Wednesday 22 January 2020

Banks don't do charity -- except for themselves

Failed financial institutions get bailed out by taxpayers but what about cutting the little guy some slack, asks Brendan O'Connor

Sometimes the more blatant things are, the more we are inclined to swallow them. Because we just think -- nah, that couldn't be as outrageous as it seems.

For example, Bank Of Ireland's Richie Boucher, sat in front of a Dail Committee the other day, being "minimalist" in his answers, and, in response to a question from Joe Higgins about "mean spirited" increases in charges, Boucher came back, quick as a flash: "We are a commercial enterprise."

So suddenly Richie Boucher is all about capitalism and free enterprise and the market. It's almost as if we are supposed to all magically forget that Bank of Ireland is not in fact a commercial enterprise. If Bank of Ireland were purely a commercial enterprise it would not exist anymore. Richie Boucher and his colleagues in Bank of Ireland screwed up their business so badly that we had to buy a load of their liabilities off them, had to pump over €4bn we didn't have into them and we will possibly have to give them more. That, Richie, is not a commercial enterprise, buddy. That's closer to a charity.

Except while Bank of Ireland enjoys all the upside of being a charity, like getting loads of money off the Government, it indulges in none of the other side of it, like helping people. For a completely failed entity that exists only because of the charity of the Irish people, they also enjoy good salaries and pensions in Bank of Ireland. Richie Boucher gets a package of €620,000 a year. Richie Boucher was a top executive in the Bank of Ireland at the time when the bank went over the edge and when the Irish Government entered into the disastrous bank guarantee. Brian Goggin, who was in charge of the bank at a time when it was doing much of the disastrous lending that has now landed them, and us, in such trouble, gets a €650,000-a-year pension. Presumably it is supposed to be punishment enough for Goggin, as he sits counting his money, to think about what he did, to reflect on the trouble he caused.

But ask Richie Boucher about writing off some of the unsustainable loans that he and his colleagues gave to mortgage-holders and he will tell you that he disagrees with a transfer of money from deposit holders to mortgage holders. Again those principles of capitalism. It would be wrong for one bunch of people to bail out another bunch of people. Even though the banks were given billions to cover bad loans they made, and developers have effectively been forgiven billions through Nama, it would simply be a breach of the high principles and ethics of banking to use any of that free government money to let someone off some of a mortgage that is strangling them, even if it made that guy a better mark in the long run.

The AIB was being pretty blatant during the week too. They were up in front of the Finance Committee too and they also had their principles about bailing out anyone. Their boss David Duffy told the Committee that AIB would not engage in debt forgiveness where borrowings "magically go away". This would lead to moral hazard and would get us into "very dangerous territory", Duffy said.

I'll tell Duffy what dangerous territory is. Dangerous territory, moral hazard, is when people know that no matter how badly they mess up, there will be no consequences for them. Like when you make a balls of running your bank and you magically get €20bn from a state that is already bankrupt to keep you afloat. That is very dangerous territory because it could cause you to take €1.1bn

of that €20bn and put it into your pension fund. And then it could cause you to use that taxpayers' money to pay the very people, who screwed up, half a million a year for the rest of their lives. That's how much Eugene Sheehy, who was in charge of AIB when the guarantee of his bank among others brought down this State for generations, gets every year for his trouble. Colm Doherty, his successor, will get €300,000 a year from the pension fund we bailed out once he hits 65.

And David Duffy has the gall to sit there and tell us that money cannot just be magicked up and debt cannot be magicked away and people need to be responsible for their actions or we get into dangerous territory?

But of course they will keep peddling this crap to us and sitting there lecturing us about the principles of capitalism while we still take it. The line is this: Banks get bailed out and the world doesn't end. In fact it's necessary to stop the world ending. Developers get debts written off and the world doesn't end, in fact that's all part of the recovery process. But it would be highly dangerous to let an ordinary person off one penny of their debt, even though it might be strangling them and strangling the economy. If they did that, the world would end. It's different for the little guys.

And sometimes we become so bamboozled by it all we start to think that we are the crazy ones, that what seems obviously ridiculous or wrong to us is perfectly normal, we just aren't intelligent enough to see it. And they encourage you to think that. They encourage you to think that you are just misunderstanding. It must take some balls for them to sit there on their half a million a year, in charge of their failed businesses that have been kept alive by transfusions of our blood, telling us that blood transfusions are wrong. But they do.

Last Saturday I had one of those moments of revelation.

I'll confess, I had kind of wondered quietly when the details of the Personal Insolvency legislation came out, why it needed to resolve debts of up to €3m. They keep telling us that this law will sort out those who are drowning in mortgage debt. But €3m seems like a lot of money to be forgiving ordinary people. I'll admit though, that I thought I must be just stupid and I wasn't getting it, so I kept my trap shut about that aspect of things.

Then last Saturday Stephen Collins wrote in the Irish Times about it. He said: "The propensity of the Irish political system to be captured by narrow vested interests rather than operating for the common good has been illustrated once more by the terms of the Personal Insolvency Bill, which will allow people to write off debts of up to €3m. The ostensible purpose of the Bill is to protect families in financial distress and ensure that they do not lose their homes. It seems, however, that our politicians are using this as a pretext to protect the interests of those who speculated in the buy-to-let property market. What other explanation can there be for the €3m threshold when the average mortgage is in the region of €350,000?" Collins went on to point out that the troika thinks it is odd too and the delay in this urgent legislation is partially because the troika can't see why the ceiling needs to be anything above €1m.

And there it is again. Another massive scam aimed at looking after developers and millionaires, and we've become so muted by all the bullshit that we need it pointed out to us, even though it's plain as the nose on your face.

So in one way, while you might think I'm pointing out the obvious about the last week, it's probably worth pointing it out. Because they have made us doubt ourselves so much now. And because they sit there with straight faces and tell us things that completely contradict the reality of their own situations. And we all assume that if the carry on of the banks was as outrageous as it looks, they couldn't possibly be getting away with it. But they are. In plain sight. Then again, they have balls and a shamelessness the rest of us don't have. And maybe that's why they get the big bucks.

Sunday Independent

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