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Welcome to the Dublin City Public Libraries and Archive Podcast. In this episode Simon Carswell, the Irish Times Finance Correspondent, talks about Anglo Irish Bank and the part it played in Ireland's economic collapse. This talk, one of a series on the Irish Economy, was recorded in front of a live audience in the Central Library on 29 March 2012.

Anglo Republic: Inside the bank that broke Ireland by Simon CarswellThanks very much.  Sorry for the delay.  I actually was at an Anglo results presentation just there where they said that they are going to issue legal proceedings against Michael Fingleton today so they’re issuing a plenary protective summons which is, which seems to be a ... they didn’t explain what it was about but it’s a block that they’ve put in that gets around the statute of limitations.  But anyway they’re going to issue proceedings later today and they’re obviously trying to get around the statute of limitations which is a 6 year block, as far as I understand it, with regard to contractual issues so they’ve obviously found something that they can try and sue Michael Fingleton on but they need to issue proceedings today so hopefully we’ll find out later today, hopefully we’ll be able to read about it in The Irish Times tomorrow.

So as Padraic said I am author of two books and I am a Finance Correspondence in The Irish Times so I’ve been covering the banking story for 4 years now and prior to that I worked in the Sunday Business Post where I was News Editor.  And I guess the timing of the book is interesting because the first book over there was written in 2006, published in 2006, I finished writing at the end of 2005 so it kind of somewhat predates all the crises that happen and all that’s emerged with the banks since then.  So I suppose the scandals in that book are in a ha’penny place to the scandals in this book but there you go.

So just I want to give just a brief history of Anglo, it was founded in the 60s and later emerged into City of Dublin Bank, both kind of fairly small banks, Anglo was a pretty tiny minnow in the market and then it kind of developed and really only became ... Sean Fitzpatrick only became involved in it in the late 70s.  He was originally in a bank called Irish Bank of Commerce, it’s kind of confusing, the structure, but in the late 70s Fitzpatrick, who as an Accountant, was put in to run Anglo Irish Bank in ’78 and he had been moved in from Irish Bank of Commerce which was itself a subsidiary of City of Dublin Bank so, and he really allowed him to kind of steer his own ship and he developed Anglo as he saw it really into a ... what started off as a lender that would really do various small time lending in trade finance and guarantees and exports and bridge financing, so if you were moving house and you wanted to sell your house and get a loan to buy the next house without the mortgage being drawn through, he would provide that.  And then gradually he got more and more into property lending and it was specifically secondary properties or investment properties for professionals, the likes of doctors, lawyers, dentists, accountants, for those kind of people who wanted to buy their own office space or to have buy to let properties and he saw a niche in that market and really developed that.  And then I guess as a sign of Anglo’s strengths and how it rose under Fitzpatrick it actually took over its parent in the mid 80s and it’s around ... it was in 1987 that the Anglo name appeared in the stock market and then a short time later it took over the bank that Fitzpatrick originally worked in, Irish Bank of Commerce, and that acquisition actually was very much instrumental in Anglo getting into property developers and the property development space and Irish Bank of Commerce would have had a lot of clients whose names you will be familiar with today.  They had Paddy Kelly, Gerry Gannon and the Bailey Brothers.  So Anglo was kind of in the property space but its takeover of Irish Bank of Commerce really pushed it into the space of lending to developers, builders, many of the names who became very wealthy in recent years and then bust in the current time.  And the bank was also very active in the early 90s I suppose that given that it was in the property space it became very active in developing pubs and hotels and it lent to the likes of the O’Dwyer brothers who are behind some of the pubs and the super pubs, like Cafe En Seine, Break for the Border and some of those properties.  But Anglo really spotted a niche in the 90s when the property market started rising, it saw that it would support developers and builders from its relationship through its relationships in Irish Bank of Commerce and at a time when AIB and Bank of Ireland didn’t really want to have anything to do with the property market, they still thought it was very high risk.  And I guess AIB and Bank of Ireland would have been regarded in the 90s as quick sleepy to react to big changes that were taking place in the property market whereas Anglo had these guys and there were a lot of developer clients who were sitting on very large undeveloped land banks, again very familiar names now given what the property market went through and the boom when through, so it was kind of bank rolling the likes of Gerry Gannon in North Dublin and West Dublin and Sean Reilly, a Cavan developer, in South Dublin, Joe O’Reilly who went on to build the Dundrum Shopping Centre and then Gerry Barrett in Galway and then eventually got into major investment properties, the likes of Derek Quinlan and all the money that he gathered from his clients and property investors and then internationally the likes of Sean Mulryan’s company Ballymore which develops ... it is very prominent in the UK and in Eastern Europe and Treasury Holdings which is Europe, China, Sweden and France – its developments are very international.

So I guess when Anglo spotted this market and saw how much money there was to be made in it and the property value started rising that’s when AIB and Bank of Ireland started to react.  They saw Anglo making very big profits and there’s a famous quote from Michael Buckley where he said, you know, ‘Anglo joined us for breakfast but now they’re eating our lunch’ and so they had wanted to fight back and get back some of that business.  So 2003/2004 you see AIB starting to react and Buckley set up what he called a ‘win back team’ where he said ‘I want you to find out what Anglo are doing to get all this business that’s making them so much money and their investors so much money from the stock market.  And I want you to replicate that’.  So AIB set on a course under Michael Buckley to start taking in more of the property business than Anglo was doing.  So in hindsight there was a bit of a race to the bottom, bankers were willing to lend more and more money on riskier and riskier projects and I think the influence of the foreign banks in Ireland, the UK owned banks or the Scottish banks as it’s really known, you’ve the likes of Bank of Scotland Ireland which was run by Mark Duffy and it was owned by Halifax Bank of Scotland and Ulster Bank which was owned by Royal Bank of Scotland became more and more aggressive, like AIB, to compete with Anglo.  And Bank of Ireland was a lot slower to move into that space but the current Chief Executive of Bank of Ireland, Richie Buckley, would have been quite proactive under Chief Executive Brian Goggin to actually get some of the property business that Anglo had.  So really you had what Peter Nyberg who investigated the banking crisis, he described it as ‘herd mentality and group think’ and the other banks were trying to keep up and so Anglo was leading the herd and the others followed.  Nyberg used these terms to describe not just how the banks behaved but how many different aspects and people in Irish society behaved as well, where we were all kind swept up in the boom that was happening and the money to be made from it and certainly people would take issue with that and a lot of people now who are struggling to pay for their homes and their residential mortgages didn’t get involved in the investment property and didn’t get involved in speculative lending are now having to face the pain of that, this group think and herd mentality created.

