Anglo Irish report - It’s time to support the reformers

IN KEEPING with the grand tradition of greatly underestimating bad news established by a long line of finance ministers and central bank economists, yesterday’s Anglo Irish report revealed that the €300 million loan figure was a long way off the mark.

The bank’s generosity to “ten long-standing clients” has been greatly underestimated — by 50% in fact.

The amount lent to the Anglo Irish Bank Ten in the loans-for-shares backroom deal intended to support Anglo’s tumbling share value was, in fact €451 million, the bank reported yesterday.

In this context, if we were to accept businessman Ulick McEvaddy’s eccentric — at best — assertion that the Anglo Irish Ten are “heroes” in an “economic war” it’s time to upgrade their status to something a long way beyond heroic. And to think they did it for us!

Of the €451 million lent under this arrangement only €83m has been repaid and a considerable proportion of the balance may never be recovered. If the individuals are half as heroic as Mr McEvaddy assures us they are then, obviously, we have no problem.

Donal O’Connor, executive chairman of the recently nationalised bank — he replaced disgraced chairman Sean FitzPatrick — said the bank can try to recover a quarter of the outstanding debts from the Anglo Irish Ten. Mr O’Connor pointed out that the bank has the option of considering recourse to the individuals’ personal assets for sums equivalent to 25% of their borrowings.

This loans-for-shares arrangement must be put in context. As it was being put together, as the bank was on the edge of collapse, nearly €10 million was paid to the directors of this imploding business in one year — one retiring director got a golden handshake of €3.75 million. No wonder former Fás and regulatory executives had such high expectations when they had to “retire”. Is it any wonder we are facing a day of street protests and a deep and growing anger right across this deceived and plundered society?

As the Anglo Irish report was being published an elderly Dublin man, with no previous convictions, was told he is to be sentenced for forging a pension voucher more than 20 years ago. The man pleaded guilty to forging a pension voucher worth €61.92 in September 1984. The pensioner has been remanded on bail and will be sentenced next month.

The contrast hardly bares comment.

Adding to yesterday’s confirmation of “wild west” financing arrangements at the bank was the disconcerting news that the financial regulator believes it was “misled” by Anglo Irish when 10% of the bank was purchased by a group of investors last year.

Ongoing inquiries by the regulator mean that what was presented to it last year as an “arm’s-length commercial investment”, “now looks like a very different deal”. The transaction, which looks as if it will cost the taxpayer well over €300 million, has created huge political controversy for the Government, which is under pressure to name the investors. A demand supported by cabinet member and Green leader John Gormley.

The regulator has been “astonished to discover that the deal is very different to what was presented [to it] initially”. The regulator did not know Anglo lent the money to the Anglo Ten to purchase the shares, or that the collateral was such that the money may now never be recovered. So much for soft-touch regulation and bankers’ integrity.

We can use a lot of energy and anger trying to make sense of the past and we will have to expend even more energy ensuring that any bank executives who broke the law face the consequences of their actions. By now the government must accept that anything less would be utterly unacceptable to a cheated and volatile public.

However, as well as dealing with the past we must try to build a future that offers some prospect of success.

Welcoming and supporting the remarks from Anglo Irish executive chairman Donal O’Connor in no way exonerates any of his predecessors but recognises that we have to move on and try to generate a recovery of sorts. He said that the board “is resolute in its determination to ensure that the bank emerges from its current situation as a strong and viable institution and one that stakeholders feel proud of. We will deal vigorously and professionally with all legacy issues. Most importantly, we will strive to conduct all our business to the highest ethical and corporate governance standards. This is key to rebuilding trust and confidence in Anglo Irish Bank”.

Despite everything he, and all other reforming bankers, must be supported in that objective.