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Thanks very much. Sorry for the delay. I actually was at an Anglo results presentation just
there where they said that they are going to issue legal proceedings against Michael
Fingleton today so they’re issuing a plenary protective summons which is, which seems to
be a ... they didn’t explain what it was about but it’s a block that they’ve put
in that gets around the statute of limitations. But anyway they’re going to issue proceedings
later today and they’re obviously trying to get around the statute of limitations which
is a 6 year block, as far as I understand it, with regard to contractual issues so they’ve
obviously found something that they can try and sue Michael Fingleton on but they need
to issue proceedings today so hopefully we’ll find out later today, hopefully we’ll be
able to read about it in The Irish Times tomorrow.
So as Padraic said I am author of two books and I am a Finance Correspondence in The Irish
Times so I’ve been covering the banking story for 4 years now and prior to that I
worked in the Sunday Business Post where I was News Editor. And I guess the timing of
the book is interesting because the first book over there was written in 2006, published
in 2006, I finished writing at the end of 2005 so it kind of somewhat predates all the
crises that happen and all that’s emerged with the banks since then. So I suppose the
scandals in that book are in a ha’penny place to the scandals in this book but there
you go.
So just I want to give just a brief history of Anglo, it was founded in the 60s and later
emerged into City of Dublin Bank, both kind of fairly small banks, Anglo was a pretty
tiny minnow in the market and then it kind of developed and really only became ... Sean
Fitzpatrick only became involved in it in the late 70s. He was originally in a bank
called Irish Bank of Commerce, it’s kind of confusing, the structure, but in the late
70s Fitzpatrick, who as an Accountant, was put in to run Anglo Irish Bank in ’78 and
he had been moved in from Irish Bank of Commerce which was itself a subsidiary of City of Dublin
Bank so, and he really allowed him to kind of steer his own ship and he developed Anglo
as he saw it really into a ... what started off as a lender that would really do various
small time lending in trade finance and guarantees and exports and bridge financing, so if you
were moving house and you wanted to sell your house and get a loan to buy the next house
without the mortgage being drawn through, he would provide that. And then gradually
he got more and more into property lending and it was specifically secondary properties
or investment properties for professionals, the likes of doctors, lawyers, dentists, accountants,
for those kind of people who wanted to buy their own office space or to have buy to let
properties and he saw a niche in that market and really developed that. And then I guess
as a sign of Anglo’s strengths and how it rose under Fitzpatrick it actually took over
its parent in the mid 80s and it’s around ... it was in 1987 that the Anglo name appeared
in the stock market and then a short time later it took over the bank that Fitzpatrick
originally worked in, Irish Bank of Commerce, and that acquisition actually was very much
instrumental in Anglo getting into property developers and the property development space
and Irish Bank of Commerce would have had a lot of clients whose names you will be familiar
with today. They had Paddy Kelly, Gerry Gannon and the Bailey Brothers. So Anglo was kind
of in the property space but its takeover of Irish Bank of Commerce really pushed it
into the space of lending to developers, builders, many of the names who became very wealthy
in recent years and then bust in the current time. And the bank was also very active in
the early 90s I suppose that given that it was in the property space it became very active
in developing pubs and hotels and it lent to the likes of the O’Dwyer brothers who
are behind some of the pubs and the super pubs, like Cafe En Seine, Break for the Border
and some of those properties. But Anglo really spotted a niche in the 90s when the property
market started rising, it saw that it would support developers and builders from its relationship
through its relationships in Irish Bank of Commerce and at a time when AIB and Bank of
Ireland didn’t really want to have anything to do with the property market, they still
thought it was very high risk. And I guess AIB and Bank of Ireland would have been regarded
in the 90s as quick sleepy to react to big changes that were taking place in the property
market whereas Anglo had these guys and there were a lot of developer clients who were sitting
on very large undeveloped land banks, again very familiar names now given what the property
market went through and the boom when through, so it was kind of bank rolling the likes of
Gerry Gannon in North Dublin and West Dublin and Sean Reilly, a Cavan developer, in South
Dublin, Joe O’Reilly who went on to build the Dundrum Shopping Centre and then Gerry
Barrett in Galway and then eventually got into major investment properties, the likes
of Derek Quinlan and all the money that he gathered from his clients and property investors
and then internationally the likes of Sean Mulryan’s company Ballymore which develops
... it is very prominent in the UK and in Eastern Europe and Treasury Holdings which
is Europe, China, Sweden and France – its developments are very international.
So I guess when Anglo spotted this market and saw how much money there was to be made
in it and the property value started rising that’s when AIB and Bank of Ireland started
to react. They saw Anglo making very big profits and there’s a famous quote from Michael
Buckley where he said, you know, ‘Anglo joined us for breakfast but now they’re
eating our lunch’ and so they had wanted to fight back and get back some of that business.
So 2003/2004 you see AIB starting to react and Buckley set up what he called a ‘win
back team’ where he said ‘I want you to find out what Anglo are doing to get all this
business that’s making them so much money and their investors so much money from the
stock market. And I want you to replicate that’. So AIB set on a course under Michael
Buckley to start taking in more of the property business than Anglo was doing. So in hindsight
there was a bit of a race to the bottom, bankers were willing to lend more and more money on
riskier and riskier projects and I think the influence of the foreign banks in Ireland,
the UK owned banks or the Scottish banks as it’s really known, you’ve the likes of
Bank of Scotland Ireland which was run by Mark Duffy and it was owned by Halifax Bank
of Scotland and Ulster Bank which was owned by Royal Bank of Scotland became more and
more aggressive, like AIB, to compete with Anglo. And Bank of Ireland was a lot slower
to move into that space but the current Chief Executive of Bank of Ireland, Richie Buckley,
would have been quite proactive under Chief Executive Brian Goggin to actually get some
of the property business that Anglo had. So really you had what Peter Nyberg who investigated
the banking crisis, he described it as ‘herd mentality and group think’ and the other
banks were trying to keep up and so Anglo was leading the herd and the others followed.
Nyberg used these terms to describe not just how the banks behaved but how many different
aspects and people in Irish society behaved as well, where we were all kind swept up in
the boom that was happening and the money to be made from it and certainly people would
take issue with that and a lot of people now who are struggling to pay for their homes
and their residential mortgages didn’t get involved in the investment property and didn’t
get involved in speculative lending are now having to face the pain of that, this group
think and herd mentality created.
