Category: Banks & Finance

Financial Regulator's annual report – A dishonest whitewash

The Financial Regulator’s annual report, published last Tuesday, contains one very clear message that, depressingly, went completely unnoticed by the media.

That message is – Absolutely nothing has changed; the old regime is still in place; the old attitudes are still dominant; the interests of the people and the country will continue to take second place ahead of the interests of a ruthless and deeply corrupt financial sector.

Dodgy financial institutions will continue to enjoy full protection under a mountain of bureaucratic waffle and strict secrecy laws enthusiastically enforced by FR staff.

Jim Farrell is the public face of this disgraced and discredited Financial Regulatory regime. In an interview on RTE (5th report) he claimed that:

the way the country’s banks are now regulated is fundamentally and forever changed.

It is reasonable to assume from this statement that all is well at the Financial Regulator, that major reforms have been put in place which will protect consumers forever into the future and bring to account the corrupt vermin that have infested the Irish financial sector for decades.

In other words, it is reasonable to assume that Mr. Farrell has announced a virtual revolution in Irish regulatory methods and that from now on his organization will act in the interests of Ireland and its citizens rather than the interests of (dodgy) financial institutions.

The (revolutionary) measures announced by Mr. Farrell are as follows:

Extra staff with additional skills.

A more questioning and forensic approach to regulation.

Staff from the Financial Regulator are now on site in banks that are covered by the Government guarantee scheme. These people are full time and are monitoring the activities of banks.

The first two measures can be dismissed for the waffle that they are but the third measure is interesting.

My understanding of the presence of FR staff in the banks is that they are there in a temporary capacity as a result of the economic collapse and subsequent scandals.

I assumed, obviously wrongly, that once the crisis was over and banks were returned to private ownership that FR staff would also withdraw.

My understanding now, as a result of Mr. Farrell’s announcement, is that FR staff will become a permanent fixture on the staff not just of those banks under government guarantee but of all financial institutions to ensure that no such scandals could possibly recur.

To confirm this I contacted the Financial Regulator and spoke to the Senior Press Officer, Gill Forde.

Ms. Forde confirmed that it was official policy to have FR staff permanently on site in the covered institutions.

What about other financial institutions?

We are currently recruiting and enhancing our expertise in all of these areas and that’s the only detail I have for now.

My understanding from what Mr. Farrell said is that the banks covered by the Government guarantee are now going to have full time staff from the FR on a permanent basis.

Yes.

Even when they’re returned to private ownership?

He said the approach has changed and he was referring to principles based supervision.

What I’m inquiring about is the entire financial sector. Is it the policy of the FR to put their staff in all banks on a permanent basis?

The FR as you will be aware, there’s new legislation being brought forward by the Government forming a Central Bank Commission and I don’t have any more information.

I’m just going on exactly what Mr. Farrell said – The country’s banks are now regulated fundamentally and forever changed and one of the measures he has taken is to put people on site full time in those banks covered by the government guarantee.

Correct.

My question is – Is that a permanent policy, that FR staff will continue to monitor those banks forever and not just until the crisis is over?

I don’t have any information further than to say that that is our regulatory approach to supervising the banks.

So really what you’re saying is you don’t know.

I’m not saying that, I’m just saying that it’s a regulatory approach to supervising the banks.

Could you refer me to somebody who could answer the question?

That is our response.

I don’t understand your response; Mr. Farrell is saying that full time staff has been put on the banks

Exactly and that’s because the principles based approach no longer applies.

Are you saying that the placing of full time staff in the banks is a replacement for the principles based approach.

Yes, I am.

But it only applies to financial institutions under government guarantee and not to the entire financial sector?

The Regulator has been realigning with the new provisions and we are recruiting additional staff across the organization with the focus on risk, governance and enforcement

I tried to press the matter but Ms. Forde said she had to go and hung up.

Here’s my summary.

Mr. Farrell was being dishonest in suggesting that the temporary arrangement of placing FR staff in the banks was a major, industry wide and permanent reform.

