TheStory.ie

Letter in today’s Irish Times…

Madam, – I was interested to see that Brian Lenihan apologised for his role in the catastrophe that has enveloped us (Newstalk interview with George Hook, reported in Home News, April 16th). This is in stark contrast to the attitude of Brian Cowen.

I am enraged, when I see Mr Cowen taking credit for standing firm against citizens in his direct employ, making them take some of our pain, so that we can continue to borrow at the catastrophic levels and cost to meet the liabilities he has engineered in a structural way into our system.

I wonder if any finance director, later CEO, of a private enterprise were in office when it delivered a financial return of (rising) liabilities of €57 billion and (declining) income of €32 billion, would there be any way that he could continue in office? If it merely happened on his watch, would he not feel compelled to resign in shame, before an immediate push achieved the same result?

Of course the degree to which it was Mr Cowen’s fault, either directly, personally or by virtue of his being the leader of a government which delivered the worst performance of any since Nero allowed Rome to burn, is debatable. But it is a ridiculous and dishonourable thing to blame Ireland’s woes on international turmoil, as Mr Cowen has done.

I am therefore furious that I still have to look at him, as he takes credit for our continued ability to borrow vast sums, as if that were his answer to the question he must be privately and should be publicly answering. I am also furious that, in decades to come, as patients still wait on trolleys in our hospital and those who work and pay tax now to correct his mistakes must live on much reduced pensions, he will still have multiple guaranteed and inflation and promotion benchmarked pensions to see him through a comfortable dotage denied the rest of us.

How does Mr Cowen face his people without shame? Why does he not do the honourable thing and resign and waive some of his pensions, which he clearly does not deserve? All I am able to do, to reflect my futile frustration, is affirm that, even when all of this is a distant memory, I will never vote for him or his party again. – Yours, etc,

JUSTIN McKENNA,

Ulster Terrace,

Blackrock, Co Dublin.

Strangely, according a press release today, Fine Gael seems to support the establishment of the Credit Review Office. I can’t fathom why, even Mark Fielding of ISME can’t see it overturning many refusals.

The process

The banks get into trouble after giving out big loans to customers who could never really afford to pay them. Banks go bust. Banks get re-capitalised. Banks begin to more carefully consider the viability of entities to which they loan. Banks realise that some entities to which they loan have no commercial future. Banks thus lend to less entities.

Concurrently; Government realises that simply recapitalising the banks through Nama won’t ‘get credit flowing’ to small businesses. Government realises that bailed-out banks not lending to small businesses won’t look good. Government devises a way to make it look like they’re doing something to pressure the banks. Government establishes the Credit Review Office. However, Government gives the Credit Review Office no statutory or regulatory powers and thus ensures it will be little more than an Missus Doyle to the Nama banks. Will you ever give them a bitta credit? Ah go on, go on… gwan gwan gwan gwan gwan. Government does so because everyone – even them! – knows banks being careful in choosing to who they loan is a good thing, banks doing the opposite is part of what has us here in the first place.

The real reason for establishing the Credit Review Office was to allow Government spokespeople, when questioned on how it is “getting credit flowing“, to say “we’ve done a lot to make absolutely sure this happens, we’ve set up the Credit Review Office which is ensuring that viable businesses get the credit they need to keep people in jobs”. Spokespeople will be able to say so in the knowledge that what they’re claiming is waffle of the highest order because if the businesses were viable the banks would want to lend to them to help improve their own balance sheets, thus the Credit Review Office would be irrelevant.

Therefore, isn’t the very existence of this Credit Review Office an admittance of sorts from Government that Nama and the bank recapitalisation wouldn’t get credit flowing? Not that that’s shock news to anyone, but it’s something Government finance spokespeople had been claiming for months.

If Nama was to get credit flowing, then why upon the estabishment of Nama did the Government see fit – in the same Act – to establish a quango responsible for reviewing circumstances in which banks weren’t allowing credit to ‘flow’.

Oh, and while on this sort of subject, the €3bn fund for businesses via Nama? Let’s see how the banks can work that one by reclassifying the terms of current clients’ loan facilities, over-lending to customers and generally doing what they do best. Forcing credit into the market can be a dangerous thing in itself.

Footnote: The best quote in the Indo article with that Fielding sound-bite is the one from John Trethowan, head of the Credit Review Office.

The former banker said both AIB and Bank of Ireland have been working to help set the independent Credit Review body up.

“So if the credit reviewers and myself come up with the opinion that a credit is safe, I am pretty sure that the banks will be minded to listen to what I’m saying,”

Er, but the thing is, Mr Trethowan is kinda unlikely to have a differing opinion. Under the set-up all applications must have gone through the full internal appeal process – up the chain of command – in the bank before it comes before the Credit Review Office. So the chances of the Office disagreeing with the banks’ decision is fairly low.

Plus, as a former President of the Institute of Bankers in Ireland, Chairman of the Bank’s Pension Scheme, Executive Director of National Irish Bank and former Executive Director of Nautilus Insurance Europe and Northern Bank, I’m not sure if Mr Trethowan would be the type to step on the toes of tight pocketed bankers.

Is that the sweet smell of a quango?… Maybe I’m just getting cynical in my old age.

Paul Krugman, writing in today’s New York Times, has a close look at the property and credit bubble in the US state of Georgia. The similarities to Ireland are telling:

So what’s the matter with Georgia? As I said, banks went wild, in a scene strongly reminiscent of the savings-and-loan excesses of the 1980s. High-flying bank executives aggressively expanded lending — and paid themselves lavishly — while relying heavily on “hot money” raised from outside investors rather than on their own depositors.

It was fun while it lasted. Then the music stopped.

