In September of 2008, Taoiseach Brian Cowen and his Minister for Finance Brian Lenihan, in a panic and misguided by their ideology issued a blanket guarantee to the Banks. By September of 2009 an agency operating under the control of the Treasury department will be installed to take bad debts from the banks at very generous prices and all at the expense of the Irish tax payer. To understand where we are now and why it is that the weakest in our society are being targeted we must go back in time, almost 30 years to be precise…
It all started with the rise to power of Prime Minister Margret Thatcher in Britain in 1979 and President Ronald Reagan in the U.S. in 1981. Both leaders and their administrations were what are known today as Neo-Liberals. Neo-liberalism is essentially applying the “free market” ideology to all aspects of life within a country, it’s like an evolved, modern version of Darwinism i.e. survival of the fittest. Today it’s more like survival of the richest.
Both administrations set about tearing down all forms of regulation and over-site in their respective countries so as to “free-up the markets”, “not to limit the imagination of investors, bankers and entrepreneurs with pointless red tape”. This ideology continued well beyond the G.H.Bush and Clinton eras. Like a disease that lies dormant for many years it came to fruition at the worst possible time during the G.W.Bush presidency. This was because there was a moron in office whose cabinet was composed of a shower of greedy bastards.
It didn’t occur to the Neo-liberals that all this “red tape” was brought in by Franklin Delano Roosevelt (FDR) in the early 1930’s after the Wall Street crash of 1929… This was because the government realised it had lost all control over the economy because of greedy bankers and stock brokers. So they decided to bring in new regulations that would give the American economy structure on which it could be rebuilt upon. The FDR presidency had also set up “the new deal” which was a series of reforms and inward investment by the American government so as to provide Americans with jobs so as to stimulate the American economy an example of one of the public works projects was the construction of the Hoover dam. By the mid 1930’s the American economy was well on its way to recovery.
Once Bush the 2nd got into power in January of 2001 in the U.S. the symptoms of a recession began to set in… to treat these symptoms the Bush administration decided to simply print more money, (not realising that this would reduce the value of the dollar) and remove the final fig leaves of red tape from the economy… While it appeared to work it only delayed the inevitable. This was the tipping point! One of the pieces of red tape to be removed was the rule that stated that there had to be a 30% capital base held within each bank so as to cover them in the event of a recession in which people would end up defaulting on their loans… It was decided by the geniuses that this money would be put to better use if it was out on loan. Eh, no there, because lending money to people who are loosing their jobs and even those who do have wage slavery jobs is a stupid, mean and unethical thing to do… But given the kind of people we’re talking about it’s to be expected.
The managers of the banks were happy to play along with the whole sub-prime mortgage thing, they didn’t understand it themselves; but as long as the bank was lending money it was fine! However some banks went too far and for every $1 they had on deposit, they had $33 out on credit in the form of loans… This happened because the bank managers gave bonuses to those mortgage bankers who handed out the most loans. Even Irish and other nation’s banks invested in this scheme. This is where the final nail in both the American and International banking systems coffins was hammered in. The less well-off people in America were offered sub-prime mortgages by the banks which they could never realistically pay off, recession or no recession. This all happened because, under the Bush administration the Securities & Exchange commission (U.S. version of the Irish Financial regulator) had its powers relaxed so that when the extent of the banking crisis became clear to them it was already too late…
It wasn’t bad enough that what appeared to be the largest economy in the world had stalled, thus leading to an international economic slow-down, but the bad sub-prime loans were now toxic and thus banks weren’t able to recoup their losses. The human side of this is where there are entire neighbourhoods of abandoned homes, the occupants long since evicted by the local sheriff. The boarded-up houses are now used by crack-heads and their dealers…Without liquidity in the banking sector, and thus no available credit for small businesses the gangrenous rot began to spread to all sectors of the American economy. People couldn’t buy consumer goods because they were in fear of loosing their jobs, they couldn’t buy a car because there were no car loans available, they couldn’t go to college because there were no student loans available, etc, etc…. Companies went bankrupt and filed for government protection from their creditors, manufacturing plants closed due to the lack of purchases a prime example of this was GM-Chrysler who were independent American carmakers but are now going concerns for the U.S. government. One U.S. economist referred to all of these problems collectively as “The Big Shit Pile”.
What happens next is the frightening part!! Because of the stupidity and greed of our own banks, lack of over-sight and responsibility by the financial regulator, bad government policy with in-action and a speculation fuelled construction bubble; Ireland was about to get hit – HARD! The year was 2008. A Dublin comedian named Jarleth O’Reagan once said, “When this is all over, people are going to question the wisdom of storing so much shit next to such a large fan”, I think this quote best sums it all up.
The second part of this blog will be coming soon…
Thanks for reading,
Colm J. Carrigg.
