Saturday, 26 July 2014

MEETING WITH CENTRAL BANK GOVERNOR PATRICK HONAHAN JULY 2014



That was a day. It started at 8.30am, picked up in Ballyhea by Rob and Fiona Fitzpatrick; it ended when we got back to Charleville more than 12 hours later and Rob, Fiona, Siobhan (my wife) and myself sat down to discuss the day. Siobhan asked the question - what was the low point, what was the high point (only two had been allowed into the meeting, Fiona and myself)?

Where to begin.

 Rob, Fiona, Peter Mathews, Nessa Childers, Stephen Donnelly, Luke Ming Flanagan, DO'F.

We headed for Dublin via Cork (short diversion to have a few staples removed from my shoulder, result of a recent shoulder operation), final destination the Central Bank on Dame Street and a meeting with the Governor himself, Patrick Honahan.

THERE ARE MORE QUESTIONS THAN ANSWERS
We had prepared for Mr Honahan a list of questions (see below) relating to the Promissory Note sovereign bonds he now holds in his vault, bonds of over €28,000,000,000 in value (the insertion of all the zeroes is deliberate - that's what €28billion looks like).

The two big questions: 1) what happens to the billions raised from the sale of the Promissory Note bonds? 2) As a sitting member, Ireland's representative, would Mr Honahan use his influence to set up a meeting for us with the Governing Council of the ECB?

It would be our second meeting with Mr Honahan (the first took place last year) but this one was different. Accompanying us would be MEPs Luke Ming Flanagan and Nessa Childers from the European Parliament, along with TDs Stephen Donnelly and Peter Mathews from our national parliament, Stephen there representing the Technical Group.

Yet another MEP, Marian Harkin, wished to join us but was unable to do so.

Most of the groundwork for the meeting had been laid by Fiona and she had also organised a pre-Central Bank meeting with Sinn Fein MEP Lynn Boylan, who reiterated her party's support for what we in the Ballyhea/Charleville campaign group are doing, along with those in the various other centres around the country (Ratoath and Dublin getting very honourable mention here for their relentlessness).

THE MEETING
Having been signed in, we were escorted to a boardroom in the upper floors of the Central Bank (fantastic view over the south city) where we were immediately joined by Patrick Honahan and another Central Bank official, David Cronin.

ATTENDEES
Fiona Fitzpatrick & Diarmuid O'Flynn (Ballyhea/Charleville Says No); Luke Ming Flanagan & Nessa Childers (MEPs); Stephen Donnelly & Peter Mathews (TDs); Patrick Honahan & David Cronin  (Central Bank of Ireland).

The meeting lasted for over an hour, got hot and heavy on more than a few occasions, everyone having their say bar Mr Cronin. Consequently there was too much in it to offer a blow-by-blow account so herewith, a summary (quotes from own shorthand record of the meeting).

Peter Mathews
From the perspective of all those of us in our group, as a Chartered Accountant and former banker himself no-one understands the whole Promissory Note debacle more than Peter Mathews and the pain he feels at what is happening in the name of his former profession is palpable. He sympathised with the position Mr Honahan found himself in on his appointment as Governor in 2010, likening him to the fabled little boy in Holland with his finger in the dyke, doing his best to stop the floodwaters from breeching.

There, however, his sympathy ended, and Peter made very clear his anger with how bank-debt of nearly €70bn has been forced on the Irish people. "The details of the Promissory Notes have never been properly understood by the commentators at home," he fumed, "So the true story of what has happened has never been told in Europe. It's a story of bank-debt losses. The Promissory Notes have been replaced by Promissory Note bonds and we're told that because we're now in better shape, we can pay these bonds." Peter's final question was telling - "Are we a society or are we an economy?"

Stephen Donnelly
His fellow TD, Wicklow's Stephen Donnelly, with the kind of straight-talking straight-to-the-point attitude to which we've become accustomed in his Dáil performances, had a number of questions for Mr Honahan. "Is it possible for the ECB to destroy these bonds and if not, who do we go to next?"
Well, we established that even if they don't have the ultimate decision the ECB does indeed have a major say in what happens to the bonds, in which case Stephen had a very practical suggestion - "Rather than sell them, can we not just hold the Promissory Note bonds until such time as they all mature, thus costing only the minimal interest rate we're paying on the loan at the moment, around €45m/annum?"

