Our new kick-ass financial regulator

The arrival of Matthew Elderfield a.k.a. The Financial Regulator a.k.a. The Regulator a.k.a. The Sheriff of Dodge City has been universally heralded by the media and political establishment as the second coming of Christ. Well, the Christ of ledgers, calculators and informal speeches at the Financial Services Ireland Conference anyway.

At a time when public sector workers and government are almost uniformly pilloried in the press, this hyperbolic enthusiasm for a single high profile public servant appears all the more unusual.

The regulator is presented as the singular solution to the crisis that resulted from Ireland’s unique version of capitalism. The “straight-talking” “no-nonsense” gunslinger is portrayed by the media much as your typical Hollywood Western hero might be written into a script. The “polite, occasionally diplomatic, but mostly just blunt” former Chief Executive of the Bermuda Monetary Authority “rode in to clean up the town,” firstly “disarming the critics with his openness” before “shooting straight from the hip.”

The use of the metaphor is pervasive. While some journalists don’t directly refer to him as the sheriff, they apply common idioms that resonate similarly. We are told Elderfield “sticks to his guns” and “takes-no-prisoners.” The enemies he has been tasked with “eliminating our beloved banking bad boys,” the country’s formerly “untouchable” financial gangsters.

Unlike “his hapless predecessor” he has no interest in winning friends: “No doubt he will not now be wined and dined by the Irish Bankers Federation.” Displaying only his keenness to break-up the “cosy relationship” previously enjoyed between regulators and bankers.

Other journalists have taken to using strikingly religious overtones: Elderfield is a “ray of hope” who’s enemies invariably “bow” to him. One notable headline read: “The Gospel according to Matthew.” The irony of which wouldn’t be lost on Nobel prize winning economist Paul Krugman who described the driving ideology behind financial deregulation since the Reagan era as “free-market fundamentalism.”

The man himself is described in much the same way successful businessmen like Michael O’Leary and Sean Quinn are portrayed in the kind of articles found in Sunday newspapers – the ones which pay tribute to their tumultuous careers. Quinn for instance is portrayed as a “man from humble beginnings who has created a multi-billion-euro empire,” “a doughty opponent of establishment monopolies.” In 2007 Quinn invested €570 million in Anglo Irish Bank, the “anti-establishment” bank. Quinn, we are told, made “business buzz” (The Quinn family currently “owe Anglo Irish Bank €2.8 billion”).

Similarly, Elderfield is painted as an unassuming character, a “slightly gangly, ever-so-polite Englishman called Matthew,” with a “toothy smile and mild manner.” He is described as wearing a “well- cut grey suit, light blue shirt and quiet striped tie.” If a journalist wanted to stress the point they might say he is “tall, fit, tidy, polite and perfectly groomed.” Yet beneath this reserved exterior lies “a man who means business,” he is not afraid to “flex his muscles” in public, but prefers to “talk-quietly-and-carry-a-big-stick.”

Highlighting this fanfare is not intended to undermine the importance of financial regulation, after all there is little point having laws if there is no responsible person around to enforce them. It is simply an attempt to understand why the media can be so easily worked into a fever about certain things and, in this case, certain people.

One of the principle aims of regulation, aside from oversight, enforcement and prosecution, is to maintain confidence in the financial system. What better way for a government to overturn a crisis of legitimacy, in itself and the financial system that bolsters it’s power, than by restoring public confidence in that system?

The media too could be seen to be taking advantage of a prime opportunity to shirk the record of the last decade, where it failed to take the worlds of politics, banking and business to task over their intrinsic “irregularities“. A history that is peppered with embarrassing moments of deference to power, such as the Irish Independent’s hard hitting interview with the now disgraced Sean Fitzpatrick, where the question was asked “If you had a spare million?” to which he answered quite proudly “I’d do something for the homeless; provide day-time facilities.”

With that in mind, the idolisation of “Sheriff Elderfield” begins to make sense. The appointment and support of Elderfield, does much more than “show the world that the wild west of European finance has been tamed and is now a safe place to invest and do business,” it effectively provides a new facade behind which the business of politics can go on unchanged.

The only wing of the establishment to make official grumblings on the occasion of his appointment was the financial sector, who are, understandably, concerned about the implications of someone potentially applying the rule of law as it is written.

More recently ruminations from government have surfaced, albeit from rather more forthright party members. Fianna Fáil TD for Cork East Ned O’Keeffe addressed the Dáil in the last weeks saying: “There is nothing worse than overregulation. It brings further mischief, contempt and blackguardism because people will find their way around it. We have seen that occurring.” A blunt reminder of the “tacit discouragement” of regulatory “determination and tenacity” by senior politicians in the preceding decade.

Journalist and broadcaster Matt Cooper responded to this inversion, seemingly without irony: “He seems to think so little of those who run Irish banks, and by extension the Irish mentality, that he believes they would concentrate on beating, bending or breaking the rules rather than doing the right things.” A strange statement from a journalist who has not been shy to voice condemnation of Irish banking, referring to “arrogance“, “recklessness” and “criminality” as their principle economic contributions.

On the other hand Noam Chomsky has described the history of financial regulation, in broadly similar tones to Krugman, as a continual effort by business to undermine the regulatory apparatus, such that it is inevitably overtaken by the systems it is designed to regulate:

“The deregulation mania of the last 30 years, based on fundamentally religious concepts about efficient markets is gone… So there will be reconstruction of some regulatory apparatus, but the history of this is pretty clear and understandable. Regulatory systems tend to be taken over by the industries they regulate. It’s natural, they have concentrated power, concentrated capital and enormous political influence.” [Noam Chomsky in interview with Paul Jay, The Real News Network]

This “deregulation mania” was obviously not an American phenomenon. As Krugman writes, “the most striking similarity between Ireland and America was “regulatory imprudence”” driven by ideology. An ideology that led the formerly popular figure Sean Fitzpatrick to pronounce, “There are those who appear to want to establish Ireland as the perfect model in corporate policing and regulation . . . But why? What has been done here over the past decade that demands such a reaction?” at none other than the Irish Times Property Advertising Awards 2005.

We are again beginning to see hints of this again – the regulator’s move to put Quinn Insurance into administration was followed by large scale public and private lobbying of government ministers, the mobilisation of thousands of workers to protest and what amounted to a coordinated PR barrage against the regulator in the press. The obvious question arises: If the country was not embroiled in the current economic predicament and if public awareness did not extend to the complexities of insurance solvency ratios would these protests have been met differently by both press and government?

Enda Kenny the leader of the opposition has also recently cautioned “against an over-regulation of the property sector,” in response comments made NAMA’s chief executive Brendan McDonagh, who told an Oireachtas committee the agency would go after developers “tooth and nail” for debts.

Further afield the warning signs are growing, Paul Krugman commented this week: “after taking a big hit in the immediate aftermath of the crisis, financial-industry profits are soaring again. It seems all too likely that the industry will soon go back to playing the same games that got us into this mess in the first place.”

It’s quite clear then, no matter whether your Financial Regulator chews tobacco, looks good in a Stetson or walks on water, as appointed representatives they remain susceptible to the influence of higher powers.

Not until the structure of our economic and political institutions and the ideological orthodoxy that underpins them are challenged will we ensure history does not repeat itself. The media for their part have shown an unwillingness or inability in this regard.


[Title courtesy of Will Hanafin, ‘Thank the banks for really great villains‘, Sunday Independent, 25/04/10]

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