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Sunday January 18 2009

Anglo Irish Bank has a lot of dirty little secrets. Let's look in some detail at one of them, a thing called, "subordinate debt". Never heard of it? Well, it's about time you did. You and your kids (and their kids) will be paying for the antics of the banking fat cats long after scheming bastards like Sean FitzPatrick are just a bad memory.

First, a caveat. Economists and academics speak a language all their own. However, we're picking up the tab, so we're entitled to try to figure out what's happening. That means poking through the undergrowth of economic jargon -- in our layperson's ignorance -- trying not to jump to conclusions.

On the morning of Wednesday October 8, "subordinate debt" was mentioned in the Dail. This was just over a week after the Government gave its blanket guarantee to the banks, leaving us exposed to the extent of 440 billion euros, should anything go wrong.

Why, asked Labour leader Eamon Gilmore, was "subordinate debt" included in the bank guarantee?

Subordinate debt is money effectively loaned to the bank by extremely rich people. This is high-risk money, billions of euros. These loans are unlikely to be repaid in the event of a liquidation -- and therefore they attract very high interest rates.

And, just to make things more complicated, there appear to be two kinds of subordinate debt -- the dated kind and the undated kind.

In the Dail on October 8, Eamon Gilmore said that Germany, Denmark and the UK don't provide "a guarantee or cover for dated subordinated debt. Why was this form of debt included in the Irish scheme? Approximately how much of this debt exists?"

Gilmore suggested that in the weeks prior to the Government guarantee, as Anglo floundered, there was frantic trading in subordinate debt, as rich people sought to offload the risk.

Brian Cowen didn't answer the specific questions. He said only that the blanket guarantee to banks was given "on the basis of the advice from those who are competent to so advise the Government".

The Government wallowed in self praise about its blanket guarantee. It refuted suggestions that the banks were under-capitalised.

Meanwhile, what exactly was the score with "subordinate debt"? It seems that "dated subordinate debt" was covered by the blanket guarantee, but "undated subordinate debt", wasn't.

Such niceties were swamped by the Sean FitzPatrick scandal, which erupted on 18 December.

As the conniving little gouger's schemes were revealed, the Government reversed course and moved to recapitalise the banks, setting aside €1.5bn for Anglo.

On December 23, Morgan Kelly, professor of economics at UCD, published a scathing piece in the Irish Times: "the bailout of Anglo Irish follows a compelling political logic. Anglo Irish funds developers, and developers fund Fianna Fail. By any other criterion, a bailout of Anglo Irish is senseless."

The bank should have been allowed to fail.

"Institutions such as AIB and Bank of Ireland fulfil an economically vital role of clearing payments and lending to households and businesses. Anglo Irish and Irish Nationwide were purely conduits for property speculation." Professor Kelly concluded: "For all it will achieve, the money might as well be piled up in St Stephen's Green and incinerated."

That evening, Dr Alan Ahearne, of the Department of Economics in NUI Galway, went on RTE's Drivetime, where he questioned why Anglo was being saved. "The market is saying that Anglo Irish Bank is bust, it cannot be resurrected . . . why is the Government insisting on putting more and more money into it?"

Presenter Mary Wilson asked if he could understand why.

If you look at Anglo's accounts, Ahearne said, "there is some stuff there, some subordinated debt, about €2.8bn worth, that's not covered by the guarantee . . . if Anglo Irish is liquidated, then the people who own that €2.8bn will probably get nothing back . . . but if the Government puts the €1.5bn in, and if it puts it in junior to these loans . . . and the statement the other day says that it does rank below that . . . if that's the case, then those people will not lose that €2.8bn because they'll get the €1.5 billion that the Government is pumping in. So, either I'm misreading the statement, there's some problem with the statement -- or, there's something not right about the way this bank is being recapitalised."

That was two days before Christmas, at which point we all overdosed on turkey and forgot about boring bank stuff.

Last week, at UCD, a conference of economists discussed the financial crisis. In a paper prepared for that conference, Dr Patrick Honohan of TCD, former advisor to the World Bank, mentioned subordinate debt. His language was flat and measured.

"Sizable unguaranteed subordinated debt -- amounting to several billion euros -- remains in the balance sheets of the banks. If loan losses are larger than are now being projected by the banks, unguaranteed subordinated debt holders would, under the present financial structure, be exposed to losses; but an injection of capital junior to these liabilities would transfer the burden of those losses to the taxpayer." (Our emphasis.)

Dr Honohan, in what might be termed an understatement, added: "This important point has not received sufficient public attention."

Two days later, the Government announced it wouldn't put €1.5bn into Anglo. It would instead nationalise the bank, at even greater potential cost to the taxpayer.

Why? Because Anglo is the country's "third-biggest bank". Well, it's not.

Yes, in money terms it's huge. But Anglo isn't a high street bank. It's a casino within which rich people -- speculators, developers, builders -- gambled on the property bubble.

Yes, it's huge in money terms, but not because it's embedded in the Irish economy -- only because it borrowed and loaned to reckless extremes, for gambling purposes.

And the alleged "reputational" loss, because of Sean FitzPatrick's activities, is puzzling.

Everyone knew about the behaviour of that avaricious swine since December 18, and have learned little of substance since.

The subordinate debt puzzle is just one of the mysteries surrounding the handling of the Anglo crisis.

What's happening?

Buggered if I know, but it's very, very worrying. Fianna Fail has a history with developers and speculators, which rightly raises suspicions.

However, there may be nothing sinister going on, it might merely be incompetence. Or foolishness.

Transparency is paramount in these matters, and a government should say, "Here's what's happened, here's what we intend doing, and here's why". It should answer every question fully and openly -- "commercial sensitivity" doesn't apply in a lifeboat.

Instead, we've had fumbling, stumbling reversals, with inadequate and sometimes risible explanations. Perhaps there's a reason the Cowen/Gormley regime is unforthcoming.

On Tuesday, the Dail sits to consider these matters. On previous performance, the Government will stonewall, the opposition will bluster.

But this is too important. Already, the country's credit rating has been downgraded, which means it will pay billions more for the loans it needs to stay afloat.

If this goes wrong -- and it's going that way now -- the country will go bankrupt, the State won't be able to borrow or pay dole or pensions or wages for nurses or teachers.

The potential consequences are enormous.

If necessary, on Tuesday the opposition should nail shut the doors of the Dail chamber and refuse to allow Cowen and Lenihan out until clear, precise, credible explanations are given about the subordinate debt matter and the other banking mysteries that threaten us.

This is far more important than protocol, manners or party political advantage.

Never has the Dail had more need of Joe Higgins and Tony Gregory.

- Gene Kerrigan

Making it up as they go along.

By Gene Kerrigan

Sunday May 03 2009

How come, no matter what the Government does, things keep getting worse? Unemployment rising relentlessly, credit frozen solid, the only things growing are the food queues, the debt and the public sense of anger.

Why? Answer that or we're sunk.

Over the past seven months, Mr Cowen and his unfortunate crew have had two extreme Budgets, they've given a €440bn guarantee to the banks, they've recapitalised two banks and reluctantly taken over another to keep it alive. And now they're going to shell out tens of billions in their new Nama scheme, aimed at unfreezing bank credit.

They're cutting services and taxing everything that moves. And, no matter what they do, credit remains locked, and the economy continues to tank.

Why?

We can offer an answer. And we can suggest an alternative. And we can state with total confidence that the failed policies will continue to receive the obstinate backing of the same clownish politicians, hapless advisors and media cheerleaders who got us into this mess.

These people -- Cowen, Harney, Lenihan and the rest -- have a strong set of semi-religious economic beliefs. It doesn't matter that these beliefs have proven hopelessly nonsensical (the efficiency of the uninhibited market, the "new economic paradigm", the necessity for light regulation).

Capitalism is broken, but they think they can fix it.

