herald

Saturday 18 August 2018

Dan White: Another €10bn for the banks? That's just the start of it

WELCOME to our world, Alan Dukes. The former finance minister was first appointed as a public interest director to the board of Anglo in December 2008.

In March 2010 he was promoted to chairman of the disgraced lender, which was nationalised in January 2009.

For most of that time Dukes has doggedly defended the apparently indefensible.

Who now remembers that, as recently as last summer, Dukes was arguing that Anglo's losses would be "only" €22bn and that Seanie FitzPatrick's financial Frankenstein's monster should be allowed to continue operating with a "new Anglo" taking over about €15bn of its predecessor's loan book?

U-turn

The revelation last September that Anglo's losses would in fact be somewhere between €29bn and €34bn finally put a stop to this nonsense.

Not alone did the news of even bigger Anglo losses finally destroy investor confidence in the credit-worthiness of the Irish state and lead directly to last November's EU/IMF "bailout", it also forced the Government to perform a U-turn on Anglo and announce, at least two years too late, that it was winding Anglo down as quickly as possible. With the Anglo name shortly about to disappear, and good riddance to bad rubbish say all of us taxpayers, Dukes has re-invented himself once again.

His speech this week to a group of Cork businesspeople, in which he stated that the cost of fixing the banking system would be at least €15bn greater than the €50bn currently being predicted by the Government has caused consternation in government and civil service circles.

This was despite the fact that most independent analysts had long since concluded that the €50bn figure was way too low with ratings agency putting the total bill at up to €90bn as far back as last September.

Whether coincidentally or not Dukes' speech was quickly followed by the Government's announcement that the latest €10bn recapitalisation of the Irish banks was being postponed until after the General Election.

According to Finance Minister Brian Lenihan, the Government did not have a mandate to make such a decision once it had lost its Dail majority.

While this concern for the democratic niceties is no doubt very welcome it is also long overdue.

With the Greens having already signalled their intention of pulling out of Government, would it not have been much better for all concerned if the Government had called a General Election immediately after it was forced to seek the bailout last November?

That was then, this is now.

Despite the official denials, are the Dukes speech and the postponed bank recapitalisation somehow linked?

Almost certainly yes.

With the withdrawal of deposits from the Irish banks showing no signs of easing and Bank of Ireland having apparently failed in its efforts to raise fresh capital from the private sector, it was already clear that an extra €10bn, which was earmarked from AIB, Bank of Ireland and EBS, would be nowhere near enough to sort out the problem.

Embarrassing

Having to admit this fact before the General Election would have been acutely embarrassing, not to mention politically damaging, to the outgoing government.

Far better to suddenly remember one's lack of a Dail mandate and leave the next Government to carry the can.

All of which means is that the first item on the agenda of whatever new Government finally takes office on March 10 will be a further, even more serious instalment of the Irish banking crisis.

If you think things are bad then you've almost certainly seen nothing yet.

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