(I say ‘temporary’ because nobody seriously believes that the banks would allow the Regulator to closely monitor their activities on a permanent basis)

In my opinion Mr. Farrell was just talking rubbish, just mouthing meaningless words to dishonestly convey the impression that substantial change had occurred that would, for the first time in Irish history, see genuine financial regulation.

Ms. Forde’s arrogant and dismissive reaction to my questions is exactly what I have come to expect from FR staff over the years. The attitude is still the same – Bureaucratic waffle, refusal to answer even the simplest questions and always the big stick of state secrecy laws.

Ms. Forde’s claim, for example, that the placement of FR staff in banks is a replacement for the principles based approach to regulating banks is, in my opinion, insulting waffle.

If such a major policy shift was in operation I wouldn’t be hearing it from a FR press officer, I wouldn’t even be hearing it from the chairman of the Financial Regulator on RTE News. I would be hearing it from a Government press conference chaired by the Minister for Finance as he announced to the world that Ireland had finally decided to take financial regulation seriously.

A much more disturbing aspect of this situation is the reaction or, more accurately, the non reaction of the media.

The publication of this year’s annual report by the Financial Regulator is arguably the most important event in Irish financial regulatory history.

It is the first annual report following the collapse of the economy which exposed the Financial Regulator as an incompetent toothless tiger unable or unwilling to reign in rogue elements in the banking sector.

This incompetence by the FR played a major role in the destruction of the economy and by extension is at least partly responsible for the massive financial and social damage to the people of Ireland.

Despite this, the media and in particular RTE effectively ignored the report and the fantasy (dishonest) claims made by Mr. Farrell.

This ignorance of what is really going on within the financial regulatory system and other so called regulatory agencies is a major contributing factor to the financial catastrophe now facing this country.

Copy to:
Financial Regulator
Financial Regulator (Press Office)
RTE

The puzzlement of Alan Dukes

DUKES
Former Fine Gael leader and Anglo Irish Bank director, Alan Dukes, is puzzled at the delay by the Director of Corporate Enforcement (ODCE ) in his investigation into Anglo Irish Bank.

I find it rather odd that the Director of Corporate Enforcement announced in February that he was satisfied that there was a prima facie case for an investigation into the bank. Having announced it in February in sent people in, in April, to begin the inquiry and announced recently, that if things go well, in November he might be in a position to tell the DPP whether or not there’s a case. I don’t know why it’s taking so long.

Mr. Dukes is puzzled because he, in company with the great majority of Irish citizens, is unaware that he lives and works within an administrative system that is largely corrupt.

That system is specifically designed to protect white collar criminals, including politicians, from being made accountable. A whole range of useless agencies like tribunals, High Court inspectors, ODCE, Financial Regulator and Financial Ombudsman are set up to absorb public anger, prevent immediate action and eventually allow allegations to become historical and forgotten.

Let me state once again. Nobody in Anglo Irish Bank will ever be brought to account for their actions.

Banker: Everybody is to blame – except us

In recent times Irish bankers have been keeping very quiet while the Government makes arrangements to bail them out with billions of taxpayer’s money.

Now however, one of them, former chairman of AIB, Mr. Dermot Gleeson SC, has crept out from under his rock to tell Irish citizens that they are to blame for the financial catastrophe because they rejected the Lisbon Treaty and, to add insult to injury, has warned us all that we had better get it right in next October’s referendum.

Conor Ryan of the Irish Examiner writes an excellent analysis of the rest of Mr. Gleeson’s warped views.

WHEN you have chaired Ireland’s largest bank during a period of overheated property speculation only to watch as massive loan books crumble onto unwitting taxpayers, you must know who to blame – everybody.

Former chairman of AIB, Mr. Dermot Gleeson SC has been telling Irish citizens that they are to blame for the financial catastrophe because they voted No in the Lisbon Treaty and that they had better get it right next time.

Well, everybody but yourself that is.

Welcome to the world according to Dermot Gleeson – senior counsel and outgoing chairman of AIB.

Yesterday he treated the morning audience at the MacGill Summer School to a lengthy explanation on how it all went wrong.

Obviously being relieved of the burden of chairing the bank – which had doubled the size of its lending in recent years – has allowed Mr Gleeson to sit back and assess AIB’s embarrassing fall.

