Since then, of course, we have found out that the few billion that the banks said they would need on that fateful night in September has now turned into liabilities heading towards €100 billion.
We were told back then that there was no alternative to the bank guarantee. We now realize that there was an alternative, that the two most reckless banks could have been allowed to fail (like Lehmans) and that the holders of higher risk bonds (for which they were getting higher interest) could have been forced to take a write down. In general, a sizeable proportion of the debt owed to the lenders could have been switched into equity in the Irish banks.
What happened with our banks is one reason why a lot of Irish people have now begun to see the deal we have been given by the IMF/EU as a con job. Most of the tens of billions that the Irish banks blew away in the property bubble were billions that they had borrowed from European money markets, mainly from German, French and British banks. These banks took a risk in lending into the overheating Irish economy, and they did so with their eyes open because the returns were so high.
When it all went pear-shaped the Irish government stepped in and guaranteed all loans and liabilities. Instead of being forced to take the pain, the European banks were going to get all their money back, every last euro of it.
There was just one little problem -- the Irish state could not afford it, and the international markets would not lend us even more money to pay our debts.
If the Irish state had to default or write down debts, the banks in Germany and France that had loaned us the tens of billions would not be getting all their money back. Something had to be done. So the IMF and the EU stepped in to "save" us.
Except that the ones they were really saving were the German, French and British banks that had lent the Irish banks all the money to begin with.
The IMF/EU money has to be paid back, of course, and the Irish people have been saddled with the cost of that huge burden, though cuts in state services and higher taxes. Billions of our taxes every year will be going to pay the interest on the IMF/EU money.
And while the standard of living here plummets as a result, the European banks who lent us all the money in the first place will be paid back, in full and on time.
A lot of people here are now asking whether this is fair. Since these European banks took a risk lending to us, why are they not sharing in the cost of the collapse?
To add insult to injury, we are paying close to 6% on the IMF/EU loan facility, even though we have now learned that the IMF and the EU are paying only around 3% on the money they are loaning on to us. Why?
Because the IMF and the EU have decided that giving us cheap money would set a bad example to other over-spending countries. Or in other words, we must be taught a lesson.
Of course it is true that we cannot borrow the money on the markets so, unless we default, we have to borrow the money from the IMF/EU. But is it fair?
Should they really be penalizing us like this when they are supposed to be helping us? Should they be screwing us like this when the European banks who lent us billions to fund the property boom are being let off the hook without any penalty?
The rogue Irish bank that was most to blame in the property bubble was Anglo Irish Bank. And what almost sank Cowen in the last few days was the recent revelations that he had spent a day playing golf and dining with the head of Anglo Irish Bank in July 2008, shortly before the controversial government guarantee for the Irish banks was announced in September that year.
Cowen has insisted that banking business was not discussed that day, and that the game of golf had been arranged by a long time friend of his who is a former director of Anglo Irish Bank. But the revelation was highly damaging.
It showed again how small the circles are at the top of business and political life in Ireland. And it increased the suspicion that we have only been told half the story of what really happened when the Irish banks were rescued. The suggestion is not that the two Brians did anything corrupt, only that the two of them (both lawyers, not financial experts) were completely out of their depth.
Cowen has survived, for the time being. But there are huge unanswered questions in the air.
I mentioned at the end of last week's column that there are things we could do to transform the situation in Ireland. I said I would reveal all this week. I'm not going to spell it out for you. If you read between the lines above, you will see the solution yourself.
The sad thing is, as I said last week, this course of action is likely to be far too radical for the next government, whoever that may be.
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