Is David Drumm Innocent?

Anglo Irish Bank in New York
Anglo Irish Bank in New York (Photo credit: Wikipedia)

David Drumm, former Chief Executive of Anglo Irish Bank, still protests that there was no deliberate misleading of the government. In this interesting interview with Irish Central he claims the bank was not trying to hook the State into open-ended support, despite what the tapes may have suggested. And by suggested I mean “said aloud”. What’s surprising is that he actually does come across as innocent.

And by innocent I mean “having the intellectual capacities of a child”.

He claims that all Anglo ever wanted from the government during the market storm that followed the collapse of Lehman Brothers was a single little shot of €7 billion to keep it liquid – I quote – “assuming the financial markets crisis returned to normal at some point in the near future”.

We do all know of course that this storm was the financial markets returning to normal. The period before that, when banks like his made billions simply by driving up the price of houses and pouring massive piles of credit onto anyone who stood still long enough, that was the abnormality. The cash equivalent of a screaming drunken spree with an open bottle of whiskey in each hand is the normality he is referring to here.

Anglo, he’s saying, just needed a few billion to tide it over until things became unsustainable again. He cannot of course have been stupid enough to believe that was in any way realistic; it was just the line of bullshit that they had to take in a desperate bid to survive. What surprises me is that he’s stupid enough to think we’re stupid enough to think he really believed it.

 

Smoking Tape

AngloSo the “Anglo Tapes” – internal phone recordings made during the last days of Anglo Irish Bank. Do they constitute a smoking gun?

Hoo boy, you betcha. A smoking gun, covered with bloody fingerprints, with a note taped to the barrel saying “For doing the murder with”.

This is the stuff.

I have to admit I was a little dismissive when I first heard of this, much as I couldn’t quite believe all the fuss over the PRISM revelations. (“You mean you believed US intelligence forces didn’t spy on whoever the hell they liked?”) We all knew that Anglo had ripped off the nation. Had, as the Indo bluntly put it, “cost Ireland our sovereignty“. But we also knew it was done with nods and winks and complicity, screened off by tendrils of loyalty and friendship. These people don’t leave evidence.

But that really seems to be what we’ve got here. The tapes record senior – very senior – management explaining a strategy of lying about the severity of the bank’s situation. They knew that if they revealed the full picture, government would see little alternative except to let the bank fold. They cynically calculated that if the State was tricked into giving a few billion of support at first, it would be forced to follow up with more and more in a frantic effort to save its investment. Which is precisely what happened.

They cheated the State in order to try to save their wealth and positions, cheated it of billions and billions. And when I say the State of course, I mean you and I. People who pay tax, people who rely on the State to support and protect them. Everyone in the country, in other words. We were all robbed by this, quite deliberately.

We shouldn’t oversimplify. This doesn’t let the other lenders and speculators off the hook for stoking the property boom, exonerate the politicians in Fianna Fáil (and elements of the media) who were complicit in the bubble, or mean that the euro was not grossly mismanaged. Anglo’s rooking of the public was certainly not the only cause of Ireland’s economic demise. But these men tricked the country into taking on billions and billions in debt. Billions that could have gone to creating jobs or equipping hospitals.

And there are tape recordings of them saying how they did it.

One does not want to prejudice any possible legal proceedings, so to be circumspect… Wait, what was that? Sorry, I thought I heard something. Probably thunder. Though it sounded even more like a long corridor of cell doors clanging shut.

Coup In Ireland

Noonan

It was strangely reminiscent of that military coup where the signal to attack was, of all things, the Portuguese entry in the Eurovision Song Contest. With coded announcements, the President snatched away from a diplomatic mission, an emergency all-night sitting of the house, and plenty apparently deliberate misinformation, “Project Red” saw Ireland taken over – though not by the military.

If you went by the news coverage, you might be forgiven (a special offer, today only) for thinking that we just escaped the jaws of disaster here. On the contrary – Ireland avoided an acute short-term problem by making an awful long-term commitment. A very, very, very long-term commitment. We were forced into it at what might be termed fiscal gunpoint.

