The Irish Independent has spent the last few weeks releasing recorded phone conversation between Anglo Irish Bankers in 2008, in the few weeks prior to the banks total collapse and state bailout. No one listening to the tapes can be in any doubt about the level of contempt with which the bankers hold the regulators, the government and the tax payers. Yet again, bankers are allowed to fail, deceive and mislead with utter impunity.
The Anglo Irish Story
First, a brief recap of the Anglo Irish Story.
Anglo, as the Bank is referred to in the Financial Services sector, was established in 1963 and primarily focussed around business and commercial lending. It remained an insubstantial operation, with net worth of €5bn in 1985. The reign of Sean Fitzpatrick as CEO commenced in 1986 and over the decades to 2007, the bank was finally valued at €13.3bn.
By the time Fitzpatrick became Chairman of the Bank in 2005, replaced as CEO by David Drumm, Anglo’s profits had rocketed from €3m in 1988, to €500m, with yearly increases in net profits of 40-50% in the preceding few years. In Drumm’s first year as CEO profits rose another 36% and it was reported that Anglo had emerged as ‘the world’s top performing back over the last five years’.
Fitzpatrick and Drumm may well have increased the paper value of the Bank, but that value wasn’t worth the paper it was written on after the property market collapsed in 2008. Virtually all of Anglo’s €72bn of lending was to building firms and property developers. When their market collapsed, it was only a matter of time until Anglo went the same way.
The Bank was haemorrhaging deposits at a rate of €1bn a day as depositors withdrew their money from the bank in fear of losing their money in a collapse. The Irish Government increased its loan guarantee scheme (with taxpayers covering deposits) from €20,000 to €100,000 but to no avail, finally guaranteeing all deposits and borrowing for two years.
The government’s decision to back Anglo with such expensive guarantees and approving a bail out deal was the result of a September 29th 2008 meeting with the Chief Executive David Drumm where it was stated that the short term government support would see Anglo back in €300m profit in 2009.
In May 2009, Anglo posted a half year loss of €4.1bn. The government, already on the hook, continued to inject public money into the dying bank, to no avail. By March 2010 Anglo were reporting a €12.7bn loss, the largest loss in Irish corporate history and half the company’s loan book (€35.6bn) was transferred into the state vehicle – National Asset Management Agency (meaning the state took on the toxic debt).
By September 2010, the Irish government had injected €39.4bn into Anglo, a high price which sent Irish Sovereign debt over 100% of GDP and played a significant role in the collapsing state fortunes. The Irish government were recently offered a restricted deal with the European Central Bank to pay back the Anglo debt over the next 34 years.
It now transpires that Anglo withheld information which, if known, may have resulted in the Irish Government choosing not to blow the nations finances on a zombie bank which limped along until it was dissolved this year by sucking the lifeblood out of the beleaguered Irish economy.
The Anglo Irish Tapes record a series of conversations in the final, frantic weeks preceding the bank’s collapse into nationalisation. Most of the conversations are between Head of Capital Markets John Bowe, Head of Retail Banking Peter Fitzgerald, and David Drumm, the Chief Executive at the time of the crisis. It was Mr Bowe’s job to ensure the bank had sufficient capital to operate on a daily basis, and Mr Fitzgerald’s job to defend the interests of the banks retail depositors. The tapes reveal several astonishing revelations:
1) Bowe and others deliberately misled markets, the Central Bank and regulators about the true health of the Bank.
2) Anglo-Irish agreed a deliberate strategy to radically understate the initial bailout request, in the certain knowledge that it was nowhere close to the actual sum required. Discussing the €7bn bailout figure he had given the government, Bowe states: ‘I picked it out of my ass’ .
3) The Bankers gambled, correctly, that once the government had stumped up the initial €7bn, they would be committed to provide the rest of the sums required. As Bowed put it: “If they (Central Bank) saw the enormity of it up front, they might decide they have a choice. You know what I mean? They might say the cost to the taxpayer is too high . . . if it doesn’t look too big at the outset . . . if it looks big, big enough to be important, but not too big that it kind of spoils everything, then, then I think you have a chance. So I think it can creep up.” Fitzgerald, the Director of Retail Banking, is heard saying: “Yeah. They’ve got skin in the game and that is the key.”
Below are some key quotes from the tapes as the Disaster Bankers jokingly pull together their plan to defraud the Irish taxpayer of €34bn.
Joking About Repaying the Bailout Loan
Bowe: This is 7bn bridging.
Bowe: So..it is bridged until we can pay you (the taxpayer) back…which is never!”
(both laugh heartily)
Bowe: So under the terms that say repayment…we say ‘no’
Manipulating the Regulations
Bowe: (The regulators said) ‘Jesus, you’re kind of asking us to play ducks and drakes with the regulations’…and we said: ‘yeah’
Speaking of the Future of Banking
Bowe: It could be breaking it up and selling individual books, it could be nationalisation you know. That would be fantastic if it was nationalisation, we’d all keep our jobs!
Fitzgerald: It would be fantastic wouldn’t it?
Bowe: Yeah…civil servants, you know.
On the Strategy for Getting Money from the Government
Drumm: Yeah and we’ll be saying ‘Yeah , because, a stress because HBOS were fucking sold and Lehmans went bust and fucking Bank of America fucking took over Merrills and other fucking non-normal things happened, you cunt’
Drumm: Get into the fucking simple speak: ‘We need the moolah, you have it, so you’re going to give it to us – and when would that be?
The Toxic Banking Sector Carries on Polluting
Former CEO and Chairman Sean Fitzpatrick is due to go on trial in October 2014 – but not for any of this. He has been alleged to have received undeclared personal loans of €139m in contravention of the Companies Act. While it is good news that Fitzpatrick will be brought to heel in a court of law over these fraudulent loans of €139m – not a single person is being held to any account for the €34bn of loans gained fraudulently from the public purse. In fact, former CEO Drumm has since gone on the offensive in the press, condemning the ‘drip, drip, drip’ release of the tapes – seemingly missing the irony given his ‘drip, drip, drip’ release of the true cost of his Bank’s reckless behaviour.
We can be fairly sure, given the conversations shared with various parliamentary and senate committees during the LIBOR scandal, that these tapes represent the voice of the financial services sector, and it is laughing at all of us. While UK citizens begin to swallow the line that immigrants, the unemployed, an over generous welfare system and unaffordable public spending caused the financial crisis – they are laughing.
The crisis was in the financial services sector. This was a private sector crisis. It only became a public sector crisis when the government took taxpayer money and handed it over to these banks. We now find, on the basis of a lie.
Instead of going after the banks and bankers for this lie, politicians of all hues have leveraged the crisis to push through an unprecedented assault on the welfare state. This has turned from a crisis of capital, into a crisis of democracy.
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