Was Brian Lenihan pushed or did he jump because he had nowhere left to go??

2 views

There was a lot of copy written both before and after the BBC documentary, the Bail Out Boys come to Dublin compiled by the Irish Times’ writer, Dan O’Brien.

But listening to it there are a few accounts in that programme that seem to conflict with Mr Lenihan’s headline grabbing, not to mention rather simplifying suggestion that the measures were not necessary and the ECB forced him (not to mention the rest of the country) into taking the money.

It also rather conveniently seeks to put the current government somewhat offside, and his own party in a convenient place for it’s oncoming role as official opposition.

Patrick Honohan governor of the Central Bank:

Perhaps Irish people expected, as we have got in the past from Europe,  a hand out.  From my point of view this is the right and necessary thing to do. There is a couple of years of hard work ahead and we now need move ahead and try to make sure that the longer term problems are resolved.

Klaus Masuch, the chief negotiator for the European Central Bank:

The Irish government decided on its own to seek help. We’re not pushing, we are advising the government. It is important for the people to realise that the programme is the consequence of bad policies in the past. This programme does not cause further problems, it solves problems. We have not pushed anybody.

And finally, Mr Lenihan himself:

It would be fair to that the major force of pressure for a bailout came from the ECB, yes, I would say that. I had fought for two and a half years to avoid this conclusion and now we were at it. As I said earlier I saw that Ireland’s financial survival was very much an issue from late 2008 on.

I had had a tremendous struggle to bring my colleagues and the country with me on a very difficult economic programme. I believed that I had fought the good fight and taken every measure possible to delay such an eventuality and now hell was at the gates.

I have a very vivid memory of going to Brussels on the final Monday to sign the agreement and being on my own at the airport and looking at the snow gradually thawing and thinking to myself ‘this is terrible, no Irish Minister has ever had to do this before’. It is not a good position to be in.

As Dan O’Brien, notes towards the end of the programme, the bailout does not seem to be working (at least in its intent to stop contagion)… Is Mr Lenihan trying to unstick himself (or rather his party) from his own tar baby in the hopes that it will now stick more visibly to his successor, Mr Noonan of Fine Gael?

, , , ,

  • Greenflag

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/04/could_germany_afford_irish_gre.html

    extract from Peston,

    ‘For all the formidable strength of the German economy, the balance sheets of Germany’s banks are by no means the strongest in the world. German banks would not be able to shrug off $39bn or £24bn of potential losses on Portuguese, Irish and Greek loans as a matter of little consequence.

    This suggests that it is in the German national interest to help Portugal, Ireland and Greece avoid default.

    If you are a Greek, Portuguese or Irish citizen this might bring on something of a wry smile – because you would probably be aware that the more punitive of the bailout terms imposed by the eurozone on these countries (or about to be imposed in Portugal’s case) is the expression of a German desire to spank reckless borrowers.

    But as I have mentioned here before, reckless lending can be the moral (or immoral) equivalent of reckless borrowing. And German banks were not models of Lutheran prudence in that regard.

    If punitive bailout terms make it more likely that Ireland, Greece or Portugal will eventually default, you might wonder whether there has been an element of masochism in the German government’s negotiating position.’

    It’s looking like that by 2013/2014 this issue will be resolved by dint of the bondholders having to take a substantial haircut . As Peston says the German banks were not not models of Lutheran ‘prudence . Peston may be unaware that the first woman head of the German Lutheran Church recently had to resign her position as she was arrested for driving over the speed limit with an alcohol level much above the legal maximum permitted . Here in Ireland bishop Casey was always too fast for the police and could talk himself out of jail with a nod and a wink to the right politician and or policeman as required:(.

    Attempting to hist himself off his own tar baby won’t cut much ice with the voters anyway . Everybody knows that while FF were the main perpetrators and beneficiaries of the sell out to the banks – the electorate know that neither Fg nor Labour can crow on the issue and remain credible . It’s been only the independents who have spoken up although I now see that Joan Burton of Labour is demanding a full enquiry which should be made public .

  • http://nalil.blogspot.com Nevin

    “now stick more visibly to his successor, Mr Noonan of Fine Gael?”

    Noonan and Gilmore have discovered the antidote: an EU-Ireland Love Fest.

  • Alias

    I don’t think there is any need to look for ulterior motives so as to imply that this criticism of the EU’s deplorable tactics by the former finance minister isn’t true. It is true.

    The EU briefed the financial media that Ireland’s refusal to accept a bailout was damaging the euro and that Ireland could not pay its way without accepting the funds (which were to be provided to cover the cost of the guarantee issued to EU bondholders, both directly and indirectly by Ireland diverting other reserves – such as its pension fund – to cover the cost of public services where the money available was to be diverted to cover the cost of the eurosystem guarantee). That was a deliberate and despicable tactic by the EU that was aimed at undermining Ireland’s ability to borrow from the markets. It worked, of course, and the cost of Ireland’s CDS rate duly increased, freezing it out of the markets.

