Sunday 15 December 2019

Anglo duo are a symptom of the bank crisis – not the cause

Yes, Willie McAteer and Pat Whelan deserve to be punished – but solving the problem is a long way off, says James Fitzsimons

Pat Whelan deserves to be punished but solving the problem is a long way off
Pat Whelan deserves to be punished but solving the problem is a long way off
The crimes that Willie McAteer was found guilty of are a long way removed from the actions that politicians and bureaucrats have taken no responsibility for

James Fitzsimons

THEY saved the bank, but then they lost it. A few were brought up on charges and two were convicted. One was acquitted and another is in the US. Pat Whelan and Willie McAteer, formerly of Anglo Irish Bank, have been found guilty, but what happens now?

When they pulled the plug on Lehman Brothers in the US in 2008, it brought financial systems crashing down all over the world.

Until then, there was every possibility that the strategy that a few senior executives had devised to keep Anglo afloat would pay off. If it had, they would have been the heroes who saved the financial system, the faceless elite who earn outrageous salaries and bonuses for the risks they take every day.

The whole thing went pear-shaped. They could have been princes, but they are convicted criminals instead. If they had pulled it off, their bonuses would have been unthinkable sums. About €30bn was at stake – at least that's about what it cost to bail Anglo out. The deal they put together was unusual, and now we know it was also illegal. If it worked they would have been deep in the money, but it flopped.

Top bankers in America could earn $100m (€72m) a year before the crisis. Back home our top banker, Richie Boucher, is struggling to earn even a million a year. Next week his package of about €840,000 will be approved. That's more than a million dollars. So much for caps on bankers' pay.

Meanwhile, two Anglo men have been convicted as charged in relation to the Maple 10 loans, but acquitted on charges relating to the loans to Sean Quinn's family. If those loans were illegal it could have strengthened the case for the Quinn family to walk away from them.

The trial heard that the ex-CEO of Anglo, David Drumm, came up with the plan to prop up the company's share value, when financial markets were heading into the storm. It was a bold move in more ways than one. It came after years of growth built on success and, at the time, it must have seemed as if nothing could go wrong.

The bank had previously engaged in risky lending. But that wasn't illegal, just foolhardy. Something had to give, but nobody predicted the whole banking system would crash. If Brian Lenihan hadn't stepped in, with the ill-fated bank guarantee scheme, we were in trouble. But that turned out to be a mistake, too. The difference between bankers and politicians is that politicians can change the law.

No bureaucrat or politician has been held accountable for throwing the country into the financial crisis that will take many people to the grave. McAteer and Whelan were charged with giving illegal loans to prop up their company's shares. What they did is a symptom of the crisis, but it's not what caused it.

This case is one of the most high-profile cases to ever come before the Irish courts. When you break it all down, it's about how bank executives interpreted written company law. The court heard that they tried to work within the law and failed. They will be made pay for what they did and so they should.

The crimes that McAteer and Whelan were found guilty of are a long way removed from the actions that politicians and bureaucrats have taken no responsibility for. They have been found guilty but it would be wrong to hold them accountable for the system that supported what they did. The real problem hasn't gone away, if anything it has got worse.

James Fitzsimons is an independent financial adviser specialising in tax and financial planning

Sunday Independent

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