My Celtic Tiger ‘shoeshine boy’ moment
The Crash – 10 years on: Norah Casey, Eamon Dunphy, Jim Power, Eleanorr Tiernan, Eamon Ryan and Frank Connolly on the moment they knew the boom was going bust
Joe Kennedy, the wealthy father to a US president, famously sold his shares before the 1929 Wall Street Crash after a shoeshine boy gave him stock tips. He took it as a sign that the market had become too hot and that he had to get out. It was a cautionary tale that symbolised the end of the Roaring Twenties.
Ten years ago this month, Ireland began its quarterly slip into recession after the booming 1990s and Noughties, but some had spotted the warning signs long before January 2008.
Today six people share those lightbulb moments when they realised the country was heading for a crash.
Others were more reluctant to disclose their Damascene revelations. One well- known estate agent said it was still too soon, even a decade on. He explained that he did not want to say as he had not shared his view with others and feared the inevitable “Well, why didn’t you tell me then?” responses.
Another businessman says he knew the Irish property market was overheating when he saw land values in Dublin 4 in 2005 outstripping the cost of acres in London’s most affluent suburbs.
A further warning sign was the financing of major development projects in Dublin with loans from investors at a rate as high as 17 per cent. It proved to him there was little or no cash in the system and that the Irish property market was, in fact, a house of cards flimsily constructed with debt.
My Irish shoeshine boy was the Dublin taxi driver who posted a sign on the dashboard of his cab, trying to woo cash investors into a syndicate buying properties in eastern Europe. Other signs were when the banks started selling their own properties and leasing back their branches from property investors, or when the country’s biggest estate agents began cashing in and selling their own firms.
For others it was something more personal. Here are a few modern Irish shoeshine-boy moments.
Eamon Ryan, politician
In late 2006, Eamon Ryan was doing rounds of meetings as a Green Party TD in anticipation that his party might find possibly itself in a coalition government after the next general election.
Ryan recalls Sheehy proudly showing off the bank’s new head office building. Ryan’s father had worked for many years at AIB, and the politician considered Sheehy an old-style, conservative banker until he shared his party’s concerns that there had been far too much lending on property.
“I remember Sheehy saying that his problem was that the bank did not have enough risk opportunities. He was effectively saying, ‘I have got more money than I know what to do with it’,” says Ryan.
“I remember my dad saying that the bank had become a borrower rather than a lender. In other words Sheehy was awash with short-term cash from inter-bank markets and AIB could fill their boots with whatever they wanted and they didn’t know who to lend it to. That was my eureka moment.”
The government ended up bailing out AIB with €20.8 billion of public money.
Jim Power, economist
Sitting in a bar in San Francisco over St Patrick’s Day 2008, Jim Power, then an economist with life assurance group Friends First, watched the TV news about the collapse of investment bank Bear Stearns.
Until that weekend he had considered the US subprime lending market – which doled mortgages out to people who could not afford them – a risk factor, but the failure of a major US bank changed everything.
“It was a little bit late, clearly, but that was my moment when I realised just how much sh*t was going down overseas that would have a desperate impact on Ireland.”
Power says he did “a 100 per cent flip” in his economic forecasts after that. Four months later he predicted that Irish property prices would fall by a further 50 per cent.
“The biggest mistake I made was I believed what the Central Bank and the ratings agencies were telling us about the health of our banking system,” he says.
In hindsight, Power says he made a “huge mistake” appearing on RTÉ’s Prime Time to debate with UCD economics professor Morgan Kelly, one of the first economists to warn about the Irish bubble, in April 2007. Power argued that the boom was sustainable and that Ireland’s economic fundamentals were unique.
“It was me really refusing to turn down a media opportunity, to be honest,” he says. “That will haunt me to my grave.”
Eamon Dunphy, broadcaster and writer
Two incidents resonated with Eamon Dunphy about how unstable the Irish economic boom was. In 2002, a relative was encouraged by a mortgage lender to ask his employer for a wage slip that inflated his pay by 20 per cent in order to secure a home loan.
