Brian Cowen: “The Irish Banking Crisis – the Mistakes, the Responses and the Lessons”

An Taoiseach gives his views on the Irish Banking Crisis in this speech.

[This month will see much more on this topic, with the two scoping inquiries on the banking crisis due at the end of May.]

73 thoughts on “Brian Cowen: “The Irish Banking Crisis – the Mistakes, the Responses and the Lessons””

  1. “In addition, we take encouragement from the fact that the labour market — where the recession has hit hardest — looks like it is beginning to stabilize since the end of last year. We are looking at net job creation of 20,000 next year and 45,000 each year thereafter. ”

    So 20,000 jobs but not until 2011. This is a spit in the ocean compared to the number of unemployed. I wonder who he thinks is going to create them? Keep emigrating lads.

  2. “There was an estimated fall of 4% in unit labour cost last year and an expected further fall of over 8% between this year and next.”

    Anyone know where the Taoiseach obtained these numbers? An 8% drop between this year and next if reflected in take home pay is a pretty sharp cut particularly if inflation comes back to zero.

    The CB Governor was calling for a 20% reduction in rates in Feb/Mar 10.

  3. @ Liam Delaney

    The laissez faire ideology reigns again. Bail out the banks and leave the population to fend for themselves.

  4. The former Minister for Finance and his economic view.

    “My Department has worked closely with the Irish Bankers Federation,
    representing the Irish financial services industry and with the Financial
    Regulator on the proposals approved by Government today. [Asset Covered Securities Act 2001] It is a further example of co-operation between Government and industry to underpin the innovative dynamic which has made Ireland a centre of excellence for financial services”.
    Brian Cowen. Minister for Finance January 2006.

    “We can only deliver on these objectives by maintaining a sensible,
    responsible and prudent budget policy which only commits the government to spending and tax levels which are affordable today, tomorrow and in the
    long-term. Budget responsibility is the best guarantee of our future
    prosperity”.
    Brian Cowen. Minister for Finance. 30 March 2007.

    “I have heard a lot of speculation about the economic outlook in recent
    times, much of it of a negative variety. I accept that there are risks to
    the outlook but I believe that our economy will continue to outperform most of our peers. . . Our economy is set to enjoy strong growth rates over the medium term, albeit at a lower level than that enjoyed over the past ten years. By accepting that more moderate outlook now, we can make it a reality and enjoy the much talked of ‘soft landing’.
    Brian Cowen, Minister for Finance June 2007

  5. I don’t know whether the idea of “laissez faire” makes much sense in this context. There is a massive state intervention in the labour market and in the banking sector. The labour intervention is just badly thought through and lacks any energy or vision. Stabilising the labour market has received no real attention from any of the main political parties. This is partly because voter turnout is lowest among the unemployed and younger voters and partly because they are taking advice from those among us who tell them that all jobs programmes are doomed to failure.

    To be fair though, this is one for another post. The focus of the Taoiseach’s speech is the banking crisis. Amazingly quiet on this post given the content of the speech!

  6. I really don’t understand why you lot are giving the poor man such a hard time. It was Lehman and the international financial crisis and whoocoodanode and sure aren’t we doing the best we can otherwise we would have been Iceland!

    But seriously, it looks like Mr. Cowen is not really interested in introspection or finding the best resolution to any of the difficulties the country faces. He is still living in denial and there are four more stages to come!!

  7. “Amazingly quiet on this post given the content of the speech!”
    Liam – all talked out perhaps? What indeed more can be said about the banking crisis, the role of the govt, the reaction of the economic profession, yadda yadda.

  8. What is it about the Dublin Chamber of Commerce? Why not try to communicate with the rest of the population?

  9. @All

    Nothing unusual here – simply a rerun of that well known Gaelic ploy of getting some of one’s retaliation in early – before the ‘bank scopes’ see some of the light of day later this month. Stunning failures of corporate governance there certainly were – but looks like the corporate communications wing of GFF is still functioning … are they are still running the show.

  10. @ Brian Lucey

    Don’t get apathetic on us. We need you guys on your toes; which means constantly repeating youselves, otherwise the Gombeens will re-write history, sound-bite by sound-bite.

    Besides, we have a Chinese property bubble crash and a euro crisis coming down the tracks. God it’s a bloody bad time to owe money.