So to give you an idea of just the level of borrowing that took place and that was a heavy concentration in property, at the peak of the boom for every 5 euros that the banks had lent out 3 related to property, so I think that that statistic on its own really describes the bubble that was created in Ireland by the likes of Anglo and the others following them, there was a huge concentration, there was far too many eggs in one basket and as we’ve seen now the crash is as a result of that.  And one of the areas that the banks got involved in they were frantically trying to lend money out they created what they call the dreaded equity release and this is where Anglo and the other banks what they did was well they said to the developer ‘You made so much money on the last development, you know, all of the houses sold out in the sales weekend’ I mean we all remember the queues of people and people camping out and sleeping in their cars to try and buy a property, so the banks said ‘Well you’ve made so much money from selling those properties that you haven’t even built let’s take those paper profits and assume that that’s the cash element of the next deal.  So there’s no cash in from that but don’t worry they’ve all been sold so it’s fine.  So let’s put that money into the next deal.’   And so the next deal had no cash in it at all and if you do that a number of times and you do that across your book and the banks had a huge concentration amongst a very small number of developers that you’re really piling debt on debt on debt and the cash element is never taken out, there’s no cash ever taken off the table, so you create this house of cards really and that practice in banking explains the ghost estates that we now have, the 2,000 odd ghost estates, where you have half built derelict houses that have not been sold but the banks felt well the market isn’t going to collapse, it’s going to be soft landing, everything will be fine.  So they felt that well it’s not an issue, the money would always come off the table at some point.  So this left the banks kind of terribly exposed in the event of a property crash.

I just want to describe a little bit more about Anglo’s culture because I think it really does point a lot to the kind of bank it was and also how it worked with customers.  They had what they called this relationship banking model where it was staying close to your customer, you know exactly what they want, if there’s problems on their building sites or with their property investments, you know before AIB would or Bank of Ireland would because you’re a small team of people, you’re kind of in the customer’s face all the time, so they actually thought that they’d broken the banking mould and this invariably meant that they would work with them by day and entertain them at night and in corporate hospitality trips and I think it’s kind of significant the culture of the institution because bankers themselves in Anglo liked it because it gave them an idea as to what kind of customer they were  dealing with and, you know, everything from how they would hold their drink, how they would behave when they were having a good time, if a good looking waitress walked by, all of these things, you know, really played on the bankers’ minds as to whether they were a good or bad customer and whether they should be lending money to them.  And also access to clients was crucial as well and this is where we had this massive spending on golf, apart from the fact that Sean Fitzpatrick was a golfing fanatic, golf put Anglo in a position where it could meet its customers and get to know them well and some of the figures that I have in the book, I mean the bank spent more than 2 million euro on golf in 3 years between 2006 and 2008 and also they got involved in golf competitions and this expenditure on golf balls alone was 208,000 euro which is an astonishing figure.  And aside from that they also did trips, there was ski trips, there was a famous trip on the Orient Express where they brought developers from Paris to Venice and brought their partners as well.  And again to give you an idea of some of the expenditure on corporate entertainment the bank would engage in, in 2008, this is the year of the bank guarantee, Anglo spent €21,000 on Manchester United tickets, €19,000 on Chelsea Season Tickets, €42,000 on tickets for Six Nation away games, and €9,000 to take clients in the US to the Boston Red Sox baseball game, so that’s the kind of spending they were doing.  And then gifts to customers, in Christmas 2008, 3 months after the bank guarantee, they spent €53,000 on hampers and wine and they used to do an annual thing where they’d bring some of the valued customers, a lot of the valued customers, and their kids to the panto in the Gaiety and they spent 24,000 euro on panto tickets in December 2008.

Participant 1: Can I just ask you was there a psychological profile on what were good developers based on what you’re talking about, apart from the entertainment aspect, but just ...?

I think it was very simply based around whether they could work with the individual or not and if they made demands of the developer that the developer would meet their demands and the problem was that the relationship banking model was seen to be well, you know, you can make a lot of money from customers by staying close to them but as we’ve now seen they got too close and the relationship model was far too close.  For example, in the Quinn case, we’re now seeing in the courts that the bank lent more than 2 billion to Quinn to allow him to meet the margin calls in this investment that he made on the shares so his investment was collapsing in value and the bank was lending to him and it was that incredibly close relationship between senior Anglo lenders.  I don’t know whether there is a psychological profiling done in the bank of developers but it’s just who they knew who they liked best and who they could get on with, I think it was that simple.

So this is an older picture of Mr. Fitzpatrick and Gerry Murphy, who was Chairman until the late 90s in fact he was there, this is the chap who ran City of Dublin bank through the 70s and 80s, really Fitzpatrick was his protégé of sorts.  This picture I think is around the time of ‘88/‘89 after the bank had listed on the stock market.  So just to describe what happened in the market, I’m not going to spend too much time on the graphs and the slides in relation to economic data but I think where the lines go will give you an idea of what happened, so you had the boom in house prices with house prices quadrupling and Anglo had many clients in development so they did exceptionally well and as I said earlier a lot of the developers would have had land banks dating back to before this graph in the early 90s, so they would have been sitting on options on land as well as land itself that they would have bought from farmers and ready to move and when then property market went where it went, these figures in comparison to Spain and the UK, they made a lot of money and as a result the Anglo share price soared.  Anglo share price rose by 2000 per cent in 7 years.  So just to explain it in kind of simple money terms, if you invested 5 grand in Anglo in 2000 you’d be sitting on 100 grand in 2007.  So if you go back to the herd mentality and the group think and the naysayers in the early noughties coming out  saying this won’t last after  7 years of growth with that amount of money to be made I think it would convince even the most sceptical that this was a bank that had done things and was doing things differently and given where the share price went the value of the bank went from about 600 million in 2000 to 13 billion in 2007 I think people felt that well they’re on to a winner here and I’m going to put my money with them, both in terms of depositing with them and buying their shares. 

Here you have ... this slide is to do with house completion, so again it reflects the increase in prices and this would be all of the new builds by developers and builders and the figure reached ... 2006 is the peak of the market where there was 90,000, just over 90,000 new houses built, and just look at that in comparison, that’s twice what would be built of new buildings that would be build in the UK which is 14 times the size of Ireland’s population so it gives you an idea of the level of the ... we talked about the lending boom or the credit boom in Ireland and the banking boom well this is the construction boom, this is the slide that shows that.  And again, you know, everyone felt that we’d hit a new paradigm and things would change with immigration and that there would always be a demand for houses so 90,000 new houses in one year was not regarded as a bubble it was regarded as something that was simply responding to the needs of the country and people needed homes. 

