Ahearne and McCarthy on the Banking Crisis

Today’s Sunday Business Post carries two interesting opinion pieces.  Alan Ahearne writes a defence of the NAMA approach (you can read it here), while Colm McCarthy recommends an inquiry into the banking crisis (you can read it here).  The latter suggestion has been adopted elsewhere (for example, in Iceland).

40 replies on “Ahearne and McCarthy on the Banking Crisis”

I think the telling sentence for me in Colm’s article is:”Last week, David Went, the chairman of the Financial Services Industry Panel, called for a strengthening of Ireland’s system of bank regulation. ”

Just how long is this (strengthening bank regulation) going to take? You would never believe there is a banking crisis (amongst others) in this country when you look at the speed of reaction and actually getting down to doing something about it.

On another but related point – I’m trying to do some research on less obvious knock-on effects of the banking/economic problems in Ireland. I have anecdotal evidence that people are emigrating in droves. Anyone know where I can start looking for some hard data to back that up?

Joseph, the CSO’s Population and Migration estimates for April 09 will be published before the end of August, no precise date yet. The Q1 QNHS implies pop figs for the adult population, and has been released.

I think Colm McCarthy is right, though I think we need to investigate beyond what is suggested to allow us to restructure the banking sector. He concentrates on one side of the banking profitability equation – the losses. He does not go into all the ways in which banks fundamental future profitability has been damaged. Obvious issues are: ‘safe’ tracker mortgages, which are now losing money; the downturn reducing the volume of business; capital scarcity preventing the making of good loans; overstaffing.


Both are interesting pieces, but neither will change the parameters of the debate significantly. Colm’s assertion that NAMA is a bail-out only of depositors is questionable. Bond-holders are more likely a much bigger beneficiary.

Regarding the impact on developers, there is too little in the legislation to judge whether NAMA will offer much or less forebearance to debtors than would be the case if the loans were left with the banks.

Only last November, the IMF finished a study on banking and property busts in seven other countries where the NAMA approach was adopted, and concluded that “Government-owned asset management companies appear largely ineffective in resolving distressed assets, largely due to political and legal constraints.”

In layman’s terms, the IMF believes that state quangos are much less skilled than hard-nosed private bankers at recovering loans from politically well-connected borrowers.

Alan contrasts the “quick sale” and “the price of immediacy” with “long term economic value. I don’t think anybody has a difficulty with this in theory, but in practice the latter is impossible to estimate, and the legislation provides for a surprising degree of political interference in the process. It may well be that current market prices end up looking generous in a decade’s time.

The legislation is fatally flawed in that it does not allow for this uncertainty and makes no provision for long-term risk-sharing between taxpayers and bank investors of all hues.


Colm McCarthy, in his SBP piece, brings some badly needed perspective to this financial and economic mess and, usefully, demolishes some damaging and false perceptions that have grown legs, but he seems to pull his punch when proposing an Oireachtas inquiry. I fully agree that the Oireachtas, representing the ultimate authority of the Irish people, should play a much greater role, but it is dominated by a Government which does not have a popular democratic mandate for the policies it is pursuing. The Oireachtas is neither empowered, nor likely to function in a manner, to engender a national consensus to accept the beginning of a sequence of drastic fiscal adjustments in the December Budget.

Though Colm has attempted to provide some perspective to the unfolding debacle, I think it is necessary to go even further. Does it not strike anyone else as very strange that almost one year will have elapsed since the emergency bank guarantee before legislation addressing the banking crisis will have been enacted – and there is only a high probability of this happening?

Most other countries faced with a major crisis in their banking systems have applied mechanisms and established institutions to resolve the crisis and are beginning to see some signs of success. And, unlike Ireland, only a proportion of their banks were insolvent or teetering on the edge. The entire Irish-based banking system – not just one or two banks – is insolvent. Would it not be unreasonable to expect even greater urgency that that exhibited by other countries?

What I think has been missed by most commentators and which helps to explain the Government’s lethargy and determined opposition to full nationalisation of the banks is the recognition that it would need external equity investment to support recapitalisation and that any subsequent disposal of its holdings would lead to majority – or, perhaps, even total – external ownership of the banks.