  11. well get the banks sorted out then they will try to concentrate on the jobs situation, by that stage there will have been further downward pressure on labour costs due to the increase in unemployment so making us a bit more competitive……meanwhile they will trumpet any stabalisation in the unemployment figures which will be really down to emigration and people going back to college.

    Don’t worry the top boys won’t share in the pain…….just think about it a reduction in the old age pension cannot be ruled out for the next election but politicans with jobs and high salaries were very reluctant to give up their early pensions……as long as I keep ye in jobs lads I am happy!!!

  12. The government’s employment policy is working. Deflate the economy, increase unemployment, and thus reduce labour costs hoping that the ‘increased competitiveness’ will boost the export sector and eventually reduce the more than 25% of the labour force that’s on the dole. And of course increase emigration.

  13. It would be about time the leader of “Ireland Inc” started showing some real leadership for a change instead of trying to justify his previous actions. For instance, it appears the prime minister of the fourth largest economy in the eurozone, Jose Luis Zapatero, is in for a pay cut of 15% which will bring his pay down to €6515 per month or €78180 per year! Now what is Brian Cowen on again? (And remember Spain is a country of 40 million people compared to our 4.5 million max.)

    http://uk.finance.yahoo.com/news/eu-imposes-wage-cuts-on-spanish-protectorate-calls-for-budget-primacy-over-sovereign-parliaments-tele-55cc0202fcd4.html?x=0

  14. Cowen applauds himself for not abolishing stamp duty in 2007 — his most buoyant revenue source.

  15. methinks the 4 parts of the plan should HAVE read

    (2) PROP UP THE BANKING SYSTEM

    (2) PROP UP THE BANKING SYSTEM

    (2) PROP UP THE BANKING SYSTEM

    (2) PROP UP THE BANKING SYSTEM

  16. The sad thing is that Brian Cowen either still doesn’t understand or wish to admit the role that EMU played in this crisis. In this he reminds me of the reluctance of the RC hierarchy to admit the role which the Vatican played in mismanaging the Church’s child abuse scandals.

    Just as the Irish hierarchy doesn’t blame the Vatican for the systematic mismanagement of the RC Church’s child abuse scandal (instead holding to account individual prelates here in Ireland) so too the Irish government seems never to blame EMU for the systematic distortion of the cost of debt which caused the credit bubble (instead holding to account individual bankers and regulators here in Ireland).

    Certain aspects of our national culture (timidity in the face of overwhelming authority, a non-intellectual reluctance to join the dots in any crisis) are in bad need of change.

  17. “The EU cites the Irish austerity plan as a model, but Ireland has an open economy with a dynamic export sector, and may be sui generis. In any case, Ireland’s nominal GDP has fallen 18.6pc, without a commensurate fall in debt. Ireland is not yet safely out of its debt-deflation trap. ”

    Torygraph
    http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7716530/EU-imposes-wage-cuts-on-Spanish-Protectorate-calls-for-budget-primacy-over-sovereign-parliaments.html

  18. @ Cormac Lucey

    Cormac,

    You’re back on your old hobby horse!

    This is like the guy who said he robs banks because that’s where the money is.

    It could be included in a long list of factors but the notion that it could credibly absolve the main culprits, is risible. I’m not saying that you’re directly making that argument but comparing Frankfurt and Rome, just isn’t credible.

    The Church is after all an absolute dictatorship with delusions that it speaks for an external authority.

    @ All

    Some of the issues Cowen chose to ignore:

    http://www.finfacts.ie/irishfinancenews/article_1019685.shtml

  19. ” In addition, we take encouragement from the fact that the labour market — where the recession has hit hardest — looks like it is beginning to stabilize since the end of last year. We are looking at net job creation of 20,000 next year and 45,000 each year thereafter.”

    Do the maths, leaving aside the second and third level students coming onto the jobs market how many years exactly might it take to take in excess of 400,000 of the Live Register then??

    and this only merits 2 lines in his only because I did this and I did that we would be worse off speech

  20. “So, no-one saw IT coming??”. Not so: I was inadvertently alerted as far back as 2003 – 2004! So were a few others! If you are wondering why these precient folk were not heeded – think popularity and votes. Sentiment always trumps rationality – always.

    Politicians may have been’too busy’ to bother with the details. Their advisors may have been too scared to tell the truth. Outcome: the unfortunate taxpayer picks up the bill. Well, this time the aggregate bill exceeds the aggregate funds available. So what’s that situation – in plain speak?

