Meet Brian & Brian, the short and curlies keepers

Urban Legend?
Photo owned by laverrue (cc)

There are times when it’s trendy to disagree completely with David McWilliams. Times when ology analysis  bites the back of your neck. Times when you’d love to tell Breakfast Roll Man where to stick it. Yesterday was not one of those times. Economic punditry aside, action on the widening banking crisis was well needed.

Swift moves were necessary to counteract the very real fears on the street that an Irish bank could go under in the coming weeks. And that’s exactly what we got.

I imagine Linehan and Cowen hunkered over heavy mahagony tables,  hammering out a disaster recovery plan from the maw of shrinking liquidity. With faux 70′s buddy cop pizazz, Brian & Brian collars up, slugged that all too strong coffee and hashed it out. Perhaps with some pacing and Biffo popping out to the lav for a leveling puff out the window? In the space where macroeconomics and politics intersect, perception amounts to at least seven tenths of the effect. The hard talk imaginings are really not that far from reality. Sam Smyth went to some great pains setting the scene of Brian & Brian’s banking tryst in the Indo yesterday. Being seen to do something is paramount. McCain would be proud.

So, after all of the tetherhooking ripe for a media gorging, where are we? We’ve just signed the biggest cheque of guarantee ever. The Dáil and the Seanad were kind enough to nod on Government’s proposed bill to guarantee every deposit in the Irish banking system, subject to fingerprints of the Minister for Finance. The President is the only signatory left.

What else could the Government have done? Very little. The economic crisis affecting Irish banks is starkly different from almost every other country. Why? Housing, pure and simple. Irresponsible lending to property developers has left the Irish banks with an unimaginable amount of risk on the books. The banking heads punted on continued economic fortune,  even when global business activity started to bottom out. They acted in an unregulated environment but critically, outside the bounds of prudence.

Free market advocates (yes, I am) have to wince and accept that Government intervention was necessary in this case. Were we in not in the throws of the property development hell for the State Finances, employment in the Construction Industry and dribbling capital, then perhaps bailouts divvied to Bradford and Bingley or AIG would have been a better fit. But we are where we are.

And where are we? Given that the State is now a guarantor for the deposits of the Irish banks (and now possibly, Ulster Bank too), will the banking sector continue to act like a seventeen year old drooling over a brand new roadster that Daddy signed for? Will maturation of the Irish banking sector only come when the salt and peppered banking heads roll? Would this be just window dressing as the boards of these institutions are essentially accountable? More interestingly, how does this affect our international neighbours as they try to weather their own banking storms? Lots of interesting questions mushroom up.

With a State guarantee on deposits, Irish banks are safer than their international counterparts. Deposits already have and are continuing to float in from international institutions. Alistair Darling, the British Chancellor of the Exchequer, tried to intervene in the Irish guarantee plan – twice! Money flowing out of already shaky banks does little to stabilise them in this face of global crises like this, does it? At what price does feathering our nest with liquidity come? Is it enough to tell them to be damned?  Without doubt, it has a strong effect on our current rocky relationship with Brussels.

By jumping in and taking the initiative to guarantee deposits, the Irish Government preempted any direction from Brussels. (While Europe cannot intercede in the internal machinations of the economy, it will not smile fondly on the Irish move. ) This may or may not, have been on purpose. Think about it. Over the past decade, inflationary pressures have been compounded by the strong Teutonic hand of the European Central Bank. Directions from Brussels on economic policies have been central European specific. They concentrated on the boosting the fiscal stability of citizens along the Franco-German belt. As the greatest financial contributors and most populace nations, it made sense.

Landed with economic meltdown and fearing that Europe would yet again ignore the Irish Problem, Brian & Brian decided to act fast. It’s not much of a stretch to imagine that they enjoyed the rush of speeding legislation through the Oireachtas. With Euro skepticism at an all-time high in the Irish electorate and a second stab at Lisbon looming, would Europe dare contradict Ireland’s actions? Images of Brian & Brian holding short and curlies abound. Got any pictures? * shiver *

Great coverage over at Harry’s blog.

October 2nd, 2008 at 3:08 pm • Filed in Business, Politics



Comments

One Comment to “Meet Brian & Brian, the short and curlies keepers”

  1. Who’s blogging about the Irish banks and the safety net? | Maman Poulet Says:
    October 5th, 2008 at 6:33 am

    [...] Alexia, free market advocating is talking about Brian and Brian. [...]



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