There’s a most interesting and pertinent piece of political writing in today’s Irish Times by Miriam Lord. She watched high-ranking bankers appear before the Oireachtas Finance Committee.
Eighteen months ago…
…when the same Oireachtas committee wanted to ask the same banks about the way they conducted their business, fewer chairmen and chief executives deigned to turn up. To add insult to injury, the bankers then proceeded to talk down to the worried politicians, assuring them their fundamentals were sound.
…Richie Boucher, before his big promotion, was present back in July of 2008. “Unequivocally,” he declared, “we do not believe there is a Northern Rock lurking in Ireland.”
His colleague, David Guinan, stated: “We pride ourselves on the fact that we have been and continue to be very prudent and responsible.” Donal Forde of the AIB offered the following gem: “In regard to lending standards in AIB, we have behaved very responsibly in recent years and we have maintained a very prudent credit stance.” (Correct. There was a whole shed load of them.)
The highlight of the committee meeting was supplied by Willie McAteer, then executive director of Anglo Irish Bank. “Clearly, the whole perception of Ireland and the negative sentiment towards it are obviously of concern to us. However, this sentiment is not borne out by the fundamentals.”
Here’s another rib-tickler from Willie: “I reject the suggestion that banks have been foolhardy in recklessly lending and driving up values . . . in my experience, the banks have been prudent.”
Yesterday…
The Bank of Ireland went so far as to say it wouldn’t have to go back to the Government next year for a further handout. Sheehy was similarly upbeat about AIB.
Do you believe them this time ’round?
There has been a giveaway of billions to the bankers and the problem we seem to have in Ireland at present is that we have a Minister of Finance who is unwilling, or unable, to negotiate with the bankers on behalf of the taxpayers and to insist on fundamental changes which are needed.
The bankers are still not lending to the small and medium sized companies that will create the jobs we need to bring our economy back to health.
What the bankers are doing, and have been given permission to do, is to engage in proprietary trading and investing overseas. That is not how Irish taxpayer’s money should be spent.
Yes, we had to bail them out but did we get something back in return and unfortunately the answer is NO.
The original purpose of the taxpayers banking guarantee and the government’s adoption of the NAMA model was to stabilise the financial markets and get credit flowing to businesses and consumers.
Mr. Boucher of BOI and Mr. Sheehy of AIB appeared before an Oireachtas Committee this week.
AIB and BOI have each got about €3.5 billion from the government and they get to transfer about €15 billion each of bad loans to NAMA.
Mr. Sheehy of AIB said “if people think that credit will begin flowing freely again after NAMA, that is not going to happen. The bank’s balance sheets will be stronger and that will allow them to finance their long term funding cheaper and there will be a ‘trickle’ down effect.”
So there will be no perceptible difference at AIB branches in terms of lending to customers.
Mr Sheehy also said AIB would like to keep its Polish bank BZ WBK.
BOI chairman Pat Molloy said that €2.1 billion has been drawn down by small and medium sized businesses in the first nine months of the year.
Then Fine Gael finance spokesman Richard Bruton said it was not credible to suggest that every business needing credit was getting it. Mr Molloy then acknowledged that there was a mismatch between what politicians hear from their constituents and what the banks say.
Was Mr. Molloy indicating that he himself was lying, or that Mr. Bruton was?
There was another rather odd exchange; asked what the bank will do with the bonds it was receiving from NAMA, Mr Sheehy said AIB would use the bonds to improve its overall funding position.
Previously the banks were very sure that the ECB was going to accept these as collateral for additional finance. I wonder has this situation changed, because if it has where does that leave NAMA. The banks seem ready to simply dump their bad loans into NAMA, with the emphasis on bad.
The current situation seems to be that the banks are getting their funding and they will next be allowed to park their bad debts with NAMA and then they will very likely become active in other more lucrative markets than Ireland.
But the taxpayers who provided the guarantees and capital for all this are going to end up with very little.
One wonders where the Finance Minister Mr. Lenihan stands in all this.
Well there was a clue to that in an address he gave to the American Chamber of Commerce this week in which he said; “hostility to bankers and media attention is what held up recruitment of executives at AIB.”
The whole country knows the real reason was that AIB defied the minister on the question of appointing an insider.
So, in answer to your question “do we believe the bankers this time,” the answer is NO and the same goes for the Minister for Finance.