    Some of you have mentioned emigration as an option: to where??? This current debt predicament is global – US, UK, EU, Japan! The remainder are going there.

    Fiscal reform, if it is ever permitted, will have to be political first, then economic. Chances of this occurring are, at present time anyway, Nil and Zero.

    The only Realist political option is currency devaluation and money inflation. But if They all do it, simultaneously and at the same time!

    B Peter

  21. It looks like Cowen took every thought he has had in the last 3 years and put it down on paper in pass leaving cert English quality. Leaving aside the content which really says nothing new it’s like Cowens resignation letter.

    I’m amazed they are still saying that they are policing senior banking salaries after the Boucher fiasco.

    Appalling stuff.

  22. @ Michael

    I may be on an old hobby-horse but that doesn’t alter whether my argument is right or not.

    Is it a coincidence that:
    a. Ireland, Greece and Spain are geographically and economically peripheral to the EMU core?
    b. EMU brought substantially reduced interest rates to Ireland, Spain and Greece?
    c. those substantially reduced interest rates unleashed large credit bubbles?
    d. those credit bubbles spawned massive increases in construction activity with spillover into the real economy and the public finances?
    e. over time the credit bubbles triggered unsustainable leves of private sector debt, banking system instability, inflated domestic cost bases and inflated public sector revenue bases?

    I am not arguing that were no errors by bankers, regulators or politicians (or that they should escape individual accountability for their errors). But they were secondary errors relative to the primary errors of joining EMU.

    Similarly, failings by individual Irish prelates to confront child sex abuse were clearly individual errors for which they must take responsibility. But – given that the same pattern of errors has occured worldwide – they were secondary errors relative to the systematic failings of the Vatican in handling these matters.

    The Pope reponds to all this with an Apostalic Visitation. The EU now responds with Fiscal Visitation! But both are an intellectual fraud based on Head Office blaming subsidiaries for errors which are fundamentally the fault of Head Office.

  23. The maths on net growth of 45,000 in employment work out more or less OK as a basis for recovery. As of Q4 2009, unemployment was 267,400. Other things being equal, about more 160,000 jobs would have meant 5% unemployment, so other things being equal the target is to grow employment by something like a net 160,000. If we assume zero net migration, and natural growth in the labour force of 17,000 per annum, it takes 5 to 6 years after 2011 to get back to 5% unemployment.

    There is significant net outward migration as of the most recent data.

    The more important question is whether net growth of 45,000 jobs per annum is feasible.

  24. @Liam Taylor

    “Government’s policy on unemployment is currently still an immense disgrace.”

    The governemnt have a policy on unemployment?

  25. @ TOD

    Cowen’s forecast on jobs is based on the ESRI Recovery scenarios, published in May 2009.

    The forecast GNP growth of 5.9% in period 2012-2015 seemed optimistic then and even more so now given the background of debt in the advanced countries and it’s foolish to expect the pre-crash growth levels in rich countries to reaappear again soon.

    Improved competitiveness helps Ireland somewhat but employment in the foreign-owned sector is back to 1998 levels; Ireland can only benefit indirectly from emerging markets; exports to China are below the level of Swiss-bound exports.

    @ All

    Cowen says there was an estimated fall of 4% in unit labour cost last year
    ECB data for the total economy shows -0.3% for Ireland.

    Data for countries such as Germany were impacted by short-time working schemes.

    http://www.ecb.int/stats/exchange/hci/html/hci_ulct_2009-10.en.html

    @ Cormac

    Cormac,

    Where does that leave non-Eurozone peripheral countries like Iceland and the UK?

    There was no ‘invisible hand’ guiding the reckless; it was of course an era of low interest rates worldwide and Asia’s ‘saving glut.’

    Iceland attracted carry trade because of its high interest rate.

    As with quitting the euro now, it’s only in pubs where you will find easy choices.

  26. @ Michael

    The UK is recovering. We face prolonged debt-deflation. (I don’t know about Iceland).

    I am not suggesting we leave EMU now. But I do think we should leave if it becomes economically feasible. That might be 10 years away. And I think Ireland should vote “No” to any new EU treaty which suggests that EMU membership is a core requirement of EU membership. More economic foolishness should not be the price of political integration.

    The most profoundly disappointing aspect of Cowen’s speech was its utter failure to even mention EMU as a factor in what has happened.

