Tuesday 27 September 2016

This Government no better than others at tackling banks

People are moving on from the past and are more interested in seeing manners put on banks right now, says Brendan O'Connor

Published 26/04/2015 | 02:30

Brendan McDonagh
Brendan McDonagh
Dermot Gleeson
David Duffy

It is convenient isn't it? That the Banking Inquiry ramped up a bit last week and gave us some real juice. It is convenient that memorable images came out of it. It is convenient that the idea of Brendan McDonagh, the state's banker, sitting watching the world collapse on TV while our leaders, without deigning to tell him what was going on signed away our lives in the next room, captured the public imagination the way it did, as we watch another Government in thrall to the banks.

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When all else fails, it is always good to give people a bit of soap opera from a night that we can tend to obsess over in our post-traumatic stress disorder.

It is a night we have been taken through time and time again, the way a PTSD victim replays over and over again the source of their trauma. By now, we have heard it from several angles. But McDonagh gave it to us from a different perspective, a new camera angle, which will go down with Lenihan chomping garlic in David McWilliams's house as one of the stand-out images from the lore of those dark months when the country teetered on the brink.

This is all very convenient for this Government, because it wasn't there. It fits in perfectly to its general MO, which is roughly: "Look over there!" or, perhaps more accurately, "Yes, but remember when Fianna Fail ruined the country." Indeed we know that this Banking Inquiry was pretty much set up for the very purpose of blaming Fianna Fail for everything.

Enda Kenny admitted when the membership of the Inquiry was being discussed that he needed a Government majority on the committee so that it could be controlled by the Government. "How do I know what your members will do? I don't know," Mr Kenny memorably said to Micheal Martin to justify adding two Government members to ensure control of the terms of reference. The move, you will recall, was referred to by one Fianna Failer as something that Hitler would be ashamed of, while Enda's allies were a bit kinder, with the Government's Alex White saying it was the kind of thing that gives politics a bad name.

Some aspects of the Inquiry have not worked out as well as people might have hoped. The attempt to blame the media for the bust, rather the banks, the borrowers, the regulators or the Government, was a bit of a damp squib. But the Inquiry delivered in style last week with tales of 'banking then' banishing tales of 'banking now' off the front pages. And then, of course, there were tales of 'banking in between now and then'.

There was a trend in all these stories, the identity of the Government in question. For example, the Banking Inquiry is a good-news story because the people being made fools of were Fianna Failers. The story on the fallout from Siteserv - tales of Noonan having no confidence in what Irish Bank Resolution Corporation (IBRC) was telling him, of IBRC doing deals that might not have saved the state the most money it could, IBRC showing a disregard for the Minister's requirement on downward pressure on remuneration - is not a good story for this Government because it involves it failing to get to grips with a bank it owned and should have been able to control.

The current banking story as played out at the Finance Committee last week is not a good one either, as it involves, again, this Government and, again, banks it owns and, again, a seeming inability to control them. And unfortunately for this Government, no matter how hard it tries to make the show trial of the Banking Inquiry into the big news, people are getting tired of endless rehashings of what went on back then, and are more interested in more recent events. Back then is now what the accountants would call a sunk cost. But current standard variable rates and even IBRC? People feel they have a bit more skin in that game.

The most significant thing that happened up at Leinster House last week with regards to banking was not Dermot Gleeson playing the haunted, hunted man who did his best. Nor was it Brendan McDonagh telling us that he knew better than the people in the room, but he wasn't let into the room - Oh, lucky man. No, it was a tanned, smooth and light-hearted David Duffy at the Finance Committee.

Duffy, the outgoing head of the state-owned AIB was there to talk, among other things about the scandalous standard variable mortgage rates that apply in Ireland. And he was ready. He had something in his pocket to defuse the whole situation. If the costs of funds to AIB, and their operating costs, and their assessment of risk continues to decline, Duffy announced, AIB will cut its SVR by a princely 25 basis points, .25pc. He was like a tanned Santa Clause. And it ensured that all the headlines about his visit to the Finance Committee concerned AIB cutting its rates, bowing to public pressure and to the Government's stern words. So now, SVRs will go from being about twice the European average to... only being about twice the European average.

When it was put to Duffy by Stephen Donnelly - one of the few politicians who seems to be capable of calling bankers to task in a credible way - that AIB's SVR in 2012, when the economy was still in crisis, was 3.5pc, and that now, in an improved economy, it is 4.1pc, while ECB rates have fallen by .7pc in the meantime, Duffy brushed it off by explaining patiently that only a tiny fraction of AIB's borrowing comes from the ECB. In other words, while simpletons like the rest of us might equate there being free or really cheap money flying around everywhere with the fact that mortgages should be cheaper, we really don't understand anything about the true cost of funds.

This will all no doubt be spun as the Government called this guy to heel and he came in and humbly agreed to cut rates. But the reality is that the Government has proven yet again on the SVR issue that it is as cowardly and inept as any Fianna Fail government when it comes to dealing with its tanned, smoothie, banking overlords. So the best the Government can do is posture publicly and say it is not happy about interest rates and it is going to talk to Patrick Honohan about it. While ignoring the fact it owns the main protagonist in these inflated interest rates.

It's a bit like how it says it is disappointed in the banks for vetoing so many insolvency applications, when it was this Government which made up the insolvency law that gave the major creditor a veto, and when everyone told it at the time that it was pointless having an insolvency regime where the banks have a veto. But now the Government acts like it's nothing to do with them. It stops short of blaming the past and Fianna Fail for that one, but you sense it would if it could.

The thing about being four years in Government is that you start to develop your own past, and when that past starts catching up with you, you can't blame the Government of the time.

And meanwhile the mistakes Fianna Fail made are receding more and more into the distance, and people are getting less interested in obsessing about the past and more interested in moving forward.

And moving forward, and what money is in people's pocket right now, is becoming more and more the responsibility of this Government.

Sunday Independent

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