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• FitzPatrick’s tale hard to swallow

  January 14, 2011 @ 12:41 pm | by John Collins

  It has to be said The Fitzpatrick Tapes is compelling reading. When I first heard about Tom Lyons and Brian Carey book in The Sunday Times I had reservations. What had the two journalists agreed to in order to get the former Anglo Irish Bank boss Sean FitzPatrick to speak at length on the record – something he has streadfastly reused to do since the collapse of his beloved institution?

  Tom Lyons covers off the genesis of the book very well in his introduction. FitzPatrick wanted to give his side of the story and Lyons put in the groundwork to win his trust and cooperation.

  The issue is that FitzPatrick’s claims around many key events are hard to swallow – even for his colleagues. The authors call him out on some of these claims – such as not knowing the identity of the “Maple 10″, the Anglo clients who bought 10 per cent of Sean Quinn’s stake in the bank. FitzPatrick himself acknowledges that others have different memories of key events – in one case Anglo exec Pat Whelan has phone records to prove he informed him the deal was close to completion. But even then FitzPatrick can’t say he was wrong – just that he believed Whelan.

  The true worth of the book, however, is how it has driven the news agenda this week and shown there are significant gaps in our knowledge about events running up to the bank guarantee. The revelations about FitzPatrick’s golf game with the Taoiseach have now been followed with the news that Cowen assembled a kitchen cabinet at Druid’s Glen but apparently one which did not discuss the elephant in the room – the ailing Anglo.

  While much more rounded accounts of the meltdown in Irish banking will emerge, and are currently being worked on, The Fitzpatrick Tapes is a compelling, if by its nature limited, contribution to the publics knowledge of events that have helped bring our economy to its knees.

  • A full review of The FitzPatrick Tapes by Kathy Sheridan will appear in tomorrow’s Irish Times.

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• Peston gets to the heart of our banking crisis

  September 27, 2010 @ 5:14 pm | by John Collins

  At the risk of stating the blindingly obvious international media attention is firmly focused on Ireland; our stuggling economy, our toxic banks and the social habits of our leader. (more…)

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• Luxury car market still in good health

  September 7, 2010 @ 4:04 pm | by John Collins

  So what do you think was the best selling new car in Ireland last month? The modest Toyota Yaris? The functional Volkswagen Golf? The ever-reliable Ford Fiesta?

  Not a bit of it. While all those models sold well, it was actually the 5-series BMW – with a price tag of between about €42,000 and well over €100,000 depending on model and configuration – that was the best selling model. Analysis of the car registration figures by Motorcheck.ie shows that 350 of these luxury  cars were registered in July. In comparison the second place model, the Toyota Yaris, managed just 198 registrations.

  While the vast majority of people are still feeling the economic downturn the figures clearly show there is a sizeable minority of people out there who are still doing very well.

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• Should borrowers be forced to opt for bankruptcy-lite IVAs?

  October 12, 2009 @ 1:30 pm | by Laura Slattery

  Prize-winning economist Joseph Stiglitz told The Irish Times last week that a percentage of the debt of mortgaged-to-the-hilt people in negative equity should be lopped off. This, he said, would assist economic activity, by alleviating the sense of entrapment that people feel. It’s an easy stimulus that would also create more realistic bank balance sheets. (Read Colm Keena’s interview with Stiglitz here.) It also sounds attractively like getting a voucher for money off after you’ve paid for the (overpriced) goods. Please quote the promotional code “NAMA”.

  One day later and the renewed Programme for Government proposed by Fianna Fail and the Green Party were touting the arrival of IVAs, or individual voluntary arrangements, a kind of court-free bankruptcy-lite process currently available to UK residents. Under an IVA, debt-riddled consumers can get a certain percentage of their debts written off if they come clean and – via the mediation of an insolvency adviser (a private company!) – successfully persuade three-quarters of their creditors to agree to a new schedule of reduced repayments. If they do, this is then binding on all the creditors.

  Hmmm. This is just not the same thing at all. Sure, it might mean that some people who would be evicted from their homes under the current system would live to pay another loan repayment. Superficially, it seems like a good deal for bedraggled borrowers if they can get 62 per cent of their debts written off (the average last year in the UK). But IVAs can be insidious voluntary arrangements, too. For a start, it stands to reason that lenders would not agree to an IVA if they didn’t think they would work in their favour.