It doesn't matter that these people don't understand their own capitalistic beliefs. (Competitiveness, for instance, is about a whole lot of things -- research, innovation, workplace morale, management efficiency, pricing, forward planning, infrastructure etc. To them it means one thing -- cut labour costs.) The crudeness of their understanding of their own economic creed is breathtaking.

In the name of "competition", another core semi-religious belief, they insisted for years that the ESB must hold electricity prices at an artificially high level. The consequent guarantee of big profits would, they believed, entice competitors into the energy business. (And this high price policy was justified because competition, believe it or not, would then drive down prices. A policy truly made in Killinaskully.)

The result -- of course -- was years of high electricity prices crippling productive business. In the name of competition.

The same set of semi-religious beliefs is being applied to the collapse of the economy. We will note just two. The first is the centrality of "stabilising the public finances", as a response to economic chaos. Second, the utter abhorrence of nationalisation as a tool to attack the banking crisis.

Anyone is entitled to such beliefs. But when a government stubbornly insists on failed policies, against the evidence, for semi-religious or ideological reasons, we face not a few years of relative poverty but a generation of economic obliteration.

When they finally acknowledged there was a crisis -- after 20 whole months of sloth (February 2007 to September 2008), they immediately reached for the policies their economic religion decrees.

Just last week, Brian Cowen stubbornly insisted yet again that the fiscal books must be balanced before the Government could think of defending jobs or attacking unemployment. "The prerequisite for economic recovery is to get the public finances in order".

Now, there's nothing wrong with balanced books. But this is madness. In the midst of a recession comparable with the 1930s, the first priority has to be protecting and creating jobs -- the cornerstone of any economy.

Instead, the Government clings to its semi-religious convictions. Wage and job cuts -- the orthodox response -- depress demand, leading to further job cuts, which further depress demand, leading to -- etc etc etc. And the economy spirals downwards.

And the books don't get balanced -- because letting unemployment rip drives up the cost of social welfare, which unbalances the books even further.

In addition, in attempts to cut costs, the Government stoked up the ever-useful anti-public service feeling. Private sector workers, and the unemployed, were encouraged to demand that public sector workers "share the pain". Of course, if you reduce public service pay and jobs -- which, despite the propaganda is what is happening -- you reduce demand. You also frighten those with jobs into suppressing their spending.

In short, cutting the public sector reduces demand for private sector goods and services, leading to further private sector job losses.

And, yes, taxes were too low, in line with the semi-religious beliefs of Ahern, Harney and Cowen -- but pushing them up abruptly in the midst of a recession further deflates the economy. But, of course, his assault on the public finance impresses foreign investors, says Mr Cowen.

A dead economy, with perhaps 600,000 on the dole. I'm sure foreign investors will be very impressed.

When private capital flatlines, as it has done, only state action can keep the economy functioning. Except when articles of faith prevent it doing so -- which is what has happened. Which is why things keep getting worse. We can come up with as many billions as the zombie banks require, but not one or two billion for job protection and creation -- until we balance the blessed books.

How to unfreeze bank credit? The sensible thing, as we noted last November, would be to set up a state bank. Of course, the semi-religious creed says that only the private sector can do banking properly (no kidding), so anything of that sort was a non-runner.

From Nobel laureate Professor Paul Krugman to UCD Professor Karl Whelan of UCD, rational, urgent arguments have been made by mainstream economists for bank nationalisation. It's the cheapest, fastest, most efficient means to unfreeze credit (short of setting up a state bank).

It's blasphemous, apparently. Government advisor Peter Bacon effectively confirmed on Prime Time last week that nationalisation wasn't among the two options put on the agenda for him to consider. By the way, Dr Bacon's argument against nationalisation was shockingly unimpressive.

So, Mr Cowen blunders go on. Just as he blundered into this mess, as Minister for Finance, following a semi-religious creed. In July 2007 Bertie Ahern recommended suicide for those who warned of dangers. Two months later he denounced "politically motivated attempts to talk down the economy". In March 2008 he did the same. As late as September 15, 2008, Brian Lenihan claimed that, "our banks uniquely have weathered the storm". Two weeks later he began bailing them out.

It wasn't just incompetence that caused so many of the establishment to get so much so wrong for so long -- it was a semi-religious belief in a set of economic commandments, as firm as the Pope's belief in winged angels.

And, in the absence of any job protection or creation policies, the Government (and most of the opposition) await a global recovery, which will lift us all to heaven. How's that going? Well, in the USA they've just realised that come September there's going to be a wave of commercial mortgages -- worth hundreds of billions of dollars -- going belly-up, just like residential mortgages began doing in spring 2007. Some reckon that two-thirds of such mortgages won't be able to get the refinancing they need. The next phase begins.

Capitalism is broken. Where we go from here is anyone's guess -- but we could do without the current mindless determination to pull the old levers and expect the old results. We need fresh thinking. What we have is semi-religious dogmatism.

How will this play out? Two predictions.

One -- the current policies will continue. Two -- as a consequence, we flirt with national bankruptcy, with loss of sovereignty, IMF rule, followed by catastrophic social unrest.

It's an anarchist's wet dream -- brought to us by a shabby cabal of right-wing incompetents who never saw the catastrophe coming and have yet to wake up to the reality of our plight.

- Gene Kerrigan

Cowan's dangerous game

By Gene Kerrigan

Sunday March 15 2009

It's not that they're stupid or uncaring, but Brian Cowen and his ministers don't get it. Nor do the bankers or the builders, or the pillars of society proudly announcing their voluntary pay cuts and urging everyone to "share the pain". They don't get it, and as a consequence they're playing with fire.

On Friday, a State outfit called Ciroc issued a report. It should be kept in a museum, as an example of how out of touch the establishment is with recession Ireland.

Here's what they don't get. We weren't in the game. But we get to pay the bill.

This is dangerous. It's so fundamentally unfair, and clearly understood to be unfair, that it risks disaffection and alienation on a scale never before seen in this country.

What's the game and who's playing it? What's Ciroc and why should it stick its report where the sun don't shine?

Here's the game. The bankers made fortunes borrowing billions abroad, to lend to builders. The builders made fortunes selling houses to people anxious not to be excluded forever from the property ladder. The banks made another fortune inflating loans to sell to the anxious house-buyers. The builders and estate agents inflated house prices and increased their fortunes.

The politicians encouraged all this, with reckless tax policies and deliberately lax regulation.

This on its own would be bad enough, but the game got wilder. An enormous service industry grew up around the property boom -- architects, lawyers, insurers, lobbyists, PR and image maintenance. The pay of senior bankers and top executives throughout the business world rocketed in sympathy. Soon, in those circles, a salary of half a million was the sign of a loser. A wage for the job wasn't enough, there had to be bonuses. And massive pensions.

This was all separate from the financial partying of bankers like dear old Seanie Fitz, busily getting creative with figures.

An enormous culture of entitlement grew up around this nonsense. To rise into the top layers of many businesses was not to get a job, with appropriate pay -- it was to be handed a winning lottery ticket. You were set for life.

This culture of entitlement -- in truth, a culture of looting -- spread through the professions, through private and public sectors, into the top layers of the civil service. Politicians joined in. Executive and professional pay began to relate not to the earnings of those at the coal-front, but to the inflated salaries, bonuses

and pensions of the absurdly overpaid top layers. Money breeds money -- and the elite speculated on property here and abroad, running up huge profits while it lasted.

The great money game was played by a thin layer at the top. Lower level civil servants, for instance, got an ordinary wage. Below the top layers of barristers, lawyers often do useful, necessary work for a surprisingly small fee.

Pop -- the bubble burst. Now, says the Government, who're we going to get to clean up this mess?

We weren't in the game. But we get to pay the bill.

Simultaneously, similar games in the USA created a spreading recession, so Irish exports collapsed and before the end of the year there'll be half a million unemployed, and counting. Fear and depression spread. Some won't ever work again. No holidays, no Christmas, education plans for kids on hold. How many of our kids will emigrate when the global economy picks up?

