The Irish Banking System: Unfinished Business

Colm McCarthy writes on this topic in today’s Sunday Business Post: you can read it here.

45 replies on “The Irish Banking System: Unfinished Business”

@Philip Lane
“Also, the failures in bank regulation and supervision, and in the governance of the Irish banking system, have been colossal and home-grown.

The public are entitled to a thorough and public investigation into what went wrong.”

Colm McCarthy is completely right but the previous record of investigations set up by our governments, to enquire into events under our governments, has been dreadful. What would really help is if our regulators and police services actively investigated in the aftermath of disasters. One might have expected then that the new Governor of the Central Bank, Patrick Honohan, would be kicking down doors like a seventies TV detective after the mass insolvency of our banks. Think again:

“I am not in the business of looking into old files to see what went wrong…” !!!

“…but I can say that, while there may be institutions thinking of moving in search of lighter regulation, there is no point in them moving to Dublin, because they won’t find it here.”

Never mind a seventies TV detective. This is like Miss Marple arriving in a country house and on being told there was a dead body in the library announcing: “I am not interested in the dead body already in the library but I would like to publicly warn that if any more dead bodies appear in the library then I will certainly investigate.”



“any opportunities to impose cost on bond-holders exploited in full when the guarantee runs out in September next year”

I look forward to seeing bondholders taking a substantial haircut but I won’t be holding my breath.

“The new guarantee excludes subordinated debt and extends to instruments with a maturity of up to five years. Previously, liabilities were covered until September 29th, 2010 maximum,” the Commission said in a statement.”

That aside, a grim outlook. Any shock to the bond markets could substantially increase the cost of funding Irish debt. Any strikes or go slow in the public service could have the same effect.

With the amount of recap needed by the banking system in 2010 at €15.5bn (€2bn Nationwide, €0.5bn EBS, €7bn AIB/BofI, €6bn Anglo) it’s going to be an interesting year.

“The private sector of the economy is also heavily borrowed, via the banking system, and any uptrend in interest rates will hurt here too.”

I don’t understand. I read something that Alan Greenspan wrote about a year ago. He talked of industry having obtained long term finance at suitable rates. That industrial capacity was relatively well financed (I assume he refers to the US) but the problem will be in demand.

I can’t see any reason to fault that analysis myself. Apart from a few huge behemoth property companies that were always going to collapse anyways – no big surprise there – the rest of the private sector of the economy isn’t is very bad shape.

Sure the small may not survive – but we got too small a distribution of companies sizes in the past few years anyhow, as companies split up to make individual boutique firms, to pull down larger personal profits. I am not sad to see many of the small firms go at all. Many of them were spin-offs from larger companies anyhow. Larger companies that were starved of a workforce the longer the boom continued.

The fact is, we need sufficiently large companies operating in the economy in Ireland. The only danger in Ireland is that we ran these into the ground during the good years. In which case, Greenspan’s analysis doesn’t apply. We haven’t got larger companies which are well structured financially, provided that demand returns in 2010.

“It is desirable that the reduction in credit outstanding is concentrated on the unwinding of those components of the credit stock which were excessively inflated, and not in areas such as working capital for viable businesses.”

What kind of working capital are we taking about? I mean, is it a couple of software engineers who put a couple of credit cards together, max them out and hope to ‘ship a product’ to the marketplace in 9-12 months. Or is it a substantial company who has a payroll of significant size, and a new production line?

What is the make up of ‘business’ in Ireland. I fear it is mostly small and short term, rather than larger and longer term. I fear that Ireland will have to learn some way to amalgamate and group together a lot of our minnows and build something larger. The Germans can do it, the Japanese can do. Granted Irish people can’t get along with one another for more than 5 minutes. But we may have to learn.

“the debt ratio at 123 per cent.”
That would be debt:GDP. The Greeks have 300 bn of debt outstanding, which is 123% of their GDP.

With NAMA, we’ll be there in no-time. Never let it be said that there wasn’t a target that an uncoordinated set of Irish gombeen alcoholics couldn’t hit eventually.

Anyway, fabulous article. It gives me hope, Joanna…

“Crystallising losses does not cause them – they have already occurred, and everyone knows that, none better than the international capital markets.”

The markets know something else too. They know about the sheer lack of sophistication and committment of the Irish political system. Which used the private borrowing of business and individuals as a sort of windfall. A windfall to fund all sorts of daft expenditures. In other words, the Irish government managed to ‘borrow’ at an expensive rate vicariously through its own citizens.

