I have scanned and converted the schedule of the decision into spreadsheet format. It can be viewed here. The decision relates to 91 meetings of Cabinet between April 1998 and December 1999.
Cabinet Agendas June/July 1998
As part of an ongoing process, the Cabinet Agendas for June and July 1998.
Previously: Cabinet Agendas April/May 1998
€27 billion
In case you missed the drip feed over the past year, that’s the total estimated figure so far (including impending recapitalisations) given by you, the citizen, to the banks – AIB, Bank of Ireland, Anglo Irish, INBS and EBS. It could end up being more. Remember that the State is borrowing money, or taking money from the National Pension Reserve Fund, in order to pay for these recapitalisations.
€27 billion rolls off the tongue doesn’t it? I am working with a friend on a visualisation of this amount, which we hope to publish soon.
Comedy commentary from Kelly
Simon Kelly has a few classics in his column on the back page of the Sunday Tribune‘s Business section this week.
He writes about the DDDA in broadly positive terms. There are a few laughs in there, including…
The local authority planning system causes daily damage to Ireland and this damage is far in excess of the final cost of the DDDA. I forecast reform here shortly because Nama will not put up with the rubbish that developers had to deal with over the years from the planners.
Eh. It’s not quite clear what exactly Mr Kelly means by “rubbish” but to me it seems is he suggesting the planning system was overly regulated and restricted during the boom years, which caused developers hassle. If so; seriously, Mr Kelly?
What do you make of it?
Either way; reform is predicted because of Nama, not because lack of reform. Not because the culture that lack of reform allowed prevail. The culture which is, you know, one of the main reasons there is now a need for a Nama.
Further on in the piece…
The private sector has the incentive of profit, whereas the public sector has the incentive of self interest. These look the same but are very different. The profit motive drives activity and creativity, whereas the self-interest motive drives inaction and maintains the status quo.
Profit; not equal to self interest, says Simon Kelly. Public servants not driven by profit; a bad thing, says Simon Kelly.
The private sector makes decisions and takes action whereas the public sector delays decisions, and actions, for fear of scrutiny in the future.
“Scrutiny, can’t be having have that when it comes to planning and development in this democracy. The less the better. Have I said a public oversight body should be scrapped yet?”
The best stuff is nearer the top though – where Mr Kelly does say a public oversight body should be scrapped. The following paragraph, which I’ve split into four below, is the best part…
The DDDA was given its special planning powers to facilitate the fast-track development of the IFSC and the docklands area. It was given these powers because the local authority planning system was and still is dysfunctional.
Translation: The Government wanted to attract financial services multinationals. It thought it could so with a well-serviced hub in which international companies paying minimal amounts of tax could then base their HQs – or a few desks they could call HQs for tax purposes – so they gave the DDDA powers to allow planning which could develop this. In short, the Government were not prepared to invest in reforming the dysfunctional planning process, so they decided to bypass it, that’s why the DDDA was given these powers.
Try explaining to CitiBank that it cannot build its new headquarters because a local resident has an objection to the building.
Translation: The locals are plebs, try telling Citibank they’re not.
It is in the context of this stupid right of objection that DDDA was formed. We needed a professional planning authority, not subject to An Bord Pleanála, and that is why we got the DDDA.
Translation: It’s stupid to allow plebs a say. An Bord Pleanala – tasked with ensuring infrastructural and physical development is open and sustainable – slows stuff down, so we needed to ignore them and get professionals in, and that’s why we got the DDDA.
Before we hang it, let’s reform the planning system and implement a professional system to replace the current political one.
Translation: Before we hang the DDDA let’s reform the planning system that we ignored during the boom in giving the DDDA the powers under which they fucked up, and replace it with a planning system more like the DDDA. There’s no important financial services companies even half-considering Ireland anyway now, so we have time to do it!
Nonsense from Kelly.
Neil Callanan’s piece on the same topic and the same page, is in stark contrast.
Week of the banks
Last week I wrote that the interview with Anglo chief executive Mike Aynsley in the Irish Times to me marked a shift in the PR strategy underlying the bank recapitalisation/nationalisation schemes. David McWilliams yesterday talked about it in similar terms. I warned that the next week would see a miasma of news and spin, and so it appears to be coming to pass with several speeches planned this week around the issue.