So to give you an idea of just the level of borrowing that took place and that was a heavy
concentration in property, at the peak of the boom for every 5 euros that the banks
had lent out 3 related to property, so I think that that statistic on its own really describes
the bubble that was created in Ireland by the likes of Anglo and the others following
them, there was a huge concentration, there was far too many eggs in one basket and as
we’ve seen now the crash is as a result of that. And one of the areas that the banks
got involved in they were frantically trying to lend money out they created what they call
the dreaded equity release and this is where Anglo and the other banks what they did was
well they said to the developer ‘You made so much money on the last development, you
know, all of the houses sold out in the sales weekend’ I mean we all remember the queues
of people and people camping out and sleeping in their cars to try and buy a property, so
the banks said ‘Well you’ve made so much money from selling those properties that you
haven’t even built let’s take those paper profits and assume that that’s the cash
element of the next deal. So there’s no cash in from that but don’t worry they’ve
all been sold so it’s fine. So let’s put that money into the next deal.’ And so the
next deal had no cash in it at all and if you do that a number of times and you do that
across your book and the banks had a huge concentration amongst a very small number
of developers that you’re really piling debt on debt on debt and the cash element
is never taken out, there’s no cash ever taken off the table, so you create this house
of cards really and that practice in banking explains the ghost estates that we now have,
the 2,000 odd ghost estates, where you have half built derelict houses that have not been
sold but the banks felt well the market isn’t going to collapse, it’s going to be soft
landing, everything will be fine. So they felt that well it’s not an issue, the money
would always come off the table at some point. So this left the banks kind of terribly exposed
in the event of a property crash.
I just want to describe a little bit more about Anglo’s culture because I think it
really does point a lot to the kind of bank it was and also how it worked with customers.
They had what they called this relationship banking model where it was staying close to
your customer, you know exactly what they want, if there’s problems on their building
sites or with their property investments, you know before AIB would or Bank of Ireland
would because you’re a small team of people, you’re kind of in the customer’s face
all the time, so they actually thought that they’d broken the banking mould and this
invariably meant that they would work with them by day and entertain them at night and
in corporate hospitality trips and I think it’s kind of significant the culture of
the institution because bankers themselves in Anglo liked it because it gave them an
idea as to what kind of customer they were dealing with and, you know, everything from
how they would hold their drink, how they would behave when they were having a good
time, if a good looking waitress walked by, all of these things, you know, really played
on the bankers’ minds as to whether they were a good or bad customer and whether they
should be lending money to them. And also access to clients was crucial as well and
this is where we had this massive spending on golf, apart from the fact that Sean Fitzpatrick
was a golfing fanatic, golf put Anglo in a position where it could meet its customers
and get to know them well and some of the figures that I have in the book, I mean the
bank spent more than 2 million euro on golf in 3 years between 2006 and 2008 and also
they got involved in golf competitions and this expenditure on golf balls alone was 208,000
euro which is an astonishing figure. And aside from that they also did trips, there was ski
trips, there was a famous trip on the Orient Express where they brought developers from
Paris to Venice and brought their partners as well. And again to give you an idea of
some of the expenditure on corporate entertainment the bank would engage in, in 2008, this is
the year of the bank guarantee, Anglo spent €21,000 on Manchester United tickets, €19,000
on Chelsea Season Tickets, €42,000 on tickets for Six Nation away games, and €9,000 to
take clients in the US to the Boston Red Sox baseball game, so that’s the kind of spending
they were doing. And then gifts to customers, in Christmas 2008, 3 months after the bank
guarantee, they spent €53,000 on hampers and wine and they used to do an annual thing
where they’d bring some of the valued customers, a lot of the valued customers, and their kids
to the panto in the Gaiety and they spent 24,000 euro on panto tickets in December 2008.
Participant 1: Can I just ask you was there a psychological profile on what were good
I think it was very simply based around whether they could work with the individual or not
and if they made demands of the developer that the developer would meet their demands
and the problem was that the relationship banking model was seen to be well, you know,
you can make a lot of money from customers by staying close to them but as we’ve now
seen they got too close and the relationship model was far too close. For example, in the
Quinn case, we’re now seeing in the courts that the bank lent more than 2 billion to
Quinn to allow him to meet the margin calls in this investment that he made on the shares
so his investment was collapsing in value and the bank was lending to him and it was
that incredibly close relationship between senior Anglo lenders. I don’t know whether
there is a psychological profiling done in the bank of developers but it’s just who
they knew who they liked best and who they could get on with, I think it was that simple.
So this is an older picture of Mr. Fitzpatrick and Gerry Murphy, who was Chairman until the
late 90s in fact he was there, this is the chap who ran City of Dublin bank through the
70s and 80s, really Fitzpatrick was his protégé of sorts. This picture I think is around the
time of ‘88/‘89 after the bank had listed on the stock market. So just to describe what
happened in the market, I’m not going to spend too much time on the graphs and the
slides in relation to economic data but I think where the lines go will give you an
idea of what happened, so you had the boom in house prices with house prices quadrupling
and Anglo had many clients in development so they did exceptionally well and as I said
earlier a lot of the developers would have had land banks dating back to before this
graph in the early 90s, so they would have been sitting on options on land as well as
land itself that they would have bought from farmers and ready to move and when then property
market went where it went, these figures in comparison to Spain and the UK, they made
a lot of money and as a result the Anglo share price soared. Anglo share price rose by 2000
per cent in 7 years. So just to explain it in kind of simple money terms, if you invested
5 grand in Anglo in 2000 you’d be sitting on 100 grand in 2007. So if you go back to
the herd mentality and the group think and the naysayers in the early noughties coming
out saying this won’t last after 7 years of growth with that amount of money to be
made I think it would convince even the most sceptical that this was a bank that had done
things and was doing things differently and given where the share price went the value
of the bank went from about 600 million in 2000 to 13 billion in 2007 I think people
felt that well they’re on to a winner here and I’m going to put my money with them,
both in terms of depositing with them and buying their shares.
Here you have ... this slide is to do with house completion, so again it reflects the
increase in prices and this would be all of the new builds by developers and builders
and the figure reached ... 2006 is the peak of the market where there was 90,000, just
over 90,000 new houses built, and just look at that in comparison, that’s twice what
would be built of new buildings that would be build in the UK which is 14 times the size
of Ireland’s population so it gives you an idea of the level of the ... we talked
about the lending boom or the credit boom in Ireland and the banking boom well this
is the construction boom, this is the slide that shows that. And again, you know, everyone
felt that we’d hit a new paradigm and things would change with immigration and that there
would always be a demand for houses so 90,000 new houses in one year was not regarded as
a bubble it was regarded as something that was simply responding to the needs of the
country and people needed homes.