And here, for the first time, is a complete run-down of Gleeson’s Bad Guys – the people and factors who, he feels, created a situation where any banker could do little else but throw caution to the wind:

1. European regulations which imposed new accounting standards that only encouraged banks to be reckless.

2. Accountants. Don’t even start Mr Gleeson on accountants. According to him them and their “mark to market” valuing practices totally confused the price of heifers and houses alike.

3. Rating agencies who handed out healthy AAA ratings like a labelling machines at a Duracell factory to obviously unsustainable financial institutions.

4. Central banks. Their warnings of impending crashes could not be taken seriously because quarterly bulletins were otherwise gleefully optimistic. Interest rate policy is a grumble for another day.

5. Government policy. Public spending was excessive and stamp duty was never a long term option. Oh, and the litany of tax reliefs drove the construction boom which banks had to provide money for.

6. The Financial Regulator. It had access to the accounts of banks and should have saved lenders from themselves.

7. Monopoly power. GP fees were too high, energy prices were costly and social partnership was not competitive.

8. The feckless public. “When you are looking for the causes it is hard to exempt ourselves the public, I am not speaking from my capacity as a former chairman of a bank (of course, Mr Gleeson). The public played a role as well because many of us participated in the property bubble.”

9. The nation. ” We believed in things that weren’t actually true… And there is a sense that national pride and confidence boiled itself into over confidence.” You bold nation, you.

10. The media. The call by some commentators that people should vote no to Lisbon was evidence, Mr Gleeson felt, that the media had lost touch with reality.

And then, finally, we have the banks. They made mistakes and here, according to Mr Gleeson, are some of the reasons why.

1. Everybody the banks relied on to assess risks got it wrong. You name it, engineers, statisticians and PhD holders.

2. Risk assessors never exposed the problems in banking practices which markets needed to know.

3. “Sophisticated international consultants” who backed Anglo as a model for other banks and among their cheer leaders, financial journalists and brokers.

4. Anglo Irish Bank. “The presence of a competitor who appears to be striding ahead of you, certainly is taking customers from you, certainly is gaining market share and is being lauded and applauded not just by its own supporters but by [market analysts].” Clearly a bad example for impressionable bankers.

However, after pointing the finger at every other sector Mr Gleeson nobly conceded that following the crowd simply did not absolve his fellow senior bankers.

“The point I just made makes no excuse whatsoever for anyone who followed [Anglo’s] bad example. But it does make up a small part of the explanation,” he said.

And on this gracious note one can only assume had it all gone right, society would have been treated to an equally systematic singling out for praise.

Mr Gleeson’s speech certainly makes it hard to believe that a banker can take credit for anything.

We'll be waiting…

The discredited head of the discredited Central Bank, John Hurley, was on RTE (2nd report, 1st item) today blaming others for his incompetence.

Asked if he took any personal responsibility for what happened in the Irish banking system over the past year he said:

The international regulatory environment clearly has been found wanting and the rules in which regulators regulated in different markets clearly were inadequate.

Irish citizens are still waiting for an official, a politician, a banker, anybody to say – Yes, I’m to blame. I think they’ll be waiting.

The farce of Irish financial regulation continues

The farce that is financial regulation in Ireland continues. The latest joke concerns allegations that banks are overcharging customers who break out of a fixed-rate mortgage (Sunday Business Post).

(Big John Wayne) Lenihan apparently heard that banks were carrying out such dastardly acts and immediately ordered the Financial Regulator to investigate.

The FR, in keeping with its high standards of professionalism and concern for the best interests of consumers approached the banks and politely asked them if they were stealing from customers.

The banks, in keeping with their high standards of honesty, integrity and concern for the best interests of consumers, carried out an in depth investigation which, I believe, included asking the janitor, but found no evidence of wrong doing.

(Big John Wayne) Lenihan was pleased and in that endearing tongue twisting manner of his, he announced:

The regulator concluded, and has confirmed to my department, that its analysis indicates that the early redemption fee calculation in all cases appears to seek to recover costs and that lenders do not generally apply additional fees in the case of early redemption.

