Was the protection of Ireland’s oligarchs the cause of its financial disaster? (PoliticalWorld.org)

Did JP McManus, other Irish oligarchs, influence 2008 blanket guarantee decision?

By “Bokonon” @ PoliticalWorld.org

The Irish Central Bank’s independent report into the banking guarantee excoriated the government’s inclusion of Anglo Irish Bank and existing/subordinated bondholders in the blanket guarantee of September 2008.

This report (“the Honohan Report”) stated:

Originally Posted by Honohan Report
…the whole system except Anglo could have been guaranteed, allowing the latter to close, without that implying destruction of the rest of the system

The inclusion of existing long-term bonds and some subordinated debt (which, as part of the capital structure of a bank is intended to act as a buffer against losses) was not necessary in order to protect the immediate liquidity position.

According to a Dept of Finance note, Merrill Lynch specifically warned the government against a blanket guarantee:

Originally Posted by Merrill Lynch
“On a blanket guarantee for all banks — ML felt could be a mistake and hit national rating and allow poorer banks to continue.”

And according to Professor Morgan Kelly, the Department itself was against the guarantee of Anglo (this account is denied by the Irish Finance Minister):

Originally Posted by Prof Morgan Kelly
According to a source of mine very familiar with what happened at the meeting, extending the liability guarantee to Anglo Irish and Irish Nationwide was strongly opposed by representatives of the Central Bank and the Department of Finance (who reportedly came into the meeting with a draft bill to rescue only four institutions).

Since that fateful night, rumours have abounded that members of Ireland’s oligarchical troika – Dermot Desmond, JP McManus and John Magnier – were seen in the halls of government when the guarantee was being enacted.

Reporters have credited two of the Troika with contributing towards the Irish government’s catastrophic banking strategy: From the Sunday Independent, October 5 2008 (mere days after the guarantee) –

Originally Posted by Sunday Independent
Senior government sources have said the suggestion came from JP McManus, while Dermot Desmond‘s name has also been associated with the plan.

From “The Bankers”, by Senator Shane Ross:

Originally Posted by Shane Ross
The Government would guarantee all the liabilities — the customer and interbank deposits, and also the vast majority of bonds — of the six Irish banks. This solution had already been canvassed by … Dermot Desmond.
“The Bankers”, Senator Shane Ross, ISBN-13: 978-1844882168

From the Sunday Times, February 15 2009:

Originally Posted by Sunday Times
The debate was not confined to the banking community. The same source said Dermot Desmond and Denis O’Brien, two of Ireland’s most prominent businessmen, both phoned the Department of Finance to argue against nationalisation in the interests of the economy.

Desmond, McManus and Magnier are awe-inducing figures in Ireland. Often investing together, they are high-profile tycoons whose major business deals include Manchester United FC and Chrysalis Records:

JP McManus – aka “The Sundance Kid” – is described as a tax-exiled currency dealer who operates from Geneva. Interviewed on radio earlier this week he was asked his opinion on the blanket bondholder guarantee. He replied:

Originally Posted by JP McManus
It’s hard for me to comment. I may be one of those….I may have a vested interest
http://media.newstalk.ie/listenback/49/monday/1/popup (4 mins into part 4)

If the sources quoted above are correct about Dermot Desmond’s or JP McManus’s influence on the guarantee, and if it is shown that McManus had “a position” in Anglo, then we are in very grave territory indeed.

A well known Irish economic commentator (David McWilliams) recently made the following comment:

Originally Posted by David McWilliams
Could it be that the only people benefiting from the Government’s blind rush to impale the small guy with the debts of Fingleton et al are our own “high net worth” individuals? Could they be pulling the strings?

In March this year, in the Irish parliament, Eamon Gilmore the leader of the Labour Party made this stark and serious accusation:

Originally Posted by Eamon Gilmore
I believe that the Taoiseach and the Government made that decision in September 2008, not in the best economic interest of the nation but in the best personal interests of those vested interests who, I believe, the Government was trying to protect on that occasion.

Unfortunately, it is all too possible that an alignment of policy took place: that the EU’s aversion to bank failure coincided with the Irish government’s instinct to rescue the oligarchs – and against all advice, the blanket guarantee was introduced, setting in motion a chain reaction that has all but bankrupted the nation.

