Friday 28 November 2014

Drumm blamed markets for Anglo problems

Paul Williams, Donal O'Donovan and Fionnan Sheahan

Published 18/07/2014 | 02:30

DAVID Drumm believed international money markets were treating Anglo Irish Bank unfairly in the run-up to the cataclysmic meltdown of its share price.

Anglo's former chief executive refused to accept the markets were acting rationally when the bank's bonds slumped in value, new recordings from inside the bank reveal.

Two months before most people realised there was a huge problem with the market's perception of Anglo, Mr Drumm angrily complained about the treatment of the banks by international money managers.

The chief executive coarsely claimed the bank had "got f***ed up the a*** by the market" through the continual discounting of the bank's bonds.

Mr Drumm – who still has outstanding loans from Anglo of €8.5m – was reacting as the bank got caught up in what we now know was a global credit crunch, which sucked money out of the international markets.

He is also heard referring in a demeaning fashion to some of his own staff, calling them "the f***ing CIA", after he put a query to them about a particular deal.

"I was probing my learned friends in group finance, otherwise know as the f***ing CIA in the way they behave themselves," he says.

In early January, the sub-prime mortgage crisis blew up in the US. As a result, the markets took a more sceptical view of any bank over-reliant on property lending.

Inevitably, Anglo, which had mushroomed during the Irish property bubble, was in investors' sights.

Mr Drumm's emotional reaction is heard in a conversation on Anglo's financial situation, as the bank's financial status became increasingly precarious at the start of 2008.

In the recording of the call on January 22, 2008, he expresses his frustration at how badly the bank's debt is performing on the international markets.

Mr Drumm appears to put forward a plan to take revenge on hedge funds by making a profit, while he believes they are betting on the bank making a loss.

"Yeah now what I'm thinking is that we've got f***ed up the a** by the market on our bond books, why wouldn't we use this as a way of pay back for the hedge?" he says.

Mr Drumm explains how strained the financial situation at the bank had really become.

He was particularly annoyed at the renowned bank HSBC changing its accounting treatment to more favourably reflect its financial position, based on what was happening in the market. Mr Drumm wanted to go further and make a real profit off the crisis. "That is bollocks. Why wouldn't you just buy it back?" he says.

Mr Drumm is expected to hear if he will be discharged from bankruptcy in the US.

The tapes reveal Mr Drumm speaking about giving his own board the "Ladybird version" of events.

As chief executive, it was his job to ensure that the board members, most of whom were not full-time Anglo employees, were appraised of the events.

The latest revelations of activities inside Anglo as the bank teetered on the brink of collapse prompted anti-austerity campaigners to point out the bailout of the bank was costing the taxpayer €500m a year to repay debt.

Independent TD Catherine Murphy said the taxpayer is still on the hook for €25bn, following the collapse of Anglo.

"To put it in context, €500m will be destroyed this year alone, that same €500m could go a long way towards stemming the budget over-runs in the Department of Health," she said.

Irish Independent

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