The extent of the ‘haircut’ has little, if anything, to do with the financial well-being of developers – or even the future evolution of prices in the property market (though a desire to prevent a collapse plays a role); it has everything to do with avoiding all Irish-based banks falling into external ownership. The credibility of any governing party would be totally destroyed if the entire national banking system were to pass into external ownership on its watch.

This is the bind the Government finds itself in. It cannot admit that this is the primary objective of its bank resolution strategy. Every diversionary ruse imaginable will be deployed to avoid admitting this publicly, but this the objective – and the fear.

Therefore the question for all Irish people is: are we prepared to see an effective resolution of this banking crisis that will minimise the present value of future taxation liabilities, but that will lead, almost certainly, to majority external ownership of the banks? or are we prepared to incur potentially open-ended future taxation liabilities to retain, almost intact, the current ownership and management?

That is the key question, even if the Government will never put it like this.

@ Paul

“What I think has been missed by most commentators and which helps to explain the Government’s lethargy and determined opposition to full nationalisation of the banks is the recognition that it would need external equity investment to support recapitalisation and that any subsequent disposal of its holdings would lead to majority – or, perhaps, even total – external ownership of the banks.”

This is most likely true, but the difference to the alternative is only an accounting trick. Either the gov’t borrows on international markets to buy equity, then sells the clean banks to new international owners (nationalisation) or else the govt borrows the same money to overpay for the bad loans (Nama). Instead of owning Irish banks, the foreigners own Ireland.

Either way, the money to pay for the mess is going to come from abroad.

Oh, there is one other difference, of course. Foreign owners would be much less likely to tolerate the corrupt, crony capitalists who ran the banks into the ground in the first place…

Andrew, I did not mean to suggest that there is no risk of being too generous to bond-holders.

@Andrew McDowell

“Government-owned asset management companies appear largely ineffective in resolving distressed assets, largely due to political and legal constraints.” IMF Report.

This is a very important finding which calls into doubt the whole idea of a government-owned asset management company of any variety.

I agree with many aspects of the Labour Party approach to the present crisis but on the banking crisis I believe that FG has a policy ,”Recovery through Reform” http://www.richardbruton.finegael.org/policies/ , which has the potential to deal with the banking and long term economic crisis more effectively. Even a temporary nationalisation of the banks presents its own problems.

Let Richard Bruton and others in Fine Gael get into gear and argue their case in the press, on the air, via a dedicated website, etc or NAMA will be bulldozed through the Dail and Seanad in the tried and tested way. Anyone for a/the guillotine?

My belief is we have “lost” the Irish banks to foreign ownership either way. Even with the capital they get through Nama their lending capacity has been critically damaged and they will need to seek new investment. That’s only going to come from abroad.

As for your comment on the slowness of our response that could be the most damaging for us all. As Germany, France and now Japan pull out of recession we’re sitting around with little going on. Assume Nama gets passed in October and then then the loans get transferred (did they mention next June for phase 1) and then the banks seek their extra capital, Nama starts drip feeding development property on to the market….. Meanwhile Europe is recovering interest rates rise and we won’t be ready. It will be the opposite of our early membership of the Euro when interest rates were too low to facilitate Germany. They will be too high. It was always going to be thus – what comes around goes around. It just happens to be worse than anyone imagined.

@Colm McCarthy
If the objective is to explain to the general public what has happened in the banking crises, then surely a Prime Time Expose would be more immediate, cheaper and simplified than an inquiry?

The calls for an inquiry and for better regulation are all welcome. For both, EU oversight is necessary as the system is clearly dysfunctional here.

But we are in the middle of setting up the biggest financial organization in the states history. Incredibly, it is excused from regulation, from paying VAT or taxes, even from publishing audited accounts….

It is being set up to deliberately and knowingly overpay for stuff with public funds, hide the debts off balance sheet, not publish accounts and with staff indemnified from prosecution, provide a distorted view of the debts being forced on the taxpayer.

This is not ‘clever use of accounting tricks’ or ‘financial engineering’.

This is an organized fraud of public money.