  27. I like this quote:

    “Governments must never again intervene in property markets via tax incentives or other measures to a degree which may make possible property bubbles.”

    I guess NAMA is one final fling.

  28. @ Joesph, first response and among the most insightful I would say. There doesn’t seem to be a firm grasp on the role of employment in the economy in governmental circles, and some confusion about the difference between the economy and the tax revenues. If the economy had been the focus then the property bubble would never have been inflated to the extent that it was.

    Mortgages will be repaid if jobs are there. Liquidity returns to the economy if jobs are there. Social welfare costs go throught the floor if jobs are there. Tax revenues climb if jobs are there. market confidence is restored if jobs are there.

    There might not be a panacea to these problems, but a focus on employment is a close as we are likely to get.

    Instead we have vague gestures in the direction of the smart economy (sans the ubiquitous broadband such a scheme would require), billions pumped into SFI for no appreciable return, trade missions with no major FDI income, tourism being promoted towards stag and hen parties in the UK, and of course FAS courses on plastering and bricklaying.

    the lack of a clear idea of how to create and attract jobs is the most glaring failure of this government, and it will be its most lasting legacy.

  29. @Cormac L & Michael H,

    Apologies for butting in, but I think the Taoiseach’s unwillingness to mention EMU is prompted by a desire to evade any consideration of the two fundamental failures of political governance that partially caused and then greatly exacerbated the current crisis. The first is the failure to use fiscal policy intruments to lean against the significant monetary easing (both in terms of increased funds and a lower cost of funds) that membership of the Euro entailed. The second is the creation of an elaborate regulatory facade that was presented as being independent of government, but, in reality, was subject to political direction.

    The regulatory failures in the banking and financial sectors are being addressed, but not in other sectors. However, we can be sure that every effort will be made to evade responsibility for the fiscal policy failures and nothing will be done to prevent a repetition. As a result the European Commission is being compelled to exercise the necessary control.

  30. @ Paul Hunt

    I’m not sure about the fiscal policy point Paul.

    Cowen addresses that point in his speech stating that there was a restrictive fiscal policy (and giving chapter and verse on the subject) but concedes that, with hindsight, it wasn’t restrictive enough.

    I think that Cowen’s failure to address EMU as the root cause of our problems stems from the fact that he is still taking official advice (you would think he might have learnt by now) and the official (DoF, CB, ESRI) view supports greater European integration. EMU cannot therefore be admitted to be a problem.

  31. @George – “What is it about the Dublin Chamber of Commerce? Why not try to communicate with the rest of the population?”

    Most politicians don’t do direct communication with the electorate until they actually want their votes (i.e. the period leading up to an election). It’s too ‘dangerous’ for them – someone might start asking them difficult and pertinent questions and not take their lies and soundbites as an acceptable answer… something that TV/radio/press here seems to have forgotten they are supposed to do.

    What a bunch of ‘bigots’ as one G. Brown might reflect 🙂

  32. I think that is a well put together speech.

    The Taoiseach is correct that the opposition were calling for huge stamp duty reduction to prop up the property markets. I recall Fine Gael had stamp duty reductions in their election manifesto. I also think the opposition objected strongly to the national pension reserve fund and suggested it could have been tapped for earlier issues.

    The Taoiseach is quite right that the action which was taken by him was taken too late. December 2005 was only 10 months before the October 2006 peak of the market. It strikes me that a lot of the people who can now lay claim to having “seen it coming” only saw it coming when the runaway train was 100 meters away. Much fewer saw it coming over the hill with a few years to spare, e.g. 2002, even though property prices were rocketing then and had been for a long time.

    It is good to see the Taoiseach admit failures and to set out what those failures were. An frank explanation from a cabinet member’s view of why those failures occured would help.

    My suspicion is that it was all left in the hands of the Minister for Finance and the Department of Finance and everybody else saw it as falling outside their responsibility. That is not acceptable. In future, all cabinet Ministers should be briefed fully by the DoF, or an Independent Council as proposed by Philip Lane, on economic matters and future risks. Indeed, the Dail and the opposition should be briefed too.

    A swipe at the DoF to keep it on its toes: If the Dept of Finance spent as much time working on a Resolution Scheme as they seem to spend creating reports, diagrams and powerpoint presentations on how other bodies didn’t spot the problems either then we would be a lot better off. The errors of other bodies are pretty irrelevant when those bodies would have relied on the DoF information in arriving at their conclusions.