Today we are given page one stories all about the impending banks scheme. While all of them cover it, it was Emmet Oliver’s lead in the Irish Independent this morning that struck me most. Headline:
Accept my deal or quit, Lenihan to tell bankers
Let us get this very straight. Many commentators and economists argued a long time ago that nationalisation should happen early, and if it didn’t, it would happen eventually. Now this is coming to pass. As Constantin writes:
Since May 2009 I have consistently supplied estimates as to the eventual state ownership in both AIB and BofI. Depending on various scenarios:
* assumed Nama haircuts,
* the actual current risk weighting on the loans being transferred,
* share price at the time of announcement and the willingness of the banks and the Government to recognize future expected losses on the loans not transferred to NamaRVF approach to valuing AIB and BofI balancesheets suggests that at the end of the current crisis, the state will outright own around 85-90% of equity in AIB and 50-60% in BofI. This eventual outcome, for political reasons, will come in two stages:
* post-Nama injection of capital (with AIB placing around 60-70% of its equity with the State and BofI placing around 40-45%), plus
* second stage recapitalization to correct for continued deterioration in the books over 2010-2011 (adding another 20-30% of equity for AIB and 10-15% for BofI)The problem with this two stage recapitalization is that the taxpayer will end up paying three times for the same equity:
Having injected €7 bn into two banks at the time when they were worth less than €2.5 bn for the entire lot,* we are now be left on the hook for some €20 bn worth of largely worthless loans – to be purchased at ca 30-40% discounts (against the real market discount of 65-90%),
* plus €7-8 bn in fresh capital post-Nama
* plus the margin of ca 10-15% for further deterioration in non-Nama loan books (requiring another €7-9 bn of fresh capital).Thus the Irish state is now likely to use up to €20 bn to buy up equity and loans from a bank that is currently worth around €1.5 bn… In the world of finance, even the most reckless bankers never managed such margins.
Now without personalising this against Mr Oliver (and the headline would have been written by a sub), what part of this particular story is positive? When was Mr Lenihan screaming “Iceland!”, what was the Government’s view 12 months ago on de facto nationalisation? How much has all this waiting cost us? Does anyone remember the last 12 months?
When you use sentences like “Finance Minister Brian Lenihan is going to seize control of the country’s biggest bank, and tell its top executives to leave if they cannot work under the new regime”. Eh?
Add in words and phrases like “uncrompromising” “momentous” “pump” “state of the union” “uncompromising” (again) “forced” “fall on their swords” and you would be left with the impression that the Government knew exactly what it was doing all along. Sadly this was never the case.
A bit like backdating the NAMA values arbitrarily to November 2009, when prices have fallen significantly since then. Backdating the values has likely cost more to the State than the entire public sector cuts will save the economy this year. But remember, in September Mr Lenihan said we were very near the floor:
No, nowhere near it. We do have “further to go down, and further and further and further”. Even Friends First agrees prices will fall nationally another 10% this year.
And do not forget how the system reacted to the letter by economists nearly 12 full months ago.
OVER THE last number of months extraordinary changes have occurred in the Irish banking and financial scene. We believe that we are now at a critical stage in Irish economic history and that it is crucial that the Government take the right course of action to deal with the problems in our banking sector.
The banking system is widely perceived to have seized in terms of lending, and whether correct or not this perception needs to be addressed. We believe that the correct action to take now is nationalisation of the banking system, or at least that part of it that is of systemic importance.
Their professionalism was called into question, and they were vilified for railing against the prevailing views. And how do you go back on all that and nationalise now? You make it sound as if you’re taking on the evil bankers.
Deflection I guess, is a good remedy.
Digest – March 28 2010
I want to draw attention to one particularly important story this week, so there’s a note before the usual home, world, other stuff.
– NOTE
Wikileaks is one organisation that seems to scare the CIA. The non-profit website, which is run on a shoestring, publishes confidential documents leaked anonymously to them from sources all over the world. In recent years they’ve published the manual for CIA operative in Guantanamo Bay, documents showing evidence of government-known human rights abuses in Kenya, the BNP membership list and the court-surpessed Trafigura report, amongst more than a million other documents. No source has ever been traced back to the leaking of a document through Wikileaks. Documents are verified before release and they say they’ve never released a false document.
Their documents have resulted in countless front page stories in the mainstream press.
Earlier this month they published a CIA report which details ways Wikileaks could be destroyed. Earlier this week they had another CIA document which analyses ways the French and German public could be manipulated to ensure support for the war in Afghanistan.
On Wednesday Wikileaks said it was under “aggressive surveillance” from US and Icelandic government employees. They say they were stopped and questioned by US agents and shown secretly taken photos of their own editorial meetings. They say the tailing and questioning is due to a film they have which they say contains footage of a US massacre (reportedly in Afghanistan) which they’re due to release at the US National Press Club on April 5th.
Read their editorial about what has happened to them in the last week here. Glenn Greenwald tells you why they’re so important here.