By all means, regulation is needed but it needs to start with NAMA. At a minimum it must operate to the same level as every other person or company in the state ..

1) Pay full taxes, VAT, PAYE etc.
2) NAMA and its employees must be subject to full legal and regulatory framework that everyone else is, no indemnities.
3) Publish full audited accounts.

It can be argued that this makes work as it is a state agency, but forcing them to work to the same rules as everyone else is essential. Whats a few accountants when compared to EUR 90,000,000,000.00 ?

“Drowning kittens must be avoided”
by a Man Who Works for the Minister for Domestic Animals

Those who oppose the governments plan to purchase surplus kittens at a really high price, in the hopes that pet owners will use the extra money to get their pussycats fixed, must realise how horrible drowning kittens is. It is wrong to drown kittens, therefore we must buy up all unwanted kittens at whatever price it takes in order to buy them up. Don’t forget, kittens are cute, so money should not be an object.

Let’s not forget either that those kittens will one day be cats, which the government can sell for lots of money because by overpaying for these kittens, this plan will increase the future price of cats, particularly pussycats in heat.

There is widespread support among experts for the idea of the government purchasing kittens, as evidenced by a NSCPA report which described kitten drowning as “a vile practice”.

Other countries are also offering cash for litters, and the whole scheme is not unlike CAP, which has benefitted Ireland enormously.


In the insiders’ world, it would be difficult to find an untainted group.

As lawyer cartels have been the main beneficiaries of two public tribunals that will be soon be sitting for 12 years, with ZERO change in the land rezoning sytem and likely much else, a special committee of the Oireachtas would likely be the most appropriate, even though that body has rightly also been discredited.

Prime Time can do whatever it likes, but RTÉ has no credibility when it came to standing up to the political class. Nobody said boo because the advertising bonanza would just keep rolling.

The value of an investigation would only be evident if the next government is serious about reform, to avoid a third reprise of economic gombeenism, since 1977.

“Foreign owners would be much less likely to tolerate the corrupt, crony capitalism”

National Irish, anybody?

@ Michael Hennigan
I agree that RTE are tainted but who in the media (capable of delivering a message to the general public) isnt?
I think the Prime time team could do a good job on this issue.
If Joe public is the audience then what is needed to inform him is a fairly simplified conscise version of this bloody mess to allow him to make some informed choices as to wheather Nama in its current form is the best alternative.

Like you said thrawling through evidence spending millions we dont have on lawyers and waiting a decade for a judge to give judgement is useless when you think about the biggest reason people need to understand the ‘banking crises’
i.e so they can make an informed decision on wheather they favour NAMA in its current form.

We need something that can help peoples understanding (at least somewhat) before the government has a chance to push this through in later this year.

I agree with the content of both articles.

On Colm McCarthy’s article…

The debate is becoming dangerously addled with personal predictions about mistakes that will be made and why they will be made. I have no problem with people highlighting the dangers of various approaches and those matters yet to be determined which will have crucial economic and moral impacts. However, the repeated assertions about tiny haircuts and the Government being behoven to every national and international cloven-footed vI are now threatening to prevent any proper action being taken. The age old political business of bringing a Government down is being coming into play in a way that makes it one more poison ingredient in a perfect storm that brings about national collapse. Paul Krugman in his second lecture to the LSE noted that Argentina could have escaped bankruptcy by the numbers but nobody believed it had the political will to do so.

The public rightly see bankers as being highly connected and influential and also as being highly culpable and having huge vested interests. The Government must prove to the people by an Oireachtas enquiry that the Department of Finance and the Government shares the public’s anger and disgust and is prepared by way of a minimum first step (i) shame the bankers for their greed and incompetence and (ii) expose in public any possible wrongdoing by the bankers.

On Alan Ahearne’s Article…

We need a solution to our problems as quicly as possible. There are thorny problems and difficult issues to be addressed in cleaning up the banks. What price to set assets at? How do we approach bondholders? Do we ultimately nationalise? Do we nationalise 100% or by majority? What is our banking system to look like eventually?