  33. Does anyone know where the Taoiseach got his 8% reduction in unit labour costs between this year and next. That’s a sharp reduction when taking into account inflation turning positive. The 8% carries the Taoiseach’s imprimatur so I’d guess needs to be taken seriously. Does anyone know where he might have sourced that figure?

  34. @zhou
    Recall it was McDowell’s gaffe in late 2006 hinting at a reduction in stamp duties that readied the market for 2000.

  35. although I realise that Brian Cowen was not finance minister for most of the period when the Section 23 ‘type’ reliefs were in place, his claiming credit for abolishing them in 2006 is a bit of a joke. That particular stable door should have been shut at least six years previously. Remember that the 1996 review of these schemes by KPMG highlighted very significant deadweight associated with the Urban Renewal Scheme. Not only was this scheme continued after this it was extended to include a plethorah of additional large and small towns. Most problematically in my view, although Section 23 designations in towns and cities were limited to individual sites from the late 1990s in an effort to address the deadweight issues (on the recommendation of KPMG), the Rural Renewal Scheme applied these designations were applied in a blanket fashion to most parts of five rural counties in the north west. This scheme should never have been introduced during a property boom and certainly in this format. Anyone who saw RTE’s excellent documentary on ghost estates on Sunday night is well aware of the results.

  36. @bill hobbs

    Michael McDowell and Richard Bruton were the chief cheerleaders or stamp duty reduction and tried to make it an election issue. Cowen did well to face them down.

    @MH

    I agree blaming the opposition is a poor justification for mistakes. However, I think it is correct to point it out when the same opposition suffers collective amnesia. Similarly, it is fair for Richard Bruton to remind people of his criticisms of bench-marking.

  37. @ zhou_enlai

    It is also fair to consider Ruari Quinn’s prudent pre-election budget in 1997 as to how his party and Fine Gael would have governed.

    Of course, Quinn got a lot of thanks for that prudence and groans of We are bled white,” from Middle Abbey St.

  38. @Cormac,

    The thust towards EU integration is being driven by Germany (with the support of the founding members – Italy is half here and half with the PIIGS, the Scandinavians and, increasingly, the rest of central and eastern Europe). This is being reflected in the stance of the Commission and Council. The objective is to create an economic entity that has the heft and cohesion to go toe-to-toe with the BRICs.

    The PIIGS must shape up and take the pain. They’d be left to ship out if they did not owe so much money to German and French banks and bondholders. They add relatively little to the economic heft of the zone. The price for keeping them on board is the stripping of their fiscal sovereignty.

    In the view of the Commission and of the “core” EU members their fiscal irresponsibility since joining the Euro should deprive them of any fiscal freedom to screw up the bigger project again. The Commission obviously set out its stall to the maximum extent possible in the expectation of being forced to row back a little, but the most the governments of the PIIGS will get are some fig leaves to conceal the extent to which fiscal sovereignty will be stripped from them.

    This is the new reality. Time to wake up and smell the coffee. Thorough-going reform of the system of democratic governance is required if Germany et al are to be convinced that governments of the PIIGS should be allowed to exercise any degree of fiscal sovereignty. In Ireland, there is no widespread popular understanding of the extent to which fiscal sovereignty will be constrained – or of what is required to reclaim it.

    Let’s hope the unelected despots in Brussels are more tender of our interests than the elected gombeens at home. By 2016 Ireland will have gone full circle from a British colony to an EU statelet subject to central oversight and control. We shouldn’t be surprised that the Taoiseach failed to mention EMU.

  39. To slightly misquote from a Monty Python sketch – ‘What did economic sovereigntity ever do for us’?
    Methinks Cowen is feeling a great deal of heat from his own lot – If Lenihan was in the full of hs health – would Biffo still be in position?

  40. @Vinny

    I hope you’re not in the ‘canonise Lenny camp’. In his own way he is as convinced of his own infallibility as is Cowen. He is also equally contemptuous of opinions which differ from his own ….and isn’t that how we got into this mess in the first place? c.f McCreevy, Bertie who suffered from the same affliction.

    @Celtic Phoenix
    “@ Brian Lucey

    Don’t get apathetic on us. We need you guys on your toes; which means constantly repeating youselves, otherwise the Gombeens will re-write history, sound-bite by sound-bite.”

