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  • irishtimes.com - Posted: September 30, 2008 @ 7:40 pm

    Crisis, what crisis?

    Harry McGee

    One of my favourite documentaries of all time is Errol Morris’s masterful portrait of Robert McNamara, JFK and Lyndon Johnson’s defence secretary during the Vietnam War. The film is essentially McNamara speaking – with extraordinary clarity intelligence and insight – about the 11 lessons he has learned in life.

    The title of the film is The Fog of War. And here is McNamara’s explanation for it:

    “There’s a wonderful phrase: ‘the fog of war.’ What ‘the fog of war’ means is: war is so complex it’s beyond the ability of the human mind to comprehend all the variables. Our judgment, our understanding, are not adequate. And we kill people unnecessarily.”

    YouTube Preview Image

    In an extraordinary development, we woke up today to find that in the early hours of the morning,  the Taoiseach Brian Cowen, the Finance Minster Brian Lenihan had hammered out a scheme with the six indigenous Irish banks that would guarantee their deposits and debt to the tune of €400 billion.

    It was a bold move and certainly took everybody by surprise. In retrospect, it should not have. Bank shares – especially for Anglo Irish and Irish Life and Permanent – had plummeted yesterday.

    On Drivetime this evening Defence Minister Willie O’Dea described the situation as “an imminent clear and present danger” to the Irish financial system.

    Unless action had been taken, at least one Irish financial solution would have crashed.

    The fix that the Government came up with is unusual to the point of being unique. Yesterday, when a series of banks across Europe ran out of liquidity because of the credit cruch,  governments in Britain, Holland, Germany, Belgium, Luxembourg and Iceland nationalised them.

    Instead, what Cowen and Lenihan decided on was a radically different course of action. They used the ‘good standing’ of the Irish state to guarantee all deposits and almost all debt. If the worst were to happen, the cost to the taxpayer would be calamitous. Yet,  Cowen went to great lengths in the Dáil to point out that the scheme backs up the bank’s asset and does not involve any expenditure.

    But after a long day of uncertainty, of shifting timetables, and of fluidity, the legislation had not been published by 7pm

    It is now almost 7.30pm  and the Dáil is due to resume. It’s not known what degree of clarity the financial resolutions bill will bring to the scheme. The opposition expressed concern about the lack of detail and potential gaps – in effect, saying that the banks may have been given a free pass by Cowen and Lenihan.

    Kenny’s best quote: “We do not want the gains to be privatised and the losses to be socialised”.

    Gilmore’s best passage: 

    “I can see what’s in it for the banks and what’s in it for the banks’ shareholders.

    “I can see what’s in it for the six chief executives who earned €13 million between them last year.

    “I can’t see what’s in it for the taxpayer. We are proposing to hand over the deeds of the country to bail out the bank and what are we getting in return.”

    Cowen has insisted that the problem was one of liquidity and the scheme will allow banks to get access to funds. He said that the State guarantee was not for free and that a commerical price would be levied on the bank.

    Update: 7.3opm. The Bill has just been published. The debate has been adjourned unitl 9pm. Fine Gael and Labour are both complaining bitterly about the ‘chaos  and slapstick with the Government having produced nothing over 12 hours after announcing the scheme.

    Labour whip Emmet Stagg is complaining that “after four missed deadlines we are going to get a cobbled-together piece of legislation”.

    Back to the Fog of War. One of the things that concerned me this week was the admission by the Fed’s Ben Bernanke that there was an arbitrary element to the picking of $700 billion as the size of the package to buy toxic debt from American banks.

    Will the Government’s scheme work. Sure, shares rose today. But the reality is that this crisis is so deep and so complex and so unpredicatable that nobody really knows.

    • Dan Sullivan says:

      I doubt that it is the sole reason for the government acting but it is legitimate in my view to ask the question if the shareholding on one individual in particular believed to be close the the former Taoiseach Bertie Ahern and perhaps FF more generally was in any way even remotely a factor in influencing the government’s decision in this matter.

      http://findarticles.com/p/articles/mi_qn4161/is_20020512/ai_n12840678

      It may well have had nothing at all to do with it, but I believe it is worth questions being asked such as did the potential exposure of someone who may be close to the main government party and perhaps has donated money to that party have any part to play, or how would the appearance that it might have potentially influenced the decision play out in the global market reaction to the decision?

      I can understand if this comment is moderated out, but the concern remains. Were Anglo-Irish owned by other parties might it have been left to fail?

    • paul m says:

      sounds like georges marvellous medicine, chuck it all in and hope for the best. here’s hoping its the potion that makes the frail system grow to gargantuan proportions rather than shrink to oblivion.

      oh, and can someone please explain to me why in gods name throughout the course of this financial scare and soaring unemployment that the voice to the forefront doing the rounds of tv and radio seems to be defence minister willie ‘i’ve got a little something for ya’ o’dea? Where the hell is the Tainiste Coughlans constant reassurances backing up Lenihan and Cowens muted responses so far?

      Its not very reassuring when numbers 1 to 3 in the government pecking order are barely seen let alone heard and all carry portfolios totally relevant to our current situation – leadership, finance, and trade and employment.

    • Dan Sullivan says:

      Paul , Willie’s full title is the Minister for Defence of the government. Truth is that while I find Willie to be one of the worst offenders when it comes to the clientelist nature of Irish politics I will have to concede that he makes a considerably better fist of the issues involved in this Bill than the likes of Coughlan, Hanafin, Dempsey, Harney, Ahern or ó Cuiv, as he is an accountant and barrister and as such knows about how a bill becomes a law, and knows a bit more about sums and things like the fact that the ECB isn’t going to rush to save our banks if there was a German or French bank that needed access to money instead.

    • paul m says:

      thanks for clearing that up Dan, perhaps then Minister O’Dea is sitting in the wrong part of the government bench then. Would he be better suited to a role beyond Defence? Or perhaps the government should move to have the economy covered by the Department of Defence seeing as it’s under such sustained attack at the moment.

    • Dan Sullivan says:

      Willie loves Defence because he can follow the model of ministerial oversight has laid down by Michael Smith. He rings the Army a few times a week to make sure the country is safe and spends the rest of the time tending to his flock in the constituency. Seriously, Willie still walks along the Dock road in Limerick in the mornings so he can be seen by commuters heading to work. His driver then picks him up, puts him in his top pocket and whisks him away to wherever he actually needs to be that day.


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