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Lenihan: Doing OK?
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So how is Lenihan doing? I was amused by the phrase that went round when Lenihan was first appointed to Finance by Cowen : “he is very intelligent”. It made me laugh. Was he really? How do we know? And doesn’t it say something about the caliber of our senior public representatives that having a brain would make one of them stand out. Anyway, there is no way of measuring intelligence that would adequately capture the skills necessary for being a good minister – smart yes, but also courageous and possessing sound judgement and an ability to lead and, nowadays, communicate.
Here now in the middle of the storm, everyone is shouting about Lenihan’s shortcomings. He didn’t capitalise first off; he didn’t wind up Anglo; he didn’t fold the two big banks into one good big bank and dump the bad loans in a financial landfill. But actually, much of the commentary is just people letting off steam (the remainder is mainly no more than political game playing). People are frustrated because they still expect some kind of quick fix or rapid conclusion. The nation hasn’t yet settled in to the reality that the Irish economy is a small raft which has just entered a long canyon with a series of rapids along its length. We don’t know how long the canyon is, nor how many rapids there are, and we have no idea whether a little raft like ours can make it to the end without overturning.
In general there has been little effort to understand the situation in which Lenihan finds himself. He is not a financial expert and even if he were, it wouldn’t guarantee success for we have entered completely unknown territory. Lenihan is faced with a set of circumstances which are rapidly changing and for which there is no agreed or known formula for making things better. Even the most powerful nations have been badly shaken by the global crisis and are to a large degree making it up as they go along. How could any Irish minister expect to be any different?
True, we can disagree about specific measures : the distribution of new taxes or the percentage of board members which should be replaced, but in general there is no over-arching template which will lead us to safety.
We do need a robust opposition now – for all measures taken now need careful scrutiny. But the general public should also scrutinise the scrutiny. It is very easy for Richard Bruton for example to list off what the minister is doing wrong. “it’s very simple” said Bruton “we need to set up a new bank with a clean balance sheet”. But no, actually it’s not that simple. This route has not yet been chosen by any other country. It is by no means tried and tested. It may carry considerable risk. For example, much of the present banks function perfectly well – they have systemic knowledge of the Irish economy, they know Irish customers, they use methods which have been honed for years, they have division which functions well. It seems reasonable to me to try to resuscitate them. Yes, we need immediate changes of personnel, and medium term we need to build a brand new regulatory framework and to try to create a new banking culture. But much of this will take time and considerable thought, debate and agreement in order to make it work.
Overall, I think Lenihan has tried pretty hard and has proved agile and courageous when necessary. He also comes across as quite commanding and determined. And I would be tempted to give him the benefit of the doubt. That is to say, I would see no prospect of better performance by any of his potential replacements, from within FF or without. ( By the way, this is not the same as saying I would be opposed to a change of government. I think that while Lenihan deserves a certain understanding, FF senior ranks and its power-fattened, arrogant culture, is way out of touch and there needs to be a far broader rebalancing in society between the very wealthy, the merely well off, and the ordinary working people).
True, Lenihan should have read the entirety of the report that mentioned the IL&P loans. It was a mistake not to have done so. But I’m not convinced it meant that he wasn’t taking the whole Anglo thing seriously nor that he wasn’t dedicated to getting past that particular hurdle. But everyone makes a mistake and that one wasn’t catastrophic. With or without that revelation, Anglo was a basket case. But of course Lenihan cannot get away with many similar errors. He will have to be hyper diligent now.
Nevertheless, I think it is far too easy to say what Lenihan should do and what he shouldn’t. For every second day he has to take (and has taken) enormous decisions which will affect this country for a long time. And there is no easy way. As economist Dan O’Brien said the other night “this is a process”. And it is unprecedented. It’s about fire fighting for the time being. It’s about keeping going and there are no easy answers.u
Re: Lenihan’s failure to read the full report – Surely that was just a fig leaf? I’d wager tht Lenihan read the report, or at least that he was aware of the situation regarding the loan, but by claiming that he had not read it and was unaware of the odd accounting practices offered him protection from accusations that he’d tried to conceal the misleading practice.