On September 30th 2008 in the wake of the collapse of Lehman brothers in the US, the Irish government pledged to guarantee the banking industry here. Not just the banks’ deposits but all their liabilities – including the vast amounts they’d borrowed from banks overseas to fuel the country’s property speculation bubble. That figure turned out to be truly mind-boggling – over €400 billion. That is more, even after inflation, then all of Germany was forced to pay in reparations after World War I.

You might fairly ask how the government of a small country could hope to come up with €400 billion. They couldn’t of course. It was a bluff, a confident front designed to ward off market chaos and speculation. But if you’re bluffing, you don’t bet the house. The government exposed the country to a liability that beggared belief. Indeed, beggared the lot of us.

It’s been argued in their defence that the industry lied to them, directly, about the scale of their liabilities. That’s true, but they knew damn well that there was something seriously wrong anyway. These banks had been making staggering profits for a decade mainly by lending people money on excessively easy terms, thereby boosting the price of housing, thereby creating demand for bigger loans… Banks had been enjoying a prolonged bonanza, but it was a bonanza of debt raised against assets that no one could seriously argue were not grossly overpriced.

Why had banks not simply raised the price of borrowing, to profit more from less lending – and at the same time moderate demand? Because there was no limit to the amount of money they had to offer. Other banks, in the US, the UK, but mainly in continental Europe, were lending them as much as they could shift. There was a global credit boom going on of course, there was an (originally) quite genuine boom in the Irish economy, and to cap all this there was no longer a national currency to wildly inflate and so damp things down as had happened in booms gone by. Ireland represents perhaps 1% of the Eurozone economy, so even incandescent levels of overheating here were not going to drive up the cost of money. Money was, as odd as this may sound, too cheap. Yet keeping inflation down was the main – indeed about the only – guiding principle of the European Central bank. It, or rather its political masters, chose to pursue a policy which might have been reasonable for the Eurozone as a whole, but which was utterly unsustainable for Ireland.

Some people, mainly politicians eager to share out their responsibility, have blamed the population for borrowing too much, as if economic meltdown is caused by sudden outbreaks of cupidity. Those who borrowed more than they should have did so in the main because banks were quite literally pushing money on them. Like many, I opened my post one morning to find I’d been approved for a loan I hadn’t asked for. Certainly far too many got into property, but the housing boom was not only driven by speculation. Another major factor was that thanks to all this cheap credit, house prices were rising far faster than incomes. People worried – not unreasonably – that if they didn’t buy a house soon they would never be able to afford one. Lenders fuelled the fear with the marketing image of the “property ladder”, the idea that if you wanted any chance of owning a good home in the future you needed to buy a bad one now. Many, many awful houses and apartments were sold – and even more built. The entire Irish banking industry had in effect become a Ponzi scheme, profitable only as long as there was new investment. When the market fell it fell like a lift with the cables cut. In doing so, it called the government’s bluff.

At which point they could and should have said “You got us. Of course we can’t possibly afford to pay that much money. Ever. It’s an insane figure.” And they would have been right of course, we can’t. Even after realising the assets of the collapsed banks and throwing in the national reserves, we’re still left something like 70 billion short. They even had an excellent excuse to renege on the guarantee when it came to light just how much these banks had been lying to them about their assets. They should have known better, sure, but officially they didn’t.

Unfortunately however government needed to pay more than just the billions in bank debt. This Ponzi scheme had essentially become the tax base. Not only was a lot of revenue raised on property sales, a simply ludicrous proportion of the population was by then employed in building buildings that no one would ever actually want but which existed solely to be traded on the bubble market. Without this income the exchequer couldn’t even keep public services going, pay doctors and teachers and police and pensions. But the fact that our economy looked to be (and indeed, was) on the point of collapse meant that the country couldn’t borrow cash on the market at anything approaching an affordable rate. The only institutions with both the money and the motivation to lend to us affordably were those of the Eurozone, the very ones who were to a large degree responsible for the collapse. In return, they held us to the untenable: The undertaking to pay back all the money our failed banks had borrowed to fuel the property bubble. The fear being that if we didn’t, the banks that lent to our failed banks would in turn fail, and so on.

