Sunday, December 21, 2008

The Tsunami of Greed



I listen with considered and continued interest to the Marion Finucane Show every Saturday and Sunday and it never fails to grab my interest and hold my attention. It is rich with in-depth interviews, human interest stories, consumer and lifestyle news as well as a lively panel discussion on issues of the week, not to mention that old stalwart staple of any weekly show, the newspaper reviews. However, what makes it so good for me is the easy, chatty, intelligent, astute and sympathetic questioning style of our good woman.

My title for today's post comes from Pat Cox, that wonderfully bright and intelligent former politician, journalist and lecturer who has in recent years retired from the position of President of the European Parliament.  He is a wonderful speaker and I envy him his articulation and indeed his profound insight.  Since then he has become President of the International European Movement and Managing Partner of European Integration Solutions, a Washington DC/ Brussels-based, transatlantic consulting firm, and a Board member of Michelin.  This morning, and I quote the following as best as I can while listening to the podcast of this show from the RTE web site. 

Pat Cox lamented, with regard to the current economic climate, the mismanagement and dubious practices in the banking industry, with great insight and articulation, "the tsunami of toxicity and greed" that has spread from "Wall Street in all of the collapses and from the city of London - and that Ireland is not kingpin in this." He then went on to refer to the banking scandals in Wall street and especially to a "Mr Madoff - one of the gurus of Wall Street - whose corrupt Ponzi scheme or scheme of pyramid selling as we know it has cost the USA some 50 billion US dollars."

With regard to Mr. Bernard Madoff we read at The Independent on Sunday web site the following.  (Obviously Cox had read this article.):

Madoff: was Wall Street's regulator asleep at the wheel?

The scale of Bernard Madoff's alleged fraud has shocked investors, who are already demanding to know how US regulators could have let it happen. Stephen Foley reports

Thursday, 18 December 2008

"Madoff Securities is the world's largest Ponzi Scheme." This was the conclusion of the Securities and Exchange Commission, Wall Street's regulator, when it charged Bernard Madoff with a fraud of $50bn (£32.2bn) proportions last Thursday, a day after the veteran trader's sons called the police and turned him in.

But hang on, the quote is not from the SEC. It is from Harry Markopolos, a fast-talking Boston accountant, from a letter he wrote to the SEC in 1999 after he began snooping around Mr Madoff's firm. Mr Markopolos wrote again and again – but for nine years, the SEC failed to investigate and failed to uncover what now looks like the biggest scam in Wall Street's history.

To say the failure is an embarrassment would be to understate it. For an organisation already fighting for its survival, and assailed for facilitating the Wall Street free-for-all that has now trashed the credit markets, this is a new crisis it could do without.  (See the following for the full article: Asleep at the Wheel )

I deliberately quoted the above almost in full to underline Cox's assertions, namely that the so-called watchdogs or regulatory agencies seem to be asleep at the wheel and let the bankers do as they please.  Is the same the case in Ireland?  Unfortunately, it would seem to be damningly so.  However, I was not just gripped by Cox's views on our sorry economic state and how that came about but by his contention, which is almost patently obvious when one thinks about it, that the whole sorry state has been brought about by a failure of leadership.

The Failure of Leadership:

Great leaders normally come to the fore in times of crisis, e.g., Winston Churchill in England during World War 2 and then our own Seán Lemass during the late fifties and early sixties of the last century in Ireland.  However, we can but agree with Pat Cox that there is a lamentable failure of leadership, of good authority and of governance.  These are Cox's words and they are wonderful.  Not alone are they wonderful, but they are damningly true.  On the one hand the panel, including Cox, referred to the presenting scandal from Anglo Irish Bank, namely, with regard to the actions of its recent Chairman Seán Fitzpatrick.  We read at The Irish Independent web site the following lamentable facts:

Yesterday the Irish Financial Services Regulatory Authority issued a statement saying it had called for an urgent review of directors' loans in Anglo Irish Bank. The Authority also said it had begun investigating the treatment of directors' loans in all of the institutions covered by the Government's guarantee scheme. And the committee is due to report back to the Authority on its findings in three weeks time. It followed the resignation of three senior officials at the bank following the revelation that the Banks' Chairman, Seán Fitzpatrick concealed 87 million euros in loans made to him by the bank. It had been claimed that the Financial Regulator was aware of the transactions early this year but the Board says it only became aware of the situation on Wednesday. Meanwhile, the Government is understood to be preparing to make an announcement on the recapitalisation of Anglo Irish bank shortly. (See this link: 87 Million Loan

One can but re-echo Pat Cox's words that this sorry state of affairs at Anglo Irish Bank shows a shocking failure of leadership, of good authority, of good judgement, of governance, of any moral standards and of transparency.  The panel pointed out that Seán Fitzpatrick had not broken any laws, but notwithstanding that he had shown himself to be deceptive and purposely so as he had hidden his (legal) loans which had been authorised by the financial committees of both banking institutions over a period of eight years - meaning that there were sixteen transfer transactions.  While nothing unlawful was done, surely there was a grave lack of forthrightness and authenticity and a patent abuse of transparency.  Fitzpatrick was covering up and concealing his transactions from his own shareholders.

