By Colum Kenny
Sunday October 05 2008
If Ted Poe of Texas were Ireland's Minister for Finance, then Irish people might have more confidence in the Government's massive guarantee for Irish bankers. As Brian Cowen and Brian Lenihan last week bet the family silver -- and much more besides -- on a shaky financial future, Congressman Ted Poe caught the public mood on both sides of the Atlantic.
Poe told the US House of Representatives on Monday, "Small businesses, mom and pop grocery stores, don't get this break. When they make bad financial decisions, they go out of business. But the rich and famous Wall Street New York City fat cats expect Joe Six-Pack to buck it up and pay for all this nonsense."
And Sean or Brigid Six-Pack could be bucking it up even harder for Irish nonsense, as the deal for Irish fat cats may end up costing more than the American bail-out, relative to our economy.
People are worried, and they should be. Putting the future of the State on the line was only responsible if there was no other choice. It is a high-stakes gamble, no matter how much or how often the Government tries to sell it as a "sure thing".
Minister for Finance Lenihan claims that there is "a very significant buffer before there is any question of the guarantee being called upon", because the six banks involved (he claimed) have total assets worth 80bn more than the guarantee.
But a bet is a bet, and who knows what those assets are now really worth, or will be worth when the chickens come home to roost?
The minister ultimately relied on the banks' own valuation of their assets, which the National Treasury Management Agency told me last week comes to 438bn, just 38bn more than the figure of 400bn cited as the value of the guarantee, and not 80bn as the minister reportedly claimed. But, sure, what's a few dozen billion between bankers and their friends in Government? And can we rely on the banks' own valuation of their assets, calculated long before the current crisis?
Politicians mounted their high horses to defend the guarantee last week.
Brian Lenihan's aunt, Mary O'Rourke TD, condemned British critics of the deal's implications. Another senator dismissed the US Congress as a bunch of Ballymagash councillors. That'll teach those Yanks for showing disrespect to the banks.
Commentators and politicians keep saying what "must" happen now in return for the deal, but the only sure thing is that the banks will get public money if they want it. Bankers panicked the Oireachtas into gambling the independence of Ireland on the throw of a dice.
Ordinary citizens have a sick feeling about the deal. If the gamble works, ministers will crow that they always knew how sure a thing it was. If it fails, then the guarantee may ruin Ireland for at least a generation. Is that risk worth the odds? There were more careful alternatives.
For years, banks cut services to customers and put their frontline staff under pressure so that shares would balloon.
Irish regulation was weak. Financial executives appeared in handcuffs on American TV, but never here. The Irish banking and stock-exchange worlds could do no wrong.
And now nobody says sorry. And nobody's head rolls. And nobody pays back.
But the taxpayer foots the bill. Big bankers will still have the same big cars and the same big attitudes. Talk of them paying a price will, in traditional Irish fashion, mean little in practice.
Voters are dizzy at the scale of the Government's gamble with their money.
A new Minister for Finance, with no background in business or even accountancy, is supporting a plan that could cost 10 times the national debt.
The Oireachtas rushed through legislation. It was so
urgent that they could not debate it in detail, yet some members did not even turn up to vote. Just 44 out of 60 senators voted. Given the perks and benefits of being an elected representative, those who failed to turn up in a national emergency should resign their seats (unless they were seriously ill).
Irish people are now being forced to clean up a mess that leaves many ordinary citizens frightened. They include those stuck in houses for which they paid too much, or those laden with debts that bankers and others suckered them into.
The economists and politicians who spoke of a "soft-landing" and condemned those who warned otherwise are still out there, shamelessly telling us what is what. Brazen and brash, they told people not to "talk down" the economy while those whose interests they served ran it down.
Voters are sceptical of politicians who emulated the smash-and-grab bonus ethos of banking to give themselves a whole range of perks that greatly inflated their already generous salaries and remarkable pensions.
Ministers are now telling Irish people that we must cushion reckless banks -- or else. These banks lent money in ways that inflated house prices, some of which money no doubt ended up as political contributions from builders to Fianna Fail.
There are also extra hidden costs of this blank cheque for banking. When it comes to Ireland's international credit rating, the deal will make it harder or more expensive for the Irish Government to raise money abroad for public purposes such as health, education and transport.
And the prospect of money leaving foreign banks to come to Ireland to benefit from this unique guarantee has angered stronger banks abroad. EU states are already exercised by our special tax breaks for multinationals. The deal gives rise to a fascinating prospect: Irish taxpayers one day paying back large amounts of foreign savings if an Irish bank fails.
The deal will have further negative consequences for us internationally, on top of the Lisbon referendum vote that lost us friends in Europe.
We are no longer "good Europeans" but spoilers, and those who do deals on our behalf will in due course learn all about what others now think of us.
In the worst-case scenario the Irish Government may be liable to pay a fortune to banks, but even then may not have enough taxpayer cash to cover all deposits fully.
The United States now faces some tough decisions in order to maintain its economic place in the world.
A decade that started with a symbolic attack by al-Qaeda on one of the world's greatest financial and trading centres (made possible partly because deregulation had weakened airport security) is ending with an almighty implosion on Wall Street (caused partly because deregulation allowed reckless financial practices). But the USA is rich enough to repair its economy and weather the storm.
Ireland, on the other hand, is a small country with a track record of government deals that failed to protect the public interest as well as they might have. Think AIB bailout, tax evasion amnesties, or the Catholic Church and its sex abuse liabilities.
Many citizens would not like to bet their house on Brian Cowen and Brian Lenihan putting together a package for banks that will also safeguard Sean Six-Pack. But Sean and Brigid Six-Pack have just had their houses bet for them, and they are worried.
Personally, I think that it is all the media's fault. Those bloody journalists do not have enough respect for their betters, or trust in their politicians. Yeh, that's it. It's the media that has brought down the Dow Jones and punctured the Irish stock exchange.
Sean Six-Pack would be a lot happier if he just stopped reading newspapers and got on with paying his taxes to the bank.