Wednesday, February 02, 2011

A Labour - Fianna Fáil coalition?

The current media coronation of Enda Kenny may prove to be unwise, if today's Irish Independent poll is to be believed (It puts FG @ 30%, Lab 24%, FF 16%, Greens 1%, SF 13%, Independents 15%).

If Labour get mid-40s seats and FF can get to 30+, with several “FF gene-pool” independents, will Eamon Gilmore be able to resist the lure of the Taoiseach’s office through doing a deal with Micheál Martin?

I doubt that he’ll have much of a problem winning the wrestling match with his conscience “in the national interest”, of course.

The only real question would be whether FF would be willing to play second fiddle to labour. That would probably be the wrong long term strategy for a FF recovery.

I have little doubt that if the numbers could be made to stack up, Gilmore & Labour will certainly give it serious consideration.

Tuesday, February 01, 2011

Shane Ross - Payback Time?

On the morning of the 1997 general election, The Irish Independent published a front-page editorial titled “It’s Payback Time” which urged readers to vote Fianna Fáil and kick-out the incumbent Fine Gael, Labour & Democratic Left coalition government. Fianna Fáil duly got back into power, in coalition with the now defunct PDs.

It was alleged, but unsubstantiated, at the time that the stance of Independent Newspapers might have been influenced by the failure of the business interests of Sir Anthony O’Reilly to prevail in the awarding of mobile phone licenses by the 1994-97 coalition administration.

In 2000, Senator Shane Ross and his media best buddy Eamon Dunphy launched a sustained assault on the management and board of Eircom, organising a populist shareholder revolt. This was facilitated by a falling share price following the privatisation flotation a year earlier.

The end result, partially influenced by the Ross/Dunphy disruptive and sustained “bad publicity” blitz, was that Eircom’s legacy landline business was put on the auction block. (The mobile phone business had already been sold to Vodafone).

The two final bidders were Denis O’Brien’s eIsland and the Sir Anthony O’Reilly-led Valentia Consortium.

The Valentia bid, highly leveraged and with minimal capital input, was ultimately successful, in November 2001, and that outcome was facilitated by a change in tax law by FF Finance Minister Charlie McCreevy, specifically structured in order to allow the Employee Share Ownership Trust (ESOT) to vote in favour of the Valentia leveraged proposal, without having to cash in the trust’s shares and incur a significant capital gains liability.
NB: this tax change would not have been necessary if O’Brien’s bid had prevailed.

Could that tax change by Minister McCreevy have been “payback time”, a “thank you” from the FF-led coalition government to Sir Anthony for his support in winning the 1997 general election? If so, we’re unlikely to find the smoking gun.

But if one is inclined to view the 1997 support for FF as linked to the 2001 tax change to support Sir Anthony’s Valentia bid for Eircom, does Senator Shane Ross’s sustained 2000 campaign to undermine the management and board of Eircom take on a new significance?

Might it have been one of a series of orchestrated steps which resulted in significant profits for Sir Anthony when, as expected, Valentia offloaded Eircom less than 3 years later in a stock market reflotation exercise?
Will we ever know for sure?

Monday, January 31, 2011

Shane Ross - practitioner of cronyism

Shane Ross was one of Fintan O'Toole's putative "dream team" and is now running as an independent candidate in Dublin South constituency in the upcomimg general election.

In Saturday's Irish Times (29th Jan), Miriam Lord quotes from a recent Shane Ross campaign letter on cronyism, a key theme in his campaign for election to the Dáil. In fairness, Senator Ross has a long record of attacking cronyism in the boardrooms of Irish companies.

Unfortunately, this record is somewhat blemished by the Senator’s long-standing ability to turn two blind eyes to the boardroom of his own employers, Independent News & Media (IN&M).

While Senator Ross has regularly railed against the perceived corporate governance failings of other companies, he always managed to most dutifully ignore the fact that, for many years his employer, Sir Anthony O’Reilly, in contravention of corporate governance best practice, held the dual roles of Chairman and Chief Executive of IN&M, while the company’s board was bereft of truly independent directors, being largely comprised of a mix of old company retainers and family members.

In addition, IN&M sharholders have suffered losses that are proportionately as large as those suffered by AIB & BOI shareholders, but I defy your researchers to find one critical word about the performance of the company or its managemnet from the so-called "Business Editor". (I seriously doubt his ability to read a company balance sheet.)

In all IN&M/Sir Anthony matters, Senator Ross can be accused of being a practitioner of cronyism and of showing no appetite for biting the hand that feeds him. I strongly suspects that he’s not nearly as fearless as he’d have us believe.

Saturday, January 29, 2011

Fintan O'Toole chickens out. Quel surprise!

I applaud Fintan O’Toole for the candour of his revelation that a bold scheme to save the country, devised by himself, David McWilliams and other unnamed luminaries, has come unstuck because, after 3 years of national crisis, they couldn’t cope with the general election coming one month earlier than they had anticipated.

It might seem that our best hope of national salvation has been destroyed by, to quote Harold Macmillan, “events, dear boy, events”.

On reflection, if this dream team couldn’t deal with something as minor as a moving deadline, perhaps the country has been spared a major letdown and this team of, largely unnamed, luminaries has been spared significant reputational damage.