How do the markets know that? It is simple. They look at a country such as Dubai and they say, well yeah, it has a state property company that over-borrowed, and built all of this ‘new city’ in the desert. Well okay. But at least it was a state property company obtain-ing its own finance directly. What did Ireland do? It borrowed even more but it doesn’t have a new city in the desert to show for it.

What Ireland does have is a population that are over-leveraged. Furthermore, as Pat McArdle points out in his budget articles last week, the Irish government has quadrupled, I think, it’s borrowing per capita since 2008. In other words, citizens in Ireland are over-leveraged from a personal point of view, and on top of that, from a state point of view. They are left with nowhere to turn – quite literally, they are snooker-ed.

That is what the market knows. Heck, if I was the market I would know I was in the ideal bargain-ing position to screw these guys to the wall. I would make Ireland pay for every drip of credit they take out. Because the market knows, Ireland has no other choice except to pay.

@ yoganmahew,


“Greece’s deficit is projected at 12.7 per cent of GDP next year”

means that Greece is not able to balance it’s book each year, so the debt ratio won’t improve next year.

Pat McArdle says in his Irish Times article, the Irish state was borrowing €300 per person in 2008. But the fact that McArdle hasn’t faced up to, is that the Irish government was really borrowing a lot more than that in 2008 in real terms.

But the Irish government received so much windfall taxes from its citizens, it only appears as though its borrowings per capita was only €300. I am disappointed quite frankly that analysis of the figures has been so shallow, all round.

In fairness to the humble environmental think tanks in Ireland, they saw right through the ‘fiddling’ that went on with the numbers. I hope the markets are not as perceptive. Apologises for the multiple replies, but I think I have made a point and driven it home.

I think this country owes Colm McCarthy a debt of gratitude. He has made a great personal effort by making repeated media appearances. His clear writing and speaking style, his ability to rise above personal and party politics and his ability to call it as it is have made him one of the foremost, if not the foremost, independent commentators who people can trust is telling them the truth without spin.

Colm McCarthy is right that we cannot come through our problems if we don’t tell the truth about the problems we face. He is also right that we won’t come through this as a healthy united country unless we tell the truth about how we got to where we are. Similarly, all organisations that have had a part in what has happened must be honest with themselves, their staff, shareholders, members and supporters if they want to come out of this as better stronger organisations that are going stand the test of time and deliver what their organisation is dedicated to.

@ Zhou,

as always, your comments amongst some of the highest quality here. Can I make a suggestion, by the by?

One would have to be a bit of a technological geek to understand this. Back when I started to read through Nicholas G. Carr’s blog called ‘Roughtype’ dot com, I started to understand how a transformation is happening in business.

We went for strong centralised organisations to more dispersed and flexible small units, connected up through technology. That is one of the things that Ireland is struggling with at the moment. Our industry adopted this model and put its two hands around it. We don’t have the large conglomerates like other countries have. Most of our industrial or service sector growth happened in a time when this new idea of small companies widely dispersed had really gained prominence.

The reason I mention Nicholas G. Carr, is that he questioned this structure. He asked the question, just because modern technological infrastructure is widely dispersed, mobile and small, does our attitudes towards business administration have to reflect that?

When I read Colm’s article in the SBP I begin to wonder why Irish business is so heavily indebted at this point. Is it because most Irish business consists of a couple of ‘dudes’ taking out credit lines at expensive short term rates, where few questions are asked. I mean to say, that might have worked ‘spank-ing-ly’ well in 2005 or 2006. But what about today?

Do we need to provide other kinds of climbing frames for Irish business to recover? Ones which require less exposure to crippling short-term credit. What is the answer to this? A genuine question to all of you knowledge-able folks.

@Philip Lane
I posted this elsewhere but I think we really need to reflect on whether we can build Jerusalem for our domestic banks while building Las Vegas in the IFSC:

“Both Mr Elderfield and his boss Prof Honohan now face a balancing act; they must show the world that what happened in Anglo Irish Bank is not typical of how the Irish financial services sector works and crack down on lax practices at domestic banks.

They must also keep the hedge funds, investment funds and foreign insurance companies based in the International Financial Services Centre in Dublin happy.”