This is Anglo’s profits, as you’ll see, this is their own from their own report so
this is what they reported every year so again the figures, this is 2007, so you can see
through the noughties it really soared and this would have been David Drumm’s first
year as Chief Executive and that was ... he took over from Fitzpatrick, so again once
he took over he said he wanted to double profits in 5 years and he did it, it soared up, that’s
1.2 billion. So they reported that figure in November 2007 after the credit crunch so
again the figures show that the profitability of the bank followed the other markets and
followed the growth in the share price as well. So this is David Drumm and Tom Brown,
Tom Brown was Head of the Irish Business, so this is them presenting the results and
Tom Brown would have been instrumental in doing all the property development in the
Republic and David Drumm really put the accelerator down, the pedal down, and took the bank to
new places in terms of growth. So this is the boom in Irish bank lending, you can see
the increases, the light blue is the Irish banks and the dark blue is the IFSC banks,
so again huge increase in lending by the Irish banks where total assets to balance sheets,
assets or loans and other ... mostly loans, the balance sheets of the Irish Banks was
700 billion in 2008. And there you have Anglo’s loan book, it’s soaring again, the last
three are David Drumm’s years, so you’re seeing a massive increase in lending by the
bank. Sorry it goes back to that figure there. And it’s a massive increase, the lending,
it goes from 6 billion in 1999 to 33 billion in 2005 and 73 billion in 2008, so it’s
massive increases; that’s the credit bubble there.
So where does the money come from that they lend out to customers? The Irish banks traditionally
in the late 90s you would have had for every euro you had on deposit you’d have roughly
about a euro out on loan and that was the traditional banking, you pay for deposits
and you charge for loans, it was very simple. And that changed, so what you say is the cheap
and easy access to funding through the bond markets and borrowing from other banks and
it allowed banks here to lend out money more cheaply and freely. Being in the Euro after
1999 it removed the currency risk from the banks own borrowing and it gave them access
to vast pools of borrowings across Europe so the main banks in Europe that would have
been lending to the Irish banks were the UK banks and then you would see the French and
German banks and then the Italian banks, but mostly the UK. So we hear about bondholders,
those are the people lending money to the banks when Ireland entered the Euro and Anglo
would have borrowed from those banks to lend on to customers. So the gap between loans
and deposits which didn’t really exist in the late 90s change completely and it rose
to 2:1 so for every euro you had on deposit you had two euro on loan, so that gap was
filled by borrowing from bondholders in other banks. And in Anglo’s case it was extraordinary
growth in borrowing reflecting the growth across the other banks, they had borrowed
100 million from bondholders in 1999 and this reached 23 billion by the peak of the bank
in 2007, so borrowing from other banks soared and the other problem for Anglo was they thought
that the deposits that they had were very sticky, in other words they wouldn’t be
withdrawn in a hurry, but they left pretty quickly when the crisis hit and those corporate
depositors would have been kind of multinationals here, insurance companies, pension fund companies
and the like. So that’s the increase in Irish bank borrowing.
And then you have the crash, so property values start to fall from 2007/2008 and they really
start to nosedive in 2008 and 2009 and this is the Anglo building, some of you know, in
the North Quays, it’s kind of become a symbol for the crash here, it was built by or half
built by property developer Liam Carroll who actually wasn’t a long term customer of
Anglo but he won the competition to build the building and Anglo provided 60 million
to do that, that cost 60 million, what you see there. It kind of stands as this post-Apocalyptic
monument to Irish excess. I saw ... I remember a columnist I met from the UK and we were
discussing it, it was kind of like the monument in Hiroshima where you have the hall under
the site of the bomb site so perhaps it’s a pretty crude and unfair analogy to draw
but it’s kind of become our symbol of the crash.
So property prices falling, they’re down, Anglo said there an hour ago at their presentation
that the market is down 65 per cent so it’s quite a drop. This is a slide from the Department
of Finance. House prices are down about 60 per cent and commercial property down 70-80
per cent but the development land which is much riskier for the bank is down about 90
per cent and in many cases, particularly outside the city, it has reverted back to agricultural
values. And when you think about it that Anglo had 80 per cent of its loan book in property,
more than 20 per cent, a fifth, more than a fifth of their book was in this high risk
land and development so if you think about the bank at the peak of the market, 73 billion
in loans in 2008, it just had 4 billion set aside to cover potential losses which isn’t
enough. And I mean you could argue well whose fault is that? Well if you look at the Basel
rules which are the rules that all international banks follow in terms of how much they need
to set aside in capital, the Basel rules have been changed so they’re now saying that
the minimum is four times what it was originally. So if you think about if you were to apply
that, go back in time and apply that, the banks should not have grown more than a quarter
of their eventual size so the banks just got too big and it wasn’t just an Irish problem
it was across Europe and indeed across the world, particularly in the US. So we kind
of get to the nub of the talk which is the cost to the State of all this and Anglo’s
role in Ireland’s economic collapse. I suppose the best way to describe what happened and
to look at Anglo’s role in it is what actually triggered the economic collapse and whether
Anglo is responsible. I spoke earlier about how it led the race to the bottom as we can
now see what it was and it drove all the other banks down with them. But on the night of
the guarantee itself, September 29th/30th 2008, Anglo had run out of money that day
and the share price had collapsed almost in half so that’s kind of like a megaphone,
the market saying this bank is gone, really it’s absolutely tanked and it had run out
of cash and it had gone to the Central Bank looking for money. So if you look at what
happened on that night the government didn’t think it was dealing with a solvency crisis,
they didn’t feel or weren’t told by the Regulator that the banks hadn’t enough cash
in reserve to meet the possible losses from the property cash and they felt they were
dealing with the liquidity prices, the collapse, after the collapse of Lehman Brothers in Wall
Street caused the markets where the banks borrowed, as I said half their money, those
markets froze. So Anglo was the trigger for the government’s decision to do something
on that night and as we seen Brian Cowen said that they needed to give kind of one signal,
a big signal to the market that they were fixing this problem. So Anglo would need more
the following day after running out of cash and after getting the 3 odd billion from the
Central Bank on the 29th so the government felt well Anglo has run out of cash, the other
banks are going to run out of cash if we don’t do something because there was this domino
effect and investors weren’t really discerning between good and bad banks, they were kind
of painting the Irish banks as too exposed to property and also heavily borrowed in the
international wholesale markets, money markets. So the government went too far, the government
wanted the silver bullet solution to ease market concerns and most people who know about
this kind of thing in official circles have said that a guarantee was required and you
have the likes of Patrick Honohan, his report, the OECD saying ‘yes use a guarantee’
and certainly a guarantee is one of the tools in the toolbox you take out when you want
to repair a banking system that has gone bust. But it was far too broad this guarantee, it
pushed the liabilities covered by the State, insured by the State, to 440 billion and the
State was only ... our economic output at that stage was in the order of 170/180 billion,
so clearly it was a lot to put on the shoulders of the State. So if the government had instituted
a more narrow guarantee it could have given the government now more options to burn other
bondholders, senior bondholders, because the guarantee is place they’re protected and
we’re protected under the extended guarantee as well, so this increased the cost to the
bailout to the State.
