Wednesday 26 June 2019

Bankers look hungrily at the trough again

As politicians find that they can get away with anything, bankers are creating their latest fairytale, writes Gene Kerrigan

Gene Kerrigan

Gene Kerrigan

These days, the fairytales come in threes. Our Fianna Fail friends are currently pointing to Bertie Ahern's claim to have "cleared my name". And we'd be blessed if he allowed us make him President.

Our Fine Gael soulmates point to Denis Naughten's claim that he merely "gave my opinion", and therefore didn't breach ministerial confidence. We're blessed to have such a great minister.

And now, fairytale No 3: a very determined campaign to allow our beloved banking buddies resume their habits of reefing in huge bonuses. We're told that allowing them to create bonuses that will double their pay will be to our benefit. It will incentivise the bankers to work harder, so they can pay back the €20bn of our money that the politicians gave them.

So, they think we're stupid?

Not necessarily. But they're aware of the phenomenon of recreational outrage. Encouraged by social media, we get angry about a dozen things a day. And, before we can actually do anything about even one of them, suddenly it's tomorrow and there's another dozen things to get upset about.

All a politician under pressure needs to do is utter a form of words, no matter how blatantly untrue, and then claim the scandal has been "dealt with".

As in: "I've dealt with that, I cleared my name".

Or: "I just gave him my opinion".

Frankly, as far as some of us are concerned, both Bertie Ahern and Denis Naughten can take a flying poke at a rolling doughnut. It's the greedy bankers who pose the bigger threat.

But, just so the outrage isn't all recreational, let's briefly, just for the record, nail the Bert and Den-Den.

Bertie Ahern was caught in possession of large chunks of money. He explained on oath that friends gave him a "dig-out", at a tough time. Just threw a few quid into a hat, so to speak.

Then it turned out some of those dodgy deposits were in sterling and in dollars. And Bertie couldn't explain that. His former secretary, who lodged the money for him, was left in distress on the witness stand. Ahern shrugged. Nothing to do with him.

Classy bloke.

Denis Naughten got a call from a lobbyist: "Are you going to do x?"

It would be a breach of his ministerial confidence if Denis said yes or no - and to the benefit of the lobbyist.

Denis says he merely "gave my opinion". And it would be tyrannical to prevent a chap expressing an opinion.

Giving an "opinion" on whether or not you will do x is answering the question on whether you will do it. And that's a breach of confidence.

At the end of all this, Ahern's still seeking a run for the Presidency. And Naughten is still in office.

We've since had dozens of things to get outraged about, and we've "moved on".

The bankers are counting on us to surf the waves of outrage, across the sea of scandals - to briefly yelp in outrage, and then move on.

Irish bankers have been livid since 2009, when they endured a backlash against their multi-million salaries and bonuses. The head of AIB, Bernard Byrne, is currently suffering under a pay cap of €500,000 (plus €100,000 a year into his pension pot).

The Irish Times found an expert on banking "remuneration" who described Bernard's pay, and that of his banking mates, as "extremely low".

No kidding.

The push to get banker snouts back into the trough began in earnest this year. AIB came up with a "deferred annual share scheme", which would create bonuses of up to 100pc of salaries.

Gradually the bankers aim to get the kind of fabulous "remuneration" the AIB chaps were getting when they crashed the bank in 2009 - when the bigger snouts got between €2m and €3m a year.

We're told that the bankers are "unable to implement a competitive market-driven compensation and benefit structure to retain and incentivise key executives".

The problem, they say, is that we are thick. We're envious of the big bucks these geniuses earn. And the "politics of envy" means we won't allow them to hire the best bankers (ie like the ones who crashed the banks).

The Minister for Finance, Paschal Donohoe, is against the bonus scheme. For now. Paschal knows that allowing the bankers to stuff their faces again would be unpopular, so he's against it - this side of the coming election. After the election - who knows?

Bank shareholders are very much in favour of the bonus scheme. Why? The expert The Irish Times found says bonuses will "promote alignment between executives and shareholders' interests".

What does that mean?

Well, remember, they say we're laden down with envy. We're shallow people, seething that we're not paid millions, so we want to screw it up for the banking geniuses. And that, in turn, weakens the banks because they have to hire people who'll work for a mere €500,000.

But that's not what the bonus culture was ever about. Bonuses are an incentive to increase risk. The banks crashed because the more money the bankers loaned to the avaricious builders, the bigger their bonuses became.

As a result, Irish families suffered - and continue to suffer - immense pain.

We ended up with banks being run into the ground by overpaid clowns who believed their own propaganda and who didn't understand how banking works.

Why would shareholders want to "incentivise" bankers to play fast and loose with risk again, after what happened last time?

There are two kinds of investor. There are the long-term pension and dividend types - people who want a reasonable return on their life savings. And there are speculative investors who want bigger profit and they want it now.

Those investors who now want to "align" their interests with bank executives are the latter - they want bankers to jack up their earnings by taking risks that they wouldn't take now, on an "extremely low" €500,000 salary.

The "alignment" of interests would aim to make both the bankers and the shareholders even richer.

Tempt the executives with millions in bonuses and they'll go for it - that's what the "expert" (who makes a living serving banking interests) means.

Of course, the bankers know we're suspicious. They carefully promise that if we let them take massive bonuses it will be under strict conditions - with lots of "clawbacks" and "targets". But this is cosmetics.

By and by, if they get the nod from Paschal, legal documents will ensure banking executives get mandatory bonuses as long as they don't actually defecate on the boardroom table in the presence of two or more non-executive directors.

If they get what they want, we'll have bankers who'll get paid millions for lending more millions to every "entrepreneur" who isn't actually doing a line of coke on the banker's desk while signing for the loan.

The investors will make millions, as everyone piles into bank shares, and share prices rise.

And they'll all salt the proceeds away carefully, before the next collapse.

When the banks crashed, we were told they had to chase people who lost their jobs and couldn't pay their mortgages - "moral hazard" they said.

Where's the moral hazard for bankers? They're free to play tracker games and screw with people's lives, no one goes to jail.

Now, the fairytales come out again. We've cleared our names, they say, we dealt with that, let's move on.

Let's not.

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