One of the tweets said “if anything happens to us, you’ll know who’s to blame”. Here’s hoping the April 5th video does get out, safely.
– HOME
Bryan Mukandi of Irishtimes.com reshuffles… Continue reading “Digest – March 28 2010”
Harry McGee on political lobbyists and lobbying
Harry McGee has a good piece in this morning’s Irish Times on politcal lobbying and lobbyists, an oft ignored subject in this country.
One quick note on the second to last paragraph:
Since the mid-1990s, stricter ethical requirements have been introduced for those who are lobbied (ie politicians) who now must furnish statements of donations, make declarations of interests and adhere to codes of conduct for office holders.
The ethical standards in this area are still very, very lax.
The “details” of donations made to TDs over 2009 were published last week, just 20 TDs declared they received a donation over the (too high declaration limit) so we know bugger all about how people funded their work. This issue was covered in the first post on this blog. Political parties don’t have to publish accounts. The donations system is easily bypassed, legally (!). SIPO doesn’t have the right powers to investigate off its own back, and is hugely underfunded and understaffed.
Messy stuff in dire need of reform. Fix that and get a lobbyists’ register going, now please.
Footnote: A voluntary one? Fianna Fáil you are winding us up, right?
DDDA Reports
We have obtained a copy of the three DDDA reports by Niamh Brennan from the Fine Gael press office. The reports have been scanned, OCRd and uploaded and can be searched or download from the interface below.
The reports run to 216 pages, this is the only soft copy available it is therefore possible (but unlikely) that some pages are misordered.
The details were first covered by David Murphy, Business Editor with RTE, this morning.
Fine Gael have accused of John Gormley of a cover-up over the reports. As per The Irish Times: “The reports deal with matters to do with finance, planning and the board’s reaction to these matters. [Fine Gael Deputy Phil] Hogan said the planning report raises questions over the status of planning permission for some of the most well known buildings.”
Amongst the main issues detailed in the report are revelations that the Irish Glass Bottle site was never formally valued. It was purchased by the DDDA and a number of developers and financial entities in 2006 for more than €400m but quickly fell drastically in value. Those involved included Bernard McNamara, who has sued the DDDA claiming they didn’t deliver on promises relating the deal. Sean Dunne was also involved and also took the authority to court over the now-near-abandoned Anglo site. He won his case.
Labour says the issues of corporate governance can be put down to, amongst other things, Anglo – which had an interest in the site through its loan portfolio – having two members of its own board, Sean FitzPatrick and Lar Bradshaw, sitting on the board of the DDDA.
Further issues are also covered relating to the DDDA granting planning permission for structures which could be considered non-compliant and the absence of value-for-money audits being carried out.
Suspension of CIÉ employee remains in place after court finding
Interesting details available in a finding made by the High Court last week.
Mr John Keenan is the plaintiff, he has taken a case against CIÉ/Iaranrod Eireann (hereafter referred to as CIÉ), at present he remains suspended with pay. He is a long standing Labour member, friend of Emmet Stagg and is being represented by Alex White. In the above case he sought “interlocutory injunctions directing Iarnród Éireann to allow the plaintiff to perform his duties… without interference; and restraining the defendant from taking any steps to remove him from his position”. In short, he asked the court to tell CIÉ to lift the suspension with immediate effect.
Mr Keenan was head of human resources when the incidents which give context to the judgement are alleged to have taken place. It should be noted that this judgement has not considered the allegations made by either side in the case, only whether or not the suspension should be lifted.
In October 2007 Mr Keenan was asked by CIÉ’s CEO, Dr John Lynch, to compile a report for the company’s Audit Committee. The report set out the progress made in respect of disciplinary charges issued in the case of an Iarnród Éireann employee, one of the subjects of the then on-going Baker Tilly investigation.
In the last sentence of his report Mr Keenan stated that the losses expected to be detailed by Baker Tilly would “be seven or eight digit sum”. This, he says, triggered “a very adverse reaction” from some in senior management.
[Mr Keenan] says that Dr. Lynch and Mr. Paul Kiely, the chairman of the Audit Committee believed that this aspect of the report jeopardised their positions and that he was told that he was stupid and should have known better than to suggest such high losses in writing to a Board sub-committee.
Mr Keenan continued directing the Cost Audit committee but says in December 2007 there was a direction given that no minutes be kept of meetings of a “steering group” on these matters and that nothing should be kept in writing.
