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Alan Dukes interview… February 22, 2011

Posted by WorldbyStorm in Economy, Irish Politics.
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A very interesting interview with Alan Dukes in the Mail conducted by Jason O’Toole which sort of provides a run-down of just what things will be like after the election.

Chairman of Anglo Irish, Alan Dukes has gained a reputation as the prophet of doom whose predictions on the collapsing state of our economy have been frighteningly accurate. When Fianna Fáil Finance Minister Brian Lenihan appointed the former Fine Gael leader as a public interest director on the bank’s board – in December 2008 – he wasted no time in getting to grips with the problem. He marched into the Department of Finance and warned the mandarins their prediction that €1.5billion would be needed to recapitalise Anglo was a ridiculous under-estimate. He insisted that an additional €2.5billion – at least – was needed. They scoffed that he was ‘exaggerating the figures’. And they were wrong. His latest prediction – that an additional €15billion will be needed, along with a doubling of Nama’s budget to €75billion, for our banking system – is being similarly criticised.

Duke’s isn’t too worried about saying it like it is.

The politicians who balk at his predictions are really ‘talking out of both sides of their mouths’ and will have to ‘eat their words’ after the General Election, the straight talking chairman tells me when we meet at his plush office on the fifth floor of Anglo’s HQ on Burlington Road.

And…

The conversation quickly turns to the 65-year-old’s alarming predictions about the need for an additional €15billion, which prompted an outraged Enda Kenny and Leo Varadkar to categorically state that ‘not another cent’ would be pumped into our ailing bank system. ‘Well, I think that they are responding to a kind of emotional movement in public opinion, which I fully understand, but in a way which I think is not very wise. And I make this point about political parties in general. They seem sometimes to forget that people are going to remember some months down the line what they said during the course of the election. And a lot of words are going to have to be eaten. ‘And I don’t say that with any pleasure or vindictiveness, but if you make resounding statements on a less than fully informed basis they’ll come back to bite you. I find that the level of information in all the political parties about the mechanics and the implications of the banking scene is less than perfect.’

The problem is, though, that Dukes seems to accept that this is the way it is and this is the way it’s going to be…

Dukes not only stands over his assessment that a mind-boggling additional €15billion will be needed, but goes even further and states that it may be even more again. He explains: ‘While it may be a difficult message to sell to the public, I think we’ve seen enough of the way this crisis has moved to be able to say that any figure given can be subject to change – either up or down. To the good or to the bad. ‘But as Groucho Marx’s said: “Forecasting is very difficult – especially when you’re talking about the future”. Anybody who claims to be able to put a figure on what this is all going to cost is taking a punt. ‘Now, some of them may be better informed punts than others but they are all punts.’ Pardon? A punt? Dukes painstakingly explains that it’s all down to chance because the continuous drop in the price of property means that the value of the loans given out by the banks also continue to fall, and because of this the ‘impairment gets bigger and bigger as we go through it’. Worryingly, he believes that property prices could plunge further. ‘I don’t think we’ve seen the end of the property price fall. And we won’t know that we’ve seen the end of it until prices start to move up again. And I don’t expect that to happen anytime soon.’ He is therefore critical of the outgoing Government’s decision, last September, to put a definitive cost of €50billion on the banking crisis, saying it is too soon. ‘

So we see the costs of all this rise and rise. Remember when the Budget deficits were the hot-button issue? Well, we haven’t seen anything quite like this before….

Even more alarmingly, Dukes maintains that the incoming government might have to go back to the ECB and IMF with a begging bowl for additional funding on top of the already crippling loan of €85billion we have taken out. ‘I don’t think we can rule that out completely,’ he says.

A way out of this? He tilts towards one…

And he warns that ‘without wanting to scare the horses’, all options need to be examined at ‘eurozone level’ – including the possibility of default.

But backs away…

He says: ‘Default is one of the things that will certainly be looked at in terms of public policy. But whatever course of action is taken – and the eurozone seems to be against that particular one – I think it has to be taken at the eurozone level. ‘Personally, I think that there’s an awful lot more work that has to be done at the eurozone level. A resolution has to be found at that level. And if that means that all of the options have to be carefully examined at eurozone level, that’s fine. But it has to be done at that level. ‘A potential problem like this in any part of the eurozone is a problem for the whole eurozone. And we’re part of that. So far, the approach to that has been partial.

As for culpability?

…he believes it is important to state that it’s ‘too easy a narrative’ to simply point the finger of blame at Seán FitzPatrick and David Drumm because ‘Anglo wasn’t the only bank that had those particular problems’.

Maybe it’s me, but that seems to too sanguine a view. The issue was a culture in Irish financial circles (though not restricted to them). But he’s not averse to a little finger-pointing either.

