Monday, March 02, 2009

Don't Bank on It


"The liquidator's report to the High Court said bluntly that the bank had been 'operated and run by the directors with scandalous disregard not only for the Companies Act but also for the Central Bank Act'. According to liquidator Paddy Shortall, possible offences included bribery, conspiracy, corrupt transactions, falsifying or destroying books, publishing fraudulent statements, making false returns to the Central Bank, concealment of property and obtaining credit by false pretences. On foot of his report the Garda Fraud Squad was called in but no further action was taken against Gallagher in this jurisdiction"

The Builders, pps 32/3

Sounds familiar, but it is not about Anglo Irish. This was Patrick Gallagher's Merchant Banking which collapsed in 1982, twenty six years ago.

And there has been no shortage of other implosions over the years, both in this country and abroad, which underlined the need for rigorous, conservative and cross-border supervision. ICI (1985), Savings and Loan crisis (1980/90s), BCCI (1991), Enron (2001), to name but a few.

But the country was becoming bewitched by the Celtic Tiger and it's hubris knew no bounds.

The Celtic Tiger, insofar as it represented genuine economic advancement, was the product of a number of sensible polices over previous decades, including investment in education, strict (albeit intermittent) control of the public finances, joining the EU, attraction of multi-national industries from abroad, and developing an indigenous entrepreneurial sector.

Unfortunately, the financial sector, or at least a large proportion of it along with property developers, lost the run of itself. It was subject to "light regulation" and was, inter alia, advancing megabucks to speculative developers and 100%+ mortgages to ordinary housebuyers. The state itself was becoming accustomed to a lavish income stream, much of it generated by excessive property values and ultimately dependent on mega-loans from abroad.

The country was firmly in hock to the bubble. The system could only continue to work as long as property values kept rising at a sufficient rate to keep householders in positive net equity and to sustain the enormous gambles being taken by the developers and the banks.

Now that the bubble has burst, the country is burdened with repayment of these loans at a time when "private" real estate values have tumbled and public sector income is massively reduced.

And the public sector is stuck with servicing a settlement pattern which has been effectively determined by a crowd of cute hoors rather than sensible long term planning. The Kenny Report (1973) made recommendations aimed at taking the corruption out of land zoning and ensuring that any increase in land values as a result of zoning accrued mainly to the community. These recommendations were sacrificed on the altar of the absolute rights of "private property" by successive governments hiding behind the constitution. It cannot speak well for our democratic system that one party (FF) has been in power for 80% of the last half century.

Some of these thoughts flashed through my mind the other day when I noticed the sign on the pillar of the headquarters of the Bank of Ireland in Baggot St. I wondered if, in its current straitened circumstances, the bank might ultimately be obliged to take down the sign and lease the space for the very activities it now prohibits.

God forbid.




Previous posts:
Blogging against Poverty Bloody bankers et al.
Blogging for the Environment Perverse incentives in the economic system.
Crock of Gold Pardon the somewhat optimistic conclusion!



7 comments:

Anonymous said...

You wrote this
"But the country was becoming bewitched by the Celtic Tiger and it's hubris knew no bounds."

Thanks for writing it. It means there are still people with healthy common sense in this country.

tema said...

It's time civil war politics were finally dumped in this country, and people voted with their heads and not according to family tradition.

It's also time to put an end (somehow) to political dynasties -- where a person's seat is almost-automatically taken by their spouse or son/daughter when they die.

Both of these are strangling politics in Ireland.

Cromwell's ghost said...

I agree. There is no rationale for the FF/FG split other than tribal. But the tribal is still fierce.

And FF are invoking the ghost of Cromwell. Noel Dempsey's hypocritical and hysterical denunciation of the bankers as the worst pillagers since Cromwell conveniently skipped over nearly 50 years of FF's intimate involvement with the property sector. Fifty years of turning a blind eye to brown envelope manna falling from the heavens.

They weren't the only ones but they came in for most of the loot.

Any chance we could purge the system by a massive vote for independents, or at least for candidates on the basis of merit, rather than on party affiliation.

People actually died and gave their lives (as opposed to dying) for this bloody country. You wouldn't think it to look at the present crowd.

Roundhead said...

A more appropriate headline for Minister Dempsey's contribution would be:

Minister exonerates Cromwell

He did point out that whatever Cromwell did it was not for personal gain.

So that's all right then.

Póló said...

I note that Transparency International has published a report which rates Ireland reasonable on "unlawful corruption" but way down the list on "lawful corruption". This latter category refers to the use of influence which is not illegal but is morally corrupt (say, appointments to State boards and the like).

It may look like this could not have come at a worse time, but I take a positive view. The need is now so urgent to restore our reputation abroad, if we are to survive at all, that the government may be pushed into doing something about the cute hoor defects in our national fabric.

You can get a feel for the situation here and here.

Póló said...

I have just read this in the letters column of the Irish Times. I am reproducing it because it seems to me to typify a lot of what is wrong with the country. Institutions (public or private) have gone from serving the customer to self-serving the institution, and then refusing to engage meaningfully with the customer. I will post on other aspects of this hubris byproduct at a later stage. No wonder we need competition, preferably from foreigners as our own crowd have their heads in the clouds.

__________________________________

An Post's way of minding your mail

Tue, Mar 03, 2009

Madam, – An Post has introduced a service called MailMinder. The brochure advertising this service advises us: “You’re on holidays for just a week. Your post is left unattended. It builds up and gradually it turns into a welcome mat for burglars.”

For over 30 years, if I was going to be away from home I called at my local post office and requested that they hold my post until my return. When I tried to do this recently, I was told this practice was now banned and if I wished to use the MailMinder service I had to complete a form and post it to Dublin, giving at least five days’ notice before my postal delivery could be suspended. The fee for this “service” is at least €30.

If I decide on Saturday to go away for a week beginning on Sunday my form will not reach Dublin until Tuesday; and, given the five-day notice rule, my post cannot be held until after my return date.

If I go away at short notice for two weeks my post will have built up for over a week before An Post suspends delivery.

I wrote to the redirection centre at An Post, highlighting this problem and asking how it could be overcome. I received neither acknowledgement nor reply. I then phoned the centre to ask for advice and was told that nothing can be done – that “for legal reasons” I could not simply ask my local post office to hold my post.

I wonder what legal obstacles are overcome by sending a form to Dublin that could not be dealt with by handing the same form (and a fee) into my local office, thus ensuring that my postal delivery could be suspended immediately.

An Post has changed a system that worked to one that doesn’t. It is clear that it is more interested in raising money through MailMinder than in providing a service. – Yours, etc,

ED HAUGHEY,
Muff,
Co Donegal.

© 2009 The Irish Times

Victim said...

You have referred to the public sector servicing an inappropriate settlement pattern. That only reflects those costs that are budgetised.

Isolation, pollution, frustration and God knows how many other strains on family life and national welbeing are no less real for not being financed directly by the taxpayer.

The cowardice of the political class in the face of the crock of gold is being paid for by the people in cash and in kind.

Shame on them. Vote them out!