So this slide shows the holes in the Irish banks in what we’ve ... how we filled them.
As you see the biggest is Anglo, it’s lumped in with Irish Nationwide under IBRC, Irish
Bank Resolution Corporation as it’s now known. So the biggest hole was at Anglo, it
was 29.3 and they’ve said that it will rise to 34 if the market doesn’t recover for
10 years. Just earlier there today at the presentation the bank said again that it expects
the figure for Anglo to be in the order of about 25-28 billion. And then other figures
AIB, which is I suppose the next worst in terms of absolute numbers, is the order of
about 20 plus the 20 billion we’ve pumped into them and Irish Nationwide 5.4, Bank of
Ireland 4.2, EBS 2.4 and Irish Life and Permanent as of yesterday has gone to 4 billion from
2.7. So of those we own AIB, EBS, we own Irish Life and Permanent, we own Anglo, Irish Nationwide
and we own 15 per cent of Bank of Ireland and the bailout is 63 billion. The situation
with Bank of Ireland is again as I said earlier they were slower to get into the property
market and that maybe saved them from government control because they required less from the
State and they could manage to get these US investors in last year who took 35 per cent
of the company. So if you look at the guarantee on the night of the guarantee a 700 billion
banking system compared to the economic value of the State 170 billion, and that’s down
to about 150 now, really the guarantee put the State on the hook for the banks’ losses
and the State couldn’t cope with those losses. When the size of the hole at Anglo emerged
in 2010 which was a month before the blanket guarantee ended it was really a case of the
markets got very concerned and said well what is the figure for Anglo we don’t know, it
seemed to be rising all the time and the government were unable to put a figure on it until September
2010 and by that stage the banking guarantee, the 2 year guarantee, had ended and under
the guarantee the Irish banks had borrowed 30 billion so when they couldn’t borrow
to repay that 30 billion the only place they could turn to is the Central Bank, two places
– Frankfurt and Dublin – the Irish Central Bank and the European Central Bank. So what
you saw is the banks borrowings for the European Central Bank and the Irish Central Banks soared
and that really spooked the ECB and they said we didn’t expect it to go as high as this
and although the authorities here would say well we warned them, we let them know from
the Greek crisis blowing up in May 2010 that there was a problem coming down the tracks
and when that bank borrowing soars the top line there shows how much it increases by,
in two months Anglo’s borrowings from the Central Bank went from about 14 billion to
34 billion and that was really ... that had the alarm bells sounding in Frankfurt, they
said we need to do something here, and that was the trigger for the ECB coming in and
putting the government under pressure and the view in the ECB was there is more black
holes in the Irish banks that you haven’t identified because clearly you’re just grappling
with Anglo and you’ve been dealing with that for a time. So again that spike, that
was the trigger, we talk about another trigger, that’s the trigger that prompts the bailout
of the country, so you had the bailout of the banks in 2008, the State couldn’t cope
with that, and ultimately the next trigger then is this, the increase in the Central
Bank borrowing.
So the government feared at that time that the ECB could increase the rate it was charging
on emergency loans to Anglo, that was the one it was most concerned about. You hear
talk now about Trichet, Jean-Claude Trichet, the European Central Bank President, threatening
Ireland and some say the fear was that they would withdraw the funding from the Irish
banks. I’m not sure they could have done that but what they could have done is put
pressure on the government by increasing the charge and increasing the interest rate on
that. So this is what led to the bailout programme and the decision to provide 67½ billion in
bailout loans to the Irish government. So again Anglo really was the trigger for that,
the other banks were following in as well, like AIB had borrowed on emergency loans from
the Central Bank as well.
So unrelated to property lending Anglo did some wild things. This is Mr. Fitzpatrick
leaving the Garda Station in Bray after his first arrest. He’s been arrested a second
time. So Anglo, some of you have been following know now that the issues around that are loans
to directors which were provided mostly by shares in the bank, they were initially non-recourse
which meant the directors didn’t have to pay the loans back, now they’ve been changed
to recourse and a lot of those directors are in severe trouble. David Drumm has applied
for bankruptcy in the US. Sean Fitzpatrick has applied for bankruptcy in Ireland or filed
for bankruptcy in both cases. And then Sean Quinn, their biggest borrower, has filed for
bankruptcy as well. He tried to do it Belfast but he was blocked by the bank and he’s
now bankrupt here. Then the issue of Fitzpatrick’s loans hidden in Irish Nationwide at the time,
Anglo wrote up its annual accounts and then I suppose one of the most incredible aspects
of that is that emerged in December 2008 and even though the government had stepped in
to guarantee the bank it left Fitzpatrick and Drumm in place and in their jobs after
the guarantee. So the scandal about Fitzpatrick’s loans increased the pressure on the bank and
on the government and it eventually led to pressure on the deposits and that’s when
the government had to step in and nationalise the bank in January 2009. So since then investigations
and arrests have arisen over things that the bank did in 2008 when its back was against
the wall. We’ve now discovered that Anglo was cooking the books with dodgy deposits
from Irish Life and Permanent in 2008 to make their balance sheet and make the books look
better than they actually were. And that was – now talking about triggers – another
trigger for the nationalisation of the bank back in 2009 and now we’re seeing through
the courts this week and last and in international courts the battle with the Quinn family. They
owe the bank almost 2.9 billion. They’re the biggest, after the loans have been transferred
to NAMA, they’re the biggest borrowers at what is now Irish Bank Resolution Corporation
and the bank is pursuing them internationally and here to try and recover as much of that
as they can. And again most of those loans relates to his decision to invest in the bank
in the period up until ... he was buying right up until 2008 when the share price was collapsing.