Is this twin track approach dooming us to another catastrophic failure?
Surely a regulatory house divided against itself must fall?
Another question. If, say in 10 years, Brian Lenihan puts Ireland on the hook for massive losses at an IFSC operation, will Germany step in again to save us from disaster?

I commented before about how Frank Fahey appears to be a very good guide to likely future banking developments – as befits the second most prominent pro-NAMA spokesperson.
“I predict that many of the Anglo Irish Bank assets will be among the best that will come into the ownership of NAMA, particularly in the US and Britain. The NAMA assets that will be taken over there will be the first assets that will yield profit for NAMA.”
Being able to predict this means he is obviously very well informed. But a statement he made just before this is also very enlightening, especially as there have been a lot of comments in the blogosphere about turning Anglo into an SME bank. “but from now on, Anglo Irish Bank could become critical to the successful recovery of the property sector.”
Conclusion: Property lending is all they think about. It’s their heroin. This is
what they mean when they talk about Anglo as an SME bank.

NAMA is a bargain – only 30% of Germany’s WW1 War Reparations!

@E65Bn plus interest and NO extra lending!

If, say in 10 years, Brian Lenihan puts Ireland on the hook for massive losses at an IFSC operation, will Germany step in again to save us from disaster?

Do you mean in addition to the bailout they already did for Depfa Bank?


“When I read Colm’s article in the SBP I begin to wonder why Irish business is so heavily indebted at this point. Is it because most Irish business consists of a couple of ‘dudes’ taking out credit lines at expensive short term rates, where few questions are asked. I mean to say, that might have worked ’spank-ing-ly’ well in 2005 or 2006. But what about today?”

I think that the reason we are so indebted today is that the banks extended leverage so much. Whatever about the relative merits of small independent organisations as against large organisations, I think we can safely say that it was large organisations that got us into this mess.

Furthermore, in the aftermath, the guys in the small organisations in Ireland are suffering losses, being wiped out and bearing personal responsibility in a lot of cases.

The debate between the merits of big and small organisations could go in for a while. As with all complex problems you will find that it is horses for courses.

Sticking to the subject of the discussion, it seems clear that banks have to be big organisations for various reasons. One failing in banks that can be associated with big organisation is that employee promotion is often a matter a function of the culture of the banks rather than a meritocratic process as some might imagine. He who rises to the top promotes those who admire him and edify him by imitation and praise.

As one behavioural economist (whose identity escapes me) posited, the means by which stupidity rose to the top in these organisations may be a function of psychology. Thereafter, however, many of the bad decisions are simply as a result of stupidity and ignorance rather than psychology or economics. We should not tie ourselves up in knots over the why and the wherefore at that stage.

It is enough to know what happened so the errors can be described to those working in those areas and to the public (rather than people spinning and lessons not being learned). That is why we so badly need this investigation into the banking sector in Ireland.

@ Frank Galton

And if Hypo hadn’t previously taken over Depfa we would have been on the hook.

That should scare the daylights out of every Irish Citizen/Taxpayer.

Hoe well is the IFSC regulated right now?

“Technically speaking we didn’t have to do that,” one leading finance official fumed to this paper last month. “We could have left that in Ireland’s lap.”

Irish financial experts would disagree, saying the highly illiquid bank was Germany’s problem, even if it operated from Ireland.

Regardless of who was responsible for the mess, it stuck in the craw of the Berlin finance ministry to have to bail out a bank that had deprived Germany of billions in tax revenue by moving to Ireland.

And what was this Ireland, financial officials in Berlin asked, except an economic basket case of fictitious money and very real debts, and regulation so light to the touch that it amounted to a “regulation-free zone”.

Ireland….”an economic basket case of fictitious money and very real debts, and regulation so light to the touch that it amounted to a “regulation-free zone”

@ All. “An abundance of fictitious and imaginary money causes the same disadvantageous as an increase of real money in circulation, by raising the price of land and labour, or by making works and manufactures more expensive at the risk of subsequent loss. But this furtive abundance vanishes at the first gust of discredit and precipitates disorder”. Pithy quote from Ireland’s (Europe’s?) foremost theoretical and practical economist *.

Times were that you ‘crammed down’ the un-repayable debt, kept quite for a while, rebuilt savings and slowly emerged.

Those pesky dinosaurs became extinct because their food supply declined. Our current financial species needs credit as their feedstock. Seems that a debt virus has infected the soil and no credit plants can grow. A very cold winter, apparently, kills virus particles.

