Archive for July 21st, 2012

Villain of the Week

[Graphic above produced by Japlandic.com, contact here]

Former HSBC boss Michael Geoghegan was named on numerous occasions in a US Senate report on activities of the global bank HSBC which has been found to have lax controls to guard against money laundering, lax controls which apparently enabled Mexican drug cartels – presently causing mayhem throughout Mexico with mass killings, kidnappings, torture, and corruption – to benefit from their ill-gotten gains. Although no accusation of criminality was laid at the door of Michael Geoghegan, it was seemingly concluded that he did not act to bolster money laundering controls when alerted to shortcomings including growing backlogs of suspicious transactions. One of many references to shortcomings from the report

“On April 20, 2007, for example, Matthew King, head of HSBC Group Audits, sent an email to HSBC Group CEO Michael Geoghegan with this update: “I am told the Mexican authorities are taking a relatively benign attitude to our involvement with this customer, which is fortunate because the review has revealed a number of weaknesses. A series of inaccurate, and possibly fabricated, visit reports seem to have been filed by the business which resisted any reporting of suspicions a number of times. For its part, the Money laundering Department failed to act as a proper check and balance. I have suggested a thorough review of processes within the Moneylaundering Department and of the Moneylaundering Committee to ensure they are robust. … There are also a number of personnel decisions to be taken.”Neither HBMX nor HSBC Group informed HBUS about the case.”

Michael departed from HSBC in September 2010, and a year later he turned up at the Global Irish forum at Dublin Castle and seems to have become best friends forever with Minister for Finance Michael Noonan who appointed him to review NAMA, and subsequently appointed him to chair the newly-created NAMA advisory board – a three-man board whose members provide their time free of charge, but which we learned yesterday, has a budget of €40,000 a year for hotels, travel and subsistence to attend four meetings a year. Minister Noonan has defended Michael during the week follow the publication of the Senate report, but it doesn’t bolster trust in Irish public life to have ministerial appointments using an almost royal prerogative – except we’re a republic – and then have the appointee criticised by the world’s only Superpower.

Whilst Michael Geoghegan – and current chairman of AIB, former HSBCer David Hodgekinson – were at least challenged during the week following the publication of the Senate report, another former HSBCer who now has a senior role in Ireland’s state agencies, seems to have escaped beneath the radar. Things must get confusing at our own National Treasury Management Agency where there are two Brendan McDonaghs holding senior positions. The two, pictured below, are Brendan McDonagh the well-known CEO of NAMA pictured on the left and Brendan McDonagh, the former boss of HSBC in the US who is now on an advisory committee of the NTMA.

And this “other” Brendan McDonagh – the one on the right – is also named in the Senate report. According to the report, Michael Geoghegan did communicate anti money laundering problems at the Mexican HSBC operation, to Brendan McDonagh – “HSBC Group CEO Michael Geoghegan told the Subcommittee that HBMX problems were discussed at HSBC Group Management Business (GMB) meetings, which HBUS CEO Brendan McDonagh attended, so he thought HBUS was aware of the problems” –  and that “HBUS conducted no due diligence assessment of HBMX, did not evaluate its riskiness, did not review its audit findings, and did not monitor its wire transfers, cash letter activity, or banknotes transactions for suspicious activity. HBUS had rendered itself blind to the fact that it was servicing a high risk financial institution”

Table of the Week

The National Treasury Management Agency (NTMA) published its annual report for 2011 during the week, and we were reminded of the breadth of functions carried out by the NTMA. Ireland has a dedicated agency to deal with compensation claims against state organs, for example, and that is part of the NTMA. But the NTMA also deals with so-called “dormant accounts” – bank accounts for which the account holder or their next-of-kin can’t be traced. There’s nearly €300m in unclaimed cash in bank accounts and nearly €50m in unclaimed insurance policy payouts, presumably life or endowment insurance. Unfortunately there isn’t a searchable list of the owners, and the Government would presumably like to keep as much of the loot as possible, but if you suspect a departed relative might have had a bank account or insurance policy, you might contact the NTMA, might be the best investment in a phone call you ever make!