This is Anglo’s profits, as you’ll see, this is their own from their own report so this is what they reported every year so again the figures, this is 2007, so you can see through the noughties it really soared and this would have been David Drumm’s first year as Chief Executive and that was ... he took over from Fitzpatrick, so again once he took over he said he wanted to double profits in 5 years and he did it, it soared up, that’s 1.2 billion.  So they reported that figure in November 2007 after the credit crunch so again the figures show that the profitability of the bank followed the other markets and followed the growth in the share price as well.  So this is David Drumm and Tom Brown, Tom Brown was Head of the Irish Business, so this is them presenting the results and Tom Brown would have been instrumental in doing all the property development in the Republic and David Drumm really put the accelerator down, the pedal down, and took the bank to new places in terms of growth.  So this is the boom in Irish bank lending, you can see the increases, the light blue is the Irish banks and the dark blue is the IFSC banks, so again huge increase in lending by the Irish banks where total assets to balance sheets, assets or loans and other ... mostly loans, the balance sheets of the Irish Banks was 700 billion in 2008.  And there you have Anglo’s loan book, it’s soaring again, the last three are David Drumm’s years, so you’re seeing a massive increase in lending by the bank.  Sorry it goes back to that figure there.  And it’s a massive increase, the lending, it goes from 6 billion in 1999 to 33 billion in 2005 and 73 billion in 2008, so it’s massive increases; that’s the credit bubble there. 

So where does the money come from that they lend out to customers?  The Irish banks traditionally in the late 90s you would have had for every euro you had on deposit you’d have roughly about a euro out on loan and that was the traditional banking, you pay for deposits and you charge for loans, it was very simple.  And that changed, so what you say is the cheap and easy access to funding through the bond markets and borrowing from other banks and it allowed banks here to lend out money more cheaply and freely.  Being in the Euro after 1999 it removed the currency risk from the banks own borrowing and it gave them access to vast pools of borrowings across Europe so the main banks in Europe that would have been lending to the Irish banks were the UK banks and then you would see the French and German banks and then the Italian banks, but mostly the UK.  So we hear about bondholders, those are the people lending money to the banks when Ireland entered the Euro and Anglo would have borrowed from those banks to lend on to customers.  So the gap between loans and deposits which didn’t really exist in the late 90s change completely and it rose to 2:1 so for every euro you had on deposit you had two euro on loan, so that gap was filled by borrowing from bondholders in other banks.  And in Anglo’s case it was extraordinary growth in borrowing reflecting the growth across the other banks, they had borrowed 100 million from bondholders in 1999 and this reached 23 billion by the peak of the bank in 2007, so borrowing from other banks soared and the other problem for Anglo was they thought that the deposits that they had were very sticky, in other words they wouldn’t be withdrawn in a hurry, but they left pretty quickly when the crisis hit and those corporate depositors would have been kind of multinationals here, insurance companies, pension fund companies and the like.  So that’s the increase in Irish bank borrowing. 

And then you have the crash, so property values start to fall from 2007/2008 and they really start to nosedive in 2008 and 2009 and this is the Anglo building, some of you know, in the North Quays, it’s kind of become a symbol for the crash here, it was built by or half built by property developer Liam Carroll who actually wasn’t a long term customer of Anglo but he won the competition to build the building and Anglo provided 60 million to do that, that cost 60 million, what you see there.  It kind of stands as this post-Apocalyptic monument to Irish excess.  I saw ... I remember a columnist I met from the UK and we were discussing it, it was kind of like the monument in Hiroshima where you have the hall under the site of the bomb site so perhaps it’s a pretty crude and unfair analogy to draw but it’s kind of become our symbol of the crash. 

So property prices falling, they’re down, Anglo said there an hour ago at their presentation that the market is down 65 per cent so it’s quite a drop.  This is a slide from the Department of Finance.  House prices are down about 60 per cent and commercial property down 70-80 per cent but the development land which is much riskier for the bank is down about 90 per cent and in many cases, particularly outside the city, it has reverted back to agricultural values.  And when you think about it that Anglo had 80 per cent of its loan book in property, more than 20 per cent, a fifth, more than a fifth of their book was in this high risk land and development so if you think about the bank at the peak of the market, 73 billion in loans in 2008, it just had 4 billion set aside to cover potential losses which isn’t enough.  And I mean you could argue well whose fault is that?  Well if you look at the Basel rules which are the rules that all international banks follow in terms of how much they need to set aside in capital, the Basel rules have been changed so they’re now saying that the minimum is four times what it was originally.  So if you think about if you were to apply that, go back in time and apply that, the banks should not have grown more than a quarter of their eventual size so the banks just got too big and it wasn’t just an Irish problem it was across Europe and indeed across the world, particularly in the US.  So we kind of get to the nub of the talk which is the cost to the State of all this and Anglo’s role in Ireland’s economic collapse.  I suppose the best way to describe what happened and to look at Anglo’s role in it is what actually triggered the economic collapse and whether Anglo is responsible.  I spoke earlier about how it led the race to the bottom as we can now see what it was and it drove all the other banks down with them.  But on the night of the guarantee itself, September 29th/30th 2008, Anglo had run out of money that day and the share price had collapsed almost in half so that’s kind of like a megaphone, the market saying this bank is gone, really it’s absolutely tanked and it had run out of cash and it had gone to the Central Bank looking for money.  So if you look at what happened on that night the government didn’t think it was dealing with a solvency crisis, they didn’t feel or weren’t told by the Regulator that the banks hadn’t enough cash in reserve to meet the possible losses from the property cash and they felt they were dealing with the liquidity prices, the collapse, after the collapse of Lehman Brothers in Wall Street caused the markets where the banks borrowed, as I said half their money, those markets froze.  So Anglo was the trigger for the government’s decision to do something on that night and as we seen Brian Cowen said that they needed to give kind of one signal, a big signal to the market that they were fixing this problem.  So Anglo would need more the following day after running out of cash and after getting the 3 odd billion from the Central Bank on the 29th so the government felt well Anglo has run out of cash, the other banks are going to run out of cash if we don’t do something because there was this domino effect and investors weren’t really discerning between good and bad banks, they were kind of painting the Irish banks as too exposed to property and also heavily borrowed in the international wholesale markets, money markets.  So the government went too far, the government wanted the silver bullet solution to ease market concerns and most people who know about this kind of thing in official circles have said that a guarantee was required and you have the likes of Patrick Honohan, his report, the OECD saying ‘yes use a guarantee’ and certainly a guarantee is one of the tools in the toolbox you take out when you want to repair a banking system that has gone bust.  But it was far too broad this guarantee, it pushed the liabilities covered by the State, insured by the State, to 440 billion and the State was only ... our economic output at that stage was in the order of 170/180 billion, so clearly it was a lot to put on the shoulders of the State.  So if the government had instituted a more narrow guarantee it could have given the government now more options to burn other bondholders, senior bondholders, because the guarantee is place they’re protected and we’re protected under the extended guarantee as well, so this increased the cost to the bailout to the State. 