Many of these questions cannot be answered at this moment in time. Whatever solution we adopt must be robust and flexible. It must also be transparent. Beyond that, the difficult decisions and the setting of the crucial parameters will be done at the time of execution, i.e. at the time assets are acquired, at the time the guarantee is withdrawn or reduced or not renewed, at the time part of the banks are sold, at the time of nationalisation and so forth.

The NAMA legislation is a modular part of the apparatus required to allow us to implement a solution. It is like the chain on the bicycle – it is important but does not determine what the bike will loook like or how fast it will go. It does not preclude nationalisation. It does not preclude us taking a more aggressive stance with bondholders, bankers or borrowers. As the IMF has said, nationalisation and asset management companies are two sides of the one coin.

In a make believe world we could legislate to rule out over-payment, to eliminate unjust enrichment of speculators and bankers, to claw-back tax-payer losses, to ensure that all distressed loans are managed perfectly. However, that is one hell of a make believe world!

In the meantime, the most effective thing we can do is to insist on proper oversight and transparency at all stages and to reserve the right on the part of the state to terminate the asset acquisition process or to negotiate or make lower offers for individual assets.

Alan Ahearne points out that we need to progress towards a solution as rapidly as possible. Who can contradict him? As they sometimes say in the USA, we must not let perfection get in the way of the good.

Those opposing the NAMA legislation are engaging in dangerous crystal-balling that fails to appreciate (i) the flexibility within the process, (ii) the limits of what is included in the legislation, (iii) the limits on what can be achieved in legislation and (iv) the urgency of the situation. They also fail to apprectiate that the Sword of Damocles still hangs by a hair and a display of political inability to progress a modular part of a solutuion acceptable to the ECB (who are funding everything) could be fatal.

At this crucial time, all politicians owe it to the Nation to concentrate at all stages on the national interest rather then their own personal or party political intersts. That simply cannot be repeated often enough.

I apologise for using the phrase “one more poison ingredient in a perfect storm”… ughh.

The last people I would engage on a Review of the Banking Crisis/ Industry is Politicians through an Oireachtais Committee. They would without us even knowing it have deduced all of the reasons why they the politicians and their compatriots in the Civil and Public Service had no hand act or part in the Crisis who though their incompetence in Legistation – tax and otherwise and downright lazy or non existent regulation have contributed massively to the problems in the Banking sector. Up to now it has been very easy to blame Bank management and the “greedy” Devolopers because we have had a media circus who have a quest for blood because they see their readers/viewers want some scapegoats. If there is to be a Review of the Crisis bring in Banking experts from outside the country with no connection to the problem and main parties involved.

On Colm’s article, I’d agree with TRP. Two points on that:
First, politicians are among the first to apportion blame, and the last people to admit to drawing up the rules of the game regarding financial regulation in Ireland. Light touch regulation was not just an invention by an incompetent regulator, but also by various ministers for finance and their department.
Take a look at the quality of both the questions and the answers at any Oireachtais debate. The questions, with the exception of one or two members, could charitably be described as a poor rephrasing of researcher-generated talking points; the answers of the people appearing are of a worse quality which is worrying given their day jobs.
Second, on a more practical level, Committees in Ireland are generally fairly toothless; people can decline to attend etc. Throw in the inability to get FOI information from the regulator or finance dept, such an endeavour would be stillborn. Contrast this with the German parliamentary inquiry into HypoReal’s collapse. Some other means of investigating this failure will be needed.

On Alan Ahearne’s article:
Alan, along with most other commentators fail, to understand the reasons why we ‘needed’ a guarantee and need some type of bad bank like Nama. There are three problems (liquidity, solvency, morphing into a systemic crisis). The guarantee and nama attempt to address three problems with two solutions.
The resolution of a systemic crisis requires an orderly framework to wind down banks over a short timeframe. This could be the credible stick that is needed to make the other two parts of the government’s response effective and in the interests of the people funding it: you and I. If it is possible to draft Nama legislation in a couple of months, then it is possible to do this. Tip for people in the dept of finance, google ‘UK Special Resolution Regime’.
This resolution framework could then accompany a large scaling back of the guarantee, and orderly winding down of Anglo and INBS, and importantly, a reduction in both the contingent debt level assumed by the government, the servicing of this burden, and the uncertainty associated with both.
Perhaps, most importantly, this would put a stop the financial system in this country playing a game of chicken with the taxpayer.

