The McCreevy generation

I’ve been posting here a lot recently, considering I said I won’t be updating much longer. It’s just that occasionally something occurs that just can’t be ignored. This is one of those times

There’s an article in yesterday’s Irish Times about Charlie McCreevy. It seems he was on Miriam O’Callaghan’s radio show on the weekend defending his role of finance minister until 2004, when he was booted out to Europe. On the property bubble he claimed: “There were property bubbles in a number of other countries.” It’s amazing. They’re still trying to pretend there isn’t something unique about Ireland’s economic crash, that we’re simply victims of a global downturn. This is infuriating on its own, but it’s made so much worse when we consider that, arguably, there is nobody in government who shares as much blame for Ireland’s recession as Charlie McCreevy.

When shares in Anglo Irish Bank plummeted at the end of last year – eventually leading to nationalisation of the bank – following the revelation of Seanie Fitz’s secret loans, we were all left wondering: “How the hell did nobody manage to spot this until it was far too late?” All eyes turned to Patrick Neary, head of the Financial Regulator, and he responded in the only way left open to him: retirement. Months earlier, after Anglo bosses claimed a drop in their market shares (the St Patrick’s Day Massacre) was the result of “false and misleading rumours” regarding their financial health, Neary told an Oireachtas committee:

On St Patrick’s Day we commenced an investigation. We spoke yesterday of the rumours in the market then, which reached a crescendo on that particular weekend. We felt there were unjustified stories about a leading financial institution in circulation and we were extremely concerned that well capitalised, strong, profitable financial institutions could be severely and negatively impacted by unfounded and groundless rumours emanating from unknown sources.

Of course hindsight is always 20/20, yet it’s fascinating to see the so-called independent regulator speaking like the bank’s PR firm. This is the legacy for which we have McCreevy to thank.

When the Financial Regulator was being established in 2002/2003 there was disagreement in government about how independent it should really be. Mary Harney, then Minister for Industry and Commerce, wanted a body fully independent of the Central Bank to monitor financial institutions. McCreevy figured the Central Bank was the way to go, his first instinct being to sympathise with the bankers. The outcome was a compromise that was in effect a victory for McCreevy, an independent body that drew its expertise from the Central Bank. As a result, financial regulators in this country have always understood their role to be protectors of bankers. Neary called this “principle based” regulation, which he explained in 2006 by saying: “Our regulatory approach is good for business… We will seek to implement rules to the minimal extent necessary.” Basically, the banks were running the show. Anglo made impossible profits on the property market. The others were dazzled by Anglo’s success and jumped on the bandwagon, and we all know where it went from there.

Neary was a spectacular failure as the regulator, but as Shane Ross points out in his book The Bankers, he was also “a victim of a terrible system he did not invent” The Central bank and commercial banks have always been singing from the same hymn-sheet, and the establishment of the regulator’s office was merely a continuation of that culture. This was the McCreevy generation. We have him to thank.

He points out that unemployment dropped from over 10% to 4% while he was in office, conveniently forgetting we’re now back at 12%. Of course it’s hard to blame him for this when he’s been in Europe for the last five years, yet it is impossible to believe anything would be different had he remained in Dublin. In the Miriam O’Callaghan interview McCreevy went on to claim: “Cutting taxes has proven to be a success in galvanising economies.” By way of example, here’s an excellent post on how cutting taxes has galvanised the hotel industry. According to McCeevy: “People have to get things in perspective,” as, “it’s a damn sight far better place that it was even 15 or 20 years ago.” Well, here’s a cold, hard dose of perspective for you. If the best we can hope for is that we’re not as worse off as we were 20 years ago, then McCreevy and his policies really have failed us.