B Peter

* Richard Cantillon, late of Ballyheigue, Co Kerry.

Have a look again at the profits Depfa was making in its pomp. It was gambling huge sums of money for tiny return. The problem is not the loss of tax revenue, it is the riskiness of the business model. Complaints about regulation free zones are not looking at fraud, they are looking at business practices.

The same regulatory failings are evident in relation to the Irish banks – business models skewed to a single bet. Playing both sides of the game. Absurd sales incentives. Absurd bonuses. So far, nothing has changed.

No wonder the Germans are upset!

The IFSC is devoted to money laundering and gambling. Pecunia non olet. Once said about a tax on urine, an important part of the leather trade in Roma.

A part of it is legit, related to back office operations, carried out more cheaply! in Dublin than London etc.

Time to reconsider the IFSC? Or do we want to know? After all Anglo-Irish was fully regulated. Nobody knows precisely what goes on north of the Liffey!

Do we yet have a good bank? One with no debts except for operating capital, willing to lend to businesses that can afford the rate? No? Would it be a good idea?

Does anyone trust FF? Or their senior public servants who do lie upon oath? Want names? From Revenue Commissioners of course! I’m sure they do so across the public service as they will not get on unless they do. Change this culture?

Otherwise things look real rosy!

Cantillon was never listened to and still is unknown! Why? Bankers would be out of business.

Who pays for war? Who creates the business cycle over the 70 year term? Who gets the World Bank to lend to poor countries? But they are lovely people …….. very polite and they give our money to charity.

@ yoganmahew

I agree. I have previously posted this link. About “Control Fraud” in pursuit of bonuses.

You’ve probably seen it but worth a second glance.

I really do wonder what lurks about down on the docks and are we responsible for it.

Moyers & Black.”

“It was gambling huge sums of money for tiny return.”

And when the Death Star finally powers up? 😯

@ All

Has anyone looked at the Canton banks in Switzerland (with local gov control)- they seem to have come through this and some big boys in Switz needed a bail out. If Greg’s €15.5 billion recapitalisation is anyway accurate (careful of heart failure here – SPV does not hide the real debt/GDP ratio) then NATIONALISATION will arrive -albeit two years late. We might learn something from these Canton banks.

@ Zhou
You’re slipping Zhou- drop all that prescriptive stuff and get back to what you are good at (-;

“Also, the failures in bank regulation and supervision, and in the governance of the Irish banking system, have been colossal and home-grown.

The public are entitled to a thorough and public investigation into what went wrong.” Colm McCarthy

100% in agreement on this one. Will it happen? From experience with the Tribunals – NO.

@ David O’Donnell

Take €2.5bn off it.

Will you sleep any better?


Remember to take account of the €4bn already lost in Anglo and the €7bn “invested” in AIB/BofI.

Fitch are already taking NAMA, what (?) another €70bn into account for Sov debt purposes.

If we reduce public sector pay and welfare to zero we just might make it.


We really need a public debate on regulation of the IFSC. The country was wilfully walked into one massive fist regarding our domestic banks. We have clearly exhausted the Germans patience with the DEPFA affair. In the early eighties our leading bank almost took itself down. Twenty five years later all our leading banks took themselves down and we sent shockwaves through the German banking system. What will we do next: destroy the entire global financial system? Before we do, I think we should at least have a debate about it.

“There be monsters.”
Too true. But if we tell ourselves they aren’t there we can live peacefully and make lots of money – until the next disaster.

@Philip Lane
It was an excellent article and although my views would be to the left of Colm McCarthy’s he has done a huge service to the country by identifying waste and inefficiency. That we will not see much of it cut until two and a half years into the crisis (I am sure they had identified many of the issues long before his report) at the earliest, if even then, is disturbing.

Likewise, those on this site who call for paycuts as an alternative to unemployment are correct but they should have stuck to Kevin O’Rourke’s proposal of a national cut. The public sector first approach has been divisive and may ultimately prove disastrous. Lenihan’s attempt to prove his fairness by now moving on to the semi-states is unlikely to work. Whatever about the effect of the prospect of increased taxes on consumption generally public servants must have been saving furiously for the last year when faced with the prospect of wage cuts. The minister’s threat of further cuts will surely incline them to do this even more now. Semi-state workers are now likely to do the same. This government’s threatening of so many sectors of society – particularly those who spend most of their income – must have cost thousands of retail sector jobs. The fact that frequently the threats are not actually carried out makes it seem all the more perverse. How does the country benefit from this reign of policy change terror?

