In 2006 Ireland was riding on the back of the Celtic Tiger phenomena. The country was booming. The sky was full of cranes, unemployment was the lowest in Europe, everyone seemed to be driving a new car, and shopping trips to New York seemed normal. Fast forward to the end of 2011 and the country is in a very different place. One of the biggest banking busts globally led to the country being bailed out by the troika of IMF-ECB-EU and the effective loss of economic sovereignty. Unlike most of the rest of the global financial crisis that started to unfold in 2007, Ireland’s economic crisis was not tied to the packaging and reselling of complex financial derivatives linked to sub-prime loans in the US. Rather it was a good, old fashioned property bubble grossly inflated by access to global inter-bank lending, very poor financial regulation, tax incentives, laissez faire planning, and greed. Ireland’s banks, hungry for profit and growth, started to believe the rhetoric of developers hungry for capital to buy land and build property, and lent out massive sums of money. Risk assessment, due diligence and basic market analysis were pushed to one side. The result was huge profits, high stock price, massive lending way in-excess of deposit books, and enormous over-exposure to property. As the global financial crisis started to bite, the Irish banks and their lending came under scrutiny. Large institutional shareholders, investors and depositors started to get nervous. Share price dropped, money flowed out of the country, and investors wanted repaying. A run on the Irish banks seemed likely. The Irish government stepped in with a bank guarantee scheme, offering a national guarantee to all deposits and investments (to the tune of €440 billion). Next followed a calamitous set of decision-making that ultimately led to recapitalisation and nationalisation of the banks, the formation of NAMA, effectively a state bad bank, and the country being bankrupted. Bankrupted being the right word, since by tying the state to the Irish banks through the guarantee, the country was wedded to their dwindling fortunes.

Anglo Republic tells this tale through a forensic examination of Anglo Irish Bank. Anglo was the financial darling of the Celtic Tiger years. It grew from a small investment bank to become the third largest bank in the state. Each year it posted record profits and its share price grew accordingly. And more than any other bank its growth was tied to the property sector. Analysts were flabbergasted at its performance. Rather than questioning its business practices, they instead invested. Here was a bank that had seemingly found a magic formula. As Simon Carswell’s book reveals, however, it’s success was built on poor foundations and dodgy practices. Anglo was dependent on persistent high growth in the Irish economy to keep its house of cards upright. As soon as the economy started to slow, it started to fail. And it started using all kinds of tricks to keep the cards in place, including shifting money on and off the books when accounts were being audited and lending money to borrowers to buy shares to keep the share price up. If things were bad in the bank, things weren’t much different outside with the financial regulator, Central Bank and Department of Finance all working to keep a dying entity alive. Anglo was viewed by the Irish government as a systemic risk to the state and could not simply wound down. Its balance sheet was equivalent to 60% of Irish GDP (Lehman Brothers was 7% of US GDP), and represented a fifth of the banking sector. Globally, no bank that represented such a large proportion of a country’s banking balance sheet had failed before. All told, an entire year’s worth of tax receipts were pumped into Anglo and promptly written down, never to be seen again. When Carswell chose the subtitle, ‘Inside the Bank that Broke Ireland’, he was being literal.

Anglo Republic is a fascinating read for anyone interested in the present Irish crisis and how it unfolded from a wider banking perspective and within a single financial institution. Carswell has amassed amount of information on the company and how it operated, included access into board meetings, email between key players and dozens of interviews. He does a very good job at putting a shape to all this information, producing a compelling narrative that details what went on in and outside the bank. Crucially he manages to weave the main characters, their motivations and actions, into the story to lift the book up out of a rather dry history. Sean FitzPatrick, David Drumm, Sean Quinn, Pat Neary and Brian Lenihan all figure prominently. What is particularly interested is the ways in which FitzPatrick, Drumm and Quinn schemed to try and save themselves and their personal fortunes whilst trying to keep a sinking ship afloat. Where the book is a little thin is with respect to wider analysis and judgement. Carswell describes in great detail Anglo’s rise and fall, but does little to explain it; he shies away from commenting on the legalities and moralities of actions taken; and he fails to state how he thinks the system needs to changed to stop such a situation arising again. Overall, a book heavy on factual narrative that provides a very useful descriptive analysis of a banking and state failure. It’s also a book that should perhaps come with a health warning: ‘likely to make your blood boil’.

Rob Kitchin

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