The Government is afraid to borrow more to try to stimulate growth, because it's already borrowing billions to recapitalise the banks.

Those in work have wages cut, taxes are going up. Hospital services shrink; now they're going to cut social welfare. At every corner, there's some well-fed gobshite urging us to "share the pain".

Enter Ciroc -- the Covered Institutions Remuneration Oversight Committee. And it recommends that the pay of the heads of AIB and Bank of Ireland be capped at €690,000. Guess how much the head of AIB thinks he's worth now -- €696,300. So, Ciroc recommend a pay cut of €6,300. A whopping cut of 0.9 per cent.

Even Brian Lenihan is embarrassed. He "suggests" €500,000 is enough. Half a million, for bankers with a proven record of incompetence.

In a country where people will die on hospital waiting lists. Lenihan thinks this is "appropriate". Fine Gael says €250,000, itself an absurd overpayment.

It's outrageous that this is even an issue.

Of course, the argument goes, we have to pay these people big bucks or they'll leave. Really? Good riddance. Besides, where will they go? To the USA, where upwards of 200,000 bankers are on the dole? And they'll be asked for a CV. "I ran an Irish bank," they'll say proudly. When the interview panel stops laughing they'll ask these lads why they left. "Well, they wouldn't pay me enough money."

This is farce. The elite are being protected from their own folly to an astonishing extent -- and we, who weren't in the game, get to pay the bill.

Look at the ministerial pensions. Paid to people with well-paid jobs. The latest State Finance Accounts has Charlie McCreevy, who gets a whopping salary from the EU, down for a State pension of €70,710. John Bruton, also in a high-paying EU job -- a €94,627 pension.

Sitting TDs are listed for pensions. Eamon Gilmore -- €5,812. Ruairi Quinn -- €44,171. Mary O'Rourke -- €53,622, Richard Bruton -- €14,041. And so on and so on.

Peter Sutherland, who recently lectured us all on the need to tighten belts, is an enormously successful and rich lawyer and banker. He's listed for a State pension of €49,791 -- this, presumably, comes from his two years and eight months as attorney general back in the early 1980s.

Then there are the crazy expenses for ministers, the helicopters, the jets, the premium air fares, the State cars and full-time drivers, the nixers, the committee jobs for the boys. The culture of entitlement is endless.

At the top of every hierarchy, whether in the public or private sector, there's a layer of overpaid people who are untouchable. There are policies -- such as the hundred million annual subsidy to exclusionary schools, the carefully constructed tax avoidance

laws -- that are untouchable.

Many in that top layer seem to think that a deep, long recession is "a challenge". No, it's deadening, hopeless, dangerous.

Applying "across the board" cuts isn't the point. A cut of 10 or 20 per cent makes no difference to this layer. When they "share the pain" it means instead of a €63 bottle of wine with dinner they'll endure a bottle of €48 plonk.

They'll sail unhurt through this. And people who weren't in the game -- many even unaware that the game was going on -- see their families destroyed.

Here's where that's dangerous.

Remember O'Connell Street, February 2006, a Saturday afternoon, a handful of Continuity IRA sympathisers, plus a few hundred disaffected inner city youths hanging around to see what would happen? The Dublin riots were a sudden, unexpected explosion of violence, then it all went quiet. They haven't gone away, you know.

In the 1980s there was an illusion that we were all in it together -- the truth of the widespread tax fraud wasn't understood. Today, the unfairness of what's happening is blatant.

The existence of huge wealth can't be denied. Also, we have expectations now that we didn't have then. And there are headbangers mooching around disaffected, resentful youths, with a view to recruiting cannon fodder for their war against pizza delivery people.

The Government could have started at the top and cut savagely -- particularly among those prominent in the great money game. Instead, it takes the usual route -- social welfare, education, health.

It's a gamble. Another game. And even more dangerous.

Getting Sean Q off the hook-at Joe taxpayers expense..

By Gene Kerrigan

Sunday February 22 2009

They're hiding a lot, but they couldn't keep some of the dirt from spilling out. By the small hours of yesterday morning, as we picked clean the bones of the two reports on Anglo Irish Bank, the simple, devastating unfairness of what's happening was unmistakable.

Let's start with Sean Quinn, the richest man in Ireland. Some time ago, Mr Quinn decided he'd like to own a share of a bank. Perhaps it made good business sense, perhaps he was seduced by grandiose thoughts. Whatever -- he began assembling a stake in Anglo Irish Bank.

Mr Quinn used a device called "contracts for difference" (CFDs), which had advantages over buying shares directly. One advantage was that CFDs multiplied your gains, which was great fun. And, thanks to Brian Cowen, you didn't have to pay tax on CFDs (Revenue wanted to impose a tax a few years back, but Brian overruled them).

By and by, this one man, Mr Quinn, had CFDs for 25 per cent of Anglo. One man owned a quarter of a bank.

Unhappily, some other gamblers began messing with Mr Quinn. They saw a chance to make money and they gambled against him and upset his plans. And while CFDs multiply your gains, they also multiply your losses -- and Mr Quinn was losing big. And, since Mr Quinn had such a huge slice of the bank, Anglo was in trouble. Mr Quinn needed to quickly "unwind" the CFDs and buy Anglo shares instead.

Anglo is a tight outfit, bankers to a small group of immensely wealthy people. And they did what has become traditional in certain circles -- they arranged a "dig out".

Anglo loaned €451m to 10 insiders, who together bought 10 per cent of Anglo shares. Mr Quinn bought 15 per cent. And he thus shed the albatross of CFDs hanging around his neck. His little adventure had cost him €1bn.

By mid-summer, the panic was over.

Unfortunately, another crisis loomed.

The global credit bubble was about to pop. And the Irish property bubble had already burst. Anglo had loaned enormous amounts of money to a small number of very rich customers, heavily into land and property that suddenly no one wanted to buy.

Fifteen rich people were into Anglo for more than half a billion each.

Word got out that Anglo was in trouble. Depositors rushed to get their money out. Around €10bn was withdrawn. In the space of one week in late September, the bank lost €5.4bn in deposits.

€5.4bn. In one week. There's a lot of big money out there.

Mind you, amid the gloom, some people did alright. The chief executive of Anglo got over €2m in salary last year. The directors got €9.5m between them. A retiring director was sent on his way with a nifty €3.9m cheerio. Directors' loans were notoriously generous -- a total of €255m last year. And just €115m was repaid. The collateral for some loans is made up of Anglo shares, which are now worthless.

Guess who picks up the tab?

The bank's head honcho, Sean FitzPatrick -- good old Seanie -- was doing his annual trick of shifting tens of millions from Nationwide into Anglo and back to conceal his loans.

Arrangements with other clever dicks in Irish Life and Permanent saw billions shuffled around to help conceal Anglo's problems.

You or I knew nothing of these problems -- it was the people with big money, the insiders, who got the word about Anglo's troubles and who moved their cash out.

The other banks were worried. If Anglo went under, people might worry that Nationwide or even Bank of Ireland was next. They told Mr Cowen and Mr Lenihan what they needed and a panicked government gave the banks a blanket guarantee -- effectively, the taxpayer would assume responsibility for all losses.

Overnight, the bankers' problems became ours.

Anglo's big shots -- Sean FitzPatrick and David Drumm -- had already been telling us we needed our belts tightened.

Mr FitzPatrick demanded that the medical card be taken away from pensioners -- and the government brought forward the budget and did just that.

Remember the €451m that Anglo loaned the golden circle of 10 insiders? Just €83m was paid back. The "dig out" was so structured that the golden circle don't have to pay back most of the money they borrowed -- we now pick up the tab for that, too.

As billions of euros vanished into carefully constructed hidey-holes, the call went up for a return to patriotic values. Suddenly, the problem was defined as "a hole in the public finances". (The very real hole in the public finances was, of course, a consequence of the property bubble bursting, and the fall in tax revenue -- it wasn't a cause of the economic slump).