So this slide shows the holes in the Irish banks in what we’ve ... how we filled them.  As you see the biggest is Anglo, it’s lumped in with Irish Nationwide under IBRC, Irish Bank Resolution Corporation as it’s now known.  So the biggest hole was at Anglo, it was 29.3 and they’ve said that it will rise to 34 if the market doesn’t recover for 10 years.  Just earlier there today at the presentation the bank said again that it expects the figure for Anglo to be in the order of about 25-28 billion.  And then other figures AIB, which is I suppose the next worst in terms of absolute numbers, is the order of about 20 plus the 20 billion we’ve pumped into them and Irish Nationwide 5.4, Bank of Ireland 4.2, EBS 2.4 and Irish Life and Permanent as of yesterday has gone to 4 billion from 2.7.  So of those we own AIB, EBS, we own Irish Life and Permanent, we own Anglo, Irish Nationwide and we own 15 per cent of Bank of Ireland and the bailout is 63 billion.  The situation with Bank of Ireland is again as I said earlier they were slower to get into the property market and that maybe saved them from government control because they required less from the State and they could manage to get these US investors in last year who took 35 per cent of the company.  So if you look at the guarantee on the night of the guarantee a 700 billion banking system compared to the economic value of the State 170 billion, and that’s down to about 150 now, really the guarantee put the State on the hook for the banks’ losses and the State couldn’t cope with those losses.  When the size of the hole at Anglo emerged in 2010 which was a month before the blanket guarantee ended it was really a case of the markets got very concerned and said well what is the figure for Anglo we don’t know, it seemed to be rising all the time and the government were unable to put a figure on it until September 2010 and by that stage the banking guarantee, the 2 year guarantee, had ended and under the guarantee the Irish banks had borrowed 30 billion so when they couldn’t borrow to repay that 30 billion the only place they could turn to is the Central Bank, two places – Frankfurt and Dublin – the Irish Central Bank and the European Central Bank.  So what you saw is the banks borrowings for the European Central Bank and the Irish Central Banks soared and that really spooked the ECB and they said we didn’t expect it to go as high as this and although the authorities here would say well we warned them, we let them know from the Greek crisis blowing up in May 2010 that there was a problem coming down the tracks and when that bank borrowing soars the top line there shows how much it increases by, in two months Anglo’s borrowings from the Central Bank went from about 14 billion to 34 billion and that was really ... that had the alarm bells sounding in Frankfurt, they said we need to do something here, and that was the trigger for the ECB coming in and putting the government under pressure and the view in the ECB was there is more black holes in the Irish banks that you haven’t identified because clearly you’re just grappling with Anglo and you’ve been dealing with that for a time.  So again that spike, that was the trigger, we talk about another trigger, that’s the trigger that prompts the bailout of the country, so you had the bailout of the banks in 2008, the State couldn’t cope with that, and ultimately the next trigger then is this, the increase in the Central Bank borrowing.

So the government feared at that time that the ECB could increase the rate it was charging on emergency loans to Anglo, that was the one it was most concerned about.  You hear talk now about Trichet, Jean-Claude Trichet, the European Central Bank President, threatening Ireland and some say the fear was that they would withdraw the funding from the Irish banks.  I’m not sure they could have done that but what they could have done is put pressure on the government by increasing the charge and increasing the interest rate on that.  So this is what led to the bailout programme and the decision to provide 67½ billion in bailout loans to the Irish government.  So again Anglo really was the trigger for that, the other banks were following in as well, like AIB had borrowed on emergency loans from the Central Bank as well.

So unrelated to property lending Anglo did some wild things.  This is Mr. Fitzpatrick leaving the Garda Station in Bray after his first arrest.  He’s been arrested a second time.  So Anglo, some of you have been following know now that the issues around that are loans to directors which were provided mostly by shares in the bank, they were initially non-recourse which meant the directors didn’t have to pay the loans back, now they’ve been changed to recourse and a lot of those directors are in severe trouble.  David Drumm has applied for bankruptcy in the US.  Sean Fitzpatrick has applied for bankruptcy in Ireland or filed for bankruptcy in both cases.  And then Sean Quinn, their biggest borrower, has filed for bankruptcy as well.  He tried to do it Belfast but he was blocked by the bank and he’s now bankrupt here.  Then the issue of Fitzpatrick’s loans hidden in Irish Nationwide at the time, Anglo wrote up its annual accounts and then I suppose one of the most incredible aspects of that is that emerged in December 2008 and even though the government had stepped in to guarantee the bank it left Fitzpatrick and Drumm in place and in their jobs after the guarantee.  So the scandal about Fitzpatrick’s loans increased the pressure on the bank and on the government and it eventually led to pressure on the deposits and that’s when the government had to step in and nationalise the bank in January 2009.  So since then investigations and arrests have arisen over things that the bank did in 2008 when its back was against the wall.  We’ve now discovered that Anglo was cooking the books with dodgy deposits from Irish Life and Permanent in 2008 to make their balance sheet and make the books look better than they actually were.  And that was – now talking about triggers – another trigger for the nationalisation of the bank back in 2009 and now we’re seeing through the courts this week and last and in international courts the battle with the Quinn family.  They owe the bank almost 2.9 billion.  They’re the biggest, after the loans have been transferred to NAMA, they’re the biggest borrowers at what is now Irish Bank Resolution Corporation and the bank is pursuing them internationally and here to try and recover as much of that as they can.  And again most of those loans relates to his decision to invest in the bank in the period up until ... he was buying right up until 2008 when the share price was collapsing.  And the fear at Anglo was that if he couldn’t afford to meet the losses on his investment that would force the brokers who held the shares to dump them, the share price would fall, depositors would see that, they’d get spooked, they’d pull their money out, then you have a run on the bank and then the bank collapses.  So the bank in 2008 decided to get ten customers together when it couldn’t sell Sean Quinn’s shares in the markets it got ten customers together, it gave them 450 million in loans, got them to buy 10 per cent of the bank in a secret deal and that 450 million is gone now.

