DUBLIN, Ireland — In the middle of its worst-ever financial crisis, Ireland has found an unlikely new hero, who has secured that status partly by facing down one of the country’s most popular business tycoons.
The latest national icon is Matthew Elderfield, an Englishman recruited last year from Bermuda, where he was financial watchdog, to become Ireland’s Financial Regulator. His mission could be defined as ending Ireland’s crony capitalism — otherwise known as “light-touch” regulation.
Last week Elderfield shocked and delighted the nation by giving something of a tongue-lashing to bankers while appearing before a parliamentary committee in Dublin. The main focus of Elderfield’s testimony was his decision two weeks ago to appoint a receiver to one of Ireland’s largest insurance companies, the Quinn Group, because of doubts about its solvency. (In Ireland a receiver keeps a company operational while trying to find a buyer.) Elderfield's move sparked an uproar of the kind that in the past might have forced a retreat.
Sean Quinn is a popular entrepreneur who has created more than 6,000 jobs in a deprived border area. Quinn wrote angry letters to government ministers, and his workers, fearful for their jobs, staged several demonstrations. But on Thursday he raised the white flag of surrender when the High Court in Dublin confirmed Elderfield’s decision to take over the company.
Sean Quinn’s basic problem is that he owes 2.8 billion euros ($3.8 billion) from the collapse of Anglo Irish Bank, a debt that caused the company to breach solvency rules. Anglo Irish Bank is at the center of Ireland’s banking catastrophe, which stems from the irresponsible and greedy acts of a golden circle of bankers, politicians and developers during the property bubble that lasted from 2000 to 2008. Several bankrupt property developers have debts in the billions and the government is pumping up to some 22 billion euros of taxpayers’ money into Anglo Irish to keep it from collapse.
The administration has set up the National Asset Management Agency (NAMA), to buy 80 billion euros worth of bad loans from the Irish banks, using government bonds that can be converted into cash by the European Central Bank. The chief executive of NAMA, Brendan McDonagh, is also emerging as a white knight in the war on cronyism.
McDonagh, a plain-spoken native of County Kerry, is displaying a candor to which the once-cozy world of Irish finance world is not accustomed. He castigated the banks for a “reckless abandonment of basic credit risk and prudent lending.” McDonagh also earned popular acclaim for declaring war on the previously rich who have transferred their palatial homes to spouses to avoid seizure.
The reaction to Elderfield's first public appearance since he took up his post in January has been a national sigh of relief that at last full openness has come to corporate Ireland.
Independent Senator Shane Ross, a trenchant critic of Ireland’s bankers, said “the important thing is that he isn’t in the pocket of the government or anyone else.”
Elderfield lectured the politicians on how the boards of Irish banks and insurance companies need to raise their game. He dismissed claims that he was being heavy-handed and acting in haste against the insurance company, saying he gave Quinn every chance to “show me the money.”
(An unnamed director of the Quinn Group told the Irish Times, “The regulators held all the cards. Pennies dropped across the whole system.”)
Elderfield, a veteran of the United Kingdom's Financial Services Authority, will in future veto the appointment of directors to the boards of Irish banks, a mechanism in the past for enriching members of the financial elite. His English accent and no-nonsense approach represents something of a cultural transition in Ireland, made possible by public outrage at the antics of local bank directors, and the feebleness of past regulators. He takes over an office in shambles, mainly due to lack of staff.
Labeled the “Sheriff of Dodge City” by Labour politician Sean Sherlock, Elderfield told the Irish Senate he needed up to 350 more deputies for his financial investigations. In the current climate, the government dare not turn him down.