I confess that I was eagerly looking forward to David McWilliams running in my constituency when I would have the opportunity to confront him with his advocacy of the 2008 blanket bank guarantee, which has proven to be a major catastrophe for the country. Some of these putative national saviours need their feet held to the flames by the electorate.

When will media commentators learn that it’s far easier, and more comfortable, to pontificate from the sidelines than to be responsible for the results on the field?

Aired by Pat Kenny on his RTE Today programme.

Tuesday, January 25, 2011

Klaus Regling nicking my ideas!

In an interesting column in today’s Irish Times, Economics Editor Dan O’Brien reports that Klaus Regling, head of the European Financial Stability Fund (the EUs bailout fund which is lending money, along with the IMF, to Ireland) is proposing that EU governments buy back their own bonds in the secondary market where those bonds are trading at a discount to their face value.

I sent the following letter to the Irish Times on Nov. 11th 2010. Needless to say it wasn’t published. “The inane ramblings of a crank” was probably the reason.

“Irish government bonds trading at over 9% on the secondary market means that they are being sold at a significant discount to their original issue price. The government should now instruct the NPRF to buy these bonds at their current discounted levels.

There are a number of benefits to this approach: it will, in real terms, improve our National Debt:GDP ratio, it will send a signal to the markets that we have confidence in our ability to manage our way out of this crisis and, last but not least, it will remove these headline-grabbing rates, for relatively small amounts of stock, from the domestic and international media with their confidence-sapping headlines and editorials.”

Should AIB & BOI be sold to foreign banks?

I am perplexed by the regularity with which Central Bank Governor Patrick Honohan seems to publicly put our two main high street banks up for sale to any taker. A prospective buyer would be foolish to offer anything other than a firesale price, given the governor’s undisguised keenness to offload AIB & BOI.

Perhaps the Governor has failed to register the exodus of foreign-owned banks from our high streets in recent times? Halifax/Bank of Scotland has closed down, as has Postbank. National Irish Bank is withdrawing from traditional branch banking and Ulster Bank’s appetite for business has been markedly reduced in recent years as RBS, its UK parent, struggles.

Selling the two large Irish-controlled banks to large foreign institutions will probably result in them being the “runt in the litter” of a portfolio of overseas holdings. Instead of the performance of the Irish market being the first item on the agenda at every board meeting, it will be the last item – under AOB!

Future investment in the Irish market could be significantly curtailed, leaving us permanently reduced to the status of an economic backwater.

Actively managing a reduction in size of the balance sheets of AIB & BOI makes sense as it limits future risk. However, a firesale of the Irish-based banks or their assets will a short-sighted and costly solution which we will doubtless live to regret.

Tuesday, January 18, 2011

Sean Fitzpatrick's BMW - a new symbol for Ireland?

Sean Fitzpatrick’s 18-year old BMW is up for auction on eBay and the proceeds will go to the Samaritans charity. On day one of the week long auction, bids had already reached over €5k.

The car has to be scrapped and the winning bidder will get to press the button to crush it but, for some legal reason, will be unable to take away the bale of scrap metal which results.

Could it instead become a piece of modern art?

Possible locations would be as a replacement for that ball of fool’s gold which adorns the forecourt of the Central Bank or, alternatively, on the plinth outside that ship of fools known as the Dáil.

It would serve as a permanent and public reminder of the failure of legislators and regulators to fulfil their most basic function, the protection of our national interests.

David McWilliams - dangerous charmer

“Golfgate” is turning into an exercise of pinning the political blame for the blanket bank guarantee onto the Cowen/Fitzpatrick donkey. In part, this arises because there appears to be confusion as to who actually recommended the blanket guarantee to the Government in September 2008.

I’m perplexed by this apparent confusion because the origin of the plan has been hiding in plain view for over two years now, although its economist author has been uncharacteristically reticent about claiming the credit for it!

Following a midnight meeting between David McWilliams and Finance Minister Brian Lenihan on 17th September 2008, McWilliams published an article advocating the blanket bank guarantee eleven days later in the Sunday Business Post of 28th September 2008.

In that article McWilliams stated that "The only option is to guarantee 100 per cent of all depositors/creditors in the Irish banking system. This guarantee does not extend to shareholders who will have to live with the losses they have suffered. However, it applies to everyone else."

It seems logical to assume that the content of this post-meeting press article accurately reflects the advice given to Minister Lenihan on the night.

Two days after publication of that article, the Government announced it was implementing a blanket bank guarantee, along the lines proposed in the McWilliams article. As recommended by McWilliams, the only exclusion from the blanket guarantee was to be the shareholders.

It's high time the media gave David McWilliams the credit he deserves for this strategy, at a time when many of the public are clamouring for him to launch his own political movement to sort out the mess the country is in.

It would also seem prudent to bear this 2008 proposal in mind when we read the ever-growing menu of McWilliams solutions for getting the country back on track!

Footnote: Published as a letter in the Irish Times.
Timing couldn't have been better as, the following day, there were media reports that McWilliams intends to stand as an Independent in the upcoming election in my constituency.
I can't wait to meet him at the door! He'll get what for.
Charlatan and Charmer are very close bed-fellows in my dictionary; it cannot be mere coincidence, can it?