    As the eurosceptics have often pointed out to the eurogombeens, the limited sovereignty that the state retains in areas where it has derogated significant sovereignty to the EU is nothing other than a comfort blanket.

    So we now again see the proof of it. The eurogombeens would foolishly claim that Ireland has the sovereignty to determine if it wants to accept a bailout or not. That was, in theory, Mr Lenihan’s call as finance minister. In practice, he has to do what his masters instruct him to do even in areas where the sovereignty is not derogated.

    That is because his masters hold the sovereignty in areas that of policy that make it impossible for the minister to operate his limited sovereignty without cooperations from those masters in the areas in which the state has transferred that policy.

    Mr Honrohan, for example, is not acting to promote the Irish national interest and nor is he proffering independent advice to the minister. The Central Bank is an institution of the State insofor as the finance minister is its sole shareholder but it is an integral part of the ESCB and Mr Honrohan is legally obliged under Article 14.3 of the Maastricht Treaty as ratified in the Irish constitution to “act in accordance with the guidelines and instructions of the ECB.” In other words, he is the ECB’s man in Ireland.

    The Irish state has sole legal liability for all debts owed by the Central Bank but the ECB has sole magerial control over it. In fact, it is illegal for the finance minister to offer any advice whatsover to Mr Honrohan about how he, as the ECB’s man in Ireland, should contrain his borrowing from external sources. So the Irish state is liable for all debts that the ECB runs up in this state via its operational control of the Central Bank but it has no sovereignty at all to seek to limit these debts. That was an insane contract for the state to enter into but you have the eurogombeens to thank for it.

    So far the ECB has used its operational control of the Central Bank to expose Irish taxpayers to 187 billion worth of debts that it has used to fund the eurosystem’s Irish operations. That money was used to repay EU bondholders, so the taxpayers of the state didn’t see a penny of it. What the ECB has in effect done is convert an additional 187 billion worth of private eurosystem debt into sovereign debt without the knowledge or consent of the taxpayers in this state.

  • http://amanfrommars.blogspot.com/ amanfromMars

    What the ECB has in effect done is convert an additional 187 billion worth of private eurosystem debt into sovereign debt without the knowledge or consent of the taxpayers in this state. … Alias 27 April 2011 at 3:26 am

    Is that criminal and allowed/encouraged and condoned for CHAOS? And if CHAOS is a Mystery does it have a Ministry for Clouds Hosting Advanced Operating Systems for Orderly Mayhem in Bedlam. :-)

    Is that OFDFM chit chatter/banter/craic for feeding to SMARTer troops and volunteers, or them advising Government of their Presence and Prescience in Future Events.

    The Legislative Assembly at Stormont don’t have Cyber Defences or Virtually FailSafe Protection at All, do they? In this day and age, is that unwise and a vulnerability too easily exploited for no real good because of bad intentions in sub prime conditions.

    Who speaks for Cyber Affairs in Stormont? Who advises MLAs on Virtual Travel Protocols to Ministries and Organs of Power?

  • Alias

    amanfromMars, that would be an ecumenical matter.

  • Greenflag

    Alias ,,

    Good post -you are improving in readability and clarity .
    A couple of questions .

    ‘ Mr Honrohan is legally obliged under Article 14.3 of the Maastricht Treaty as ratified in the Irish constitution to “act in accordance with the guidelines and instructions of the ECB.”’

    Does this mean or can it be interpreted as meaning that all those Central bank governors of all the EU States which ratified the Maastricht Treaty signed what you term ‘insane contracts’ ? Mr Honahan strikes me as not particularly insane not in the way that say Milton Friedman does or Alan Greenspan under both of whom’s auspices the world’s banksters have been allowed to get away with ‘theft’ on a scale never before experienced in human history ?

    In the final analysis the Irish State is just that a State -It may or may not speak for it’s people . The people will decide that and if the Irish people decide that they will default and tell the reckless German and French and British and Irish banksters and the bondholders to take a short walk over a steep cliff -that will be that .

    I suspect however that long before that happens the Germans and French and British banks will have their talons clipped by their own taxpayers .

    Most of this debt will have to be written off but probably not before the world’s financial authorities can reform the banking systems to ensure that a repeat performance is made unlikely through the imposition of stricter fianancial regulations and oversight in all of the G-20 .

  • Alias

    I’m not questioning Mr Honohan’s sanity. I’m questioning the sanity of the political class who signed a treaty that gave operational control of the Central Bank to the ECB, giving it the authority to run up massive debts to promote the EU’s interest for which the taxpayer would be liable without the taxpayer having any right to object and with it actually being illegal and unconstitutional for the State to object either.

    What has now occured is that the ECB has funded the Central Bank to the tune of 187 billion (at last count) and that it has provided these funds so that eurosystem banks based here could pay off their debts to eurosystem banks who are not based here. However, the taxpayer via the finance minister is the sole shareholder of the Central Bank so the taxpayers now owe the 187 billion since the banks are never going to be able to repay it – and, anyway, the taxpayers via the finance minister now own the banks.

