Government Banking Inquiry Proposals

@Karl Whelan
The banks started to get into trouble from 3 years ago (the start of 2007) at the latest. So we have already been waiting three years. We need the truth, in public, starting immediately. A mature 21st century democracy should not have to wait 4 minutes, let alone 4 years, for the full, blunt truth about the collapse of it’s banking SYSTEM.

As Vincent Browne wrote:
“The Department of Finance and Brian Cowen personally must have had prior notice, from at least the beginning of 2007, that the banks were in crisis, especially Anglo Irish. Michael Somers, then head of the National Treasury Management Agency (NTMA) said he knew Anglo was in trouble from then and it isn’t believable he didn’t tell anybody.”

The government just don’t get it, even now. We’re not peasants, we’re citizens of one of Europe’s oldest continuous democracies. Even under Edwardian British rule we would have gotten more answers, more quickly about a bank collapse – never mind a banking system collapse.
The government also want to exclude NAMA, as a result of which,
“the Irish state will be engaged in the riskiest derivative instrument undertaking of all known to man to date.”
(Dr Constantin Gurdgiev of Trinity College Dublin.)

They want to exclude AIB’s giving of half a billion of public money to Zoe in March 2009 for a farcical degree of security (how much of that will we see back?) (Irish Independent Today).

Then there is the fact that we have been building houses since mid-2005 with no buyer (Irish Independent Today).

On second thoughts, the government get it only too well. That’s why they are pushing this into the future for as long as they can. A 21st century democracy should show them the door forthwith.

I’d also like to be the first to call for a Tribunal of Investigation into the establishment of the Commission of Investigation (Banking and Regulation Failure 2010).

@ Paul Iticsdotayee

No director of the Central Bank who was in position from 1st January 2005 should be a current director. I’m not saying they did anything wrong I don’t even know who they are). It’s just that with the Nation having been brought to the brink of destruction (to paraphrase Alan Ahearn) it seems utterly absurd that those tasked with the protection of the Treasury at the time should still have that responsibility.

And, as Karl points out, Honohan is required to report on Begg and others. You’ll be able to cut the atmosphere in that board room with a sledge hammer.

Nothing like having the Board of the Central Bank dripping with mutual suspicion in times of crisis.

@ Paul,

I’m slow at the best of times.

But what does Iticsdotayee mean? Are you a Mayan God?

@ Greg

Oh come on, you’re better than that. Say it quickly. ALL of it.

I can make out the .ie but having puzzled over the “Itics” for the day, I can’t figure out either.

It goes back to ancient traditions. (Cue the Sinead O’Connor music) The Irish story is a human story and an old one. I can imagine how Alexander the Great must have felt like when he looked at the state of his country. This collection of thugs and war lords. Alexander began to think of how he might harness these brutes – who would rather take lumps out of one another – into an organised fighting force.

That is the challenge facing Ireland as we stand in 2010. Who will be our leader? The man on the white charger who will lead the cavalry. A cavalry consisting of Dublin docklands property developers such as Bono of U2, Harry Crosbie, Sean Dunne, Liam Carroll and so forth. The problem is the number of different tribes which has separated this island during the Celtic Tiger years. Who speak in many different tongues. On the island, we produced wild and fantastic species of war lord, the likes of which are found no where else on the planet.

We have regional banking branch managers who have amassed vast property empires. We have local authorities who have become developers themselves, such as DunLaoghaire Rathdown County Council at Cherrywood. We have bankers who operated as local authority chair persons (such as Sean Fitzpatrick) on one of the ‘largest buildings sites in Europe’, the Dublin docklands area. We have politicians who actually became builders. Some that we know about, such as Bernard McNamara. Morgan Kelly would argue, we have no real idea what loan book is outstanding to Irish politicians. That is a question that could be asked?

Not extending the inquiry to include the guarantee makes no sense.

Willie O’Dea. Hmmm..

Lets call a spade a spade.

If a group of tribal leaders like the Talaban had raced through one’s country leaving it in ruin, would be raising concerns about impugning on the character of persons involved, to use an expression by Willie O’Dea on PrimeTime RTE television this afternoon.

And just because they choose not to use Nissan pickup lorries with mounted artillery as their form of transport, lets not make distinction between the Irish breed and their brethren in the deserts.

There are times when I am ashamed to be Irish. While I understand there is a certain amount of balderdash going on so that Ireland can continue to borrow from the international markets, it is very difficult to stomach the total lack of responsibility from these ex bankers.

I remember talking to a solicitor about obtaining a mortgage in 2000. He mentioned Irish Nationwide. However I instantly ruled that institution out.

The reason being I remembered watching a eviction of a family down in Waterford (or Wexford, I can’t remember) sometime in the late 1990’s or very early 2000. The family borrowed something like 80K, fell behind in their payments incurred heavy penalties and eventually paid back over 160k. But it was still not enough, the payments were too infrequent and erratic. It made headlines on RTE at the time. Some of you may remember it.

But I will always remember the trauma on the young daughter’s face as the family were turfed out. Not a pleasant experience.

However the more revelations I read about in the press the more depressed I become. This time its not the one family down in the sunny south east that is getting the rough end of the stick. This time its all of us together.

@ Karl Whelan.

Correct me if I am wrong but I believe you went to study in the US in the past. Do you have any information on the RTC commission which was set up in the early 1980’s to offload toxic loans from US banks?

Would it be worth drawing up a comparison between the RTC commission and NAMA? Or am I asking you to compare apples and oranges?

