WHICH of our noble financial hierarchy recently said: "Our position therefore is that there is no need for further recapitalisation"?
Financial regulator Paddy Neary? Fallen AIB chief Eugene Sheehy? Sean FitzPatrick?
Yes, indeed. They all asserted such nonsense, but back in 2008.
Patrick Neary's famous quote was a paraphrase of today's Government line: "I believe," declared the unloved regulator, "the Irish banks are adequately, more than adequately, capitalised. . ."
Paddy Neary is alive and well in the corridors of power. So who echoed the same nonsense more recently?
Last year, Brendan Howlin uttered those fatal words in the Dail. He may soon be forced to eat them.
Last Thursday, the Department of Finance told me that "Our banks are well capitalised. There is nothing to suggest that further recapitalisation will be necessary. They are very well capitalised.".
In reply to a query about the dangers of our mortgage arrears monster causing another 2008-type crisis, the spokesman reassured me that there was a stress test done in 2011, that those carrying it out made "conservative" assumptions about mortgage arrears and about the underlying assets.
There is an alarming complacency in high places about our banks' solvency. History is repeating itself. The font of all wisdom, the Department of Finance, is making soothing sounds. Both Michael Noonan and Brendan Howlin have, in turn, been parroting the mandarins' propaganda. This is the same department that was briefing Patrick Neary and Brian Lenihan back in 2008 that we had a liquidity, not a solvency crisis – and that the root cause of Ireland's problem was the collapse of Lehman Brothers in faraway America.
Others who agree with the Department of Finance and the Government are none other than Ireland's biggest villains – the bankers. Such a united message from politicians, bankers and mandarins would fill the Almighty himself with fear. Politicians are the most innocent party in this troika of snakes.
Presumably the Government is aiming to steady the ship and assure foreign investors that the banks are solvent. Any hint of another collapse could scare bond traders, the guys who have temporarily taken a punt on Enda Kenny, Michael Noonan and Brendan Howlin's line that we are out of the woods.
It will take more than the voice of three patriotic teachers, coached by the Department of Finance, to convince bond dealers for much longer. More objective, if not such popular, foreign heads, have been analysing Ireland's bankers' prospects.
On the same day that the mandarins were oozing complacency, credit ratings agency Moodys was blaring out a warning. Banks in Ireland, Spain, Italy and the United Kingdom will need more money to beef up their balance sheets this year, asserted the agency in its global banking outlook for 2013.
A week earlier, Standard & Poor's had reported that Irish banks would need more capital, specifically identifying massive mortgage loans as the sword of Damocles. Two objective agencies are claiming that our banks are not nearly as healthy as we pretend. Indeed, that they are on life support. Unfortunately we have no more oxygen left in the shape of taxpayers' money. It has run out.
Even our Central Bank chief Patrick Honohan has recognised the danger, if not yet the reality, of the mortgage threat. Ten days ago he spelled it out: "if they [the banks] are not dealing with their mortgages, we will have to require them to increase their capital because, by not being prepared to deal on a permanent basis with those debts that cannot be paid, they are worsening the risk position of the banks and will require more capital."
Recapitalisation is political dynamite. Billions more for the banks can only come from two sources – from the taxpayer, or from Europe.
That is probably why Enda Kenny's rather shrill cries for help in Davos last week were beginning to smell of desperation. His open demand for Europe to honour its pledge to deal with Ireland's banks as a special case and to pay off our legacy bank debts signal the failure of his behind-the-scenes diplomacy. We are obviously getting nowhere in secret talks with the Germans, the Finns and the Dutch about a unique rescue package for AIB, Bank of Ireland and Irish Life. The deal on Anglo – the dead bank – is done and dusted, but the more important deal to rescue the living is stalled.
Kenny even made a veiled threat of a bad market reaction to any further delay, when he claimed that "markets have factored in a conclusion to this situation in Ireland". Decoded: if Europe does not deliver on the legacy debt issue, bond dealers will turn their guns on Ireland. There could be carnage in the Irish bond market. His speech was far from a calm message. It was an SOS.
Perhaps Enda has been looking at those other cold judges of Irish banks, the stock markets. Bond dealers may have been making short-term gambles on Irish bonds, but less-excitable equity dealers have not been so impressed.
The price of AIB shares remains near an all-time low of 8c, Irish Life at 4c and Bank of Ireland marginally better at 14c. Longer term equity investors are not fooled by the bullish spin from mandarins, bankers or politicians. They simply look at the banks' mortgage book, see a lethal swamp and beg for mercy. They know that the banks have grossly underprovided for losses in their mortgage books. The end game is the taxpayer, Europe or bust.
Equity investors are hardly the only party who have not been fooled. Bankers themselves have not been fooled by their own propaganda. Directors of AIB did not buy a single share in their own bank last year. Even the new managing director, David Duffy, did not seize the chance to put a cent of his €500,000 salary into the company he controls. Dick Spring has never bought a share in AIB. Chairman David Hodgkinson is wise enough to steer clear. Tom Foley, the insider chosen for the board last year, came to the table with more confidence than most. Tom had been bold enough to buy 100 AIB shares at some point before he arrived at the post. His investment is worth less than a tenner. Some risk-takers, these guys. They must have seen the true state of the AIB mortgage book. They are dead right: take the directors' fees and run.
Michael Somers, the €150,000-a-year vice chairman, still holds the 13,437 shares he bought years ago. He has been wise enough not to dip his toe in the swamp since his appointment. None of the other directors hold a single share.
All the directors will doubtless express loud confidence in the future of AIB, if they are asked. You would wonder what these clever Dicks do with their savings.
Yet they are super-confident in their bank's future. As are Kenny, Noonan and Howlin. Good.
Let me make a fair suggestion to the bankers and the ministers: forget all the hubbub about your vast pensions. Keep them. After a lifetime of service you deserve just rewards. We will even give you a bit of icing on the cake.
Take your pensions – but the State will give them to you in AIB shares.