Now the Government needs its own people in the banks … they must be independent, not some patsies
Why doesn’t Bill Cullen choose the directors the Government wants to put on the banks’ boards? We could have a special ‘Apprentice’ programme, which could pick the new “Untouchables” who will shake up the way our banks are governed.
Given the toothless compromise that is being proposed by the Minister of Finance, the ‘Apprentice’ format would undoubtedly lead to a better outcome. Make no mistake about it: over the next few weeks, the decision made about the future of the Irish banks will be the most momentous financial decision in the history of this State. If we get it wrong, we face a depression rather than a mere recession. If we get it right, there will be light at the end of the tunnel.
Let us remind ourselves where we are. Lamentably, the clarity of the initial days following the guarantee (when the Government looked to be in control) has given way to six crucial weeks of indecision.
The guarantee — which was innovative but also risky — can only work if it is followed by two other initiatives. The risk that the Government’s guarantee would be called upon can be minimised by a successful recapitalisation. To make the recapitalisation successful, the State needs to know exactly what is going on inside the banks. In order to see clearly, the Government needs its own people in the banks. These representatives of the people must be single-minded and focused.
Most importantly, they must be independent, not some patsies who have been vetted by the banks’ present management who got us into the mess in the first place.
Rather than parachuting his own men into the banks (as this column argued a few weeks ago), the minister has allowed the banks’ management to have a say in the process. He says he will propose a list of 24 independent directors of whom 13 will be picked — not by him but by the banks’ management!
This is a joke. The only problem is that the joke is on us, because if it does not work, we the taxpayers will have to stump up for the guarantee. So having saved their skins last month with the guarantee, the State should be driving the agenda, rather than prevaricating.
The issue here is not about personalities, nor recrimination, it is about the process.
The reason the process is so crucial is that we will only get one chance at the recapitalisation. When Ireland goes to look for money on behalf of our banks from the capital markets in the next few weeks, we had better get our figures right. The banks’ management can’t be trusted to do this. Every time one of them has tried to “come clean” by giving an estimate of just how bad things are, the reality has been much worse.
In its simplest terms, the write-off that our banks will have to make, will be much greater than any of them are suggesting at the moment. And the reason they are prevaricating is that their jobs are on the line. The new owners of the banks will be partly international investors, partly the Irish State and, hopefully, partly Irish investors who will participate in raising new cash for our banks.
When the new owners are in place, they will fire the management. Therefore, the game is a struggle for survival on the part of the boards and management on the one side, and, on the other, a struggle for clarity on the part of the new investors of whom the State will be a big player.
The people charged with getting to the bottom of this mess and putting manners on the bankers — as well as getting the best deal for the State — are the State’s anointed directors. This is why these lads can’t be chosen by the banks, which are largely responsible for this predicament.
If the minister doesn’t want to put his balls on the line by choosing, what better way to choose than by the ‘Apprentice’? We could have a special ‘Apprentice Banker’ programme, orchestrated by Bill Cullen and shown on TV3.
The hopeful directors advanced by the minister could face Bill and a panel of our choice and be asked to perform the type of tasks that bankers will have to execute in the downturn.
The first task might be to analyse the balance sheet of a former high-flying, but now bankrupt, property tycoon.
Rather than protecting the developer, the apprentices would be asked how best to deal with this person’s ailing balance sheet on behalf of shareholders. Should the business be wound up and sold on at a much cheaper price for the lands which are the assets in the business? Or should the bank prevaricate and try to save a man that the board members regularly play golf with?
On the other hand, the apprentice might also be asked whether it is wise, for all concerned, to mark the value of the asset now when there is essentially no market? If the apprentice marks down the land, the value of the land will be obviously way below the value when “normal” conditions re-establish themselves, so there might be economic sense in keeping the developer afloat for a while. There’s the dilemma.
Like the TV3 programme, there will be numerous simple banking tasks demanded of the apprentices. They will make alliances, reveal petty jealousies and we, the public, will see how their characters stand up to the pressure. After all they will be paid to represent us.
We will see them in various pressure situations and then the big decision — Bill Cullen will sit in judgment of the best candidates. After Bill has whittled half of them out with the “you’re fired” line, the public will be reminded of the remainders’ talents.