Looking at the “Week in Politics” show yesterday one could not but be depressed. On the one side were Richard Bruton and Joan Burton, expert in financial matters with a clear sense of decency, fairness and justice. On the other side was Brian Lenihan – the exact opposite. Alas for our country that he is the one in office. There must be at least a dozen people on the opposition benches who would do a better job, Bruton and Burton a vastly better one.

@Philip Lane
Looking at Colm McCarthy’s article again one is struck by how willfully and foolishly Brian Lenihan has defied it’s suggestions. McCarthy says bondholders should face costs but Lenihan is doing all he can to avoid this, even though Morgan Kelly told us the bondholders are insured against losses. When anyone mentions bondholders Lenihan starts screaming about Iceland.

“The exchequer costs of the bank rescue need to be minimised ruthlessly, and any opportunities to impose cost on bond-holders exploited in full when the guarantee runs out in September next year. Compensating providers of risk capital to failing businesses infuriates taxpayers, and gives capitalism a bad name.”

While McCarthy stressed the importance of being honest about the cost of the bailout, Minister Lenihan keeps telling us that NAMA will break even without even breaking sweat. The business plan forecasts a €5Bn profit!

“In approaching bank re-capitalisation next year, there should be no nervousness about revealing fully the capital losses which have occurred.

Crystallising losses does not cause them – they have already occurred, and everyone knows that, none better than the international capital markets.

If there is a further exchequer cost looming in sorting out the banks, better to know about it and get started on reconstructing the system. The capital markets will not be shocked: the pricing of government debt suggests that they already expect recapitalisation costs.”

Finally, McCarthy makes a powerful call for a bank inquiry.

“Also, the failures in bank regulation and supervision, and in the governance of the Irish banking system, have been colossal and home-grown.

The public are entitled to a thorough and public investigation into what went wrong.”

Lenihan has never even mentioned this let alone considered it. A swift independent public inquiry with majority foreign expert membership under a foreign non-anglo american expert chairperson, all with reputations for getting to the truth without fear or favour, is the last thing he wants.

Zhou Enlai said,

“I think that the reason we are so indebted today is that the banks extended leverage so much. Whatever about the relative merits of small independent organisations as against large organisations, I think we can safely say that it was large organisations that got us into this mess.”

There is a lot to be said for that analysis. For the want of an ‘academic reference’ to bolster the analysis even further:

I finally got a chance to read through Haldane’s article, Banking on the State, linked by Kevin O’ Rourke earlier.

I extracted this section from it:

“Over the past few decades, the global banking system has evolved into a particular organisational form, with a small number of large banks, a high degree of concentration and relatively low rates of entry and exit. Events of the past two years have accelerated these trends. In 1998, the five largest global banks had around 8% of global banking assets. By 2008, this fraction had doubled to around 16% (Chart 10).”

I might as well quote the following paragraph as well. Haldane describes the hedge fund as the dog that did not bark this time around.

“Hedge funds started this crisis in the doghouse. Yet they are the dog that has not barked. Their industrial structure may explain why. Unlike banking, the hedge fund sector does not comprise a small number of large players, but rather a large number of relatively small players. The largest hedge funds typically have assets under management of less than $40bn, the largest banks assets in excess of $3 trillion.”

Zhou Enlai said,

“Furthermore, in the aftermath, the guys in the small organisations in Ireland are suffering losses, being wiped out and bearing personal responsibility in a lot of cases.”

This is fair enough as a point too. However, we should be careful not to paint small business in too sympathic a light. It is sort of like the problem of pretending everything in Ireland was perfect in 2008, except some dasterdly credit crunch came along and ambushed us.

I know that isn’t what you implied, but I wanted to reinforce the point.

Zhou Enlai, I don’t know exactly what line of business you have enjoyed using your obvious talent, observation and intelligence in – perhaps providing advice to business, delivering them with sound financial products or other services – something along those lines I am inclined to think. In other words, you have refined your craft and your ideas. That is commendable.

However, what we are really lacking at the moment is a ‘systems thinking’ approach, to things which are ‘systemic’ in their nature as problems. I have suggested elsewhere that young economics students at UCD and elsewhere should be treated to lectures by the faculty in air conditioning systems. Anything basically that has a dynamic nature about it.