So this is the fallout and the end of the bank, the name, a kind of symbolic day in April 2011, an Anglo signage being removed from the bank’s branches and this is a photograph taken of the building in St. Stephen’s Green.  I think it says a lot.  It doesn’t take away the anger that people feel towards the bank because we’re still paying for it and the current talks are about trying to push out the cost of that so these promissory notes, these IOUs, that have been written up by the government back in 2010 when we didn’t have the cash to pay for Anglo, they said well here’s a promissory note, it’s an IOU, we’ll pay you over a long period.  The cost of that is very high every year and the government wants to reduce that because it needs to get to this target deficit by 2015 to show the markets that we’re getting back on our feet again.  So it’s a small amount of the debt that the country had, the debt problems the country has, but it’s kind of trimming at the edges but it should ... it seems to be ... Patrick Honohan has said that it’s likely to be successful so the payment is due on Saturday for 3.1 billion and they’re saying well instead of paying that in cash which would be a drain on the State let’s do another IOU, we’ll give them a government bond, and say this is 2025, we’ll pay you back in 2025 and IBRC takes that instead of the 3 billion in cash and goes to European Central Bank and exchanges it for cash.  So that’s the whole exercise that’s being done in private at the moment and then the longer term exercise that’s being done is to come up with a whole new system to restructure the rest of the 30 billion that we have to pay.

So to summarise I’d say that Anglo drove the other banks into reckless lending because they say the spoils that were to be made from that and I think they’re as guilty though on reckless lending charges because they followed Anglo.  And also Anglo was the trigger for the decision to guarantee the banks and also the trigger, or at least the biggest reason, for the ECB forcing the government to take the bailout from the EU and the IMF.  So this was a bank that started out as a small Dublin lender and it soared on the property market in the property boom.  It eventually became too big to fail and then too big to bail and ultimately too rotten to save.  So you can see here in front of you but it’s a gratuitous plug for my book (Anglo Republic: Inside the bank that broke Ireland) which you can either buy or borrow from here, hopefully, there’s loads of copies in the library.  I can take some questions if anyone has anything they’d like to ask me?

Q & A

Participant 2: I’ve two questions, just go back to 2008, the banks came in to see the government.


Participant 2: The first question is did the banks actually lie to the government?  And the second question is in 2008 could the government have burned the bondholders?

In 2008?

Participant 2: Yeah?

I’d say did the banks lie when they came into the ... I mean that’s a question I’ve asked when I ask any bankers now who were there and I say “Were you lying or were you just deluded?” and I think it’s a bit of both.  I think in Anglo’s case there was an element of deceit about it.  Certainly from my research in the book there were managers within Anglo who could see in June 2008, there was a big board meeting in June 2008 Anglo did down in Cork and there was a presentation made to the board how bad is our property book and certainly at that point they knew they had major problems.  And I mentioned there about equity release, the other issue that was a real signal that there was problems was… is interest roll up, they weren’t even paying their interest bill through 2008 and that was widely known.  Some of the big developers were just not paying back the loans at all.  So I think that in Anglo’s case they probably knew they had major problems in the loan book but again as was widely felt in the marketplace was that this was a blip or a soft landing, it wasn’t going to be a major crash, so I think they were deluded as well.  So I think it’s a bit of both.

Participant 2: Right.

They were lying, they were deluded.  I think in the case of AIB and Bank of Ireland who went in to government on the night and said ... I mean they went in to say you need to nationalise Anglo and Irish Nationwide, we’re not the problem here, but we will be, we will have a major problem if you don’t take these out because international investors who give us money, who lend money to us, are saying ‘What’s the story with Anglo and Nationwide, we know they’re bust, they’re exposed to the property market. 80 per cent of their loan book is for the property market why aren’t you doing something about that?’ but I think AIB, in particular AIB, did not know the extent of the problems within that bank and when you look at the figures back in that chart in terms of the bailout, I mean AIB is not far behind Anglo in terms of what it’s cost and in fact during the boom years developers would say you could get a loan from Anglo in a week but you could get it in 2 weeks from AIB so a lot of them went to AIB so I think AIB knew they had the problems there and I think they were deluded, I don’t think they were lying I just think they were deluded as to the extent of the problems.  Could they have burned the bondholders in September 2008?  Yeah they could have.  If you apply a guarantee like this kind of throw a massive blanket over the system and say ‘We stand over everything that the banks have and we will pay their liabilities no problem’ you immediately limit your options as to what you can do with those bondholders.  I mean I think people ... the issue of bondholders and who owes what it’s like a queue, if you can imagine it like that, who is first to take the losses, shareholders take losses because they take a punt and the view is as well who is next in the queue to take losses if the business goes bust, the subordinated bondholders who get paid a bit more than the senior, so they’ve taken a higher risk in this regard, they’re next.  The decision on the night of the guarantee to include some of them in the guarantee is astonishing, absolutely astonishing from my perspective.  Look they decided to guarantee the date and subordinated bondholders and what that means is those are guys who have a loan note or an IOU from the bank saying they’ll get paid at a certain point, they get paid a good interest rate, they get 10/11 per cent in some cases, so those guys should have been burned and yet they were included.  Now if you look at the advice that Merrill Lynch gave on the night in the run up to the guarantee they raised a possible problem, they said well there’s what they call cross default and what that is is that somebody could have a subordinated bond and they could have a senior bond, if I have a subordinate bond and you burn me on that I can call you in on this so Merrill Lynch warned it’s not as easy as that so I think that that might have influenced the thinking on the night.  But yeah you could have, what you could have done on the night is you could have said, right, we’re going to take out Anglo and Irish Nationwide and nationalise them, we’re going to put a guarantee in place but only for the depositors at AIB/Bank of Ireland and we’ll only guarantee any new bonds you issue and you apply all sorts of terms and conditions to those bonds but and as we’ve seen Brian Cowen had said in this lecture that he gave in a university in the US he said ‘We wanted a big bang solution’ if you don’t know the extent of your problems in your banks you can’t do that and what surprised me is there was an admission by Kevin Cardiff who has now gone off to that job in Europe, he was Head of Banking in the Department of Finance, he was asked after the crisis they said ‘At what point did you realise you had a problem here or that you didn’t know the extent of your problems in the banks?’ and he said “When we could no longer rely on the Financial Regulator for information we had to rely on the banks own advisors” and that was Goldman Sachs in the case of Irish Nationwide and in the case of ... I can’t remember who it was in Anglo Irish ... but for a senior government official to admit that and that was prior to the guarantee they were calling on Goldman Sachs, we did not know the extent of the problems because the Regulator didn’t have the information available that we had to turn to their own advisors, knowing that  now and even knowing that then if you had realised that then why then would you have agreed to a guarantee?  Granted Cardiff isn’t making the decision but he’s there on the night.  So yes you could have burned senior bondholders on the night.

