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Paddy the Bearded Banker

Posted on: December 20th, 2009

CHRISTMAS is a perfect time for an amnesty. This year let us swallow hard and give a fool’s pardon to the sinners with beards, namely the trade union guys who tried to wreck the economy.

Beards are not always a sign of badness. Every year we have to forgive Santa Claus for looking like David Begg and Jack O’Connor; but as the man from the North Pole only surfaces annually we can rapidly revert to the comfort zone of blackening the comrades with whiskers for the rest of the year.

Unhappily the ancient sport of beard hunting may have to be abandoned. Last week, a man who would easily look lost in the middle of a photocall with comrades David and Jack surfaced in Leinster House. A small man with a big beard, determined to save the Irish economy, arrived at an Oireachtas Committee. It was all a bit counter cultural.

A beard may be a bad start, but Patrick Honohan soon put an end to any suggestion that he was one of the wrecking brethren. The new Governor of the Central Bank walked casually into a committee room in the bowels of Leinster House armed only with a brief statement, his brains and a scary dose of humility.

Governors of Central Banks are normally pretty unhelpful, inscrutable interviewees for TDs and senators. They look down their noses at us, giving the impression that they are royalty and we are peasants.

Not Professor Patrick. At one point, after an informal exchange, Fianna Fail’s Sean Ardagh asked him whether he should call him ‘Professor’ or ‘Governor’.

“Patrick will do fine,” retorted the incumbent of the stuffiest job in the State.

We were being introduced to ‘Paddy the Governor’.

Paddy the Governor is a genius with a common touch. Despite his terrifying academic prowess he is threatening to emerge from an ivory tower to launch an assault on a fortress. Fortress Central Bank could be on the point of being torn down.

Patrick has been given a great start , not of his making — but thanks to Finance Minister Brian Lenihan. Several months ago the minister resolved to end the madness of automatically filling a vacancy at the top of the Central Bank by appointing the boss at the Department of Finance. The nation’s top mandarin had invariably had first call on the Central Bank gig and its €300,000-plus salary.

Consequently , the toff from Finance had traditionally transferred the embedded culture of the mandarins with him into the Dame Street stronghold. The Central Bank and the Department of Finance have been joined at the hip for decades.

Patrick’s appointment has the potential to sever the link.

He made a great start on Tuesday. When he was asked a few questions, he disarmed his interrogators. He was open. He was honest. He was different.

We were all a bit disorientated because we were used to lofty obfuscation.

Not from Paddy the Governor. Indeed, Paddy kicked his hosts straight in the solar plexus.

Hardly a wet day in the job, he demanded a parliamentary inquiry into the banking crisis. It should look at the roots of the problem, not just the culprits of recent years.

As he spoke, shivers must have been shooting up the spines of some of the government ministers fielding opposition questions just down the corridor. A public inquiry into the banking crisis would inevitably start with the politicians in power at the time.

Star of the show would be Brian Cowen, now Taoiseach, but finance minister in the four years leading up to the crisis.

On Wednesday morning, Cowen was distinctly unenthusiastic about his new Governor’s piece of sedition. He explained to the Dail that there were “limitations on Oireachtas committees being able to inquire into questions of fact”. He rubbished the Governor’s idea.

The Taoiseach may suddenly have yearned for the good old days when the Secretary of the Department — not some unreliable academic — would have held Paddy’s post. No house-trained mandarin would have uttered any of that guff about inquiries.

Paddy did not finish his solo run with his demand for an inquiry. He put clear water between his new regime at the Central Bank and his predecessors. He pointed an accusing finger at some of them when he insisted there had been a ” serious breach of regulation”. He went on: “The regulation should have been more proactive in preventing the rapid growth in lending”.

Patrick Neary, only one year ago the financial regulator, must have shuddered on the first tee out at his South Dublin golf club at the prospect of a public question and answer session about his tenure in the job.

And then Paddy the Governor declared that regulators need to “trust less and verify more”.

Decoded, he was condemning the cosy “trust” between bankers and regulators; in particular, he must have been signalling the failure of Ireland’s regulator to challenge the bankers’ shenanigans. He may even have been thinking of our regulator’s refusal to carry out any unannounced inspections on the bankers.

Paddy wanted a “whistleblowers’ charter” — legislation to protect heroes like Eugene McErlean and Tony Spollen, both AIB employees victimised for their honesty.

Even more ungratefully to his government patrons, Paddy expressed a preference for the appointment of more “outside people” to the banks’ top jobs, a veiled criticism of recent promotions at AIB and Bank of Ireland.

He went on to damn the two big banks’ recent appointees with faint praise by describing the successful candidates as “competent” and “experienced”.

Richie Boucher of Bank of Ireland and Colm Doherty of AIB must be starting to realise that the new boy down in Dame Street is no normal pushover.

Honohan’s openness was mind-boggling for a Central Banker. He happily discussed the prospects for individual banks, including the delicate subject of Anglo’s future. He even differed with the Government’s risk-sharing arrangement within Nama.

Will the bearded crusader succeed? Honohan has a mountain to climb. All the old personnel and the deeply imbued culture will work against him. Bankers will retrench to bypass and outwit him.

Just as I dared to hope that this man might reform the system, the Dail division bells rang. I took a quiet break on a seat outside the committee room.

As I minded my own business, a shadow lurked up beside me.

“You must come in and meet the new Governor sometime,” offered a vaguely familiar silhouette on my right. It was one of the Governor’s minders — a member of the old regime still in charge of the nuts and bolts at the Central Bank’s press office regime.

He was part of the squad that had defended the former regulator throughout the crisis and preached the Neary doctrine that our banks were properly capitalised.

I am afraid that I told him that our conversation was of little value. Once bitten by the regulator’s spinners, twice shy.

Powerful forces — both inside the Central Bank, in politics, within the civil service and among the bankers themselves, will soon circle the wagons to deny Paddy the Governor the reforms he seeks.

Yet if he continues to bang on about a parliamentary inquiry the clamour could become irresistible. Despite the Taoiseach’s reluctance, a banking probe looks closer this weekend.

It is the first time I have put my faith in a man with a beard.

‘The Bankers: How the Banks Brought Ireland to Its Knees’ by Shane Ross, published by Penguin, is in all good bookshops nationwide