to have concluded that it was his duty to save the banks and that the NAMA solution was the only possible path. He was not as concerned about the political consequences for himself or for his party as were some of his colleagues. A realist, he probably saw that Fianna Fáil was destined for a long period in the political wilderness regardless of how it handled the banking crisis.
But what about his colleagues in Cabinet? How had consensus leaders like Cowen, Foreign Affairs Minister Micheál Martin and Justice Minister Dermot Ahern swallowed the oligarchs’ line? Was this not, just eighteen months earlier, the party of Bertie Ahern, the softly-softly genius of keeping the peace, embracing all comers under one umbrella and pacifying warring factions? It was; but Bertie had never faced a crisis of anything like this magnitude.
The deeper truth exposed by the present crisis is that Ireland harbours more powerful forces than Fianna Fáil. The NAMA project is the brainchild of the Department of Finance and the banks. It is the oligarchs’ solution, a monument to their triumph over the will of the people.
Fianna Fáil could have eyeballed the banks and the mandarins. It didn’t. It was fearful that the bankers could press the Armageddon button and take the country down with them. Cowen, Lenihan and the rest recognized the realpolitik: the permanent government, conspiring with the bankers, was more powerful than the elected government. It had always been thus.
Fianna Fáil was overawed by the oligarchs. Throughout the banking crisis of 2008–9 the government was more like a passenger than a driver. They were driven by the powerful, unelected forces that held the nation in their grip. As the economy imploded, they took their cues from those who held the permanent levers of power in their hands.
The launch of the NAMA project was perhaps the bankers’ greatest triumph. It had sent out a potent message: that Ireland’s banks were too big to be allowed to fail; Ireland’s bankers were too powerful to punish.
The author with Sean FitzPatrick, chief executive and latterly chairman of Anglo Irish Bank, in happier times.
Phil Flynn, the former vice-president of Sinn Féin who became chairman of Bank of Scotland (Ireland). The bank’s dramatic cut in mortgage rates in 1999 helped to bring about the lending practices – 100 per cent mortgages, looser lending criteria – that did so much to inflate the property bubble.
John Hurley, long-time governor of the Central Bank, who sounded alarm bells about the property bubble but did little to rein in the banks.
Patrick Neary, the chief executive of the Financial Regulator, whose ‘principles-based’ regulatory approach proved inadequate.
Sean Dunne, the developer whose land purchases in Ballsbridge constituted perhaps the single biggest property gamble of the boom years, at Croke Park with Irish Nationwide supremo Michael Fingleton.
Fingleton photographed with the Oireachtas golf team that competed in the Army/Garda/Press/Oireachtas Challenge Cup, sponsored by Irish Nationwide, in 1987. Back row: Austin Deasy TD, Senator Denis Cregan, Cathal O’Laoighaire, Hugh Byrne TD, Denis Reid, Senator Donie Cassidy; front row: Tom Enright TD, Robert Molloy TD, Michael Fingleton, Colm Hilliard TD.
The Taoiseach and the developers at the races: Bertie Ahern with Bernard McNamara (upper left, at Galway Races), Sean Mulryan (upper right, at Punchestown), and Sean Dunne (below, with his wife Gayle Killilea, at Punchestown).
Businessman and racehorse owner J.P. McManus with Dermot Desmond, who has had a sometimes tempestuous relationship with Ireland’s banking and financial services establishments; most recently, in his capacity as a major Bank of Ireland
shareholder, he has criticized the appointment of Richie Boucher as the bank’s chief executive.
The summer 2004 edition of The Nation – the internal Fianna Fáil magazine that was packed with ads bought by property developers and construction firms.
Mick Bailey: property developer, Flood Tribunal villain, tax defaulter, Galway tent regular, and joint master of the Ward Hunt in Co. Meath.
Sean Quinn, Ireland’s biggest businessman, whose massive indirect shareholding in the ruined Anglo Irish Bank was unwound with the help of the ‘Golden Circle’, ten Anglo customers who bought up the shares using money loaned by Anglo itself.