As Paul Hunt has pointed out, one year has elapsed since the blanket Government guarantee was given. I do find it strange that we are no nearer a proper resolution of the banking crisis.
Colm McCarthy is reported today as saying that NAMA is not the only problem facing the banks, he is, of course, right. Apart from the hotel and farming sectors, it is probable that the ECB will start increasing interest rates with France and Germany emerging from recession. Mortgage defaults will then start to increase. The AIB results recently highlighted the level of loan impairment at 25%. This figure demonstrates that even if the NAMA bound 20-24b of toxic stuff is removed, the remaining loan impairments will create another requirement for an equity injection.
The Research note by RBC Capital analysts has done immense damage to our banking sector. No amount of spin – such as the CIBC leak will undo that. It is difficult to see foreign investors buying into Irish Banks until they are confident that they have been completely cleaned.
So the country is in a vegative state along with the banks.
We need to now recognise the losses, recapitalise and implement a Resolution Trust without delay. What is wrong with using the National Pensions fund to achieve this. Better the 16 or so billion be invested in our national banks then in some far flung widget maker. The upside when it eventually comes will accrue to the Fund and eventual ownership of the banking sector could be controlled by the NTMA. Various issues would arise about concentration of assets etc. but desperate times require…..

Alan Aherne has simply trotted out all of the usual cliches as to why we need/have NAMA. Like all academics he has no concept of what it is actually like in the Private Sector at present. We have been hearing about NAMA since april and at best it will have cleared out the banks of some dodgy loans by april 2010. We still will not have a cent extra loaned out to business and their customers by the banks. If Aherne had any real business experience he would understand what this means and instead of delays that seem to be accepted by Governments and Politicians woulld arrange to get some system in place to put liquidity into the Irish Banks with guaranteed funding to business ASAP. Perfectly good well run businesses are struggling to survive because they cannot get paid for their goods and services. There is major damage being done to native Irish businesses at present and many will not recover let alone survive. Aherne thinks we can wait until sometime in 2010 or 2011 for some reprieve from this incompetence. Very few will be left to enjoy any improvement available at that time.

@Alan Aherne
“NAMA is designed to prevent a disorderly resolution involving a widespread fire sale of assets, which would be detrimental to economic recovery.”
NAMA is the Government’s belated response to a disorderly and widespread raising of asset prices – a fire which was stoked by Government policy coupled with ineffective regulation of financial institutions. This has clearly led to the impairment the means needed for the kind work we need to do and which some are trying to do, as Ray has just pointed out.

In addition to recapitalising Irish banks through NAMA, other responses are needed to limit the scope for similar land and property development in the future. They are needed now – not later!

I would have more confidence in our government system if I thought that the powers-that-be are determined to control the price of building land eg as proposed set out in Judge John Kenny’s 1974 report (which I suggested last October, in the immediate aftermath of the Government bank guarantee. http://www.independent.ie/opinion/letters/chance-to-rein–in-developers-1489912.html)

It is worth adapting one of Judge Kenny’s recommendations to the pricing of loans that are to be transferred to NAMA. He proposed that designated building land (eg. aka – loans to be transferred to NAMA secured on buildings and development land) be acquired at existing use value plus a premium of 25 per cent. It is a different way of approaching the values that NAMA will pay for the loans. It puts a different slant on long term value and thus on recapitalisation of banks.

@Colm McCarthy
“But public anger would be assuaged, and public willingness to accept cutbacks and tax impositions could be increased, if there were to be a full accounting for the failure of the Irish banking system……it is past time for an Oireachtas inquiry into the failure of the Irish banking system.”

Is an Oireachtas inquiry the most suitable means of promoting public willingness to accept the fiscal cut-backs arising from the failure of the banking system?

As far as I know, Oireachtas committees do not have powers to compel people to attend or give evidence or to produce documents, papers and records. So how much light an Oireachtas enquiry shed on the origins of Ireland’s banking failure?