So the Irish government’s gamble didn’t save our banking industry; virtually ever lending institution in the country (honourable exception: the Credit Union movement) went bust. But it probably stopped the European banking system going down like the world’s most expensive set of dominoes.

This is what really rankles. Instead of being punished by the market for poor – indeed, reckless and harmful – investment decisions, these institutions are going to be rewarded just as if they had made profitable decisions. They’ll probably give themselves bonuses. And these rewards will be paid not willingly by the market but unwillingly by the taxpayers of Ireland whose jobs and lives they so damaged. And the taxpayers’ children. And their children, if there’s anyone left here by then. Those of us who had the willpower to resist the easy credit have to reward them, just as if we’d taken it. Those who lost their homes because they could not afford the repayments to these institutions, still have to reward these institutions. Those who now own homes worth a fraction of what they owe on them but who are nevertheless still making repayments to these institutions, will see their taxes go to these institutions. The injustice of it is barely conceivable. Ireland is paying roughly 42% of the cost of Europe’s banking crisis. We can’t possibly do it of course. That’s why the Eurozone governments and ECB cut the deal that all the fuss has been about. To help us.

To help us pay back the money we didn’t borrow.

You may have seen the headline figure, that this is meant to save us €20 billion. Are they writing off some of the debt? No. On no account are we to even contemplate not paying any of that money. The twenty billion is just the difference between the “easy” interest we’ll get from them and a rate we might have paid otherwise. They’re giving us easy terms to repay the debt we don’t owe. Some deal.

This explains why we had to shut down the Irish Bank Resolution Corporation – formerly Anglo – literally overnight. While most of the bad debts of the various failed Irish institutions were still being held by this “zombie bank”, there lingered some remote possibility that a government would have the guts to say “Look, the state has no moral duty to pay back failed private investments. Goodnight.” We almost certainly would have negotiated a deal rather than just pulled the plug of course, but we had that bargaining chip. Instead we’ve cashed in our last chance for freedom. Whereas repudiating Anglo’s debts would not have been technically or morally a loan default – indeed, might have been seen favourably by the markets as the shedding of a liability – there is no way out of our commitment to the ECB. Short, that is, of crashing out of the Euro in flames.

So now we are committed to this vast payment. That still doesn’t mean we can pay it of course; indeed, attempting to will just drive us deeper into recession. We will inevitably default on this, as Germany defaulted on the onerous Versailles treaty terms. It will just be later rather than sooner. The only achievement will be a few more years – perhaps decades – spent impoverishing ourselves to enrich those irresponsible lenders.

The “deal” won yesterday was quite the opposite – a scared and desperate government buying time and in doing so, condemning their country to indefinite economic servitude. Death of the Republic would hardly be an exaggeration. Democracy is effectively suspended; the government we elected to overturn the errors of the last has repeated and even amplified them. We are being dictated to – not by the military, not by a despot, but by an industry.

Humour 1 – Terror 0

Another story that almost sneaked past me, though good news this time: The appeal judgement in what became known as the Twitter Joke Trial was reached, and Paul Chambers, victim of one of the stupidest miscarriages of justice in years, has had his name cleared. To recap, he made a joke on Twitter and was convicted under laws against issuing threats – even though the judge admitted that it was clearly not meant as a threat.

What made me incandescent with rage (an older form of anger, more intense than modern fluorescent rage) was his bizarre logic that the existence of real terrorist threats meant that things clearly not terrorist threats must be treated as terrorists threats. I quote here what I wrote in the newspaper two years ago:

At what point can we just declare that the terrorists have won and let them get on with running things? Almost every day brings them new victories. I’m not talking about murders and bombings, those are merely weapons. To defeat a democratic society you make it turn on itself. And so a stunning victory was achieved this week in the courts of England, when a man was criminalized for making a joke on Twitter.

