Friday 15 December 2017

How bankers planned policy of deception

David Drumm, Peter Fitzgerald and John Bowe pictured in 2006
David Drumm, Peter Fitzgerald and John Bowe pictured in 2006
Donal O'Donovan

Donal O'Donovan

THE latest Anglo Tapes were recorded on September 19, 2008.

In the chronology of the Irish Independent's Inside Anglo series, this latest call comes just one day after the bank's acting Director of Treasury John Bowe's conversation with Director of Retail Banking Peter Fitzgerald.

This was the now-infamous conversation where Mr Bowe said that the figures involved in the bank's previous request for a €7bn loan from the Central Bank had been "picked out of my arse".

In the latest phone call, Mr Bowe is heard in discussions with the bank's then most senior manager, David Drumm, who was group chief executive at Anglo Irish Bank.

The two men were directly involved in discussion with the Financial Regulator and Central Bank officials about the banking crisis.

As such, the content of this latest tape appears to decisively show that key bank executives worked together to purse a deliberate policy of aggression, and deception about the bank's true condition, in the run-up to the bank guarantee at the end of September 2008.

Mr Drumm and Mr Bowe estimated that, as a bank, they "are going to be dead" in a matter of weeks, unless government support is secured.

The tapes suggest that senior executives deliberately presented the crisis at the bank as a "liquidity" or cash-flow issue rather than a more fundamental problem.

They had clearly deluded themselves into thinking that the bank's auditors could be persuaded to think similarly to themselves.

Like the earlier tapes, there is a palpable air of aggression and contempt, mainly aimed at state officials – dubbed "Freddie F***ing Fly down there at the Regulators" by Mr Drumm.

Mr Drumm defiantly threatens to pass the bill for Anglo Irish Bank's failure on to taxpayers if the Central Bank will not come to its aid.

"If you want the f***ing keys now I can give them to you," he says he will tell officials.

He exhibits an utterly cavalier attitude both to regulation and regulators.

"We need the moolah, you have it, so give it to us . . ." Mr Drumm says of his plan to secure state support.

Mr Drumm candidly admits to having a limited understanding of how the bank's own financial system worked.

"I'm learning about this Treasury mojo," he joked.

He makes clear he wants to avoid presenting a full picture of the extent of the bank's problems to outsiders.

"We've got to make our best attempt to get the balance sheet looking in reasonable health," he tells Mr Bowe.

Today, we know that the banking crisis went on longer and was worse than it might have been because banks refused to own up to the true extent of their problems.

What happened next?

In the tapes, Mr Drumm says he wants the Central Bank to bail out Anglo with a €7bn loan. Anglo Irish did not get that deal. However, Mr Bowe's view that the bank could only survive by attracting back deposits is a signpost to the rescue deal the bank did eventually get.

That came the next day, when the Government raised the guarantee on customer deposits following meetings with bank chiefs including Mr Drumm.

The full bank guarantee was introduced 10 days later.

This sparked the celebratory conversation between the two men – including, notoriously, the singing of 'Deutschland Uber Alles'.

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business