@ Bond. Eoin Bond

“Oh come on, you’re better than that. Say it quickly. ALL of it.”

Now I know I’m slow.

Your inscrutability leaves me almost wordless.

Maybe all that good Maltese sun has fired my brain.

What are you getting at Mr Bond?

What All? Do you know something I don’t?

Oh, by the way. What is the value of €3,500,000,000 (Par), €3,500,000 (Nominal) Perpetual Preference Shares @ 8% when the dividend is not paid?

You’re a banker Mr Bond.

Is there some formula for calculating the current value of non-dividend paying perpetual preference shares?

That of course excludes the probability that they will be converted at Nominal to non-dividend paying Ordinary shares.

Your insight in this matter would be useful here before the €3,500,000,000 (by 2) vanishes just like the €4,000,000,000 given (not invested in) to Anglo Irish Bank, and of course the next €6,000,000,000 to be given to Anglo Irish Bank and the €2,000,000,000 to be given to Irish Nationwide Building Society.

As a banker it is of course possible that you believe that the Treasury should be looted to the tune of (oh what the hell) €65,000,000,000 to save the banks. Maybe you have a lesser figure.

As a banker do you have an opinion on how much of the Treasury should be expended on saving the Citizen?

Why doesn’t the banking inquiry enlist the services of a medical professional? Someone like Dr. Gregory House? Having played around with the ‘war lord’ analogy above, I will attempt to use one other analogy. I will attempt to draw some analogy between the world of medicine and the world of inquiries into banking/political systems. From my viewing of the hit TV series House M.D. I have already learned the following.

When Dr. Gregory House would find a case that was deemed ‘interesting’ he would proceed as follows. His job was as a diagnostician in a hospital, where he dealt with the ‘hard to diagnose’ patients. The thing with diagnosis is you have to follow a very rigorous procedure based on logic and first principles. A patient might have problems with one or more of the following, and Dr. House would attempt to diagnose based on symptoms the patient might exhibit.

Genetic.
Cancer.
Allergy.
Infection – Viral, Fungal or bacterial.
Neurological.
Psychological.

The important point to note, is that an early mis-diagnosis could result in the waste of much valuable time for the patient’s chances of recovery. It was only possible to think about ‘treatments’ for the patient, if one could identify where all the underlying symptoms were coming from. Very often, Dr. House would find some problem hiding behind another one, and so forth.

Any inquiry into the problems in Ireland should consider the following. There is no doubt the ‘Celtic Tiger’ madness in Ireland was some kind of virus which spread throughout the population. But there were certain ‘genetic’ factors – things we cannot do much about. There is certainly a need in any inquiry to look for cancer. But then, if cancer is not present, or is not the leading cause of the patients problem, we should not try to blame everything on cancer either. Because the treatment for cancer eliminates the patient’s immune system and thereby eliminates their ability to fight any kind of infection.

The symptoms which are purely psychology, that is, in our own heads (we imagine them) have to be eliminated also from the equation. In any case, psychological treatments are conducted in a different branch of the hospital. What Dr. House often found was the best way to identify an infectious disease for sure – one which might be hiding away cleverly in all kinds of nooks and crannies of the system – the best way to flush it out was to make it temporarily worse, in order to diagnose the symptom properly.

If the problem is neurological, things can get extremely complicated. The brain of the system is a vast and complex organism, which human beings do not understand fully. Let us hope that the Irish inquiry does not discover it is a neurological problem. But still, this possibility has to be eliminated in order to proceed to the proper eventual diagnosis.

Note that Dr. House would be very careful in the earliest stages to stay away from the patient. Dr. House made sure he did not know the patient or feel in any way emotionally attached or ‘invested’ in the patient’s well being. The easiest way to conduct an effective and timely diagnosis, was ironically, not to care the slightest about the patient’s welfare, or that of his/her immediate relatives. You can imagine this produces some funny scenes in the TV show. Dr. House’s sheer absence of any human feelings towards his fellow man, never fails to amuse me, I have to admit.

Best Wishes, BOH.

I forgot one other possible cause of the patients illness above – narcotics. That is, there is no point in treating a patient for an apartent symptoms, which might be produced by natural causes, when it is in fact being produced by artificial means, because the patient is lying to you.

BOH.

@ yoganmahew

“Paul (POL) itics (ITICS) dotayee (.IE)…
In case you haven’t seen Paul’s explanation above (I had to wait for it too).”

Thanks. My mother loved scrabble. Never could see the point myself. Now I know I’m right, to the tune of (at least) €30,000,000,000. Words and the playing with them have a funny way of reliving the Treasury of money. But then, perhaps money is just words.

“Anyone know why 3.5 bn of 8% preferreds only gives a dividend of 250 mn and not 280 mn?”

Being a dunce I’d say that was an auctioneer’s view of long term economic value. But in my more lucid moments I think it speaks to plain old sloppiness.

“Oh, and Greg, in theory we should get common equity instead of the dividend, so about 14.3% of th bank for 250 mn euro missed dividend… can’t wait until we own, like, 3,000% of BoI…”

On this I think you are mistaken. The conversion of an unpaid dividend is at the absolute discretion of the directors of the bank.

http://www.finance.gov.ie/viewdoc.asp?DocID=5669

“Dividend: Fixed dividend of 8%, payable annually. Dividends payable in cash at the discretion of the bank. If cash dividend not paid, then ordinary shares are issued in lieu at a time no later than the date on which the bank subsequently pays a cash dividend on other Core Tier 1 capital.”

