Why They Should Not Be Arrested - Pt 8

This post is one of a 10-part series of posts, the rest of which can be seen here.

In this post, I shall address some issues which have been raised by comments made (on this site, Twitter and elsewhere) querying my overall thesis.

Common-Law Crimes

A "common-law crime" is one which was not voted into existence by the legislature. Many things have been recognised to be criminal for thousands of years. For example, murder, rape and theft were all recognised by the police and by the courts as crimes, even before statute law (that is, laws enacted by our elected representatives) defined and refined the details.

It has been suggested by Fintan O'Toole of The Irish Times, for one, that what caused the insolvency of our banks was the commission of common-law crimes by bankers. He refers favourably to what happened in the case of The City of Glasgow Bank, implicitly suggesting that that case showed "just how it should be done" if our justice system would only work as well as did, notoriously, that of 19th century Scotland, oh yeah !

Well, I have seen no evidence that similar behaviour occurred in our own recent disaster, but if it had, the perpetrators could be charged, not with such common-law crimes, but with crimes which have now, like murder, been defined by the legislature.

In any case, the City of Glasgow situation was in hardly any way comparable: only the shareholders lost money.

Finally, I know of no (other) common-law crime which applies to the behaviour of those who are responsible for our banks' failures.

Unjust Enrichment

There is no crime of "unjust enrichment" known to Irish Law. I am not even aware of it being a crime in other jurisdictions.

There is a tort (meaning a civil wrong) of that name. It describes the situation where, for example, you give me a €50 note thinking it to be €20. I do not notice, but may have been "unjustly enriched" by €30. You may be able to sue me for the return of the €30 - good luck with that ! - but there is no question of my being punished for what happened.

It might just be possible that some of those responsible for the banking mess might need to be nervous about this. To be clear, though, they may worry about having to return money received, not about being arrested or imprisoned.

"General Criminality"

This is the most common objection to my thesis, if hardly the most compelling.

What is said is that our "top bankers" were all obviously up to their necks in "blatant criminality", by which it is meant that they disregarded all constraints of law to indulge their greed. I have even been assured, by intelligent people educated to third level, that said bankers knew what they were doing and were determined to ruin their banks and the Irish economy so that their own wealth would be maximised.

Challenged to justify this belief, they will cite the revelations about the behaviour inside Anglo-Irish Bank during 2008, but are unable to explain why, if both Seán FitzPatrick and David Drumm are now bankrupt, wealth maximisation was going on.

I see no evidence of this alleged "widespread criminality". Greed is not a crime.

What happened during 2008 was not a cause of the crash, but a desperate attempt to avoid it.

Recklessness

Almost as common as the last, this concept is mentioned often, and appropriately so, in my opinion.

There is no general crime of recklessness, or even of gross negligence, in Irish Law. (There are road traffic offences which amount to the same thing, but prosecuting for lending "carelessly" "without due care and attention" or "dangerously" under the Road Traffic Acts are not viable options).

Now, Irish law does recognise a crime of "reckless trading" (Companies Acts, section 297A). Prosecutions of this can only take place if the accused was a director of a failed company (meaning one in examinership, or liquidation).

Because of the way in which the failure of the Irish banks has been handled (even Anglo is not a "failed company" in the above sense), technically the crime does not apply. I will discuss this further in the next part of this series of articles. For now, I will say two things about it.

First, I do not believe that the authorities had that legal position in mind when they chose to proceed as they did, but anyone of another mind is welcome to try to change mine.

Secondly, I cannot resist reminding you that I asked for a mandate from the electorate last year to make "reckless lending" a crime in itself, but there was little interest from voters and none from commentators.

Coming Soon

Part 9, in which I (attempt to) answer the question

So, they just get away with it, do they ?

Book review: "Engineering The Financial Crisis" by Friedman & Kraus

"Engineering The Financial Crisis" by Jeffrey Friedman & Wladimir Kraus, University of Pennsylvania Press. Available from Marston Book Services, 160 Milton Park, Abingdon, Oxon, OX14 4SD, England / direct.orders@marston.co.uk. Price £29.50

This is a superb book, which deserves to be read by anyone who is serious about trying to understand how the Banking Crisis happened.

It has insights to offer on more general topics as well. These relate inter alia to the (alleged) delusions of the economics profession, the futility of some common expectations of democratic policy-making, and even to the limitations of human capacity to manage the complex systems that now dominate our lives. We think we understand these systems because it is we (or people like us) who constructed them, but even the most sophisticated of us are sometimes caught out.

A long time ago, the American wit H.L.Mencken observed

for every complex problem there is an answer that is clear, simple, and wrong.

The response of commentators, wherever located, to the Banking Crisis illustrate this quite well. The standard narrative (hereinafter "TSN"), not just in Ireland, is that what happened in 2008 followed years of reckless behaviour accompanied - indeed encouraged - by inflated salaries and ridiculous "bonus" payments to bankers. When the inevitable "feco-ventilatory intersection event" occurred, these same bankers then turned around and expected to be rescued from the consequences of their folly.

As Friedman & Kraus point out

... [these views have] immediate and important consequences. The informed public's impressions of the crisis are based in part on journalists' and scholars' hasty pronouncements. These impressions have now hardened into convictions. Political movements of the right and the left are already acting upon dogmas about the crisis that have little or no basis in fact, and policy changes have been made on the basis of these dogmas.

They go on to pick apart systematically the most popular U.S. explanations for the Crisis - which overlap with the most popular in Ireland, too - test them against the facts, and, one by one, discard them as unsatisfactory. (The authors might put it more strongly than that).

For example, they show that, as indeed in Ireland, the banks that failed most disastrously were also the ones led by men whose personal shareholdings were highest. This is counter-intuitive, as well as inconsistent with TSN.

They also show, in what they appear to regard as their most controversial finding, that the banks consistently chose security over high returns. This, too, is inconsistent with TSN, which takes it as axiomatic that "moral hazard" wreaked havoc by encouraging executives to take excessive risks, since it was (supposedly) a "tails I win, heads you lose" situation.

"The Right Kind of Regulation" ?

The book authors go on to propound their own explanation, which could be briefly summarised as

it was the Basel rules wot done it.

That is their précis, not mine. (The wording is not theirs, though).

And, more fundamentally,

the crisis was caused by ignorance on all sides.

That ignorance was not necessarily attributable to incompetence or similar faults. Nor was it otherwise culpable: it was a consequence, possibly not completely avoidable, of the complexity of the systems which had to be understood, and managed. Friedman & Kraus describe it as "radical ignorance".

In doing so, they "take a pop" - one of several, mainly at him, but at the economics community generally - at Joe Stiglitz, the Nobel laureate:

Essentially, his solution to this problem is consistently to downplay the possibility of human error - that is, to deny that human beings (or at least uncorrupt human beings such as himself) are fallible. ...