Mr Lenihan says he did not read the report and therefore did not know what was going on. How then did he know enough to give this bank billion of taxpayers money. Either he is reckless and irresponsible or he trying to deceive taxpayers by pretending he did not know what is going on. Either way it does not bode well for putting trust inn the government. When are people going to learn that the wool has been consistently been pulled over their eyes for the past ten years.
EddieL – fair point. First, yes, certainly, Lenihan should have read the full report. But I think that given he – like most ministers – is not qualified in the area for which he is responsible, he is highly dependent on his officials to give him the most relevant executive and background information for decision making. In this instance, you could certainly argue that his team let him down in not red lining the IL&P transaction.
My point is that Lenihan is mucking through and so far is keeping the financial system from total collapse. That is precisely what is happening elsewhere and may be the best that is possible. No quick repair is possible.
Yet in terms of the overall political strategy I think the government is failing badly. That is Cowen’s responsibility: he has not given the right kind of leadership and has not be to the front enough during this crisis. Nor have they succeeded in communicating a strategy. Tactically too they are falling short. They accept that an increase in taxation is required – from whereever – and yet they dither saying that they are waiting on a commission on tax to report in 6 months. That is madness. First it allows six months to pass when nothing is done on the tax side. Even if they have not the completely right answers they should have acted immediately with a best effort on initial tax reform. There is a second reason why it was bad tactics. It meant that the public spending cuts were announced on their own and allowed the impression to emerge that the public service is shouldering the bulk of the financial pain for the current economic degradation – which of course they aren’t but that was an easy impression that government have allowed to develop. That is why the tax announcement should have came in parallel. Even if immediate tax changes were not the right ones for long term, they could have been corrected when the commission reports later.
Overall then the government is doing a terrible job. They need to announce a strategy and a set of principles and then explain how each step along the way fits in to the strategy. For a start they need to announce a major overhaul in Irish corporate governance (not just in banks, this is a far wider issue and we’ve seen the bullshit with Fyffes etc before. And we all know the joke of transparency and accountancy in Irish corporate (and political) life. They also needed to come clean on the political system. No more buddies appointed to state boards. No more friends running pet projects. No more in service pensions. No more 20 junior ministers. Etc. One can think of far more in terms of painting a background canvas on which the shape of our recovery can be painted incrementally as we move forward. This would enable a far higher level of buy in than has been so far achieved.
Doing ok relative to what?
Sabhaircin – that’s precisely it. There is no precedent to compare with. We have never been through a similar crisis. The only possible comparison is with other countries right now. And on that basis, Lenihan is probably not much worse than the rest. The progress across the water in Britain has be equally uneven and uncertain in terms of getting the banks back in order.
There are always two aspects to government policy, what it does and what it does not do and what it does not do is often more important than what it does. I caanot accept that it does not know what it is doing. In this instance it is very important that we look at what the government is not doing. It is becoming glaringly obvious that the government has made little or no attempt to deal with what it claims are the dreadful state of the countries finances. In fact it would seem to be using it only as an excuse to drive down public sector wages. I can only assume therefore that the public finances are in better shape than we are led to believe and the government is using the chaos created by job-losses to pursue IBEC’s agenda just as it pursued the developers agenda for the past number of years.
“doin a heck of a job Brianey!
Tomaltach
Must say I agree. No Government in the world has experience of this, or the expertise to handle it – because it is unprecedented. Lenihan is intelligent, but unfortunate that this is his first economic ministry. Officials should have highlighted this, but perhaps he is also guilty of not asking the right questions.
That said, I think Richard Bruton would probably do somewhat better – not because he’s more intelligent, but because he knows how economics has traditionally worked. While all bets are off in relation to previous experiences, he would still have a greater insight into the subject matter and wouldn’t be so reliant on officials.
