Notes on the Front

Did anyone catch the curious symmetry?  On the day that unemployment, once again, shot up, AIB announced their half-yearly profits.  Two different worlds on this small island.

Not that there weren’t attempts to show that these different worlds are experiencing the same thing.  The Irish Times headlines:  AIB Profits Fall.  And the Irish Independent has it: AIB Set for First Earnings Fall in 17 years. Yes, there was that.  But let’s put this into context.  AIB’s profits for the first half of the year was €1.28 billion.  This compared to profits of €1.32 billion in the first half of last year.  A fall but only by a fraction – and given the changed financial landscape it’s hardly a fall worth mentioning. 

Of course, AIB senior executives had to make a finely nuanced presentation – suggesting difficult times ahead while saying nothing that would frighten the investors.  Hence, the dividend increase which fed into growing investor confidence (shares bounced after the announcement).  And the get tough line on expenditure – job losses (which were not really job losses but rather postponement of job replacements).  A rise in ‘criticised’ loans – loans which require increased scrutiny – but hardly any arrears from the 100% mortgages on their books.  If it was all a bit of smoke and mirrors, a bit of this and a bit of that, the bottom line remained – AIB is making a hell of a profit and the great taxpayer bail-out is being set up.

What’s that?  There are suggestions that the banks (or some of them) are preparing to ask the Government (that is, the taxpayer) to secure loans.  Essentially, the public is being asked to give the banks a guarantee for activity that they should be doing anyway – lending money.  This is of a piece:  when Bears went belly-up in the States, the Federal Reserve essentially guaranteed their dodgy asset book to facilitate a buy-out by JP Morgan (without the guarantee, Bears would probably have sunk bringing a ton of people with it).  Nice for JP Morgan who picked up shares in Bears for a rock-bottom price.  Likewise, UK banks have been lining up outside the Bank of England looking for similar public subsidies.  It’s the old ‘privatise profits, socialise losses’ gambit. 

There are no smoke and mirrors when it comes to unemployment, though.  While there are some slight quibbles as to the actual percentage out of work (is it 5.9% or 5.8% or 5.7% when seasonality is finally factored in?), the fact remains:  between January and May, the numbers signing on increased by an average of 5,000 per month; in the last two months that average has doubled to 10,000.

And whereas at the beginning of the year, it was mostly males in the queue (71 percent), in the last two months the majority of new signings on have been women.  All this suggesting that the construction decline has well and truly made it into other sectors of the economy.

And what do the unemployed get?  Unemployment payments well below the relative poverty line, Minister Hanafin putting them through a number of hoops just to get an insurance payment they have paid into, and little prospect of getting back into the workforce as the decline accelerates.  And this comes with a hefty price-tag to the taxpayers – €690 million by some estimates.

Still, be grateful for small mercies.  AIB maintain their profits, their shareholders get a higher dividend, share prices increase and, if they play their cards right, they’ll get a big fat subsidy down the line from a Government who jumps everytime the financiers say ‘boo’.  Again, paid for by the same taxpayers who are footing the jobless bill (and the real hoot is that some of those taxpayers are the unemployed). All that with no hoops to jump through.

God, you just gotta love capitalism.