It’s been called a black hole, a bottomless pit, a zombie bank, and its former chairman has just been declared bankrupt — but keeping Anglo Irish Bank alive is set to cost the Irish taxpayer over 24bn euros.
That’s the amount – just 10bn euros short of a year’s tax take – the Irish government has committed to the bail out of a bank that once typified the Republic’s booming economy, and which many blame for sinking it through reckless lending. The final bill may even be higher, given that the discount on the bad loans the bank is transferring to NAMA, the state rescue agency, has still to be decided.
Some of the state aid is to be used to restructure the now nationalised Anglo Irish into a small business lender, a plan still to be approved by Brussels. But most of the money, as Anglo’s new chief executive, Mike Aynsley, admitted with typical Australian candour, “will never be seen again and will end up in a black hole”.
However, he argues that the cost of closure, even over a period of years, would be much higher. Finance Minister Brian Lenihan takes a similar view, warning of the damage a default would do to Ireland’s reputation and its impact on state borrowing costs and on banking confidence. Opposition parties and a sceptical public, hard hit by Lenihan’s austerity measures, are not convinced.
Increasingly they are asking: how much is too much to save Anglo? It is a question the minister may eventually have to answer as the bail out bill keeps rising.
Meanwhile, Sean FitzPatrick, the man who built Anglo Irish into a 13bn euros bank in the heady days of the Celtic Tiger boom, has been declared bankrupt, at his own request. He took the action unilaterally when the bank he once headed as chief executive, and later chairman, refused to agree a settlement deal on his overall debts of 150m euros.
The Irish High Court was told that the bank is owed 110m euros. In a hearing that lasted just 12 minutes, it appointed a court officer to take charge of the affairs and assets of the former multi-millionaire. As a bankrupt, under Irish law, he will be unable to act as a company director or manager for 12 years and be unable to take out a loan for more than 650 euros without declaring his bankruptcy.
He told creditors, at a meeting before the court hearing, that he accepted “full responsibility for my own ruin.”