FitzGerald: My regrets over crash are with me until I die
A LEADING member of the country's economic watchdog has told how he agonises over his own personal failure to foresee the economic collapse.
Professor John FitzGerald told the Banking Inquiry that he was completely wrong to claim, in 2008, that the foundations of the economy were "sound".
During at times emotional testimony yesterday, Prof FitzGerald said the Economic Social and Research Institute (ESRI) could have better alerted the government to the looming economic crisis.
"Not seeing the unsound nature of the banking sector was a bad mistake," he said, adding that he will feel regrets "until the day I die".
Prof FitzGerald was a leading figure in the ESRI in the years leading up to the financial collapse.
He said if he had properly scrutinised the balance sheets he would have determined that the banks were in trouble.
Asked by Sinn Fein TD Pearse Doherty about his statement in 2008 that the "fundamentals" of the economy were "sound", Prof FitzGerald said this was a mistake.
"It's a regret ... Not seeing the unsound nature of the banking sector was a bad mistake."
At one point during the hearing, Chairperson Ciaran Lynch intervened to inform members that Prof FitzGerald has expressed regret up to "10 times" and that the focus should be switched elsewhere.
The leading economist had earlier been asked by Labour senator Susan O'Keeffe whether he had considered resigning, to which he replied that he had not.
Prof FitzGerald said he was appearing in front of the inquiry in a personal capacity, pointing out that he retired from the ESRI in 2014.
Despite the warchdog's shortcomings, the inquiry heard of the repeated warnings of an inflated housing bubble and a series of risks facing the financial system.
The relationship between the ESRI and the Department of Finance became "frosty", the inquiry heard, as finance officials grew "upset" and "grumpy" at the ESRI's warnings.
But Prof FitzGerald was extremely critical of the Financial Regulator, which he said "fell asleep on the job".
He had warned the regulator of his fears - but he said the reply he got was along the lines of: "We got your warning, we think things are okay and that's the end of it".
"It seemed to me that they were brushing aside (these concerns)," he told TDs and senators.
He had written to the regulator twice in the first quarter of 2006 expressing his concerns about the economy's potential exposure.
His worry stemmed from knowledge about a number of Irish investors who wanted to invest large amounts of money in Poland.
He described how he became suspicious as one Irish bank had a branch in Poland where investors had "leveraged" large amounts of money for their investment.
The banking crash, he felt, could have been prevented by prudent fiscal policy and prudent policy by the central bank.
The property bubble got out of control between 2003 and 2007 and became "a tumour which grew and grew and squeezed the rest of the economy," he stressed.
The number of houses being built was running ahead of the population and people expected house prices to rise in the future, which made buying better than renting. This all led to the bubble.
Prof FitzGerald said it was impossible to identify when the bubble became irreversible and when a collapse became inevitable.
At the time, however, "the people of Ireland did not want to change."
"The information was out there. You couldn't miss what we were saying," he claimed.
The ESRI and the banking crisis
Despite the domestic housing market seizing up, ESRI said the external environment is "likely to be generally positive for Ireland in 2007 and 2008". "GNP per capita, the growth rate for 2007 and 2008 being 3.2 pc and 2.2 pc respectively," it said.
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