Participant 2: Yeah.

Would the ECB have let you?  That’s another question.

Participant 2: That was my ... Brian Cowen in that article that he gave in the States a few days ago or whatever recently he said that’s the common factor that you could even now, he was saying right across from 2008 to now ...


Participant 2: ... you’d have a problem burning the bondholders.

And the senior bondholders are what count because we burned subordinate bondholders but it’s not nearly enough to cover this bill, so the senior bondholders were really the only ones that could have been burned to save on that and no senior bondholder in a Euro zone bank has burned.

Participant 2: Yeah.

They refused to allow it because they feel if it happened it would unravel, it would lead to another Lehman Brothers type tsunami across the European banking system.  The one country that has burned senior bondholders is Denmark, they allowed it, but in that case they only allowed it for a couple of small banks.  Like as I said we had six banks and three of them got far too big, much bigger than the State could cope with when the crash came, so the Danish model is interesting, the markets did react and they did ask for more money when they were lending to the Danish banks after they did that.

Participant 2: Right.

But that calmed down again.  But we haven’t seen a major bank in Europe both ... well definitely not in the Euro zone but outside the Euro zone, I haven’t seen a major European bank burn senior bondholders.

Participant 3: Thank you very much.  Going back, Lehman Brothers collapsed in the middle of ’07.

September ’08.

Participant 3: Yeah, okay yeah, but the market was beginning to down from the middle of ’07.


Participant 3:  It was the 15th of September ’08 but I’m bringing it up to date, last weekend there was a big debate in Frankfurt on the sovereign debt debate and the whole issue of sovereign debt and on the bailout of countries, now we’re one of the three countries in an IMF programme, Christine Lagarde, the Managing Director of the IMF, when asked just on the day of the signing of the austerity, the new ...the latest from Greece, was asked do you think you’ll come through and she said yes on condition that private investors, pension funds and bankers take a haircut.  What I’m picking up since and that was only a few weeks ago is that a lot of the pension funds lost 75 per cent of their money, some of them had credit default swaps, now is this not, you know, the sovereign debt, we’re now producing an IOU into sovereign debt with 25 years, we’re now introducing sovereign bonds to go into pension funds and annuities now are we not just, you know, switching credit around and no real money, you know, are we not doing exactly the same as what’s been going on in the last five years?  If you even listen to Freddie Mac and Fannie Mae exactly the same debate and language is around the property in the States as it is here, you’re now hearing it also from China, so I don’t think anyone has learned anything and I don’t think ... I think all of this is going around and nobody knows what’s going on.

Well yes is the answer, it’s all paper going around, like it’s credit again.  The difference being it’s sovereign borrowing rather than private borrowing or company borrowing so yeah it’s to do ... like the whole restructuring, the promissory notes, is just you know if you have a mortgage and it’s 30 years if you push it to 40 years you’re going to pay more over 40 years but you’ll pay less every year, that’s what they’re doing, it’s that simple and they’re doing it with paper, with IOUs with loans, there’s no cash to pay for this and the whole aim is that they need to separate the decision on the night of the guarantee, State banks one, they need to separate it again.  And this is that process that they’re trying to do, they’re trying to take out a chunk of this, so half this figure, take it out and get it off the State’s balance sheet and do something else with it.  Now the ideal situation would be to go and get agreement from the European authority and say listen just give us a loan from EFSF and instead of giving it to us just give it to IBRC or give it, you know, or better still let private investors come in and they take it but that’s not going to happen so really you’re right it’s the ...

Participant 3: But I gather ... sorry for crossing over, I gather the small print on the Greek deal that hardly anyone found out until the end of the day was that the priority orders is such that the IMF get 100 per cent in that, the ECB get 100 per cent, even the EIB gets 100 per cent, the sovereign doesn’t, it’s on the very end, so who would actually put money in a sovereign debt considering most of the Central Banks actually do have ... most of their balance sheet is in sovereign debt.

Well not in Greece, they wouldn’t do it at the moment, but that’s what they’re trying to do in Ireland, if they separate the State and bank debt they’re trying to get people in to start lending to the State again but people don’t want to, investors don’t want to come and buy Irish debt just yet because they want to be sure that Ireland will recover by the time it says it will recover, if we get the deficit down by 2015, so Honohan, Noonan and the rest of the government are saying well if we do this with the Anglo promissory note it will ease some of that burden and show those investors that Ireland is recovering and that you can lend to us and that you will get it back.

Participant 3:  They’re saying there’s a 60 per cent change of default when you look at the risk assessment.

Well it’s a high risk yeah absolutely it’s high risk but I mean you know the talk of a second bailout, is there going to be a second bailout for Ireland? I mean I wrote a piece in the paper today saying you could argue that what they’re trying to do with the Anglo loan is a second bailout because they’re trying to get money from a different fund or more money from the same fund in terms of the ESN, the longer term bailout fund, over a much longer period, so it kind of is a second bailout.  But yes is the answer, with paper, have the learned a lesson?  I’d hope so.  They’re doing the same thing but it’s with sovereign paper instead of bank credit.

Participant 4:  Would it not be better to accept a second bailout if you’re getting a better interest rate?  I mean obviously if you go back to the market you’re going to have to pay a higher rate to attract private investors or new investors into buy Irish sovereign debt, would you not be better off just accepting the bailout because it’s at a lesser rate?

Well no and what they’re doing is and again we don’t have the full details of what they’re doing in the background right now both in terms of the payment due on Saturday and the rest of the payments due until 2031 but Honohan said at the Oireachtas Committee the other day he said it’s got to be less than the bailout fund money or otherwise we’re just going to take the bailout fund money but they were saying that they would.  Sorry, yeah?

