David Drumm and the bondholders

THE latest reel of recordings from the Anglo Irish Bank’s internal phone system is likely to stir up those familiar feelings of anger and disgust.

The foul language and arrogance punctuating seemingly flippant attitudes towards the billions of euro that were flowing out of the bank is hard to stomach.

This is especially emotive, considering the headache from the bank’s demise is basically being levied from every worker through the Universal Social Charge.

While the public may feel agitated once again, there is little in the latest edition of the tapes to move the issue onto another level.

But for bondholders, the story is different.

The newly released conversations of January 2008 show that, long before the share price was attacked on March 17, 2008, the man running the bank was willing to play fast and loose with the fate of the money invested in the group.

Chief executive David Drumm, who has not returned to Ireland to face potential prosecution, advocated a strategy to exploit the fact that bondholders were losing money.

He said the bank should consider buying its own bonds at a discounted price, saying this could be done on the quiet so Anglo could profit from the deal.

It was put to him that his proposal effectively meant profiteering on the back of the losses incurred by the bank’s clients. “I don’t know what the fucking morality is. It’s the morality of well we’re not going to do it because it would be wrong of us to do it but that’s the price, that’s the offer price,” he said.

The same day, Drumm was also in bragging mode about how he could keep the worst details of the bank’s position from his board. He said he would give them the “Ladybird version of the movement of the numbers” during a dinner to outline the position of the bank.

This statement underscored the arguments made by Sean FitzPatrick’s defence at the recent criminal trial, that even though he was chairman he had been insulated from the real goings-on at Anglo.

The fate of bondholders might not rank highly on the list of those likely to earn public sympathy.

In the build-up to the last general election, the bondholders were held in the same esteem as the witches of 19th century New England, with calls to burn them.

But lost in the demands for sacrificial burnings was that among the bondholders were funds belonging to many ordinary people.

Pension funds of every make and shape had portfolios that included bonds.

The Irish Credit Union Movement had almost €100m invested in bonds in Anglo Irish Bank.

Even the money coming through the trading desks in Frankfurt had originated from people and corporations who represented something put into Anglo in good faith.

It was all supposed to be covered under the terms of the European transparency directive, which was designed so that investors were given the assurance that all pertinent information about a financial institution’s trading position was vetted and in the public domain.

David Drumm’s approach flew in the face of the spirit of the transparency directive. He said he wanted to dip into the market in such a way so that it did not leave a “residue”.

“It would be a small move on the needle on the capital and nobody would care,” he said on January 22, 2008.

When needles make small moves on gauges it is not necessarily a sign that a crisis is imminent. But if it was your money in the game, those small changes might have given you cause to reconsider your position.

They could have looked for more information on Anglo’s activities and changed the profile of their portfolios before the massacre of the bank’s share price two months later left them with nothing worth holding.

At that point, in January 2008, Seán Quinn was already overexposed to contracts for difference he had taken out, and his borrowing from the bank. So its fate was sealed.

But the investors did not have to be burned in such a chaotic and dramatic fashion that contaminated stakes in every other Irish institution.


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