Simply turning over all power to a Nobel laureate economist such as Stiglitz is no answer. There are many Nobel laureate economists, and they quite frequently disagree with one another. Which one of them should be the economist-king who will ensure that regulators do not make even worse mistakes next time ?

...If economists are our most important advisers, but their world-views have no place for genuine human error, we are in deep trouble

While the book is about only the U.S. dimension of the crisis - the authors say that all the data available there is not available for Europe or elsewhere - I believe that the basic analysis is accurate for Ireland as well.

What we have (or had) in common was an unquestioning belief that property values could never fall significantly. While I was previously aware of this fateful delusion, this book has brought home to me more than before the extent to which the Basel rules not only sanctified it, but incentivised banks to become more property-focussed.

In view of where we are now, the fact that the same conventions, in effect, also encouraged banks to over-lend to badly-run sovereign states is noteworthy as well.

Remembering that our own Nyberg report laid so much emphasis on the role of "group-think", the book’s observations on what it describes as "homogenisation" as a necessary effect of regulation are thought-provoking.

Another insight which merits attention, and helps to explain why "the bail-out keeps clocking up the billions", is the inappropriateness of the term "cushion" to describe minimum capital standards for banks. As the authors say, "hard-floor" would be a more accurate short-hand: as soon as a bank hits that level, those in control are in imminent peril of losing that control. They are naturally, and this is the intention, impelled to either raise fresh capital or to shrink loan-books.

That looks fine in theory, and may be considered to work well for a crisis confined to a single bank. As we have found, it does not work well in circumstances when there is a system-wide, and international, problem. In that situation, it is illusory to suggest that borrowers can repay quickly (or perhaps at all), and this will be so well-known that the normal suppliers of capital will not re-capitalise lenders.

In another finding which TSN ignores, Friedman & Kraus point out that

even the commercial banks that actually became insolvent had significantly higher regulatory capital levels than required by law

It is difficult to quarrel with their observation on that, viz.

This suggests that the chief cause of their insolvency was not (as a rule) deliberate risk taking but ... risk taking in which the bankers were ignorant of the true level of risk

I do not agree with every judgement of the authors. For example, contrary to their view, not every economist - and none of those who taught and still teach me - believes that any economist has precisely modelled reality. Also, while generally correct as to it having a major direct role in causation, their implicit view that remuneration models were of no relevance at all is one that I am not yet prepared to accept. As Steve Randy Waldman remarked recently on Twitter:

to the frustration of social scientists everywhere, a thing can be an important factor yet neither a necessary or sufficient cause...

Nevertheless I am grateful to them for their scholarship, and for their clear presentation of it, to which I cannot do adequate justice in a short review.

I heartily commend this book.

David Drumm's Interview with Niall O'Dowd

On the wonderful website The Irish Economy, I made a number of contributions in the Comments section following a post on the above subject. A commenter called Bklyn_rntr responded to me (and to others) on November 28th last and again early on the following day. As the comments to the post in question had already gone on for too long, I promised to respond here and I belatedly do so now.

I shall address his points in the order in which they were made.

...Anglo had only one reasonably effective system for managing risk and that was to insist that loans granted MUST be deposited with the bank. Indeed, a minimum deposit was required or the loan would become callable. In 2008, apparently, when Lenihan was presented with a series of choices surrounding the guarantee, he chose to guarantee everything AND to allow deposits to be withdrawn, including those subject to the minimum deposit requirement.

I don't believe that when considering, and deciding upon, the Guarantee, the then Minister or anyone involved would - even if they knew about them, which I also doubt - have had the position of such security deposits in mind. If the suggestion is that Anglo management later released such security without repayment of the loans, then I will await sight of the evidence that this happened before commenting.

...if you want to demonstrate your superior legal skills by offering a definition of treason, feel free. I don’t pretend to have training here. However a dictionary says it is acting to weaken or harm your state or sovereign or offering help or succor to your country’s enemies. Well, IMHO, foisting what were clearly private sector losses onto the sovereign in order to protect the banks of Germany and France, was an act that weakened Ireland.

Compliment acknowledged, but I don't think that it requires legal training to appreciate the fact that to speak of treason is out of place here. Indeed, working out what constitutes the offence in the modern world caused grave difficulty as far back as 1916, when Roger Casement ended up being "hanged by a comma".

If a country is at war with another, someone who aids the enemy might be reasonably described as a traitor. At a stretch, one might also so refer to someone who works to replace, by force, our democratic constitutional arrangements with rule by one man, or by a small group, accountable to no electorate.

In both cases, the intention of the traitor to actually bring about the bad results would have to be an essential ingredient of the offence. One is not validly called a murderer automatically just because one is the cause of someone's death. It can be an accident.

I might agree with the opinion that the actions of many people - from all walks of life, not merely politicians and bankers - have, with the benefit of hindsight, damaged our state. Unless it can be shown that they did so with that intention, it is not just inaccurate but ludicrous to speak of what they did as criminal in any sense, never mind treason. And we are not at war.

Of course, I realise that many serious people, not excluding better lawyers than I, will speak in those terms in informal social encounters, but they will not do so in a serious context such as the present one.

If anyone really believes that people like Seán FitzPatrick, David Drumm or Brian Cowen took the disastrous decisions that they did with the intention that they would damage Ireland and/or aid the country's enemies, then it is long past time for evidence of such intentions to be produced. I have seen nothing which has even tended to constitute such evidence, and those who keep muttering about it are, it seems to me, living in a fantasy.

...it is shocking to think that concealed management loans, back handers, irresponsible lending practices, nefarious share support schemes were, and I suppose are still, legal...

None of those things have ever been or are "legal". (It might be useful to know, though, whether we share the same understanding of the terms "irresponsible" and "back-handers"). I don't understand Sarah Carey to suggest that she disagrees. What I understand her to be saying is that, because so many of the crimes alleged happened with the apparent connivance of the authorities, the miscreants can't and won't be prosecuted.

The world still spins on its axis in the same way, and accordingly I disagree with Sarah, but she has a valid point. Just ask yourself if a jury would convict Willie McAteer if they believe - I am not sure that I do - that he was actively encouraged ("Fair play to you,Willie") by the Financial Regulator to "window-dress" Anglo's balance sheet. And would a jury convict Kevin Cardiff of conspiracy if he persuaded the jury members that he sincerely believed that the interests of the State required him to do what he did ?

And that those who ran the country into the ground (public and private sector) are ... given an opportunity to state their side of the story to an obviously sympathetic journalist is shocking to me.

Sigh.

