The top executives of all three big banks operated in a similar spirit: they bought shares in their own companies right up to the moment of collapse, and continued to pay dividends, as if they had capital to burn. Virtually all of the big Irish property developers who behaved recklessly signed personal guarantees for their loans. It’s widely assumed that they must be hiding big piles of money somewhere, but the evidence thus far suggests that they are not. The Irish Property Council has counted twenty-nine suicides by property developers since the crash—in a country where suicide often goes unreported and undercounted. “I said to all the guys, ‘Always take money off the table.’ Not many of them took money off the table,” says Dermont Desmond, an Irish billionaire who made his fortune from software in the early 1990s, and so counts as old money.
The Irish nouveau riche may have created a Ponzi scheme, but it was a Ponzi scheme in which they themselves believed. So, too, for that matter, did some large number of ordinary Irish citizens who bought houses for fantastic sums. Ireland’s 87 percent rate of homeownership is the highest in the world. There’s no such thing as a nonrecourse mortgage in Ireland: the guy who pays too much for his house is not allowed simply to hand the keys to the bank and walk away. He’s on the hook, personally, for whatever he borrowed. Across Ireland people are unable to extract themselves from their houses or their bank loans. Irish people will tell you that, because of their sad history of dispossession, owning a home is not just a way to avoid paying rent but a mark of freedom. In their rush to freedom, the Irish built their own prisons. And their leaders helped them to do it.
JUST BEFORE THE closing bell, the two men who sold the Irish people on the notion that they were responsible not merely for their own disastrous financial decisions but also for the ones made by their banks arrive in the chamber: Prime Minister Brian Cowen and Finance Minister Brian Lenihan. Along with the leader of the opposition, and the third in command of their own party, both are children of politicians who died in office: Irish politics is a family affair. Cowen happens also to have been the minister of finance from 2004 until mid-2008, when most of the bad stuff happened. He is not an obvious Leader of Men. His movements are sullen and lumbering, his face numbed by corpulence, his natural resting expression a look of confusion. One morning a few weeks before, he went on national radio sounding, to well-trained Irish ears, drunk. To my less trained ones he sounded merely groggy, but the public is in no mood to cut him a break. (Four different Irish people told me, on great authority, that Cowen had faxed Ireland’s 440-billion-euro bank guarantee into the European Central Bank from a pub.) And the truth is, if you were to design a human being to maximize the likelihood that people would assume he drank too much you’d have a hard time doing better than the Irish prime minister. Brian Lenihan, who follows on Cowen’s bovine heels, comes across, by comparison, as a decathlete in peak condition.
On this day, incredibly yet predictably, the Parliament decides not to hold a vote to fill three of its four empty seats. Then they adjourn, and I spend an hour with Joan Burton. Of the major parties in Ireland, Labor offers the closest thing to a dissenting opinion and a critique of Irish capitalism. As one of only eighteen members of the Irish House of Commons who voted against guaranteeing the banks’ debts, Burton retains rare credibility. And in an hour of chatting about this and that she strikes me as straight, bright, and basically good news. But her role in the Irish drama is as clear as Morgan Kelly’s: she’s the shrill mother no one listened to. She speaks in exclamation points with a whiny voice that gets on the nerves of every Irishman—to the point where her voice is parodied on national radio. Now, when I ask her what she would do differently from what the Irish government is doing, even she is stumped. Like every other Irish politician, she is at the mercy of forces beyond her control. The Irish bank debt is now Irish government debt, and any suggestion of default will only raise the cost of borrowing the foreign money they now can’t live without. “Do you know that Irish people are now experts on bonds?” says Burton. “Yes, they now say one hundred basis points rather than one percent! They have developed a new vocabulary!”
As the scope of the Irish losses has grown clearer, private investors have been less and less willing to leave even overnight deposits in Irish banks, and completely uninterested in buying longer-term bank bonds. The European Central Bank has quietly filled the void: one of the most closely watched numbers in Europe has been the amount the ECB has loaned to the big Irish banks. In late 2007, with the markets still suspending their disbelief, the banks had borrowed 6.5 billion euros. By December of 2008 the number had jumped to 45 billion. As Burton spoke to me the number was rising, from around 86 billion to a fresh high of 97 billion. That is, from November 2007 to October 2010 the Irish banks have borrowed 97 billion euros from the European Central Bank to repay private creditors. In September 2010 the last big chunk of money the Irish banks owed to their bondholders, 26 billion euros, came due. Once the bondholders were paid off in full, a window of opportunity for the Irish government closed. A default of the banks would now not be a default to private investors but a bill presented directly to European governments. This, by the way, is why there are so many important-looking foreigners in Dublin dining alone at night. They’re here to make sure someone gets his money back.
One measure of how completely the Irish can’t imagine offending their foreign financial rulers is how quickly Burton declines to contemplate such a default. She bears no responsibility at all for the banks’ private debts, and yet when we creep up on the possibility of simply walking away from them, she veers away. Actually, she ups and leaves. “Oh, I have to go,” she says. “I have to meet the finance minister with the bad news.” Lenihan has called a private meeting with the opposition so that its leaders will be the first to hear of the draconian new Irish budget. This meeting is held not inside the Parliament, where the media can be kept at arm’s length, but in a nearby building where the media are allowed to congregate. “We tried to have it in here but he moved it outside,” says Burton. “He’s taken to bringing us in to tell us the bad news first, so that when we walk out we’re the ones announcing it to the media.” She smiles. “He’s tricky that way.”
BRIAN LENIHAN IS the last remaining Irish politician anywhere near power whose mere appearance does not cause people on the streets of Dublin to explode with either scorn or laughter. He came to the job just weeks before the crisis, and so escapes blame for its origins. He’s a barrister, not a financial or real estate person, with a proven ability to earn a good living without being bribed by property developers. He comes from a family of political people who are thought to have served honorably, or at any rate not used politics to enrich themselves. And, in December 2009, he was diagnosed with pancreatic cancer. Anyone who has been anywhere near an Irish Catholic family knows that the member who has had the most recent run of bad luck enjoys exalted status—the right to do pretty much whatever he wants to do while everyone else squirms in silence. Since news of Lenihan’s illness broke—just days after he’d learned of it himself, apparently, and before he’d told his children—he’s minimized his suffering. Running under the public opinion polls that show the Irish feel a lot better about the minister of finance than they do about other politicians in his party is a common, unspoken understanding of his bravery.†