Patrick Honohan: Why Anglo Bankers Escaped Sanctions Faced by INBS

As the National Asset Management Agency (Nama) concludes its operations, the recent death of Michael Fingleton, former chief executive of Irish Nationwide Building Society (INBS), prompts a reflection on the Irish banking crisis and accountability.

The article questions the disparity in sanctions applied to bankers, particularly contrasting the situation at INBS with that of institutions like Anglo Irish Bank. It highlights that all Irish banks failed during the crisis, necessitating substantial state intervention, including a broad bank guarantee, Nama's acquisition of property loans, central bank lending, and government capital injections.

The immense cost to the government, estimated at around €37 billion, primarily stemmed from INBS and Anglo Irish Bank. The broader impact on public finances was even greater, with government debt soaring by €150 billion over six years due to falling tax revenues and increased public service costs.

Nama successfully managed and disposed of most of the acquired loans, reportedly making a profit. However, the article touches upon the debate regarding market timing and whether Nama could have achieved greater profits by waiting longer to sell assets, acknowledging that property prices continued to rise after its portfolio sales. It also briefly mentions external pressures, such as the European Central Bank's desire for faster sales, though it notes this pressure was not extreme.

Unlike the US, where financial engineering was a cause of bank failures, the article suggests that in Ireland, such engineering was employed as a tool to navigate out of the crisis, particularly through the use of specially designed financial instruments like asset-backed bonds.