How are we to judge whether these people are really responsible if we object to hearing their side of the story ? Even if some issues of their responsibility may be clear by now, there is still a lot that they can explain. I would like to hear them do so.

In this case, a provocative interview with one of the most spineless, grasping thieves, and I will say it again, a traitor to boot is really too much to bear

Contact me if you have the evidence for those accusations, and I will help you to bring a prosecution yourself, if it can be done. I will not be holding my breath while I wait.

And "what about" sentences won’t do to justify why NOBODY, including this traitor, has been called to account

There haven't been any "what about" arguments made against your position, as far as I can see.

(By the way, I also participated starting here in the discussion about the same interview on the rather good Namawinelake website).

Why They Should Not Be Arrested - Pt 7

This post is nearly the last of a 10-part series of posts, the rest of which can be seen here.

Given the title of this series of posts, it is long past time for me to state a premise of my position - one that may surprise some readers:

• I believe that we should forget about "arresting people" altogether.

• Even if there are good reasons for believing that someone is guilty of crimes, to arrest him (no female suspects have been mentioned to me) is the wrong thing to do

• The correct thing is to charge him with the crimes, give him a fair trial and, if found guilty, sentence him

• All of that can be done without an arrest, unless the sentence includes a term of imprisonment

Outside the context of police catching people in the act of crime, arrest is an abuse of state power.

"It's a free country", people sometimes say. One of the characteristics of that freedom is that people can only be deprived of their liberty after what the Americans call "due process" has been followed. (It is an American phrase, perhaps, but not a peculiarly, or even originally, American idea - it's in clause 29 of Magna Carta all the way back in 1215, for example).

Forget about what you see and hear on television, and what you hear from your friends. Why are police forces so keen on arresting people and holding them for as long as possible without charge ? After all, the right to silence means that prisoners have no obligation to tell their captors anything, and are best advised to tell them nothing. (It amazes me that well-educated people - even, more shockingly, lawyers - complain about prisoners who "select a point on the wall and stare fixedly at it, for days on end, refusing to say anything".)

Why should he do anything else ? The prisoner is warned that anything said by him may be recorded and "used in evidence against him". Note that he is not promised that things he may say can be used for his defence. Note also that his interrogators may lie to him without penalty, while if he lies to them, or even makes an honest error, it may "hang him".

I am afraid that the reason why police like to arrest suspects and hold them as long as possible before charging them is so that the prisoners can be intimidated and the hope is that the process will result in a confession.

"But", you object, "if police cannot arrest and interrogate people, how can culprits ever be discovered and punished ?"

This is a common view, and a fairly natural one, but it overlooks some rather obvious points:

1. It is based on the presumption that confessions are both quite common and perfectly acceptable. I do not suggest that a confession is never satisfactory, but a system which excessively relies on confessions is asking for trouble.It gives incentives to police to mis-behave (see below for examples of where that happened).

2. It is much safer to use testimony from people other than the accused

3. There is no need to arrest someone, whether s/he be a suspect or not, in order to interview them. Indeed, the police ordinarily have no legal power to arrest people simply to question them.

4. Interviews, whether of someone expected ultimately to be charged or not, may take place anywhere, not just in police stations.

Have we forgotten so quickly about The Birmingham 6, The Guildford 4 or even the Dean Lyons case ? If so, I recommend that you just read John Grisham's "The Confession" - it may be fiction but people who know about these things will tell you that it is very true to life.

Why They Should Not Be Arrested - Pt.6

In part 5, I discussed criminal liability and promised to mention the other types of legal liability. That I now do.

To repeat: only if a crime is involved does the possibility of arrest or imprisonment arise.

Other important differences between criminal and civil law remedies are:

• Jury trial: Except for minor crimes,trial is by jury. The only non-criminal cases triable by jury relate to defamation
• Standard of proof: To be guilty of a crime, the evidence must be found to show guilt beyond reasonable doubt (sometimes abbreviated to BRD). In non-criminal cases, the standard is much less demanding: the balance of probabilities, which means that something has to be shown to be more than 50% likely to be true. Yes, 50.1% is enough.
• No police:The police will not be involved in a civil case, except as individuals, or as members of an organisation like any other
• Not about "guilt":Civil trials do not deal in guilt, they deal with liability (to pay, usually) or to resolve conflicts over e.g. planning issues.

In the context of Ireland's banking crisis, some form of (civil) legal liability may arise for consideration under the following headings :

• Negligence - or, in plainer language, carelessness. It may be that some bankers failed in duties of care to their employers, to customers or to outsiders. Other than New Beginning, who indeed have had little enough success (as they warned was probable), there is little or no sign of people making such claims in the courts, even as defences when banks sue them
• Restitution/unjust enrichment - if I give you €50 and we both, for some reason, mistakenly think that I have only given you back the tenner I borrowed yesterday, the law says that you have been unjustly enriched. (That does not necessarily mean that the law will oblige you to give me €40 in restitution: if you discover the extra money without realising how you got it and buy drinks for all around, for example.) However, if I sell you a house whose real value is €100,000 for €200,000, the law does not recognise it as unjust enrichment
• Contract - for instance, if in return for their bonuses some bankers promised specific things which they have not delivered. I am unaware if this is a possibility - it seems unlikely that such issues could remain hidden for long. And, yes, this indicates more incompetence, in that clearly at least some bonuses were paid to those who steered the institutions "onto the rocks"
• Deceit/fraud - yes, this can be a civil matter as well. I await examples.

The End

We are now approaching the end of this series of posts.

The final substantive part (no.9) will answer the question

So, they just get away with it, do they ?

and the absolute last part will be a summary of the series.

Before we get to those last two, there will be a short digression on the subject of "arrest", and part 8 will address some issues that have been raised by readers.

Still Not in Favour of Gaol, But...

I here digress (again) from my apparently interminable series on Why They Should Not be Arrested - it hasn't gone away, you know (it's here) - to take a slightly different line on a related issue

Kieran McGowan is a 67-year old executive with an impressive record of success. I don't know him, but I would say that he is very well regarded in Ireland's business/professional community. His position as Chairman of the board at Ireland's most successful indigenous company, the multi-national building materials group CRH testifies more reliably to that than anything I can add. While I cannot forbear to express my opinions on his recently published views, nothing that follows below is intended to impugn the reputation that he has earned.

In Friday's "Irish Times", an interview (by Simon Carswell - yes, that Simon Carswell ) with Mr McGowan was published. The interview covered in part his time as a director of Ireland's largest home-mortgage provider, Irish Life & Permanent group ("ILP").