Then the moment of truth. The public will be asked to decide. Given that these candidates will be acting in the public interest, paid by the public and work for institutions that are guaranteed by a public guarantee, why not let the public decide?
We could have a nationwide vote, sponsored by the now nearly bankrupt Australian venture capitalists that own Eircom, with the prize of a much “sought after” apartment in Bulgaria to see who might represent the people on the banks’ board.
Spread out over three nights, on TV3 — a national broadcaster owned by another hard-pressed British venture capitalist outfit — the nation would be transfixed.
If you think about it, a candidate chosen by Bill Cullen and the people in a public ‘Apprentice’-style process, has at least as good a chance of sorting out the financial institutions as a hopeful anointed behind closed doors by the cozy cartel of bankers who conspired to blow the boom. More to the point, it would be compulsive television. Just the type of thing we’d tune into on these winter nights.
The problem that exists within any long term organisation is that the mindset remains steadfast in its resolve to keep going the same way. Independent directors should also come from diverse backgrounds and not just previous bank management.
How else are these boards to explore options that may be right if they refuse to see beyond thier limited expertise and experience. These are extraordinary times, extraordinary problems that may need extraordinary thinking.
……there was a wise aoulde fox called …’prevaritique’…..who lived …in the central massif area of …eerlandique…….and who saw …the light at the end of the tunnell….only to hit the uncoming train to dublin from galway ….now he is plastered …in paris
You’re sharper-than-usual cyncisim show’s pretty well that you’re as fed up with this situation as the rest of us.
How about a banking Dragons Den… banks go before the Dragons with their business idea, financial plan and valuation of worth.
Hi David, The only vote that people really have are for politicians. Alas, we only get to vote for them once every 4 or 5 years and there is no way that any politician can accurately represent the views of the people in the constituency it represents. The political system is equally, if not more, faulty in comparison to the global capital system which is sufferiung a major “headache”. The political system in most so-called democratic counties is NOT democratic, it does not represent our views on all issues and it is NOT accountable. It is systemically inept. The problems… Read more »
In order to be able to chastise, punish and reform the banks for irresponsible lending, the government needs to be able to sit in some position of moral authority on this matter.
The problem is that they lost any possible moral high-ground when they wilfully sponsored sub-prime lending to help developers shift their ludicrously overpriced stock at the expense of ordinary working people.
The Willie Walsh episode in Aer Lingus, proved that the most capable problem solver, is the very thing our political establishment detests the most. Willie Walsh was a threat to North Dublin FF. He was too good at his job, and was outside the North Dublin maFFia – so he got shafted.
David seems to be whistling the same tune over and over again about removing the management from the banks and replacing them with government appointees. Why would the government do a better job of picking people to head the banks through this fiasco when they have demonstrated only complete ignorance and incompetence themselves? Also, what does that say about Irish businesses anyway that the government is forced to come in like a scolding parent and send all the naughty managers and board members packing? In the US the heads of the banks fell on their swords and admitted they screwed… Read more »
It is a difficult task if not indeed nigh impossible to change what has become an inherent part of Irish society, and not Ireland alone obviously. I’m talking about the clan, nation, clique, jobs for the boys; you voted for who would pump money in the right direction regardless of the overall good of the action. The government wants the rich/investors/banks to start generating (lending again, it‘s so pathetic when that is the root cause of our problem) wealth again quickly. They don’t want to know the truth of what has really happened. Market capitalism (as we know it) has… Read more »
David
Sounds like they’re not listening any more.
Are we facing into a Japan recession like scenario? (15 years of fun) It looks like our private school boys are looking out for one another. Those school/rugby/golf roots run real deep. Don’t understand it myself. Maybe you should do an article on the power of these ties.
Ger
The only thing I took from that article is that DMcW knows there’s a depression on the horizon for Ireland unless we see action. There’s not much action.
Here we go.
David…I have to disagree with your TV Programme Suggestion………..it serves no purpose .Have you ever watched the Monks in Glenstal Abbey …television does not play a serious part of their lives …instead they pray and listen …….not once…..they do it all the time ……and no one else is present only themselves and Devine Authority……and …pure silence ……..somehow they always get things right and are always successful…..they ask….they listen and ….they act on the issues ….they are reasonable people …with extraordinary strength and vision….music helps too …could you rethink again ?