And the fear at Anglo was that if he couldn’t afford to meet the losses on his investment
that would force the brokers who held the shares to dump them, the share price would
fall, depositors would see that, they’d get spooked, they’d pull their money out,
then you have a run on the bank and then the bank collapses. So the bank in 2008 decided
to get ten customers together when it couldn’t sell Sean Quinn’s shares in the markets
it got ten customers together, it gave them 450 million in loans, got them to buy 10 per
cent of the bank in a secret deal and that 450 million is gone now.
So this is the fallout and the end of the bank, the name, a kind of symbolic day in
April 2011, an Anglo signage being removed from the bank’s branches and this is a photograph
taken of the building in St. Stephen’s Green. I think it says a lot. It doesn’t take away
the anger that people feel towards the bank because we’re still paying for it and the
current talks are about trying to push out the cost of that so these promissory notes,
these IOUs, that have been written up by the government back in 2010 when we didn’t have
the cash to pay for Anglo, they said well here’s a promissory note, it’s an IOU,
we’ll pay you over a long period. The cost of that is very high every year and the government
wants to reduce that because it needs to get to this target deficit by 2015 to show the
markets that we’re getting back on our feet again. So it’s a small amount of the debt
that the country had, the debt problems the country has, but it’s kind of trimming at
the edges but it should ... it seems to be ... Patrick Honohan has said that it’s likely
to be successful so the payment is due on Saturday for 3.1 billion and they’re saying
well instead of paying that in cash which would be a drain on the State let’s do another
IOU, we’ll give them a government bond, and say this is 2025, we’ll pay you back
in 2025 and IBRC takes that instead of the 3 billion in cash and goes to European Central
Bank and exchanges it for cash. So that’s the whole exercise that’s being done in
private at the moment and then the longer term exercise that’s being done is to come
up with a whole new system to restructure the rest of the 30 billion that we have to
pay.
So to summarise I’d say that Anglo drove the other banks into reckless lending because
they say the spoils that were to be made from that and I think they’re as guilty though
on reckless lending charges because they followed Anglo. And also Anglo was the trigger for
the decision to guarantee the banks and also the trigger, or at least the biggest reason,
for the ECB forcing the government to take the bailout from the EU and the IMF. So this
was a bank that started out as a small Dublin lender and it soared on the property market
in the property boom. It eventually became too big to fail and then too big to bail and
ultimately too rotten to save. So you can see here in front of you but it’s a gratuitous
plug for my book (Anglo Republic: Inside the bank that broke Ireland) which you can either
buy or borrow from here, hopefully, there’s loads of copies in the library. I can take
some questions if anyone has anything they’d like to ask me?
Q & A Participant 2: I’ve two questions, just
go back to 2008, the banks came in to see the government.
Yeah.
Participant 2: The first question is did the banks actually lie to the government? And
the second question is in 2008 could the government have burned the bondholders?
I’d say did the banks lie when they came into the ... I mean that’s a question I’ve
asked when I ask any bankers now who were there and I say “Were you lying or were
you just deluded?” and I think it’s a bit of both. I think in Anglo’s case there
was an element of deceit about it. Certainly from my research in the book there were managers
within Anglo who could see in June 2008, there was a big board meeting in June 2008 Anglo
did down in Cork and there was a presentation made to the board how bad is our property
book and certainly at that point they knew they had major problems. And I mentioned there
about equity release, the other issue that was a real signal that there was problems
was… is interest roll up, they weren’t even paying their interest bill through 2008
and that was widely known. Some of the big developers were just not paying back the loans
at all. So I think that in Anglo’s case they probably knew they had major problems
in the loan book but again as was widely felt in the marketplace was that this was a blip
or a soft landing, it wasn’t going to be a major crash, so I think they were deluded
as well. So I think it’s a bit of both.
Participant 2: Right.
They were lying, they were deluded. I think in the case of AIB and Bank of Ireland who
went in to government on the night and said ... I mean they went in to say you need to
nationalise Anglo and Irish Nationwide, we’re not the problem here, but we will be, we will
have a major problem if you don’t take these out because international investors who give
us money, who lend money to us, are saying ‘What’s the story with Anglo and Nationwide,
we know they’re bust, they’re exposed to the property market. 80 per cent of their
loan book is for the property market why aren’t you doing something about that?’ but I think
AIB, in particular AIB, did not know the extent of the problems within that bank and when
you look at the figures back in that chart in terms of the bailout, I mean AIB is not
far behind Anglo in terms of what it’s cost and in fact during the boom years developers
would say you could get a loan from Anglo in a week but you could get it in 2 weeks
from AIB so a lot of them went to AIB so I think AIB knew they had the problems there
and I think they were deluded, I don’t think they were lying I just think they were deluded
as to the extent of the problems. Could they have burned the bondholders in September 2008?
Yeah they could have. If you apply a guarantee like this kind of throw a massive blanket
over the system and say ‘We stand over everything that the banks have and we will pay their
liabilities no problem’ you immediately limit your options as to what you can do with
those bondholders. I mean I think people ... the issue of bondholders and who owes what it’s
like a queue, if you can imagine it like that, who is first to take the losses, shareholders
take losses because they take a punt and the view is as well who is next in the queue to
take losses if the business goes bust, the subordinated bondholders who get paid a bit
more than the senior, so they’ve taken a higher risk in this regard, they’re next.
The decision on the night of the guarantee to include some of them in the guarantee is
astonishing, absolutely astonishing from my perspective. Look they decided to guarantee
the date and subordinated bondholders and what that means is those are guys who have
a loan note or an IOU from the bank saying they’ll get paid at a certain point, they
get paid a good interest rate, they get 10/11 per cent in some cases, so those guys should
have been burned and yet they were included. Now if you look at the advice that Merrill
Lynch gave on the night in the run up to the guarantee they raised a possible problem,
they said well there’s what they call cross default and what that is is that somebody
could have a subordinated bond and they could have a senior bond, if I have a subordinate
bond and you burn me on that I can call you in on this so Merrill Lynch warned it’s
not as easy as that so I think that that might have influenced the thinking on the night.