  In the middle, a swathe of licensed insolvency advisers take their cut (in the UK, this is usually a couple of grand). That might generate a spot of employment for some out-of-work mortgage brokers: IVAs become next season’s debt consolidation deals. But are commercial insolvency practitioners really the kind of jobs that we want to create? Needless to say while others are enriching themselves on the back of the difficulties you’ve suffered as a result of the mismanaged economy, your credit rating will be flushed down the toilet (not that banks will be lending to anyone anyway).

  The scheduled repayments, which typically last three to five years, are rigid, formal agreements: if you can’t keep to it, you are plunged into the very bankruptcy you were hoping to avoid.  I know, that sounds a lot like a mortgage or any other loan. But borrowers were motivated by the desire for security (not greed) when they signed up to a mortgage. Sign your name to an IVA and you are effectively admitting culpability: your debt, your problem. That may be fine, but it does absolve the Government from having to force Ireland’s zombie banks to reduce borrowers’ debts in a manner that admits their culpability.

  The Government is “overpaying” for the Nama assets by some €7 billion over the current market value. Asked why, Minister for Finance Brian Lenihan said this: “We’re talking about distressed loans, we’re talking about a distressed market, and you are entitled to make some allowance for long-term value… After all, if you look at it from the point of view of the bank – which is not a popular way to look at it, I accept that – why wouldn’t they just hold onto the loans and work them out themselves, if there was absolutely no premium involved?”

  If you’re feeling a little shivery reading that, then it’s probably because you know you’re not going to get your “premium”, even though you’re a part of that distressed market too. Instead, you’ll be getting an economy marred by cuts to wages and welfare that will only increase the real value of your debts. Without a corresponding reduction in your loans, this painful slump will last a lot longer for everyone.

  Of course, existing court debt enforcement procedures are Dickensian and individual voluntary arrangements – key word “individual” – as they exist in the UK will help reform this particular problem and spare some misery. But they are not the right mechanism to prevent Ireland’s zombie banks from breeding zombie consumers.

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• France, Germany and Japan are out of recession. Who’s next?*

  August 18, 2009 @ 1:20 pm | by Laura Slattery

  Japan officially and somewhat surprisingly exited a deep “V-shaped” recession yesterday, an admirable feat given the freefall its economy went into last winter when the rest of the upgrade-addicted world suddenly made do with the cars and consumer electronics already in their possession.

  Only last February, then finance minister Shoichi Nakagawa gave what appeared to be a wine-assisted performance at a G7 news conference: not even the exciting news that Japan’s economy was contracting at the fastest rate since 1974 was enough to stave off his slumber. Now the Japanese economy has recorded annualised growth of 3.7 per cent in the April-June quarter and is up 0.9 per cent on the first quarter. There’s never a dull moment in the Japanese economy, whatever Mr Nakagawa or anyone who read the previous sentence might think.

  Japan’s rebound from the depths of despair, albeit more of a (perhaps temporary) statistical phenomenon than any reflection of how well off its citizens are feeling right now, means it joins France and Germany in the “recession-free” map of the world: last week, the two European powerhouses declared that their economies had shaken off their negative growth phases, both countries finding a way to clock up a 0.3 per cent quarter-on-quarter expansion. (Sweden and Portugal have also left their contraction days behind them for the moment, although they’re not in the G7, so we don’t care so much about them.) Which recession-battered country is next?

   * Clue: it’s not us.

  It’s not Australia, because it just about managed to dodge recession.

  It’s not China, because it never got anywhere near a recession. It’s economic growth is set to slow down to 8 per cent this year.

  It’s not Singapore, because it’s already out, laughing in the face of its downturn with a 20.7 per cent rocket in its second quarter GDP.

  It’s not Spain, because its economy shrank by more than expected in the second quarter and is declining 4.1 per cent year-on-year. Ouch!

  It’s not Ireland, because if Japan’s recovery seems improbable, a bounce by the Irish economy right now would require the improbability drive from The Hitchhiker’s Guide to the Galaxy… plus a trampoline and a whole lot of collective wishful thinking. Our very own tidal wave of economic destruction can be quantified as an 8.5 per cent year-on-year decline in the first quarter. The Q2 numbers, out next month, are likely to be more flattering, but suffice to say that camping out in that Spanish villa your aunt’s boyfriend bought in 2004 seems like an attractive option.