If the Japanese recession thought us anything then it is that ‘Battle Royale’ style show is the only way to go in a situation like this.
……..thats your prognosis furrylugs….now whats your …proposal ?
I think selective democracy would be a great idea. Everyone must pass an exam before they can vote. It would remove a lot of the retarded crap from Irish politics.
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These are an interesting bunch to stimulate new ideas.
http://www.neweconomics.org/gen/
Michael O’Leary should lead this brigade !!! FACT ……..
Hi David, I think you’ve overplayed the point that the banks are choosing the directors. This is not entirely true — as you say the minister is proposing 24 candidates and the banks are then choosing 13 from that list. To me this means that the majority of the control remains with the minister as the banks HAVE TO choose from a list and cannot propose any candidates themselves. The job of the minister is to make sure that ALL 24 candidates can do the job and represent the interests of the tax payer. If he does this job correctly… Read more »
PF – Churchill must have thought along those same lines when he said –
“The biggest argument against democracy is a five minute discussion with the average voter”
I’d summarize it as follows: The government needs to sort out the banks but won’t. The people need to sort out the government but won’t. The directors are prepared to let the banks sink so long as they can milk them to the bitter end and the government are willing to let the country sink provided they can protect their friends and sectional interests. The Irish state is the enemy of its people. The world economic crisis, although an aggravating factor, serves as a smokescreen and as an excuse. The Irish situation is fundamentally different from that of our neighbours.… Read more »
David wrote: “Rather than parachuting his own men into the banks (as this column argued a few weeks ago), the minister has allowed the banks’ management to have a say in the process. He says he will propose a list of 24 independent directors of whom 13 will be picked – not by him but by the banks’ management! This is a joke.” Below is a post I wrote following an article you published on October 19, entitled “Bank guarantee will mean survival of the weakest”. “David, you might be upset at clause 2.6, and you might be right, but….what… Read more »
There is far too meritocracy, transparency and accountability in the idea to see it approved by the powers that be. These are all the features that are missing from the process at the moment. There is no accountability, there is no transparency. And if the committee is to be staffed in the same manner as the entire state system, there will definitely by no meritocracy. Unfortunately in Ireland, the joke is the reality and the reality is the joke. The committe supervising the banks is likely to be staffed with all sorts of stooges and insiders(who always get described in… Read more »
Surely with all the Irish banks laiden with the irish property millstone for years to come there is an opportunity for a new upstart bank – What would a ryanair bank look like anyway?
In the Irish system of crony capitalism, Lenihan would likely appoint FF stooges.
Even if he tried to be objective, he might be inclined to appoint some banking pensioners but with nothing to lose and connections with serving managers via the golf club, previous employment etc., how different would they operate?
An alternative of bringing in overseas people wouldn’t look very good in an economy where foreign firms are responsible for 90% of its exports.
The regulators have clearly failed and attracting back John Fingleton from the UK’s Office of Fair Trading (OFT) may be a better route to take.
How could anybody decide who is fit for the job of running a bank in such short space of time? You would need to monitor bank managers in a boom only, but there won’t be one of those for a long long time. Why not just look at where the banks went wrong, have proper regulations drawn up and adhered to. Put a limit on lending and especially investors buying up houses in bulk. I saw that RTE programme last night and it showed an estate with 40% of the houses owned by investors who get more advantages (vat back… Read more »
coldblow, thank you for your contribution. It is chillingly accurate. A lot of Irish people did smell a rat. Generally I would say that the looser ends of our society smelt the rat. But the mainstream of the generation under the age of 35 fell for it. This is what happens in manias. The confidence factor in the Irish property charade was immense and overbearing. Now the market was collapsed. But the mental state has not yet adapted. People are now living beyond on their means, but on a reduced budget. There were several canaries in the coal mine on… Read more »
………at this point do we hear ourselves laughing …..or are ……….others laughing at us…..and if they are…..that is very very dangerous now …we have everything to lose…….unless it is too late already……we are now in the mode of….fear ……moving to….desperation ….before we meet….PANIC……………….only then to …..cry
But we’re still treading water chaps. The rest of the world has moved on apace for the last 4 weeks. We’ve done nothing but sit back after the bank bail-out. The banks are sitting back, indemnifyed, to see what entrails they can feast on. There is no social response a la Citigroup in the States. Sounds like the Pres-Elect is throwing a little muscle around already. There’s little doubt Obama will go protectionist with the exception of the G7. China, as I think Lorcan reminded me some weeks ago, will form an internal market of some sort. Etc Etc. Looks… Read more »
