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| July/Iúil 2010
www.anphoblacht.com
YES, BANKS ARE BORING. But we should all be paying attention to them and what the Government is doing with them, because billions of our money is being poured into them while equal amounts are being subtracted from our health, education and social welfare systems
Banking bombshells g
BY JOANNE SPAIN
EGULATION, shareholders, subordinated bonds, directors’ loans - these are the terms most of us never thought we’d understand let alone hear every day of the week. Yet these, or a variation of, are the very words that most of us will be using in years to come to explain to our children why they are paying 80 cent of every Euro they earn in tax. The reasons for the billions and billions in debt that the 26-County state has incurred as a result of one of the largest (comparatively speaking) banking crises in the world were published during June with the pro-
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duction of two banking reports from three experts in the banking and economic world. They proved to be damning indictments of a Government under siege. Not even the mayhem in Fine Gael towards the end of the month could distract from the disastrous policies of Fianna Fáil as they were laid out in black and white. Yes, banks are boring. But we should all be paying attention to them and what the Government is doing with them, because billions of our money is being poured into them while equal amounts are being subtracted from our health, education and social welfare systems. And it’s just the start of the payback for the ‘solutions’ to the banking crisis, ironically being implemented by the same political party that caused it.
5 Bertie Ahern, Bank of Ireland, AIB and Brian Cowen
8 things you should know about the banking reports and the economy 1 The authors of the two reports Patrick Honahan of one, and Klaus Regling and Max Watson of the other - were expressly told not to investigate anything that happened in the banks subsequent to the night of the Guarantee in September 2008. Since then, we have had:= The nationalisation of Anglo Irish Bank, one of the most corrupt banks in our history; = The awarding of a millioneuro pension to the former CEO of Irish Nationwide, Michael Fingleton; = The establishment of NAMA, a body designed to buy €54billion worth of bad loans that are probably worth much less; = The recapping of several banks to the tune of billions, with the result that AIB is all but nationalised; = The signing off of apparently inaccurate, if not fraudulent, accounts at several banks by Government-appointed directors and auditing firms that were subsequently awarded contracts with NAMA. So, not much has happened in the two years since the Guarantee worth investigating then... Both reports are heavily critical of Government economic policy, the financial regulation system, and lending policies of Irish banks.
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They state clearly that the crisis is domestic and that the Government’s line about the collapse of Lehman Brothers is false. They find that the Government’s economic policies caused the crash. The banking inquiry arising from these reports will start over the summer and run for six months but its terms of reference are already compromised by the Government. It is refusing to let the inquiry investigate Government economic policies, instead appointing an Oireachtas committee which, of course, will have Government members, to do a report on the Government’s macroeconomic policies.
These reports vindicate Sinn Féin’s economic policy and what we were warning about since 2002. During what the Establishment parties and the media called our ‘economically illiterate’ years, Sinn Féin called for: = Stronger regulation; = Caps on remuneration; = An end to property inflation; = Fair tax policy based on stable direct taxation; = Corporate law to be improved; = A tax on speculative trading; = Counter-cyclical budget policies. Back in 2002, Arthur Morgan was raising the need to bring down property prices before a bubble grew. In 2005, Caoimhghín Ó Caoláin
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pushed for and succeeded in getting an Oireachtas committee to examine flaws in the banking system. The results of his findings were never acted on.
Though not mentioned in the reports, the other political parties do not fare well in this review of economic policies. Fine Gael and Labour both share an economic approach that, if implemented, would have inflated the bubble. They both wanted to lower direct taxes and abolish Stamp Duty in 2007, all of which would have added fuel to the fire. Labour was in fact first out of the blocks with its populist and dangerous taxcutting proposals in 2007. Neither party has the economic cop-on to bring us out of the crisis. They still follow the Government’s line on fixing the economy through cutting the deficit.
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Brian Cowen has said he takes ‘full responsibility’ for and ‘regrets’ decisions he made in the past that led to the economic crisis. But he refuses to follow through on that responsibility and resign. The Government says it has learned from its mistakes. It hasn’t. One of the reports’ criticisms is that the Government followed a procyclical budgetary approach and relied on unstable taxes. (Pro-cyclical is Charlie McCreevy economics spend money when you have it, don’t worry about saving. A count-
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er-cyclical approach saves in the good times so you can spend in the bad when the economy needs a boost.) The Government is still taking a pro-cyclical approach - meaning cuts, cuts, cuts - which is the wrong approach because it is deflating the economy. If pro-cyclical was bad then, it’s worse now.
Honahan says the Guarantee was necessary and justified to prevent the banking system imploding and essentially Ireland becoming another Iceland - but the terms and conditions fell short. This is Sinn Féin’s policy on the Guarantee in a nutshell. We believed the damage was done and the Guarantee was the first step to full nationalisation and was necessary to stop the banks imploding (from the information put in front of us). We wanted to protect ordinary people, but Honahan is right - the terms and conditions fell short so we voted against them. We wanted Anglo wound down. We wanted taxpayers, not bondholders, protected. We wanted the main banks taken into public ownership and turned into a state bank. Once again, Labour took a completely populist position and opposed the Guarantee but they did not present what their alternative was. They did not say what they would have done when it looked like people would be getting up the next day and not have been able to
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