The group, product of a merger of two lending institutions (TSB and Irish Permanent) with a life & pensions group (Irish Life), is now effectively nationalised (though I seem to recall that there are legal issues with finalising that process). As may be gathered, I have not been paying it much attention, for reasons too detailed to recount just now. Suffice it to say that I have not regarded PTSB (ILP's banking arm) as the worst horror story of the banking sector.

The interview was significant in that, brief though it was, it is only the third public account that I have seen from one of those people who were "on deck when the iceberg hit" in 2008. (The first was Jim O'Leary's(PDF), of which, having just now re-read it, I have to say that it deserves a lot more respect and attention from all of us. The second was "The FitzPatrick Tapes".).

I wish to highlight three points from Mr McGowan's interview

1. They Couldn't Say No

   The introduction of 100% LTV home mortgages to the Irish market by Ulster Bank (part of the RBS group) was apparently greeted with horror by all at PTSB. However horrified, though, they were too fond of market share not to "join the fun". I am reminded of what I have described here as "the crux" of the Anglo story, but also of Chuck Prince's notorious dictum "as long as the music is playing, you’ve got to get up and dance".

   Consideration of this almost makes me want to change my tune on jailing the bankers.

   Imagine a trading company board member confessing after its collapse that he had presided over a policy of losing money in order to keep market share. Did these people never hear of "Turnover is vanity, profit is sanity" ? Is it what the Companies Act 1990 calls being "responsible" ?

2. Mr McGowan agrees that the PTSB decision to put market-share before prudent lending was not a good thing.(Wow !). Indeed, he confirms - I, at least, never doubted it - that the upper echelons of the bank were very perturbed about it.

   What is amazing is that he apparently still thinks that complaining to the Financial Regulator and/or to the Government was somehow an adequate discharge of their duties.

   This view, which was by no means unique either to Mr McGowan or to PTSB, clearly points up the phenomenon of infantilism by regulation. In other words, many otherwise adult bank directors thought - I hope that they no longer do - that it was someone else's job to stop them from destroying their own institutions by imprudent lending.

3. Again echoing other bank directors and executives, Mr McGowan (per Simon C.), said the bank could not attract deposits at the same rate that it was growing its loans and that this meant borrowing heavily in the international bond markets.

   "I never thought, to be honest, that wholesale lending would just come to an abrupt stop like that. In all fairness, I don't think too many people did because it was the way the world was,"

   Let me make two observations about that.

   First, I would like to know about the decision-making which led to PTSB becoming, like Northern Rock, over-dependent on the wholesale markets. Was it again an obsession with preserving its market-share ?

   Secondly, one can certainly be somewhat indulgent of a non-banker like Mr McGowan in this regard, but I find it very difficult to excuse the banking industry generally for complacency about the risks of a credit-crunch even before Northern Rock. I wonder what an examination of PTSB's activity after Northern Rock's demise in August 2007 would tell us about the ability of its guiding lights' to see clearly.

Nothing that Mr McGowan or anyone else has said seems to me to come very close to suggesting that bank directors committed criminal offences while "steering their ships over the waterfall". However, discussion - which will resume before long in my above-referenced series - of their culpability or otherwise need not be limited to the question of criminal sanctions.

More on the Troika and Bonds

My last post was found unconvincing, even - shockingly ! - by some lawyers . So, I need to elaborate further on my case.

Before I start, I should again attempt to make it clear what I am, and am not, saying.

I am not arguing that there is a term in the Troika documents which explicitly (or even implicitly) provides that any particular debt of any bank must be paid in full. To the contrary, there are a number of references to the option of not doing so.

What I am contending is that, under the Troika agreements, the decision on whether to pay is not for the Irish Government alone, and that the consent of the Troika fairly clearly was not forthcoming for anything less than a full payment of Anglo's "billion-dollar bond" last week.This news story from last June would appear to bear that out. Note in particular the last paragraph

On the issue of plans affecting senior bondholders at Anglo Irish Bank, Mr Van Rompuy said he 'took note of it' but this could happen only with consultation and negotiation

See also this story, also from June 2011, featuring a rather significant comment

The European Central Bank has opposed any moves to force losses onto senior bank bondholders and Ireland won’t act unilaterally, Deputy Prime Minister Eamon Gilmore said today.

In that sense - and that one only, I think - the payment is required by the "bail-out". Without the "bail-out", the Irish Government would have had a freer hand, although the fear of causing difficulties for the continuation of ECB liquidity support for the banking system would have been a significant constraint on that freedom.

I propose to elaborate further by way of some "big picture" points, followed by some detailed citation of the publicly available documentation.

Big Picture

1. If the "bail-out" deal does not give the Troika a veto over significant financial/economic decisions, just why were we all so upset at having to accept it ?
2. Specifically, why did the late Brian Lenihan express his disappointment with the deal vis-a-vis "burning the bondholders" ?
3. Although it is not a view universally shared, the deal explicitly names the banking crisis as the root problem of the economy. That being so, is it plausible that the Troika would not require a say in the detail of its resolution, and for this "say" to be written-in ?
4. The Troika is composed of the IMF, the ECB and the EFSF. While it is of course conceivable that the Troika could split, there is no sign that it has done, and there is reason (see my earlier post link) to believe that there is less disagreement on this issue than assumed by many
5. The ECB's view on the issue of "burning bondholders" hardly needs further discussion: to put it mildly, it is agin it. Is it conceivable that it would not write-in a veto (or something resembling it) ?
6. It has been suggested that the issue of bonds was, at best, peripheral to the "bail-out" negotiations. Au contraire, it was, I believe, the "elephant in the room", though perhaps not the only one. How else to explain Brian Lenihan's comment ?
7. Above all, the main obstacle to believing that the "bail-out" and the bond payment are unrelated is the lack of any credible alternative explanation for the failure to impose a "hair-cut" on the bondholders.

Deal Provisions

The version of the "bail-out agreement" from which I will be quoting is this one (PDF) from the Department of Finance website.

Please note these provisions

• The Irish authorities ... will stay in close contact and consult with...the ECB... on the adoption of these measures and in advance of revisions (page 4, paragraph 10)
• To this end, by end-January 2011, we will submit to the European Commission a revised proposal developed in collaboration with IMF, to resolve Anglo and INBS (page 11 paragraph 10)
• The quarterly disbursement of financial assistance from the European Financial Stabilisation Mechanism (EFSM) will be subject to quarterly reviews of conditionality for the duration of the programme.(page 22, second paragraph)
• In the context of the above strategy, a specific plan for the resolution of Anglo Irish Bank and Irish Nationwide Building Society will be established and submitted to the European Commission ... This plan will seek to minimise capital losses arising from the working out of these non-viable credit institutions.(Page 25)

I think that the cumulative effect of these provisions is clear enough. Yes, I agree that the language is not very strong, or particularly "tight", but it is the same tone throughout the documents, on all areas of policy. The Troika can speak quietly because it carries a big stick.