But yeah you could have, what you could have done on the night is you could have said,
right, we’re going to take out Anglo and Irish Nationwide and nationalise them, we’re
going to put a guarantee in place but only for the depositors at AIB/Bank of Ireland
and we’ll only guarantee any new bonds you issue and you apply all sorts of terms and
conditions to those bonds but and as we’ve seen Brian Cowen had said in this lecture
that he gave in a university in the US he said ‘We wanted a big *** solution’ if
you don’t know the extent of your problems in your banks you can’t do that and what
surprised me is there was an admission by Kevin Cardiff who has now gone off to that
job in Europe, he was Head of Banking in the Department of Finance, he was asked after
the crisis they said ‘At what point did you realise you had a problem here or that
you didn’t know the extent of your problems in the banks?’ and he said “When we could
no longer rely on the Financial Regulator for information we had to rely on the banks
own advisors” and that was Goldman Sachs in the case of Irish Nationwide and in the
case of ... I can’t remember who it was in Anglo Irish ... but for a senior government
official to admit that and that was prior to the guarantee they were calling on Goldman
Sachs, we did not know the extent of the problems because the Regulator didn’t have the information
available that we had to turn to their own advisors, knowing that now and even knowing
that then if you had realised that then why then would you have agreed to a guarantee?
Granted Cardiff isn’t making the decision but he’s there on the night. So yes you
could have burned senior bondholders on the night.
Participant 2: Yeah.
Would the ECB have let you? That’s another question.
Participant 2: That was my ... Brian Cowen in that article that he gave in the States
a few days ago or whatever recently he said that’s the common factor that you could
even now, he was saying right across from 2008 to now ...
Yeah.
Participant 2: ... you’d have a problem burning the bondholders.
And the senior bondholders are what count because we burned subordinate bondholders
but it’s not nearly enough to cover this bill, so the senior bondholders were really
the only ones that could have been burned to save on that and no senior bondholder in
a Euro zone bank has burned.
Participant 2: Yeah.
They refused to allow it because they feel if it happened it would unravel, it would
lead to another Lehman Brothers type tsunami across the European banking system. The one
country that has burned senior bondholders is Denmark, they allowed it, but in that case
they only allowed it for a couple of small banks. Like as I said we had six banks and
three of them got far too big, much bigger than the State could cope with when the crash
came, so the Danish model is interesting, the markets did react and they did ask for
more money when they were lending to the Danish banks after they did that.
Participant 2: Right.
But that calmed down again. But we haven’t seen a major bank in Europe both ... well
definitely not in the Euro zone but outside the Euro zone, I haven’t seen a major European
bank burn senior bondholders.
Participant 3: Thank you very much. Going back, Lehman Brothers collapsed in the middle
of ’07.
September ’08.
Participant 3: Yeah, okay yeah, but the market was beginning to down from the middle of ’07.
Yeah.
Participant 3: It was the 15th of September ’08 but I’m bringing it up to date, last
weekend there was a big debate in Frankfurt on the sovereign debt debate and the whole
issue of sovereign debt and on the bailout of countries, now we’re one of the three
countries in an IMF programme, Christine Lagarde, the Managing Director of the IMF, when asked
just on the day of the signing of the austerity, the new ...the latest from Greece, was asked
do you think you’ll come through and she said yes on condition that private investors,
pension funds and bankers take a haircut. What I’m picking up since and that was only
a few weeks ago is that a lot of the pension funds lost 75 per cent of their money, some
of them had credit default swaps, now is this not, you know, the sovereign debt, we’re
now producing an IOU into sovereign debt with 25 years, we’re now introducing sovereign
bonds to go into pension funds and annuities now are we not just, you know, switching credit
around and no real money, you know, are we not doing exactly the same as what’s been
going on in the last five years? If you even listen to Freddie Mac and Fannie Mae exactly
the same debate and language is around the property in the States as it is here, you’re
now hearing it also from China, so I don’t think anyone has learned anything and I don’t
think ... I think all of this is going around and nobody knows what’s going on.
Well yes is the answer, it’s all paper going around, like it’s credit again. The difference
being it’s sovereign borrowing rather than private borrowing or company borrowing so
yeah it’s to do ... like the whole restructuring, the promissory notes, is just you know if
you have a mortgage and it’s 30 years if you push it to 40 years you’re going to
pay more over 40 years but you’ll pay less every year, that’s what they’re doing,
it’s that simple and they’re doing it with paper, with IOUs with loans, there’s
no cash to pay for this and the whole aim is that they need to separate the decision
on the night of the guarantee, State banks one, they need to separate it again. And this
is that process that they’re trying to do, they’re trying to take out a chunk of this,
so half this figure, take it out and get it off the State’s balance sheet and do something
else with it. Now the ideal situation would be to go and get agreement from the European
authority and say listen just give us a loan from EFSF and instead of giving it to us just
give it to IBRC or give it, you know, or better still let private investors come in and they
take it but that’s not going to happen so really you’re right it’s the ...
Participant 3: But I gather ... sorry for crossing over, I gather the small print on
the Greek deal that hardly anyone found out until the end of the day was that the priority
orders is such that the IMF get 100 per cent in that, the ECB get 100 per cent, even the
EIB gets 100 per cent, the sovereign doesn’t, it’s on the very end, so who would actually
put money in a sovereign debt considering most of the Central Banks actually do have
... most of their balance sheet is in sovereign debt.
Well not in Greece, they wouldn’t do it at the moment, but that’s what they’re
trying to do in Ireland, if they separate the State and bank debt they’re trying to
get people in to start lending to the State again but people don’t want to, investors
don’t want to come and buy Irish debt just yet because they want to be sure that Ireland
will recover by the time it says it will recover, if we get the deficit down by 2015, so Honohan,
Noonan and the rest of the government are saying well if we do this with the Anglo promissory
note it will ease some of that burden and show those investors that Ireland is recovering
and that you can lend to us and that you will get it back.
Participant 3: They’re saying there’s a 60 per cent change of default when you look
at the risk assessment.
Well it’s a high risk yeah absolutely it’s high risk but I mean you know the talk of
a second bailout, is there going to be a second bailout for Ireland? I mean I wrote a piece
in the paper today saying you could argue that what they’re trying to do with the
Anglo loan is a second bailout because they’re trying to get money from a different fund
or more money from the same fund in terms of the ESN, the longer term bailout fund,
over a much longer period, so it kind of is a second bailout. But yes is the answer, with
paper, have the learned a lesson? I’d hope so. They’re doing the same thing but it’s
with sovereign paper instead of bank credit.
Participant 4: Would it not be better to accept a second bailout if you’re getting a better
interest rate? I mean obviously if you go back to the market you’re going to have
to pay a higher rate to attract private investors or new investors into buy Irish sovereign
debt, would you not be better off just accepting the bailout because it’s at a lesser rate?
Well no and what they’re doing is and again we don’t have the full details of what they’re
doing in the background right now both in terms of the payment due on Saturday and the
rest of the payments due until 2031 but Honohan said at the Oireachtas Committee the other
day he said it’s got to be less than the bailout fund money or otherwise we’re just
going to take the bailout fund money but they were saying that they would. Sorry, yeah?
