A million here, a million there – Who cares?

A typographical error by a government official in 2002 resulted in two barristers employed by the Moriarty tribunal earning an extra €1m over the past six years.

The “typo” seven years ago added €250 per day to the agreed €2,250 “per diem” fee paid to John Coughlan and Jerry Healy, the two highest-earning barristers in all the recent tribunals.

Despite being spotted shortly after it occurred, the mistake was not corrected by the Department of Finance. After legal advice the higher payment of €2,500 was sanctioned, so Coughlan and Healy were paid a higher per diem than any barrister in any tribunal.

The mistake was revealed in the Comptroller and Auditor General’s report published last Thursday.

The Sunday Times

My comments:

What’s to stop civil servants arranging such ‘errors’ across a wide range of departments and splitting the spoils with confederates? Citizens can be forgiven for assuming that such ‘deals’ are common.

Has the senior official in the Department of Finance, who make the mistake, been sacked or promoted?

If senior counsel had been underpaid by a million would the legal advice have been – ‘Tough, you have to suffer the loss?’

If somebody on social welfare was over paid by, let’s say, €50, could they, like the learned gentlemen, (legally) refuse to give it back or would the full force of the State come down on them like a ton of bricks?

Someone to watch over us

From Times Online

G7 ministers ‘must help struggling Ireland’

Simon Johnson, former IMF chief economist, says country must not be next Iceland

Simon Johnson, the former chief economist of the International Monetary Fund (IMF), called for this weekend’s meeting of G7 finance ministers to put Ireland’s troubles at the top of the agenda.

His comments come as the cost of buying insurance against Irish government bonds soared to a new record high on Friday, having almost tripled in the space of a week. Debt market investors now rank Ireland as the most troubled economy in Europe.

Johnson said: “A key warning sign just moved from orange to red. The G7 ministers of finance and central bank governors need to focus on this problem during their discussions (this weekend). What is the strategy for Ireland? Does the European Union come in to help? Is this a job for the IMF?

“Just don’t, please, tell me more about the ‘basic principles’ of financial reform unless and until you have addressed the ‘Irish problem’. And don’t tell me, ‘the Irish have to sort this out for themselves’. Eventually, the world always comes to help; check your notes on Iceland. It’s much better and much cheaper to come in early and decisively.

“We need a plan of action for Ireland, and we need it now. What we don’t need is another Iceland-type situation.”

Following the scandal at Anglo Irish Bank over undisclosed loans, the market fears there are more hidden problems which could ultimately fall to the state to resolve.

The Irish government has stated that it needs to borrow €20 billion this year. Gross debt as a percentage of the country’s gross domestic product, which was just 24.8% in 2007, will increase to 53% this year and 62% in 2010. These figures assume no worsening in the country’s finances.

The cost of insuring Irish debt hit 350 basis points on Friday, meaning that for every €100 of debt it would cost €3.50 to insure against default. A year ago it would have cost 10c to insure every €100 of Irish debt.
Insuring Greek debt against default costs about 250 basis points, while Italian debt insurance costs about 170 basis points. UK debt insurance, which has also spiked considerably, costs about 150 basis points.

Debt-market experts said any potential debt default in Ireland was still considered to be a long way off, but the problem would have to be addressed at some point.

One strategy being discussed by analysts as a possible solution would see Germany buy billions of euros of Irish government debt through a fund set up by the European Central Bank.

“I don’t expect Ireland to default, but it’s clear that something has to happen,” said one credit strategist at a large investment bank.

Fears of sovereign default are rising around the world. The IMF has warned that its pot of emergency funds to bail out troubled economies could run dry within months.

The organisation, funded primarily with contributions from the US and Europe, is thought to be in talks with China about securing a $50 billion (€38.8 billion) loan to shore up its coffers. However, talks could stumble over conditions attached to the deal.

A further $50 billion is expected to come from a Middle Eastern consortium, led by Saudi Arabia. The members of the G7 would also be expected to pledge about a further $100 billion as part of any refinancing deal.