He puts a considerable proportion of the blame for Anglo on the Financial Regulator of the time. ‘There were serious problems in the way the regulatory system worked. I was appalled, shortly after arriving here, when I saw from the inside the amount of reporting that banks do to the regulatory system, and reflected that the regulators had never taken the action that was required to stop over concentration.

Indeed, and who would disagree with him? But the Financial Regulator and the regulatory system were the product of the political context, one where the private sector sought to minimize regulation (indeed up until a year or two ago there was a government task force directed to further deregulate the financial sector – quietly shelved for some reason though in more recent times).

‘When the public interest directors got here, this bank had broken through every conceivable potential limit of concentration by sector or by borrower or by group. ‘And all of that information was available to the regulators because even though we called it ‘light-touch regulation’ the amount of information that goes to the regulator from banks is huge. And they certainly had enough to see what was building up. And I can find no evidence that they made any real effort to stop it.’

What he doesn’t seem to notice is that the regulator had no real regulatory teeth, as noted here, precisely because of a political/economic approach rooted in neo-liberalism. This wasn’t just light-touch, this was no-touch – deliberately crafted as such, and while the Regulator was at fault, how much more so was the broader political system, a right of centre one at that, which allowed this to happen, hand in glove with the private sector.

Some might find this averting of his eyes to that small detail curious given that he was the man who in the late 1980s sought to reposition FG as a ‘social democratic’ party… but there you go.

He finds it ‘laughable’ that former Taoiseach Bertie Ahern is in denial when it comes to accepting his responsibility for the crisis. ‘One evening sometime after Bertie had left [as Taoiseach], I saw a headline on the front of the Evening Herald, where Bertie said, “Everything was grand when I left”. And I nearly creased myself laughing. ‘I thought, “Either that man had no clue what was going on all around him or else he’s rewriting history”. I think his protestation that nobody told him what was going on in the banks are absolutely laughable. Those are the kindest words I can use about it.’

And he gets a bit confused here…

…he also rubbishes some of the arguments that were put forward by his old party Fine Gael and by Labour about how they would have handled the banking crisis. ‘There have been contradictory and rather ill-judged statements about what should have been done. For example, Fine Gael, at one point, wanted every bank to be broken into a good bank/bad bank and given a year to prove whether the good bank could work. I think that kind of timescale was utterly unrealistic. ‘ He says: ‘The Labour Party objects to the State having taken on the debts of private banks and yet says they had wanted to nationalise all the banks. I don’t think those two things square together.

Well, aren’t those two rather different issues? Leftists, and I’m not entirely certain of LP policy in regard to bank nationalisation, seek banks run in the public interest, which would lead – at the least – to a rather different configuration as regards banking structures. So the elision of the two points of view Dukes purports to put out seem to me to be a bit askew.

However, even though he understands there’s an appetite among the public for reckless bankers to get prison sentences, he admits he can’t envisage it coming to pass. ‘There are several investigations. They’ve been going on for rather a long time. I can understand that the authorities want to know that there’s a good prospect of succeeding if they take prosecutions. I don’t know whether that will happen and if it does whether they’ll succeed. ‘And the most unsympathetic, or apparently unsympathetic thing I can say, is that there isn’t any way in 2011 we can jail people for having committed a crime that we define in 2011 but that they allegedly committed in 2007 or 2006. ‘Retrospective legislation of that kind just doesn’t work. And I’m afraid that to a certain extent, being an imprudent banker or an incompetent civil servant are not crimes.’

Which neatly avoids placing the blame on the actual socio-economic approach cheerled by ‘imprudent’ bankers, their political allies and a range of media and other sources.

Comments»

1. Pope Epopt - February 23, 2011

Have I mention before that we are royally screwed?

The insouciant way in which Noonan talks about taking on another 15 billion of debt ( in a country with a population of 4.5 million and falling) to pump into institutions which are still no use to man or beast, makes despair the only feasible option.

Still, in for a penny…, and this kind of nonsense can only hasten the next round of the financial crisis.

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LeftAtTheCross - February 23, 2011

Yes, painful but necessary, and not in the “taking tough decisions” sense either.

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2. EamonnCork - February 23, 2011

There’s no more remarkable example of how this society enables people at a certain level to go through life making a mess of everything they’ve ever done and continue to prosper than Alan Dukes. Not an iota of self awareness or humility there, just an almost patholgical sense of entitlement. A jackass.

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3. EamonnCork - February 23, 2011

And speaking of Fine Gael jackasses, one small consolation for their election result will be seeing Garret, so eager to sneer at Kenny, having to watch the man break his seats record.

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4. Anonymous - January 9, 2012

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