So, as long as the bank doesn’t pay dividend on ordinary shares they don’t have to pay the dividend on the preference shares. No?

How many years will it be before AIB and BOI pay dividend on ordinary shares?

What if AIB and BOI don’t pay a “cash” dividend on Core Tier 1?

What if they get really clever (with ECB approval of course) and find a non-cash way of paying dividend to new (and unknown investors)?

Can we call that a “reorganisation” of the capital of the banks in the “public interest”?

Sounds good to me. But then I’m just Paddy Six Pack.

This has been planned.

They (Cowen & Lenihan) knew when they “gave” €7,000,000,000 to AIB and BOI that it simply wouldn’t be acceptable to Paddy Six Pack. So they dressed it up as €560,000,000 annually to the Treasury. Paddy Six Pack took the bait. The two Brians knew that the cash would never be forthcoming and that the €7,000,000,000 was as good as the money they put into Anglo Irish Bank.

They did that with the oversight and collusion of the ECB.

Anyone for Treason charges? Conspiring with a Foreign Power to undermine the ability of the Government of Ireland to protect its Treasure?

The ECB has now stopped the payment of the dividend to the Treasury. Is there anything you can think of that would in future allow the ECB to permit the Irish (what used to be a) Government to insist that the dividend be paid?

Nothing.

This has been planned.

I call it Treason.

Treason/Treasury.

Why are those words so close?

It is the looting of Treasure that is Treason.

Well at least we know that we are protected from blasphemy now. But not theft of the nature being discussed here.

Is there a chance that anyone else will join in or is it manifestly evident that NAMA is indefensible?

Which suggests that there is as much hope of getting the truth from any enwuiry as there is of finding what was written by Gillian Tett at http://www.ft.com/cms/s/0/99b57662-012d-11df-8c5400144feabdc0.html as linked by http://www.nakedcapitalism.com/2010/01/could-england-be-the-next-iceland.html.

It seems our neighbours in the “UK” need our money again, to stave off their creditors! Thank God we aren’t all republicans or else we might demand that no money be paid to them!

The focus of Karl’s initial post is on the mechanics of this inquiry, but I think it’s necessary to examine the purpose of, and tactics surrounding, this inquiry in order to assess properly the mechanics.

The proposed inquiry is just the next phase in the ongoing War of the Survival of the Government. It should buy the best part of a year as any fallout isn’t scheduled to emerge until the beginning of next year. It will provide some cover for the Government to address bank recapitalisation, the blanket guarantee and to introduce another, very likely severe, budget. There will be an effective separation of investigation of the causes of the problems and the remedies being pursued by the Government.

In the meantime and tactically, the Government spin machine will be in overdrive and much effort will be expended to erect excrement-deflecting shields. I expect we will hear, inter alia, about:
1. The importance of keeping financial regulation separate from direct politcial influence and that this prevented government from intervening to curtail credit growth;
2. Government policy to welcome workers from the new EU members from 2004, the requirement to house immigrants and an increasing population and to ensure that the construction industry was incentivised appropriately to do its bit and to generate growth in the wider economy;
3. That the Irish banking system, unlike others, was not exposed to losses from toxic, exotic financial instruments. The drying up of the international money market arrived out of a clear blue sky;
4. The PDs exerting undue influence on economic and financial policy and infecting FF ministers such as Charlie McCreevy and Seamus Brennan.
5. .. and so on.

The mechanics mesh into this overall strategy and set of tactics by minimising the extent to which the inquiry will be open to public observation and scrutiny. And I agree that Governor Honohan is being placed in an extremely difficult position and it is entirely inappropriate. Any investigation of the Bank’s behaviour prior to Prof. Honohan’s appointment should be investigated by an independent external body which would prevent its findings to the Governor and allow him to effect whatever remedies he is empowered to effect. The Minister expressed his welcome for Governor Honohan’s call for an inquiry through gritted teeth. This looks like payback time: “You wanted an inquiry; you can kick it off.”

The pursuit of this nakedly politcial strategy by the Government will not address the serious underlying problems of public policy formulation and scrutiny (going far wider than the banking system), the exercise of democratic governance and the entire, citizen-damaging “facade” of better regulation and competition that successive governments have erected.

And, if it were possible, it diminishes even further the authority of the Oireachtas. It’s time for the people to take steps to remove this Government.

@ politics.ie

“It would be €500 million annually though, going by yoganmahew’s figures?”

yoganmahew was not suggesting that it was €500,000,000.

It is the Bank Of Ireland that “thinks” they owe €250,000,000 (per the next thread).

“In accordance with the terms of the 2009 Preference Stock, the NPRFC would become entitled to be issued, on February 20, 2010 or on a date in the future, a number of units of Bank of Ireland Ordinary Stock (based on the average trading price of Ordinary Stock in the 30 trading days prior to February 20, 2010, assuming the Ordinary Stock was settled on that date) related to the cash amount of the dividend that would otherwise have been payable (€250m), should there be no change in these circumstances.”

They’re very good at sums at the Bank Of Ireland.

They should be running a bank.

@Pat Donnelly
I am certain that if Patrick Honohan prepares a report he will do so completely honourably. But that doesn’t matter. There is no way the Icelandic people would have been satisfied with their government promising that:
their parliamentary representatives would have a Q and A session in three months time, with Honohan and another international banking expert, even ones of indisputable integrity.
that the reports would have limited scope and terminate right at or before the key moment of the banking crisis, but nowhere near the end of the crisis which continues to date.
that the Q and A session would be followed by a secret inquiry that will go on for years.
that events such as the half a billion Zoe loans in March 2009 would be completely excluded.
that NAMA, the biggest single financial decision in the history of the country, would be excluded.

