Anglo Irish Bank should not be operated as a going concern. Fianna Fáil cannot have that sort of influence over how much money is recovered from its developer friends, writes Richard Bruton
THIS GOVERNMENT is always playing catch up when it comes to managing our economy through the current economic crisis.
Their recapitalisation U-turn on Anglo Irish Bank is simply the latest manifestation of this delayed response to every problem.
Last summer they had a small, half-hearted, cut at wresting back control of the public finances. Then they went on holidays for three months. They then had another go at the problem with the rushed Budget in October that did more harm than good. It was built on foundations of fiscal fantasy. While ignoring warnings from all sides and all comers they will still have to have another go at controlling the public finances in the next six weeks or so.
The banking bailout guarantee was a short lived moment in the sun for this Government, until it was apparent that they accepted the banks claims that recapitalisation wasn’t required. Again, while all informed commentators said that recapitalisation was absolutely necessary, the Government agreed with the bankers and resisted a recapitalisation plan.
When the markets confirmed that the Government was wrong to have sided with the bankers who got us into this predicament they belatedly announced a recapitalisation plan.
Moreover, in this plan they included Anglo Irish Bank. Despite the incredible lending practises that emerged before Christmas, the details of which were confirmed at Anglo’s egm yesterday, and warnings from commentators and politicians like me, the Government forged ahead and committed €1.5 billion of taxpayers’ money into Anglo.
On Thursday the Government were finally forced into recognising their latest mistake. They ditched the recapitalisation plan, as Fine Gael had argued for just the day before, and committed to nationalising the bank. Fine Gael, however, stressed that the nationalisation plan should be implemented with a view to winding down Anglo in an orderly fashion over five to seven years with a new management team recovering whatever monies are possible.
It appears that Fianna Fáil is intent on nationalising the bank and operating it as a going concern. It is simply not credible that the State would continue injecting unknown amounts on a rolling basis into Anglo in some vain hope that the bank will be refloated. This is not realistic.
Given this unrealistic approach from the Government, it is vital that some very important issues are clarified by Fianna Fáil regarding their announced plans for Anglo and the viability of keeping the bank operating as a going concern.
The Fine Gael Leader, Enda Kenny, has written to the Taoiseach seeking clarification on a number of these issues. The response will tell us what the Government’s plans are for Anglo and whether we can have any confidence that this is an issue that they might handle better than any of the other economic disasters they have been associated with.
We need to know what is the Government’s long-term plan for Anglo Irish Bank and their unrealistic plan to operate it as a going concern.
Fine Gael also wants to ensure that a specialist management team will be appointed with expertise in the recovery, management and sale of distressed property-related loans. If necessary these experts should come from outside of Ireland.
It is also essential that the board be replaced by a board and chairman that would be vetted by a cross-party Oireachtas committee. This means that the political and financial communities, as well as the watching public, will be able to have confidence in the new board.
The danger is that, with the State now owner of Anglo Irish Bank, Fianna Fáil politicians will have influence over how much money is recovered from its developer friends who are Anglo’s debtors. It would be unacceptable if these debtors felt they could now get an easy ride because they think they owe the State rather than Anglo Irish Bank millions of euro.
One final issue yet to be clarified is whether there has been any implicit or explicit extension of the original bank guarantee scheme to the owners of preferred shares, subordinated debt and other Anglo securities.
Speculators and traders in these securities should not be in a position to earn a windfall gain at the expense of the taxpayer. The Government should clarify its position to make it clear that the owners of these securities will only be repaid if sufficient loans are recovered.
These are the type of crucial issues that need to be addressed before next Tuesday’s debate in the Dáil. The answer will help inform the Fine Gael contribution to that debate, but crucially, they may tell us if this plan of action by the Government will be a success where so many others in this and related areas have ended up back at the drawing board.
The economy, the markets, our businesses and the people they employ cannot afford any more trips back to that drawing board.
Richard Bruton TD is Fine Gael spokesman on finance