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Tuesday, April 27, 2010

The cosy, crony capitalism of the Irish Republic


This week Goldman Sachs is being investigated in the US for fraud. It has been credibly alleged that as the banking crisis and recession took hold Goldman Sachs exploited it as an opportunity to make further profit for themselves at the expense of others. Reports suggest that while the economy was turning belly up Goldman Sachs developed and sold risky mortgage packages and then bet against them. A win – win for the Wall Street giant.

A series of damning internal Goldman Sachs emails have been published by the US authorities one reports the “good news” that the wipeout of one security and the imminent collapse of another meant Goldman would make $5 billion from a bet against the instruments it had set up and sold itself. Even after the US authorities moved to charge Goldman Sachs with fraud against its investors to the tune of €1 billion and the German and British authorities’ in turn commenced investigations Goldman announced a new round of bonuses for its staff amounting to £3.5 billion.

What has this got to do with us? Well, as the government consistently reminds us, in a futile effort to evade taking responsibility for the nation’s current troubles, we live in a global economy. Our banks are tied up with the international financial markets. Our banks eventually follow where their international role models lead. And Goldman Sachs analysts issue assessments of Irish banks which have consequences for their abilities to raise capital. The per-share profit estimates issued by Goldman analysts have consequences for Irish stocks. What have our government done in response to the growing evidence of fraud by this financial ogre? Have they blacklisted it from future contracts and consultancies? Have they sought to minimise the consequences for Ireland of its activities? No. The Fianna Fáil Green government sought an endorsement of its NAMA plans from Goldman Sachs and has been happy to rely on it since.

Let’s be under no illusion here Fine Gael would do no better. The Fine Gael hack Peter Sutherland pumped up on his own arrogance and bloated self-importance, who would close half of Ireland universities if he got his way and who is against a University for Waterford, is chairman of Goldman Sachs International. And Fine Gael Senator Eugene Reagan is a director of Goldman Sachs Ireland.

This world of cosy crony capitalism which both Fianna Fáil and Fine Gael inhabit is the source of our countries woes! A property-lending binge was embarked upon by the Irish banks for the most part of a decade. The Government had a very pro real-estate policy. Fine Gael was no different. For almost 15 years the growth in bank credit outstripped the nominal growth in GNP by a factor of about 2 or 3. Poor lending standards, unregulated products and bonus bonanzas brought the Irish financial sector to its knees.

Meanwhile in the real world thousands of people are still losing their jobs. Nothing is being done to help those out of work. Young people are being forced to emigrate. As we approach International Workers Day 460,000 people in this state are out of work with 26,000 in Waterford City and County. Thousands more are now facing mortgage interest hikes while simultaneously losing their jobs and having social welfare cut. A lot of small to medium size businesses are being starved of credit. We have no jobs plan. The banking bailout has failed. And yet dozens of former Ministers still in paid positions had to be dragged kicking and screaming into surrendering their pensions. Am I the only one angry?

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