Dubious bank bulls and pigs in pokes

 

Miriam Lordfound a very different view of bankers among Dáil deputies yesterday than in optimistic July

WHAT HAVE our top bankers got in common with the National Ploughing Championships?

Bullocks.

(And pigs in pokes.)

It only dawned on us yesterday, as the debate continued on the Government's emergency legislation to save the banks. Opposition deputies agreed that the Credit Institutions (Financial Support) Bill had to be passed as a matter of the utmost urgency, but not with undue haste.

Forgive us, they argued in the Dáil, for being suspicious. But the Government was insisting it had no alternative but to introduce unprecedented financial measures to stave off the collapse of the banking system. The Government stressed they did this, not to preserve the fortunes of the people who ran their banks into trouble, but for the greater good of the plain people of Ireland.

But from where did the information come that forced them into such swift action?

It came from the money men of the banks, who piled into Government Buildings late on Monday night and convinced our nation's leaders that the end was nigh unless blanket financial support was forthcoming.

To be fair to Brian Cowen and Brian Lenihan, they couldn't ignore what they were told. Liquidity had dried up, said the money men. Without ample irrigation, business would shrivel up and die.

Faced with such a grave outcome, the two Brians had little choice but to turn on the taps, for we would all suffer in the resultant drought.

For the last two days in Leinster House, they have received nothing but sympathy and support for the grave predicament they found themselves in on Monday.

However, as the debate got under way, Opposition deputies outlined their deep worries about why the decision to act came about, and how the precise details of the rescue package were put together.

Labour's Pat Rabbitte summed up the feeling in one word: "trust". Which is when bullocks, and the ploughing championships, came to mind.

Let us return to the afternoon of July 2nd, and the meeting of the Oireachtas Joint Committee on Finance and the Public Service. The committee had hauled in some top-ranking suits from the AIB, Anglo-Irish Bank, the Bank of Ireland and Permanent/TSB, to account for the behaviour of these institutions now that the economy was entering a rocky path.

To a man, they sang the same refrain: there may be a slight squeeze on, but business is doing great. Ireland had nothing to worry about.

"We are still very much open for business," was the universal message. Those committee members who complained they felt the banks were adopting a somewhat arrogant approach to their inquiries were afforded the equivalent of a pat on the head and told not to worry.

If the bankers had a complaint, it was that a "negative sentiment" was being put about by people which "was not borne out by the fundamentals". Ah yes, the famous fundamentals. That committee room, along the side where the bankers sat, was groaning with bankers boasting about their fundamentals.

Welcome to testosterone city. These were impressive beasts of big business.

Just like Maximus. We met Maximus at "the ploughing" - a tonne weight of sleek muscle and the finest Charolais pedigree. It would take a brave man or woman to check out his fundamentals.

Except for one thing. Maximus was a bullock. No fundamentals. Not that he was trying to hide the fact.

On Monday night in Government Buildings, two months after convincing an Oireachtas committee that they were banking bulls, the same institutions galloped to the Government and broke the news.

"We're only bullocks after all, and we need your help." And poor Brian C and Brian L were forced to take them at their word.

In the Dáil yesterday, with time to consider the financial package put in place to safeguard the bullocks, deputies were less inclined to take them at their word. Perhaps the truth really is that the banks are merely suffering from liquidity problems. The State underwrites their international borrowings so they can continue to trade and survive.

But what if there is more to the situation than a problem with liquidity? Fine Gael's Michael Noonan pointed out that some of the bullocks might be on the brink of insolvency, which is a far more dangerous situation.

But as it stood, nobody in the Dáil knew whether this might be the case. Before staking the deeds of the nation on the word of the bankers, it might be a good idea to establish the real state of their business.

Pat Rabbitte threw in another word. Capitalisation. "There is a credible school of economic thought which believes that the banks concerned have a capitalisation problem," he said. The measures being introduced by the Government would do nothing to solve it.

Tánaiste Mary Coughlan, standing in for Brian Cowen, explained that the Bill represented "broad enabling legislation". This did nothing to alleviate the worries. Broad enabling legislation for whom, and to do what? On the word of the banking bullocks of July - "we do not believe there is a Northern Rock lurking in Ireland" - there was a danger of "stampeding" through legislation, cautioned deputies.

"It's all very well to watch economists for stockbrokers and banks being rolled out to say that this is a marvellous innovation . . . what would you expect them to say?" sighed Rabbitte.

He echoed Michael Noonan's call for more information on the true nature of the banking crisis.

His colleague Michael D Higgins was also not in the mood to trust the bankers, going forward. The situation should not just be about keeping the banking show on the road. "It is to assume that one does not make an analysis on how we have arrived at this point." The "irresponsible lending" practices by some institutions that helped bring about the crisis should not go unexamined.

Just as well Michael didn't hear the economist on radio in the morning, dismissing such calls with the mantra "we are where we are". Visions of gurriers in courtrooms around the country, facing rap sheets going back for years, following the same tack to escape censure: "I robbed them houses, sure, but we are where we are now, judge, and I promise to be good, going forward." The debate dragged on. The economics of the farmyard continued, with many deputies urging the Government to give further information on the guarantee given to ensure we have not been sold "a pig in a poke". Fine Gael's Paul Connaughton was downcast. "I always regarded the Central Bank as a sacred cow," he sighed.

Even Fianna Fáil's Ned O'Keeffe, while commending his Government on their decisive action, urged caution.

"There are many issues out here that need to be clarified for the pundit (sic) in the street."

If the pundits are stumped . . .