Dublin Opinion

Political speeches in the Dail rarely rock my world. Perhaps the calluses of cynicism have grown over my ears. But similar to the motivation of people who only read poetry as a way of finding consolation after a traumatic event, so one has a tendency to read what politicians say during a momentous, historically significant event. And the announcement yesterday of the extent of the recapitalisation of the banks is momentous and it is historic. It’s an indication of the phenomenal scale of the fuck up and considering its inevitable impact on the economy a sign of how bad things are going to get in the next ten years - at least. Thank you, Fianna Fail.

And considering the scale of the fuck up, you’d expect left-wing politicians with Dail seats to use their position to respond accordingly. In my opinion, Joan Burton’s is good but doesn’t go near far enough. Arthur Morgan, however, puts in a stunning performance.

It is taking the Minister too long to resolve the banking crisis. This crisis first came to the fore in the summer of 2008. Since then the real economy has plummeted and the banks have played no small part in this as a result of their refusal/inability to extend credit. Businesses have closed their doors and householders face repossession. The only action the banks have managed to take is to hike up charges and interest rates, along with fighting off calls for cost-cutting amongst their higher paid members. The 0.5 mortgage interest increase from AIB, at a time when the ECB’s rates remain stable, is testament to this. The bank may be borrowing at a higher rate on the wholesale market, but what has it done to ensure security for its customers? When the state talks about taking a higher stake after recapalisation, suddenly the bank is suggesting it can sell its foreign assets – should it not have done this before push came to shove? The failure of the government to put a stop to this rate increase is shameful. The banks may be borrowing higher on the wholesale market, but, if they squeeze already under pressure mortgage holders, are we looking at another tranche of bad loans in the residential property market further down the line? This domino effect will grip the Irish financial sector and Irish taxpayers will be hit doubly for the failures of the Irish banking system: not only through the cost of recapitalisation but through the increase in mortgage interest rates, personal loan and overdraft rates.

And what fruits will be borne on the other side of this? Will there be a nationalised state bank, which will be capable of offering individuals and businesses credit at fair rates? Only partially. The people will be offered more or less the same. And slowly the system, if left to commercial devices, will slip back to its own unregulated ways.

The banks will still not accept responsibility for what they have done. The only stakeholder that needs to be given due consideration here is the taxpayer. What the banks do or don’t want is completely irrelevant at this point. In any other sphere of business, at this stage those banks would be in receivership or liquidized. This attitude of self-importance is the same that prevailed in the lead up to the crisis – there is absolutely no basis for it to be allowed to continue.

And

The government has bent over backwards to ensure it try to prevent nationalisation of the two larger banks. From the guarantee, to the initial recapitalization, to NAMA and now further recapitalization, we have spent the last almost two years witnessing a finance department create policy that has the sole intent of preventing banks being nationalised. The only bank the state leapt to nationalise is the only bank that nobody wanted nationalised. There can be no doubt that the speed with which Anglo-Irish was dealt with was a reflection of the government’s desire to hide the machinations at the bank, which would have come to light much quicker and in fuller detail had that bank been allowed to fold. Instead we are getting a drip feed of information from a bank that is no longer functioning as a bank but is costing the state billions. This bank could require a further €9 billion in recap over the coming months. That alone is twice what the government attempted to cut from the deficit last December.

Brian Lenihan has stated that the country is in a better financial place now to deal with the funding needs of the banks. This is astonishing. The state is carrying a €20 billion plus deficit that the EU has ordered us to dramatically reduce. According to this government we don’t have a red cent for investment purposes, but we can use the NPRF for recapitalizing the banks after NAMA takes the bad loans of their books at an even sharper deal. The NPRF at the last count had a value of €13 billion and another €7 billion in AIB and BoI shares. If the government has its way, the entire NPRF will be made up of bank shares. This will be ironic if the state, after all its procrastinating is forced to fully nationalise the banks and the largest shareholders to get burned at that point are the Irish taxpayers.

Note that the image above is a reference made in Joan Burton’s speech to donkeys and lions:

This is the sixth time the ‘donkeys’ of Fianna Fáil will be asking the taxpaying ‘lions’ to take on the chin the mess that was made of their economy.

David McWilliams works in the same analogy in his latest column, looking at where the original expression came from.

The wonderfully vivid but tragic expression attributed to the German high command during the [first world] war that the British generals were “donkeys commanding lions” certainly rings true when you look at the military record.

And concludes

We have also been informed that €8.3bn will be transferred to Anglo now. Additional support will be required to the tune of €10bn. So that is an extra €18.3bn for Anglo alone. AIB will need another €7.4bn to keep it open. Irish Nationwide will need another €2.6bn and Bank of Ireland will receive €2.7bn from us, the taxpayer. But these figures have been calculated by people who have constantly underestimated the scale of the problem, so why trust them now?
NAMA and throwing money at our banking system is the financial equivalent of trench warfare, billions will be wasted and we will be left with the bizarre situation where even the winner loses.