Banks hit jackpot, but don’t let them gamble with our cash

By | October 7, 2008

I used to play poker. Sometimes you weren’t quite sure if you had the winning hand, but you’d go “all-in” and hope your opponent couldn’t see your heart leaping in your chest. Win or lose, it was quite a rush. Last week Brian Lenihan went all-in and our hearts are still thumping as we wait to see how the finance minister’s hand plays out. It’s terrifying and thrilling and I have a headache from trying to figure it all out.

There are bright sides: the arguments over Grey’s Anatomy versus Champions League have ended in our house. We’re watching one show — the news. Every night brings a fresh twist on the credit crunch: the outrage in Brussels over our guarantee to the banks, the mind-boggling “nouveau Europhilia” at Downing Street. My pre-packaged opinions are useless. There is only one line to which I cling, and it comes from a New York broker: “Anyone who thinks they know what’s going to happen next is deluding themselves.”

Last week I wrote that we shouldn’t trust Lenihan. This week it appears we have no choice. There are still plenty of reasons not to trust him. This is Fianna Fail we’re talking about, so builders and bankers get first dibs on the lifeboats. The taxpayers are the mugs in steerage who’ll be left clinging to driftwood. On the other hand, he is a Lenihan. His clan is full of desperately decent people, if unfortunately misguided on the subject of loyalty. All we can do is pray that, this time, the legendary fealty of the Lenihans will be directed towards us and not Fianna Fail.

Of course it would be better if it wasn’t up to prayer. It would also be more reassuring to have a section in the Credit Institutions (Financial Support) Bill 2008 stating that the banks’ chief executives will get 40 lashes for every ¤100m of state guarantees.

Lenihan says he will ensure there is oversight and accountability, but insisted that the Dail give him a free hand. You know what we’ve done? We’ve given him what Congress refused to give Hank Paulson — unlimited authority.

When Congress said no to Paulson, I recalled Conor Lenihan telling me that his father once observed it was a shame that history often fails to credit the great decisions to do nothing. Sometimes, doing nothing is the right option. Is this one of those times? Should we have let the “scum” (as Paul Gogarty, a Green TD, called them) go down? They tell us we can’t because as The Brother said when news of the bailout broke: “The banks have us by the short and curlies.” On the other hand, The Uncle arrived for coffee grinning from ear to ear: “Isn’t it great? We have them by the short and curlies.” They’re both right. The banks have us over a barrel and we have to bail them out, but this is also a chance for, if not revolution, then at least reform.

We’re all in shock at each new development, but we need to snap out of it.

If we don’t seize the initiative, the creeps will pull us deeper into the mire and we’ll be paying for it for another 10 years.

The author Naomi Klein calls it The Shock Doctrine. Every now and then a country faces a calamity, either a natural disaster like Hurricane Katrina; a terrorist attack like 9/11; or a financial shock such as the one we’re experiencing now.

While the public reels and tries to absorb the shock, the establishment is ready. It smashes the “Break in Case of Emergency” glass and pulls out pre-prepared policies which the public accepts because it is too busy trying to save itself.

In New Orleans, poor black communities fled their homes after Katrina and they are now being rebuilt as condominiums for the rich. In Washington, the Patriot Act was rushed into legislation after 9/11 and it introduced the corporatisation of national security. Every disaster in our health service strengthens the case for Mary Harney to build private hospitals on public sites. Every crisis is really just another opportunity for the right wing to protect the super-rich at the expense of the permanent poor.

So now, with people terrified that we’re about to go back to 1983, the bankers who over-leveraged their debt are seizing not just the public’s money but the state’s entire reputation, just to protect and advance themselves. We’re witnessing the wholesale dumping of private debt onto the public purse. The smug millionaires who extolled the purity of the market are exposed as being wholly without ideology. Government intervention, so long despised as an unnecessary and outrageous constraint on the wisdom of the glorious market, is co-opted as the new tactic in the pursuit of profit. Klein calls it Disaster Capitalism.

