Minister for Finance Brian Lenihan rang RTE boss Cathal Goan to complain about Liveline’s programme last Thursday week. The government was outraged because Duffy suggested that customers shouldn’t trust the banks. The plebs were panicking. It was irresponsible, the government felt, to create alarm amongst the general public by discussing the stability of our banking system on the airwaves. What sanctimonious drivel. What Lenihan was really saying was, “Cathal, please – not in front of the children”.
It’s called a credit crunch because banks have stopped giving each other credit. They’re afraid to lend each other money and right now, not even Henry Paulson’s $700 billion can fix that fundamental lack of trust between banks, regulators and politicians. So let me get this straight: they don’t trust each other, but we’re supposed to?
Regular readers of this column will know that I have little patience for the hysterical over-reactions of the ill-informed, but on this occasion callers to Liveline were not inventing anxiety – they were accurately reflecting the worries of the establishment.
Until the past fortnight, I’d been observing the global financial meltdown with the same insouciance one has when watching news reports of drug gang assassinations in far-off suburbs. It’s dreadful of course, but its only bad guys killing each other. What’s a few thousand Wall St brokers to me? I have a zero tolerance approach to financial risk and refuse to even take out a pension as I won’t expose my savings to the risks of the stock market. I confess, I’ve been feeling a bit smug about that decision lately.
Then an innocent bystander is killed by a stray bullet. I began to get the uncomfortable feeling that my cash on deposit was entering the line of fire. Why did people keep mentioning the bank where my SSIA money sits quietly gathering dust and a miserable interest rate? Of course, I know that the government wouldn’t let a bank go under. Of course I know that even if a bank did collapse deposits would be safe. The papers assure me that rumours of an Irish bank’s demise are the work of dirty rotten short sellers who thrive on the misery of others.
But up until last weekend, the only cast iron guarantee I had was that 90% of customers’ deposits up to a limit of €20,000 were actually secured by the government. I didn’t want to lose 10% of my money. I didn’t want to lose 1% of my money. Then Lehman Brothers employees emptied the chocolate vending machines on their way out the door. The butterfly was flapping its wings in China. Was the earthquake coming? I began to ring my establishment friends looking for a little assurance. I didn’t get any.
The insiders I spoke to were doing plenty of panicking. Business people, stock-broking types and financial journalists either didn’t want to talk about it which was bad enough or warned me to get my money and stuff it in the nearest mattress.
I fretted and rang around some more. “Look”, the men-in-suits said, “Even if your bank goes down the tubes, you will probably get your money. But it could get tied up in paperwork for months though so you should get it out now while you can. Try the Post Office.” I hadn’t even heard Liveline. My own phone lines were live with the financial anxiety of those-in-the-know. So where did Lenihan get off complaining to RTE?
He’s the one who turned green when he got a look at the books after his big promotion. Does he expect us to believe that his civil servants and central bankers are dining out on long lunches and wondering what all the fuss is about? No: panic is for the insiders who can take steps to protect themselves when the pyramid scheme comes crashing down. The function of the public is to pick up the tab. To keep the system working, we have to be the last ones to know that the money is gone.
The Minister says, “Trust me”. The Regulator says, “Trust me”. The bank’s CEO says smoothly at the AGM “Trust me”. Why? What have any of these people done to deserve our trust? We are where we are because none of them did their jobs properly. The entire history of banking and investments is one where the insiders run off with the cash and the hoi polloi lose everything. Not this time Minister.
The same day as the Liveline show, Financial Regulator Paddy Neary had issued a soothing statement saying that Irish banks were sound, but that meant nothing to me. It’s his job to say things like that, especially when they’re not true. When they start making statements you know things must be really bad. It’s also the Regulators’ job to make sure that banks don’t over leverage their debt. It’s also the Regulators’ job to make sure that banks don’t lend too much money to people who might not be able to pay it back. If the global financial meltdown has shown anything it’s that Regulators have been taking a 10 year nap instead of doing their job. So excuse me if I don’t hold their statements in high esteem. I don’t trust Regulators any more and that’s their fault, not Joe Duffy’s.
On the Friday afternoon Lenihan went on telly and informed us that bank deposits were not in danger and despite persistent questioning from the only man in the country with sense – George Lee, he insisted that speculation about raising the state guarantee on savings was unhelpful and not even that important. I liked the body language, but it wasn’t enough. I rang my bank and told them to transfer my money out first thing Monday morning.
On Saturday, Lenihan raised the deposit guarantee to €100,000. So tell me this, Minister: were you economical with the truth on Friday or did you get up on Saturday morning and suddenly change your mind as you munched your cornflakes? Are you fickle or a fibber? I think the decision had been made on Friday. Don’t get me wrong, it was the right move and I decided to leave my money in the bank after all. But he should’ve done it four days earlier, and he shouldn’t get upset when we talk about trust. He looked us in the eye and told a porkie on Friday. And he thinks we should trust him?
“There, there” he’ll say. “Daddy couldn’t say anything on Friday. He had to wait til the markets closed. Here’s a lollipop. Go and watch cartoons”. I don’t want to watch cartoons. I want the truth.
The FBI is beginning investigations into the whole mess and we can look forward to some high profile perp-walking. Jailing bankers is a strategy I like. Trusting them? Don’t talk to me. Talk to Joe. He’ll tell you what’s going on.