More on Anglo… July 7, 2013Posted by WorldbyStorm in Economy, Irish Politics.
Given the week that has been in it it’s easy to forget the Anglo issue. Indeed given the thoughts many of us had last week about how that might impact on political activity in the last three weeks before the Dáil recess it is interesting how the passage of the abortion legislation wiped it off the front pages.
As background here’s an interview conducted by Jason O’Toole in the Mail back in January 2011 with David Drumm. It provides some particularly useful insights into the mind set of those at the centre of the events.
Of course one has to factor in that this interview was given for a very specific purpose but even accounting for that it is interesting as an outline of how those involved have sought to provide a degree of cover…
Let’s start with something that gives a sense of the closeness between political and financial circles. The extreme closeness.
Drumm claims that Seán FitzPatrick had his first meeting with Brian Cowen in late 2007 when he was asked to become a member of the future Taoiseach’s adhoc team of advisors – his kitchen cabinet.
He told a friend: ‘In that part of late ’07 the writing was on the wall… And Sean was brought in to advise Brian Cowen. It came about because obviously good old Bertie was on his way out and Cowen was the heir apparent. Drumm claims Fintan
Drury, a long-time friend of Mr Cowen, made the introduction. ‘Seán was probably giving smart advice to Brian Cowen. He had very, very smart people around him.’ Drumm says that these kitchen cabinet meetings were ‘ad hoc, on demand, not scheduled, weekly, evening time, no real set tone’. ‘Seán attended these informal meetings. I cannot confirm that a meeting of the kitchen cabinet was ever held in the bank. In fact, I think they were usually in Government Buildings. The whole purpose of the (kitchen) cabinet was to get a broader brief, you know?’
Now it’s worth contextualizing the above with FitzPatrick’s thoughts on fiscal/social policy as expressed here just prior to the collapse of Anglo. It certainly puts those comments in a different light.
Some odd claims in the following:
‘THE point was that the German chancellor put money in to prop the bank up, but the treasury management agency only put €40 (million) in. This is an Irish bank, Irish money and the Germans have €200million – why can’t we get more from our own country? I’m sure Allied Irish Bank and Bank of Ireland would have had €100million. ‘It’s only now that I know that they had some issue with us, that they didn’t like us. They never came to us. They never cross-examined us on our numbers. They never asked to see our loan book. ‘We requested it to Brian Cowen. Our treasury colleagues were waiting for me to come back and tell them what happened. ‘I’d asked Brian Cowen had he done anything about it and we had a long conversation about our budget worries and that not only would we like the money, that that would help, that it would send out the right signal to the market – that the Government was supportive of the bank. (It was) to combat the negativity in the market. So, when I asked had anything happened with it, he got annoyed and said that he had – quote – “I told those f******”.’ He said, “I told those f******”. There’s no real proof, unfortunately.’ He adds that he wasn’t surprised that Cowen readily agreed to help Anglo. ‘Not surprised at all. Seán was in there.’
And that’s an interesting comment in itself, that last point.
Drumm claims that Anglo went to Bank of Ireland and AIB looking for help. Perhaps not unexpectedly, it was not forthcoming.
‘‘WE went down to the Bank of Ireland on the 29th because everybody was dying, 14 days after Lehman brothers. It was far more damaging to us because we were down to the bottom of the tank. Whereas the others just bleed, they could use their home loan books. We didn’t have that home loan lender. If it had kept going we might have lasted for another week or two, but not much longer. ‘AIB and Bank of Ireland right up to death’s door would not help us. On the day of the 29th we went to the Bank of Ireland and they were incredibly gracious towards us. But they told us, “We got our own problems”. All of us should go down to the Central Bank. I asked Brian (then Governor of Bank of Ireland), “Have you got your home loan books and you could use that?” He said he’d used up a lot of it already. They were in trouble.’ He claims that AIB ‘flat out’ refused to cooperate with Anglo. ‘Then the two of them (Bank of Ireland and AIB) hobbled off down to the Department of Finance.’ He believes there should have been more cooperation with the banks. ‘Someone forming a strategic thinking would have said this is going to come back and haunt us if one guy goes… Anglo goes, we might go.’
At this point, according to Drumm, the Central Bank resiled from giving Anglo money.
