The fall of the “Mighty” Sean Quinn from Ireland’s (and Forbes-listed) richest man to one of the world’s most indebted individuals is perhaps the biggest story of Ireland’s boom-to-bust recent economic experience.
The latest developments leave Quinn bankrupt under Irish law, owing the Irish Bank Resolution Corporation (IBRC) – which rose from the ashes of bogeyman Anglo Irish Bank – a debt of more than 2 billion euros.
Quinn ultimately owes Irish taxpayers this money, as the government owns IBRC lock stock and (substantial amounts of GDP) barrel. To give you some perspective, this debt represents about 7% of the total tax raised from all sources in the Irish economy in a year.
Quinn had earlier attempted to walk away from the debt in the space of just a year by declaring bankruptcy under the amazingly lax system in the United Kingdom, where you can do so with a minor degree of proof of residence for a short period. In Ireland, he will now hold his bankrupt status for 12 years.
He can make a living, but it is not clear how. He cannot be a manager or director of a company, and what he earns will be largely handed over for his debts. And far from taking his private jet away on a whim, he will now need permission to leave the country.
The last roll of the dice for both parties is the series of legal actions over whether Quinn’s assets worldwide, and those held in the name of his wife and children, are fair game for recoupment of the debts. According to the Irish Times, his portfolio includes property on every continent and over 70 companies in 14 countries
In many respects the Quinn tale reflects the recent economic experience of Ireland more generally, only on a monumental scale.
Firstly, it demonstrates the stupidity of the financial dealings where, in effect, Anglo Irish Bank was lending billions to Quinn in order for him to gamble on derivatives and other financial instruments based on the bank’s own share price. This is the root of Quinn’s defence against the bankruptcy process – that Anglo was foolish to have lent the money to him in the first place.
This is no different to the experience of the many householders. Irish banks made available cheap and easily accessible finance to buy inflated housing assets, which are now falling in value by about 100 euros a day, and are down about 60% from the peak in 2008. Now that these assets are worth so much less, many families are underwater financially and are, as with Quinn, effectively bust.
The only thing certain about the Quinn story is that lawyers across the globe are going to get paid well. Less clear is whether Irish taxpayers ever will be. It is hard to see any realistic repayment that will recoup these debts.
The same is true for the thousands of mortgage holders in arrears and significant negative equity. A grand conundrum remains unanswered: are these reckless borrowers who deserve to be ignored by the government, or are they citizens – trapped in the slipstream of the dying boom – in need of rescue?
The inherent moral hazard of this issue means that the government has kicked this issue well and truly down the road, with little real progress on a policy to deal with it. Unfortunately the already under-siege Irish economy is going to have to face these debts at some point.
The rise and fall of Sean Quinn is a not-insignificant scalp for a public hungry to see someone pay for their actions. Quinn’s story is the story of many ordinary Irish families, whether they like to see it that way or not.