Private sector workers were encouraged to see the public sector as the problem. We were all encouraged to "put on the green jersey". Pull in every shekel you could get your grubby hands on and you were a national institution and the taxpayer picked up your debts. But buy your Christmas drink in Newry and you were unpatriotic.

At a time when jobs are disappearing and investment is needed, the country's financial structure has been paralysed, sabotaged by the greed of a small number of extremely wealthy people.

The government's response to this has been turgid, timid and deferential. They believe what the bankers tell them. They get advice from the bankers.

There's no reason to accept Fine Gael innuendo about Brian Cowen -- there's no corruption on his part. He has for years, however, socialised with the builders and the bankers -- he is steeped in that culture.

There was never a possibility, for instance, that his government would even consider an alternative to propping up the banks with taxpayers' money. Setting up a clean state bank that could facilitate commercial activity -- that could attract investment and compete the hell out of the corrupt, compromised banks -- was a reasonable option.

Such a move would be alien to Mr Cowen's very nature.

Instead, the government and their banker and builder friends huddle close and shift the burden to the old, the schoolkids, the sick, the unemployed. Lives are being destroyed.

At the other end of the scale, the cuts are minimal. The high-flyers wouldn't even notice a 10 per cent cut.

For instance, Mr Drumm, of Anglo, demanded last year that we have our belts tightened. We pointed out that Mr Drumm could take a cut of 95 per cent on his 2007 pay (€3.2m) and still be on a very snug €160,000 salary.

To squeeze the wealthy would, we're told, risk a "flight of capital". Instead, the government risks a flight of stability.

The government seems unaware of fierce, fierce anger that exists, as people are expected to calmly watch their family's future disappear -- people who played no role in creating the crisis.

In the absence of even a pretence at fairness, the marches and the strikes are inevitable.

The state has chosen the route of class conflict and social upheaval. And this isn't a short-term thing. We face years of this, and the possibility of something awful happening is very real. We're one swing of a garda baton, one cracked head, away from chaos.

We're told the army is ready to step in. Good move -- the government has set private against public, now we might see guards on strike and the army doing their work, with all the social cohesion that will bring.

You might imagine that this Government has no sense of history. You might think they have no notion of historical process. And you'd be right.

Cunning vote buyers-at any cost to the Nation.

By Gene Kerrigan

Sunday January 25 2009

Once upon a long time ago, in a gloomy pub toilet, I had the pleasure of having a pee alongside the late and legendary Oliver J Flanagan TD. It occasioned a useful lesson for a young reporter -- my only regret being that I couldn't take contemporaneous notes, my hands being otherwise engaged.

In the jacks that afternoon, Oliver continued a conversation with a flunky who stood in the background. It was in the middle of an election campaign and the great TD had identified an area of the constituency that had faltered in its loyalty to him. He rattled off numbers -- how many people lived in the enclave, how many voted and who they traditionally voted for. And he identified specific election boxes where his votes came up short last time. Those people had to be worked on.

Until then, I hadn't realised the skill, talent and unwavering dedication that went into being a successful TD. It involves long hours gathering and interpreting electoral information, and long years massaging constituents. Subsequently, other TDs revealed the true value of such practices as repeat canvasses and detailed tallies.

You might dismiss the likes of Oliver as a small-timer of no significance. You'd be wrong. A TD for four decades, Oliver was in the first ranks of the Dail. For 11 years he represented us in the Parliamentary Assembly of the Council of Europe and he became a minister in the Fine Gael/Labour "government of all the talents". (The joke of the time was that when asked to be minister for defence, Oliver solemnly promised he would indeed look after "de fence" to the best of his ability.)

Bertie Ahern, Enda Kenny and Brian Cowen are Oliver Flanagan without the anti-Semitism. In a few words, nods and handshakes, Bertie can empathise with a whole roomful of voters. The empathy may be entirely bogus, but it's an amazing talent -- and one that voters reward.

We have a parliament dominated by dedicated and skilled vote hunters. Unfortunately, other necessary skills are lacking. With all the information they had, neither Ahern nor Cowen realised the depth of the pit of unsustainable debt they helped dig, along with their builder friends. They simply believed it to be true when estate agents said our land and property was now worth multiples of what it used to. And they thought it appropriate that builders and bankers should use that "truth" to "leverage" their way into such debt as to destabilise the banking system.

As Anglo Irish Bank rushed towards collapse, poor, pitiable Brian Lenihan struggled to avoid a blunder, and walked the rest of us into a catastrophe.

He had to give a blanket guarantee -- of a potential €440bn -- to save Anglo and thereby protect the banks. Because he'd been told Anglo was a systemic part of Irish banking. The latest steps expose us to risks of tens of billions we don't have.

Economists such as Morgan Kelly and Alan Ahearne tell us Anglo never was the kind of bank that had to be defended at all costs. I'm not qualified to take part in such arguments, but I can open a phone book. You'll find a whole page of numbers for AIB and another for Bank of Ireland. Even NIB has half a page -- showing branches spread throughout the community, systemically embedded lines of commerce and credit.

Anglo has three numbers, head office, personal savings and private banking for the elite. Anglo was little more than a specialist gambling house. Albeit a gambling house with an amiable chap in charge, a gambling house patronised by rich builders with links to Fianna Fail. Whether such links influenced policy, even subliminally, we can't know.

If politicians lack detailed knowledge of matters such as banking, they can substitute an over-all vision of society, of where it is and the direction in which they want it to go. Such vision is almost entirely absent from Irish politics. It's all short-term stuff, career curves and constituency profiles -- latterly oiled with promises of tax breaks. No vision, no political programme beyond the catch-all and disposable "policy document" produced to wave around at election time.

Brian Lenihan, and Brian Cowen are prisoners of their political history. Their skills are in vote-hunting. Both are entirely honourable in personal financial matters. However, the party in which they rose to power is steeped in a doubtful environment -- in which the best interests of builders and developers are identified with the best interests of the nation.

The media likes to label people -- and Cowen has been labelled a sensitive, intelligent soul. But he was a minister in six departments, and -- in the timeless phrase -- he rose without trace. His performance in recent months is not a dramatic fall from top form. This appears to be his top form.

Lenihan told the BBC the economy is "thriving" -- perhaps he thinks this will impress foreign investors. But anyone seriously considering investment will already have done their research. They look at him on TV and see a minister for finance who's out of his depth. And pass on.

This was Lenihan's John McCain moment -- "the fundamentals of the American economy are sound", McCain repeatedly chirped, and voters who knew better turned away in embarrassment.

The line between the likes of Oliver J Flanagan and Brian Cowen is obvious -- but how do we account for the likes of John Gormley, whose party sustains this current government?

Many of us see the likes of Gormley as somewhat different to the usual run of TD -- motivated by issues. However, when asked by Vincent Browne, on TV3 Nightly News, why he made a deal with Fianna Fail, Gormley said that the prospect of five more years in opposition was "soul destroying".

He seemed consumed by the need to be relevant at whatever price -- the same bug that bit old Oliver.

So, Mr Gormley saved his soul. And if that meant he had to support the mugging of pensioners, so be it. And slashing public transport -- that too. And continuing the inefficient, dangerous free-market experiment with the health system -- Mr Gormley could stomach that.

He could allow increases in primary and secondary class sizes. When Batt O'Keeffe brings in his third-level education tax, in the form of fees, Mr Gormley will salute.

On the bright side, he can tell himself that, thanks to his efforts, faltering hospitals and schools will not be illuminated by the wasteful type of lightbulb.

Politically, we've long been careless in our choices, easily swayed by local loyalties, habit and a weakness for charming non-entities.

And many of these people really are entertaining and truly likeable. But gormless. In the years to come, we may pay a price of Icelandic proportions.

John Gormley's understanding of why there are rumblings of dissatisfaction with the Greens is as follows: "People are not aware of all the achievements of the Green Party in government. That is a worry because we have to get that message across."

He thinks we're disappointed and angry because we don't know what he's doing. No, John, your problem is that we know all too well.

why is Sean Fitzpatrick not in gaol.?

