Tuesday 23 January 2018

Once the guarantee was given, there was no escape

The tapes display a spin and spoof government obsessed with planting stories, writes John Drennan

Taoiseach Brian Cowen,TD with Brian Lenihan,TD
Taoiseach Brian Cowen,TD with Brian Lenihan,TD
John Drennan

John Drennan

In truth, the State was in a literal sense blind, for as that unusual tag team of Garret FitzGerald, Joan Burton and, indeed, the Sunday Independent regularly pointed out, there was only one economics PhD in the Department of Finance.

That was not the only lacuna, for the finance minister was a constitutional lawyer, the Taoiseach a small-town solicitor and the Financial Regulator had in a previous existence majored as a classical scholar.

We were not only flying blindly towards the abyss: Mr Neary's distance from the real world and Mr Lenihan's determined ebullience meant that we were also flying blithely into it.

Readers may be appalled by the ongoing contempt displayed over the past week's tapes for the grand panjandrums of the Irish Government.

However, given the desperate straits they were in and the quality of the guard dogs who were supposed to defend the interests of the citizen against these wolves, the contempt was understandable.

It undoubtedly helped Anglo's plans that the Government was still infected by the final fumes of hubris that had fuelled the longest and largest boom in the history of Ireland.

Outside of Brian Lenihan, who had hailed the "cheapest bailout in the world so far", even such natural Eeyores as John Gormley had bumptiously claimed that Ireland had shown the rest of the world how to deal with the escalating financial crisis.

Behind closed doors, however, an entirely different narrative was gathering, where, ironically, given the often-maligned nature of the public sector, the previous Secretary General of the Department, Kevin Cardiff, emerges as a somewhat unlikely hero.

If the Anglo bankers found meeting with Mr Cardiff to be "just f***ing horrendous", owing to the desire of the department that Anglo start showing them some "moolah" by raising its own funding in the markets, most of the rest of their experiences with the Government were somewhat less stressful.

That is not to say that the relationship was always as happy as it was during the blithe era of Biffo and rounds of golf in Druid's Glen.

As the guarantee that shook the world began to shudder and fall apart, the nervous arrogance of our banking elite that had become far too used to pliable politicians is starkly captured by the observation that if Mr Lenihan did not come up with the goods, Mr Drumm would "probably punch him. I mean punch him to say, 'What are you actually doing? Because you're creating an awful lot of uncertainty'".

The somewhat more subtle Mr Bowe, however, cut to the core of the central weakness of a finance minister whose naivete meant he was utterly unsuited for swimming with these sharks, as he warned that the famously loquacious Mr Lenihan would have to be told: 'Do you realise that your every word is dissected? Do you realise that when you are talking about banks from a systemic point of view, the market, the press, the media have excluded us?'"

The annoying difficulties attached to the none-too-easy task of trying to explain finance to overly sociable slow learners was taken up with a will by Mr Drumm, who notes wearily at one point just how hard it was to teach Mr Lenihan, to "get through to him" little financial truths such as "when you've guaranteed somebody's entire liabilities, it is smart to write a very small cheque to stop them being called"!

The tapes also display a government obsessed by spin rather than substance, that spent more time planting stories than investigating the wolves that lay hidden within.

No amount of spin and spoof, however, could disguise one fundamental truth, for while Anglo could complain all it wanted about being forced to engage in such new experiences as "process and due diligence and all this", in a real way it just did not matter.

Just as you cannot be just a little pregnant, Mr Drumm noted that once the Government had "made that decision on the 29th of September" and told "the f***ing world we are all solvent", there was no escape.

Instead, the only Hobson's choice a government of gamblers could now make was to, in the words of Mr Drumm, "protect your 100 billion guarantee of us by writing a two or three billion cheque and get on with it".

Oddly enough, amid all those complaints by the bankers about how "the mean" way Mr Lenihan was "dispensing the Government largesse" meant they were being "shot to death" was the unfortunate taxpayer who was shoring up the entire rickety scheme.

The Anglo horsemen of the fiscal Apocalypse would, of course, come calling on that familiar last resort soon enough.

Irish Independent

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