He claimed to the court that at one point he told other members of CIÉ senior management that Baker Tilly estimated losses could have been 12% of the CIÉ’s annual spend. He said the Chief Executive, Dr Lynch, argued that this estimate was outside Baker Tilly’s terms of reference and wanted it removed. Mr Keenan attempted to argue the relevance of the figure but, he says, Dr Lynch was unmoved. According to Mr Keenan the figure was then reduced to €2.5 million. That was around September of last year.
When published the Baker Tilly Report, as covered in some depth on this blog, detailed €2.6m in quantifiable losses, with a note that the team was “confident further unidentified losses exist within the company”. At the time Shane Ross estimated the true extent of the losses to be €9m.
It’s important, and I again wish to note, that none of the allegations made by either side are found correct or incorrect by the judgement about which I write in this post. They will be considered in a later case.
Mr Keenan also claims that on November 11 2009 the CEO, Dr Lynch, and Richard Fearns, the chief financial officer, relieved him of responsibility for the Cost Audit Unit. He says they did so as they wanted him “off the pitch”. Mr Fearns categorically denies this to be the case and says there was legitimate reason for the change. Mr Fearns believed the Audit Unit would be better handled by the finance section of CIÉ, not Human Resources, of which Keenan was in charge, as it was covering issues of financial irregularities.
It is accepted by both parties that there was considerable tensions between the two at this point.
On December 3rd Keenan was suspended from CIÉ for dereliction of duty. The reason given related to separate case which is now under judicial review in the Equality Tribunal.
The Equality Officer for that case had delivered findings on November 13th which were “very much averse to Iaranród Eireann”. They stated a female employee in the company had been harassed on gender grounds. There were clear implications made which could have damaged the reputations of both Mr Keenan and Mr Fearns.
Mr. Keenan says that having received it personally on 20th November 2009 (a Friday), he took the determination home with him and returned to work on the following Monday, 23rd November. He says that he then took a number of steps in relation to the determination, involving meeting with the Iarnród Éireann solicitor who had dealt with the matter (with regard to an appeal) and also instructed that counsel be briefed. The plaintiff says that he planned to brief Mr. Fearns on this issue at a meeting arranged for 2nd December, 2009. A full meeting however did not proceed as planned.
Mr Fearns contends Mr Keenan had ample opportunity to inform him of the findings and that by not ensuring he did so he was in dereliction of duty. He said due to Mr Keenan’s inaction there was a possibility that the company would be the subject of bad publicity for which it would be unprepared. Mr Keenan states this not to be the case, saying that the details of the cases are not made public for a month after the Equality Tribunal makes its findings.
Mr. Fearn deposes that he informed the plaintiff that he had a crisis of confidence in him as a H.R. Director as he had failed to tell him about this decision and that he should have known what a big issue this would be for the company. He says that he directed the plaintiff to stand aside from his duties with immediate effect, to go home and not to return to work until further notice. He was to continue to be paid his full salary. He was to collect his personal belongings and to hand him the keys of his office.
That was on December 3. Mr Keenan claims that the decision was disproportionate. He implies that the suspension was an attempt to silence him and that the CIÉ pair have been seeking to suppress information and acting in bad faith in dereliction of their duty to investigate alleged fraud.
However, after the meeting with Mr Fearns, Mr Keenan didn’t go home immediately. He returned to his office and made a number of phone calls. Mr Fearns claimed Mr Keenan indicated that he would return to work the following day despite being told not to. Mr Fearns then decided to seal Mr Keenan’s office, close his access to the internal email system and cut off his internet facilities. Security staff were later told – though Mr Fearns says, not by him – to ensure Mr Keenan didn’t return to CIÉ grounds. I’ve been informed that this included the posting of Wanted-style posters around CIÉ facilities.
The judgement says these decisions were “quite radical”.
The CIÉ representatives say following the December 3 incident Mr Keenan contacted employees who had been reporting to him and told them to access email correspondence and make copies. Mr Keenan said this was not “wrong” and that it was part of his duties. They say he procured access to the email account of the personal assistant of the Chief Medical Officer, Dr Declan Whelan, and that he may have authorised access to employee’s bank accounts. Dr Whelan accessing his assistant’s email account was a breach of trust. Furthermore, the defendent (CIÉ) claim Mr Keenan authorised the placement of a tracking device on an employee’s car. Mr Fearns called for an investigation in the matters and said the suspension should remain in place until complete.
Judge John Mac Menamin found that the suspension should remain in place. He didn’t find against Mr Keenan however. He said that allowing him to return to work would be wholly impractical as the level of trust between the the top brass in CIÉ and Mr Keenan had disintegrated completely.
The allegations which gave context to the case will be assessed at a later date.