Participant 5: Just in relation to the IBRC does it have like a time span that’s allowed
exist for the end of it and it has to wrap up or what is its objective?
Well it’s a topical question because we were just asking Mike Aynsley, the Chief Executive
of IBRC, that and he said on their briefing notes they hand it said 2020 is the day they
have to be gone but one of the things they’re doing in the background is tracker mortgages
are sitting on the books of AIB and Permanent TSB and they’re loss making, they’re making
no money and burning money for those banks, so there’s talk now that as part of the
restructuring of the promissory notes that they take out the promissory notes out of
Anglo and Nationwide and put in trackers because it’s both their assets and funny enough
the trackers at AIB and Permanent TSB are about 34 billion so it’s kind of a neat
match between the figures involved and the issue with the tracker mortgages is that they
don’t make money but they’re not bad, they’re being repaid so there’s money
coming in off them, it’s just that the reason they’re not profitable is that the banks
borrow at a particular rate and they charge at another and instead of being like that
they’re like that so they’re making any money but they are ... they could be used
as a way of both fixing the IBRC problem and also fixing the AIB and Permanent TSB problem,
if you get them out of those two banks you may encourage investors to come in. To answer
your question the debate now is well if IBRC gets tracker mortgages some of those won’t
fall due to be fully repaid until the 2030s so IBRC will be around for a lot longer.
Participant 6: The different talks we’ve had, people had different kind of analysis
of why we have a crisis, let’s say Conor McCabe seemed to think it was a particularly
Irish version of capitalism and Ronan Lyons said that it was kind of a classic property
bubble. A lot of people would put it down to Anglo an when you look at Anglo you think
the failing was their relationship banking model, was it just people being a bit reckless,
was it a lack of regulation, why did it blow up so much? I mean it’s happened in every
country at the same time, similar things but not to this extent, but what was it uniquely
Well it is depressing that it’s a kind of classic property bubble, it’s not that complicated
what happened here, I mean there’s no kind of derivatives or CDOs or CLOs or any of the
stuff that’s taken down like a few of the American banks, it’s just a plain old property
crash. I think in terms of the scale of the problem here Patrick Honohan has said the
scale of the problem is four times worse here than in other European countries, and I suppose
leaving Greece aside for different reasons, but the scale of the crisis here was four
times worse than the market or the average and for that reason, you know, it’s much
more of a domestic issue and you can’t blame Lehman Brothers or international factors for
what happened here. But I don’t really ... I don’t kind of buy into the whole is it a
particular type of capitalism I think there’s one type of capitalism and there is extremes
within it in terms of, you know, how government sets up a regulator to regulate capitalism
in your country and I think what happened here was a variety of factors, I think if
you’re asking legally who is to blame you could lay the blame first and foremost at
the door of the banks and then I think at government before regulator because I think
the government should have oversight over the regulator and I think that if you only
give the regulator certain tools then you’re kind of tying one hand behind their backs
in terms of what they can do with the banks. Also I think the regulator was too close to
the banks just like Anglo is too close to its customers the regulator was far too close
to the banks and this light touch regulation of principles based regulation or a better
way of describing it is regulation for grown-ups, we’re going to have a little code here on
the wall we want you to go and look at it every week just to tell you what you should
and shouldn’t be doing, that’s the extent of our involvement as a regulator, I mean
that’s no good either. But I think what the banks and what particularly Anglo did
here is it convinced people that it had established a new secure form of banking that was incredibly
profitable and others believed it, the other banks believed it and then everyone else believed
it because of the money they were making. And I think that that kind of turned Irish
banking on its head a bit but again like if you look at the UK, RBS and HBOS, and there
was a report into what happened in the commercial banking division of Lloyds which is primarily
HBOS they say all the same things happened in Anglo, too much lending to a very small
number of people and you were too close to them and that’s the problem, the concentration.
I mean concentration just kills in banking and you spread your risk, you know if you’re
an investor you don’t buy 28 per cent of Anglo Irish Bank and that’s why the losses
are so great for Sean Quinn. Just as investor you spread your risk; it’s simple, simple
so. But I think we had ... we took it to a different level in this country. Sorry?
Participant 7: Do you think it struck me down your last point there about taking it to a
different level, could it have been a large part or one major reason why it happened was
Anglo wasn’t a retail, a high street retail bank I mean it didn’t deal with customers
off the street, it dealt with basically investors. I remember when they used to have a little
ad in The Irish Times front page, you know in the left hand corner and nobody knew who
they were just that it was a nice picture. Surely if they had been watched more closely
or supervised from outside more closely if they had been retailers or somebody would
have heard earlier what was going on and maybe the regulator might have had more experience
maybe to observe what was going on there before, could that have been part of it do you think
that they weren’t doing anything? I just remember that you were talking about lawyers
earlier on, in the beginning of my career I worked in the merchant banking liquidations
and I was very junior but people used say that he ran that bank, the person involved,
as his own private bank, the profession at the time around Dublin, and ...
This is Patrick Gallagher, yeah.
Participant 7: ... it seems that they had been doing something fairly similar; I don’t
Well I think that the regulator was certainly hands-off when it came to Anglo and it was
too late when it did react. The two things that the regulator did that I would say now
oh we did these things, and you know we attempted to take the heat out of the market, they told
the banks, regulators and principals of debt regulation they really only measure their
‘can dos’ say well if you’re going to do that kind of lending we want to force you
to put more aside in reserve in case those loans go bad.
Participant 7: But would you trust an Irish government to supervise the regulator properly
as you had said, would it not be better to have Mrs Merkel do it, she doesn’t trust
us to do it or any other government probably either, be regulated from abroad in terms
of the regulator?
Well there was talk of this kind of European wide regulator and the European Banking Authority
which is supposed to be doing a stress test is coming into all sorts of trouble and it’s
woefully understaffed, I think there’s only 40 people working in London. So you know people
said things in the crisis and what we need to do but I mean they’re not following through
and responding. I mean there’s talks now, you know, people saying at conferences and
privately people saying we can’t have a knee-jerk reaction, we can’t have over regulation,
well I think we can, I think 63 billion is an awful lot, a big price to pay for Ireland.
Participant 7: How many are there are working in Dublin? So maybe they have it everywhere,
because they are civil servants they’re appointing that they appoint someone they
know won’t to do anything anyway so they can get on with the government themselves.