‘WE didn’t ask for a guarantee. We didn’t think a guarantee was a good idea. We asked for a secure loan from the Central Bank – of €2billion initially.’ He says this figure would have extended to €7 or €8 billion. ‘We offered up our loan book. A big part of our loan book as collateral. And they couldn’t get their heads around it. They couldn’t make a decision. The issue that they had was they had no money. Bob Barbour (at the Central Bank) told me that he had €4billion in a number of different pots. He said, “But I can’t give it all to you because I’m going to need it for other banks”. So, the sys tem was f*****. The ECB was effectively handed over control, if you want to call it that. Monetary control of the banking. So, they couldn’t get at the ECB. They did not respond. They didn’t really understand the climate.’ ThDuring a crucial meeting with the Central Bank, Drumm claims Seán FitzPatrick kicked him under the table to warn him off revealing the true horrors facing Anglo. ‘The Central Bank asked me on a couple of occasions not to bring him to the meeting, the chairman of the bank. They caught him kicking me under the table one day in the Central Bank to shut me up. ‘He kicked me after something I said. It was just about the survival of the bank. I got a lash under the table because all Seán could think about was his shares.’ He says the Central Bank was ‘very keen’ on ‘internal cooperation’ with the banks. ‘When we had meetings down there he would ask about an internal market solution. “You could be a partner with AIB, Bank of Ireland”. We always said AIB were a better fix because they were in our business, where Bank of Ireland was more conservative. We discussed a Life and Permanent merger with the Central Bank.
Meanwhile, back at the Government…
SEVERAL days before the Government’s bank bailout, Drumm says both he and Seán FitzPatrick walked down to the Department of Finance to meet an intermediary to be kept abreast of developments. ‘The way I know the intermediary is because in the crisis period in ’08, me and Seán – I’d never met the intermediary before in my life – ran up to meet him as a go-between to the Department of Finance. ‘We couldn’t communicate with the Department of Finance. So, we went down to the Department of Finance. They’d sit and they’d listen and they’d look and still in the end we’d be none the wiser, you know? ‘They wouldn’t tell us what to do. They wouldn’t help us… ‘We ran up to the intermediary earlier that week before the guarantee came in and just asking him, “What should we do? What are they thinking? “Are we doing the right things Are we doing the wrong things?”’
‘IT would have been the night before the board meeting or the night of the board meeting. It would be unusual for us to have a dinner on the night of the board meeting. Probably the Sunday night before the board meeting. ‘The dinner was for Brian Cowen. We put the dinner together for him. It would be really unusual to bring somebody with him. Brian sat there, one of the gang, right beside me.’ Drumm is adamant that senior figures in the Department of Finance were well aware of the problems facing Anglo and other banks. ‘Hold on, it’s simply implausible that for six or seven months of absolute trauma with Irish banks losing money daily, weekly – every other day another bank falling over. Ireland was becoming Iceland. The joke with investment bankers was there was one difference between Iceland and Ireland – one letter; it’s only a question when it goes. ‘Everybody ran away from the Celtic Tiger. Everybody was in that boat together. ‘So, for a politician or a senior figure in finance (department) to say that they didn’t know they were either not reading the papers, or were not talking to the bank, they were not talking to anybody. They were under their beds.’
Well, yes. But he neglects to note that the government had largely bowed to the whims of the financial sector for years previously. A sector which had adamantly set its face against comprehensive regulation or rigorous political oversight of its activities. And that this was something that came from the top of the political pyramid, the government in particular, but which infected a broader ‘orthodoxy’. In other words if politicians or senior figures in Finance ‘ran away’ that wasn’t a glitch, that was a feature. None of which is to remove culpability for such an approach from politicians who championed it, but it is to contextualize it just a little.
Then there’s the small matter which sometimes gets lost in these discussions of certain loans… some €70m of personal loans that FitzPatrick had.
‘ON the issue of the hiding of the loan, he admits that he did it. He admits that it was wrong. Frankly, nobody in the bank – but maybe we were distracted by everything else going on – ever foresaw the immense damage that would do to the bank. The shock heard around the world actually killed us. The thing about the loan is probably immaterial. What was wrong with the bank… the bank ran out of money. We just happened to f*** up at the absolutely worst time to f*** up. At one time, we were the envy of most other banks.
‘we just happened to run out of money’… hmmm.