I feel another tribunal coming on! But the costs and timescales associated with our recent experiences of tribunals would not meet Colm’s aims.

An alternative is the type of enquiry is that carried out by a single individual. One example is John Travers report on the long-standing illegal charging by the Government of people in long-stay care in health board institutions, see here
http://www.oireachtas.ie/documents/committees29thdail/committeereports2005/document3.pdf. This was a non-statutory inquiry which took less than 3 months to complete.

For a critical review of the issues arising from this report, see William Kingston’s
“Reflections on the Travers Report” http://www.studiesirishreview.ie/j/page202
(available only on payment)

I doubt that a similar non-statutory exercise by any Irish figure, or even an outsider, would now generate the kind of trust that is needed to meet Colm’s aims. Would those who know cooperate with a non-statutory enquiry, any more than they would with an Oireachtas inquiry?

Going further, is it possible that Colm and others under-estimate the awareness of the public on the seriousness of our situation?
To illustrate, I draw on a lecture organised by the then Swiss Ambassador here in Dublin during the mid-1990s. He was trying to make us aware of how the public authorities went about traffic management in Zurich. If I have remembered it correctly, the lecturer pointed that that opinion polls had been conducted in different parts of German-speaking Europe on various options regarding accessing the city centre which found that ie.
1. The general public agreed that access by car should be restricted
2. The politicians also agreed that access by car should be restricted.
However, when the politicians were asked what the general public would think of such restrictions on car usage, the majority responded by saying that the public would not wear it.
There was a disconnect between what needed to be done and what those in power thought would be acceptable to the public. The outcome was that Zurich opted for on-street light rail – in a city that is subject to citizens’ initiative and referenda!.
While we do not have a Germanic culture here, I suspect that a similar disconnect is present here in many spheres.

What is missing is trust that things can and will be done competently, thoroughly and fairly. Any inquiry into the past will not set out options for a future that will limit the scope for the kind of excesses we have seen here.
We need far more managerial imagination – the sort shown by Judge Kenny – than has emerged from enquiries whether they were conducted by tribunals, the Oireachtas or individuals.
That said, Judge Kenny’s report was just that – a report on which no action was taken.
We do not have that luxury now, any more than we had it 35 years ago!


There must not be an effective enquiry as it will destroy the establishment. The hunt for the guilty should, as usual, turn into the punishment of the innocent. Let the taxpayer pay. This is all a storm in a tea cup. Once we get the economy moving again …. Oh.

Find a solution quickly but not liquidation of the insolvent ……. tricky! I can see many millions being wasted and months going by. Isn’t it great!

When the government do not know what to do the opposition become more important. Tallaght strategy?

Kiss goodbye to Lisbon, unless we use electronic voting …… Once the corruption starts, it becomes very difficult to stop doesn’t it? How will it stop? We know after 1 Billion that Charlie and others were corrupt. We know that all it takes is one rotten apple in the barrel and all become corrupt and the genuine coin gets put away while the tainted coin moves faster and faster. When will it end? Who will end it? The gardai are threatening to break the law. What next? When do we stop it?


@ Colm
I think that this is becoming a distraction within the news cycle.

It may help, but probably unlikely in that those with means can challenge every step in the process. This was exposed with the Abbeylara commitee investigation??? And nothing has been done to put a dail commitee on a more sounder footing.

We have laws, and if these laws have been broken then there are/ should be consequences. But instead, in this country, we have this political/ legal theatre that ends up with all cost, little drama and f all consequences for those involved.

Again this has the danger of becoming a theatrical distraction.


I too agree that we need to enquire as to what went wrong with the banking system. Unfortunately, IMO, we need to do this before we buy loans from NAMA. It is beginning to sound like the developers have been on life support from the banks since the post-9/11 credit crunch. This leads to the suspicion that the banks have become little more than leveraged property-funds. As they are both providing credit to the suppliers and the purchasers (builders and buyers) with a greater exposure to the suppliers, it is in their interest to diffuse their risk by having many purchasers buying at a high price.

Given that our principal sources (in the media anyway) for the future direction of the economy and current prices paid (PTSB index) are the banks themselves, we have a market where the banks are funding both sides and providing the intellectual underpinning of the market.