Perhaps I should begin by explaining what Twitter is, as many – including it seems the judge in this case – still have no idea. Twitter is confusing to some because it doesn’t easily fit into the categories of public medium or private communication. On one hand it’s very public, in that anyone who joins can post remarks on it. In another sense it is quite private; your posts are (normally) only seen by people who choose to see them, and therefore know who you are.

Paul Chambers was planning a trip to Belfast to see a friend when he heard that his (oddly named) local airport had been shut down by last winter’s bad weather. “Crap!” he wrote, “Robin Hood airport is closed. You’ve got a week and a bit to get your shit together otherwise I’m blowing the airport sky high!” Now that wasn’t a very funny joke, but it is quite obvious that it was meant in jest, as a way to vent his frustration. And yet he now has a criminal record – which in turn has destroyed his career as an accountant – for “sending, by a public communications network, a message that is grossly offensive or of an indecent, obscene or menacing character”.

Clearly ‘menacing’ is the word at issue here. And clearly it was not menacing, because (a) it was patently not intended to be, (b) menaces are generally sent to the person or persons you are trying to menace, not to your friends, and (c) terrorists never preface their threats with the word “Crap”.

It is also clear that this law was not intended to criminalize casual speech. Judge Jonathan Bennett acknowledged this. Yet using his years of carefully honed stupidity, he managed to reach the conclusion that though not meant as a threat by the sender, the fact that it might be misunderstood to be menacing (by whom?) makes it a criminal act. He was satisfied – and these are his exact words – that the message was of a “menacing nature in the context of the time we live in”.

He may as well have said “I must deliberately misconstrue all jokes as serious expressions of intent, because that is what the terrorists have instructed me to do.” He is doing their bidding. By cooperating with their aim of destroying a free society, this judge may as well be a terrorist himself.

I’m not joking here.

I was pretty pissed off, wasn’t I?

Thankfully more thought was put into the judgement of this final appeal. (Two earlier appeals were – incredibly – rejected.) You can read the whole thing here. A lot of it is spent on legal rumination over which exact points they need to reach a judgement on. Shakespeare is referenced, needlessly. But when they finally get to the meat of it, they just spell out the commonsensical in terms even a district court judge can understand:

The language and punctuation are inconsistent with the writer intending it to be or to be taken as a serious warning. Moreover, as Mr Armson noted, it is unusual for a threat of a terrorist nature to invite the person making it to ready identified, as this message did. Finally, although we are accustomed to very brief messages by terrorists to indicate that a bomb or explosive device has been put in place and will detonate shortly, it is difficult to image a serious threat in which warning of it is given to a large number of tweet “followers” in ample time for the threat to be reported and extinguished.

Well yeah.

An interesting point arising; the judgement also states of Twitter:

Effectively it may communicate any information at all that the user wishes to send, and for some users, at any rate, it represents no more and no less than conversation without speech.

As a friend pointed out (*waves to friend*), if Twitter is accepted to be conversation, then you can’t libel someone on it. Hmm… I might get a little more legal advice though before I start tweeting my allegations about Sean Quinn, the entire board of Anglo Irish Bank, and all those poor, poor gerbils.

Humour 1 – Terror 0

Another story that almost sneaked past me, though good news this time: The appeal judgement in what became known as the Twitter Joke Trial was reached, and Paul Chambers, victim of one of the stupidest miscarriages of justice in years, has had his name cleared. To recap, he made a joke on Twitter and was convicted under laws against issuing threats – even though the judge admitted that it was clearly not meant as a threat.

What made me incandescent with rage (an older form of anger, more intense than modern fluorescent rage) was his bizarre logic that the existence of real terrorist threats meant that things clearly not terrorist threats must be treated as terrorists threats. I quote here what I wrote in the newspaper two years ago:

At what point can we just declare that the terrorists have won and let them get on with running things? Almost every day brings them new victories. I’m not talking about murders and bombings, those are merely weapons. To defeat a democratic society you make it turn on itself. And so a stunning victory was achieved this week in the courts of England, when a man was criminalized for making a joke on Twitter.