Honohan should not possible be expected to simultaneously:
Work with AND investigate his own STAFF and his own BOARD,
Continue to POLICE the banks,
Liaise with the DOF on the preparation of NEW central bank legislation, Work with European regulators on the development of NEW EU wide regulations,
At EU level make the case for Quantitative Easing and the ECB continuing to loan money to our banks for as long as possible against the securities they hold and keep interest rates low. And I am sure there is a lot more.

Prediction 1: If you gave Honohan 2 identical clones he still wouldn’t finish his report by 31 May 2010.

Prediction 2: Ending the enquiry at Sept 2008 is to protect Lenihan, who may well have come to an understanding with Cowen, who will eventually go, probably before he can be questioned.

It’s astounding that Lenihan should even presume Honohan should do this. If I was Honohan I wouldn’t touch this with a 54 Billion foot barge pole.
THIS IS OBVIOUSLY A COVER UP.

A Banking Inquiry- The Icelandic experience one year later.

1. Despite the establishment of an Inquiry by the parliament, the outside investigator (‘wise woman’) threatens to quit over lack of political will.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5507616/Iceland-corruption-investigator-Eva-Joly-may-quit-in-frustration.html

2. Parliamentary hearings and public hearings are not the only answer.

“Perhaps her biggest achievement so far is to ensure that any prosecutions are on the agenda at all. Parallel to the criminal investigation, a sort of “truth and reconciliation” commission guided by parliament is also looking at the events of the past year, and is due to report its findings early next year. Joly has warned that political hearings are no substitute for prosecutions. “Icelanders were very discouraged when I arrived,” she says. “Lots of newspaper articles were saying that what happened was just bad luck, that a new page had to be turned and that was that. But before reconciliation, before forgiveness, you must first establish responsibilities, you must find out the truth.” Partly because of Joly, only 27 per cent of ­Icelanders say they trust the parliament’s investigation committee.

She warns that, while momentum is building, the investigation is still only just beginning. She sees the first cases being prosecuted by the end of next year, but thinks the whole inquiry is likely to last five years. It has to, she thinks, if it is to be done properly. “This is huge. It will involve other European banks,” she says. “It will show that what happened in ­Iceland is not just an Icelandic problem.”

Financial Times:
http://www.ft.com/cms/s/2/b4979f3a-cf2a-11de-8a4b-00144feabdc0.html

@ Eoin,

Thanks for the link.

I don’t see that it states that the “coupon date has been fixed at the 20th February”.

Perhaps you meant to provide another link?

“Bank of Ireland (Governor & Co)

31 March 2009

Bank of Ireland announces that, following satisfaction of the conditions to the NPRFC Investment and the Direction of the Minister for Finance, completion of the NPRFC Investment took place today.

Under the terms of the NPRFC Investment, Bank of Ireland has received €3.5 billion and in return has issued 3,500,000,000 units of New Preference Stock of €0.01 nominal value at an issue price of €1.00 per unit and granted Warrants to subscribe for up to 334,737,148 units of Ordinary Stock of €0.64 nominal value to the NPRFC.

Capitalised terms used in this announcement have the same meaning as given to them in the Circular to Stockholders which was published on 4 March 2009.

Ends”

@ YM

there’s been a suggestion overnight (though i actually heard the same thing suggested from Goldman’s a few months ago) that BOI will try to do a debt-for-equity swap for their outstanding subordinated debt. This would (a) create some fresh equity and (b) possibly allow the EU Commission to waive the dividend suspension on the prefs by the time they roll around again next year, because outside of the govt prefs there won’t really be any non-senior debt on the books at that point.

@ Eoin

Damn. That guy Greg is good.

😆 😆

@Elaine Byrne
The Min for Finance and the NPRF agreed to give AIB €3.5 Billion in February 2009.

This was to recapitalise AIB so it could lend to small and medium sized businesses. Knowing this money was coming (it was paid in May 2009) AIB then lent €550 MILLION to mega developer Liam Carroll with the flimsiest of security. In effect, €550 million from the NATIONAL PENSION FUND, was given to prop up Mega Developer Liam Carroll, with grossly inadequate security, on the pretext that it was going to help AIB give loans to small and medium businesses.

Either:
The government were dishonest. OR
The government, even up to Mar 2009, didn’t know what was going on in the banks and allowed things like this to happen.

The government will say it was the second but remember:
The country was fully guaranteeing these institutions since Sept 2008.
They should have been all over the banks. So either the government were recklessly negligent or knowingly allowed public money to be indirectly funneled to developers and were dishonest about it.

If this doesn’t sink them I don’t know what will.

Pension fund money anounced Feb 09.
Revelation of reckless lending by AIB in MAR 09 yesterday.
Money goes in May 09 but that is irrelevant – AIB and the government both knew it was going in, and AIB was fully guaranteed since Sept 08.
Yesterday’s story in Irish Times just illustrates why AIB should have been watched like a PARANOID HAWK for ALL THE TIME since the bank guarantee.

Reckless Gross Negligence vs Dishonesty and Corruption.

@Elaine Byrne

http://www.nprf.ie/Investments/directedInvestments.htm

http://www.independent.ie/national-news/courts/judge-shocked-at-aib-security-when-lending-to-carroll-firms-2020808.html

http://www.irishtimes.com/newspaper/finance/2010/0118/1224262563538.html

Our civil service and banking sector are nowhere near as big and diverse as the USA or the UK. Nevertheless, I am sure the Government will take the suggestion of starting two wars on board.

