The Banking ‘scum’ and the Financial Crisis
5 January 2009
When the bank guarantee scheme was being debated in the Dail in October last year the Green TD Paul Gogarty described some bankers as ‘scum’, although this did not prevent him or his party voting a huge amount of money to the banks should they need it. It was as good an example of the useless nature of moral outrage as is one is likely to find. It is never any substitute for political programme.
No one could seriously dispute Gogarty’s description. The 1990s had witnessed exposure of scandal after scandal involving the banks, from DIRT to Ansbacher; almost all of them involving cheating the taxpayer on behalf of wealthy clients and their own profit. How ironic that these bankers now needed the taxpayer to bail them out from the speculative property boom that they did so much to create and sustain and which has now collapsed around them. This, after claiming for months, if not years, that there wasn’t a problem!
When the bail out of the six Irish financial institutions was announced the bosses of the major foreign owned banks operating in the State cried foul and demanded to be included. When the British government then bailed out Halifax Bank of Scotland (HBOS) the chief Executive of its Irish operations, who had energetically demanded inclusion in the scheme, then took out full page ads in the newspapers declaring how wonderful it was that his bank wasn’t now part the ‘discriminatory’ scheme! Meanwhile the son of one banking boss covered by it went against government instructions and tried to use the State guarantee to boost investment in his institution - the Irish Nationwide. One journalist recently called the banks Ireland’s perennial recidivist criminals, except that unlike ordinary decent criminals they are never punished, and in fact rewarded for their greed and corruption.
Who could really have been shocked then by the latest exposure of banking malpractice, when the Chairman and Chief Executive of Anglo-Irish Bank were forced to resign when it was revealed that for eight years the Chairman had been hiding huge personal loans from the bank to himself. By transferring them to Irish Nationwide before year end each year, when they would have to be reported, and then transferring them back to Anglo-Irish after year end, he had successfully hidden them from almost everyone. Only ‘on reflection’, and after it was going to be publicly revealed, did Sean Fitzpatrick feel obliged to resign and describe his actions as ‘inappropriate’ and ‘unacceptable’.
Thus Fitzpatrick had availed of the taxpayer guarantee for his bank, which prevented the €87 million he had on loan from being called in, yet he kept his mouth shut about this direct personal benefit throughout the process. Of course this might have suited all parties, including the Government. It may otherwise have made too obvious an aspect of the scheme – that it was about bailing out bankers with our money and that they really were ‘scum’.
Fitzpatrick and his Chief Executive David Drumm, who was also forced to resign, are perfect examples of the ‘scum’ tendency in the Irish capitalist class. In resigning Fitzpatrick said he had done nothing illegal, a declaration quickly endorsed by the Financial Regulator, whose own credibility is almost as threadbare as Fitzpatrick’s. Yet it is not even clear that this is so, and that even by the double standards of the rich man’s laws Fitzpatrick’s deception may have contravened some law. The State however has been quick to pass over his indiscretions; it needs exposure of the rotten character of the system like a hole in the head as it attempts to get everyone else to pay for the financial crisis.
Indeed dwelling on Drumm and Fitzpatrick might encourage the plain people of Ireland to go beyond antipathy to individual bankers to opposition to the whole system. At the end of the day these two individuals are representative of their class and embody the values and purpose of the existing financial and economic system. Fitzpatrick is a blue-chip member of the Irish capitalist establishment. What goes for him goes for the system.
Not only was he Chairman of Anglo-Irish Bank, he was also a Director of Aer Lingus and Chairman of the major packaging company Smurfit Kappa. His deceit cannot only have involved Drum and himself at Anglo-Irish, it also involved Irish Nationwide. It was Fitzpatrick who said after the bank bail out that what we needed was a ‘brave’ budget which cut corporation tax, and the ‘sacred cow’ of universal child benefit, State pensions and medical cards for the over 70s. The government then announced in its budget the end of universal medical cards for the over 70s, cuts in child services and more tax cuts for corporations.
Fitzpatrick, Drumm and Anglo-Irish may be seen to epitomise the great Irish capitalist disaster that has now unfurled. All are now thoroughly discredited. While they were going however they appeared to soar very high indeed. Four years ago Anglo-Irish was the best performing bank stock in the world. Once valued at €13.3 billion in the middle of 2007 it is now valued at around €200 million. Just like the Government and most economic ‘experts’ Drumm dismissed warnings of impending disaster as ‘unpatriotic’, and in fact welcomed the wiping out of 40% of its competitors as good news for Anglo-Irish. Far from being in difficulty Anglo-Irish claimed it only had a tiny exposure to bad debts, from 0.13% to 0.18% of outstanding loans to the end of September 2008, up from only 0.1% in the first half of the year. No one believed him. When year end forced disclosure of a 37% drop in profits and higher bad debt provision Drumm claimed that things would get better and the bank’s capital ratio would improve, even while its share price continued to go through the floor.
Denial of a problem with the great economic miracle, calls to ‘patriotism’ when the whole thing collapses and then deceit about what is going on – Anglo-Irish PLC or Ireland Inc? Spot the difference!
to be continued