And if such a compromised decision was made – even if only slightly tainted by consultation – it would limit all future options for the decision-makers. This may go some way towards explaining the Irish government’s continued insistence on a course which is driving the country to abject ruin.

From a discussion at PoliticalWorld.org.

Also, these links, from same thread:

  • The Guardian – US embassy cables; Top US official travelled to Dublin looking for ‘secret’ of Celtic Tiger’s success: 2. (U) The November 14-15 visit of U.S. Treasury Secretary John W. Snow was an opportunity for substantive discussion on the “secrets” of Ireland,s economic success. During a dinner hosted by the Ambassador and a lunch arranged by the Ulster Bank, Secretary Snow spoke with 16 policy-makers and businessmen (listed in para 12) who were instrumental in the emergence of the Celtic Tiger economy. A breakfast with the American Chamber of Commerce and a classroom exchange at Dublin City University (DCU) reinforced the points made by these key figures… 12. (U) Participants in the Ambassador,s November 14 dinner for Secretary Snow were: Charlie McCreevy, EU Commissioner-designate and former Irish Finance Minister; Dermot Desmond, financier; Eoin O,Driscoll, Chairman of Forfas and the Enterprise Strategy Group; Padraig White, former CEO of the Industrial Development Authority; and Padraig O,huiginn, Former Secretary General in the Office of the Taoiseach. Attendees at the November 15 Ulster Bank lunch were: Ray McSharry, former EU Commisioner and Minister of Finance; Lochlann Quinn, co-founder of Glen Dimplex; Peter Cassells, former Secretary General of the Irish Congress of Trade Unions; Albert Reynolds, former Prime Minister (Taoiseach); Allan Gray, Chairman of Indecon Economic Consulting; Willie Walsh, CEO of Aer Lingus; Bill Harris, National Science Foundation Director; and Cormack McCarthy, David Pierce, and Michael Torpey of the Ulster Bank.
  • Scottish Daily Record / via Farlex – £9M Land Deal That Shocked A Government: Rangers’ new “Goldfinger” Joe Lewis and Celtic director Dermot Desmond were both named in a report into a huge property scandal in Ireland.
    The controversy led to an official inquiry and rocked the Irish Government.
    It involved the pounds 9.4 million purchase in 1990 by the state-owned Telecom Eireann of a disused bakery in Dublin as the site for a huge new HQ.
    The storm broke after it was revealed that Telecom had paid an inflated price for the site which was previously owned by a company called United Property Holdings.
    UPH was led by Desmond and among its shareholders was his friend Mr Lewis, who was listed as having 2.5 per cent. Michael Smurfit, the chairman of Telecom, owned 10 per cent. Government inspectors at one time froze Mr Lewis’s shareholding in the firm, along with those of the other shareholders. When their report was issued, Desmond – a close friend of the then Irish Prime Minister Charles Haughey – was named as the main beneficiary of the controversial sale.
    That’s a charge he has always denied.
    The report of the inquiry, conducted by John Glackin, found that UPH had sold the bakery site to two offshore companies called Chestvale and Hoddle.
    These firms passed it on to Telecom Eireann, and the total profit on the deals, concluded over 18 months, came to pounds 5.3 million, of which UPH made pounds 2.3 million. The ownership of Chestvale and Hoddle was never firmly established.
    The Glackin Report said that it was Desmond, knowing that Telecom were looking for a site for a new HQ, who told Smurfit about the bakery site.
    Glackin alleged that Desmond was the real power behind the companies in the bakery deals, and had been involved at almost every stage.
    The report was scathing about Desmond’s involvement but cleared Smurfit, who had already resigned as Telecom chairman. It also probed the business affairs of some of Desmond’s closest friends.
    They included flamboyant Irish gambler JP McManus – known as The Sundance Kid – stud-farm owner John Magnir, property developer Pat Doherty, and Isle of Man financier Colin Probets.
    Both McManus and Magnir owned shares in UPH, along with Desmond and Lewis.
    No criminal charges were brought, but the affair, it is said, soured relationships between Desmond and Irish Government ministers.
  • Gavin Sheridan / TheStory.ieThe Glackin Report (Final) Part 1;

Read more.

This entry was posted in Accountability, Austerity / Cutbacks, Bankers' Bailout, ECB/IMF, Economy, Elections, EU, Housing Bubble, ireland and tagged , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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