JOE Higgins twinkled. The former socialist TD was back in Leinster House on Tuesday.
“The system is collapsing,” he told me triumphantly, surveying the shell-shocked faces of TDs and senators all around him. Joe was trying to get up my nose.
Joe was having a good day. Indeed the likeable old leftie has had a good week, a good month, and a good year. Through the eyes of Joe the world is sinking into paradise. The United States is nationalising its banks; Gordon Brown made a dog’s dinner of saving Northern Rock; and Chinese sovereign wealth funds are circling the bastions of capitalism.
Last week Warren Buffett took five billion out of his back pocket and bought a chunk of Goldman Sachs; George Bush went on the airwaves warning Americans that their sacrosanct market economy needed a $700bn rescue package; and the US state was being compelled to subsidise the tottering towers of capitalism. Joe was on cloud nine.
On Wednesday night, as Joe was listening to George admitting that “the markets are not functioning properly” and warning of “financial panic”, he must have allowed himself another twinkle. Comrade George W was speaking Joe’s language.
On Thursday global stock markets rallied hesitantly, but nervous investors were still heading for the safest havens. Short-dated government stocks, Joe’s type of investment, soared.
Joe was right. The Bush administration was running out of rope. Buffett’s bravado was greeted by a dip in the Dow. After a relief rally, Bush’s dire threats were met with lukewarm scepticism. Many saw them as a move to rescue a drowning Republican presidential candidate, John McCain. Bush and Buffett, the most powerful man on earth and the most influential global investor, were no longer in control.
Next, Comrade George’s package was torpedoed by the Republican Right. Chaotic scenes followed in the White House.
This weekend the jury is out on the US package, but the agonies of the free market were giving Joe Higgins his day in the sun.
Joe should take his eyes off Wall Street and stop indulging his fantasies over its death throes. The US will stumble through this crisis. Wounded maybe, but the US system will not fold.
If Joe wants to make hay he should focus his firepower not on the White House, but on Leinster House. Ireland has its special problems. Not only do we share the woes of the global credit crunch, but we have created home-grown troubles to boot.
All week Joe had been scoring points. “Irish pensions,” he had thundered, “are being gambled away in a casino. It is insane,” he insisted. “Irish pension managers might as well be playing roulette with workers’ money”.
So spoke the only real rebel on the Irish political scene.
Not for the first time, the rebel was right. Last week new numbers revealed that Irish pension funds had lost €18bn in 12 months.
Fertile ground for Joe. In a few years time Ireland will contain a generation of impoverished geriatrics, a swamp of discontent. This weekend he will be able to dream of arming an ageing peasantry with pitchforks .
But if Joe scrutinises Ireland’s banks he will enjoy the greatest buzz of all. Unchecked, they have been allowed to run riot for two decades. Suddenly, attempts are being made to find an instant remedy to the excesses of a generation of bankers. They are not working. Cosmetic probes, prohibition on short selling and public relations exercises by a financial regulator all at sea, have created a vacuum. The vacuum has ensured that rumours are rife.
Rumours that the Irish Nationwide was in trouble were found to be false. Mischievous rumours that the same building society was being bought by the even more controversial Anglo Irish surfaced in the media as gospel. Rumours that Bank of Ireland was on the point of being taken over by Banco Santander of Spain were dismissed. Rumours, rumours, rumours.
If only the rumours of takeovers and mergers had been true. But they were not.
In other countries mergers have been arranged. Cross-border takeovers have happened. Good fits, like Lloyds/TSB and HBOS, have been found in the UK.
Not in Ireland. Ours is a lonely banking world. Foreign predators have periodically run the slide rule over Irish banks and rushed screaming from the room. They expected to find bad debts, sub-prime mortgages, overlending and all sorts of other problems.
They have not been disappointed; but they have found far more. They have unearthed a motley crew of banks which have overdosed on property; they have found banks encouraged by a government hypnotised by its own property developer friends; not only that, but the Government has showered the same developers with tax breaks. The flames were fuelled. Ireland headed for a property furnace. Now it is burnt out.
Foreign banks will stick to the knitting. We are on our own. A US lifeboat will not save Ireland.
Joe will be glad that there is little hope of salvation from capitalists abroad.
More alarming is the fading hope of help from capitalists at home. Last week few pundits could see any prospects for Irish banks seeking local partners.
The rumours that Anglo Irish was eyeing Irish Nationwide, were strenuously denied by Michael Fingleton’s building society. Someone was peddling porkies.
Proof that no such bid beckoned — if proof was needed — appeared when it was announced that two of Anglo’s directors had been on a spending spree. Chairman Sean FitzPatrick and his chum Lar Bradshaw had been buying shares in the battered bank. Insider dealing rules forbid directors from trading in shares when sensitive information is available to them. So, nothing sensitive could be going on. Jim Flavin of DCC would be an authority on such antics.
Another mooted mega- merger — between Allied Irish and Bank of Ireland — is out of bounds on competition grounds. Elsewhere, there are no obvious fits.
Why? Because the Financial Regulator has ensured, by years of inertia, that most Irish banks are infected by the same property bug. They have all been at the same racket. Why would they want to be burdened with each others’ poison?
The real economy in Ireland is worse than in the US. On Thursday Joe, already on a high, must have been salivating: Ireland was officially declared to have hit recession. Even the US has not yet plumbed such depths. Nor has any other country in Europe.
The Irish market is waiting for an Irish bank (maybe under instruction from a foreign parent) to pull the plug from under one of its heavily indebted property developers. The mother of all banking crises could follow. Properties will be put on the market at rock bottom prices. Whole new, much lower, valuations will mushroom. Balance sheets will implode.
An economy in recession is chronically unfit to save an isolated banking system in distress.
We have created ideal conditions to put old-fashioned socialists like Joe in a state of excitement.
We have one opportunity to wipe the smile off his face. Over to you, Brian Lenihan.