Other questions asked by the panelists this morning deserve answers, questions like:  "Is our own Banking Regulator asleep at the wheel?"  "Who is held accountable for such ineptitude?" "Why have no heads rolled throughout all of this?" "Why do the big bankers continue to get such huge dividends when they have presided over a sheer monetary catastrophe?

Then the perennial issue of child abuse came up and the panel admitted that there had been a sequence of excellent reports on this topic.  However, they lamented the fact that there was a slowness to move with the times in certain quarters.  Again we read on the web page of The Irish Independent with the respect of handling child abuse scandals in the Diocese of Cloyne:

The report by the National Board for Safeguarding Children (NBSC) was ordered earlier this year into how two cases of alleged clerical sex abuse were dealt with by the Diocese of Cloyne.  There were two clerics involved -- Priest A, who was alleged to have sexually abused a young boy working as an altar server, and Father B, who was alleged to have abused two girls and two boys. One of the girls claimed she was abused during Confession on a youth retreat.  In the case of Priest A, gardai were only informed by the diocese of the alleged abuser's identity six months after the initial complaint.

In the case of Father B, the report found that the policy of the diocese in its subsequent contacts with the gardai was to give "minimal" information" and that "no information was to be volunteered in respect of any previous complaints involving this priest". Diocesan officials are now awaiting a decision by Children's Minister Barry Andrews on the publication of a separate but related report by the Health Service Executive.

"Bishop Magee now has to seriously consider his position and decide whether or not he can retain the confidence of the people of Cloyne in the light of these disclosures," said Cork Labour TD Sean Sherlock. He said the report on childcare procedures in Cloyne was damning and warned that diocesan policy appeared to be to offer minimal information to the gardai about one of the clerics involved while the bishop himself didn't seem to appreciate that the ultimate responsibility for protection rested with him.

- Ralph Riegel (See this link here: Sex Abuse Cloyne)

This again is a shocking failure of leadership, of good authority, of good judgement, of governance, of any moral standards and of transparency this time on the part of a Church leader. The said Bishop is very much doing a solo run here, in contrast with his fellow bishops like Archbishop Diarmuid Martin of Dublin who has laid bare all the Archdiocese's files and has given them over to all the relevant authorities and commissions.  Canon Law is, and must always be seen to be, secondary to Civil Law.  Another marvellously sincere and open bishop is Bishop Willy Walshe of Killaloe Diocese who has stated this fact on many occasions in the media.   Oftentimes, false accusations are indeed made against priests, to be sure, but the length of time Bishop Magee sat on his files and the way he handled these sad allegations were lamentable.  It wasn't the question of determining the guilt of anyone.  The panel praised Dr Diarmuid Martin of Dublin for his approach to the child sex abuse scandals among the clergy over the past years - that is, "get it all out in the open and let it go where it will.  In the end it will be cleansing to give it full exposure and full openness."   

When leadership is sadly lacking, there then ensues a consequent confidence and trust in anything anyone in authority may say or do.  If we are to restore confidence and trust in our institutions, both Civil and Religious, we must cultivate good leadership.  We must look to inculcating high moral standards in our young and in our not-so-young.  We must also reward high moral standards and have definite sanctions for those who fail to meet them.  It is all too apparent to most of us that those in authority (whether in government, financial institutions, government agencies, in private business or in the church) who subsequently are shown to abuse or misuse it for personal gain or otherwise have not been severely enough, if at all, dealt with.  We need no less.  All institution need a rewards system, but they must, surely, need a system sanctions. Surely this stands to reason on rational, psychological and social grounds.  Good practice must always be based on a strong ethical base.



Above I have uploaded a picture of the great Nelson Mandela who, to my mind at least, comes closest to the ideal leader. How sorely we need such people in our world today! How sad that politics only throws them up when a nation is in great crisis. Maybe our present series of crises all over the world will throw forth good and exceptional leaders. Let us hope so!

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