By Gene Kerrigan

Sunday January 18 2009

Anglo Irish Bank has a lot of dirty little secrets. Let's look in some detail at one of them, a thing called, "subordinate debt". Never heard of it? Well, it's about time you did. You and your kids (and their kids) will be paying for the antics of the banking fat cats long after scheming bastards like Sean FitzPatrick are just a bad memory.

First, a caveat. Economists and academics speak a language all their own. However, we're picking up the tab, so we're entitled to try to figure out what's happening. That means poking through the undergrowth of economic jargon -- in our layperson's ignorance -- trying not to jump to conclusions.

On the morning of Wednesday October 8, "subordinate debt" was mentioned in the Dail. This was just over a week after the Government gave its blanket guarantee to the banks, leaving us exposed to the extent of 440 billion euros, should anything go wrong.

Why, asked Labour leader Eamon Gilmore, was "subordinate debt" included in the bank guarantee?

Subordinate debt is money effectively loaned to the bank by extremely rich people. This is high-risk money, billions of euros. These loans are unlikely to be repaid in the event of a liquidation -- and therefore they attract very high interest rates.

And, just to make things more complicated, there appear to be two kinds of subordinate debt -- the dated kind and the undated kind.

In the Dail on October 8, Eamon Gilmore said that Germany, Denmark and the UK don't provide "a guarantee or cover for dated subordinated debt. Why was this form of debt included in the Irish scheme? Approximately how much of this debt exists?"

Gilmore suggested that in the weeks prior to the Government guarantee, as Anglo floundered, there was frantic trading in subordinate debt, as rich people sought to offload the risk.

Brian Cowen didn't answer the specific questions. He said only that the blanket guarantee to banks was given "on the basis of the advice from those who are competent to so advise the Government".

The Government wallowed in self praise about its blanket guarantee. It refuted suggestions that the banks were under-capitalised.

Meanwhile, what exactly was the score with "subordinate debt"? It seems that "dated subordinate debt" was covered by the blanket guarantee, but "undated subordinate debt", wasn't.

Such niceties were swamped by the Sean FitzPatrick scandal, which erupted on 18 December.

As the conniving little gouger's schemes were revealed, the Government reversed course and moved to recapitalise the banks, setting aside €1.5bn for Anglo.

On December 23, Morgan Kelly, professor of economics at UCD, published a scathing piece in the Irish Times: "the bailout of Anglo Irish follows a compelling political logic. Anglo Irish funds developers, and developers fund Fianna Fail. By any other criterion, a bailout of Anglo Irish is senseless."

The bank should have been allowed to fail.

"Institutions such as AIB and Bank of Ireland fulfil an economically vital role of clearing payments and lending to households and businesses. Anglo Irish and Irish Nationwide were purely conduits for property speculation." Professor Kelly concluded: "For all it will achieve, the money might as well be piled up in St Stephen's Green and incinerated."

That evening, Dr Alan Ahearne, of the Department of Economics in NUI Galway, went on RTE's Drivetime, where he questioned why Anglo was being saved. "The market is saying that Anglo Irish Bank is bust, it cannot be resurrected . . . why is the Government insisting on putting more and more money into it?"

Presenter Mary Wilson asked if he could understand why.

If you look at Anglo's accounts, Ahearne said, "there is some stuff there, some subordinated debt, about €2.8bn worth, that's not covered by the guarantee . . . if Anglo Irish is liquidated, then the people who own that €2.8bn will probably get nothing back . . . but if the Government puts the €1.5bn in, and if it puts it in junior to these loans . . . and the statement the other day says that it does rank below that . . . if that's the case, then those people will not lose that €2.8bn because they'll get the €1.5 billion that the Government is pumping in. So, either I'm misreading the statement, there's some problem with the statement -- or, there's something not right about the way this bank is being recapitalised."

That was two days before Christmas, at which point we all overdosed on turkey and forgot about boring bank stuff.

Last week, at UCD, a conference of economists discussed the financial crisis. In a paper prepared for that conference, Dr Patrick Honohan of TCD, former advisor to the World Bank, mentioned subordinate debt. His language was flat and measured.

"Sizable unguaranteed subordinated debt -- amounting to several billion euros -- remains in the balance sheets of the banks. If loan losses are larger than are now being projected by the banks, unguaranteed subordinated debt holders would, under the present financial structure, be exposed to losses; but an injection of capital junior to these liabilities would transfer the burden of those losses to the taxpayer." (Our emphasis.)

Dr Honohan, in what might be termed an understatement, added: "This important point has not received sufficient public attention."

Two days later, the Government announced it wouldn't put €1.5bn into Anglo. It would instead nationalise the bank, at even greater potential cost to the taxpayer.

Why? Because Anglo is the country's "third-biggest bank". Well, it's not.

Yes, in money terms it's huge. But Anglo isn't a high street bank. It's a casino within which rich people -- speculators, developers, builders -- gambled on the property bubble.

Yes, it's huge in money terms, but not because it's embedded in the Irish economy -- only because it borrowed and loaned to reckless extremes, for gambling purposes.

And the alleged "reputational" loss, because of Sean FitzPatrick's activities, is puzzling.

Everyone knew about the behaviour of that avaricious swine since December 18, and have learned little of substance since.

The subordinate debt puzzle is just one of the mysteries surrounding the handling of the Anglo crisis.

What's happening?

Buggered if I know, but it's very, very worrying. Fianna Fail has a history with developers and speculators, which rightly raises suspicions.

However, there may be nothing sinister going on, it might merely be incompetence. Or foolishness.

Transparency is paramount in these matters, and a government should say, "Here's what's happened, here's what we intend doing, and here's why". It should answer every question fully and openly -- "commercial sensitivity" doesn't apply in a lifeboat.

Instead, we've had fumbling, stumbling reversals, with inadequate and sometimes risible explanations. Perhaps there's a reason the Cowen/Gormley regime is unforthcoming.

On Tuesday, the Dail sits to consider these matters. On previous performance, the Government will stonewall, the opposition will bluster.

But this is too important. Already, the country's credit rating has been downgraded, which means it will pay billions more for the loans it needs to stay afloat.

If this goes wrong -- and it's going that way now -- the country will go bankrupt, the State won't be able to borrow or pay dole or pensions or wages for nurses or teachers.

The potential consequences are enormous.

If necessary, on Tuesday the opposition should nail shut the doors of the Dail chamber and refuse to allow Cowen and Lenihan out until clear, precise, credible explanations are given about the subordinate debt matter and the other banking mysteries that threaten us.

This is far more important than protocol, manners or party political advantage.

Never has the Dail had more need of Joe Higgins and Tony Gregory.

- Gene Kerrigan

tweedil-di- dum, tweedil-di-dee, pensions for you- pensions for me.

By Gene Kerrigan

Sunday December 07 2008

Here are three things we need to worry about: (1) what the rest of the world is doing about the global economic meltdown, (2) what our government is doing about our own collapse, and (3) whether we'll be able to protect John Bruton's pension.

You young folk may wonder, who the hell is John Bruton? I remember him well. John was Taoiseach for a little while between the end of the Haughey era and the rise of Sir Bertie of the Sterling Lodgment. John came and went without much bother.

We could have chosen any number of esteemed elders as an example, but John Bruton's pension will do as a symbol. It represents the eternal question that's part of every economic meltdown -- who gets the gravy and who gets poked in the eye with a sharp stick?

As for the global economic crisis, everyone knows there are two problems -- frozen credit and a slump in the real economy. So, billions are pumped into the banks yet credit remains frozen. And interest rates are brought down, but unemployment grows at a startling rate. The usual tricks don't work.

There's an argument -- to which Barack Obama seems open -- that a massive public works stimulus is needed, the good old fashioned Keynesian solution. But it's been too long in coming, and anything suggested so far seems derisory (the French think €26bn will do it).