@zhou
“Our civil service and banking sector are nowhere near as big and diverse as the USA or the UK.”
The small size of our banking sector relative to our number of top officials and politicans means that – even excluding the fact that we are not fighting two wars – there is NO excuse for holding the inquiry in private. The government and the bankers are not victims of child abuse – they deserve no anonymity. It is obscene that they compare the banking inquiry to the clerical institutions inquiry.

Give AIB billions more while an inquiry that stops in Sept 2008 won’t even look at this event in Mar 09?

http://www.independent.ie/national-news/courts/judge-shocked-at-aib-security-when-lending-to-carroll-firms-2020808.html

Knowing this money was coming since Feb 09 (it was paid in May 2009) AIB then lent €550 MILLION to mega developer Liam Carroll with the flimsiest of security in Mar 09. In effect, €550 million from the NATIONAL PENSION FUND, was given to prop up Mega Developer Liam Carroll, with grossly inadequate security, on the pretext that it was going to help AIB give loans to small and medium businesses.

THIS IS A COVER UP.

@Paul Itch
Yes. You’ve made the point already a number of times.

@ E65bn

“The government and the bankers are not victims of child abuse – they deserve no anonymity”

Eh, legally and constitutionally in many situations lots of them probably do, so there’s no real easy way around it. In the same way that an enquiry, by itelf, cannot mete out ‘justice’, it also can’t mete out completely free and full information on lots of things. This is a really basic concept which the people who keep shouting for an inquiry need to understand, but sadly repeatedly fail to. Now i think as much of this inquiry as possible should be in public, but if you expect it all to be then you’re being ever so slightly stupid.

Also, while the UK is currently engaging in two wars, they are, almost 7 yrs after it began, only starting to get into an enquiry on the reasons behind the first one. As such, they are a good example of how complicated issues require complicated and lengthy inquiries, and we shouldn’t expect anything different from our own look at the banking sector.

@ E65bn

“Posters strongly disagree (on politics.ie)”

If the posters on politics.ie suggested jumping off a cliff, would you jump off a cliff? Please, no one go posting malicous comments on there…

@Eoin
Professor Sandeep Gopalan is head of the Department of Law at NUI Maynooth. He doesn’t agree with you or with Willie O’Dea. He almost fell off his chair laughing at O’Dea’s bluster on Prime Time on Tuesday night. The inquiry MUST be in public, right from the start. Anglo got into trouble in early 2007 – it’s been three years already.

See Gopalan’s article here:
http://www.thepost.ie/story/eygbojkfgb/

@ E65bn

the only guys to appear before the US FCIC have been senior mgt/CEO level type guys. Moreover, the inquiry has focused on very high level general issues relating to the US banmking sector and the problems it has faced.

I dont think anyone is suggesting that similar figures in the Irish banking industry are looking for anonymity from our proposed banking inquiry. Indeed, they regularly appear before Oireachtais committees on a number of issues. However, mid level management in the banks, and the information relating to their customers, many of whom, though hugely indebted, have done absolutely nothing illegal, are the ones no doubt seeking anonymity, which they are perfectly entitled to. Again, this is something fundamentally important to this inquiry, and something which is being fundamentally misunderstood.

@zhou
Enda Kenny made the same point in relation to Mary O’Rourke’s disgraceful interview as the posters on politics.ie:

“Mr Kenny told the Dáil this morning that while inquiries into clerical child sex abuse had to be held in private because the victims were children, there was no reason to hold the banking probe in secret.

“The victims in this case are the working taxpayers of Ireland, who are now faced with pensions lost, negative equity, difficulty in paying mortgages and an understanding and perception that white collar crime does pay,” he said.”

@ALL
What is Honohan going to do when he tries to explain his report to the Oireachtas committee? As Joan Burton points out:

“Because he is being asked to make a non-statutory report, without any legal protection or powers, the Governor of the Central Bank will be bound by section 33AK of the Central Bank Acts, passed in 2003,” Mr Burton said.

“This section prohibits the Governor, the Bank and Ifsra from publicly discussing or disclosing in any manner any commercially confidential information in relation to any regulated firm or individual.”

Still, he’s a resourceful man. I suggest he will perform an allegorical play for our public representatives based on the Irish banking crisis – using Star Wars figures. We already know who’ll be Vader.

When dealing with organisations it seems to be easier to ask the people on the lower level to give information in exchange for immunity. Deal-making like that is not pretty but it is effective in gathering damning evidence for people in the top.

Starting with the top is difficult. They thrive on deniability and will have a lot of resources to fight a poorly built case.

If there are voluntary whistleblowers, go for the top. If not, I think it might be faster and more efficient to start lower.

Still, I’m not sure if the current situation is due to some peoples intent (to profit on the expense of the shareholder) or simply their poor judgement.