But wait – Big John spotted something amiss. The findings were based solely on material provided by the lending institutions themselves so in case there was the slightest risk that the legendary honesty of Irish financial institutions could be blemished in any way Big John Lenihan ordered the FR to carry out at least six on-site inspections.

A spokesperson for the financial institutions said that just because they were aware months ago of media allegations of wrong doing, were aware some commentators had expressed concern about possible wrong doing, were aware of polite questions by the Financial Regulator and were now aware that the FR was about to carry out on-site investigations with, of course, the usual prior notice of exact times and locations, did not mean that they would attempt to organise a cover up of any wrong doing.

A spokesperson for the Financial Regulator (under cover of darkness and wearing a hood) said that because of strict secrecy laws it was unable to confirm or deny reports of any wrong doing, was unable to confirm if (Big John Wayne) Lenihan was the Minister involved, was unable to confirm if it actually had powers to investigate banks and indeed was even unable to confirm if the entity commonly known as the Irish Financial Regulator really existed but the spokesperson did admit that most Irish citizens don’t really believe that it does.

Copy to:
Financial Regulator

What has to happen…?

Judges won’t take voluntary cuts; politicians won’t take voluntary cuts, while everyone else is taking involuntary cuts right on the kisser.

Politicians of every hue take to the airwaves. From our remove, they’re freakily removed from reality, their soundbites giving new meaning to twitter. The truth is “unpatriotic”. Cuts are “savings”. Shameless political self-preservation is sudden-onset “responsibility”.

Bankrupting bankers are untouchable, the Minister for Finance telling an apoplectic Vincent Browne that these international men of mystery have contracts, you know.

So had the rest of us. This is not Kafka. This is a parish-pump farce. One that reveals a deep, dangerous fracture in Irish life. People listen to the estranged politicians, look at their wreckage of their lives and wonder if they’re living in The Matrix.

This is serious. Deadly serious. We’re not just losing money here. Too often, we’re losing our minds, our lives. Scared parents wander the house at night, watching the children sleeping, wondering how long they’ll be able to keep their job, their head, their home.

Distracted men (usually) are doing away with themselves in sheds, hotels, rivers, lakes. Small, devastating exits. The ultimate personal response to political and financial treason. Yes, we’re still dying for Ireland. And the megabankers are still on the golf course, blind to the fates of mortals. A perverse acquittal granted them by the State.

Miriam O’Callaghan, Irish Times

Parish pump farce? Political and financial treason? State protection for the bankers.

So why aren’t the people on the streets? What has to happen before Irish people realise that they live in a failed political entity?

What has to happen to make them realise that that failed political entity has to be torn down and destroyed before we can start afresh?

Corruption, accountability and political ignorance

An article in yesterday’s Irish Times by Peter Murtagh relates the story of Seán, a man who, in normal circumstances, wouldn’t say boo to a goose but was now gripped by naked rage because of his financial loss as a result of the banking collapse.

Seán, who voted Fianna Fail all his life, had some colourful language for Fianna Fail, Bertie Ahern and Anglo Irish Bank.

According to Murtagh the principal reason for Seán’s anger was the lack of accountability for the banking fiasco.

This is a misinterpretation of Seán’s anger. Seán is not the slightest bit interested in accountability, his anger stems entirely from the fact that he personally lost money.

If his money hadn’t been invested in Anglo Irish Bank, if it was still secure in some other scheme he wouldn’t have featured in Peter Murtagh’s article.

In other words, he would still be, as Murtagh describes him – a nice quiet man, a gentleman. He would still vote Fianna Fail at the next election as he has done all his life and the financial devastation inflicted on Ireland and its people would only be of passing interest to him as he looked forward to his retirement.

If Seán was genuinely interested in accountability, rather than his own selfish interests, he would not have blindly and consistently voted for the most corrupt political party in the history of the state.

It was only when the disease of corruption infected him personally that he suddenly realized that somebody should be made accountable.

It is this extremely narrow outlook that lies at the root of most of Ireland’s problems. People like Seán do not vote in the national interest, they vote strictly for their own interests and it is this political ignorance that creates the perfect environment for corrupt politicians to buy votes in order to obtain power.

