BUSINESS OPINION:The baffling thing about the ruination of the building society was it happened in plain sight, writes JOHN McMANUS

IRISH NATIONWIDE Building Society will shortly unveil the full extent of the damage done to the society in Michael Fingleton’s 37-year stewardship – and the associated bill for the taxpayer.

It will not be pretty. Some 85 per cent of Irish Nationwide’s commercial loan book will be transferred into the National Asset Management Agency (Nama). The agency has said that it will pay only 42 cent in the euro for the loans; the harshest discount applied to any of the banks it is dealing with.

The losses for last year are expected to come to around €2.5 billion, significantly more than the cumulative profits made by the society during Fingleton’s almost four decades in charge. Some €2.7 billion worth of taxpayers’ money will be needed to ensure that money borrowed by Fingleton from international lenders – the now legendary bondholders – to bankroll developer clients is repaid.

It is pretty safe to assume that Irish Nationwide epitomises the “mindless scramble to funnel lending into one sector at considerable pace and of a reckless abandonment of basic principles of credit risk and prudent lending”, which the Nama chief executive Brendan McDonagh described last week to the Oireachtas Joint Committee on Finance and the Public Service.

Certainly what little light has been shone on the inner workings of Irish Nationwide to date only confirms this picture, with Fingleton acting as a one-man credit committee and fast-tracking loans for politically connected clients, including Celia Larkin and Charlie McCreevy.

The truly baffling thing about what happened at Irish Nationwide was that it pretty much happened in plain sight. Fingleton blatantly paid little more than lip service to the rules governing mutual societies and nobody shouted stop.

Instead of being held to account, he was lauded as some sort of mischievous, but brilliant, rogue basking in that most dangerous of Irish sentiments, sneaking regard.

In truth he was someone who was allowed hijack a friendly society through adroit use of its rules and, in particular, the omnipotence of a board that does not answer to institutional shareholders but instead to a disparate collection of members (or in truth customers) who were made feel profoundly grateful to have got a mortgage.

The list of organisations and institutions – including the media – that just sat back and watched this happen is a long one. Irish Nationwide was feted for its incredibly low cost/income ratio when it should have been exposed for the dangerous freak that it was becoming.

There were some efforts made to rein him in, but Fingleton saw them off without too much trouble. Maurice Harte was brought in from AIB in 2001 with the presumption that he would improve standards and take over from Fingleton. He packed it in after a year of getting nowhere.

Instead of triggering a crackdown by the regulator, this actually marked the beginning of the most intense part of the society’s transformation into a property bank with a small retail lending business attached. Astonishingly, in 2006, changes were made to the building society legislation specifically tailored to allow Fingleton sell the building society at the time and in the manner of his choosing.

The credit crisis eventually exposed Irish Nationwide for what it had become, an insolvent property bank, but Fingleton clung on grimly. He left last April apparently of his volition, taking with him his €27 million pension pot and a €1 million bonus paid to him in November 2008, just weeks after the society secured protection under the State guarantee.

His departure was hastened by the revelation that he facilitated the less than admirable activities of Anglo Irish Bank’s Seán FitzPatrick who used round-robin loans from Irish Nationwide to hide the extent of his borrowings from his own bank.

But unlike FitzPatrick – who is now publicly vilified – Fingleton appears to enjoy a reasonably peaceful retirement. It is all the more bizarre, because of the extent to which Irish Nationwide was a one-man band makes Fingleton’s responsibility for the €2.5 billion mess to be unveiled shortly absolutely unequivocal by comparison with his peers at the other banks. They at least followed corporate governance norms. It did not save them, but it does spread the blame.

The Government has pretty much washed its hands of the issue and left matters to the Office of the Director of Corporate Enforcement and the Financial Regulator.

This provides a convenient fig leaf for inaction but, as of the beginning of this month, the Government took control of the society when it gave it the first €100 million of the €2.6 billion of taxpayers’ money that will be needed to fix the mess created by Fingleton.

It would be nice to think that a letter from the Minister accompanied the cheque instructing the society to pursue its former chief executive and his pension. If Brendan Murtagh’s creditors can do it, then surely so can Fingleton’s former employers.

But even this seems unlikely given that the Government plans to dismantle Irish Nationwide as soon as possible.

With one bound our hero is free.