Footnote

An interesting consequence of the repayment of this unguaranteed bond issue is to undermine the importance of the infamous "Bank Guarantee" of September 2008 in the evolution of the Irish bank crisis. One is prompted by recent events to doubt whether the ECB would have permitted bank defaults, even without the Guarantee.

A Gimlet Eye on the Troika Agreements

(Don't shoot this messenger again, please ! I am describing, not defending, the "bail-out deal")

This post is written in response to the continued suggestions from members of the Irish media, political class and economists (e.g. Namawinelake, Professor Brian Lucey, Stephen Donnelly T.D.) that the redemption at par of the senior bonds - neither secured nor guaranteed, be it noted - issued by Anglo-Irish Bank was not required by the terms of the so-called "IMF bail-out".

Before showing (as I hope)that this view is grievously mistaken, I must observe that I find the prevalence of this view, and the vehemence with which it is held, rather surprising. It seemed to me - even before I read the documents - that nothing could explain the Government's persistence with the payment, other than external compulsion. It also was my impression that submission to the bail-out terms was widely accepted, and indeed lamented, in the same quarters, as removing our freedom of decision in such matters.

The Agreement

Ireland's agreement with the Troika - commonly mis-described as "our IMF bail-out" - gives the latter, of which the ECB is one member, a veto over any plans to "burn bondholders".

See paragraph 10 et seq. of the first attachment to this letter (it's on page 5 of the PDF) sent by Lenihan & Honohan on December 3,2010. It is a crucial part of the "bail-out deal" architecture. By it, Ireland has committed to agreeing its plans in the relevant respects, including "burden-sharing" with bank creditors, with the Troika.

The word "veto" is not used. It does not have to be. Failure to approve has the same effect.

Now, there are those who are suggesting that our government has not tried, and that if they only tried hard enough, the ECB would "cave-in" and agree to "burden-sharing" a.k.a "burning the bond-holders".

I have no personal knowledge of whether such suggestions have any basis in reality, but I have noticed that Messrs Kenny, Gilmore and Noonan have claimed to have discussed the question with M. Trichet. I have also noticed a lot of abuse directed at Trichet because of his alleged obdurate refusal to countenance any suggestions that the ECB should relax its opposition to bond "haircuts".

I also note that, contrary to views expressed in many quarters, the IMF is none too keen, either. See p.23 of this PDF at paragraph 34, third bullet point (and especially the last sentence).

It does not look to me as if the necessary approval is available from the Troika just now, whatever the future may bring. What leverage do we have to persuade them to a change of mind ? As long as our borrowing requirement is circa €15 billion, not a lot, in my view.

But what do I know ?

Update on Monday, November 7, 2011 at 06:11PM by Fergus O'Rourke

I repeat that I am not defending the "bail-out" terms. I share the views of Martin Wolf.(Gavyn Davies says the same thing in a different way).

Update on Sunday, November 13, 2011 at 12:04PM by Fergus O'Rourke

I have elaborated further later post here

Carswell in 60 seconds

Simon will probably be able to digest this in a minute "flat", but no-one else should be upset if it takes them longer than that ! The title originally referred to how long my first draft took to sketch, but to finish it consumed much longer than 60 seconds.

Here is my reaction - it's not really a review - to Simon Carswell's Anglo Republic.

• The crux: Anglo directors were agreed in 2004 that the exposure to development property needed to be reduced sharply, but because the bank lending staff were "deal junkies", they ...just...couldn't
• Another explanation: Chairman Gerry Murphy said in 1995 that the aim was 30% p.a. growth. New C.E.O. David Drumm repeated this target in 2004! Large property deals were the most, um, effective route to this goal...and took the bank over the precipice
• Something that might surprise you #1: Seán FitzPatrick did not like 100% (LTV ratio) loans
• Quotation from FitzPatrick: "We never employed people to tell us why we shouldn't lend" - a bit of an exaggeration, but only a bit
• More crimes were committed during the final slide over the precipice than have previously been revealed
• As the growth "snow-balled", anything, including prudential procedures, that slowed loan approvals was characterised as "inefficient" and was dismantled, wholly or partially. Not a thought seems to have been given to macro issues of sensible lending - all "turnover vanity", little "profit sanity", so to speak. In time, no-one was left who was likely to shout "stop !" or even to hesitate to lend more
• Something that might surprise you #2: Anglo's expense ratio was only one-third of the industry average
• It is tempting to see Seán Quinn as the "real villain", but Anglo was "going down" even without his astonishing shenanigans
• Anglo - other Irish banks too - was full of people with business degrees who had trained as accountants (as opposed to bankers or economists) and who saw banking as "just selling money"
• In early 1990s, 90% of Anglo lending staff were ex-AIB
• Something that might surprise you #3: there was really no "special relationship" with Brian Cowen, or even with Fianna Fáil in general
• At least after the departure in 2005 of Tiarnan O'Mahoney, the funding discipline, such as it had been, disappeared
• The biggest omission from the book: there is no detail on how the loans to Mr FitzPatrick were actually approved e.g. who did the due diligence (if any) ?
• I was surprised at the description of personal guarantees as an "Anglo trademark". During my banking days, which ended in the mid-1980s, they were more associated with my employer, Industrial Credit Company (as it then was named). There was constant pressure on us to abandon the requirement, not just in individual cases but in principle, and by 1985 seeking them was much less prevalent as a practice. How did Anglo get away with it so easily ?
• Something that might surprise you #4: The Financial Regulator was not completely useless: at several points, he obliged Anglo to modify its behaviour

The reasons for Anglo's specific route to disaster viz.

1. the lenders' addiction to deals
2. the ludicrous growth ambitions
3. the weakness of the funding function
4. and (my own gloss) the overall shallowness of the corporate culture

prompt the (for me) obvious question to those directing the other banks, and especially AIB Group

What's your excuse ?

Why They Should Not Be Arrested - Pt. 5

In this post, I will discuss the meaning of criminal guilt, why it is often difficult to find, and why it is not the same as responsibility/ culpability/ fault/blame.

The context, in case you've forgotten, is my current view that crimes did not cause the collapse of the Irish banks, notwithstanding the fact that Seán FitzPatrick and a number of others have - at least - a case to answer in respect of criminal charges. (The crimes in question were not a factor in the bank's collapse). However, it is beyond argument that Mr FitzPatrick is to blame, even if not solely, for the collapse of his bank. There is a handful of others, in that bank and in others, of whom exactly the same can be said.

On the other hand, a much larger number - dozens, perhaps even hundreds, of individuals can be said to have performed their duties with such incompetence that they also share the blame, and have to take responsibility. The nature of that responsibility is almost certainly not criminal in nature, and in some cases may not even have any legal significance at all.