Around the same time he had a conversation with a bank manager friend of his. The manager used to like to talk about football with Dunphy. He invited him into his office for a cup of tea and a chat.
“I said, ‘How is it going?’ He said, ‘There is a madness going on around this town. I won’t be around to see it when this crash happens. I will be well retired.’ Then he nodded [to the management] upstairs and said, ‘What those guys are doing is going to destroy this country’.”
Dunphy continues: “Putting those two things together, I thought, ‘F*** me’.”
Then, he says, there was the “lightbulb moment” of an opinion article Morgan Kelly wrote for The Irish Times in 2006 warning about the risk of sharp house price falls.
The sports pundit recalls, in particular, the horror of his friend, “the ordinary decent old-school bank manager,” at what was going on in the property market.
“The bank manager said, ‘This all goes through me and people are looking at me as if I have two heads’. He had always been prudent and he was very aware of his prudential responsibilities. He said, ‘I am giving money, hundreds of thousands of euro, to people who can’t afford it’.”
Norah Casey, publisher
Glossy consumer magazines for retailers accounted for more than half of Norah Casey’s contract publishing company, but when the crash in Ireland came in 2008, so too did a big hit to her business.
“It became pretty obvious to me within weeks of that downturn that no one was going to be spending money in that space, particularly because the shops were emptier,” she says. “The first to go is the spending in marketing departments. When customers are down and marketing budgets are tight, you get rid of your glossy magazine. I knew it was coming.”
It unfortunately meant that Casey had to make 15 people redundant. “We did it very early, which is why we survived,” she says. “We would never have survived if we hadn’t done that.”
Frank Connolly, journalist and trade union spokesman
The depth and scale of the potential economic crash was brought home to Frank Connolly on a warm summer evening in 2006. He had been researching the links between Anglo Irish Bank and the Dublin Docklands Development Authority for some time for a report he was writing.
Seán FitzPatrick, the chairman of Anglo, was a board member of the DDDA, while the chairman of the DDDA, Lar Bradshaw, was a board member of the bank. These were ties that drew attention to the close relations between a commercial lender and a State agency. FitzPatrick and Bradshaw owned Anglo shares.
The bank was providing hundreds of millions of euro in loans to developments being built by a borrower of the bank, Treasury Holdings, on land in the Dublin docklands provided by the DDDA. Connolly put calls in to FitzPatrick to find out whether he declared his potential conflicts of interest at DDDA meetings.
“When FitzPatrick returned my calls on the issue in the summer of 2006, he told me that he was on a sailing holiday in the Mediterranean. He sounded like he was relaxed and enjoying himself,” he said.
When he put a series of questions to the banker, FitzPatrick responded angrily, repeating more than once: “Connolly, you are a sad bastard, a sad bastard.”
“Although I instinctively knew that the harder the economic boom, the harder the crash would be, I suspected then that the masters of our destruction held little fear of the consequences and that they were the ones likely to suffer least,” said Connolly.
“It was only a matter of time.”
Eleanor Tiernan, comedian
After a late night at the Cat Laughs comedy festival club, she had dragged herself out of bed before the 10am cut-off to avail of the complimentary hotel breakfast.
At the hotel’s futuristic pancake-making machine, Tiernan found fellow comedian and pal Fred Cooke there, having breakfast. For years before then, she says it was “routine” for comedians to “reject the perfectly satisfying and complimentary hotel breakfast in favour of one that didn’t require getting up quite so early.”
“At about midday we would begin to surface and dawdle downtown for some avocados on toast at a local and – crucially – more flexible eatery,” she says.
“Now, however, both my friend and I had found that we indeed did have the strength to roll downstairs at a respectable hour. I wondered what was different about now and then it hit me: lazy lunchtime hipster brunches up town are not included in the hotel price while the hotel spread – though not on “comedian time” – is. Fred and I were noticing the financial pinch and the first thing that had to go was our morning lie-in.”