Yeah I think you’ve got to establish a proper regulator and you know regulation is set up
by legislation, government legislates.
Participant 8: Yes, thank you very much Simon for your presentation, it’s so technical
and everything, and I liked your tone. I was just wondering do we know who the ten golden
circle are?
Yeah we do. If I can name them now I’d be doing well. Paddy McKillen is one of them,
who is being sued by the Barclay brothers over in ... sorry he’s suing the Barclay
Brothers over in London at the moment, he’s one. Gerry Gannon. Sean Reilly. Joe O’Reilly,
the Dundrum Shopping Centre guy. Other names on it ... there’s an auctioneer up in Malahide
I better not ... because this is being recorded. (laughs)
Participant 8: No that’s fine.
It’s in the book somewhere. They were described as kind of the loyal customers, or longstanding
customers.
Participant 8: And did they actually pay physical cash or these paper trails again?
No loans.
Participant 8: Loans.
Just loans. They got loans to buy the shares. Brian O’Farrell is the auctioneer. He owns
the Northside Shopping Centre in Coolock. Gerry Maguire who owns the Laurence Shopping
Centre in Drogheda. Patrick Kearney, a Belfast-based property developer. Seamus Ross, Menolly Homes.
John McCabe. Gerry Gannon, I said that. Yeah that’s them, that’s ten.
Participant 8: Thank you. And are they being followed, you know, in terms of those loans?
They, as I understand it, are witnesses not suspects so they are not the focus of the
investigations but in other words it’s not viewed that they did anything wrong.
Participant 8: But they haven’t repaid the loans?
Well the loans were given on a non-recourse basis meaning ... well a quarter of the loan
was recourse which is so you’re on the hook for a quarter so each of them got about 45
million so just over ten.
Participant 8: On the securitisation you’re saying that it just so happens 34 I presume
is that million or billion?
Billion, all billion. No more millions anymore. (laughter)
Participant 8: Billion. Okay, it’s just that I ... yeah, 34 billion it matches another
one – not to do double entry yeah.
... that’s just I mean it’s a neat coincidence but it could possibly help the solution.
Participant 8: Yeah but two questions on that is it was securitisation and the collateral
that was behind it that caused the financial crash around the world, in other words people
kept on sending mortgages to mortgages to third parties etc.,
Yeah.
Participant 8: The assumption here is that securitisation of the tracker mortgages we’ll
actually produce what is supposed to be on paper producing, so that’s question number
one, so there’s a risk there but number two why do the banks or the lenders on tracker
mortgages not allow an individual to pay off these 25 year loans if they so ... say they
won the lottery without ... at a proper discount or the net present value on it?
Yeah well I think they’re going to come around to that, like some of the banks have
been saying ... some of the banks were offering deals to customers privately case-by-case
Participant 8: But only if you’re in trouble not if somebody just wanted to get out of
it.
... yeah well I think that eventually they’ll come around to that. I think that if you have
a tracker mortgage the banks don’t want to do it because again it’s an admission
of a problem and a mistake that they made by selling these things, they would say well
we’re going to lose 100 grand on your mortgage, tell you what, we’ll pay you 25 grand if
you come off the tracker now and go to another institution or we will help you find a loan
elsewhere. I think those deals will eventually have to come about. It’s 34 billion of loans
that have a much longer life than some of the property development loans so you have
to deal with them. In terms of the securitisation question, I don’t think it applies here
because you’re talking about swapping loans around three institutions that are already
owned by the State so if they weren’t owned by the State I’d say that’s a relevant
concern, oh securitisation got us into this trouble, why are you shuffling from one institution
to the other, we own them all it doesn’t matter.
Participant 9: Yeah just going back to the early part of the lecture, thanks I enjoyed
it, with turnover developments and wasn’t that related partly to the Capital Gains tax,
why they did that? Secondly just the savings to lending ratio, what was the impetus that
changed that which was back in the end of the 90s or the beginning of
the new decade? And then in relation to the type of capitalism here, isn’t there a particular
type in the sense of like the closeness of Fianna Fail and developers and so on, some
of the motivation in there, a culture of poor regulation and also in terms of being a what
would you call it like not offshore but low tax rate and so on. And finally, it’s a
bit too much, in terms of Europe the sense of because they made mistakes both politically
and economically and they don’t want contagion, they don’t want the banks to fail so essentially
then they’re going to make the ordinary people, and particularly in Ireland, pay for
it.
Yeah that’s basically it, that we have to pay for it because we borrowed it.
Participant 9: Could I just ... sorry for cutting in, does that make not the political
arrangement corrupt really?
Corrupt? I don’t know about that word but I guess you know if you think about the European
Central Bank is largely influenced by German policy measures both Central bankers and again
the view of how the crisis should be worked through is based on the fact that you pay
back everything you owe unless you can’t, and this is the whole debate about debt sustainability
and whether we can or cannot repay it, and this is why the restructuring of the notes
are going ahead. I think that ... is it corrupt? I don’t think it’s corrupt I think that
there’s a fear that we could go back to a point where the crisis would start to kick
off again and the contagion can’t be stopped, that’s the fear, that if you start saying
well okay Ireland can burn senior bondholders and then suddenly a French bank blows up and
say well they’re going to burn senior bondholders and then suddenly when the banking market
is kind of trying or on the verge of recovering it can’t recover at all if that happens.
I mean I think you’re talking about ... you’re looking at the whole kind of fabric of capitalism.
Participant 9: Oh yeah but it’s sacred.
Well I think that if you assume that you can only fix the system with the system you have
you do everything to protect the system and that’s why they’re not ... Sorry?
Participant 10: What effect did the rating agencies have in the whole crisis? Did they
have any effect on the Irish system?
Oh absolutely, they would have given Anglo a AAA rating in the early noughties, I think
2003/2004 and with that Anglo went to the banks in Europe and said we’ve a AAA rating,
Ireland has a AAA rating, we’re good for it, we’ll get your money back, can you give
us the money to do all the lending we want to do and they played a key role and then
I suppose it’s more international the issue with credit rating agencies that they didn’t
... I think the credit rating agencies did point to the fact that Ireland had a big exposure
to property much like the Central Bank did although you’d need a degree in Central
Bank speak to understand what they said sometimes but I think the credit rating agencies did
point out some of the potential land mines in Ireland with property, internationally
they didn’t, they gave AAA ratings to bundles of loans, that they’d no idea what was in
those loans.
Facilitator: Okay folks I think we’re going to finish it up there, thanks very much Simon,
we appreciate that. (clapping)