What is a crime ?

In a democracy, "crime" (often, the expression "criminal offence" is used) describes conduct which the population, through its elected legislature, has decided shall merit punishment by the State, such punishment often including deprivation of liberty i.e. imprisonment. (There is no longer a significant number of "common-law crimes", but I will deal with that topic, which Fintan O'Toole raised in this article, in a later post.)

In general, legislators have criminalised actions which are agreed to be "morally wrong", which have serious adverse consequences on a society-wide basis, which were intentional and for which there was no reasonable excuse.

Not all behaviour which we regard as "morally wrong" has been deemed criminal. For example, simple failure to pay a debt is not a crime. Nor is greed or adultery.

Conversely, some crimes are not "morally wrong" in an immediately obvious way e.g. marginally exceeding the speed limit. In the case of yet others, a lot of people will deny that the conduct is wrong at all e.g. smoking cannabis.

Usually, to be a crime, there must be both an instance of prohibited conduct - an actus reus (guilty act) - and a guilty mind (mens rea). In other words, an unintended act will not count as a crime. As is well-known, ignorance of the law does not mean that the perpetrator has no mens rea.If you buy something from a thief, it is only a crime if you know that the thing purchased was stolen. You have still committed a crime even if you incorrectly think that, because you did not steal it yourself,it having been stolen does not matter.

Guilt Can be Complicated

Take the case of a fatal road traffic accident. Two vehicles collide, and one driver is pronounced dead at the scene, while the other is uninjured. Is it always the case that the survivor is guilty of the crime of dangerous driving causing death (maximum sentence 10 years) ? No. Is it always the case that the survivor is guilty of criminally careless driving (maximum sentence 2 years) ? No. Is it always the case that the survivor is guilty of any crime at all ? No.

For readers having difficulty in accepting these negative answers: please consider these possibilities:

• the dead driver was drunk
• the dead driver had a heart attack
• the dead man's vehicle was defective
• the surviving driver's vehicle had been sabotaged

And what if the surviving driver lets slip that he did notice something not quite right about his vehicle ? Does that mean he had mens rea?

For completeness, I should add that some crimes are crimes of strict liability. In such cases, a crime is committed even though the criminal was unaware of doing anything wrong at all. An example is possession of an unlicensed firearm: it does not matter that you did not know it was under your bed, or thought that it was a harmless replica.

I am aware of no "strict liability" crimes which could be said to have been committed in the genesis of the Irish banking collapse. It might be useful for the legislature to create some, though.

In Part 6, I will briefly look at the other forms of legal "blame".

Why They Should Not Be Arrested - Pt.4

"We all know who are responsible for the ruination of our country. If I was compiling the report I would name the bankers, the regulators, and the government ministers responsible. I would then recommend that their pensions and lump sums be withdrawn, have them arrested and have them tried for treason."

This tirade, from a letter in The Irish Times last year, echoing many before, and re-echoed often since, fairly well encapsulates the themes which this series of posts seeks to address.

I list my problems with it a little further down, but I should digress first to stress that I too am an outraged citizen of Ireland, that is to say, a victim of The Madness that gripped this country (and others) until the blow-out of 2008. I do resist resort to the "lynch-mob"; that does not mean that I want no assignment of blame at all. Regrettably, many seem to think that "real justice" went out with the Star Chamber, and the lynch-mob, and that there has been no replacement.

The problems with the tirade are :

1. "We all know who" - Actually I am not at all sure that we do. The names usually "trotted-out" are essentially scapegoats rather than evil miscreants
2. "responsible" - this is a key word, to be discussed in detail as we proceed
3. "withdraw pensions" - in other words, punish by confiscation and probable impoverishment. Without trial or other due process ?
4. "have them arrested" - code for John Gormley's beloved but disgraceful "perp-walk", or as we lawyers call it, "public humiliation, usually at the suspect's workplace, followed by detention without trial, all in the hope of intimidating a suspect into confession, false or otherwise"
5. "tried for treason" - what ? Nothing else ? What's "treason" anyway ? (Note also that "charge" carries with it a necessary implication of possible acquittal)

Like everyone else I know, when a major calamity hits, I look for a culprit behind it. There isn't always one (accidents happen;trust me), but it's natural to check.

When it is possible to identify someone whom we think that we can blame, nowadays we do not simply hang him immediately from the nearest tree. This, I suggest, is not merely because we have now forsaken capital punishment, nor that too many innocent people were victims of that in the past.

Among the real reasons, in my opinion, are:

• our innate fairness
• the need of everyone to feel that guilty verdicts are the end of a rational process of achieving some understanding what really happened
• our appreciation of the fact that "guilt" is not a straightforward matter

The last point is what I had planned to address in this post, but considerations of space require me to defer it to the next, which will now follow more quickly than this one followed Part 3.

Boston vs. Berlin: "Blame-Game" Episode

Mary Harney, for good or ill one of the most influential figures in Ireland's political life over the last 30 years, said in a 2001 speech which is still debated

As Irish people our relationships with the United States and the European Union are complex. Geographically we are closer to Berlin than Boston. Spiritually we are probably a lot closer to Boston than Berlin.

Now, I offer you more grist to that particular mill.

"It's The Economy, Dummkopf"

In the latest entertaining (but, um, scatological) article by Michael Lewis for Vanity Fair entitled as above, our old friend gives us much interesting detail on cultural differences. Read the whole thing; there is more in it than I can possibly précis for you. However, partly but not entirely because of my current series of posts on a related theme, I found this observation especially interesting:

The American bond traders may have sunk their firms by turning a blind eye to the risks in the subprime-bond market, but they made a fortune for themselves in the bargain and have for the most part never been called to account. They were paid to put their firms in jeopardy, and so it is hard to know whether they did it intentionally or not. The German bond traders, on the other hand, had been paid roughly $100,000 a year, with, at most, another $50,000 bonus. In general, German bankers were paid peanuts to run the risk that sank their banks—which suggests they really didn’t know what they were doing.

Reference to $150k p.a. as "peanuts" may be offensive to some, but in this context, is not hyperbolic: some American traders were paid millions, to sell what turned out to be "toxic" products, and for which in Lewis' telling, the less well-paid German fund-managers were actually the "ultimate patsies". He goes on:

But—and here is the strange thing—unlike their American counterparts, they are being treated by the German public as crooks. The former C.E.O. of IKB, Stefan Ortseifen*, received a 10-month suspended sentence and has been asked by the bank to return his salary: eight hundred and five thousand euros.

The emphasis is the author's, who thereby reminds us of American financial entrepreneurs who have made more than $805 million from similar activities.