Participant 5:  Just in relation to the IBRC does it have like a time span that’s allowed exist for the end of it and it has to wrap up or what is its objective?

Well it’s a topical question because we were just asking Mike Aynsley, the Chief Executive of IBRC, that and he said on their briefing notes they hand it said 2020 is the day they have to be gone but one of the things they’re doing in the background is tracker mortgages are sitting on the books of AIB and Permanent TSB and they’re loss making, they’re making no money and burning money for those banks, so there’s talk now that as part of the restructuring of the promissory notes that they take out the promissory notes out of Anglo and Nationwide and put in trackers because it’s both their assets and funny enough the trackers at AIB and Permanent TSB are about 34 billion so it’s kind of a neat match between the figures involved and the issue with the tracker mortgages is that they don’t make money but they’re not bad, they’re being repaid so there’s money coming in off them, it’s just that the reason they’re not profitable is that the banks borrow at a particular rate and they charge at another and instead of being like that they’re like that so they’re making any money but they are ... they could be used as a way of both fixing the IBRC problem and also fixing the AIB and Permanent TSB problem, if you get them out of those two banks you may encourage investors to come in.  To answer your question the debate now is well if IBRC gets tracker mortgages some of those won’t fall due to be fully repaid until the 2030s so IBRC will be around for a lot longer.

Participant 6: The different talks we’ve had, people had different kind of analysis of why we have a crisis, let’s say Conor McCabe seemed to think it was a particularly Irish version of capitalism and Ronan Lyons said that it was kind of a classic property bubble.  A lot of people would put it down to Anglo an when you look at Anglo you think the failing was their relationship banking model, was it just people being a bit reckless, was it a lack of regulation, why did it blow up so much?  I mean it’s happened in every country at the same time, similar things but not to this extent, but what was it uniquely about Anglo?

Well it is depressing that it’s a kind of classic property bubble, it’s not that complicated what happened here, I mean there’s no kind of derivatives or CDOs or CLOs or any of the stuff that’s taken down like a few of the American banks, it’s just a plain old property crash.  I think in terms of the scale of the problem here Patrick Honohan has said the scale of the problem is four times worse here than in other European countries, and I suppose leaving Greece aside for different reasons, but the scale of the crisis here was four times worse than the market or the average and for that reason, you know, it’s much more of a domestic issue and you can’t blame Lehman Brothers or international factors for what happened here.  But I don’t really ... I don’t kind of buy into the whole is it a particular type of capitalism I think there’s one type of capitalism and there is extremes within it in terms of, you know, how government sets up a regulator to regulate capitalism in your country and I think what happened here was a variety of factors, I think if you’re asking legally who is to blame you could lay the blame first and foremost at the door of the banks and then I think at government before regulator because I think the government should have oversight over the regulator and I think that if you only give the regulator certain tools then you’re kind of tying one hand behind their backs in terms of what they can do with the banks.  Also I think the regulator was too close to the banks just like Anglo is too close to its customers the regulator was far too close to the banks and this light touch regulation of principles based regulation or a better way of describing it is regulation for grown-ups, we’re going to have a little code here on the wall we want you to go and look at it every week just to tell you what you should and shouldn’t be doing, that’s the extent of our involvement as a regulator, I mean that’s no good either.  But I think what the banks and what particularly Anglo did here is it convinced people that it had established a new secure form of banking that was incredibly profitable and others believed it, the other banks believed it and then everyone else believed it because of the money they were making.  And I think that that kind of turned Irish banking on its head a bit but again like if you look at the UK, RBS and HBOS, and there was a report into what happened in the commercial banking division of Lloyds which is primarily HBOS they say all the same things happened in Anglo, too much lending to a very small number of people and you were too close to them and that’s the problem, the concentration.  I mean concentration just kills in banking and you spread your risk, you know if you’re an investor you don’t buy 28 per cent of Anglo Irish Bank and that’s why the losses are so great for Sean Quinn.  Just as investor you spread your risk; it’s simple, simple so.  But I think we had ... we took it to a different level in this country.  Sorry?

Participant 7: Do you think it struck me down your last point there about taking it to a different level, could it have been a large part or one major reason why it happened was Anglo wasn’t a retail, a high street retail bank I mean it didn’t deal with customers off the street, it dealt with basically investors.  I remember when they used to have a little ad in The Irish Times front page, you know in the left hand corner and nobody knew who they were just that it was a nice picture.  Surely if they had been watched more closely or supervised from outside more closely if they had been retailers or somebody would have heard earlier what was going on and maybe the regulator might have had more experience maybe to observe what was going on there before, could that have been part of it do you think that they weren’t doing anything?  I just remember that you were talking about lawyers earlier on, in the beginning of my career I worked in the merchant banking liquidations and I was very junior but people used say that he ran that bank, the person involved, as his own private bank, the profession at the time around Dublin, and ...

This is Patrick Gallagher, yeah.

Participant 7: ... it seems that they had been doing something fairly similar; I don’t know what you want to do comment on it at all or give an opinion on what they said?

Well I think that the regulator was certainly hands-off when it came to Anglo and it was too late when it did react.  The two things that the regulator did that I would say now oh we did these things, and you know we attempted to take the heat out of the market, they told the banks, regulators and principals of debt regulation they really only measure their ‘can dos’ say well if you’re going to do that kind of lending we want to force you to put more aside in reserve in case those loans go bad.

Participant 7: But would you trust an Irish government to supervise the regulator properly as you had said, would it not be better to have Mrs Merkel do it, she doesn’t trust us to do it or any other government probably either, be regulated from abroad in terms of the regulator?

Well there was talk of this kind of European wide regulator and the European Banking Authority which is supposed to be doing a stress test is coming into all sorts of trouble and it’s woefully understaffed, I think there’s only 40 people working in London.  So you know people said things in the crisis and what we need to do but I mean they’re not following through and responding.  I mean there’s talks now, you know, people saying at conferences and privately people saying we can’t have a knee-jerk reaction, we can’t have over regulation, well I think we can, I think 63 billion is an awful lot, a big price to pay for Ireland.

Participant 7:  How many are there are working in Dublin?  So maybe they have it everywhere, because they are civil servants they’re appointing that they appoint someone they know won’t to do anything anyway so they can get on with the government themselves.

Yeah I think you’ve got to establish a proper regulator and you know regulation is set up by legislation, government legislates.