@ karl deeter Eoin etc on mid-level managers

In the Banks – the buck stops with the Senior Management and the Boards – back to the DIRT Inquiry – where lessons were obviously not learned by Government, Dept. of Finance or Regulators, or indeed academics. Justice Blaney and Tom Grace place the responsibility for these Crimes – yes CRIMES – at the top – middle managers do what they are told or they get themselves another job such as FF TD or other such menial occupation [but they can provide useful info to any inquiry].
In earlier post I noted that 92% of upper echelons of US banks still in position – based on E65Billion’s diggin endeavours – I suggest that 95-99 of upper echelons here still in position – NO REAL CHANGE at the top……………. Blaney and Grace, (the latter no stranger to handling the slippery ball in pressure situations], in their DIRT report noted that it is:

“…important to set the conclusions of (their) report in relation to tax evasion in the context of the culture of the period…………..The problem of DIRT evasion was an industry-wide phenomenon……….The operational environment in the Bank at the time has also to be taken into account and the behaviour of individual branch managers and staff must be viewed in this context. The branch network was target driven – there were, amongst others, targets for fee income and deposits, but limited support by way of systems or training to enable the achievement of these targets. Managers felt under pressure to meet these targets, in the setting of which they had negligible participation and which many considered unreasonable; they feared criticism and possible humiliation before their fellow managers if they did not meet the targets set.” [p.4]

Justice Blaney and Tom Grace (2004) Report on investigations into the affairs of National Irish Bank Limited and National Irish Bank Financial Services Limited: Summary and Inspectors’ Observations. Dublin.

I suppose this will all end, to use Minister Martin’s phrase recently ‘in the fullness of time’ ……. As mere ‘ERRORS OF JUDGMENT’ as announced yesterday in another little minor matter of 80 million or so ……… peanuts really in the present context – wouldn’t worry too much about it ………..

@Karl Deeter

Good point on the whistleblowers. Previous witnesses against AIB at Oireachtas Committee meetings were told that they enjoyed no privilege. We need a degree of privilege for witnesses to get at the truth.

Given that the Governor is independent (and this is protected under the Treaty of Maastricht) he should refuse outright to co-operate and reiterate his call for an inquiry similar to that of the 9/11 commission.

He might also follow the example of the Governor of the Bank of England and call the government out on its poor policies for restoring growth and cutting the growth in public spending.

Just a suggestion!

Maybe we can get to see the banks credit policies?

I don’t see them as being good enough for anyone to want to use them so they shouldn’t have much commercial value…..

Or if the credit policy was good, then (judging by the results) there should be plenty of occasions of it being broken & then there should be some disciplinary actions taken and maybe this could lead to the Gardai being involved.

@Paul Hunt
“The Minister expressed his welcome for Governor Honohan’s call for an inquiry through gritted teeth. This looks like payback time: “You wanted an inquiry; you can kick it off.””

Listening to Michael Soden on The Last Word this evening I can see you were 100% right. While watching Soden on TV last week it occurred to me that I hadn’t seen anything so small and yet so destructive since Nick Nack, “Scaramanga’s dwarf manservant and accomplice,” in “The Man with the Golden Gun”.
http://en.wikipedia.org/wiki/The_Man_with_the_Golden_Gun_(film)
I was really hoping that at the end of the show Peter Mathews would bundle Soden into a wicker cage and tie him to the nearest mast.

Nick Nack made it very clear that Scaramanga (aka Brian Lenihan) really doesn’t want a banking inquiry. Not until we have seen the effect of NAMA he said. As far as Scaramanga is concerned only historians yet unborn should inquire into our banks. AIB effectively fired €500 million due from the national pension fund straight to Liam Carroll in March 09, backed by the flimsiest of security. So it is remarkable that Scaramanga and Nick Nack are so blase about firing in another €54 Bn into Irish banks in advance of any investigation.

The REALLY disturbing thing, as with the cut off of Sept 2008, is the determination to investigate as little as possible. If something turns up, FF TD Dara O’Brian said, before 30 Sept 2008, we will continue to investigate it after that date (how gracious of their lordships). Anything after that we’re not interested in. No interest whatsoever.

What I have always observed throughout NAMA is that the government’s initials statements are their most honest. Following public pressure they have completely begrudgingly conceded an inquiry. They will now issue passionate but entirely insincere declarations of their desire to find out the truth. But in reality they HATE this inquiry and they will do the maximum they can to stall and derail it. After all, as should now be clear to everyone…

THIS IS A COVER UP.

@Paul Iticsdotayee

It is a huge issue… Anglo systematically mislead the markets on the most important issue: how much toxic debt it had.

The few hundred million in share price prop ups, directors loans, or the deposits shenanigans were minor by comparison.

Given the fallout this disclosure caused, the fact that this issue hasn’t been followed up more , is baffling. It rather makes me wonder why people want a public inquiry at all.

http://www.politics.ie/economy/47446-anglo-overlooked-loans-re-categorisation-scandal-biggest-well-pay.html

cYp

@ DE

“This would be in no one’s interest except the existing bank shareholders. Why should the government agree to it?”

How does paying coupons on the pref shares benefit the existing shareholders? I’m not suggesting a renewal of the ordinary share dividend.

Pat Donnelly

While I hate to dispel your conspiracy theory of the day, Gillian Tett’s articles are all available on the FT website – in the comment section under columnists – including the article relating to UK debt, which I think is the one to which you are referring. I have copied some of it here.

“Britain’s unsavoury debt mire
By Gillian Tett
Published: January 14 2010 23:01 | Last updated: January 14 2010 23:01
Which country experienced the biggest jump in debt, relative to gross domestic product, over the past decade?

A year ago, as the world reeled from the subprime mortgage crisis, most investors might have said America. And these days, countries such as Iceland, Dubai or Greece tend to spring to mind, in connection with deadly debt burdens.