    I’ve got to echo this. Brian, Karl et al. We need you guys. I can appreciate the feeling of futility in banging your respective heads against the wall of stupidity, arrogance and deception put up those who continue to prosper in this Fianna_Fail_NAMA_Disneyland we live in, but we need some sane voices speaking out, even if it feels like you’re alone in the wilderness.

  41. @Cormac Lucey

    ‘… EMU as the root cause of our problems …’ is a bit too simplistic a projection; it borders on political spin.

    The fundamental roots of our problems are home-grown – start with those nominally in charge of directing the state … and standards of private and public governance.

  42. Did I hear the Taoiseach on the radio this evening saying “of course we should have had a property tax”?

    Ehh, we did. It worked, and was called rates, and was abolished in 1977.

    (Its pathetically emasculated successor, Residential Property Tax, was abolished in 1997. See http://www.revenue.ie/en/tax/rpt/index.html. By 2006 the RPT exemption limit was up to €1,389,000).

  43. @ Pat Donnelly
    “Rewriting history is what these boyos are good at.”
    Unfortunately for the ‘boyos’ the facts don’t allow that ………
    http://www.spiegel.de/fotostrecke/fotostrecke-54629.html
    .
    Ireland is now in a deflationary vortex, with nominal GDP declining faster than real GDP (both are down for two years straight but nominal declining at a faster rate — nominal GDP down 11% in 2009, real down 7.5%). There is lots of slack in the economy and the output gap stands at -7.1%, which suggests more deflationary pressures over the medium term.
    This problem is now widespread: Spain’s output gap is -5.3%, Portugal -3.6%, Italy -5.7%
    and Greece -4.6%.
    .
    When deflation sets in and GDP falls there will be problems with improving fiscal ratios.
    http://www.statistics.gov.uk/about/methodology_by_theme/public_sector_accounts/downloads/Use_of_GDP.pdf
    .
    This puts the future of the Eurozone project, as it currently stands, in doubt.
    Either the Euro declines dramatically or Ireland will inevitably be forced to opt for its own currency to ease the deflationary pressure on the economy.
    .
    Meanwhile, fears of contagion begin to set in as indicated by Euro banks sell off today;
    .
    Spain
    Banco Santander, -10.32%
    BBVA, -8.24%
    .
    France
    Societe General, -9.09%
    BNP Paribas, -7.24%
    Credit Agricole, -6.95%
    .
    UK
    Barclays, -6.11%
    Lloyds, -4.36%
    .
    Germany
    Deutsche Bank, -4.15%

  44. I am at odds with two comments. 1) People at the margins do not vote. That has been true whne there was high employment rates and excellent unemployment benefits including retraining. 2) The Telegraph is quoted as citing a decline of 18%+ in GDP this year. I predict that in the next election in this fair isle of ours you will see the highest turnout since Cuchulainn was a spalpeen. I do not want to begin to entertain the thought of a decline of 18%+ in GDP. Please tell me that a mistake was made and it is half of 18%.

  45. I posted this on another thread but more relevant here:

    @Paul M – “We are electing seriously sub-standard people ”

    I overheard an academic seriously stating the other day that he believed that if you took out a (small) handful of talented people from the Dail then the average reading ability would be about level 3 (and I’ve no reason to doubt him).

    Most of them are not fit to govern but very good at attending funerals, nodding and winking, etc.

    How could we impose some kind of ‘minimum levels’ of attainment and education on anyone who stands for office?

    Another thing that came to mind is whether TD’s shouldn’t have some kind of ‘induction training’ when they first enter the Dail e.g. at least some rudimentary training in economics and other important subjects. So that they are more aware of the consequences of the decisions they are asked to make.

    I would also suggest we don’t allow anyone in who’s never had a real job before becoming a lifetime politician. I actually know a woman who’s only ever lived off of her well-off ‘daddy’, has only ever tooled around doing things like interior design courses – never done anything seriously – and is talking about daddy getting her set up to stand at the next election (because she thinks being a TD is a ‘grand old life’, not because she passionately believes in some aspect of the job). Believe me, she’s hardly the sharpest tool in the box – but she has the looks and the charm. ‘All front-office and no back-office’ is the phrase that comes to mind.

  46. p.s. Can anyone comment on the possible consequences of this to the taxpayer (from the IT last night):

    “Bank of Ireland announced tonight it is to sell further shares in the bank at 64 per cent discount as part of a plan to bolster capital.”