At the end of the article Murtagh suggests that perhaps things are changing.

Maybe the anger of all the Seáns out there will translate into our “betters” being held to account by the Garda, the DPP and the corporate enforcer.

Like Seán, Murtagh is living in a very narrow world completely unaware of the reality of what Ireland has become.

Every single action by the Government and State authorities since the economy collapsed and exposed Ireland as a corrupt state has been to protect and maintain that corrupt system while at the same time trying to convince the international community that we are a normal democratic country.

The Garda, DPP, Corporate Enforcer, and all other so called regulatory agencies are a major part of the problem and the problem will not be resolved until all of these agencies are radically reformed or replaced altogether.

But nothing, absolutely nothing will change until the present corrupt political system is completely destroyed and replaced with a genuine, accountable, democratic system.

That’s how radical we need to be and quoting meaningless sentiments from a Bob Dylan song, as Murtagh does, will certainly make no difference to the forces of corruption that have infested every level of Irish society.

Copy to:
Peter Murtagh

Accountants not accountable

Madoff gets 150 years and his accountant has been charged with aiding and abetting fraud and four counts of false audit reports.

In Ireland, to my knowledge, not a single accountant has even been investigated never mind actually charged despite the theft of countless millions in a whole variety of criminal scams over the years.

Meanwhile, Jim Flavin of DCC and Sean Fitzpatrick of Anglo Irish Bank are still walking around free men, still supremely confident that they will never have to suffer the indignity of actually accounting for their activities.

White collar crime – denial and punishment

Bernard Madoff has been given the maximum prison sentence of 150 years for masterminding a massive fraud that robbed investors of $65bn (£40bn).

Here’s a list of words in sequence as they appeared in an Irish newspaper reporting Madoff’s case.

Crooked…sentenced…swindling…a massive “Ponzi” pyramid scheme…duped thousands of investors…behind bars…prosecutors…fraudster…fraud… perjury…false reporting…fraud…crimes…fraud…wrong…criminal…fraud…fraud…pretence…scam.

Compare this list with the following list of words taken from another Irish newspaper reporting efforts by former National Irish Bank (NIB) boss Jim Lacey to avoid even the minimum consequences for his part in a massive ten year scam that saw countless millions robbed from the State and directly from customer’s accounts.

Improper practices…tax evasion scandal…falsified documents…hot money.

Ah yes the old reliable ‘improper practices’ it’s the term most favoured by politicians, government officials and journalists when reporting/commenting on major crimes within the Irish financial sector.

In most counties it is also common to witness white collar criminals (the term is still not officially recognized in Ireland) express regret and apologise for their crimes. Here’s what Madoff had to say.

I’m sorry I know that doesn’t help…apologised for the “legacy of shame” he had brought on his family and the industry…I’m responsible for a great deal of suffering and pain, I understand that.

As we know ‘errant’ Irish bankers do not do apologies, they don’t do accountability and they certainly do not do time.

Lacey, denying everything, blamed bank managers who weren’t up to the job or were out playing golf. He blamed Revenue for not testing the bank’s systems. He blamed internal and external auditors and he blamed the Central Bank. Everybody is to blame, maybe even the customer, but not Mr. Lacey.

And then there’s the proceeds/profit/loot gained from financial skullduggery.

Mrs. Madoff agreed to give up almost all of her property except for $2.5m (€1.7m) set aside by the Government as part of a $171bn (€122bn) forfeiture order against her husband by the judge.

She will relinquish her interest in the couple’s penthouse in New York and other homes worth an estimated $22m. She will also give up a $39,000 piano; $2.6m of jewellery; silverware worth $50,000; bed linen worth $18,000; 35 sets of her husband’s cufflinks; a $36,000 sable coat and a $12,500 mink.

She and her children are also under suspicion of complicity in the fraud.

Compare this to the family of the corrupt Haughey who were allowed to keep his millions.

Some; if not most of this money, is the proceeds of Haughey’s nefarious activities but there’s as much chance of a Haughey being investigated for complicity as there is of Lacey ending up in jail.