Ironic or .. ?

In summary, in "Boston" people made millions by selling toxic stuff to relatively underpaid, naive, people in "Berlin". The latter, arguably victims of a kind, are the ones threatened with jail. In Ireland, my impression is that those doing most of the similar threatening tend to be those on the "Boston" side of the debate.

*Mr Ortseifen was charged and convicted, not of "losing billions" (though his firm, Lewis says, did lose more than $15bn under his leadership), but for allegedly making a false statement to the market. The conviction looks rather unsafe to me (for whatever that is worth), and I understand that it is under appeal.

Why They Should Not Be Arrested - Pt 3

Before considering the crimes that might possibly have had a causative role in the collapse of the Irish banks, we need to briefly look at the details of that collapse.

(All of the figures which now follow are stated in very "round" figures for ease of understanding, and are roughly, but only roughly, correct).

The Irish banks (those covered by The Guarantee) have "failed" because they have lost €100bn of the €500bn gross assets which they had they thought that they had in June 2008. Out of that €500bn, they owed €360bn to depositors (including multi-billion deposits from foreign banks), and €120bn to the bondholders, leaving a net worth of about €23bn, being capital, reserves and profits retained (i.e. not paid out as dividends).

In theory, then, they could afford to lose €23bn without "going bust". This was, on the face of it, a substantial buffer - Jérôme Kerviel's enormous rogue trading (allegedly) losses were only (!) about €5bn, after all. The somewhat relaxed attitude on the part of some commentators to the notion of guaranteeing the banks should, for balance, be seen in that light.

However, we all now know otherwise, and the insolvency of the banking system, had the State not stepped in, is beyond dispute.

How So Much ?

How could losses at this level, beyond even Morgan Kelly's October 2008 prognostication, have happened ?

In theory, one could imagine, for figures of this magnitude, the following scenarios:

1. Grand theft
2. overall collapse in the economy
3. disease, earthquake/tsunami or other natural disaster annihilating borrowers and their businesses
4. "rogue-trader" type behaviour similar to Nick Leeson or Kerviel (allegedly)
5. poorly-managed speculation in volatile assets e.g.derivatives a.k.a. "rogue trading" with the firm itself as the "rogue"
6. mis-pricing i.e. lending at an interest rate that does not allow the bank to make a profit
7. over-paying for deposits (a variation on 6 above)
8. incompetent lending on a large scale

Incompetence !

Only the last appears to have been significant in the collapse of the Irish banks, though mis-pricing (a type of incompetence in itself) of some loan products (most infamously the "tracker-mortgage") has not helped.

It could also be said that the incompetent lending was largely a factor of under-pricing the loans made, in the sense that lenders did not appreciate how risky the loans really were, and accordingly failed to impose terms of appropriate strictness. I believe that this understates the scale of the miscalculation: many billions were lent for projects so misconceived that no terms could have made the lending profitable.

Many people also suspect that "theft" would better describe many of those loans. Bankers, it is suggested, advanced the banks' money to their friends (actually, "cronies" is the term of preference) and the friends might as well have stolen it, given the improbability that it would be paid back. Notwithstanding undeniable cronyism, I have seen no evidence which comes close to justifying this suspicion, but I remain open to receiving it.

We are left with incompetence: the bankers advanced too much money which will never be repaid.

Incompetence Is Not A Crime

Provided that it is not dishonest, incompetence is not generally criminal. Otherwise, who would 'scape whipping ? as Shakespeare had Hamlet say. There are exceptions to this, though.

Before exploring whether the incompetence involved in this case is, or is not, caught by the proviso, or by other exceptions to the general principle, I am going to explain in Part 4 why there is an important issue at stake.

Why They Should Not Be Arrested - Pt. 2

In Part 1, I told you about my attempt to arouse interest in a private prosecution of the "criminal bankers", and that it has so far "gone nowhere". The title of this series of posts gives a hint of the conclusion that I have reached as to why that has been so. I will now state it explicitly:

The Irish banking disaster was not caused by criminal behaviour

Indeed, it is not clear to me that the thing that above all caused the banking disaster can even be said to be a matter of straightforward immorality on the part of those who took the decisions which caused the damage.

None of this means that there was no criminal behaviour:there was. Nor does it mean that "immoral" conduct did not form part of the causal mixture:it did. Still less does it mean that no-one needs to be held accountable and possibly to suffer adverse consequences: they do (and some have, adequately or otherwise).

(What primarily caused it, in my opinion, was a loss of risk appreciation by all economic agents involved. Investors in bank shares - and, to a degree, in bonds - came to incorrectly believe that banking was pretty well risk-free. Unfortunately, bank management "bought-in" to this delusion, and behaved in a manner that tested the belief literally to destruction. Bad practices, poor regulation, hubris and other minor factors, including the so-called "bankers' bonuses" problem aggravated the rush over the precipice).

It does not really "give me a warm feeling" to arrive, however provisionally, at this view, notwithstanding that it does mean that people who have been friends and colleagues may not, therefore, be at hazard of being jailed. Like everyone else, my reflex response was to believe that disaster on such a scale had to have A BAD GUY behind it. It is as difficult for me as for everyone else - including, not so incidentally, many of the supposed culprits - to comprehend how so much damage could occur without someone acting in a really evil, criminal, manner.

There is a distinction between responsibility, moral culpability and criminal guilt. I do not think that it is novel or controversial to say that only if there is the latter do questions of "arrests","trial" or "jail" arise.

I would again add that, usually in response to calls for "immediate arrests" or the like, I have regularly posed, in public (on a series of internet fora) and in private, the question "which crime is it that they have committed ?", and have received only one even-halfway-satisfactory answer. I will reveal that answer in a later post in this series. Many plausible as well as some insanely paranoid answers will also be discussed.

My conclusion is not necessarily final: I am open to persuasion that I have got it wrong. And I repeat my offer: find me a way to prosecute privately a banker for something that caused the crash, and I will do it, or help others to do so.

The offence has to have caused the crash: something like a bank official "looting" a customer's deposit account for his own gain, or a bank over-charging a class of borrowers, is of no interest to me for this purpose. Such crimes have always occurred, and, human nature being what it is, can no more be totally eliminated than other crime.

Why They Should Not Be Arrested Pt.1

Matthew Tannin of Bear Stearns being arrested. A jury later acquitted him. (Copyright: San Francisco Sentinel)

This is the first in a series of notes concerning a topic on which I suspect that many readers will, at least initially, disagree with me.

I will be writing in an Irish context, and specifically in relation to the Irish banking sector, but the points that I plan to make can be applied not only to other sectors but also outside Ireland.

