Anglo-Irish: deciphering the spin

Saving Anglo Irish will cost the poorest in order to protect the country’s elite, argues Luke P. Field

Ireland’s beloved zombie bank seems to be undergoing some cost revision these days. Initially, we were being told that Anglo Irish would cost €25 billion to keep afloat. Then last month, it emerged that a far more realistic figure would be €35 billion. This allowed Anglo CEO Mike Aynsley to announce, with inexplicable pride, that the actual cost to the taxpayer would be “far below” that figure, at a mere €28.5 billion. So, it appears that there is no shortage of people asking the question of how much Anglo’s life support will cost, and no shortage of answers either.

What’s troubling is the apparent lack of people asking why it’s necessary to keep Anglo afloat at all. And as is typical, when nobody bothers to ask questions, answers become thin on the ground. The closest thing we’ve had to an “explanation” from Taoiseach Brian Cowen is that letting the bank fall would hit the taxpayer to the tune of €70bn. No rationale for this figure appears to exist in the public domain. He appears to have simply plucked it out of the air.

One could be forgiven for being sceptical of Cowen’s financial acumen given that he was one of the Ministers that presided over our headlong descent into the recession. Current incumbent Brian Lenihan has also proven to be a good little soldier in Fianna Fáil’s army of PR muddlers and spin doctors. In his department’s press release of the 8th of September, Lenihan was quoted as saying that the decision by the Government “will provide certainty about the future of Anglo Irish Bank” and that resolution of the situation “is essential to the promotion of confidence and stability in our financial system.” Strong words, but still no hint of exactly why Anglo is seen as central to this turnaround.

Let’s investigate further. What does Anglo, in its current form, actually do that makes it so essential? Apparently, it has been split into a funding bank (the “good” bank) and a recovery bank (the “bad” bank). Except that the funding bank exists to loan money to customers, which it doesn’t even do (I quote the Department of Finance’s statement: “this bank will not engage in any lending”) and the recovery bank merely exists to transfer as much of Anglo’s massive debt as possible to NAMA by 2015. This, to me anyway, suggests that we paid €25–€35bn for two banks, and yet are receiving, well, none.

Which brings us, rather neatly, to the all-important issue of payment. Disregarding all the hyperbole and propaganda about it being an “essential” financial institution, the real reason we’re keeping Anglo afloat is to avoid the bank from defaulting on its massive debt. Again, Government PR monkeys will probably tell you that this is “essential” because such a default would harm Ireland’s national credit rating. I cannot stress strongly enough how bogus this claim is. After all, Ireland’s credit rating is currently lower than that of Greece, a country which allowed its economy to utterly collapse and is currently being bailed out by the rest of Europe. Things could scarcely get worse.

Just who stands to lose money from this default, anyway? A quick look at Anglo’s previous financial strategy gives a pretty clear indication: it is an investment and lending bank that invested in, and loaned, primarily to construction developers. It’s fair to say, then, that the ones who stand to lose out in the event of a collapse are construction developers. The same construction developers that led us into the recession, and the same construction developers that Fianna Fáil has traditionally protected. Funny, that.

So, instead of a few wealthy developers footing the bill for Anglo, everyone will chip in through the spending of our tax money, right? Wrong. Prevailing statistics over the past number of years show that the top earners only pay 1% of Ireland’s total income tax takings, presumably through the use of accountants that can claim the maximum available tax credits and non-taxable earnings for their clients, and also through paying taxes in countries with lower rates. In other words, thanks to our broken tax system, our deluded neo-liberal society, and a Government that appears ill-equipped to manage the finances of a street stall, the poor will pay so that the rich don’t have to. As always.

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