However, if McKinsey consultants are to be believed, the real leverage giant – at least among the big western economies – is actually the UK. After crunching the data, McKinsey estimates that the gross level of British private and public debt is now 449 per cent of GDP – up from 350 per cent at the start of the decade.

And even excluding the liabilities of foreign banks based in the UK, the ratio still runs at 380 per cent – higher than any country except Japan (closely followed by Spain where debt has also spiralled dramatically, according to a McKinsey report issued today.*”

@Eoin
Wouldn’t the state be much better off if the dividends were converted into equity rather than deferred?

@Brian O’Hanlon
“It is almost as if the minister for finance knew this was coming down the road for a long time, it was only a matter of time. We have been sold this BS story of the panic striken bank managers arriving on his doorstep. But what the Taoiseach Brian Cowen and Minister Brian Lenehan’s response indicates to me, is a situation whereby they already knew the patient had developed a drug-seeking behaviour. It was only a matter of time before one of the organs blew out, in some fashion, and they had a kind of antidote stashed away in a closet somewhere, ready and waiting to stick in the patient, the minute its palpitating corpse ending up on the front lawn of the Oireachtas.

A certain scene from the movie Pulp Fiction springs to my mind here. I mean, the Irish public are not fools.”

The dramatic “Night of the Bank Guarantee” looks more and more like a work of pulp fiction concocted by FF.

“The dramatic “Night of the Bank Guarantee” looks more and more like a work of pulp fiction concocted by FF.”

I hope they could find the ‘magic marker’.

BOH.

So AIB had four other candidates to replace Eugene Sheehy including a ‘very strong’ candidate from the US (RTE – Nine O’Clock News). But yet they went for an insider, Colm Doherty, who, like the Gov of the CB will hardly squeal on any former or still standing colleagues if questioned by the proposed ‘in private’ inquiry.

The Dept of Finance knew about the 4 other candidates. And remember all the hoo-haa about O’Doherty’s salary?

Is FF taking the piss?

@ Brian O’ Hanlon

Good analysis. I agree, its deeper than Fianna Fail, or what ever party happens to be in government. But Fianna Fail have been in power for 20 of the last 23 years! But you are right, by focusing just on a particular political party, we miss the point entirely, the point being the systematic failures. But there also the cultural failures, voters have to take responablity about the way in which they vote which is where the Stockholm Syndorme came out of.

I rest my case.

But it is not wrong that Elaine Byrne sees every problem as a political problem – that is the severe difficult in specialising in political science, or specialising in anything else. It happens all the time on Dr. House M.D. TV program. The cancer guy sees cancer everywhere. The neurological guys thinks everything is brain related. The immuneologist knee-jerks into seeing something different.

Anyhow, that is why I think we need a Brian O’ Hanlon , who can work with Elaine Byrne, Pat Honohan, Joe Stiglitz, or Father Christmas – benefit from their key insights – but put it all together into an effective diagnosis. Preferably before the patient dies in the ward.

Grey’s Anatomy.

I don’t know that TV show. I must pick up a DVD box set some time. I don’t go in for TV shows in general, that is the weird thing. But honestly, I watched 5 no. DVD box sets of House M.D. almost entirely in one sitting. That is 5 no. seasons of 24 no. 1-hour episodes in each season. Around 150 hours worth of viewing in total.

I think something about Hugh Laurie’s character, reminds me so well of some of the best architects I have worked with. Something to do with problem solving. Everyone in the architecture world always deals with a lot of very intelligent and well meaning people, who are so emotionally invested in some project or another, which might vere off course in one way or another, the architects job is to try and detach from all of that, and assess the situation.

The ‘treatment’ is the easy part, provided you haven’t completely mis-diagnosed the problem in the first place.

The best architect I ever worked with reminds me a lot of something Edward De Bono once said. The crisis we face, in terms of the globe and the human race, is not climate change. It is a crisis in our ability to think. The point is though, had economists (from Ireland or any other part of the world) been exposed to situations like in any hospital, where sick patients come in, economists would have developed and grown certain instincts.

As I understand it, Edward De Bono was trained as a psychiatric doctor to begin with. Maybe that has something to do with how he views the world.

I also felt sure that economists should study more dynamics systems – be they natural, mechanical, virtual or whatever. I often used air-conditioning systems in tall buildings as an example I am familiar with. Those 2 no. things, patient diagnosis and dynamic systems. Two areas where economists in general, simply don’t get enough practice.

@politics.ie (and possibly B O’H and Elaine Byrne),

Shhhhhh!

The academics, economists and associated specialists wish to commune in peace. I’m sure the institutional dysfunctionality and the effective suspension of any semblance of democratic governance (and their impacts on economic policy and performance) are well recognised, but provoke serious comment or engagement only when formal proposals are advanced to alter these arrangements – or when an academic paper touching on these issues is published.

In the meantime, the Government continues as an elected dictatorship and most posts (and comments) are directed at its proposed policies and policy decisions and at international experience and analysis that illuminate these policies and decisions. This frequently allows the principal contributors, if they wish, to draw on this engagement to present policy critiques in the wider media – which may or may not have an impact on public opinion and, ultimately, on the detail of Government policy.

This is as far as it goes – and probably should go. Anything more is political campaigning – either within or outside the existing political parties.

You see, the point I am making Paul, is all of the academic discussion is just that, academic discussion. As long as the Irish people on main street are hamper-ed with this over-simplistic model of their universe and of themelves, they will contain to vote into power, the same politicians who will work to re-instate, this over-simplistic arrangement, whereby men go back to work ‘on the buildings’.