The thing we have to realise sooner or later in Ireland, is that small business is not so innocent. I worked for multi-billion euro companies in Ireland – they were big slave driving operations like Dell computers or Zoe developments and others in the food industry. I have been around that block a few times. The funny thing about a billion euro company in Ireland, is that nobody wants to work there. Because rewards are meagre, hours are long and labour is always short. (the part about the labour is recursive)

But the other things about having a multi-billion euro operation in Ireland, is while noone wants to work there, everyone wants to sell them services and consultancy at their terms, on their own hours and at their own price. It is like having the cream and eating it. You get a big supplier of fees, but you don’t suffer the toil of being inside the operation. This is what every smart, self-respecting, clever young dude in Ireland does and gets away with.

I wasn’t smart enough I guess. Anyhow, this is what we need to realize about Ireland, it is nothing without a couple of major players at that centre. Now we find ourselves in the absense of our major players at the centre, and the small business suddenly finds itself in an un-sustainable position. It defends itself by saying the banks are to blame, because they don’t have the credit. But in reality, the banks are not to blame (this time) because small business doesn’t have the orders, and the credit isn’t really that big of a problem.

We can go around pretending to ourselves otherwise and it is all very nice. We need the big players and the little players. But the fact is, the small players in a way are the ones responsible. Their attitude was, starve the large company of a workforce. Hold them to ransom to pay the high consultancy fees. Ah sure! It doesn’t matter, those large companies have a huge tap on credit from the banks anyhow. They will always be good for another bucket or two full of money.

The small companies, without having anything to do with larger companies or banks, killed the goose that laid the golden egg. It is time we all wised up to that and had a hard re-think about business organisation. Otherwise we won’t make it, we simply won’t. The banking investigation is fine, but like every good story in ‘Butterfly economics’ the storm originated somewhere else.


I agree that we need to focus on systems and how they work and how problems flow from them. I also agree that the rules and concepts by which organisation are organised have far far reaching consequences that most Irish business people do not understand. (Like PJ Mara and his vote and candidate management, the managers too often cannot see beyond the first 10 years. They think the proof is in the pudding after they have only taken one bite.) However, that should be a matter of academic research which should lead to changed business practices and changed advice for government.

However, the reason for an enquiry into the banking system is not about systems analysis. It is about social and political stability and cohesion. It is about reputation and social status. It is about responsibility and social accountability. Colm McCarthy is not asking for an enquiry into the banking system so an Oireachtas Committee can come up with a new system of regulation. He is asking for an equiry because people are being asked to pay for mistakes that nobody is really taking responsibility for. The Masters of the Universe who had huge personal power want to be seen as functionaries of the Universe staff with no culpability or responsibility. We still do not know the full extent of their personal dealings or profit taking in the era of reckless lending.

I agree that small business people are to blame too. They took the big fees and the big prices while things were good. Many knew it did not make sense but they did not call time. However, we all know that people will always behave that way in a bubble. Indeed, nobody criticises those who got out at the right time or who banked large parts of their profits. Why should they refrain from taking profits that others would take in their stead?

It all comes back to leverage, bank debt, regulation and the seemingly risk free profit. The banks are the only institutions that can really tell the value of fiat currency. If they get that calculation wrong then ordinary people and small businesses cannot be expected to second guess them. The problem with the Irish banks is that not only did they make mistakes but it appears they compounded their mistakes, misrepresented their position to shareholders and the taxpayer and obliterated much of our wealth.

If there isn’t an enquiry into the banking sector and its regulation then the ordiary tax payer will always feel duped, the feeling of us (the great unwashed) and them (the connected thieves) will be exacerbated. That feeling of injustice, exploitaion and alienation will manifest itself on an individual level with greater criminality, violence, worker demoralisation, family stress, depression and fear and in at a public level in a degradation in public services including education. We need to allow people to get angry at the real mistakes and the people who made and for people to understand the quotidian stupidity and venality that underlies most of this. We need it to be set out as clearly as Colm McCarthy writes. Otherwise people will feel helpless, disenfrachised and their anger will be directionless and corrosive.

@ Zhou Enlai,

I think the above piece is very nice indeed. It is well written and makes the right sense with great clarity. You should be very proud of that piece of writing. I will come back to read it again, I have no doubt.

The thing is though, I don’t write like that. To give you an example of how I would ‘make my point’ I have offered you a few sentences below. Bearing in mind though, I haven’t covered as many points, I have not expressed them as well or in as many dimensions as you can do above.