David Drumm, Sean FitzPatrick’s successor as chief executive of Anglo Irish Bank, who presided over the bank’s most spectacular profit figures – and then over its collapse.
Donal O’Connor, the new Anglo chairman who has various old connections to the bank, at the EGM held immediately after the bank was nationalized.
The author makes a point at the Anglo EGM as Eamon Dunphy (to author’s right) and other shareholders look on.
Eugene McErlean, former internal auditor of AIB, with the author on his way to testify before an Oireachtas committee regarding the handling by the Central Bank and the Financial Regulator of his allegations about the bank’s practices.
Richie Boucher, the Bank of Ireland insider who succeeded Brian Goggin as chief executive.
Gillian Bowler, chairman of Irish Life & Permanent, who survived the fallout from the revelation of the bancassurer’s deposit-swap deal with Anglo.
Dermot Gleeson, chairman of AIB, after being hit by an egg hurled by an irate shareholder at the bank’s AGM.
Colm McCarthy, the economist whose ‘Bord Snip’ recommended swingeing cuts in public spending in order to control deficits created by the collapse of government tax revenue and the recapitalization of the banks.
When it rains… Minister for Finance Brian Lenihan.
Liam Carroll, arguably Ireland’s biggest property developer, photographed outside his home after he was forced to seek court protection for some of his companies against one of his creditors, ACCBank; the other banks supported Carroll’s application.
Epilogue
Two voice messages from David Drumm to Shane Ross
26 June 2009, 11:03 p.m.
David Drumm here, ex-Anglo, very late admittedly returning your call and I apologize for that. I moved out to the US this week so a little bit all over the place. I was very keen to return your call. I’ve been told many times you’re a very honourable person and good old PR people have held me back at times, and I have to say I’ve learned a lot in the last number of months about who to listen to and who to trust but anyway, I would dearly love, you have no idea how much I’d love to be sitting down with you [line cracks here] to talk about everything that went on in the last couple of years but the lawyers are telling me that I cannot speak about this stuff because of the amount of, sort of, legal things going on out there and I have to be honest – at the personal level I’m a bit afraid… em… of the backlash that could come from… from certain quarters. But I didn’t want you to think that I wouldn’t return your call or that I wouldn’t want to speak to you – I do. I’m hoping that your book is a bit more substantive – I know it will be – and informative than a lot of the old junk that’s been out there. Irish people deserve and want to know about the complexities behind the scenes – I’m convinced of that – and the global… em… context for everything that’s gone on. So, again, I do genuinely wish you well, Shane, with the book, and hopefully there will be a time when I can get a few hours with you and a cup of coffee and have a long chat about all of this. So all the best. Take care, Shane, bye bye.
3 July 2009, 12:10 p.m.
Shane, it’s David Drumm here. Got your message, sorry to leave a late voicemail again. Just to reiterate, I can’t get into a conversation with you at this stage. I hope… em… we will have a chance at some [muffled] time in the future to do that and again just, good luck with your, with your book, Shane. God bless.
Photo Credits
Credits for the inset photographs are as follows:
Tom Burke, Irish Independent: page 7 top left.
David Conachy, Sunday Independent: page 1, page 2 bottom right, page 3 top, page 5 top right, page 6 all, page 7 top right and bottom, page 8 top right.
Andrew Downes: page 4 top left.
Eamonn Farrell, Photocall Ireland: page 4 top right and bottom.
Tony Gavin, Sunday Independent: page 2 top.
Steve Humphreys, Irish Independent: page 8 top left.
Frank McGrath, Irish Independent: page 2 bottom left, page 5 top left, page 8 bottom left.
Gerry Mooney, Sunday Independent: page 8 bottom right.
Senan Doran O’Reilly, Evening Herald: page 5 bottom right.