Everyone forgets that for some years following the Wall Street crash all sorts of skullduggery and corruption and malpractice was uncovered and some of the then kings of Wall St ended up in jail for their pains. Sound familiar?
Well the bad behaviour bit is anyway. And it’s predictable, because powerful men tend to do whatever they can get away with and when a day of reckoning beckons there is nothing they won’t stoop to in order to protect themselves and their positions of power and influence.
I think we have a tendency in Ireland to get extremely hung up on side issues such as the latest imbroglio fashioned out of Brian Lenihan’s admission that he hadn’t read every last detail of the 700 page report on the banks, which was mainly to do with loans, not deposits, and that he therefore missed something that later turned out to be very significant. The point is, an official had spotted there was something odd about the reference to Anglo’s customer deposits and had referred it to the regulator and in due course it all came out.
I think Lenihan was very honest, if politically unwise, to admit that even had the crucial paragraph been drawn to his attention at the time, he would probably not have appreciated its full significance. Either it would have to be further investigated before the full story became clear – which it was – or it wasn’t really the main focus of anyone’s attention in respect of that report at the time. The Minister has been credited with spotting the funny pass the parcel loans business between Anglo and Irish Nationwide and uncovering that particular little scandal; which led to Anglo being nationalised instead of getting a 1.5bn recapitalisation bung.
Everyone seems to have forgotten that now. ‘Get the Minister’ is altogether a much easier game to play. It saves having to come up with a coherent anyalysis of our actual problems or advance any useful proposals for dealing with them.
We wouldn’t have Lenihan as Finance Minister if things had worked out differently. We wouldn’t have Bruton either – if a Rainbow Government had taken power in June 2007, we would have Pat Rabbitte as Minister for Finance, who was very clear that the job was earmarked for him. (Bruton was expected to opt for the Education portfolio). If Bertie Ahern hadn’t been shunted off the stage mid last year, Brian Cowen would still be Minister for Finance. And if Brian Cowen had picked someone else – Noel Dempsey for example – for the Finance brief; Lenihan would still be in Justice , presumably, and probably Tanaiste as well. So for comparison purposes, I think you have to look at those who would most likely occupy this position as an alternative to Lenihan before judging him.
So who amongst them would be better? Rabbitte? Dempsey? Cowen? I don’t know, because it’s all hypothetical. What does matter at this particular time, I believe, is the character of the Minister for Finance. Of course he’s going to make mistakes. And some ‘mistakes’ in retrospect may turn out not to have quite so mistaken after all. For instance, I don’t see how it would help the economy at all to introduce a raft of new taxation measures that would then have to be reformed next year after the Commission on Taxation has reported because they were panic measures or simply put up to satisfy the unions or for PR purposes. We shall see.
If the responsibility is supposed to rest with his officials point it out to him then doesn’t this just demonstrate yet again that members of the civil service must be fired if they fail to do their jobs properly? We had the same rigmarole with the nursing homes charges and no one lost a job of it.
Dan Sullivan: I am afraid that it is the job of the government to govern and it is the job of the public service to serve. As I said above there are always two aspects to government policy (1) what they do (2) what they set their face against doing.
Both are equally important e.g. why did the government set its face against changes to the income tax regime from the beginning and insisted instead on reducing the wages and salaries of public sector employees? It is patently obvious to me that there is an agenda here.
Do you seriously believe that “officials” were responsible for any decision the government took in the last six months? I find it astonishing that any one would believe that the government should give away billions of euro in ignorance.
I am afraid the government knows exactly what it is doing. After all both Mr. Cowan and Mr. Lenihan have politics in their blood. and do they not have a plethora of “advisers” and “consultants” (e.g. Merill Lynch, need I say more) who have obviously taken over from public servants (at great expe3nse) since things started to go so disastrously wrong in this country over the last ten years. Witch-hunts will get us nowhere!