It may be useful to begin by noting this: for approximately the last four years (since solicitor Michael Lynn fled the jurisdiction), I have regularly - in public (on a series of internet fora) and in private - sought assistance, and/or offered to assist others, to privately prosecute any one of a series of notorious alleged miscreants, starting with Mr Lynn himself. All of these objects of public obloquy have in common that their (alleged) misdeeds are associated with Ireland's drastic change of economic circumstances since circa 2007.

No Takers

Although I have not given up, and the offer is still open, I have had no "takers". Not one. Zero.

This is surely very odd, considering that nearly everyone with whom I have ever discussed the matter - and that includes dozens of lawyers - is convinced that our current economic Armageddon is the result of criminal mis-behaviour (their emphasis) by a large collection of people belonging to one or more of the following groups:

bankers, regulators, politicians, auditors, economists, lawyers, auctioneers, accountants, civil servants, builders and property developers.

Yet, these discussions have failed to generate a single candidate who could be prosecuted for an identifiable crime !

It seems to me that this failure should be at least as difficult to understand as the absence of public prosecutions to date. This series of posts is my attempt to elucidate the issue.

My Travel Insurance Claim - Day 800

Dies irae - dies illa !

Forgive me, please: I am nearly two months late in passing on this news.

Finally, there is closure of a kind.

It is the wrong kind, sadly: the Ombudsman has rejected my complaint.

I am not too upset, for several reasons. Firstly, the FOS is so busy that it was apparent to me that a complaint such as mine was not going to have a good chance of attracting adequate attention: it's always easy for an adjudicator to say "no".

Secondly, time had inevitably dampened my outrage.

I may post at a later date summarising why, in my view, the complaint in fact raised serious issues, but "don't wait up".

MOPE: "Most Oppressed Profession Ever" ?

In Ireland, the grievances of Northern nationalists have occasionally been exaggerated, leading to the derisive label of MOPE ("most oppressed people ever") being applied by some of the more cynical among us.

I am often reminded of this when reading the complaints of some independent financial advisers ("IFAs") in the United Kingdom. A current example is this article by Alan Lakey of Highclere Financial in Hemel Hempstead. Mr Lakey has been a vociferous critic of financial regulation for quite a while (at least 5 years, if I recall correctly), and there is much to criticise. As with the Northern Irish nationalists, the "hype" about the precarious position of IFAs reflects real grievances, not imaginary or invented ones.

However, in the recent article, Mr Lakey parades two "hoary old chestnuts" beloved of the "IFA community".

Expanding the Complaint

A big bone of contention is that

Unlike a court, the FOS is able to depart from the specific allegation being levelled and pick through the advice process looking for some aspect it does not like. This inquisitorial process often results in the original allegation being rejected but another, often disassociated matter, being used to uphold the complaint...Some of these are clearly vexatious or devoid of logic yet the FOS invariably accepts jurisdiction causing the adviser hours of unnecessary work, interaction with his PI insurer and, potentially, payment of a £500 case fee.

(Emphasis added by me)

This is based on a misconception of how judges - at least the better ones - deal with cases. Particularly with litigants-in-person, a judge will seek to be sure that s/he understands the real source of what has given rise to the proceedings. If that means permitting the claim to be amended, that will be done.

I would doubt that Mr Lakey could sustain his charge that vexatious, illogical claims are invariably added to original complaints, but I accept that when it does happen, as it probably does, it is not a nice experience, for the reasons mentioned by him, and others.

Limitation Rules -A Human Right

Another area causing outrage is ...[that the] FOS totally ignores the 15-year long stop.The lack of a long stop is the most emotive as it singles out our industry for a removal of human rights. No rationale is used for this confiscation of rights apart from some mumbling about the long-term nature of financial advice.

This is where Mr Lakey really "loses it" and loses me, too.

The idea that benefitting from the English (or any other) statutory rules on limitation could be regarded as a "human right" is - I cannot think of a more polite word - ridiculous. All limitation rules are inherently arbitrary and work a lot of injustice in themselves. (Sadly, that does not mean that we can do without them, but that's a story for another day). For that reason. presumably, they are restricted to "legal proceedings", and complaints to the FOS are not legal proceedings.

To put it another way, it is said that the limitation rules do not extinguish the right but merely remove the remedy of being able to sue (in court) to enforce the right.To my mind, it is entirely reasonable that the FOS, not least because of the very long-term nature of some financial-services contracts, should leave open the possibility of examining complaints about events older than the 15-year long-stop.

Naturally, to do that raises difficulties of evidence on all sides, and one would expect that the FOS would not neglect this. Nor should it fail to have regard to the normal legal approaches to protests by defendants that there has been unconscionable delay in making or pursuing a claim, and similar protests.

On the evidence point - which is normally the main difficulty - it is relevant to wonder, nearly a quarter-century after the 1988 Financial Services Act, whether it should not be severely embarrassing for the industry to be be still worried that its paperwork might not vindicate its position.

Emigration #4

The previous blogposts in this series have now been kindly re-published as a single article here by TheJournal.ie.

The article has generated a satisfying number of comments, some of quality, and there has also been vigorous reaction on Twitter.

The discussion will continue here and elsewhere.

Let Ireland Remember

Wise words from an old post by Seth Godin

Letting your customers set your standards is a dangerous game, because the race to the bottom is pretty easy to win. Setting your own standards - and living up to them - is a better way to profit. Not to mention a better way to make your day worth all the effort you put into it.

This, it seems to me, is good advice for groups as well as individuals.

One for the IMF ?

In Ireland, female employees who are pregnant are entitled to 42 weeks maternity leave (26 weeks of which are compulsory). The timing is at the employee's option, but at least two weeks must be before the birth, and four weeks after. This applies to all categories of employees, whether permanent or temporary, up to and including the chief executive officer.

Recently, leading Dublin solicitors William Fry tell me, an employer sought to engage someone on a temporary contract basis in order to do the work of an employee taking such leave. A candidate was selected, who, like all candidates, had been informed of the reason for the employment, and had explicitly confirmed that she envisaged no difficulty in working for the required period of 42 weeks.

On being offered the position, however, she disclosed that she was herself 18 weeks' pregnant. Note that she was already within the period that could form part of her maternity leave, so that after one day's work she could legally demand to be given leave.

The job offer was withdrawn. The offeree complained to The Equality Tribunal, following which an Equality Officer, determined that she had been the victim of illegal discrimination on the grounds of sex was entitled to compensation of €12,697, the equivalent of approximately 18 weeks' pay at the Average Industrial Wage.

A fuller account is here. A hat-tip for informing me via Twitter of this story goes to Rossa McMahon.

Update on Wednesday, May 11, 2011 at 07:40AM by Fergus O'Rourke

Amended to delete reference to The Equality Authority