THIS morning’s arrest of former Anglo Irish Bank chairman Sean FitzPatrick has sent shockwaves through Ireland’s tightknit banking elite.
As the cost of bailing out the banks continues to rise, other former bank bosses now fear that they too will feel a copper’s arm on their collar.
Ever since he was forced to quit as chairman of Anglo Irish in December 2008, the clamour for Sean FitzPatrick to be sanctioned has continued to rise.
FitzPatrick was forced out of the bank which he had run since 1986 when it emerged that he had concealed personal loans from Anglo of up to €129m for eight years.
It was an ignominious end to the career of the flamboyant perma-tanned banker who, more than anyone else, came to symbolise the excesses of the Celtic Tiger years.
The revelation of the concealed loans caper destroyed what was left of Anglo’s credibility and led to its nationalisation the following month, wiping out its shareholders and exposing the taxpayer to enormous losses.
Since it fell into state ownership in January 2009, the true cost of FitzPatrick’s appalling mismanagement of Anglo has become apparent.
The State has already pumped in €4bn, more than either AIB or Bank of Ireland has received, of fresh capital into Anglo.
Without this extra capital, Ireland’s cowboy bank would almost certainly have gone bust. And that isn’t even the half of it.
When NAMA starts operating in the next few weeks, Anglo will transfer €32bn of bad loans, almost half of its total loan book, to the new organisation.
This means that Anglo, a bank with just one sixth of the total loans of the Irish-owned banks, will be the source of almost half of the bad loans going to NAMA.
Quite clearly, FitzPatrick’s Anglo was rotten from top to bottom. Just for good measure, it has now emerged that, in addition to pumping €4bn of fresh capital into Anglo, the Government has – through the Central Bank – lent Anglo a further €10bn.
As this money is secured on Anglo’s lousy loan book that no-one seriously expects more than a fraction of to be ever repaid. This brings the total cost to the taxpayer of the Anglo debacle to €14bn and rising. That’s almost half of this year’s likely tax revenue. Irish taxpayers will be paying for FitzPatrick’s irresponsibility for decades to come.
It represents a stunning fall from grace for FitzPatrick, known universally to friends and foe alike as ‘Seanie’.
During his 22 years as either chief executive or chairman of Anglo, he transformed a tiny lender into Ireland’s third largest bank with a peak Stock Exchange value of more than €13bn in May 2007.
Back in those halcyon days, with the Celtic Tiger still apparently still purring, it seemed that Anglo could do no wrong. FitzPatrick was universally feted as an Irish business hero.
He was invited to serve on several blue-chip boards including those of Aer Lingus, Smurfit Kappa and, most controversially of all, the Dublin Docklands Development Authority.
FitzPatrick was a director of the DDDA when it agreed to pay €412m for the former Irish Glass Bottle factory site at Ringsend in October 2006.
The DDDA and its partners borrowed most of this money – about €280m – from Anglo.
The site was recently valued by auctioneers Lisney at just €50m. We now know that the success of Anglo and FitzPatrick was no more than smoke and mirrors.
Not alone is Anglo now bust beyond any hope of recovery, but FitzPatrick himself is utterly ruined.
His 4.5million Anglo shares are now worthless and Anglo is pursuing him for €70m of unpaid loans.
Less than two years after its share price peaked, Anglo had collapsed into State ownership as the impact of the Irish property bust on its ropey balance sheet became apparent.
FitzPatrick is the first of Ireland’s former banking titans to go from hero to zero. And he almost certainly won’t be the last.