Perhaps I should begin by explaining what Twitter is, as many – including it seems the judge in this case – still have no idea. Twitter is confusing to some because it doesn’t easily fit into the categories of public medium or private communication. On one hand it’s very public, in that anyone who joins can post remarks on it. In another sense it is quite private; your posts are (normally) only seen by people who choose to see them, and therefore know who you are.

Paul Chambers was planning a trip to Belfast to see a friend when he heard that his (oddly named) local airport had been shut down by last winter’s bad weather. “Crap!” he wrote, “Robin Hood airport is closed. You’ve got a week and a bit to get your shit together otherwise I’m blowing the airport sky high!” Now that wasn’t a very funny joke, but it is quite obvious that it was meant in jest, as a way to vent his frustration. And yet he now has a criminal record – which in turn has destroyed his career as an accountant – for “sending, by a public communications network, a message that is grossly offensive or of an indecent, obscene or menacing character”.

Clearly ‘menacing’ is the word at issue here. And clearly it was not menacing, because (a) it was patently not intended to be, (b) menaces are generally sent to the person or persons you are trying to menace, not to your friends, and (c) terrorists never preface their threats with the word “Crap”.

It is also clear that this law was not intended to criminalize casual speech. Judge Jonathan Bennett acknowledged this. Yet using his years of carefully honed stupidity, he managed to reach the conclusion that though not meant as a threat by the sender, the fact that it might be misunderstood to be menacing (by whom?) makes it a criminal act. He was satisfied – and these are his exact words – that the message was of a “menacing nature in the context of the time we live in”.

He may as well have said “I must deliberately misconstrue all jokes as serious expressions of intent, because that is what the terrorists have instructed me to do.” He is doing their bidding. By cooperating with their aim of destroying a free society, this judge may as well be a terrorist himself.

I’m not joking here.

I was pretty pissed off, wasn’t I?

Thankfully more thought was put into the judgement of this final appeal. (Two earlier appeals were – incredibly – rejected.) You can read the whole thing here. A lot of it is spent on legal rumination over which exact points they need to reach a judgement on. Shakespeare is referenced, needlessly. But when they finally get to the meat of it, they just spell out the commonsensical in terms even a district court judge can understand:

The language and punctuation are inconsistent with the writer intending it to be or to be taken as a serious warning. Moreover, as Mr Armson noted, it is unusual for a threat of a terrorist nature to invite the person making it to ready identified, as this message did. Finally, although we are accustomed to very brief messages by terrorists to indicate that a bomb or explosive device has been put in place and will detonate shortly, it is difficult to image a serious threat in which warning of it is given to a large number of tweet “followers” in ample time for the threat to be reported and extinguished.

Well yeah.

An interesting point arising; the judgement also states of Twitter:

Effectively it may communicate any information at all that the user wishes to send, and for some users, at any rate, it represents no more and no less than conversation without speech.

As a friend pointed out (*waves to friend*), if Twitter is accepted to be conversation, then you can’t libel someone on it. Hmm… I might get a little more legal advice though before I start tweeting my allegations about Sean Quinn, the entire board of Anglo Irish Bank, and all those poor, poor gerbils.

Down With The Bastards. Except Our Bastard

Hands Off Our Billionaire

The world is puzzled by how passively we have borne the gambling losses of the super-rich. Where are the marches, where the strikes, the riots? Are we stoic or fatalistic? Have we internalised the blame for the bankers’ catastrophe? Or is it, as some theorise, just too damn wet here to take to the streets? Whatever the reason, it seems that the Irish just don’t protest.

And then one of the super-rich is convicted in court, and people come out to defend him in their thousands.

What, you might well ask, the holy fuck?