Luke Ming Flanagan
For Luke Ming, a face-to-face meeting with the ECB is an imperative. "I hope to meet the ECB and ask them to do what is morally right. We're being forced into a marriage with these people but it's like Ireland of the 70s, no divorce option. I'm not sure what kind of people we're being tied to; I want to meet them and know, are they worth dealing with? Their answers will define that. We need a meeting, we need assurances, we need to see if they understand that Ireland took this Promissory Note debt on board to save the European banking system. The ECB cheered us on and why wouldn't they, but the people made no profit from any of those banks – well, the debt isn't going to come our way either. I need to meet those people, I need to be able to go back to the 124,000 who voted for me and let them know what the ECB is like."

Nessa Childers
Nessa Childers outlined her fear not just for Ireland, on how the Promissory Note deal has been handled, but for Europe itself. "The European Parliament has no power over the ECB but we do meet them. I remember at our last meeting with Jean-Claude Trichet (former President of the ECB), when asked about progress he made a fingers-crossed gesture. The decision taken by Mario Draghi (current ECB President) to provide a backstop to the euro, when he said he would do whatever had to be done, has led us all into a fools' paradise. We've been pushing the debt out but are we now close to the limit?"

THIS PARROT IS NOT DEAD, IT IS SLEEPING
When Mr Honahan got to respond (the meeting was chaired and controlled by Fiona), what we heard was not in the least encouraging. He did confirm what was happening to the billions being raised through the Promissory Note bonds, what has already in fact happened to the full €3.06bn from the 2011 bond, plus to all the €350m raised from the partial sale of the 2012 bond - it has been destroyed, or to use Mr Honahan's own quaint description, it has been 'extinguished'.

BURNING THE BONDS, NOT THE BILLIONS
On the question of the possible destruction of the remaining bonds as opposed to the 'extinguishing' of the billions associated with them and the subsequent burdening of the next several generations of Irish people with that debt, not an inch from the Central Bank Governor.

"Everything I'm doing has been about protecting the Irish taxpayer from the consequences of the blanket bank guarantee," he said; "The Promissory Notes came from that. The Central Bank is bound by strict laws; within those laws I'm doing everything I can to protect the Irish taxpayer."

On Stephen Donnelly's suggestion that if he won't destroy the bonds, he could at least just hold them, let them die a natural death rather than sell them and then destroy the money, burden future generations with the subsequent debt - no dice. "I know this line will fail; already we're right up against the line of what is legal, the ECB speaking of monetary financing."

THE FALLOUT
None of this came as any great shock to any of us on our side of the table. Along with Finance Minister Michael Noonan, Patrick Honahan was one of the main architects of the Promissory Note 'deal'. I'm not going to use this forum to castigate the man – in the first instance, he can’t defend himself. Suffice to say, Patrick believes he’s doing a great job; I don’t.

For Patrick, there appears to be no objection to the idea of a nation – even his own nation – being forced to shoulder a debt incurred to save not the two Irish banks involved but their creditors across the globe, to save the European banking system, perhaps even to save the euro itself (suggestions which he appeared to accept). Whether or not it's right? Not relevant.

MEETING THE ECB
We moved on to the major reason we were there, to ask Mr Honahan if he'd use his influence to set up a meeting between this representative group and the ECB Governing Council.

Again, no. "I'm not inclined to do that" he said, point blank; "I feel I can achieve more for Ireland by not arranging that meeting, but I won't stand in your way."

Fiona was having none of it. "I don't believe in not asking the question and that's why we want to meet the ECB, to do just that. Look at the people in this room, the mandate they have; look at those who are not here but who are backing what we're doing; look at the result of the recent elections; it is now the will of the people of Ireland that the ECB must be challenged on these Promissory Note bonds. I'm asking if you'll do the will of the people and facilitate that meeting. You said you were Ireland's representative on that ECB board so I'm asking again, will you facilitate that meeting?"

Again, Patrick wasn't for moving. "I'm not sure I want to push for a set of meetings that won't go anywhere, I don’t want to use up whatever remaining credit I have on that. I think I've achieved quite a lot and I can achieve more. I don't want to (set up that meeting)."

