The smartest guys in Ireland


By Fintan O’Toole (for the Irish Times)

“Slick and buccaneering”. In Patrick Honohan’s official report on the role of the Central Bank of Ireland in the implosion of the banking system, he explains that these were the terms regulators applied, privately, to the management of Anglo Irish Bank.

After the release of recordings of internal phone calls between some of those executives, Irish citizens might have added a few more terms: arrogant, cynical, greedy, contemptuous, myopic, feckless, amoral - and a string of unprintable ones besides.

For all the extenuating pleas of gallows humour, it seems clear that the men in Anglo were confident that, whoever got hung out to twist in the wind, it was not going to be them.

Listening to the tapes, it is hard to remember that David Drumm, John Bowe and Peter Fitzgerald are not crazy or delusional. They are not in denial. They know very well that they have destroyed their bank and threatened the jobs of those who work for them. They know, too, that they are about to cost the Irish people many, many billions of euro. They know that they have screwed up monumentally.

In this light, the only thing that is really shocking about the tapes is what we do not hear. There is not a single moment of embarrassment or regret, not the slightest undertone of shame.

Nor is there even a sense of fear. These men are not worried about what is going to happen to them. A line of Peter Fitzgerald’s, referring in his boy’s-club manner to his boss, David Drumm, says it all: “As Drummer says to me, ‘Don’t worry: we’re going to be around a long time.’ “

These are men who know that, whatever happens, they can play the system to their advantage. While Bowe singing “Deutschland, Deutschland ueber alles” mockingly to Drumm might be the moment that will be remembered around Europe, for Irish people the real anthem here is not Der Deutschlandlied but Hakuna Matata. The chorus is Drummer’s line to Bowe: “I’m relaxed about it, John.”

Cost to taxpayers

The only expression of anxiety is Bowe’s admission of a concern that the authorities “might say the cost to the taxpayers is too high”, but it’s a concern that has already been allayed. There is already a confident belief that this obvious truth will be avoided by sucking the Central Bank in for a relatively small sum of liquidity and then forcing it to throw good money after bad: “You pull them in, you get them to write a big cheque.”

The guardians of the public interest are literally not a problem.

How do they deal with the knowledge that “the cost to the taxpayers” of their collective screw-up will probably be catastrophic? They wrap it in a language that distances themselves from any danger of moral responsibility.

The bankers are acutely self-conscious about language. Drumm even makes the point that, in dealing with authority, Anglo must control the linguistic agenda “because, if we stay in their language, nothing happens”.

But they also use language to control their own understanding of what they are doing. We hear different kinds of language on the tapes; four verbal strategies for avoiding any acknowledgment of the human suffering that is the price of their idiocy.

The first, favoured especially by Fitzgerald and Drumm, is the tough-guy Americanised business cliche: “Skin in the game”; “What’s the playbook like?”; “The donkey in the room”.

The second is macho vulgarity. Bowe talks of [euro]7 billion as a figure he picked out of his a**e; Drumm gives orders to “stick the fingers up” to the regulator’s concerns about the abuse of the bank guarantee and peppers his conversation with lines that seem to come straight from the hustlers in David Mamet’s play Glengarry, Glen Ross: “Do you want the f***ing keys now? I can give them to you.” (We can hear the others, in their sycophantic desire to emulate Drummer, echoing his style among themselves.)

The third verbal strategy is surreal understatement: “I don’t think we’re an easy sell to anybody.”

And lastly there is the big joke, especially at the expense of the hapless regulator, Patrick Neary. His hand-wringing - “It’s f***in’ awful what’s going on out there” - is, for them, a hoot. For the Anglo boys, regulation is almost literally a farce. They play out their contempt in mocking mimicry of his ineffectual expressions of concern.

At one point they knock some fun out of repeating, as a patent absurdity, the great cliche of reassurance that was fed again and again to the Irish public by politicians and officials as things fell apart: “We are monitoring the situation carefully.”

Karl Marx said that everything in history happens twice, the first time as tragedy and the second time as farce. But what we hear in the tapes is a tragedy being played out simultaneously as farce. For the Anglo boys, the whole thing is a breathless, madcap, often hilarious burlesque. On the streets it will play out as Shakespearean tragedy, with corpses all over the stage, but in here it’s a comedy of the absurd.

At one point Drumm calls the regulator “F***ing Freddy f***ing Fly”, a sardonic reference, presumably, to a character from the Dandy comic, Freddy the Fearless Fly. And what do you do to catch a fly? You spin a web.

One of the most striking things about the recordings is how theatrical they are. Drumm, again rather acutely, notes that the key to the whole crisis is not reality but perception: “Everything is in the head.” The reality may be that of a giant Ponzi scheme finally tumbling down, but the perception must be that Anglo is a systemically important institution that cannot be allowed to go under, at any cost.