Btw, some interesting analysis of Quinn here…
‘WE had seen a run on the bank, most people don’t. But I had experienced it in March ’08. We just about survived. We talked about Armageddon. The world was at the end of the line. ‘They took a run on the bank and we had a mini-run on the bank. We literally had to go into the vault and get ready to lock the doors, you know? The run didn’t take off completely. ‘We met the night we were told. You can imagine then the atmosphere that day happening again. It was very obvious for everybody that the problem is Quinn’s (Sean Quinn’s shares). Six or seven (percent) we would have said fine – 25 per cent was not on our mindset at all. 25 was just nuclear. ‘He owned a quarter of the company. We could be dead already. We had to get rid of this thing.
These guys don’t care about Sean Quinn, they care about hedge funds. ‘They would have fed the information and then taking the short position and kill the bank. ‘It was a bear hold. Quinn was digging a shallow grave. ‘A drop in the share price, the way that was read on the street was the market is telling us there is a problem with that bank, i.e. a credit problem. When the share price drops, money goes out the door. ‘The primary focus of the board and the regulator and the bank and the department of finance and everybody else was the Quinn thing. ‘There is no question, there never has been in my mind that Quinn was protected. Quinn is still protected. Quinn should be investigated. Quinn speculated with a credit institution. Corporate gambling. ‘Really he got away with it. Quinn shot himself in the foot and shot us while he was doing it. ‘If Quinn wasn’t a regulator entity, they then could have concentrated on the effect on Anglo. Quinn was a regulator entity; so there you had one regulator entity breaking the law, taking money out of the insurance company, buying stock, gambling the stock in the bank. It’s illegal. ‘Buying the stock wasn’t illegal, but because he was a regulator entity, it didn’t matter that it wasn’t illegal, the regulator could have forced him to… But they didn’t do it. ‘They knew that he was taking the money out. And rather than say, “Stop and put the money back”, he worked with Quinn, he worked with the bank – in the same mode as trying to save the bank at the same time.
Enter the Saudis…
In an effort to save the bank, Drumm desperately sought out private investors to take over the Quinn shares. He travelled over to the United Arab Emirates and to Saudi Arabia to meet with potential investors to get somebody to buy the Quinn stake. ‘Around the bank we talked about the Denis O’Briens of the world. ‘We met the Saudis. We actually thought it was going well, but then they didn’t go ahead. We had two meetings with Rabobank. They came to Ireland.
Exit the Saudis.
But that didn’t work either. There was a firm list, other banks. Morgan’s would make a phone call and say, “Western European bank of a certain size, are you interested type of thing.. He says Central Bank Governor John Hurley ‘was very very keen on internal cooperation…he was very keen on an internal market solution’. ‘We ran to the regulator and told them what we were going to do. They were thrilled. The main thing was, can you get it done? “Yeah, we think we can get it done?” ‘It was the last option available to us. The bank is on the verge of collapse. The issue was, “How much money went out today?” If the balance sheet wasn’t changing at all, we could have ignored it. Our daily cash balances were literally melting while this was going on. So, we had to do something. ‘We had our own discussion internally and said, “Look it, we go to the private (market)…” We were discussing a private sale option.’’
And more on Quinn Group
‘The Quinn group hired Morgan Stanley to place the stock. Morgan Stanley notified the Financial Services Authority in the UK. We’re not stupid. [That’s how] the shorting began. It leaked. ‘We had our lawyers and foreign people, an interested broker vetting the bank and it imploded. ‘We felt we would be handpicking the client who would have the financial wherewithal to handle that kind of exposure. €50 or €60million per person. The regulator denies… they f****** knew. ‘Same with the Quinn stock, the regulator knew about it. Not only did he know about it, he was organising things and at one point I’d say harassing me to get it done. ‘The regulator was hand in hand with us, and I’m not exaggerating, through all attempts… through going to the Middle East market, to phoning me on my mobile phone and asking, “How did you get on in the meeting today? Have you got another meeting tonight?” People don’t see the regulator that way. ‘I find it hard to be critical of the regulator from the place that I was in because what was happening was the global financial system had completely collapsed.
And as for the following, there’s a lack of acceptance of reality that’s telling.
‘There is an issue with the media because the Government has got away with blaming everything on the bank. And it’s not credible. Somebody killed the country. It wasn’t us. €20billion was the debt of the country, that was created in the time of Bertie Ahern with Brian Cowen. ‘They are still in government. The country cannot move on when the people that wrecked the country are still in power. ‘We need a new government. I would be very happy to join everybody on the one stage – Brian Cowen and all the rest. I’d be happy to admit all my mistakes. ‘But the problem is they want me to do it all on my own.’
Still, for all that fascinating.