Prospects? Given that the dimmest layperson's guess is as good as the average economist's -- perhaps two or three years of real pain, followed by several years of slow recovery. And that's the upside. It's also possible there will be at least a dozen years of economic Armageddon before there's any international relief -- if ever.

Given that we can't count on the international cavalry riding to our rescue, what's our own government doing about our economic collapse? Eh, well, it's waiting for the international cavalry to ride to our rescue.

It seems we're a "small open economy" and we can't do anything. Forget all that tiger nonsense about entrepreneurial spirit -- we have to do what the banks want, guarantee their loans so they don't collapse. And wait for the EU or the Yanks or the Chinese to pull off a miracle.

The only ones offering a note of dissent are the trade unions -- on Friday, Siptu issued a stimulus plan. Nothing terribly radical, just bog standard emergency capitalism. And if the past is any guide, it will be ignored.

With nothing positive to offer, our politicians and their pet economists enjoy cutting public services, numbers and pay. It won't help the problem -- in fact, it will make it worse -- but it makes them feel good and they get good media. For some reason, it's popular to attack guards, nurses, soldiers, lab technicians and train drivers (Michael O'Leary on Friday's 'Late Late Show' made a gratuitous swipe at doctors and nurses and got a big laugh and a round of applause).

Suppose the international cavalry doesn't come? Instead of stimulating the economy, using the public sector as a tool for infrastructural investment, this government will have done the opposite.

Which is where John Bruton's pension comes in.

Things are so bad that last week we brought in legislation to whip away the medical card from thousands of pensioners. Not rich pensioners, just those not on the breadline. We've taken a cancer vaccine away from young girls. We've enlarged class sizes, we've cut social programmes that kept kids in school. Hospital beds will be cut, fewer vermin-ridden prefab classrooms will be replaced. In a thousand sneaky little ways, we're making life more difficult for those who have little to cut back.

All this, of course, is "absolutely necessary". These "tough decisions" have to be made to save the economy.

So, I'm reading some government statistics, 'Finance Accounts 2006', trying in my dim layperson way to make sense of how we got into this mess. And I spot a familiar name. John Bruton. Pension. And the figure €89,777. That's some pension, for a man who's currently working as EU ambassador to the USA, a job that I bet pays a nice salary. And, I'll warrant, a job that meets most of your accommodation, transport and food needs. The man is years from retirement, and his pension is twice the average industrial wage, says I.

And all around him, names familiar and otherwise. You wouldn't believe the amounts of money they're getting, as pensions -- and many of them still in gainful employment. At least two of these chaps have criminal convictions. There are politicians you've never heard of. Others you wish you'd never heard of. There are a number of lawyers, among the highest paid in the land, entitled to State pensions of 40 or 50 grand a year.

Last May, two junior ministers got the bum's rush (nothing wrong with them, but Brian Cowen needed to give someone else a go in their Mercs).

They got golden handshakes of €106,000 between them, even though they still draw TD wages of around a 100 grand a year.

In the week that we withdrew the cancer vaccine from the young girls, RTE News told us there was a small fire in Bertie Ahern's State car. Think of it. Lord Sterling of Lodgment still has a state car. Two of them, actually, so that there'll always be one available in case he has to rush to a bank to lodge or withdraw a suitcase full of cash.

They spent €220,000 fitting out his new office, and gave him a golden handshake of €68,000. And until the day he dies, he'll have leather seats under his arse, with highly trained gardai ferrying him wherever he needs to go.

Remember Mary Robinson? Pension of €136,000. The current occupant of the Aras, Mary McAleese, is on €277,000 a year. Ah, says you, she's got a lot of expenses. Lots of people visit, and she has to put out little dishes full of Pringles. No, that kind of thing comes out of the extra €317,000 in "allowances".

Now, Mary McAleese is a nice person. She's thrilled to be president. I know she isn't in it for the money. I bet she'd do it for the €77,000, so we could save €200,000.

Obviously, this wouldn't save the economy. Not even if we took all the cars away from all the ministers and made them travel to work like the rest of us. Not even if we insisted that no one gets a pension until they retire, same as the rest of us. Not even if we stopped subsidising private secondary education to the tune of €90m a year. Not even if we stopped spending tens of millions subsidising the private health sector. Not even if we used tax measures to cap the salaries of the private sector incompetents who got us into this mess.

None of this would stimulate the economy. But that's not going to happen anyway, until the international cavalry get their act together. In the meantime, all the State is doing is attempting to trim costs, to keep things ticking over at the expense of those who can least afford sacrifice. The fact that the State squanders so much money on gratuitous luxuries for "top people", while simultaneously calling for patriotic sacrifice, tells us what this is about.

It's about maintaining the quality of the wine at the Dublin 4 dinner party, at the cost of the future of the kids who fail in overcrowded classes. It's a highly class conscious effort to ensure the recession has minimal effect on those who matter.

- Gene Kerrighan

Sneaky bastards& conniving creeps in control of the nations banks.!

By Gene Kerrigan

Sunday December 21 2008

Sean FitzPatrick is a sneaky little bastard, but let's not get hung up on the banker's "inappropriate" behaviour. The problems we face are much, much bigger than the greedy manoeuvres of the devious gobshite who captained Anglo Irish Bank to its current dire straits.

The fact that the Government still fawns over the bankers is a problem for the rest of us -- but not as big a problem as the Government's incompetence in the face of economic collapse. Whole sections of society -- not least the political class -- seem to be in denial about the gravity of the problem.

We'll come back to the banks in a moment -- and to Sean FitzPatrick, the manipulative little tosser. First, the bigger picture.

No one knows how this global emergency will work out, but things will happen quickly, unexpectedly. Internationally, we'll see increased instability in poor countries. When people become desperate and options are few, internal wars or wars with neighbours are more likely, increasing regional instability and global uncertainty. Even in the US, as unemployment soars, states like Indiana and Michigan are already running out of money to pay unemployment benefits.

The New York Times says, "CaliforniaNew YorkOhio,Rhode Island and other states are inching toward insolvency as well."

In the short term, they can borrow from the federal government. Our economy is hardly healthier than New York's, and we don't have the feds to fall back on. When unemployment benefits and pensions run out, that's when riots start. We're not there yet, but it's about time we began seeing the potential severity of the problem.

The political responses to the crisis break down -- very roughly -- into the "Austrian school" versus the Keynesians. The Austrian school of thought says that such massive recessions are a way of clearing deadwood from the system, with the markets eventually emerging stronger. Do nothing, except maybe reduce interest rates -- let the market do what it will.

The Keynesian school says the state must stimulate the economy, borrowing massively if necessary, as Roosevelt did in the 1930s. The row between Germany's Merkel government (Austrian school) and Britain's Gordon Brown (weakly Keynesian) reflects these differences. In a petty way, the recent row between market ideologue Charlie McCreevy and some vaguely left-wing MEPs reflects the same political difference.

(Our Government instinctively leans towards the Austrian school, but not really. Cowen, Lenihan and Coughlan are more from a deer-caught-in-the-headlights school of inaction. Last week's economic "plan" was a lengthy note sent up the chimney in the hope that a man with a white beard would deliver the goodies.)

Barack Obama intends to follow the Keynesian remedy, but already there are real fears that he's thinking too small (a half-a-trillion stimulus when he needs to commit four times that). And, with the interconnected nature of the global economy, the response has to be coordinated. Given the German attitude, that's unlikely. The omens are not good.

Here, masses of people face the dole, huge numbers of our sons and daughters will emigrate. People who worked hard for decades see their pensions shredded and face old age in poverty. Honest people who built businesses offering goods and services, who employed others and made a contribution to our collective welfare, will see those businesses smashed, through no fault of their own.

Our already inadequate schools and hospitals face savage cuts. The teachers who prepare the next generation, the nurses who mend us when we're broken, all the train drivers and clerks and road sweepers who make society work -- people earning modest wages for hard, necessary labour -- have been routinely and casually traduced as some kind of "public sector parasites".