Johnson worked at the IMF from March 2007 until August 2008 on leave from the Sloan School of Management at the Massachusetts Institute of Technology. He is considered an expert on economic crises. He has worked on crisis prevention and economic growth.

The slide into oblivion continues

Enda Kenny has called on (invited?) the board of the Financial Regulator to resign.

John Gormley has promised that the bankers will go to jail and that Ireland will have the most comprehensive regulatory system in the world.

IBEC Director General Turlough O’Sullivan said he believed bankers were guilty of greed and criminality and should be made to face the consequences.

Brian Cowen has also said that justice will be done, that rogue bankers will be brought to account.

It’s all about sending messages to the international community to convince them that Ireland is not the corrupt banana republic it really is.

But methinks the gentlemen are a mite too late – about 50 years too late. The game is up; the international community can see exactly what we are.

But maybe, just maybe, there’s hope. If these gentlemen, somehow, miraculously, managed to see the reality of the situation they might realise that the absolute minimum action required is as follows.

The immediate sacking and arrest of the entire board of the Financial Regulator (Even if only for the optics).

The immediate arrest of former Financial Regulator, Patrick Neary, and the cancellation of his grotesque pay off.

The immediate arrest of Sean Fitzpatrick, Gillian Bowler and Denis Casey on suspicion of fraud (Economic treason could be added later).

This is the absolute minimum signal required if Ireland is to have any hope of convincing the international community that we are serious about rooting out the rot that has infected our country for decades.

There is, of course, no hope of this happening because these gentlemen live in a fantasy world where they genuinely believe that Ireland is a normal democratically accountable state.

The slide into oblivion continues.

Justice – At some point in the far future

Daniel McConnell has a very good analysis of the Anglo Irish Bank/Irish Life and Permanent fraud in today’s Sunday Independent.

Here’s a snippet that gives us a clue as to how far Ireland is away from taking real action against white collar criminals.

“The regulator said the transactions were “completely unacceptable” and that its investigators have been asked “to complete their work as a matter of extreme urgency”. Then the Director of Corporate Enforcement confirmed that Irish bankers could face jail and that actions by senior people in Anglo Irish Bank appear to be “illegal.”

‘A matter of extreme urgency’ for an Irish regulator would be about, mmm…let’s see, about ten maybe fifteen years.

In a real democracy there would be no ‘could face jail’ or ‘appear to be illegal’. Handcuffs would have been applied immediately.

O'Connor's solution

In times of crisis it’s always good to have a laugh and Sunday Independent columnist, Brendan O’Connor never fails to deliver. His musings are all the more hilarious because they’re presented, not as mad humour, but as serious analysis.

Here are some of his suggestions on how we should deal with the ongoing crisis.

A free U2 concert in the Phoenix Park, ask the Pope to visit, get the scouts out at weekends to help people, get choirs out singing on the streets, put Cowen on the back of a lorry and send him on a tour of the country putting fire in people’s belly with his inspirational speeches, take the mothers of Ireland out for a Government sponsored coffee break once a week, and most bizarre of all – appoint Martin Cullen as Minister for Inspiration and willie O’Dea as crisis manager.

O’Connor admits it might all sound a bit cracked. It is Brendan, it is but it’s also very funny.

Banker in denial

“I’m frustrated that the banking sector in Ireland has been tarnished by what has materialised in Anglo Irish”, National Irish Bank (NIB) chief executive, Andrew Healy told the ‘Sunday Business Post’ (Irish Independent).

Clearly, Mr. Healy is totally ignorant of the long and dishonourable record of Irish banking and he’s obviously ignorant of the mafia type operations indulged in by his own bank in the past.

The Anglo Irish Bank scandal is not an isolated case that has brought a previously honest banking industry into dispute. Rather, it is just the latest example of dodgy dealing by Irish bankers who have robbed countless millions from customers and state over many decades.

The Irish financial sector is a totally discredited industry awash with crooks and gangsters. That situation will only change when long jail sentences become the norm; I’m not holding my breadth.