    Given that the ECB had Lenihan as sole shareholder on the hook for the tens of billions it had already passed through the Central Bank, he had to do as his masters insisted since the taxpayers were already by then on the hook for that amount.

    The German banks remain as the most over-leveraged banks in the world. The UK is owed 160 or so billion by Irish eurosystem banks. We need to stop pretending that this is an Irish problem, and start involving these creditor states in a solution.

    Article 109:
    “The national central banks are an integral part of the ESCB and shall act in accordance with the guidelines and instructions of the ECB.”

    Article 130:
    “…neither the European Central Bank, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. The Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks.”

    Article 282.1:
    “The ESCB shall be governed by the decision-making bodies of the European Central Bank. The primary objective of the ESCB shall be to maintain price stability. Without prejudice to that objective, it shall support the general economic policies in the Union in order to contribute to the achievement of the latter’s objectives.”

  • Alias

    In case the core trick still isn’t apparent there, it’s to do with private debt and sovereign debt. Banks owed the money as private debt, not the state. The trick the ECB used to convert that private debt into sovereign debt was to loan it to the Central Bank who in turn loaned it to the eurosystem banks under its jurisdiction who in turn used it to repay eurosystem banks outside of the jurisdiction.

    Since the money loaned to the Central Bank is sovereign debt, the state now owes it to the ECB. That is a very different situation to where the private eurosystem banks owed it. They, of course, now owe it to the state instead an d the state now owes it to the ECB. Whereas before these banks could have been allowed to fail without the state being liable for 186 billion of debt, now if they fail it is the taxpayers who must pay the 186 billion back.

    It should be noted that the ECB also took possession of the key assets of the banks when it provided these loans, so these private eurosystem banks now have no assets available to repay the depositors. That was the ECB stealing the depositors money, in addition to stealing 186 billion of the nation’s wealth. Plus, of course, the ECB also holds Ireland’s external reserves which were transferred to it when Ireland joined the eurozone so don’t bother asking for those back either if you’re thinking about defaulting.

    You’ve been totally screwed by your EU masters, and in more ways than just bad-mouthing you to the money markets that Lenihan rightfully complained about.

  • Greenflag

    Alias,

    ‘We need to stop pretending that this is an Irish problem, and start involving these creditor states in a solution.’

    I agree -but it seems at least for now that these ‘creditor states ‘ have booted any system wide solution down the road to 2013 presumably by which time both Sarkoczy and Merkel will have been ‘re-elected’ by grateful French and German taxpayers for their ‘sterling ‘ -pun intended- in keeping the Greek , Portuguese and Irish contagions from disrupting the Eurozone’s longer term stability.

    ‘I’m questioning the sanity of the political class who signed a treaty that gave operational control of the Central Bank to the ECB,’

    Am I right to assume that you would also question the sanity of the political classes of Germany , France , Italy, the Netherlands ,Belgium , Luxembourg, Portugal, Greece and others who signed the Masstricht Treaty also and who joined the eurozone back in 2002 ?

    ‘Whereas before these banks could have been allowed to fail without the state being liable for 186 billion of debt now if they fail it is the taxpayers who must pay the 186 billion back’

    Here you seem to be suggesting that Anglo Irish and AIB and BOI should all have been allowed to fail ? Had this happened or been allowed to happen would the over leveraged private bank systems in Germany and France and elsewhere within the Eurozone also have failed as per domino effect?

    Thanks in advance for any answers to above .

    And with all of that we still don’t really know why having paid Merrill Lynch 7 million dollars for financial advice on whether or not the Irish government should ‘guarantee’ all bank deposits regardless of origin our genius Minister of Finance and even more cerebral Taoiseach Cowen decided NOT to take Merrill Lynch’s advice ?

    What made them take the road they did ? ignorance , fear , stupidity , threats or something that yet remains hidden from Irish taxpayers . Good luck to Ms Burton the Social Policy minister in her attempt to get a full enquiry of how this outbreak of governmental and fiscal policy idiocy came to pass . Or will her attempt at digging be subverted by those forces within Labour who are getting used to their arses being cossetted by Ministerial Mercedes and the comforts of German engineering .

    Vorsprung Durch Technik is all very well . As long as the country doesn’t get ‘Zuruckgang Durch ECB Bank Rauberie’
    rough translation

    ‘Going backwards courtesy of ECB banksters’

    Of course there is much more than Ireland involved in the biggest heist of economic history by the banksters of Wall St -the City of London and the ECB /IMF

    http://my.firedoglake.com/democratsramshield/2011/01/05/the-german-magazine-spiegel-says-wall-street-banksters-committed-a-monumental-insider-bank-robberythe-german-magazine-spiegel-says-wall-street-banksters-committed-a-monumental-insider-bank-robbery/