The Government guarantee asks us to believe that banks will suddenly begin to act in the taxpayers' interest, writes Fintan O'Toole
ONE OF the most prominent advertising campaigns of the last year has been based around the slogan "Beat the Bankers". In the ads, bankers are portrayed as sleazy, greedy and incompetent. The remarkable thing about this ad campaign is that it has been run by, of all things, a bank. So, even the bankers have been operating on the assumption that people don't trust them, and that the best way to sell financial products has been to pretend not to be a banker.
This isn't just an advertising copy writer's wheeze, however. At the root of the current credit crunch is the fact that bankers don't actually trust each other. They won't lend each other money because every one of them thinks the other lot is a bit dodgy. And we've just trusted these people who don't trust each other and who portray themselves in ads as sleazy, greedy and incompetent with a whole generation's worth of exchequer revenue.
At the heart of the Government's response to the banking crisis is the belief that our financial institutions need to be shored up rather than transformed. This was perfectly illustrated on RTÉ Radio One's Morning Irelandprogramme last week, when Richard Bruton and Willie O'Dea were asked separately whether there should now be a cap on the earnings of bank executives.
According to the Opposition spokesman: "If you end up with executives that you need to operate this moving out of their position to well-paid positions elsewhere, and we're left without the people that we need to run the system, that wouldn't be good."
Willie O'Dea chimed in with: "There's a practical difficulty here . . . You need to insure in the interests of the taxpayer that the best people run these institutions."
These responses contain some breathtaking assumptions. The first is that the people running our financial institutions have done such a superb job that, if we were to insult them by paying them, say, a mere ministerial salary, they would be off to "well-paid positions elsewhere". Where are they going to go? Lehman Brothers?
The second assumption is that the Irish banks are run by the "best people" to take care of the interests of the taxpayer. Perhaps I'm missing something, but aren't these the same "best people" who got themselves, and us, into this trouble by shovelling money into the furnace of a white-hot property boom? Aren't they the geniuses who, to take just one example we know about, gave the rogue solicitor Michael Lynn three different mortgages on one house in the space of a few weeks, and overall gave him 155 mortgages for just 78 properties?
We're constantly told that the markets don't get things wrong, so why did the markets have such little confidence in these "best people" that shares in their institutions were falling like dead leaves in an autumn gale? As for the institutions themselves, we seem to have forgotten that their record of looking out for the public interest is a little less than stellar.
In the Deposit Interest Retention Tax (Dirt) scandal, when virtually the entire banking industry systematically enabled flagrant fraud against the compliant taxpayer, the great and the good in the boardrooms looked the other way. As the Public Accounts Committee report put it: "Boards of directors of financial institutions generally betrayed an overly relaxed attitude towards discharging their statutory and fiduciary duties in respect of the operation of Dirt."
As for ethical responsibility to the public interest, the Public Accounts Committee remarked that: "Given the eminence of many of the members of the boards of directors of financial institutions, it is surprising that they did not bring a greater weight to bear on the enforcing of ethical standards, either within their organisations or the banking sector generally."
We've just bet the entire future of the country on the proposition that, during the boom years, there has been a fundamental change in the banking culture that gave us bogus non-resident accounts, the Insurance Corporation of Ireland bailout, the Ansbacher/Guinness and Mahon fraud, the National Irish Bank scandals, the AIB/Allfirst debacle in Maryland, systematic overcharging of foreign exchange customers and so much more.
We're also betting that the queasily intimate relationship between Government and banks (the PAC called it "a particularly close and inappropriate relationship between banking and the State and its agencies" in which "the State and its agencies were perhaps too mindful of the concerns of the banks, and too attentive to their pleas and lobbying") has changed fundamentally. I'm not sure I like the odds in either case.
In this context, executive pay is more than a symbolic issue. If the people who run the banks insist on being paid obscene amounts of money to do the job, then it is a clear indication that they are unwilling or unable to act in the public interest.
They are saying the culture has not changed and that short-term greed is still the governing value of their institutions. If they refuse to take massive pay cuts, it is time to do what the ad says and beat the bankers.
With a very big stick.