Brass neck and sneers as Anglo tried to hoodwink State
Recording of Anglo executives indicates need for full inquiry into banking crisis
The picture emerging from the recording of a private telephone conversation between two Anglo Irish Bank executives shows how a failing bank sought to hoodwink the State into getting a bigger bailout than it let on it needed.
Until yesterday it had been known that Anglo had sought €7 billion in liquidity from the Central Bank during private meetings in the days after the collapse of US bank Lehman Brothers in mid-September 2008. But there has been nothing as blatant on record emerging from within the bank to show that Anglo itself knew at the time this wouldn’t be enough to stem the run on its deposits.
The request came at a time when the bank was haemorrhaging corporate money, up to €1 billion a bad day in deposits. Anglo urgently needed cash from somewhere to tide it over.
The deviousness in Anglo’s strategy in talks with the Central Bank and Financial Regulator is articulated by John Bowe, the bank’s head of capital markets who accompanied Anglo’s then chief executive David Drumm in crunch meetings with the Central Bank as the banking crisis deepened. He worked in Anglo’s treasury department, where telephone calls are recorded, as required by market rules.
Asked on the call by Peter Fitzgerald, then head of Anglo’s retail funding, where the €7 billion figure came from, Bowe said: “Just, as Drummer [David Drumm] would say, picked it out of my arse.”
“The reality is that, actually, we need more than that. But you know the strategy here is you pull them in, you get them to write a big cheque and they have to keep, they have to support their money,” Bowe told Fitzgerald.
He explained the plan further: “If they saw the enormity of it up front they might decide, they might decide they have a choice. You know what I mean? They might say the cost to the taxpayer is too high. But . . . if it doesn’t look too big at the outset . . . if it looks big, big enough to be important but not too big that it kind of spoils everything.”
‘In for a penny’
The strategy to get the State to an “in for a penny, in for a pound” position on Anglo was part the bank’s attempts throughout the month of September 2008 to force the State authorities – be it the Central Bank or the Government – to back the bank publicly. The bank believed this would to give Anglo a much-needed confidence boost in the financial market, on which its survival depended.
Anglo obsessed over this at that time. Rivals AIB and Bank of Ireland, as the country’s biggest banks, were regarded by the market as “systemically important” and considered too big to fail. The other smaller banks did not have that same implicit Government support.