Monday 24 October 2016

Banking Inquiry: Government lobbied by bankers for guarantee

Daniel McConnell and Clodagh Sheehy

Published 19/06/2015 | 02:30

Kevin Cardiff at Leinster House, Dublin, yesterday to appear at the Banking Inquiry. Photo: Gareth Chaney /Collins
Kevin Cardiff at Leinster House, Dublin, yesterday to appear at the Banking Inquiry. Photo: Gareth Chaney /Collins
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Significant leading banking and business figures lobbied the Government and its senior officials for a guarantee in the months before September 2008.

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In evidence to the Oireachtas Banking Inquiry, former Secretary General Kevin Cardiff, revealed under oath that among those arguing for a guarantee were former Finance Minister Charlie McCreevy and businessman Dermot Desmond.

Mr Cardiff also told the inquiry that he and Finance Minister Brian Lenihan argued against a blanket bank guarantee on the night of September 29, 2008.

He said Mr Lenihan later changed his mind on the matter, having spoken to the Taoiseach.

He said allowing Anglo to fail, as had been proposed by Central Bank Governor Patrick Honohan in his earlier evidence, would have been too dangerous to contemplate.

He said that banks, AIB and Bank of Ireland, arrived with a draft guarantee document, which was "not even one page long".

"Yes the banks did seek the broad guarantee. They did supply a draft, only one version, and yes they provided additional documents relating to the guarantee," he told inquiry members.

He said the Taoiseach did not present a paper to support his argument for a broad guarantee on the night of the guarantee.

"The Taoiseach said: 'Look lads, we need a good broad solution that has a real chance of changing the sentiment around Ireland'. So I took that to mean a broad guarantee," he said.

In relation to the guarantee papers presented by the banks that night, he said it was his feeling that AIB were more over it than Bank of Ireland.

But he said it was one, short, document which originated with the banks and not the Government.

Asked if he remembered the Taoiseach banging a table saying: "We are not f**king nationalising Anglo," Mr Cardiff said he did not remember that being said.

"It would be a lie to say that I never heard the Taoiseach used the F-word, but I don't remember that specific, that specific turn of phrase," he said.

In his evidence, a confident and calm Mr Cardiff, who is now Ireland's representative at the European Court of Auditors, also said Ireland was "pushed quite hard" into the 2010 Troika Bailout by external forces.

He said some of this pressure was direct and transparent, but there was also misinformation and media leaks which accelerated market pressures. He said back-door briefings by external forces were clearly inappropriate.

On burning bondholders, Mr Cardiff said the Government was blocked in 2010 by the ECB and US Treasury Secretary Timothy Geithner and others from burning senior bondholders.

The IMF under Dominique Strauss Khan was in favour but his intervention elicited a strong negative reaction. It was formally Ireland's decision not to bail out bondholders but they had no option, he said.

He said that day the ECB did a lot more than "give advice".

Significantly, he also said Irish Life and Permanent was set to run out of money the following Thursday, give or take a day.

In relation to the lobbying, Mr Cardiff said several people, including Sean FitzPatrick, Dermot Desmond, and Charlie McCreevy, suggested the introduction of a guarantee some months beforehand.

The inquiry heard, that the end of April 2008, Mr FitzPatrick, then Anglo chairman, suggested some form of guarantee to John Hurley.

Then on May 3, Mr McCreevy suggested a form of political guarantee.

In early September, Mr Desmond rang Mr Hurley to suggest a guarantee might have to be considered. It was also suggested by Irish Life & Permanent chairman Gillian Bowler and Bank of Ireland chief Brian Goggin.

Irish Independent

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