Lenihan's power-grab will make things even worse
Laws making the Finance Minister all-powerful over the banks are dangerously undemocratic, says Daniel McConnell
Dictatorships, history tells us, are essentially about the centralisation of power to one person, or a small number of people. History also tells us that they don't occur overnight, but evolve inch by inch.
It is not overstating things to say that Brian Lenihan's emergency banking legislation (the Credit Institutions Stabilisation Bill 2010) when examined in isolation is dangerously undemocratic, legally dubious and an attack on the rights of property owners across this country.
However, when viewed in the context of the totality of his banking policies since 2008, it is the latest element of the greatest power grab in the history of this State. Once it came into force, Mr Lenihan became all powerful in terms of the Irish banking system.
Combined with the fact that he is already the country's greatest property portfolio owner, by virtue of Nama, it means too much power now lies in the hand of one person -- the minister himself.
To all intents and purposes, Mr Lenihan is now Ireland's financial and property dictator, and that cannot be good for anyone. Huge emergency powers, which have the potential to affect the property rights and shareholdings of thousands of Irish people, now rest with one person whose track record on banking is less than stellar.
While we all agree there is a need to finally put manners on the banks who, despite being bailed out to the tune of €50bn, have lied, cheated and stolen while paying out €44m in bonuses since 2008, this bill goes too far and ultimately will further damage rather than restore Ireland's battered financial reputation.
According to Mr Lenihan, the law's purpose is to "allow for the implementation of the restructuring of the banking system as set out under the Memorandum of Understanding with the IMF and EU."
However, rushed through Leinster House before Christmas without adequate debate or examination and heavily criticised by the ECB, Mr Lenihan's latest bill is the third part of a trilogy of economic/ financial legislation -- including the bank guarantee and the foundation of Nama -- which will define Ireland for years to come. But given the billions of taxpayers' money already involved, the secrecy that surrounds Nama and the lack of transparency that has engulfed his entire banking strategy since 2008, Lenihan's actions before Christmas are dubious to say the least.
Under the new bill, Lenihan (or his successor) will now have the power to appoint special managers to the banks, where they can hire and fire as they please, take the place of shareholders and direct an employee of the bank to act in a certain way.
The minister will be able to move assets and liabilities, even performing ones, from one bank to another, without the consent of shareholders or property owners. He can also remove any director or employee of a credit institution without any notice being given, and he may appoint a director to any institution, with the consent of the governor of the Central Bank. He can impose conditions in relation to any financial support, including not paying financial bonuses to employees.
In a very sinister development, hefty sanctions are provided for in the bill for anyone who publishes the fact that the minister has used the main powers in the bill or is proposing to do so. Fines of up to €100,000 and prison terms of up to three years are provided for. So, attempts by the media or anyone else to inform people as to what is happening are now punishable by jail or a hefty fine.
Of real concern is the manner in which this bill was rammed through the Oireachtas, with countless sections of it not debated, challenged or tested.
"The speed at which this bill passed through was just staggering," said Fine Gael Senator Paschal Donohoe, who was one of a handful of members able to debate the bill with Lenihan. "It barely made committee stage in the Dail, received just a few hours in the Seanad and only a handful of people were able to have detailed debates on it. With such a crucial piece of legislation, it's incredible," he added.
This bill was rushed through in order to facilitate the latest injection of our money into AIB, sanctioned by the High Court which sat in private at the request of the minister. Hardly democratic.
"I and the Central Bank made clear that AIB had to meet its capital requirements by the end of the year. The provisions in the bill allowed me to make a capital investment in AIB. The application by counsel for the State for an in-camera hearing arose due to issues of commercial sensitivity included in my application to the court," Mr Lenihan said.
As seen in that AIB case, the High Court now has the power to order that any application made under the act be held in private. The court can rule that certain "commercially sensitive" information may not be reported.
But of most concern is the damning indictment of the emergency law delivered by the ECB, which said that it potentially poses dangerous risks to the entire European financial system.
The report contained almost 25 separate concerns or faults with the legislation. "It has not been possible to assess all the many constitutional, other legal and regulatory issues which this draft law undoubtedly raises. The ECB has serious concerns that the draft law is insufficiently legally certain on a number of critical issues for the Eurosystem," the ECB Opinion document stated.
The Sunday Independent contacted the ECB this weekend to see if any of its concerns have been addressed or allayed by Mr Lenihan since it published its critical report. The message back? Those problems still exist. "We were critical in our report, and we were direct in our language. Our criticisms were outlined in the Opinion and nothing's changed, they still stand," an ECB spokesman said.
Ultimately, this bill clearly shows that up to this point the power of the State in relation to our banks has been too weak. The tragedy for Irish taxpayers is that the Government is waking up to this only after using billions of our money to capitalise the banks.
What is also now abundantly clear is that all the public interest directors have failed absolutely to stand up for taxpayers' interests. They
should hand back every cent paid to them, such is the extent of their failure.
"We were told again and again that increased State shareholding and the role of public interest directors would allow the reform and stabilisation of our banking system. This bill shows that this view was wrong," said Mr Donohoe.
"In effect, it is an admission that the Government strategy for dealing with our banks failed, but we are learning this lesson after two years and after the waste of billions of taxpayers' money," he added.
Buried in the report is another worrying section regarding the source of all of our woes, the failed entity that is Anglo Irish Bank.
Separate to all other institutions, there is a section in the bill where it refers to the "reorganisation, preservation and restoration of the financial position of Anglo Irish Bank."
But didn't Central Bank Governor Patrick Honohan say Anglo was to close?
Mr Lenihan this weekend, explained this section: "The bill follows the language used in the relevant European Union directive. This does not bind the minister to any future course of action. One of the reasons for the speedy enactment of the legislation is to bring about a speedy resolution of the issues that have arisen in Anglo Irish Bank Corporation and Irish Nationwide Building Society. The legislation will facilitate the merger of these institutions, together with the disposal of certain liabilities and the preservation of the entity solely for the purpose of working out the assets over time."
Mr Lenihan denied that the inclusion of the word "restoration" is anything other than a legal requirement, and is not evidence of a departure from the Government's stated policy.
Finally, of grave concern is that this was all done in a mad rush just before Christmas during a major snow storm when the attention of the opposition, the media and of the public was not where it normally is. That much is being done in a significant information vacuum when the stakes are so high is also deeply disturbing.
The special powers afforded to the Finance Minister are to last until the end of 2012, but expect them to be extended. Also from February, additional powers, "in line with best practice," will be given to Matthew Elderfield, the Financial Regulator including further sanctioning powers over the banks.
The cost we as a people are having to bear for the greed, mistakes and calamities of others is enormous. It is an outrage that given all this that no one has gone to jail.
Things had to be done, we couldn't go on but this bill gives Mr Lenihan far too much power.
Only bad things can result.