  It could be… between the “U” countries: the US and the UK. The US has already lost its claim on the “first in, first out” theory of recession, while last week’s surprise slip in retail sales volumes showed that consumers across the Atlantic remain nervy. On the other hand, the UK remains lumbered with a broken banking system (sound familiar?) and is busy engaging in opaque experiments in quantitative easing in order to fix the mess.

  In truth, both economies are probably already going round the U-bend back into the light – yesterday a Goldman Sachs strategist told Bloomberg the US recession was ending “right now” – and who gets to claim the honour of recession-free status first may come down to something as prosaic as the financial reporting calendar.

  Both countries reported their initial (“advance”) estimates of second-quarter GDP in July, with the US Commerce Department announcing a better-than-expected 1 per cent decline and the UK Treasury declaring a worse-than-expected 0.8 per cent decline. The next estimate of the UK’s second-quarter performance, based on more complete data, is released next Friday and could revise this figure to a positive one. The US won the coin toss and gets in one day earlier on August 27th, but lately all of its revisions have been to the downside.

  My money’s on the UK… no, the US… no, the UK… or maybe neither this time around… or maybe Brazil.

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• Back to the future

  July 28, 2009 @ 4:22 pm | by John Collins

  The current recession is really engendering a feeling of 1980s deja vu; long dole queues, boarded-up shops, hundreds of people applying for 10s of jobs. Of course the summers were much better back then but at least the general levels of weath in the country are much higher now.

  The 1980s sprung to mind again when this press release passed over my desk. Basically 40 unemployed people will get their fees paid to do a Bachelor of Business Studies through the distance learning programme and they will also keep their dole, sorry Jobseekers Allowance. Students signing on – it really is the 80s again.

  Glibness aside, it does look like an ideal opportunity for the recently employed to re-engage with formal education and as business qualifications in this country go, you don’t get much better than UCD’s Quinn School of Business.

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• The big painful snip: did McCarthy and co get it right?

  July 16, 2009 @ 2:32 pm | by Laura Slattery

  After months spent surgically examining how the State is run, the report by “An Bord Snip Nua” chaired by economist Colm McCarthy has now been published on the Department of Finance website, although on my computer the eggtimer is still whirling around to no avail. You can read the Irish Times initial summary of the main recommendations here. They include an axing of 17,358 public sector jobs and a 5 per cent general cut in social welfare rates, with a 20 per cent slash in child benefit.

  Quango-wise, the Irish Film Board and Bord Bia are among the many agencies that the report says should be subsumed into an Enterprise Ireland-type super-body, while candidates for outright ”discontinuation” include the Active Citizenship Programme and the… er…Newfoundland-Labrador Partnership. Apparently, there were two Public Service Modernisation Units – one is now recommended for the chop.

  So have they got the balance right or is this the most offensive document since the Enron Guide to Honest and Sensible Accounting? Is Martin Cullen, minister of a department that Bord Snip says should be discontinued, the highest-profile loser? Which recommendations will see the light of day, which ones will be quietly shelved and which ones will prompt an embarrassing backtrack when the understandable public anger refuses to subside? What was missing from the report?

  And finally… are Brian Lenihan’s hopes for a “considered and honest” debate the biggest pipe dream since talk of a soft landing in the property market?

   Ah, I’ve finally made it onto the Department of Finance home page and it is completely blank except for the links to the Bord Snip report. Those cutbacks really are swingeing.

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• Vincent O’Brien

  June 2, 2009 @ 1:40 pm | by Barry O'Halloran

  At 3.45 next Saturday, 13 horses will line up at Epsom to contest this year’s Derby, the race that defines the thoroughbred.

   All bar two of them can trace their ancestry directly to horses trained by the late Vincent O’Brien, who died on Monday at his home in Straffan, Co Kildare.

  That, and the fact that it it almost certain to go to an Irish-trained horse, are probably the most fitting tributes to a man who is recognised as having been the greatest racehorse trainer in the sport’s 300-year-plus history.

