The best little Warehouse at Xmas

I’ve moved to the view that the best way for the government to manage the banking system in the interest of the economy is to control it. That’s why I’m not surprised at another missed opportunity by this government. Ronán O’Gara could never be a FF supporter because he takes every opportunity going! This crowd of so called independents, Galway tenter’s and veggies have just blown a golden opportunity to shake off the past by putting in place a strategy to fundamentally change the banking industry. 3 months ago they rescued Irish banks that had blown every last shilling on toxic debt.
Essentially the economy was caught high and dry because what has passed for growth in the last 15 years was a building boom in houses and commercial development that was financed off over night borrowings at 2-3% to be paid back over 15 or whenever. If the developer needed more money sure go and get planning permission to build, increase the asset value and back you again for more from the bank.

Buying a house? Forget about saving, your friendly financial institution will give you a 100% mortgage, and a loan for furniture, car and appliances. You’ll need the car to drive 2 hours to work every day!
The reason why our economy has come off the rails so spectacularly is that they couldn’t control the exposure of institutions outside the state to toxic debt. The crisis in credit that resulted finished the Irish party that was already struggling under its own weight. I doubt that the €5.5B for the 3 banks promised tonight will be able to recapitalise the SME sector, but I’d like to be wrong
This government is effectively clueless and is now about to hand cash to one bank that has already hid lending to senior management from shareholders. When the Financial Services Regulator heard he did nothing about it for a year, the Minister never “officially” heard until 2 days before it was revealed in the media. The same bank is 15% owned by Sean Quinn one Ireland’s wealthiest men. Earlier this year Mr Quinn was penalised by the FSR for benefiting has from a secret loan to Quinn Insuarance so as to facilitate the take over of BUPA a move that merited it a €3M fine. 18 months ago Anglo’s share price was almost €18 now it’s less than 30c The Quinn shareholding in Anglo raises some disturbing questions. How was his purchase of shares in Anglo funded? If the money was borrowed did any of the money come from Anglo? How much do Sean Quinn and his companies owe Anglo? What security does Anglo hold over any money it has lent to Quinn? Quinn’s €1B investment in Anglo is now worth about €35M!
Sean Fitzpatrick effectively created Anglo Irish Bank out of the tiny City of Dublin Bank & Equity Banks about 20 years ago. This bank is the story of Celtic Tiger Ireland. Like our economy it came from nowhere to become temporarily a major player, Like our economy there is something not quite right about how it got into this mess. What makes Anglo Irish different is that it is not a retail bank but a commercial bank heavily exposed to borrowings from developers and builders. With the saturation of the retail sector and the decline in construction the bank has difficulty accessing capital to lend, its customers have a declining asset value with little hope of building it, little cash coming back off its loans and no future. Mr Fitzpatrick used a curious procedure of off balance sheet financial gymnastics to hide money he borrowed from his own bank as CEO. This practise is called Warehousing. It reminds me of Warehouse John, a nickname given by the late Veronica Guerrin to another small businessman who made good John Gilligan. The electorate who are going to inject €1B into Anglo Irish should be told why Warehouse Sean needed to borrow money, whether credit committees in Anglo or INBS knew and if so what did they do and if not why not? What would the significance of the bed and breakfasting of €87M have had on Anglo Irish had it been reported at the time?
A final thought which perhaps should be the first one, where are the garda? About 4 years ago when the Republican movement robbed the Northern Bank of £26M before Christmas a major investigation took place. So where is the fraud squad, Harcourt St Garda station is about 5 minutes walk from Anglo Irish HQ and perhaps the best thing is for the intervention by the garda. Joan Burton was right when she saID that an inspector should be appointed to investigate what went on before the bank gets as much as a cent

Anglo Irish Bank Directors jump before they’re pushed

Anglo Irish Bank’s Chairman Sean Fitzpatrick has resigned after it emerged that he had loans of €87M off the balance sheet to support his investment in the bank. Mr Fitzpatrick had a facility to arrange personal loans from the bank and to re-arrange these loans with another bank temporarily for 8 years on his own admission. These loans were not declared on the Anglo Irish Bank accounts. The bank proposes to include the loans on the 2008 set of accounts. Another director Lar Bradshaw has also resigned. Fitzpatrick claims he (Bradshaw) was unaware of his financial arrangements.

My initial response is where was the auditor and how could a loan to this extent have been missed? The auditors are Earnest & Young a highly reputable firm. To make matters more interesting the Minister for Finance, Brian Lenihan TD tonight says that his commitment to underwrite the capital needs of Anglo Irish Bank and to ensure its "long term strength and viability as a bank of systemic importance in Ireland. This bank is not just a zombie bank but it seems as essential to FF and their developer friends as Banco Ambrosiano was to the finances of the Vatican City.
In 2007 Fitzpatrick slammed the regulatory regime of the financial sector as “Corporate McCarthyism”. Fitzpatrick said that Ireland’s current economic success was almost entirely due to the country’s entrepreneurs and had little to do with politicians. "You can’t keep good people down forever. It is time to shout stop. The tide of regulation has gone far enough. We should be proud of our success, not suspicious of it. Our wealth creators should be rewarded and admired not subjected to levels of scrutiny which convicted criminals would rightly find intrusive.", he said.
Tonight he seems to be of a different frame of mind “My decision to tender my resignation has been prompted by the fact that at the 30th September, 2008, I had fully secured loans, on normal commercial terms, with the Bank totalling €87 million which will be included in the annual report for 2008 in the note relating to Directors’ Loans. This balance is substantially higher than in the 2007 report because in prior years I had temporarily transferred my loans to another bank before each year end. I had done this on my own initiative over an eight year period. The transfer of the loans between banks did not in any way breach banking or legal regulations. However it is clear to me, on reflection, that it was inappropriate and unacceptable from a transparency point of view.”
Personally I feel there is surely more than to this than meets the eye. I find it incredible that a CEO could go transfer cash without someone somewhere noticing something askew, either in the bank or in the audit. Are the account holders in the bank being taken for a ride? Even still? The Irish stock exchange launched an inquiry into share purchases by Fitzpatrick in the run up to FF, FG and SF deciding to provide a guarantee in September.
Earlier this year Mr Fitzpatrick said he believed the Irish people owed him a debt for maintaining his investment in the bank. Mr Fitzpatrick recently advised the government to cut child benefit, sack civil servants and cut back on spending.
Mr Fitzpatrick has also resigned as a non executive member from the board of Aer Lingus the national airline currently the subject of a take over proposal from Ryanair, Smurfit Kappa and Greencore. Greencore and Michael Smurfit were also the source of other business scandal in the 1990’s arising from allegations of a financial golden circle surrounding then Fianna Fail leader Charles Haughey. He also said he slept well the night of the €400B bailout that kept Dail Eireann working through the night, presumably he may now have difficulty tonight on this score.
My own concerns are that something may well happen in the near future in the banking sector. Christmas will provide the cover when markets are closed to make the move. Shares in Anglo Irish will be under pressure tomorrow if the suspicion is that there is much more to this than meets the eye. The only way to stop this type of instability is for the state to nationalise the bank. Watch this spot or blogpsot!