From Socialist Voice, December 2008

All quiet on the Government’s front!

Since the Government’s bail-out of the banks early in October with the Credit Institutions (Financial Support) Act (2008) we have seen little action―positive or negative―to address what began as a banking crisis but is clearly now a crisis of capital itself.
     The overarching Government strategy, if one can be ascertained, appears to be a combination of “close your eyes and hope it’s disappeared” and “if it hasn’t, make the most vulnerable in society pay for it.” The Minister for Finance, Brian Lenihan, recently said: “The recent Budget is a first step in restoring the public finances to sustainability while avoiding depressing economic growth further.”
     This was said several weeks after the budget had been exposed from many viewpoints as a most inept, confused, inaccurate, dishonest and cowardly attempt to deal with the current difficulties.
     If this is a sign of where those leading the country are, be afraid; be very afraid!
     Following the Financial Support Act we were to see a hard-hitting, difficult budget that would deal with the public finances, protect the most vulnerable, and restore consumers’ and investors’ confidence. This, we know, did not happen. Almost two months down the line the same CEOs and the same senior managements are running the banks―the ones that have done a great job of running them into the ground; the same regulatory, or lack of regulatory, system exists; and the same performance-related pay and target-based sales culture exists.
     While this has remained the same, workers have lost their jobs, have seen their imposed market-based pensions greatly depleted, have seen their savings―often in the form of bank shares―disappear, and have been further penalised by the Government through the income levy, a levy that hit the low to middle-earners in real terms far more than the high-earners.
     One action the Government have taken, even if weeks after it was planned, was to announce their twelve representatives who may be put on the boards of banks that sign up to the guarantee. And if ever they wanted to send out a message to senior managements to carry on as before, they did just that. The list reads like a who’s who of those who were allegedly at the helm when this disaster was fermenting and who missed it completely. To name a few: Dick Spring, former Minister for Finance; Ray MacSharry, former Minister for Finance; Alan Dukes, former Minister for Finance; Tom Considine, former Secretary-General of the Department of Finance; and, possibly most ironic of all, Anthony Spollen, former head of internal audit at AIB Group. Not much auditing of bad debt done in his time!
     If all this “business as usual” wasn’t enough, and extremely worrying, the Government have not laughed away the idea of private equity firms as a means of recapitalising the banks. In fact Lenihan seems to see them as a genuine prospect. “We cannot characterise foreign investment all the time as predatory or a threat. Of course if there is private investment in the banks I will have to ensure that the public interest is served.” Was the public’s interest served in the now infamous case of Eircom? The Government would probably say Yes!
     The general secretary of the IBOA, Larry Broderick, has more accurately described these firms as “the real sharks of the business world. They operate on the basis of maximising short-term opportunities. These people have no interest in the long-term viability of the business; they have no concern for the development of the Irish economy or the future well-being of the Irish people: they are only attracted by the prospect of massive returns on their investment.
     “Predators like these aim to buy cheaply and reduce costs in whatever way they can: by cutting staff numbers and pay, by squeezing customers, and cutting services. They aim to realise as much asset value as possible, and then sell on what’s left of the business. They are not philanthropists. They are highly secretive entities that are feared and despised in equal measure throughout the business community.”

     And he is certainly right in saying, “Far from facilitating this development, the Government should intervene now to advise the bank that such an approach would offer a short-term easing of its current problems―but at too high a cost in the long term.”
     But that would require bottle, and if there’s one thing we know this Government is lacking, it’s bottle.

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