Fear is the driving force behind the most significant day in the country's recent economic history, writes ELAINE BYRNE
TODAY WILL be full of language that seeks to “once-and-for-all” draw lines in the sand. A public exhausted by financial fatigue will continue to be confused by the complexity of capital requirements, preference shares, ordinary equities and special purpose vehicles.
Brian Lenihan, the Financial Regulator and Nama representatives will dance with choreographed statements containing warnings of imminent Greek tragedy unless their policies are vigorously implemented.
When people are frightened and uncertain they want to emotionally believe in something, anything, that will make them feel safe and secure again. The power of fear is its ability to manipulate compliant deference to the powerful. When things are too big to understand we wilfully allow others to interpret them for us.
The reshuffle as an exercise in distraction politics was in the end absent of imagination and devoid of any obvious shift in policy priorities. Nothing has changed. The circus of political personalities is more attractive to understand than things that actually matter.
Today is the most significant day in this country’s economic history since the foundation of this State. And we have sleepwalked into it with our eyes wide open.
The estimated total cost of the recapitalisation and nationalisation of the banking sector will be in the region of €27 billion. Taxpayers have already donated €11 billion last year, while a further €16 billion is expected to be committed shortly.
Six thousand and fifty four euro and forty three cent is what appears on the calculator screen when €27 thousand million is divided by the total population. The mistakes made by our political and financial decision makers, complemented by an accommodating Civil Service, will cost each citizen six thousand and fifty four euro and forty three cent. And that doesn’t include Nama.
Let me give you just one example of the sleepwalking with eyes open syndrome.
High Court-appointed inspectors Tom Grace and John Blayney made serious findings of improper practices in NIB and National Irish Bank Financial Services Ltd in their July 2004 report. They concluded that NIB executives and managers were not only aware of the deliberate practices which facilitated tax evasion and overcharging, but failed to stop them. The Office of the Director of Corporate Enforcement (ODCE) subsequently sought to disqualify nine NIB executives and managers. In 2007, the High Court did not grant the ODCE’s application to have Kevin Curran, a former NIB senior manager, disqualified. Mr Justice Roderick Murphy cited the prevailing culture of tolerance within both the private and public sectors as a mitigating factor.
In his ruling, Mr Justice Murphy referred to evidence from the Revenue Commissioners that banks generally took a lax view of the need to ensure tax compliance as did the Department of Finance, which appeared to have a blind eye to such things. “Mr Curran on his own could not have eliminated the problem,” concluded the judge.
In the end, the attempts by the ODCE to improve the culture of compliance in Irish business were counterproductive. The implicit message was clear. Nobody could be held responsible because everyone was responsible. During these dizzy heights of the boom, bankers were now effectively untouchable. There were no consequences for behaviour found wanting.
Six thousand and fifty four euro and forty three cent excludes the cost of Namaisation. The Irish taxpayer is now involuntarily host to the biggest property portfolio in the world.
Already some €17 billion in loans linked to the top 10 developers out of a total of €81 billion in loans have been transferred in this first wave. These top 10 property developers very likely includes Seán Dunne, Ray Grehan, Seán Mulryan, Paddy Kelly, Gerry Gannon, Johnny Ronan and Séamus Ross, all prominent political donors to Fianna Fáil. But will any banking inquiry look at political decision-making which created tax reliefs and incentives which stoked up the price of land, inflated the boom and overheated the market?
Lenihan will also announce the collective loan books transferred to Nama from each of the banks. The discount is estimated to range from 35 per cent for Bank of Ireland to 60 per cent for Irish Nationwide. However, the valuation of individual assets, for each property developer, will not be made known because of the pretext of commercial sensitivity. Although the taxpayer is paying, we have, apparently, no right to know what they are. What is stopping Lenihan making this information subject to the Freedom of Information Act, after a specified length of time, when the rationale for such confidentiality is no longer commercially sensitive?
There is a running joke in Iceland that if you get lost in the woods you should just stand up because there are no forests in Iceland.
We can see the woods from the trees if we choose to. Six thousand and fifty four euro and forty three cent.