    Story is at:

    http://www.irishtimes.com/newspaper/breaking/2010/0514/breaking69.html

    Good thing/bad thing? Who does it favour? Why take this approach? What is the likely impact on its share price on Monday morning? 50% drop?

  47. The North American business news is dominated by Europe (this is a rare occurence) all of it negative. A decade of stagnation and deflation being in store for Europe as a result of widespread austerity measures across Europe is the tone and tenor of the articles. Europe has been seen as an economic giant and a major threat to US hegemony up until a couple of months ago. Now it is deemed to be amongst the sick economies of the world right up there with Japan and the US. Is this the second wave of problems predicted in early 2009 by many economists labelled as pessimists or perma bears at the time. As economies rebounded, stimulus would be reduced with the same effect as the gold bottleneck in 1930. Spain now entering deflation is considered to be the harbinger of worsening conditions throughout Europe.

    http://www.theglobeandmail.com/report-on-business/top-business-stories/imf-warns-on-surging-debt-but-canada-stands-alone/article1569046/

  48. @ Joseph

    if every shareholder takes up their full rights to buy, then the share issue price doesn’t really matter i dont think. However, assuming that not every existing shareholder takes up their rights to buy, then the lower the issue price, the more you gain by buying into the rights issue. SO, thinking about it the other way around, by having a the shares issued at a deep discount to current price, you should be encouraging (or forcing) existing shareholders to take part in the rights issue.

    Share price will fall significantly after the issue, but remember, there’ll be potentially 50% more shares oustanding after this exercise. This dilution of shares alone would obviously cause the share price to nominally fall by 33% by itself i think?

  49. Joseph
    Recapitalizing the banks means filling a bucket with holes in it. I warned this would and will happen. The banking machine is broken. No sane banker can lend in the current circumstances, so they lend to the state, which enables income to be earned by the bank. Slow, steady recovery. But in the meantime, fetish about the banking machine accounting means “capital” must be inserted. To enable the machine to work …… hah! Since the state is behind the bank it is a nationalized bank except “profits” belong to the shareholders, God help them! As bad debts without NAMA are recognized then new “capital” is needed. Cheaper to start a new bank which would lend very little also …….. but would not need fresh capital every few weeks. The cost differential is taken up by salaries, wages and advertizing etc. The waste!

  50. Negative coverage is exactly what is needed to drive the euro down in value. I have already said it must be kept up over the next maybe ten years, as this is the only way to repay the funny money debts being taken on. Exports will increase, they hope, while imports fall. Low interest rates will help keep the euro down.

    This is all a “Good Thing”!

  51. cearbhallodalaigh
    Agreed, but that won’t stop them!
    Chow and Lie will believe them?

    The deflationary spiral will continue and be more prolonged due to NAMA. The cheaper land being available now would positively influence the decline.

    The developed world has enough goods etc and so the output gap will be larger than anticipated. Until TPTB rediscover that employment can justify money creation in and of itself, especially if it is infrastructure, then the spiral will be vicious indeed.

    The bankers, the ones who have extracted the real wealth, will not permit the re-discovery until they have their ducks in a row and snared the best assets. They will then graciously allow the plebs to elect a new management team …… History repeats!

  52. @Joseph, no we can’t have a minimum educational standard to be elected, but your idea about training is a good one. The reason we have the people we have is the PR STV system, which the Lib Dems are shockingly thinking about adopting. It places too much emphasis on the parish pump, so by design, TDs have no need to think about national issues, and neither do voters.

  53. In theory, the IPA should be providing training to people in politics. It wouldn’t be too hard to design programmes that TDs could take on Mondays or Fridays when the Dail isn’t sitting…

  54. @Ronan Burke
    Why cant we have some basic competence tests? Require all candidates to furnish a tax clearance cert (not a receipt for having requested one…) , to sit a basic exam in what used to be called civics in school before it disappeared, and to demonstrate basic knowledge of the economy. they are after all applying for a job.
    Note that the first element apart I suspect that most of the TD’s would actually have no problem acing this. Its not stupidity or incompetence that is the problem, imho. Its the whip system. A read of Federalist Paper #10 is depressing in this regard as 200y ago very very smart political philosophers struggled to contain the effects of “factions”.