Copy to:
Andrew Healy

Golden circles and obscure data

Two articles worth reading in the Sunday Independent.

In an analysis of our financial situation Shane Ross tells us of a tiny table of numbers he came across in the Financial Times.

“The table was forbiddingly titled “Bonds — 10 year Government Spreads”. As Charlie McCreevy said about the Lisbon Treaty, “no sane mortal” would read it.

But its message was alarming.

In layman’s language it told where Mother Ireland rated as a credit risk among 21 selected countries.

Go on, guess.

All right, you are bang on. Twenty first. Out of 21 countries listed on Wednesday, we were considered a worse credit risk than the destitute Greece. In Greece there are riots on the streets.”

The second article, by Louise McBride, analyses the Irish golden circle.

It’s an amazing story of the incredibly incestuous crossbreeding within the corporate sector. It is particularly disturbing to note the number of senior civil servants who casually and without any restrictions move into the golden circle.

Obama targets Ireland

According to a report in the Sunday Tribune President Obama is about to crack down on overseas tax havens.

This is very bad news for Ireland which has, effectively, acted as a money laundering state for US multinationals. (See previous post on this matter).

The Department of Finance said the issue was being oversimplified but international tax expert Richard Murphy said the Irish government was “in a state of denial.”

So what’s new?

Financial Regulator – The leopard doesn't change its spots

On 21st Jan last (2nd report), the chairman of the Financial Regulator, Jim Farrell, appeared before the Oireachtas Finance Committee to answer questions on the banking crisis. Here’s what he had to say about the Anglo Irish Bank debacle.

“The action that was taken was in the context of the environment of the time…The Financial Regulator has relied on appropriate management and controls in firms ethical behaviour and true and fair reporting by firms and their auditors as well as on site inspections by supervision actions by the regulator. It is clear that in the case of Anglo Irish Bank this did not happen. We are committed to putting in place measures to try and ensure nothing of this sort can happen again including if necessary requesting government to introduce new legislation.”

This is a standard reflex response employed by politicians and bureaucrats in defence of light touch regulation that has allowed financial institutions to rob countless millions from customers and the State.

As I write, the ‘environment of the time’ that Farrell speaks of is still with us and his promise to introduce new measures to rein in the vermin that infest the Irish financial sector is, at best, dishonest. It is an absolute certainty that no effective action will be taken to deal with these people.

The following day, On Morning Ireland (3rd report, 2nd item) , Jack Fitzpatrick of the Professional Insurance Brokers Association responded to Farrell’s comments.

“We represent almost a thousand member firms in every county in Ireland. Regulation seems to be for the small guy, the regulator already has the power to fine any individual up to €500,000 and any company up to €5 million so the legislation is there. Sanctions have been imposed on small and intermediary some have been put out of business. No sanctions have been applied to banks, nobody in the banks has been fined and we’ve had various things ranging from the NIB tax evasion, overcharging by banks to customers, all that happens is refunds, nobody resigned, nobody was fined.”

Fitzpatrick went on to say that there was no reason why current legislation cannot be used against former Anglo Irish chairman, Sean Fitzpatrick and that there was a far too cosy relationship between the regulator, the Central Bank and the banks.

These comments prompted Jim Farrell to ring Morning Ireland (3rd report, 3rd item) (He didn’t have the courage to go live on air) to dispute Fitzpatrick’s claims that the regulator enjoyed a cosy relationship with the banks. Mr. Farrell said the authority did not have powers to impose fines when the overcharging emerged but it later recovered €167 million on behalf of customers.

This dishonest statement is proof positive that the Financial Regulator has not changed its spots, that it remains a staunch defender of a ruthless and, for the most part, corrupt financial sector.

Farrell’s claim is dishonest because the Financial Regulator has had the power to impose fines since 1st August 2004 under the Central Bank and Financial Services Authority of Ireland Act, 2004.

Since that time there have been numerous instances of overcharging but not a single institution or official has been fined. The effective policy of the regulator towards errant banks still remains – just pay back the monies robbed and carry on.

Copy to:
Financial Regulator
Jim Farrell