Too Big To Fail, Not Too Big To Bail Out

If Anglo Irish Bank's senior manager hadn't spoken openly on the phone, the Irish taxpayers would never have known he played them for fools.

There's something to be said for personal contact and private conversations, as John Bowe now realizes. Much to his dismay. The tapes of his conversations with senior manager Peter Fitzgerald have been made public, and the public is outraged.

Property markets all over the world were oversold and overpriced. One fine day in 2008, the real estate bubble burst and Mr. Bowe knew he had a balance sheet filled with property loans that were suddenly so much worthless paper. The money that Anglo Irish loaned out was not coming back in, so when account holders wanted to have some of their money back, say, to pay the mortgage, it wouldn't be there.


The government had money and Mr. Bowe figured out a way to get it to prop up his bank, using subterfuge and obfuscation and enough smoke to mask the true scope of the disaster. He discussed his plan with Mr. Fitzgerald, deciding to start small by asking for 7 billion, just to get his foot in the door of the Central Bank. That was just the beginning.

Once the Irish people were on the hook for the first installment, he would ask for more to protect that initial investment, knowing that there was no way in hell the loans from the government could ever be paid back. The money simply would never be there. But once he had the Irish taxpayers' "skin in the game", he believed they would go along like a gambler on a losing streak, throwing more money into the kitty because the next roll of the dice was sure to be a winner.

The bank went into negotiations with the government and claimed only a few billion were needed, a figure that was intended to put Anglo Irish in the "too big to fail" category. Mr. Bowe was fully aware that the bank required 70 billion euro to cover its losses, but that much of a loss could have shifted the bank into the "too big to bail out" category.

The bankers played the government and misled banking authorities, ultimately costing the Irish people 29 billion euro as Anglo Irish went back again and again for a little more and a little more, just one more time and we're good, another round, we're nearly there, a few billion here and a few billion there.

Mr. Fitzgerald has gone on record and stated that he was not in a position of authority in 2008 and had nothing to do with scamming the Central Bank. Mr. Bowe says he didn't engage in a practice to deceive, but he's stuck in that tangled web he wove with a telephone call that he never thought would be recorded and end up in the government's hands when it went about investigating how Anglo Irish Bank nearly brought Ireland to its knees.

Not popular before, Irish bankers have placed themselves in an entirely new category of public scorn. If only Mr. Bowe had walked over to Mr. Fitzgerald's office and had a friendly chat, face to face. Without a recording device between them.