Full banking inquiry a potential minefield could politicians rise above takling sides?

World of Politics with Harry McGee – harrymcgee@gmail.com

That was a sensational scoop in the Irish Independent on Monday. Newspapers love nothing better than unearthing secrets and all the better when it is a tape, especially one that is candid and self-incriminatory.

Viewed through the prism of today, there is little in the conversation between the two senior executives from Anglo Irish Bank that is surprising. That is knowing what we know now.

But it is clear that those within the failed Irish bank knew then what we only know now.

I heard people getting outraged on Joe Duffy’s show on Tuesday about the fact that the two fellows were cracking jokes. I actually have no issues with that. It was a private conversation between two colleagues. If you listen carefully to the tone and tenet of the conversation they both realised that the company was in the soup. It was a bit inappropriate, it was a bit of gallows humour. And if you excuse my contradiction of the previous sentence as I mix my metaphors, it wasn’t really a hanging offence. Ok, the laddish quote to the ‘Drummer’ (then chief executive David Drumm) and pulling a figure out of his ass was inappropriate. But it wasn’t that big of a deal.

What was really striking to me was that both knew that the game was up. In the last sentence of the transcript (which I urge you to read in full, it’s on the independent.ie site and also on the irishtimes.com site) there is an admission that the bank is a goner and can’t survive. One of the two is prescient when he says the only solution is for the bank to be broken up or be nationalised. It was as stark as that.

It’s clear from the gist of the conversation that both knew deep down that all of the other Irish banks were so reputationally damaged and  weakened (Bank of Ireland might be big here but was a ‘minnow’ in the bigger world) that they were in no position to buy Anglo and, indeed, were in trouble themselves.

What was also intriguing is that they also knew at the time that €7 billion was not enough. They said if the Central Bank was willing to cough up that amount of money it would have “skin in the game” and would cough up more. In other words, the Central Bank would have no choice but to invest much more (and we know the eventual figure came to a staggering €40 billion) in order to protect its initial investment of €7 billion.

The transcript, with its mixture of macho bravado and uncertainty, reads like the script of a David Mamet play (he’s the guy who wrote the seminal play and film Glengarry Glen Ross). There’s even a hilarious parody of the hapless financial regulator Patrick Neary. One of the two mimics Neary’s nervous search for reassurance as he was told that the Central Bank would have to stump up €7bn. Neary championed the now discredited light touch or principle-led regulation of the banks and was unaware that a crisis was about to befall Irish banks until caught in the headlights of the juggernaut bearing down on him.

There are two major political issues that arise from this disclosure. The first is how much of this knowledge was shared with the Government on the famous night of the guarantee in September 2008. All accounts of that fateful meeting seem to suggest that the problem was presented by the banks – including Anglo – as a liquidity problem but one that could fell all the banks if it was not sorted.

It’s clear that Anglo and others were economical with the verité as they obviously knew much more than they pretended and knew that the problems were graver and more systemic and – most probably – unrecoverable.

For more, read this week’s Connacht Tribune.