  But it’s also a reminder of something else - O’Brien’s enormous contribution to this country and most importantly its economy. On the back of his training skills, he became the architect of Coolmore Stud, the Tipperary-based breeding operation with divisions in the US and Australia, that is recognised as the world leader in its field.

  To put this in context, Coolmore is to racehorse breeding and bloodstock what Intel is to technology. And the foundation’s of its success are laid on O’Brien’s ability to spot raw talent in the sales ring, mould it into a top class racehorse and ultimately a stallion, or in  economic terms, an asset worth tens of millions of euro.

  He also played a key role in globalising the both the sport and the breeding industry, which meant he was bringing US investors to Ireland long before the IDA.

  The result was that he put Ireland at the centre of a multi-million, multi-national business, and not just Ireland, but rural Ireland, where there were few economic opportunities. This, combined with the stud-fee tax break, drew other bloodstock investors here. As a result, a broadly-based industry, whose influence can be seen throughout the world, sprang up here.

  The seeds of the business were here all along, and good horses were always bred in this country. But there was nothing like the strength and depth that we have now, and much of that is down to O’Brien. Unfortunately there is little up-to-date information on just how much this business is worth, but one study carried out by consultants, Indecon, five years ago, found that racing and breeding employed 16,000 people and contributed 335 million euro to the Exchequer every year in taxes. These figures may have changed, but there is no reason to believe that they have dropped dramatically.

  Despite this, plenty of people, mainly politicians in search of easy headlines, have in recent years lined up to knock this business. That’s not to say that it’s above criticism. But the problems were first, that the critics largely made statements that were plain wrong, and second, their main talent seemed (and seems) to be an uncanny ability to shout louder than everyone else.

  Partly because of this, his legacy now faces the possibility that it will be eroded, and that much of its value will simply fade away over the next decade or so. This may be disappointing for people who want to cheer an Irish winner at Epsom, but it would be alot more serious for the country as a whole.

  This is an indigenous industry which makes a substantial direct contribution to the economy, employment and the Exchequer. Despite the economic achievements of the nineties and the early part of this decade, we still don’t have enough homegrown industries that deliver value. Without them, our chances of cashing in on the global economic recovery, when it comes, are limited.

  Keeping them alive should not take much effort and it’s not in our interest to allow any of them to fade away. The best memorial that Vincent O’Brien could have is that we ensure the one that he helped to develope continues to thrive.

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• Norwegian firm gets customers working for them

  May 14, 2009 @ 12:32 pm | by John Collins

  

  As strategies to beat the recession, getting your customers to do the work for you, sounds like an ideal, if unattainable one. Not so according to this story on technology news site Ars Technica, which caught our eye.

  Lyse, a small electricity provider, has become Norway’s leading provider of high-speed fibre optic-based services by providing faster service at the same price as its competitors but also by getting customers dig their own trenches to lay the cables. The company now has 130,000 subscribers for its broadband, TV and telephony services with many of them availing of a discount on installation by digging a trench to the side of the road where they can connect to Lyse’s network.

  Somehow I can’t see debt-laden Eircom adopting this approach but some of the other telco providers could do worse than have a look.

  Photo credit: CH/Innovation Norway

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• Krugman – a laureate but not a Nobel one (technically)

  April 27, 2009 @ 2:51 pm | by John Collins

  There has been a bit of discussion on this blog and elsewhere about whether Paul Krugman is a Nobel Prize winner or not, with people pointing out that there are only Nobel prizes for literature, chemistry, physiology, peace, physics and medicine, but not the dismal science.

  While Krugman, the New York Times columnist and Princeton University professor who has become something of a household name here following his comments on the Irish economy, is indeed listed on the Nobel Prize web site as a laureate, he did not technically win a Nobel. Prof Krugman and other economists are actually recognised with The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. That award was set up by the Swedish Central Bank (“Sveriges Riksbank”) in 1968. In contrast the other prizes have been awarded every year since 1901.

  Pedants can now rest easy but use of the Nobel Prize for Economics short-hand will no doubt persist. It should be noted that even on his New York Times bio, it is stated that Krugman was awarded “the Nobel Prize in Economics”.

  Anyway all of this is really just a distraction. Like it or not Krugman is one of the world’s most high profile and highly respected economists and his prognosis for Ireland is extremely worrying. Questioning his credentials does nothing to help us re-build the economy.

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