Participant 8:  Yes, thank you very much Simon for your presentation, it’s so technical and everything, and I liked your tone.  I was just wondering do we know who the ten golden circle are?

Yeah we do.  If I can name them now I’d be doing well.  Paddy McKillen is one of them, who is being sued by the Barclay brothers over in ... sorry he’s suing the Barclay Brothers over in London at the moment, he’s one.  Gerry Gannon.  Sean Reilly.  Joe O’Reilly, the Dundrum Shopping Centre guy.  Other names on it ... there’s an auctioneer up in Malahide I better not ... because this is being recorded.  (laughs)

Participant 8:  No that’s fine.

It’s in the book somewhere.  They were described as kind of the loyal customers, or longstanding customers.

Participant 8:  And did they actually pay physical cash or these paper trails again?

No loans.

Participant 8:  Loans.

Just loans.  They got loans to buy the shares.  Brian O’Farrell is the auctioneer.  He owns the Northside Shopping Centre in Coolock.  Gerry Maguire who owns the Laurence Shopping Centre in Drogheda.  Patrick Kearney, a Belfast-based property developer.  Seamus Ross, Menolly Homes.  John McCabe.  Gerry Gannon, I said that.  Yeah that’s them, that’s ten.

Participant 8:  Thank you.  And are they being followed, you know, in terms of those loans?

They, as I understand it, are witnesses not suspects so they are not the focus of the investigations but in other words it’s not viewed that they did anything wrong.

Participant 8:  But they haven’t repaid the loans?

Well the loans were given on a non-recourse basis meaning ... well a quarter of the loan was recourse which is so you’re on the hook for a quarter so each of them got about 45 million so just over ten.

Participant 8:  On the securitisation you’re saying that it just so happens 34 I presume is that million or billion?

Billion, all billion.  No more millions anymore.  (laughter)

Participant 8:  Billion.  Okay, it’s just that I ... yeah, 34 billion it matches another one – not to do double entry yeah.

... that’s just I mean it’s a neat coincidence but it could possibly help the solution.

Participant 8:  Yeah but two questions on that is it was securitisation and the collateral that was behind it that caused the financial crash around the world, in other words people kept on sending mortgages to mortgages to third parties etc.,


Participant 8:  The assumption here is that securitisation of the tracker mortgages we’ll actually produce what is supposed to be on paper producing, so that’s question number one, so there’s a risk there but number two why do the banks or the lenders on tracker mortgages not allow an individual to pay off these 25 year loans if they so ... say they won the lottery without ... at a proper discount or the net present value on it?

Yeah well I think they’re going to come around to that, like some of the banks have been saying ... some of the banks were offering deals to customers privately case-by-case and ...

Participant 8:  But only if you’re in trouble not if somebody just wanted to get out of it.

... yeah well I think that eventually they’ll come around to that.  I think that if you have a tracker mortgage the banks don’t want to do it because again it’s an admission of a problem and a mistake that they made by selling these things, they would say well we’re going to lose 100 grand on your mortgage, tell you what, we’ll pay you 25 grand if you come off the tracker now and go to another institution or we will help you find a loan elsewhere.  I think those deals will eventually have to come about.  It’s 34 billion of loans that have a much longer life than some of the property development loans so you have to deal with them.  In terms of the securitisation question, I don’t think it applies here because you’re talking about swapping loans around three institutions that are already owned by the State so if they weren’t owned by the State I’d say that’s a relevant concern, oh securitisation got us into this trouble, why are you shuffling from one institution to the other, we own them all it doesn’t matter.

Participant 9:  Yeah just going back to the early part of the lecture, thanks I enjoyed it, with turnover developments and wasn’t that related partly to the Capital Gains tax, why they did that?  Secondly just the savings to lending ratio, what was the impetus that changed that which was back in the end of the 90s or the beginning of the new decade?  And then in relation to the type of capitalism here, isn’t there a particular type in the sense of like the closeness of Fianna Fail and developers and so on, some of the motivation in there, a culture of poor regulation and also in terms of being a what would you call it like not offshore but low tax rate and so on.  And finally, it’s a bit too much, in terms of Europe the sense of because they made mistakes both politically and economically and they don’t want contagion, they don’t want the banks to fail so essentially then they’re going to make the ordinary people, and particularly in Ireland, pay for it.

Yeah that’s basically it, that we have to pay for it because we borrowed it. 

Participant 9:  Could I just ... sorry for cutting in, does that make not the political arrangement corrupt really?

Corrupt?  I don’t know about that word but I guess you know if you think about the European Central Bank is largely influenced by German policy measures both Central bankers and again the view of how the crisis should be worked through is based on the fact that you pay back everything you owe unless you can’t, and this is the whole debate about debt sustainability and whether we can or cannot repay it, and this is why the restructuring of the notes are going ahead.  I think that ... is it corrupt?  I don’t think it’s corrupt I think that there’s a fear that we could go back to a point where the crisis would start to kick off again and the contagion can’t be stopped, that’s the fear, that if you start saying well okay Ireland can burn senior bondholders and then suddenly a French bank blows up and say well they’re going to burn senior bondholders and then suddenly when the banking market is kind of trying or on the verge of recovering it can’t recover at all if that happens.  I mean I think you’re talking about ... you’re looking at the whole kind of fabric of capitalism.

Participant 9:  Oh yeah but it’s sacred.

Well I think that if you assume that you can only fix the system with the system you have you do everything to protect the system and that’s why they’re not ... Sorry?

Participant 10:  What effect did the rating agencies have in the whole crisis?  Did they have any effect on the Irish system?

Oh absolutely, they would have given Anglo a AAA rating in the early noughties, I think 2003/2004 and with that Anglo went to the banks in Europe and said we’ve a AAA rating, Ireland has a AAA rating, we’re good for it, we’ll get your money back, can you give us the money to do all the lending we want to do and they played a key role and then I suppose it’s more international the issue with credit rating agencies that they didn’t ... I think the credit rating agencies did point to the fact that Ireland had a big exposure to property much like the Central Bank did although you’d need a degree in Central Bank speak to understand what they said sometimes but I think the credit rating agencies did point out some of the potential land mines in Ireland with property, internationally they didn’t, they gave AAA ratings to bundles of loans, that they’d no idea what was in those loans.

Facilitator:  Okay folks I think we’re going to finish it up there, thanks very much Simon, we appreciate that.  (clapping) (recording ends here)

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