Here goes.

The main reason, I think the Irish people need a banking inquiry is not for adults, but instead for children. It would be a kind of exorcism. The spirit of ex. Anglo head has gotten into every young chap in the country I reckon. They are looking at a Christmas in 2009, and thinking about what they will be when they grow up. They see their Dad who is an expert trades person signing on for food stamps. They see uncle Joe who is a structural engineer twiddling his thumbs and uncle Mike who is a very good architect, is depressed and has nothing to do either. These are all the construction crew sitting on the sidelines – the fools.

Then we have the financial guys. Even when there is nothing to do except to mop up the mess, the financial guys still are busy mopping. The young man in his early teens is saying this Christmas, I want to be like ex. Anglo head when I grow up. I am not going to be cast to one side. In fact, I’ll do it better than the Anglo guys did – I won’t get caught with my hand in the cookie jar, even though I am going to hoover up every last crumb. I am not going to be side-lined like my fool father and two uncles who tried to ply an honest trade.

That is the main reason for the banking inquiry. I was lucky when I look back at it now. I had a guy called Frank McDonald to read.

McDonald is still plying his trade as a journalist, engaging with the larger issues in Copenhagen. My hope is that McDonald’s writing will provide some example to young chaps out there. In the absense of any other adult role models. But think of it, in ten or twenty years time, we might be looking at a dozen ex. Anglo head incarnations.


the bank inquiry on its own will not be enough to pull the youngest, most impressionable minds away from the lure of the easy fix. The banking inquiry is important, sure, for people who are adults now.

But something else, something magical, new and aspirational is necessary to give all the younger minds something to work on. That is why I mention a new role for business organisation, a new re-think of how we structure our business, who we organise people and resources. That is the kind of ‘activity’ and action required to capture the imaginations of younger folk, in a positive way.

If we could do something like a space mission, that would be even better. But in the absense of that, lets stick to insulating attics, or something like that. Just a bit more exciting.

Even in Victorian Britain they would have had enquiries into much smaller controversies after a few months. A year and three months after the bank guarantee we still have nothing. The Victorian enquiries would have been done by Sir Establishment Figure, and would have provoked resignations by the responsible ministers and by several of the parties involved. Recommendations for new structures and new legislation would have followed as part of a process of sweeping reform.

Accountability in Ireland has actually regressed since Independence. We’re not even Victorian – we’re Georgian. All we have gotten so far is a review by a management consultancy and a new Central Bank governor who says he can’t be bothered with old files – but is making sure to get to know everyone in the Central Bank. The new regulator was at Cambridge at the same time as the minister. Anglo Irish bank now appears to be run by old Bank of Ireland hands. Even the very few new people in Irish banking look exactly like the old people.

The simplest explanation for the aversion to an enquiry is that the establishment believes there was no mismanagement. As Fintan O’Toole said tonight our regulators did not fail. Their job was to regulate as little as possible. That’s the way they were told to be. Reread the controversy section of this wikipedia entry and you will see that Irish financial regulation was an oxymoron long before Pat Neary took over in 2006.

“The New York Times referred to Ireland as the “Wild West of European finance” in April 2005 which was seen to underline the fragility of the Country’s Financial Regulation system.”

Pat Neary may have had a head like the Mekon but his approach to regulation was not alien but completely native to the Irish establishment.

Surely The Irish Times editorialists should be calling for an enquiry at every opportunity? Even just mention it in passing when they’re supporting welfare and wage cuts.

TPTB have a foot on the jugular. They have enquiries only into matters with no consequence to them.

Think about it. Who actually runs this country? Who has the power? It is not MSM journalists. I repeat again that the PIRA only got the secret talks brought out into the open wjheen they (stumbled upon?) The Baltic Exchange. Someone noticed that!

@ David O’Donnell

€11bn already “invested”:

“The Government has already injected a combined €11bn into Anglo Irish Bank, Allied Irish Banks and Bank of Ireland.”

Irish Nationwide & EBS = €2.4bn:

“It has also committed to investing up to €2.4bn into Irish Nationwide and EBS as discounts associated with the National Asset Management Agency (NAMA) plan blows massive holes in the building societies’ balance sheets.”

Anglo = €4bn:

“Mr Lenihan signalled last month that Anglo, which has already received €4bn, may need up to an additional €4bn.”