Guys, I do not think there is any recession. My commute time has ramped in the last 8 weeks – meaning more cars on the road. They can’t all be going for interviews. I do not think anyone has any idea what is going on in this country. Probably just as well. Certainly CSO, Government and Banks know nothing either. I suspect there is already a thriving black market. Still loads of cash transactions going on. And Aldi and Lidl will be coming opening up 50-60 shops between them. Swap shops are blossoming all over the place. My point is…Have… Read more »
Brian Cowen takes Enterprise Ireland under his wing – Is Tullomore to be the new centre of excellence where all our problems will be solved ?-
http://www.enterprise-ireland.com/StartBusiness/Start+a+Business+evening.htm
David: Sadly, your ‘Apprentice’ reality TV show suggestion is a hopeless one. The august process of Government doesn’t like being shown up as a motley collection of culchee nincompoops when confronted by big business sharks. Why do you think that the Mini-CTC Tribunal was hurriedly shut down? That was reality TV of the most gripping genre. Much better than ‘I’m a celebrity– Get me out of here’. The sight of Denis O’Brien and various shady CIE types making mincemeat of government watchdogs on live TV created too many waves for the Ship of State, who capitulated just as it was… Read more »
We are witnessing the culmination of mounting incompetence. The Peter Principle (I think) says people rise to their level of incompetence until the company as a whole becomes incompetent. Modern day methods of dealing with this is to outsource the lot to organsations that claim they can do the same but for less with the company head plonkers just looking after the brand. Hollowed out company with no competence (fully outsourced and without loyalty) hanging on for dear life until the next flip opportunity. And so it is at a country level where we are seeing with our current bunch… Read more »
Philip – the people have learned that they cannot rely on the political, financial and media establishment to tell the truth. Therefore we have everybody going their seperate ways. The most glaring example is the people who park the car in Dublin Airport, and leave the country – supposedly for good. Their bank rating will be finished in this country-they will never get a loan again. The property and the financial sectors are ruined. But we should have the testosterone to let them go. Let them fail. Save the part of the economy that is working-the export driven private sector.… Read more »
Phillip {The weakness in David’s argument is that he’s assuming the government wants to govern. They do not. They just want a jolly…just like they had for the last 10 years – courtesy or Clinton/Greenspan and our wonderful German savers.} On examination of the various government ministers, and all those that have served since the mid 1970s, it sounds like you have a very valid point there. I mean what is the point in putting a primary school teacher like Mary O’Rourke in charge of the ESB, plus CIE, plus Bord Gais, etc. I could go on – but I… Read more »
@ Furrylugs I would not worry about Libertas and Declan Ganley if he hadn’t stepped up to the plate we the Irish electorate been the bunch of sheep that we are would have just voted as we were told.
Declan Ganley could be our Obama and I for one think we need a man like him to bring Libertas together now and even run candidates for the local elections.
As you would see the ma(FF)ia bringing out their spin doctors for sure to tell us ……….well who knows
A quick note to all posters here…. I am over in the US this week and well they are suffering , what we should do is each week pick on one FF politician to hit with emails and tell them not only will they not be getting our vote but none of our families votes come the local elections and see what response they send to us. As I have wrote here before it’s time to move on now from the 1916 bunch who have been riding and playing to us for decades. Or when is enough really going to… Read more »
Rain Frog – I was watching a wonderful programme about the animal kingdoms recently and its amazing how simple they seem to know how to organise themselves in times of danger …….its natural……/ in a desert area in USA rainfrogs are known to suspend life and hibernate under the sand while the hot sun shines above ….their skins are silky and moist always and above the ground the sand is parched dry and hot ….I watched a small pond of hundreds of tadpoles squirming in the depleting water while the scorching sun shun heavy gradually evaporating the remaining water ….they… Read more »
John ALLEN – ‘rainfrogs’ as you called them, have been ridiculed and scorned by our mainstream consumer culture. They ‘did not get with it’. I recommend that you you check out the “Century of Self” on utube. You were not supposed to think about ‘rainfrog’ behaviour. You were supposed to be shuffled along with the rest of the lemmings, into the consumerist dream chase. Watch as those who believed in it search for explanations. They say that men will fight and die rather than change their mental model. From what I have seen of Irish people, this is entirely true.
