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11/22/2011

Book Review: Anglo Republic


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Anglo-Republic

Anglo Republic is the story of the remarkable rise and fall of the Anglo Irish Bank—once one of the fastest growing financial institutions worldwide, an in-depth review of how, "a small Dublin bank became too big to fail and too rotten to save—and how it dragged an entire country to the brink of bankruptcy." Anglo Irish had a spectacular rise on the Irish property boom, and an equally dramatic fall into eventual oblivion in 2008. Along the way, the Irish government and bank regulators, management, and board appear to have been largely oblivious to the bubble they were riding, and its end result. While the cast of characters may be unfamiliar to American readers, the book is a graphic chronological record of a bank failure, authored by journalist Simon Carswell, Finance Correspondent of the Irish Times. Carswell covered the Anglo Irish story throughout its peril.

This was clearly a group of positive thinkers according to the CEO, who said "we never employed people to tell us why we shouldn't lend." Wow. Anglo got high lending margins by fast response to real estate loan requests, and close relationships to the lenders. Property development became an even bigger part of the bank loan book. Anglo expanded into the UK and US doing "deals other banks wouldn't touch." As they recorded larger and larger profits, other Irish banks began to emulate what they viewed as a business model producing superior profits and growth success. The process was fueled by Ireland's tie to the Euro. This created a vast pool of money at low interest rates, which prompted the bank to lend long, borrow short. Anglo came to believe this process had no risk.

The boom became a self perpetuating treadmill. Rising land values created rising equity for developers to borrow more money. The bank used funds from the wealth management department to finance the real estate deals. Management and the board bought bank shares on borrowed money. The CEO, later chairman, borrowed over 100 million Euros for this, carefully concealed from required reporting. Ireland's then richest man, Sean Quinn, started buying Anglo stock. Quinn gambled to his demise, “increasing his holdings to 28 or 29 % at its peak during 2008." Fearful of the impact on the share prices, especially as it started to decline, Anglo made a series of loans to avoid Quinn's margin calls. In the end, Quinn owed Anglo 2.8 billion Euros.

Finally the Irish government guaranteed the Irish banks. This came to twice GNP, ten times the national debt. Then Ireland had to be rescued in an international bailout. The Irish public became very angry at the government—after years of enjoying the property boom.

Anglo Republic is very well written, keeping the reader's attention to an exceptionally detailed book, and reads as a thrilling non-fiction novel. As the first complete report on the Anglo Irish story, Carswell offers a stunning, yet instructive morality tale on property bubbles.

–Bill Hayes

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