AIB & BofI €7.2bn:

Can’t find the link, but I’m sure I’ve seen it recently.

Raising Capital:

“Mr Lenihan has repeatedly said that he would prefer the country’s two top banks to raise any additional capital needed in the private market — either from selling shares or assets.”

Difficult to see how they can raise capital at current share prices. Could be wrong but I think that selling assets will only improve the position if sold at a profit and taken to reserves.

Improving Tier 1 AIB & BofI:

“But rather than pump fresh cash into the banks, it is understood the Government plans to offer to convert some of its existing €3.5bn investment in each, held by the way of preference shares, into ordinary shares.”

Again, could be wrong, but I don’t see that converting perpetual preference share into ordinaries (at par) will improve Tier 1. But then the “nominal” value of the Preference Shares is only €35 million for (I think) both banks. So maybe there’s something clever going on.

What a strange country we live in. We are putting vastly more than the share price into these banks but the minister repeatedly tells us he doesn’t want to fully nationalise them. A rational person with only the taxpayers interest in mind would fully nationalise them and then sell off the shares in tranches as conditions improved.

Not only that, Brian Lenihan is continuously encouraging the NAMA valuers to go easy. Why? Why does he want us to overpay for the property loans?

My own opinion is that it is because he is entirely devoid of a sense of right and wrong.

“reason for an enquiry into the banking system is not about systems analysis. It is about social and political stability and cohesion. It is about reputation and social status. It is about responsibility and social accountability.”
Welcome back – much more like it Zhou – fact is that the dominant ideology appears to be a combination of reckless neoliberalism allied to cute-hoor-ism for a particular elite network whose interests always come first – and after last week this group are also winning the propaganda war. the last thing this crowd want to see is a detailed tracking of the incestous set of relations between certain gombeen capitalists, weak Irish institutions, and a fawning political cadre – the solutions to the mess created advocate neo-classcial solutions – where are the behavioural/psycholgical or instiitutional economists who could provide some input into the McCarthy/Zhou inquiry?

Good update on the greatest rip-off of the Irish peasant since the Napoleonic wars – and not a peasant revolution in sight [yet!].

@ David O’Donnell & E65Bn plus interest and NO extra lending!

Here is the body of an email I sent to Pat Kenny one year ago to the day. He did air it and was shot down by the anti-nationalisation argument.

I cannot reproduce the accompanying table in WordPress but the market values were as follows.


Name / Shares In Issue / Price / Market Value

Anglo Irish Banks / 759,952,175 / 0.377 / 286,501,970
Allied Irish Bank / 880,661,066 / 1.980 / 1,743,708,911
Bank Of Ireland / 1,004,193,740 / 0.880 / 883,690,491
Irish Life & Permanent / 276,782,351 / 1.520 / 420,709,174

Total stock market value one year ago = €3,334,610,545


Brian Lenihan could buy the entire quoted Irish Banking System for €3.3Bn and still have €6.7 left over to fund credit for “real” business.

No dividend payments for five years.

Properly consolidate the sector (Swedish style).

And then sell the restructured entities at a later date (for 5? 6? 7? Billion)

Why bother with preference shares if you can own the whole lot?

The Country is already on the hook for €500Bn in any event. Providing €10Bn in Preference shares does the tax payer no good.”


So, in short the entire quoted banking system could have been taken over by the State for less than the “investment” in Anglo Irish Bank.

Every single shareholder could have received full market value (including Anglo).

Irish Life & Permanent would by now have been re-privatised at a gain of (what) €2bn?

Instead we have NAMA. We have already “invested” €11bn and not a shred of equity.

We will (under Fianna Fail and the Greens) “invest” another (what) €10bn?

That is €21bn of Citizen/Taxpayer money utterly squandered by Fianna Fail & the Greens.

Remember, we have already guaranteed the entire balance sheets of these institutions.

Why did we waste €11bn hard cash? Why another €10/€11/….€15Bn?

Why another €70bn into NAMA.

I am beginning to think this is government by the insane.

But as long as the Stag is not stressed God will look kindly upon us and grant us absolution from insanity.

We the taxpayer demand that there is ‘An inquiry into the banking collapse’. The Government ask us to bail them over this collapse out but will not give us a chance to get an explaination as to how this whole thing happened. Brian Cowen u have been walking on thin ice for a long time now – at least make an effort to show us that ur with the people, not hiding members of the Fianna Fail Government.

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