Sunday 15 December 2019

No thanks for Casey for donning green jersey

The Central Bank and the Financial Regulator knew exactly what Anglo was up to, says Brendan O'Connor. So is Denis Casey just a useful patsy?

Guilty: Denis Casey is going down for what Sean FitzPatrick called 'funnies' in Anglo and ILP's accounts Photo: Collins Courts
Guilty: Denis Casey is going down for what Sean FitzPatrick called 'funnies' in Anglo and ILP's accounts Photo: Collins Courts
Brendan O'Connor

Brendan O'Connor

'That's fine. That's grand." That's what Mary Elizabeth Donoghue of the Financial Regulator's office told Anglo's head of Capital Markets John Bowe when he explained to her how Anglo was window-dressing its balance sheet by getting a deposit from ILP and designing it to look like it had been put on deposit by an asset manager.

It was optics, to make it look as though Anglo had more deposits than it did so that the markets, and the people, wouldn't lose confidence in it. Just optics. Show a strong number to the markets.

ILP first gave Anglo a dig-out in March 2008 and then Anglo reciprocated in June. Anglo wanted a bigger wad of what one lawyer referred to as candy floss in September and ILP agreed, providing Anglo would return the favour at its year end. The numbers involved got bigger all the time, because as one of the Anglo boys said to another: "You might as well be hung for a sheep as for a lamb."

That's fine. That's grand.

Claire Taylor, also at the Regulator's office, was apparently told straight out by a dealer at Anglo that the bank was manipulating its balance sheet for the year end. "It's not a real number," the trader told her. Claire was Anglo's regulator at the Regulator's office. She was the one keeping an eye on them for us.

I don't know what Claire did with that information, but it was hardly going to worry her bosses. After all, the Regulator and the Central Bank appear to have pretty much encouraged what Sean FitzPatrick called these "funnies" in the accounts of Anglo and ILP.

Denis Casey, the former ILP boss who was found guilty last week of conspiracy to defraud, and who is going down for these funnies, was believed by Judge Martin Nolan when he said that Central Bank Governor John Hurley and Finan- cial Regulator Pat Neary were very hands-on in relation to the so-called green-jersey agenda, which involved Irish banks helping each other out. The judge seemed to accept too that the authorities that should have been keeping an eye on Anglo and ILP knew exactly what the two institutions were up to.

Indeed, Judge Nolan believes the Regulator condoned these kinds of back-to-back transactions, because the Central Bank and the Regulator did not want the banks to go down, so they wanted the optics to be good too. The judge seemed to go so far as to say it was Neary and Hurley who put the notion of the green jersey into Denis Casey's head. Casey did what he thought they were telling him to do, and now he will go down for it while Neary and Hurley sail off into the sunset.

Indeed, the tacit approval or perhaps encouragement of the authorities could not even be really taken into account in the trial of Denis Casey and the four others who were tried with him. Legally, it was not entrapment to encourage Denis Casey to do what he did, because the motives of those encouraging him to do it were pure. They condoned Denis's illegal behaviour in order to save the banks, which seems to suggest that because the authorities' hearts were in the right place, their involvement in this was not relevant. It's bizarre. Presumably, Denis Casey had the same motive - to try to save the bank - but his motives are not relevant. What he did was illegal, so he takes the fall. Even though he did what he did because he understood that he had been requested by Neary and Hurley to don the green jersey and keep things afloat.

You'd have to think Casey might feel bitter about this. Imagine if you were encouraged by senior gardai and perhaps a judge and a government minister to break the law, by perhaps speeding in your car, in order to save the country; and imagine if you told them you were going to speed and they said "That's fine. That's grand", and then you were subsequently arr- ested for dangerous driving and sent to jail; and if you were told that it didn't matter that all these people had encouraged you to do it or that they had actually put the idea in your head, or that they had full knowledge all the time of what you were doing. If you were told all of that was not relevant to your case, you'd be pretty annoyed, wouldn't you?

That's fine. That's grand.

John Hurley is fine, too. He's more than fine. He's grand. Not only is he not facing any questions about his possible involvement in what it turns out were illegal acts, he has a fine pension of €163,000 a year. Admittedly, that has been reduced from €205,000 a year but, hopefully, he is managing. When Hurley was taking a hands-on approach to the green-jersey agenda, he was earning more than €400,000 a year.

Hurley was well worth his €400,000 as head of the Irish Central Bank. He was predicting a soft landing for the property market up to 2007. As prices began to turn at the start of that year, he predicted low, single-digit growth for the times ahead. There was, he admitted at the end of 2006, some over-valuation, but said this would not necessarily mean that house prices would fall. It would be corrected by low and stable house price growth as the economy continued to grow.

At the start of 2008, when property had begun to fall, Hurley said there were signs that underlying housing demand remained strong. Indeed, only months before he would apparently encourage Anglo and ILP to don the green jersey, John Hurley said: "Our stress-testing of the banking system and our extensive financial stability analysis . . . indicate that Irish banks are solidly profitable and well-capitalised and with no major exposures. Our own banks remain robust in the face of the international credit problems and they retain a strong shock-absorption capacity to deal with risks that have emerged."

That was January 2008. Two months later, the circular transactions between Anglo and ILP would begin, with the aim of keeping a bank from going under. By September we would be guaranteeing all the banks.

Yes, indeed, John Hurley was well worth his €400,000.

He would retire the following year with a lump sum of €615,000.

However, Hurley wasn't allowed to just walk away with all the cash. He had to come to the Banking Inquiry to explain himself. He did it quite simply. Roughly, he explained how the Central Bank really had no power or no duty to keep an eye on the banks. That duty had been passed on to the Financial Regulator, and it would have been wrong for him to interfere, though he did admit that in hindsight the response of the Central Bank would have been more robust if it had foreseen the scale of events that were to unfold.

However, €400,000 does not get you a man with foresight. It gets you a man who tells you that the banks are solidly profitable and well-capitalised and with no major exposures when some of these banks are on the verge of collapse.

Obviously, John Hurley has committed no crime, and no one is suggesting he has, but in terms of the justice and the accountability we demanded about who or what tipped the country over the edge, who is more responsible? Is it Denis Casey for donning the green jersey when the shit hit the fan? Or is it the people who were supposed to be running the system and who let it rot from the inside for years before it was all revealed to be a shell, a load of candy floss?

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