This is why the bankers talk not just like gangsters but like actors playing gangsters. The crisis, from their point of view, is one enormous role-playing exercise.

They play out different characters, including the pathetic regulator and a very senior figure in their own bank. On a day when the bank has lost [euro]1 billion in deposits Bowe imagines the blustering reaction of this famously bullish figure: “A great day. A great buzz in the dealing room. Everybody’s tail was up. Fantastic.”

But as well as playing characters the Anglo executives become characters in their own little plays. They think through what Drumm calls “the game plan” or “the playbook” for meetings with the Department of Finance.

The interesting thing about this playbook is that it’s not about the kind of thing we might naively suppose to be central to the crisis: detailed figures for losses and liabilities, bonds and assets. It’s all about personal performance. The whole thing is an act.

‘We need the moolah’

Drumm writes in advance the play that he and Bowe will perform for the Department of Finance. “Get into the f***ing simple speak: ‘We need the moolah, you have it, so you’re going to give it to us, and when would that be?’ We’ll start there.”

In the play they are devising they are not bankers but bank robbers, bursting through the doors of the State, waving shotguns in the faces of cringing civil servants and politicians.

The startling point, though, is that these demented little plays became our reality. We live in the grotesque farce they devised. For just as it is clear from the tapes that the bankers were not in denial about the scale of the mess they had created, it is clear that they were not at all wrong to believe they could treat the State as one big joke.

Freddy the Fearless Fly was easily caught in their web. The taoiseach and the minister for finance did give them the moolah. Drummer’s playbook became, within months, the language of the State: “systemic importance”; “national interest”; “austerity”.

The hidden clauses in the Anglo game plan are national bankruptcy, Nama, the troika deal, the loss of national sovereignty, mass unemployment and mass emigration. Instead of seeing the Anglo boys as idiots clinging to illusions in the face of catastrophe, we have to face the truth that they were the ones who grasped the fundamental truths that Anglo could play the State like a Stradivarius and that Ireland would dance to its tune.

What comes across in the recordings as insufferable arrogance is in fact just a keen realism. The bankers, not just in Anglo but also in the more venerable but equally reckless Allied Irish Banks, knew that the real delusions were the ones that were spun for public consumption: that the State operated in the interest of citizens, that so-called regulation could stop bankers from doing anything they wanted to do.

The bankers’ contempt for the State and the regulators was entirely justified. Which is more grotesquely absurd: the macho swaggering of the Anglo boys or a typical speech by the head of the regulatory authority in 2004, assuring the public that light-touch regulation was best because “the boards and top management of financial institutions” were “committing fully to a culture of integrity, competence and best practice”?

How the boys must have loved repeating that in a funny, namby-pamby voice.

The bankers’ verbal strutting is rooted in a simple truth: the Irish banking system had already got away with a monumental fraud on the State. In 2001, as the property boom was really taking off, the Oireachtas Committee of Public Accounts published its devastating report on the Dirt scandal. It found that all of the major banks had been running a huge fraud since the 1980s, allowing their Irish-based customers to avoid deposit-interest retention taxes by pretending to be resident outside the State.

The bankers must have feared that there would be consequences. But nothing happened: no one was prosecuted, no one was sacked, no one had to pay any price.

Bankers lobby

What the bankers discovered was that instead of facing punishment or even tighter regulation, they could see off even the mildest attempts to rein them in. A telling example is one recommendation in the Dirt report: that bank directors should have to sign individual statements that they were complying with their legal obligations.

This was hardly a revolutionary idea, but the bankers didn’t like it. They geared up their lobbying operation and made some threatening noises about how the horses at the IFSC might be frightened, and the idea was dropped.

The same thing happened with another gentle movement towards some kind of ethical regime, a statutory code of corporate governance. It, too, was dropped in the face of bank lobbying.

From these experiences the bankers learned two important things: that they could get away with anything and that they could call the shots with both officials and governments.

The Dirt inquiry criticised both the Department of Finance and the Central Bank for excessive closeness to the banks. What happened? The new regulatory regime was characterised, as Patrick Honohan, the head of the Central Bank, put it in his report, by “deference and diffidence to the regulated entities”. The official attitude to the banks was, as Honohan pithily characterises it, “Walk softly and carry no stick.”

And if the officials were diffident and deferential, it might well have been because their political masters were openly in awe of the pink-shirted bluffers who could do no wrong - not least because, when they did do wrong, it was all right.

The slick buccaneers at Anglo understood the real Ireland behind the facades of democracy, patriotism and the “national interest”. They saw with cold clarity that the rest of us lived in their world. If they come across on the tapes as sickeningly supercilious, it is only because they do not bother with sentimental niceties such as respect for the State or concern for the welfare of their fellow citizens. If those niceties were necessary, they had people to do that sort of stuff for them, politicians to put a gloss of decency on the brutal truth. That truth was that a small financial elite could dictate terms to the rest of society.

It still does.

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