So we are left with a situation where it looks like the banks bailed out the developers some years ago. The banks now in turn need to be bailed out. Is it any wonder that people think that NAMA is to protect the developers via their owners the banks? If the banks were unable or unwilling to move on the developers during the good times, why should we think that NAMA is going to do anything other than kick the can down the road another few years at cost to only the taxpayer?

“The Government must prove to the people by an Oireachtas enquiry that the Department of Finance and the Government shares the public’s anger and disgust and is prepared by way of a minimum first step (i) shame the bankers for their greed and incompetence and (ii) expose in public any possible wrongdoing by the bankers.”
They cannot achieve either of those objectives with an inquiry. They take too long.
The only way the government could show their good faith with regard to making people answerable would be to prosecute those who broke the law.
Anyone heard from Sean Fitzpatrick lately?

I would echo yoganmahew’s call for full disclosure or an investigation BEFORE signing up to buying anything from the banks

We saw with the guarantee how news of fraudulent activity became public after it was too late to rescind the guarantee… Or even put some conditions on it.

Banks which have been involved in multi billion euro fraud are now dictating policy to the people of Ireland.

We can be sure more of the same is waiting for the taxpayer should NAMA be set up as is. One needs only look at Zoe to see what horrors await us.

@Eamonn Moran

An Oireachtas Enquiry is the fastest way to bring the issues into the public light.

There is no reason why criminal and regulatory enquiries should not be commenced at the same time. One does not preclude the other. However, an Oireachtas Committee is by far the fastest way of getting answers in public.

I agree it would be preferable to have the enquiries prior to any asset transfer. Unfortunately, I do not believe we have time to wait for the results of an enquiry. For that reason I think we should aim to have the enquiry substantiall completed prior to asset transfer but should not make the enquiry a pre-condition to our taking whatever steps are necessary to minimise the costs to citizens and the real economy.

An alternative is to have a clawback mechanism in the NAMA legislation to cover recouping fraudulent loans, but the legislation would want to be very clear on what constitutes fraud.

I cant see that working to be honest…

Seanie Fitzpatrick and his cronies were able to claim no law had been broken. I find that hard to believe that no laws were broken. But if this is the case, the law needs to be strengthened.

I’m going to stick with fraud as a description of directors loans in Anglo, balance sheet manipulation in Anglo facilitated by Fingers’ crooked little outfit… Right down to ‘information’ provided by all banks to their shareholders in recent years. Zoe has shown just how far the rot goes.

Clearly, this is a minority view as I haven’t seen any prosecutions or even arrests yet. And don’t expect to.

After NAMA, Im sure we’ll hear about developers selling access rights to development land to their wives, banks mysteriously losing vital documents, directors of insolvent property companies having paid themselves massive pensions etc etc etc And thats not to mention the opportunities for corruption when assets are offloaded from NAMA….

I think there is a level of naivety here as to exactly the class of shark that is being bailed out.

“An Oireachtas Enquiry is the fastest way to bring the issues into the public light.”
It might be a fast way of venting emotion. But I doubt it will bring all the issues into the public light. An enquiry of the Travers type could be much faster.

Your earlier comment (“The Government must prove to the people by an Oireachtas enquiry that the Department of Finance and the Government shares the public’s anger and disgust and is prepared by way of a minimum first step (i) shame the bankers for their greed and incompetence and (ii) expose in public any possible wrongdoing by the bankers.”) is clearly focused on bankers only.

What standard of proof will be acceptable? Simple assertion by elected representatives?
Will the same standard of proof be acceptable on the role that successive Government policies, Ministers and officials played in stoking the events which you want investigated?

In what ways can the Oireachtas do this, given the seamless link between the Oireachtas and the Government – all of whom are members of the Dáil, the lower house of the Oireachtas?

Given the existence of corporation sole (ie. the civil servants are extensions of the Minister), I simply do not believe that any Dept. of Finance official will be allowed to say anything that could conceivably embarrass the current Minister or any previous Minister of Finance.