Why didn’t the same thing happen in Texas? The most likely answer, surprisingly, is that Texas had strong consumer-protection regulation. In particular, Texas law made it difficult for homeowners to treat their homes as piggybanks, extracting cash by increasing the size of their mortgages. Georgia lacked any similar protections (and the Bush administration blocked the state’s efforts to restrict subprime lending directly). And Georgia suffered from the difference.

As we blogged last year: Morgan Kelly’s analysis demonstrates how it was excessive bank lending that caused the problems. Our banks went wild. Our bank executives paid themselves lavishly. And now the State is picking up the tab. What consumer protections did we have? What regulation did we have?

Blaming the people for the mess is not good enough. In fact, it’s a lazy analysis Sarah:

People are entitled to shelter, but are they really entitled to buy a house if they can’t afford it? I doubt you’d find many people then, and I’m not sure you’d even find them now, who’d be willing to acknowledge that owning your own home is not a civil right, but the result of careful planning, saving and budgeting. Some observe that there was no real choice, because all party manifestos in 2002 and 2007 competed to outspend each other. That is the case, but it exposes precisely the insistence of the people to have their votes bought rather than won. It also ignores the character issue.

And if there were consumer protections and proper regulation, the banks would never have been allowed to lend the way they did, and the credit bubble would not have snowballed into a property bubble resulting in an economic depression. Tell me again why the Regulator allowed the banks to lend to people at 8 to 10 times their annual salary, or why fraudulent statements of income were widespread?

On his declaration of interests to the House of the Oireachtas Frank Fahey states he holds shares in Ryanair, Irish Life and Permanent, Aviva and Eircom. I see no way he could possibly hold shares in Eircom.

To my knowledge it’s not possible for him to hold Eircom shares since the Valentia takeover in 2001. Eircom shareholders at that time would have had to cash-out or take Vodafone shares.

Strangely, Deputy Fahey declared shares in Vodafone in 2005 and 2006, then Eircom shares in 2007 and every year since. Therefore, if I am correct, and I’ve asked around to try to find someone who could tell me I’m not (anyone?), Deputy Fahey has made an incorrect declaration for the last three years.

I asked his assistant how I could put some questions to the deputy and was told to send an email to the office address. I sent the following email on April 1, eight days ago;

Thanks for taking my phone call earlier.

Could you ask Deputy Fahey the follow questions about his declaration of interests, published in recent weeks, and return to me his response via email at this address.

In the declaration Deputy Fahey claims to have shares in Eircom. What does he mean by this?

To my knowledge it is not possible to hold shares in Eircom since the Valentia takeover several years ago. Deputy Fahey would have had to surrender the shares in order to obtain the takeover payment when the majority of shareholders voted in favour of the takeover. If he did not obtain the takeover payment it is still not, to my knowledge, possible to be an Eircom shareholder. What exactly does Deputy Fahey mean when he claims to hold shares in Eircom?

Also, could you ask Deputy Fahey; ‘how long did you spend writing your declaration of interests?’

Kind regards, hope to hear back by this time tomorrow.

Mark

I didn’t really expect to hear back the next day as it was Good Friday but I wanted to get across that I wanted a quick response.

I’d heard nothing back by the following Tuesday afternoon so I called the office again. Deputy Fahey’s assistant told me the email was brought to the TD’s attention on the previous Thursday. He said “I sent on your email and if Frank has a response to make he’ll get back to you”. “When?” I asked. “If he has a comment to make he’ll probably get back to you in the next day or so”.

So I’d no guarantee of response then, which I took to mean I’d probably get no response.

Nothing by Wednesday afternoon. Luckily I then managed to find Deputy Fahey’s personal mobile phone number on an old press release. I gave him a call…

MC Hi is this Frank?

FF Yes, who’s this?

MC Mark Coughlan, I’m a freelance journalist, I’m calling you to ask about your shares in Eircom. I sent you an email last week which your staff said you’d got.

FF What about my shares in Eircom?

MC Well to my knowledge it’s not possible for you to hold shares in Eircom since the takeover. You’d either have had to take the payout or take Vodafone shares when Valentia took over a few years ago…

FF Right… I’ll have to get that sorted so.

MC … Eh… This is the second such incident with your declaration of interest this year. You also failed to note your stake in Sage Construction but you corrected that with the clerk of the Dáil after the Mail contacted you. I mean, how long exactly did you spend compiling the declaration?

FF Listen… Who am I speaking with?

MC Mark Coughlan, I’m a freelance journalist.

FF Right. Who do you write for Mark?

MC I’m freelance.

FF Right. Listen can you put something in writing?

MC I’ve already done so and your staff said it was put to you. Which address should I send it to now?

FF My Oireachtas one.

MC Right so. Good luck.

After I completed my notes on the phone call I sent the same email as above to Deputy Fahey directly, again saying I wished to hear back from him the next day. That was the third time I’d put the same set of questions to the deputy.

It’s now 24 hours over deadline and I’ve yet to receive a reply. I’m guessing he is not going to get back to me. If he does, I’ll post it here.

Also worth noting; Deputy Fahey says he has no directorships, yet he is listed as a director of Time4Us by the Companies Registration Office. (However, this could be due to Time4Us being an non-profit social enterprise, I’m not sure).

We will now be making a complaint to the Standards in Public Office Commission about the incorrect details on Deputy Fahey’s declaration. He also failed to declare his stake in Sage Construction for the last two years.

Hopefully SIPO can figure out the situation in relation to Deputy Fahey’s claim to hold Eircom shares. I can’t, and it seems he won’t answer my questions to explain.

… and updating. The Quotes from Minister for Finance, Brian Lenihan post from last week has been given a permanent and prominent home at the top of the website. I’ve also updated it with some more quotes submitted over the last few days by people via email.

New (verifiable) quotes will be added to the top of the post after the are submitted (and I get ’round to updating).

See here for the page.