The Irish just put personal loyalty above anything else – including the law? Well there may be something in that, but it is too easy to be a complete explanation. You need to see the perspective of people who believe, not totally unreasonably, that Sean Quinn was a kind of hero. For them the villain is Anglo Irish Bank, Quinn its innocent victim, a decent businessman sucked into its corrupt financial web.

Were Anglo villains? Absolutely. Not the only villains, it must be said. Virtually every financial institution got greedy, took risks, and broke laws. But Anglo it seems were the most egregious of all. Yes, they were villains.

Was Sean Quinn innocent? Was he hell.

Their dealings together were so extensive that his interests and the bank’s were inextricable. His family borrowed something around 2.8 billion from Anglo. Two point eight billion. Just his family! The Quinn group of companies borrowed another one point two. Four billion is not the sort of money you advance to an unsophisticated innocent. Four billion is the sort of money that’s difficult to even conceptualise.

They were a good business empire I guess, as business empires go, that got involved with the boom mania. They spent money to make money, and then borrowed to make even more. It is sad and unfair, yes, that a family that put decades into building a vast fortune can lose it all to some bad decisions. But they made those bad decisions. He created thousands of jobs, but put them all on the line because of ambition. He took huge risks with borrowed money.

And his supporters know that of course. They’re in denial about it, but they know it. Their interests have also been his interests – for so long now that they overlooked the horrifically suspect relationship with Anglo. They turned a blind eye to things that should have been warning signs.

Sean Quinn was not personally responsible for getting the country into this much trouble, no. Perhaps he was one of the biggest single gamblers, but it took a hell of a lot of people like him, doing things like he did, to get the country into this much trouble. And if people can know this but still support him because he was their overambitious, risk-taking billionaire, then they have learned nothing.

Complete This Sentence

Ooh! Ooh! We got our report card! The IMF has checked out what we’re doing with all the money they lent us. Let’s start with a choice quote:

At around 40 percent of GDP, the cumulative cost of supporting the financial sector accounts for half of the sharp increase in net public debt in recent years.

That’s probably as close to saying “Basically they’d be OK if they weren’t a pit prop for Europe’s collapsing banking industry” as the IMF can allow itself to get.

On the bright side, people have finally been jailed over the billions that were ripped off the nation. Some of the bankers, right? Well no, some of the borrowers in fact. But it’s a start.

(Actually when I saw the headline “Sean Quinn’s son and nephew jailed for three months“, I assumed it was one person. Ours is not to question what goes on within a family.)

Sadly though the jail term is not for social larceny, but merely contempt of court. Which reminds me… Now cases are ongoing I probably need to scatter the word “allegedly” liberally through the following. But it seems that the Quinn family, having invested well but not wisely in the failed Anglo-Irish Bank, attempted to hide their assets from their creditors. Which, since the state has taken ownership of this mess, is us the taxpayers.

Allegedly.

There was a stupid debate on the radio today, where a loyal follower of the Quinn camp came on to argue that the family was being persecuted. It’s too late to act like innocent dupes of the big bad bank though, when you’ve been caught trying to hide your money down the back of Russia.

It was a big bad bank however (allegedly, allegedly…), and the other recent good news from the fiduciary front is that Anglo’s erstwhile financial director has been charged with sixteen fraud offences. Sixteen. Imagine, a banker could actually go to jail.

But for how long? A friend of mine did an interesting calculation. A few months ago, someone received a six-year sentence for not paying VAT on the garlic he imported. Don’t say that’s harsh until you see some of the garlic we get in the shops; you’ll agree that hanging is too good for them. The penalty was so severe because the tax he evaded came to €1.6 million. Which establishes that sentences are proportional to how much you rip off the State. Interesting…

Six years for 1.6 million – that’s 3.75 years for each million off-ripped. Anglo’s greedy machinations cost the exchequer €47 billion (€30.6 billion + interest). So if his punishment is to be kept in line, he’ll have to go away for… 175,250 years.

Not to despair though. What with prison overcrowding he’ll probably be out in just a few thousand.