……Island fever is a curse…….you saw what happened in Iceland
John ALLEN – ‘rainfrogs’ as you called them, have been ridiculed and scorned by our mainstream consumer culture. They ‘did not get with it’. I recommend that you you check out the “Century of Self” on utube. You were not supposed to think about ‘rainfrog’ behaviour. You were supposed to be shuffled along with the rest of the lemmings, into the consumerist dream chase. Watch as those who believed in it search for explanations. They say that men will fight and die rather than change their mental model. From what I have seen of Irish people, this is entirely true.… Read more »
The director appointment scheme is a fop from the government to appease the people after their clear and risky bail-out of the Irish financial sector. 1 or 2 executive director’s appointed from a list of people the banks could possibly have drawn up themselves. We need some outspoken and tough characters put in there who have the time and experience to improve the banks operations and call it like they see it. They need to actually understand the banking and financial services sector rather than be celeb business figures which already fill our bank’s boards anyway. Serious insight and knowledge… Read more »
John Allen, I would suggest that you read “The Evolution of Cooperation by Robert Axelrod” According to “The Edge” U2 owes it success to this author. Brian Cowen’s take on patriotism is simply brazen cronyism and has damn all to do with any type of genuine cooperation for the well being of our people as a whole. Ferrylugs, I would have reasonable confidence in Mr. Ganley – He’s outward looking and into the big picture. Our present lot are rooted at the parish pump and unless there’s a vote in it, it has no value. That why the building/construction industry… Read more »
Ed – thanks I will …..I suggest you buy my book ‘ Da Wu Yu Code ‘ penned by Dee Noblesse……..( thats me on world stage ) …..this will blow ur mind out……not the same way …irish politicians do it though …it will make you …think
I think that the 1st panic phase has passed. Paulson isn’t going to buy up the toxic debt anymore. He’s going to buy the banks instead. The ones he can afford I’d say and let the rest perish. He’s not going to bail out anyone thats not critical to the US either.
Ominous for us. It’s the start of the “Obama” cycle.
I agree with Magsy and coldblow. The idea that government-appointed and bank-selected directors could change the running of the Irish banks is folly. All such new directors could do is see high level helicopter views and reports on data that they are given (which may be wrong of course) and appoint management and hold a few managers to accountability. They are unlikely to do the latter. Its a smokescreen I’m afraid. David, your idea of bringing in a team of so-called Untouchables wont be realised. The problems within the banks are endemic and have been culturally created and fostered over… Read more »
roc……its Victor HUGO……the French revere philosophers …………./ they are persecuted here and by you too
I think MK1’s observation of the enforced longer commute is the correct one. The lack of early traffic could also mean people are loosing interest in their work. Satisfaction is getting lower. It could also mean that a lot of early bird businesses are going to the wall. More likely it reflects the drop in manufacturing activity when early shifts were the norm We now have longer commutes rather than increased numbers of cars causing congestion. Car Hours on roads has increased for all the wrong reasons. And this tallies with the fact that public transport numbers on buses has… Read more »
This is not only an Irish problem. Here is what you can read on a French magazine this month: “Everything falls apart, yet nothing changes. Billions given to the banks, the people responsible for the mess are still in command and the elite still doesn’t understand what’s the problem”. Sounds familiar? I think in many “democratic” countries, we have ended up in a 2 main party system: the right and the left in France, the Conservatives and Labour in UK, Democrates and Republicans in the US and FF and FG in Ireland. Yet, very little opposes these parties anymore. People… Read more »
Furrylugs – I agree with all your comments ……nevertheless I disagree with your notion now that the fist phase of the panic has passed…….we are only …’ in fear now ‘ and that has not yet matured …..soon we leave that and arrive into…..Desperation ………and early in new year …maybe feb…..if the your money is not already devalued and /or frozen …we arrive into….PANIC ……..before we Capitulate …and lose our shirts / blouses ( furrylugs )…….that road continues to….Despondency……….Depression…..( book your summer ryanair flights now that will carry you through )