Anglo’s failure and the banking meltdown left an indelible mark on the body poitic
The collapse of Anglo Irish Bank, 2008-9
The Anglo Irish Bank signage is removed from the former bank premises at St Stephen’s Green Dublin. Photograph: Matt Kavanagh /The Irish Times
Many thought Anglo Irish Bank had broken the mould in Irish banking until the financial crisis of 2008. The crisis shattered a model that, for a time, had made its bankers, borrowers and shareholders very rich.
The Dublin bank that started out helping people buy televisions and washing machines had by the middle of the last decade become the favoured lender of builders and developers, and the third largest bank in Ireland, cheer-led by the financial community, shareholders and many in the Irish media.
As property values soared in the cheap and easy-lending club called the euro area, Anglo and its clients, some of the club’s wealthiest members, epitomised the get-rich-quick culture of the Celtic Tiger era. They were the swashbuckling businessmen (they were almost entirely men) exuding an air of invincibility that came with running and being customers of the best bank in the world as it was named at the shrine of global capitalism, the Davos economic summit, as late as January 2007.
Rivals wondered how Sean FitzPatrick’s outfit managed to grow more profitable year after year. Around 2004 they stopped wondering and tried to catch up, taking on the same risks as Anglo.
While FitzPatrick had steered the ship in a particular direction, his successor as Anglo chief executive David Drumm put the engines on full throttle, speeding the bank towards the rocks of the 2008 crash.
The story in the media
The story of Anglo’s collapse started slowly and ended quickly, as the crisis deepened dramatically after September 2008. Anglo’s daily share performance served as a guide to its demise.
In the six months to March 2008, Anglo’s share price, for the most part, declined slowly along with other European banks as the growing US mortgage crisis spread into global financial markets.
On St Patrick’s Day 2008, investors targeted Anglo, wiping almost €1 billion off its value in a day as the markets wondered which European banks might be as exposed as struggling Wall Street banks.
The bank limped on for several months, going on the offensive, but by September the failure of US investment bank Lehman Brothers led money-market lenders to believe their money wasn’t safe in any vulnerable bank, especially a one-trick property lender like Anglo in a declining market like Ireland’s.
Anglo tried to woo other banks into shotgun marriages that might protect them. To stem the outflow of deposits, the government first raised the guarantee on everyday savings from €20,000 to €100,000. When that didn’t stop the run on Anglo, it introduced a blanket guarantee on September 30th, 2008 covering a staggering €440 billion in deposits and other liabilities at the six Irish banks.