Special Investment

Obviously, any Irish-based blog which purports to have an interest in current events has to talk about NAMA, and these articles have to be either sober, academic analysis or steeped in outright fury.

There always a problem with trying to dispassionately analyse NAMA, because it simply doesn't lend itself to dispassionate analysis. The numbers are so large that they're almost impossible to comprehend on their own merits; sure they're important, but working up anger about them is as difficult as it is for Sonic the Hedgehog to get into a fury about badly-written machine code. It's hardly surprising that much of the populist comment blended outrage with irrationality, because it's difficult to get angry about NAMA without being irrational. Humans tend to be angry about things we instinctively understand, and the notion that we were spending fictional money for the past decade is too frustratingly abstract to really get mad about. It's easier to believe that the money all vanished because the bankers paid it to themselves in bonuses, because it's a neater story.

I should say, from the outset, that I'm not really qualified to judge the merits of NAMA v Nationalisation v Letting Anglo Fail and all that. Suffice it to say that any of those options would have been enormously expensive, and it's not like I can judge which is which. The majority of informed voices that I respect tell me that NAMA is bad value for money, and I tend to believe them; I've long been of the opinion that NAMA was specifically created to distance politicians from the decision-making process, and anything comes second to that.

And so, today, I'd like to talk about SSIAs.

SSIAs are one of those bizarre historical oddities that now seem like some sort of ironic joke. Imagine how, nearly ten years ago, everyone in the country had so much money that the government had to pay them to stop spending it. They were the bright idea of Charlie "Just An Average Fella" McCreevy, and you can get an overview here. Short version; they were a five-year saving scheme in which the government gave you a euro for every four you saved. Most SSIAs matured in 2006, which by a remarkable coincidence was just before the General Election.

Now, there's a few things to remember about SSIAs.

1. SSIAs were spectacularly unfair. They benefited people who could afford to save, and the more you could save, the more money you stood to make. Someone on the minimum wage couldn't dream of getting an SSIA; they got nothing, but when the billions of SSIA funds flooded onto the market in 2006, it was these people who suffered most from inflation running riot. At the time, there were various questions asked about the cost of SSIAs, or how effective they would be. There was very little discussion about whether it was right to introduce a scheme that gave government money to the middle classes and excluded the poor*.
2. SSIAs were very, very expensive. We aren't talking NAMA-levels of money, but the numbers weren't small. The total cost of the scheme was well over €2.5 billion; to put that into perspective, it would buy you 2.5 billion things in a pound shop**. That's €2.5 billion that could have been put into building schools, for example, and instead was spend on helping the middle classes build extensions. This is a lot, even before you consider the opportunity cost of the scheme. It was introduced, primarily, to reduce inflation; now, if there's too much money in circulation, the obvious way of dealing with the problem is to raise taxes. Quite what, say, an additional 1% on the top rate of tax would have generated is way beyond my ability to work out, but "more than nothing" is a fair guess.
3. Most tellingly; SSIAs were incredibly popular. The take up on this scheme, this wholly unfair, incredibly expensive and fiscally bonkers scheme, was in and around a million people.

It wouldn't exactly be fair at this point to lambast the people of Ireland for taking part in something so nasty. They were being offered free money, and there aren't many people who can turn that down. It's a fair bet that a huge swathe of the people investing in SSIAs would agree that it was a warped, inequitable scheme, but hey; it's not like refusing to take part would have made the blindest bit of difference, and if you've got a few kids to support then it would have just been short-changing your family for no real reason. Everyone else was doing it; the government were encouraging it, and telling you it was virtuous; if you didn't take part, then you would be left behind.

So, about bankers-

Hopefully, the parallels with Dem Baxtard Bankers are becoming more obvious. Bankers are just about the only professional group who are now less popular than politicians (apart from taxi drivers, who aren't so much a professional group as another species). There's now a story doing the rounds of Seán Fitzpatrick being asked to leave a pub after the rest of the clientéle objected to him being present***. Even Brian Lenihan got in on the act when revealing some of the figures behind NAMA, stating "Truly shocking... our worst fears have been surpassed. They played fast and loose with the economic interests of the country." The majority of the press joined in, with headlines like "THEY SHOULD BE SHOT" being pretty unambiguous in this regard.

And yet, being angry with bankers (and, to a slightly lesser extent, developers) seems to miss the point to a spectacular degree. I don't mean this in a hand-wringing "well we're all part of it" sense - which in this case, is academically true but completely unhelpful, like pointing out that the atoms in the Central Bank are as old as the atoms in Newgrange during a discussion about building conservation - but that we seem to be expecting morals from organisations that do not and cannot have any. Banks, like every other company, have to make maximum profit for their shareholders; they are forced to do this by law. Sure, these institutions are made up of individuals, but that's where the SSIA comparison is worth remembering. If you're a bank and you don't pull every trick in the book to vastly overinflate your balance sheet, then your competitors will, and then they'll wipe you out of the market. Individual morality doesn't work as a safety-catch, because we've specifically designed the market to eradicate it as a consideration. The only safeguard is the law, and while we denounce what the bankers did as "criminal", the evidence would suggest otherwise. Arrests are conspicuous by their absence; by and large, the law let them do what they did.

(As an extension of this argument - it might be satisfying to say that the Fitzpatricks and Quinns and McNamaras are all arseholes, and they probably are arseholes, but frankly, that's their problem. There will always be people in the world who are arseholes, and it wasn't Seán Fitzpatrick who created a system that rewards arseholedom.)

If the polar bears break out of the zoo and eat a four year-old, you don't blame the bears; you blame the zookeeper. On Tuesday, Brian Lenihan had strong words for the bankers, and the country concurred. In terms of hypocrisy, and chutzpah, and just the sheer... crapness of the man, this is extraordinary even by his standards. We're talking about a government who, over the last decade-and-a-half, systematically gave these people exclusive access to power; who drafted every piece of legislation, and made every economic decision, with the welfare of these people foremost in their thoughts; who threw themselves wholeheartedly into opulent banquets and the trappings of power, and gleefully forgot their responsibility to the rest of the country.

After the budget, Lenihan was frequently referred to as "brave" and, in one notable instance, as "a hero". On Tuesday, the Bravest Man In Ireland (TM) lambasted the bankers, and in so doing he quietly removed the requirement for himself and his colleagues to bear any responsibility. As the various parties debated the economic mistakes of NAMA, and the media embraced the line of a few reckless bankers, the pathetic little perpetrators melted happily from view. Every headline, or enraged blog, or spittle-flecked slice of barstool fury directed at a banker helps them get away with it. That's why we shouldn't fall for it. That's why we should all know better.

*But then again, this was 2001, when no-one was really poor. Well, some people were, but no-one important.

** Joke courtesy of Chris Addison. Never say I don't credit my sources.

***I should say that I've heard this from two separate people, but one of them was a taxi driver, so it's almost certainly not true.