Given the scale of what's happening, this is no time for holding in awe the fools and knaves who brought us to this brink.

Which brings us back to the banks. And Mr Conniving Little Creep.

In September 2005, Sean FitzPatrick was praised for a "challenging and thoughtful" speech at the Irish Times Property Advertising Awards. In truth, it was a mediocre, self-serving speech about how wonderful he and his type were. "We had ideas, and we had balls. . . we worked the scene and maximised the moment, the world watched in astonishment." The world of capital "came to marvel at what we were doing and achieving".

He droned on about "an economy that has thrived on intuition and a spirit of adventure". He patted himself on the back: "We have done very well by Ireland.''

What the bankers, builders and the Ahern/ Harney regime were doing was encouraging borrowing and lending at unsustainable levels, creating a property bubble -- catching the global mood of reckless capitalist adventurism. What the conniving little creep was doing, at exactly the time of his "thoughtful" speech, was temporarily moving his secret €87m loan out of Anglo, to conceal it from the auditors for the fifth or sixth year in a row.

For years, politicians and the media cheerleaders bought this mystical nonsense about "maximising the entrepreneurial moment". When Richard Curran made a TV programme in April 2007, warning of the coming debacle, he was denounced. George Lee was parodied as some kind of Moaning Minnie. Bertie Ahern, sitting atop his accumulated sterling deposits, suggested that people like Curran and Lee should "commit suicide".

The Cowen Government is cut from the same servile cloth. When the bankers demanded a total state guarantee of their financial adventures, Cowen and Lenihan immediately complied. This put the entire State in hock to the tune of €440 billion. The very financial existence of the State was put at risk.

Last October, when Sean FitzPatrick demanded that the Government kill the "sacred cow" of over-70s entitlement to medical cards, that's precisely what Cowen and Lenihan did.

Now, this government proposes to put three billion of our money into Anglo Irish, a bank valued on Friday at €266m (and declining). Banks are utilities. Just like transport and power companies. A modern state needs lines of credit and the means of facilitating commercial and personal transactions.

Suppose the bankers controlled roads, electricity or water. Suppose they subverted the State by freezing those utilities and giving priority to their own interests, threatening social collapse. What would a sensible, socially responsible state do? It would take them over. If necessary, at the point of a seasoned army platoon.

Tanaiste Mary Coughlan: "What we must do is ensure the capitalisation of the banks is now progressed as quickly as possible."

Why?

At no stage has the Government spelled out exactly how it is in our interests to put vast amounts of our money into a failing bank. There are other, less politically correct, ways of ensuring that we, in our commercial and personal activities, have access to financial utilities necessary to clear cheques, transact payments and advance collateralised lines of credit.

Take state control of the banks, fire the bosses. There's lots of banking talent at the lower echelons. Then, with that distraction fixed, confront the real economic problems.

By the way, where are the police?

I don't want to hear how an obnoxious little creep like Sean FitzPatrick categorises his activities. I don't know if what he did was illegal or "inappropriate". I don't care what the Financial Regulator (known far and wide as Goofy) thinks. Or Cowen, or Lenihan, or any other star-struck ass-kisser. I want to know what the police think of what FitzPatrick did. I want the Criminal Assets Bureau to have a look into Anglo Irish. And the other banks, while they're at it.

It would be comforting to imagine there were adults in charge.

- Gene Kerrigan

Gene at his best.

By Gene Kerrigan

Sunday November 23 2008

What were you doing the night that Brian Cowen and Brian Lenihan saved the Irish banks? It was in the wee hours of Tuesday September 30. The Two Brians held long meetings with quivering bankers and emerged to declare that the Government had put something like €400bn on the line, to guarantee all bank borrowing.

Whatever you were doing that night, it had as much effect on the collapsing economy as anything the Two Brians did.

This is a democratic recession -- whether you're a Taoiseach or a tea lady, your proposed remedies are equally ineffective. It helps, though, to try to understand the depth of the trouble we're in.

True story.

Eleven days before the Two Brians guaranteed bank borrowings with money we don't have, US treasury secretary Hank Paulson was desperate to get his Wall Street rescue package through Congress. He wanted $700bn dollars to buy up all the "toxic debt" in the US banks -- and the politicians were reluctant to "bail out Wall Street". President Bush tried to twist arms, and Paulson made urgent telephone conference calls to key senators and congressmen.

This was more serious than the Great Depression, Paulson said. If he didn't get his bailout money there would be chaos. The president, he said, would have to invoke martial law. Paulson meant congressional martial law, which enables the instant passage of legislation, without effective oversight. But the politicians gasped, foresaw riots and troops on the streets.

Paulson got his money, and what happened? Nothing much.

Paulson suddenly decided he shouldn't buy the toxic debt (the word is he panicked after he read a New York Times article by Professor Paul Krugman, who said Paulson was being silly). Paulson decided he should instead use about half the money to prop up foundering businesses. The other $350 billion he -- as far as anyone knows -- hid in his sock drawer.

Few people on the planet know more about the mechanics of 21st Century capitalism than Hank Paulson, a former banker who personally made hundreds of millions out of the debt bubble. And last May, four months before seeking his $700bn bailout, this genius announced: "The worst is likely to be behind us". The same chap still has no idea what to do with his $700bn bailout money. That's how out of control this thing is.

The fashionable thing to say, in Ireland these days, is that the banks need to be "re-capitalised". They won't lend money to viable businesses, because they don't have enough cash. The Government, or private investors, should inject big money and get things moving. All around us, on TV, in the newspapers, politicians and journalists and other geniuses repeat this like they know what they're talking about. It might even be half-true. But they're all guessing.

The banks said they've got enough money. A Government-commissioned report said they've got enough money. The real problem is the banks are over-loaned, over-exposed, too much money loaned (to property developers) in proportion to the amount received on deposit. Until that's fixed -- a simple cash injection won't do it -- the credit freeze will continue.

If I was one of the Brians, I'd buy a premises in each county, and 26 safes and 26 laptops and I'd open my own State bank. Call it the Provisional AIB. Or the Continuity Bank of Ireland. Get credit moving.

Why bother giving money to the banks in the hope they'll lend it on to businesses that need it? Cut out the middle-man. We know the banks are failed financial entities, run incompetently by overpaid gobshites. I wouldn't give them a cent. As a good 21st-Century capitalist, I'd go into competition with them and drive them out of business.

But that's just me, and I've always admitted that in matters financial I'm an ignoramus. Unlike the Two Brians, who saved the Irish banks on September 30. (Go back and read the glowing comments by all the smart people who knew that soon the rest of the world would follow the lead set by our Two Brians.)

This is one of those periods that it's better to read about in history books than it is to live through. Our pensions are in trouble, our jobs are on the line -- the chilling thought of transport systems closing down, schools and hospitals run by volunteers because the money has run out, is no longer a notion fit only for old Mel Gibson movies.

What's disturbing is the lack of any fresh thinking at all. And the reason for that isn't just because everyone thinks Brian Lenihan's in the wrong job (including, probably, Brian Lenihan).

There's one upside. In previous crises, in the 1930s, 1970s or 1980s, no one knew what was happening -- it was years later before people could begin to knowledgeably discuss what they had experienced.

Today, the internet gives us news and instant analysis from all over the globe (and some of it isn't totally screwy).

There's a big debate going on out there. OK, it's hampered by the fact that no one knows anything for certain.

There's a lot of guesswork and "What if" involved. Mostly it surrounds whether or not a Keynesian solution -- State stimulation of the economy, to more or less spend our way out of recession -- is still viable.

There's lots of kneejerk stuff -- every right-winger constantly mouthing the "cut interest rates" mantra, even as interest rates approach zero and the cuts don't work.

Here? In this benighted land? No real debate.

Instead, the Government and the Opposition and the media and every talking head in the land instinctively grabbed the old reliable -- public sector pay and spending cuts.

Go ahead. See how that turns out. Reduce the spending power of almost 400,000 people, put them under threat, frighten them into hoarding money.