Many times already the meeting had become heated – this was another flashpoint. Peter Mathews had a bit of advice for Patrick, along the lines suggested earlier by Stephen Donnelly. "If you really want to concentrate their minds, tell them you're not going to sell the bonds, that you're thinking of controlling these bonds yourself. This is like being asked to pay 'protection money'."

Luke Ming was incensed. "Do you take any notice of election results, of the will of the people? We're not getting any benefit from this capital, from those bonds – I don't care how little interest we're asked to pay, or what terms we're being offered. If you can arrange this meeting, surely this can only help your cause? Prior to the last election it could be argued there was no objection in Ireland to what was being done – after the results of those elections that is obviously no longer the case. In my constituency there are two independents (himself and Marian Harkin), in Dublin there is Nessa, in Ireland South now there's Brian Crowley, while Sinn Fein have an MEP in every constituency, all against the Promissory Note debt. That election was the most recent taking of the temperature of the Irish electorate; it should tell Europe, we're about to pop. Play your card – us!"

Eventually, reluctantly, definitely against his own better judgement, Mr Honahan agreed, but it was a grudging agreement. "They're (Europe) sick and tired of the Irish bank-debt story," he claimed, "I'm happy to write a letter to the ECB board but won't be pushing for the meeting."

THE HIGHS AND LOWS
So, getting back to the opening paragraph, the low point, the high point.

That the money raised from the bonds was being destroyed I already knew, so that came as no surprise; that Mr Honahan would also not be keen to have our new group – no matter how many people were now represented – meet the ECB, again, no surprise. For me though, the low point was the confirmation by Mr Honahan that in all of what has been done to the Irish people in this entire bank-debt imposition, the fundamental human law of right over wrong simply doesn't apply.

The high point? After the meeting, during interviews in front of the Central Bank we met Conor McGregor, the soon-to-be world champion in the fast-growing sport of mixed martial arts cage-fighting and a true son of Dublin.

Conor's motto, adopted on behalf of several other up-and-coming Irish fighters, is 'We're not here to take part, we're here to take over!'

Would that the man with whom we'd been talking for the previous hour-plus had even a scintilla of that attitude. I trust though that he is a man of his word and will put through that request. Along with this new alliance, I really want to sit in front of that ECB board and ask them to justify what they're doing to Ireland.

Those bonds must NOT be sold, those billions must NOT be 'extinguished', that debt-burden must NOT be imposed on successive Irish generations, debt-slaves to Europe for the next 40 years and beyond.

NB: The above is my own opinion, neither formed nor endorsed by anyone else who attended the meeting.

Regards,
Diarmuid O'Flynn.

5 comments:

  1. (1/2) "... that debt-burden must NOT be imposed on successive Irish generations, debt-slaves to Europe for the next 40 years and beyond."

    Dear Diarmuid, please tell me what you were doing in 2001-2008? Were you protesting THEN at the debt-burden being imposed on successive Irish generations, debt-slaves to IRISH preceding generations for the next 40 years and beyond?

    But surely, you could do the maths. How much would our children have had to pay for their houses at the rate of property price appreciation? How much of their first job's wage packet would go to the landlord rather than their own needs? What proportion of their productive activity, and their consumption would be diverted to pay for usurious rentierism across all fields of business activity?

    Where were you when we were ACTUALLY indebting our children - when all the wealth of the country was going into property (Irish land, their birthright) to general applause and according to the "will of the people" as affirmed multiple times at the polls, and as anyone could hear with their own ears in public?.

    I wonder did you sneer too, at those who didn't buy into it all, as Ming's hallowed majority used to do, to their shame. Oh horror! You're still 'renting?!'

    Then, in 2008, at the time around the making of the bank guarantee, where were you then? Did you hope the narrative of "this was a temporary 'liquidity' problem, and there was little or no 'solvency' problem..." would do the trick?

    Did you turn your face from the evidence of Irish bank shares having well more than halved at the time, reflecting the understanding that assets vs liabilities were at least half of what they had been before. And systemic insolvency issues having being discussed in numerous articles in the FT and WSJ?

    Or, did you know or hope that something like NAMA would be along soon to reinforce high house prices and all would be well?