Only a disaster could allow a bill to be put through the Dail in the middle of the night which gives one minister, Brian Lenihan, extraordinary power to guarantee our banks to the tune of hundreds of billions and get absolutely nothing in return. The banks could literally take the money and run, and where would we be left then? With an enormous deficit and public services slashed for the next decade.

In the meantime, we want desperately to believe in strong leadership. It could be the making of Lenihan.

Here is the lesson for us: the banks knew what they wanted and they got it. We must get over our shock and do the same. The public has to be just as clear in its demands. There must be no equivocation on executive pay; any bank that avails itself of the guarantee should be banned from rewarding its reckless CEOs with bonuses. Their wages must be slashed before bank charges are increased. We must have government representation on risk-management committees so the banks can’t dupe us out of more money.

Since it was Lenihan to whom the Dail handed all this power, the finance minister must be the one who has to stand up to the CEOs. As the saying goes, he’s only as strong as the backbone we give him. We’re now far too middle-class to march on the Dail and demand our pound of flesh, but we do have phones, e-mail and pens. We need to remind him that the interests of Fianna Fail and the nation, so often confused, are not the same thing after all.

Lenihan’s hand was forced last week by the banks and now it behoves us to do the forcing. He’s gone all-in — with our money. If we allow him to let the banks continue to get away with their behaviour, we deserve everything that’s coming. Act now, for last week was only the beginning. My heart is thumping. How about yours?

6 thoughts on “Banks hit jackpot, but don’t let them gamble with our cash

  1. Biffo Fan

    In case you missed this in Monday’s FT.

    “The gold medal for selfishness may once more be given to the Irish, who have followed the ingratitude of their No vote on the Lisbon treaty with absolute contempt towards the search for a collective solution to the financial crisis.”

    The writer, Dominigue Moïsi, is a senior adviser at France’s Institute for International Relations.

    Today’s new York Times: “The disarray has raised painful memories of Ireland’s single-handed rejection of the European Union’s Lisbon Treaty in June, dealing a serious blow to the bloc’s efforts to streamline decision making and increase its political clout.”

    Maybe it is time that the golden circle stopped congratulating themselves with the great ‘stroke’ and acknowledged that their actions have wider repercussions. Not only have the state’s scarce financial resources been gambled in the biggest Texas Hold-em ‘All-In’ bet of all time but the even scarcer political capital in the EU has been used up as well

  2. Electron

    Sarah, one thing that did surprise most of us was the total failure of the EU to react to this crisis in any coherent way. The naked selfishness shown by our big neighbours came as a bigger shock than the crisis itself. It proved that Europe is only a trading block and nothing else and our government may now abandon any thoughts about holding a Lisbon 2 – it’s now, truly dead in the water after last week’s circus. It would appear that the drill to be followed by Europeans in such a crisis is similar to that for an aircraft with a loss of cabin air pressure – juniors should wait until the accompanying adults fit their own oxygen masks first and if junior expires while the adults fumbles about, it’s perfectly acceptable because the procedure calls for it.
    A major problem that I see coming out of this emergency is the increase in influence that government will have on the running of our Banks. They could become a type of government slush fund with politicians deciding on who does and doesn’t gets loans. This would not be a good outcome, especially now, that it’s very likely that ff will be in power for the foreseeable future and as we all know, ff and money is a dangerous mix.

  3. luke mc

    Hey Sarah, the poker analogy sprang into my mind immediately as well. Great minds and all that. The only question is – if Lenihan wins will he guard his winnings with bent arms and refuse to play for the rest of the game AKA The Carey Stratagem? :)

    What’s amazing is that:

    1. We get nothing for absorbing all this risk
    2. There is no legislation promised to prevent banks behaving like this in future
    3. Sean Fitzpatrick hasn’t been lynched for taking this opportunity to enrich himself thanks to the generosity of the tax payer.

  4. Colman

    How do we know what we’re getting? Did they publish the details yet? Has anyone read the legislation?

  5. Sarah Post author

    Still no details!

    I can’t play poker anymore :)

    Too loose or too tight. No fun!

    But I enjoyed hosting poker!

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