Good work. Now, watch the effect on the private sector.

The quality of leadership -- of alertness -- in this country is dire.

Brian Cowen has a touch of the John McCain vibe about him.

"Watch me solve the problem -- eh, well, um." Then he barks out a beside-the-point cliché about public sector cuts. Mary Coughlan, God love her -- she'd be right at home as mayor of a small Alaskan town.

Look at the Cabinet -- imagine you own a sweet shop and you're going away for a couple of weeks. Which of them would you put in charge?

I know, me neither. And the Opposition -- Enda Kenny is hopeless, but far from the worst.

Among Fine Gael's young strivers are some very loud, dynamic duds, irretrievably wedded to the kind of thinking that caused the problem. And it's not just politicians. The media has been behind the curve as this unfolded, too often repeating the mantra of the day (how the Two Brians saved the banks etc).

Business sees only its own problems, too much of academia has been compromised by the debt pimps, having spent too long cheerleading the property bubble.

On the global stage, despite the panic and the lack of ideas, there's an understanding that something has changed -- that prudence is dangerous. There's an understanding that the kneejerk solutions -- "cut interest rates", "cut public spending", "cut pay" -- is a sure sign of obsolete thinking.

Not here.

So, the Two Brians, urged on by the cheerleaders in the media and IBEC, raise high the banner of patriotism -- and attack the pensioners, students, teachers, nurses, office workers and factory hands. Not because it'll work, not because it will mend the broken economy, but because that's pretty much all they can think of.

Telling it AS IT IS.

By Gene Kerrigan

SUNDAY NDEPENDENT:October 05 2008

Two meetings -- one in Washington, the other in Dublin -- both with agendas set by bankers. Look at what happened at those meetings and we'll know a lot about how we got into this banking mess, and what's likely to happen next.

The first meeting was in a basement room at the offices of the US Securities and Exchange Commission in Washington, on April 28, 2004. The heads of the five big US investment banks had long besieged the SEC with demands for the scrapping of what was known as the "net capital" rule.

Under this rule, banks had to keep a cushion of billions of dollars, to guard against losses. Scrap the rule, demanded the banks. Release this money, so we can gloriously expand into the exotic world of "mortgaged backed assets" and "derivatives". Of course, in order to be prudent, only the biggest of the banks, with assets above five billion, should be allowed to take the risk.

For over 20 years, following the Thatcher/Reagan "revolution", the mantra was deregulate, free the market, down with the nanny state. Politicians bowed, regulators simpered, the media cheered. For a quarter of a century, the world was shaped in the image of the freebooting capitalist.

This wasn't business. It was gambling.

In an audio on the New York Times website last week, you could hear the SEC commissioners in 2004, giggling as they bowed unanimously to the bankers' demands.

"If anything goes wrong, it's going to be an awfully big mess," said commissioner Harvey Goldschmid. "I keep my fingers crossed for the future,'' said commissioner Roel Campos, as he rolled the dice.

In no time, one of the banks, Bear Stearns, was lending $33 for every dollar it had in capital. The other investment banks did likewise.

Aware of how complicated these new-fangled financial instruments were, the SEC allowed the banks to monitor their own activities.

And the debt spiralled and the bankers were paid glorious bonuses as they drove their own banks and the global banking system to the edge of a precipice.

Last week, there was a meeting in Dublin.

By now, the global banking system is chock-a-block with bad debt, deliberately hidden within complex "mortgaged backed assets". Banks are afraid to lend to one another, as all collateral is suspect. So, business freezes, jobs are shed, shares plunge, pensions dwindle.

And the Bush solution (buy the bad debt from the banks at top dollar) had been initially rejected by Congress. It was a banker's solution. Designed by Bush's treasury secretary, Henry Paulson. And Henry, then head of Goldman Sachs, was one of the bankers who in 2004 demanded and got the "net capital" rule scrapped.

"Help us", the Irish banks told the Government last weekend, as their shares collapsed. It wasn't a request, it was a demand. For weeks, the Government and the bankers had fretted as the global meltdown continued. In public, Brian Lenihan was assuring us that we weren't in trouble, not like those silly Yanks. "Our banking system has shown resilience in the face of such banking trends," he said in Galway on September 15.

"Our banks uniquely have weathered the storm to date despite many more venerable institutions being unable to do that."

When Liveline listeners expressed their fears, Lenihan personally contacted the head of RTE, blackguarded Joe Duffy and arranged to have the people shut the hell up.

We don't have an audio recording of last week's meeting between Lenihan, Cowen and the bankers. But we know what happened. As requested by the bankers, the State will guarantee all bank deposits and loans. Here's Cowen: "On the advice of the relevant people who have the competent authority in this area, I had to make that decision." Mr Cowen's advisers are locked into the banking culture. The banks got precisely what they wanted. Their shares soared.

From 1994 to 2000, surfing on the global boom, the Irish economy thrived, GDP growth was 10.7 in 1997, the year Ahern/Harney/Cowen came to office. By the time the McCreevy tax cuts came into effect, in 1999, the boom was ending. From 2000 to 2007 the government gloried in its property bubble.

The tax cuts didn't cause the boom, they were the result of it. Far from generating revenue, they squandered it. Nevertheless, deluded by its own crude ideology, at one with free market extremism, the Ahern government threw caution to the wind. The banks and the builders were like two dogs locked in a carnal act, threshing and inseparable. They needed water thrown over them. Instead, the government joined in, making this a unique and bizarre menage a trois.

Revenue from the property bubble allowed much-needed increases in public spending, but still we underfunded hospitals and schools. The proverbial "Top People" lapped it up. Thirty-three thousand millionaires (not counting the value of their homes) muscled their way to the top. Ministers and TDs entered the big money leagues. Bankers and HSE executives were on big bonuses. The banks are now in hock to the builders to the tune of €110bn. And the builders are awash with unsold properties. They don't want to lower prices, so they can't sell, so they can't pay their debts. Tax revenue collapses.

The politicians are busy passing on the blame. To us.

Here's Lenihan, washing the Government's hands: "We decided as a people, collectively, to have this property boom . . . That was a collective decision we took as a people." Here's his junior minister, Martin Mansergh: "I think there's maybe been some imprudence, with the benefit of hindsight, on the part of us all.''

On RTE, asked about making demands of the bankers, in return for the State guarantee, Mansergh's deference to the bankers was remarkable. He breathed the words "private companies", as though it was a holy phrase.

Let's remember that the banks have a criminal history -- their engagement in complex tax frauds in the Eighties cost this country dear. They did what they did to maintain market share, because the criminality was, they said, "industry wide". When it comes to trust, the banks are way overdrawn.

For the past eight years, in a blatant circle-jerk, the bankers, builders, speculators, estate agents and politicians behaved as though they believed the insane property bubble would inflate endlessly.

Any doubters they denounced as treasonous, even when prices got so ludicrous that you could buy a chateau in France for half the price of a dowdy 3-bedroom flophouse in Dundrum.

People continue to do what they know. Even when it doesn't work. This government hasn't had an idea in eight years. It believes in construction. So do the bankers. And the builders believe in cheap credit and high prices. So, the game continues.

Our money guarantees the bankers, who can get easier credit, so they can take it easy on the builders, who can maintain their prices so they can pay their debts to the banks. Oh, here comes a budget -- let's stick it to the poor and the sick, so we can give the property bubble a few reviving puffs.

A phrase you hear everywhere these days is, "We are where we are". Don't look back. Don't ask how we got here. Don't play the Blame Game. As the hapless Sarah Palin put it, "There's just too much finger-pointing backwards".

Instead, shut the hell up, keep your opinions to yourself, leave it to Daddy Cowen. And the bankers and the builders. Stay quiet, don't resist, we know what we're doing.

Or, in a world where the Daddy figures now clearly haven't a clue, where they prepare to pile pain on the vulnerable, perhaps it's time to look back. To play the blame game. To be loud in our resistance.