Tuesday, February 17, 2009

I can see fearfully now Seanie has gone ...

... or something ineffably daft. That's the great Martyn Turner, above, setting his imprint on the news.

Teiresias, the blind seer, was Malcolm's last-but-one starring rôle on the Irish stage (well, OK, at the open-air theatre at the back of UCD in Stephen's Green). In the original Euripidean Greek, too.

He had a speech which, in very loose translation, starts something like:
When you meet a wise man,
It isn't hard to talk sense;
But you, Pentheus,
On the other hand,
Are a pain in the arse.
Ever since, Malcolm has had regard for intellectuals who can communicate.

At the moment we desperately need a few easy-on-the-ear, quick-on-the-uptake economists who can explain why we are up the creek without a poodle.

Britain has one such in the all-knowing, all-purpose, sure-fire Robert Peston. Since Peston has been lucid and not sufficiently partisan in his explanations, he has been seen as sympathetic to the Government. Hence, there is a campaign among Tories and similar scum to blame the messenger, to make the reporter and commentator the story.


Today's Irish Times has an analysis piece by Professor Morgan Kelly of UCD. It is available, at the moment freely, on line: do not pass Go, go straight to the goal. It is perlucid; but it certainly is not favourable to Biffo's government.

Anyone expecting the second half of the old cliché
-- Lo! be of good cheer, said the angel, for things could be worse.
And, lo! Surely enough, things were worse
will not be disappointed.

Kelly starts with a stunner:
BETWEEN COLLAPSING house prices, bankrupt banks and spiralling unemployment, you might be forgiven for thinking that fate has already dealt Ireland every misfortune in its hand. However, there may be one more unpleasant surprise in store for us, the prospect that international investors unexpectedly stop lending to the Government.
He then cogently explains the size of the problem: that the Irish Government is committed to borrowing €20,000,000,000 a year for the immediate future. Kelly quantifies the size of that:
everything [the Republic] spends on wages or on social welfare – or about 15 per cent of a falling national income.
Just as Pentheus did not want to listen to Teiresias' sage advice, so few will want to comprehend that one without a gulp or choke or three.

Kelly then lays out why this spooks the market:
  • the Irish Exchequer, driven by the prospect of an ever-deepening slump, is committed to borrowing heavily at a time when the international money markets have dried up;
  • the bill for that rash promise on bank guarantees (a guarantee that sparked even worse problems for the UK banks -- but both Gordon Brown and Alastair Darling are being as diplomatic as they dare about that one);
  • the vicious spiral of unemployment (the equivalent of a rise of half-a-million in the UK figures -- and in one month);
  • the parallel collapse of Irish government income;
  • and lo! said the angel: no prospect in sight of things being better.
Then is proffered what the dramaturge or novelist would recognise as the "moment of lightening" (and, yes, that is correctly spelled). In the masterly hands of Kelly, even that comes mixed with hemlock:
The ability of the State to continue funding itself ultimately depends on the size of these [Bank-owned] bad debts. If they are of the order of €10–€20 billion, we will survive. If they are of the order of €50-€60 billion, we are sunk.

Irish banks could easily lose this much. If we suppose that most of the €20 billion lent to builders will not reappear this side of Judgment Day, along with 20 per cent of the €90 billion lent to developers, and 10 per cent of the €120 billion in mortgages, then we are already up to €50 billion.
Having chilled every spine in (and beyond) the island, Kelly walks us through the potential wreckage:
We would be forced to seek an international bailout... We could expect cuts of one-quarter to one-third in public sector wages and social welfare benefits, and draconian tax rises to bring the deficit back to around 5 per cent of national income in two years.
Like all exponents of grand-guignol, Kelly throws in just that extra frisson:
There is actually a worse scenario where international bond markets suffer a general panic... Not only does Ireland gets torpedoed, but also Portugal, Italy, Greece, Spain and Austria. The IMF and EU simply would not have the resources to bail out so many economies and we would be entirely on our own.
Kelly even gives us a villain to hiss: Brian Lenihan, who not only looks fit for the part of William Corder, but is first ridiculed for his:
boast that the [Bank] liability guarantee was “the cheapest bailout in the world so far”, an assurance that already ranks in the annals of supreme political irony alongside Neville Chamberlain’s “peace in our time”.
Then in another vitriolic comparison:
Watching the ineptitude and complacency of Lenihan’s bank bailout, we can understand increasingly how the people of New Orleans must have felt as they watched George Bush rescue their city: “Brianie: you’re doing a heck of a job.”
Does the good Professor have a negative equity problem, perhaps? Hmmm?

And the punch-line?

Well, here she comes, ready or not:
If, on top of this, we suffer a sudden stop, people will see their pensions and Government spending slashed to pay off the gambling losses of Seán FitzPatrick and his pals. The Irish social fabric would certainly rip and unprecedented civil disorder ensue.
A casual visitor (unlike all good Irishmen) might need "Seanie", Mr Seán FitzPatrick, explained. He is now the (very definitely) former CEO of Allied Irish Bank. For much of a decade, "Seanie" had been on the take: taking in excess of €122 million of "loans" from the Bank. The accounts didn't show them. The auditors didn't suss them.

When he was eventually exposed, "Seanie" was full of the milk of human fellowship:
The cause of our problem was global, so I can't say 'sorry' with any kind of sincerity.
He even had a recipe for the government to recover any losses from the AIB disaster: cut spending. Throw to the wolves the children, the widows, the minimal state health care, all and anything -- but not the bankers.

And the rot did not stop there.

"Seanie" achieved his coup through swapping arrangements with the Irish Nationwide Buidling Society, which have only been exposed in the last few hours:
Irish Nationwide gave tens of millions worth of sterling and dollar loans to former Anglo Irish Bank chairman Seán FitzPatrick as part of his loan transfers between the two institutions to conceal up to €122 million in borrowings from Anglo Irish...

The Irish Times understands the building society provided Mr FitzPatrick with loans of $56 million and £14 million on September 26th, 2007. Irish Nationwide also lent the then Anglo Irish chairman $26 million on September 27th, 2006. This loan was secured with an undertaking from Anglo Irish, meaning that the bank would repay the loan if he could not. The £14 million personal loan was secured on properties and 4.5 million Anglo Irish shares, worth €55 million at the time.

The building society had its long-term bank deposit rating and senior debt rating reduced by two notches to one level above speculative grade or “junk” status yesterday.
To lose one business, Mr. FitzPatrick, may be regarded as a misfortune; to lose both looks like carelessness.

[Anent that: Malcolm hears that a peculiarly-vicious examiner at Cambridge set the Lady Bracknell speech for translation into French. Bastard.]

A harsh critic might feel, with some reason, that Malcolm has barely risen above the nadir of fisking here. So be it.

Malcolm excuses himself that he drew attention to a good and spirited argument from a more-than-competent writer. Teiresias was blind, but spoke wisely: Professor Kelly has both good sight and his wits about him.

As they say on the streets of Tottenham: Respec' Sphere: Related Content

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