The Anglo spin begins
It is extremely important that the events of the past few days, today, and in the near future are watched extremely closely. There are a number of reasons as to why this is the case, and I am going to explore some of them.
I will look at this chronologically, and some of what I am writing is based on things I have been told by a source in the past few months (yes fellow hacks, one source who has proved reliablity in the past, but no second source – add your own provisos). I am publishing now because of the main story in today’s Irish Times – an interview with the current chief executive at Anglo.
According to a source, on the night of January 25, 2010, exactly two months ago, there was an urgent meeting of the board of Anglo, where I am led to believe senior Department of Finance officials may have been present. At this meeting the likely figure for the recapitalisation of the bank was discussed. The recap figure was put in the region of “double figures”: i.e. €10bn or more. Originally we had been told in 2009 that Anglo would likely only need another €3bn-€6bn on top of the €4bn already given to the bank. So remember this, Anglo Irish Bank, and its board, have known about the need for over €10bn in taxpayer monies for two months – at least.
February 4: I write this lengthy blog post. Some of it is based on the information outlined above, while other parts are based on the impending closure of ECB emergency lending. As I said in early February, emphasising myself:
In November the ECB announced it would begin the process of winding down the emergency funding. In December the last 12-month repos were sold. We are now approaching the next phase. Next month, the ECB will close the 6-month window. The 3-month and 1-month repos will close after that.
In June, Anglo received a €3.5bn recapitalisation from the State. At the time it said it might need a further €3.5bn. This is money to rebuild the bank’s capital base due to bad loans.
However, these figures are likely much higher. Anglo will likely need up to three times that figure. Combine that with AIB, INBS and Bank of Ireland’s funding needs, and the taxpayer will likely be handing over more than €22bn to our banks over 2010.
When you combine the shutting of the discount window, with the delays in NAMA transfers and ultimately our own State borrowing (indeed we have already borrowed €6.5bn so far this year – 33% of our bond issuance for this year was done in January) and with the likely writedowns of not 30% but 50% on the loanbooks, we are facing a serious crisis. And of course the other factor is the ECB raising interest rates at a time we need them to stay low.
March 18: Former Anglo chief executive Sean FitzPatrick is arrested. Lots of headlines, but a reasonable person might ask why press releases were issued, why Mr FitzPatrick was arrested at all. Is it not normal practice to schedule an interview, before any arrest?
March 24: Former Anglo executive Willie McAteer is also arrested. Again the headlines say something is being done. But is that the case?
March 25: The chief executive of Anglo gives an interview to the Irish Times. In the interview he makes a number of claims:
A liquidation would cost the State between €27 billion and €35 billion, he said, while running it down over 10 years would cost between €18 billion and €22 billion.
Anglo has asked the EU for approval to split the bank into a good bank and a bad bank and to restructure the good operation as a commercial lender.
Mr Aynsley said this would cost between €10 billion and €13 billion, including the €4 billion invested by the State last year.
…
Reinventing Anglo would minimise further State bailouts and create “exit options for the Government”, such as a future sale of the bank, a merger with another bank or refloating on the stock market.
He confirmed that Anglo would report the biggest loss in Irish corporate history when it publishes its results for the 15 months to the end of 2009 next week. The bank will post losses of almost €12 billion after writing off bad loans.
Anglo would transfer €35.6 billion of loans to the National Asset Management Agency – about half of Anglo’s loans, said Mr Aynsley.
He defended Anglo’s decision to pay salary increases to 70 of its 1,240 employees. As staff left, other employees had taken on increased workloads, he said.
“I am appalled and outraged at a lot of the stuff that had gone on in here but there are some facts of life in terms of running a bank – you can’t do it without appropriate people,” said Mr Aynsley.
Back in December I blogged, along with some writing in the media, about the rumoured “New Anglo Irish Bank”. The plan being to split the bank into two, to create a new commercial lending arm and rename and rebrand the new part. For short this is known as “New Anglo”.
I believe the chronology outlined above (but perhaps excluding the arrests, but you never know in this country), shows a careful PR strategy by the Bank against the public. The affects of the arrests is to lead us to believe that something is being done in terms of accountability. The timing of Mr Aynsley’s interview is very interesting – just after arrests and just before we hear about the full extent of losses at the Bank, and preparing the ground for the coming recapitalisation – another €10bn – while offering us hope about the future potential of the bank. The timing and method of events over the coming weeks will certainly be very interesting.
And remember: the Bank needs such a massive recapitalisation because of reckless lending that led to the losses in the first place. We are paying for the massive failures of the Bank and the Regulator, and possibly the collusion of the two.
I will be writing in more detail about Anglo over the coming days.