Our economic crisis - We must now rebuild credibility

IT is increasingly difficult to remain composed, or to even want to, as the behaviour of a voracious, immoral and appalling coterie of bankers forces our government to take another do-or-die gamble with taxpayers’ funds.

Thursday night’s announcement of the nationalisation of Anglo Irish Bank, the Republic’s third largest lender, is another throw of the dice in the battle to sustain the shabby remnants of that bank and, by extension, the banking system we all depend on.

Increasingly sceptical depositors and investors finally lost confidence in Anglo Irish last month when it emerged the bank had, with the collusion of Irish Nationwide, concealed loans of up to €129 million to its disgraced former chairman Sean FitzPatrick.

The bank conceded at an EGM in Dublin yesterday that loans to bank directors totalled €179m. The anger expressed at that meeting will be felt right across the country by the thousands of people who have lost jobs because banks would not support viable businesses.

Workers, like those in Waterford Crystal or Dell, Kostal or Banta, who may have seen their pension funds emasculated to the point of collapse because of the implosion of financial shares, will be rightly angry too.

The discovery of Mr FitzPatrick’s indulgence, amazingly unheralded by the Financial Regulator, the bank’s auditors Ernst & Young or even the bank’s credit control committee, forced investors to conclude that the prudent option was to move capital from the bank.

The unacceptable failure of the regulatory authority to act on information it received about the FitzPatrick insider loan a full year ago resulted in the early retirement of the regulator, Pat Neary, last Friday.

Though the bank is solvent — and we have to believe it is only because the Government tells us it is — that might have not remained the case for too much longer.

The nationalisation was prompted by fears that the bank could fail, triggering the state’s guarantee and leaving the Government responsible for close to €50 billion in liabilities.

Yesterday’s anger was matched by confusion because the full picture of what went on at this bank has not been revealed. This silence further undermines confidence. Already international investors have given Ireland Inc a must-do-better report card.

In the 16-member eurozone only Greece is considered a poorer credit risk and pays more to borrow on international markets. Last week, Standard & Poor’s downgraded our debt outlook from stable to negative and warned it might cut our sovereign debt rating.

In more everyday language that means we have gone from being the envied Celtic Tigers of Europe, all Range Rovers and sunshine villas, to bordering on basket-case status in less time than it takes a bank to evict a family defaulting on a mortgage because the breadwinner has lost their job.

The lack of information on the bank’s real status can only be confronted by the full disclosure guaranteed yesterday by at least two government ministers: Eamon Ryan and Noel Dempsey. Each guaranteed that all details of the sorry saga will be released. We, and more importantly international investors, must be told what went wrong and what measures are in place to prevent a recurrence. Anglo Irish is now a state company — does that mean the Freedom of Information Act applies? Let’s hope so. In any event these findings must be published very quickly indeed. Hopefully they will afford authorities an opportunity to take legal action against the individuals central to this fiasco.

Let us hope too that this intervention has the desired effect because the reputation of our financial and regulatory communities is at stake and if that is further damaged who knows where that will lead.

The Government is facing charges of incompetence from credible sources. What a pity it would be if, having ignored the too-many-eggs-in-one-basket warnings for far too long, that it did not heed warnings now about how the crisis is being handled and not avail of the best expertise available.

We are at a sorry, uncharted crossroads. A bank central to our society’s security has had to be rescued because its credibility was shamelessly squandered; unemployment is increasing at a record rate; public and private sector workers are on course for confrontation over the consequences of recession and even the Catholic Church is deeply split over a child sex abuse scandal. The confidence we once had in our banks is but a memory and our government has yet to convincingly show either the capacity or the backbone needed in these unprecedented and challenging times.

Amazingly, and despite all of this gloom, it is still possible to have a good weekend. Let’s all try to have one.