Index
Abbey 145
Abrahamson, Maurice 26
Abramovich, Roman 8
ACCBank 8, 262–5
DIRT scam 24
Aer Lingus 25, 54, 55
Age Action 198
Ahearne, Alan 159, 259
Ahern, Bertie 112–13, 114, 130–1
and the 2009 elections 250
‘Bertie Bowl’ 118
Cowen and 169, 170
Future Shock: Property Crash 160
Galway tent 114–15, 116, 117
McCreevy and 168, 169
tax breaks 127, 131
Ahern, Maurice 249
AIB see Allied Irish Banks
AIG (American International Group) 181
AIIM (Allied Irish Investment Managers) 24, 25, 152
Allfirst 237
Allied Irish Bank (AIB)
29/30 September 2008 shares 198
in 1970s 20
1985 state rescue 8, 21
2006 property sale 164
2007–8 reaction to fall in share prices 173–4
2007–9 share losses under Sheehy 234
2008 banking crisis 86, 174, 190–8
2008 share losses 212
2009 shares 231, 251, 255, 266
AIIM investment arm 24, 25, 152, 153
Allfirst subsidiary 237
approach from Sean FitzPatrick 184
bank loans 84, 125, 165, 262, 263
Bankcentre, Ballsbridge 114, 164
board make-up 26–7
directors on board of Central Bank 71
DIRT scam 23–4
Faldor scandal 24–6
and the Financial Regulator 66–9, 78
Fine Gael and 133, 134
First Maryland Bancorp and 20
formation 7
Garret FitzGerald and 134
Goodbody Stockbrokers and 46, 68–9, 146, 147
IBEC and 135
ICI and 20–3
Lenihan and the contest for Sheehy’s successor 238–40
Lenihan’s appointment of Spring and Collier 207
McErlean and 64–5, 66–9, 71–2
mortgage war 140
MyHome.ie and 166
overcharging offences 70
recapitalization issue 206, 207, 222, 237–8
regulator’s lack of challenge 26
Sheehy and 2, 173–4, 234–8 see also Sheehy, Eugene
socializing with the regulators 71–2
Société Générale and 148
state aid following nationalization of Anglo 220–2
Allied Irish Investment Managers (AIIM) 24, 25, 152
Andrews, David 12
Anglo Irish Bank
29/30 September 2008 shares 198
1990s acquisitions 47–8
1999 shareholders 48
2008 accounts 200–2
2008 banking crisis 86, 175, 192–3, 201, 204
2008 optimistic reports 174, 185–6
2008 share losses 212
2009 interim results (May) 244–6
2009 June deterioration 253
bank loans 41–2, 48–9, 57, 59, 84, 125, 200–2, 261, 264
beg
innings 38
CFDs 177–8
Clegg and 42–4
Combined Code of Corporate Governance and FitzPatrick’s chairmanship 56–7
Davy Stockbrokers and 147–8
Drumm and 4, 57–62, 175, 208–9
executive packages 53, 61, 137, 208–9, 211, 245
and the Financial Regulator 77, 87–8, 92, 175, 177
First Active and 49–50
and the Golden Circle 120–1, 178, 245, 251
Irish Life & Permanent and 183–4, 201–2, 224–7
Irish Nationwide Building Society and 183, 184, 215
Isle of Man branch 44–5
Lenihan and 215–16, 219–20
liquidation fears 260
nationalization 216–17
Donal O’Connor and 58, 216, 217–19
overcharging offences 70
Peter Fitzpatrick and 19
and the property development market 49, 52–3, 59–61, 84, 175–8, 261
Sean Quinn and 177–8
Sean FitzPatrick and 38–45, 46–51, 52–63, 91, 122–3, 175, 183–4, 200–2, 208, 215
short selling of shares 175
St Patrick’s Day 2008 87, 88, 179
Standard & Poor’s ratings and 253, 254–5
stockbrokers and 87–8
Anglo Irish Bank Corporation (‘Little Anglo’) 38
Ansbacher Banking Group 48, 134
Ansbacher scam 26, 72–5
Appleby, Paul 220
Ardagh, Seán 88
Atkins Chirnside & Co 37
Aylward, Bobby 190
Bacik, Ivana 249
Bacon, Peter 241–2, 244
Bailey, Mick 115–16
Bovale Developments 119
Bailey, Tom 115