Thus an Oireachtas enquiry is unlikely to enlighten us on who knew what, when they knew, what action was taken and not taken together with a proper discovery of the influences in play. We have seen the difficulties which Oireachtas-appointed tribunals, which have clearer powers, have had investigating the facts of the matters withintheir terms of reference.

More importantly, such an enquiry will not inform us on options for policies, practices and procedures we need to put in place to avoid the same situation arising again. It is clear that the Dept of Finance has learnt nothing from the 1980s Bord Snip report. It is also missing from the follow-on to Colm McCarthy’s recent effort.

IMO, the Government, Dept of Finance and the Central Bank should be the subject to at least the same level of enquiry that those seeking yet more evidence of the incompetence of bankers. If they claim they are not responsible, what is government (elected and appointed) about then?

We need quiet competence far more than we need the grand gestures of Oireachtas members venting anger, which will serves only to deflect attention from others who are equally responsible.

Not for the first time, I cite Madison “Ambition must be made to counteract ambition. In framing a government which is to be administered by men over men the great difficulty lies in this: first you must enable the government to control the governed and in the next place, you must oblige it to control itself.”

Many people agree with Colm McCarthy’s call for a banking autopsy – “it is past time for an Oireachtas inquiry into the failure of the Irish banking system”.

Won’t we also need an enquiry into the manifest failures of the economics profession here?

It is hard for the layman to understand how a collapse on this scale was apparently impossible to detect in advance. Time we found out.


I note your concerns about the Government. However, the public anger at this moment is that we have to take a measure to prop up the banks and the banks are not accountable. It is for this reason that I think that a narrow enquiry into the activities of bankers and lenders is necessary. It might even dispell some of the myths of endemic corruption in our banking system. I think that opposition politicians are sufficiently detached from government to spare no quarter where the enquiry touches on State activities though I do not think State activities should be the focus of an immediate enquiry.

We can always vote out the Government at the next general election and I think it is pretty certain that FF will get walloped. This would be the case whether all the evidence said they acted prudently on the advice given to them by top official and advisers or otherwise. They are the only people that the electorate can hold to account and I believe they will do so. There is no need to have an enquiry now to stimulate a political crisis on top of everything else.

I am satisfied that regulation will be reformed and that there will be an effort to bring in outside expertise and to adopt better structures in line with international developments. I think everybody is quite satisfied that the Financial Regulator body was far from fit for purpose. I am not 100% clear on how culpable the Central Bank was or wasn’t and I think an enquiry down the line is desirable.

As for the Dept of Finance, we have a huge problem there. I don’t what kind of an enquiry could penetrate that organisation and I would be slow to waste my time with one. Their review of their own capacity leaves me cold. A massive re-organisation and infusion of new people is the only solution I can imagine having a real effect. This would take a lot of planning, some bold decisions and some deft political footwork to avoid civil service opposition.

In essence, I agree that the genesis of our problem goes way beyond bankers but the bankers issue is in danger of fatally damaging our political wherewithal to addressed serious and immediate dangers. Accordingly, it is the bankers who need to be investigated now.


The lay man will have to do a bit of reading if he wants to understand what he is giving out about. Copious amounts have been writtenabout whether and to what extent there has been a failure of economics.

Beyond that the lay man could read the resources linked to in Philip Lane’s latest post on the front page of this website – Learning from the Financial Crisis Globally and Locally:



this is not academic game.

try telling 500,000 unemployed lay people to go and read willem buiter or nassim taleb to find the answers to their questions. see how you get on.


The real world doesn’t fit into Sky News sized sound-bites or the Joe Duffy show.

If people want over-simplifications, inaccuracies, bias, spin, lies, polemics, journalist diatribes and political opportunism then I suggest they start with the Irish Independent and go no further.

Otherwise they can find somebody (or a political party) that they have faith in and let that person do their thinking for them. As they say, democracy isn’t a good form of government but it’s less bad than all the other forms of government that are on offer.


“The real world doesn’t fit into Sky News sized sound-bites or the Joe Duffy show.”

.. nor does it fit the projections of most economists.

“Like all academics he has no concept of what it is actually like in the Private Sector at present”
Of course Alan like all of us lives in bubble, with neither friends nor family in the private sector…

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