  55. In a conversation last night it was suggested to me that our system of multi-seat constituencies is practically bound to produce mediocre politicians.
    Very few politicians would want to see a bright sharp young person looking for the second nomination because they realise that it is quite possible that it is themselves, the incumbent, who would lose out. Therefore a mediocre second canditate would be encouraged.
    And in due time it is someone like that who will be favoured with the succession.
    On the other hand, single seat constituencies favour the incumbent, so why not put a term limit of say 6 years on tenure in any constituency; and if they want to stay in politics they must go to a non-adjacent constituency.
    Nursing a constituency would no longer be as worthwhile. If they have shown ability let it be confirmed by the voters in the new constituency. And experiencing the diversity of the country might broaden their outlook.

  56. Ronan Burke and Conor O’Brien are correct, as long as we have the PR-STV system is place the people elected to the Dail will continue to be dominated by Councillors willing to put in 80 hours a week. There are little or no votes in Irish politics for policy.

    This issue of electoral reform has to happen in the context of rebuilding the state, otherwise you can be guaranteed that the economy will be repeatedly destroyed. There needs to be a referendum put to the electorate seeking a change. My own preference is a open list system.

    My economics professor earlier this year asked the question to the class. How many TDs would be able to articulate the difference between GDP and GNP?

    My guess is five or six.

  57. @Brian Lucey, you make an interesting point, but I don’t think its likely to pass popular opinion. On your other point, the best way to control factions isn’t so much to control them but to channel them towards the best interests of the nation; the STV system means that people vote for the TD that does them, personally, the most favours, generally regardless of his or her party affiliation, making every election a hypercompetitive popularity contest.

    A move to a partial or full party list system would focus people’s minds on the national policies of the various parties, since they would have to vote specifically for the party, not the TD. This would then leave the local issues to the councillors and local authorities, the proper forum for such matters. Of all the countries that use PR, only a very few use the STV system.

  58. @ Ronan
    Its not so much that they are controlled, as ‘compensated’.

    No 10’s idea was to diminish the power of a faction everyone should join it, therefore the public would subsume the faction.

    However, it is hard to become a farmer without land, an OAP without age, a banker without government help, etc, etc.

    The concern needs to focus on the oppurtunity cost of the compensation and whether the public gainsor looses from the transaction.

  59. @Conor O’Brien – “Therefore a mediocre second canditate would be encouraged.”

    Yes – this has been my observation. You end up with a kind of ‘race to the bottom’ in terms of candidate quality and there’s another effect in that good people take one look at what’s there already and choose not to be part of it. There’s also a big element of having to serve one’s time (G. Lee excepted!) before even getting a sniff of a candidacy – wait one’s turn, unless you are a close relative or business partner.

  60. Richard Bruton came to our doorstep last week. Among other things he said, “I hear that parking is a problem on this street.” My wife replied, “You shouldn’t be wasting your time on things like that.” He got a sad, faraway look in his eyes as he replied wistfully, “I know”.

  61. @Joseph – does the same tendency not occur in all non-profit organisations, (including academia), but also in hierarchical organisations in general, of any type?

    A noted, now retired, civil servant used the annual staff assessment system for overmarking duds (to ensure that they would be poached/promoted out of his area), while marking down those of talent, to ensure both that he hung on to them, and they would be effectively unpromotable, thus no challenge to him.

  62. @Aiman – I would tend to agree with you in non-profit organisations but something clearly observed in successful business – hierarchical or otherwise – is the desire to take on the best/talented people. Take the example of Richard Branson (there are many others): he quite openly states that he surrounds himself with people who are a lot smarter than he is.

    That makes a lot of sense to me but doesn’t fit in with any culture of ‘having to do your time and wait your turn’… what a grim place to work that would be 🙁

  63. @Brian Lucey
    “Why cant we have some basic competence tests? ……I suspect that most of the TD’s would actually have no problem acing this. Its not stupidity or incompetence that is the problem, imho.”

    hmm, I’m not so sure. I doubt if more than 5 of the 83 muppets who voted in favour of the Super Tuesday dig outs could explain the difference between a subordinated bond and a submarine.
    Its not long since the most important issue facing the nation was whether or not Mattie McGrath’s constituents could continue to drink and drive without interference from the pesky Gardai.

  64. Assessing the money flow is one more essential element in the organization technique format, so as to sustain a normal money flow to meet the important capital needs. Probability of monetary crisis and also the ways of crisis management must be pointed out within the structure. The business strategy must consist of the marketing plans and strategy leading to the expansion in the company.

Comments are closed.