Anglo bankers believed they could force an outcome at expense of State
Leaked recordings reveal bankers thought they could fool regulators
“This is Anglo so there is only one thing to do – party!” Anglo Irish Bank chief executive David Drumm (left) and chairman Seán Fitzpatrick. Photograph: Alan Betson
The aggressive stance taken by Anglo Irish Bank chief executive David Drumm with regulators, which emerges in the latest tape recordings of conversations within Anglo at the time of the 2008 bank guarantee, shows a banker under increasing pressure to save his institution and resorting to desperate tactics as the bank edged towards collapse.
Drumm’s conversations with the bank’s head of capital markets John Bowe, recorded on Bowe’s telephone line in Anglo’s treasury department, took place against the background of a run on the bank’s deposits and almost daily meetings with the regulator to respond to the deepening crisis of September 2008.
US bank Lehman Brothers had just gone bankrupt sending the financial markets into a tailspin as corporate depositors – big companies spreading large cash deposits around various banks – decided that Anglo was too risky a bet and sought the return of their money as the deposit terms matured.
The conversation between Drumm and Bowe on September 19th, 2008, is focused on how, at Anglo’s next meeting with the Central Bank and financial regulator, the bank can increase the pressure on regulators to agree to lend €7 billion to cover the amount of deposits lost, though – as Bowe himself acknowledged in a telephone call the previous day – the amount was likely to be higher.
One aspect of the detail within the conversations that has been lost in the coverage of these new recordings is that during the telephone conversations the Anglo bankers were discussing a €7 billion liquidity bailout to help the bank fund itself, they did not consider at the time – either due to incompetence or self-delusion or both – that a capital bailout to cover losses on loans was necessary.
As far as the bankers were concerned they were just dealing with a run on their deposits, not a black hole in their loan book, and were trying to get the regulators to act.
The €29 billion bailout of public money that the Government is pumping into the bank was eventually provided for bad customer loans.
The September 19th call shows the “Drummer” acknowledging that it was just a matter of days before the bank would run out of money.
Meetings between all of the Irish banks and the regulators became more intense following the collapse of Lehman Brothers on the weekend of September 14th-15th.
That week’s discussions between Anglo and the regulator marked a turning point as the crisis deepened for Anglo in particular.
For the first time, Anglo had requested a specific sum of cash in liquidity support from the Central Bank – backed by loans on the bank’s books and a promissory note as collateral. This, the bank believed privately at the time as the tapes show, would turn the tables on the regulator forcing the Central Bank and financial regulator to consider making a big call.
‘We need the moolah’
“Get into the f***ing simple speak: ‘We need the moolah, you have it, so you’re going to give it to us and when would that be?’ We’ll start there,” Drumm tells Bowe about the strategy that they would pursue in their next meeting with the Central Bank and the financial regulator.