Taxpayer-owners kept in the dark about the Anglo Irish scandal

Putting a positive spin on the figures Anglo Irish Bank published last Friday defied even the most determined attempts of the Government"s public relations advisers. But there is more than one reason to distrust the figures put before taxpayers who now own the toxic bank. Surely, the €4bn the recently nationalised lender will get from taxpayers will be enough to shore up a soured bank? Unfortunately, the promiscuous lender that for years never knowingly said 'no" to any property developer warned it may need to tap the Government for at least €3bn more to cover losses. Surely, Anglo"s souring loan book was shrinking? No, the half-year figures showed that the loan book increased by €1.3bn between last September and the end of March, because, like a ballooning credit card bill, its property borrowers were either not paying up all or any of their interest bills. It"s not that the PR spinners did not try - the Government succeeded in suggesting that it could salvage something from the mess by selling off €10bn the bank has loaned out to property projects in the US, or parts of the €19bn it loaned into Britain because, supposedly, these loan books were in better shape than here. Then, the Anglo statement adds this guff: 'We have prepared a draft business plan, and over the coming weeks we will be engaging extensively with the Minister (for Finance Brian Lenihan) and his officials, and with the Financial Regulator, in order to finalise the plan. Key elements of the draft business plan include rebuilding trust and confidence in the bank and its management by strengthening our governance and controls; operating on a funding-led basis, limiting balance sheet size to that which can be funded in a more sustainable manner.' In truth, as everybody knows, the bank, with no reputation to keep or worth restoring, will be run down in the best way that can be found. The substantial part of the property loan book that cannot be managed or sold will be offloaded onto the National Asset Management Agency (NAMA), the so-called bad bank. The agency will try to curtail the losses as best it can over a very long 20 or 25-year period on behalf of the taxpayer. However, page 43 of Anglo"s 64-page results statement rings more alarm bells, hinting at the many more billions the Government may need to inject in cash to ensure Anglo keeps in business. The rot has spread through the loan book at a ferocious pace. At the end of last September, the bank reported fairytale numbers: only a tiny fraction of its loan book was supposedly in trouble then. By the end of March, however, bank executives and auditors had determined that only €48 billion of its €72 billion in loans were either good, satisfactory or even of acceptable quality. The bank had failed to get borrowers to pay interest or capital payments between one and 90 days on a further €13 billion of loans, and had categorised a further €10 billion as 'impaired', money it is unlikely to get back. Borrowers had skipped an interest payment for over two months and longer on over half the €13 billion of loans the bank still believes remain unimpaired. Many legal advisers for small investors and the big institutions will read in great detail every statement the bank released since last September. Some banking experts say it is incredible that the stock market-listed bank failed to start to write down the value of its loan book at an early stage last autumn. Two official investigations have been launched into the Anglo Irish debacle. The Office of the Director of Corporate Enforcement - the guardian of the Companies Act - is investigating possible breaches of the law after Anglo failed to disclose huge loans, including over €120 million advanced to former chairman Sean FitzPatrick, in the bank"s financial statements over many years. It is also investigating possible breaches of the Companies Act for the loans Anglo gave to its so-called 'Golden Circle" of 10 customers who bought about 75m shares, or 10 per cent of the bank, last July. Bank executives and regulators failed publicly to raise any serious questions about the hidden scheme at the time. Last week Anglo revealed that it may need to write off over €308m because the group of 10 customers would unlikely to be able to pay the money back. The loans were secured against the value of the now worthless Anglo shares they secretly bought last summer. Meanwhile, the Financial Regulator is investigating Anglo Irish for breaches under European Union law for so-called market abuse or market manipulation. In a few weeks, the first significant anniversary of the Anglo scandal will be reached. It is remarkable, despite Anglo Irish having dumped huge losses onto the taxpayer, how little has been officially told about what went on in the bank in recent times.