    Where is your dignity? And that of your group? It is as if 2000-2008 never happened. It is dishonest and dishonorable to begin your timeline at the issuing of the promissory notes. At the point your own pocket (and those whose votes are up for sale) first felt a tug. Whereas the whole story is told in what went before.

    In September 2008 (It is boring going into this again, no doubt), it was decided to save not just the first 50K of normal depositors money using taxpayer resources (as is/was the normal situation)... not just the entire sum of depositors money... but anyone who had investment in the bank, including bond-holders.

    Now, this was an Irish innovation, unilaterally done. What Lenihan called, "the cheapest bail-out in the world". Point is, once this was done, how can you unroll it? You can't in any meaningful terms. What are you meant to say - 'well lads, we'll guarantee your money for the next year, but after that, well, we're saying nothing, hur hur...'. Not only that, but the rest of Europe and their own treatment of bondholders were dragged in to it, once the money started rolling in to Irish banks in its billions seeking the safety net of the Irish taxpayer that had been pledged the night of the guarantee.

    And the even more significant crux - this was a stroke, a desperate attempt to stop the entire edifice collapsing. And I am sorry, but I cannot and have not been ever convinced otherwise that the edifice of most concern was the high valuation of Irish property. Particularly, when the concept of Nama was proposed in public the very week after the guarantee by an indiscreet banker (Mike Soden in the Sindo), did it seem certain that this was a stroke... (cont'd)

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  2. (2/2) ... And what is most cringe-worthy in all of this, is that all along, Europe continues to pay for us - to ensure the country has enough money to keep going.

    All along, since even before 1973, Europe has been a substantial net beneficiary to this country. Previously, this money helped build up our infrastructure and economic capabilities. But now, it is the very life-blood.

    Yet, Irish people turn around and say, 'it's all THEIR fault, we have these problems'?! They sneer at people like Wolfgang Schauble when he stands up and quietly reminds people of some adult realities?

    It's not just a matter of 'biting the hand that feeds us'. It's a deeply embarrassing and shameful way for seeming adults to behave. Even in children, I'd personally expect a lot more. It is no way to carry on.

    As for your cohorts, let's get rid of populism, parochialism and clientism from this country.

    @Patrick Honahan, thank you for your work. You did your best in the situation you found yourself in, and I take no part in what is being represented above. I beseech you not to write that letter. Rather, let us try and retain our dignity.

    Our people need to stop casting around looking for "simple" or more accurately, simplistic answers to their discontents. Instead we need to deal with the more complex considerations that require us to think and self-reflect.

    Get beyond answers that above all else sit well with our sentiments and prejudices. Banish the peasant mentality and lack of moral courage this country is too much afflicted with...

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  3. To correct a few of your most obvious errors:

    1) Our narrative most certainly does NOT start with the blanket bank guarantee - see here
    http://thechatteringmagpie14.blogspot.ie/2013/07/meeting-with-ecb-dublin-july-16th-2013.html

    2) Europe is not paying for us, hasn't given us a cent - they've loaned us money which we are expected to repay with interest, money that has enable us to bail out their creditors in our banks: Troika element of the 'bailout' - €67.5bn, cost of Irish bank bailout - €69.7bn. Above any other country in Europe, Germany has benefited from this crisis; over $700bn repatriated to German and French banks from the 'crisis' countries, much of that directly from the 'bailout' funds to those countries; approx €100bn in savings for the German government as a result of the reduced interest rates on their sovereign bonds, many more billions likewise saved by the regional governments. Also, to understand how Germany has thrived on the crisis before, during and after, have a look at this - http://www.independent.ie/business/when-it-comes-to-austerity-germans-want-it-both-ways-30512128.html

    Finally, why are you hiding behind a pseudonym? You couldn't possibly be a troll for Fine Gael or even the ECB, could you?

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  4. Good on ye Diarmuid, Honohan is a typical example of the "tug the forelock" attitude to EU institutions; ye're a small country, you nearly f***ed the €; get back in ye're box. In the margins of some meeting of the ECB he'll be giving them text of the ECB's reply to his letter about a meeting and explaining"they are a crowd of moaners" marching up and down every Sunday in a backwater; the MEPs are just publicity seekers"

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  5. Gombeen seems to have gone from being in thrall to the holy trinity straight to being in thrall to the Troika!

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