Religion of the Week

Protestantism (not Catholicism, and certainly not Greek Orthodoxy)

The European financial crisis seems to have uncovered a divide along religious lines between the Drowned and the Saved, or the financially embattled countries and those with extra cash. And it seems the Protestant countries have emerged as financially fitter than their Catholic neighbours, as evidenced by bond price spreads – the difference between the price charged in the bond market for our bonds versus those charged to the safest European country, Germany. We don’t do two-way conversations at Catholic masses, otherwise we might have some unwelcome questioning for the priest tomorrow! However, it is the Greek Orthodox adherents that come out worse in the present crisis, and of course they split from the Catholic Church a thousand years ago, around the time when Pope Leo IX excommunicated Patriarch Michael Cerularius and Patriach Michael excommunicated Pope Leo right back.

Economic bright spot of the Week

The UK homeless charity cheered us up during the week when it publicised the fact that the UK has the third most expensive housing in Europe as measured by the number of households which pay more than 40% of their income on housing. The charity was using statistics from the European Union, available here, which shows that nearly 16.5% of UK households paid more than 40% of their income on their homes in 2010. The corresponding figure for Ireland is just 5.7%. Cyprus has the cheapest housing with just 2.5% of households paying more than 40% on housing, and Denmark the most expensive with 21.9%. The statistics are from 2010 and will have changed with higher unemployment and more taxes/charges, though on the other hand, interest rates have fallen and strangely, we are earning more in gross terms.

Quotation of the Week

“Insofar as Fine Gael are concerned, we will seek a mandate from the people in the forthcoming general election, as part of our programme that we should be given the authority and a mandate from the people to re-negotiate this element of what is a crushing debt on our taxpayers’ now” An Taoiseach Enda Kenny speaking in December 2010 (pictured above), after the Green Party had announced it would be pulling out of government, heralding an imminent election. Yes, it’s 19 months old, but I just came across it this week. RTE’s Sean Whelan reports from 1:00 into the video “The Fine Gael leader is not attending a meeting of the European People’s Party in Brussels where  he intends informing fellow Party members, Chancellor Merkel and  President Sarkozy of his plans to try and impose losses on a particular category of bondholder, those that hold senior debt in the Irish banks that is not covered by the Guarantee” and “Mr Kenny said there is no question of defaulting on sovereign debt or on senior bank bonds that are covered by the Guarantee but he believes that the taxpayer can save between €12-17bn by negotiating a sharing of losses with the unguaranteed senior bondholders”

A year and a half later, a senior bondholder hasn’t incurred 1c of a loss. Although last week, the ECB mooted the idea that senior bondholders in Spain might need to be burned, there is absolutely no suggestion at present that Ireland will get a refund for the senior bonds it has paid, with the bill footed by the nation which owns most of the banking system. We have now paid the majority of bonds at Irish banks, and there are just €160m of unsecured unguaranteed senior bonds left at IBRC.

Vincent Browne has a proclivity for playing the Enda Kenny video in which Enda says “we will not have “defaulter” written on our foreheads. We will pay our way. We have never looked for a debt write-down, although we want an extension of flexibility from these facilities to help our taxpayers and in dealing with our deficit, and to help repay our debts in a more realistic fashion.” Perhaps he might play the video of the above statements – available from RTE here – to better evidence the failure to deliver on commitments by this government.

Spanglais expression of the week

“Hemos vivido malos tiempos, pero es el acabóse!” Spanish anti-austerity protester during a day of protests across Spain on Thursday “We have lived through bad times, but this takes the biscuit” With Spanish 10-year bonds closing at 7.3% yesterday, and a general bailout now firmly in imminent prospect, it seems that the austerity in Spain is likely to become austerityer.You can expect similar sentiment here in a couple of months as the nation gets softened up for next years additional €3.5bn budget adjustment. Which of the tribes will prevail in maintaining their entitlements? Who can tell, but with the Troika breathing down our necks and no upside in prospect, this forthcoming budget adjustment is going to be the most acutely painful to date for the nation as a whole and the betting on here is it won’t be long before we hear widespread complaints here of “that takes the biscuit” – “es el acabóse!”

Video of the Week

The Longford Leader videoed part of the demolition of the NAMA apartment block at Gleann Riada, and the 2-minute video is available here. There had been a slight delay to the commencement of the demolition when house martins – swallows with a white patch on their tail feathers – were discovered nesting at the apartment block, and it took three weeks to “encourage” the house martins to leave and find new homes, as they are protected species in Ireland. So, good news for the three families of house martins. There was no such news for the 335 families on the housing waiting list in Longford, some of whom might have been waiting for a home for more than five years. NAMA has said that the demolition of the block is budgeted to cost €150,000 and it removes 12 two- and three-bedroom apartments from the housing stock. NAMA didn’t offer the block for sale.


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