People on main street will continue to behave like they do, until they are presented with an alternative model, and way to look at their universe.

The bankers know this better than anyone. The bankers know which side their bread is butter on.

In Fianna Fail’s best interest, they don’t want to enlarge peoples’ perspective on main street of the Irish economy, because then they would lose their biggest lever, to win votes. Like I said, a lot of very intelligent people on main street seem to have arrived at very dumb conclusions. The require assistance in see-ing beyond their present situation, beyond to something different and new.

Be careful too Paul, unless the government takes this opportunity now to start a new slate – in a time when they still have control over their situation – unless they display that courage, we will be looking back at history, 10 years from now, and saying to ourselves – yeah, we could have done something to stop that Fascist or Communist party dictatorship sweeping in, and cleaning the board in terms of votes. By which stage of course, it will be out of everyone’s control.

A good article from Michael Casey in the IT today on what questions he wants asked at the banking inquiry.

http://www.irishtimes.com/newspaper/opinion/2010/0121/1224262769895.html

Note how he doesn’t make simplistic demands calling for justice or heads on plates, or claiming that somehow some proceedings being kept out of the public eye will make the inquiry irrelevant or a cover-up etc. Its a serious, rational and pragmatic response to some of the childish sh1te that had been spouted here, there and everywhere over the last few days. At the end of the day, whats truly important in this inquiry is what questions get asked and what answers get given. As he says:

“But the methodology probably is not all that important as long as the major questions are answered fully and honestly within a reasonable timeframe. ”

This should be the primary focus of all those who actually want to fix our broken financial system, instead of simply looking for people to blame for this sad sorry state of affairs.

“Rather than a political system which warp-ed the economy, I would say we have an economy which is able to warp the political system.”

Of course, to reference a real political economist, for other peoples’ benefit. I suggest a reading of Amartya Sen’s Development As Freedom.

A book in which Sen argues which should come first – economics or social and political?

@karl deeter

Yes – you have a point on those ‘mobile upper level gangs of pirates’ in the ‘commercial banking sector’ – but these operated on the principle of ‘by the time these fools figure this out we’ll be gone’ and Ireland is not unique here. They are back in action in Wall Street etc. Of course ‘legally’ these modern day pirates can claim that ‘we did nothing wrong’ – and they have been given a minimum of 36 months by the servants of the Irish State to stash the loot in various far-flung hide-outs ……and others not so far-flung ….. these ‘criminal gangs’ were actively recruited by senior management with the imprimature of their boards in an attempt to keep up with the Jonzez gang led by Long John Seanie and his sidekick Fingers Looty in the Sky with Diamonds ……..

As to your reference to the Roman practice of ‘DECIMATION’ there is now more than sufficient anecdotal evidence that Decimation is now Item-1 on certain political party and upper-echelon agendas as the citizen Goths, Visi-Goths, Huns, Whiteboys, Ribbonmen, Roundheads, and other sundry low-lifes begin to wake up ………. or maybe not!

@paul itsadotiyee: so soden had the place running perfect and it was only after he left that things went awry? tell ya what – go pull a few balance sheets from his time at the helm and see if they back up that story (they won’t!)

@brian o’hanlon: i’ve read your posts and all i want to know is – is that show ‘house’ pretty good then?

Also, as a tac-on to that.

I understand now, that given the sheer scale and complexity of financial trading system(s) these days, that financial regulators in the US are beginning to develop artificial intelligence systems to help them police the territory. A bit like that funny machine, The Greco, that secures the casino from fraud in the movie Ocean’s 13. The Greco immediately shuts down the casino when it perceives there to be an illegal threat.

But seriously, couldn’t Ireland turn its apparent disadvantage of being in a financial mess, into an advantage? Is there not some opportunity now for Ireland to use its experience in financial collapse, to gain a lead in the new industry of financial security. This is something I would be very much excited about, and I think it would be cool if we could get the equivalent of a real Dr. Gregory House on board the project also.

Now, as for the idea of including a real life Frank Abagnale Jr. is played by Leonardo DiCaprio, in the movie Catch Me If You Can, perhaps there is scope there too, to enable some of Ireland’s biggest fraudsters to help out with the national cause.

BOH.

Interesting.

I attended a lecture last night, and one jem in the lecture I thought was Ireland’s ability in facilitation of development and entreprise.

One thing I remember reading about Silicon Valley a long time ago, I think it was a comment by a tech entrepreneur, he said it is so easy to do business in the valley. Because when you have an idea, all of the relevant sub-contractors to put the idea together are available, competitively and conveniently in the one spot. Hence, Silicon Valley can compete, even though its cost base might not be the lowest in the world.

I think this is the way to go in Ireland, rather than trying to lead the world. Even if we pick one or two key focus areas, as was suggested at the Farmleigh conference, I don’t think it will be enough to succeed in something like energy. But Ireland could a wonderful location to facilitate developers from outside to come and do their thing.

The Keystone Advantage:
What the New Dynamics of Business Ecosystems
Mean for Strategy, Innovation, and Sustainability
by Marco Iansiti and Roy Levien; Harvard Business School Press, 2004.

The book by Iansiti and Levien examines things such as the Adobe Acrobat format, to give one example, which created ‘value’ for itself by being in the middle, being the format that everyone settled upon.

The book really explores this approach to innovation.

When you begin to talk about Ireland and it’s role to play, I am much less interested in Ireland as a Leader per se, but more interested in its opportunities as being a facilitator for companies and investors all over the world – a kind of keystone strategy if you will.

BOH.