Saturday 24 September 2016

'Guarantee in train hours before Cowen met banks'

Clodagh Sheehy

Published 25/06/2015 | 02:30

Kevin Cardiff attends the Banking Inquiry in Leinster House
Kevin Cardiff attends the Banking Inquiry in Leinster House

A press release announcing the bank guarantee was being prepared at least six hours before the end of the meeting on the night of September 29, 2008.

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William Beausang, assistant secretary at the Department of Public Expenditure, has told the Banking Inquiry that his email records show "that at 21.11pm I received a document intended to be a draft Government press release announcing the introduction of a guarantee for the domestic banks".

His evidence suggests he was involved in preparing the press release several hours before then Taoiseach Brian Cowen told Bank of Ireland and AIB, who were present at the talks that night, that the guarantee was to be put in place.

Mr Beausang said it appeared the document had been "authored earlier in the evening in the Central Bank in advance of the commencement of the meeting in Government Buildings.

"My electronic files show that I was subsequently involved over the next 20 minutes or so in preparing a revised draft of the statement, which set out its intended scope."

After preparing the drafts he waited in an ante-room for the main meeting to end and had no contact with any representatives of the banks. Asked by Senator Susan O'Keeffe why the draft was ready so early in advance, Mr Beausang said it was the nature of planning when any decision was made "you want to be ready to move on it".

He insisted, however, that the final press release had "completely different language" to his draft. He also said he was not aware of press release drafts for any options other than a blanket guarantee. Chief economist in the Department of Finance, John McCarthy, described an "over politicisation" within the department in the run-up to the economic crisis.

Mr McCarthy told the inquiry in his time in the department there were instructions given to people to take things out of statements because they were "too political".

"I would agree that there was some over politicisation" and these instructions had come "from beyond my pay grade within the Department".

Mr McCarthy said there were clear policy mistakes within the department before the crisis.

"We should have articulated our views more strongly but at the end of the day we advise, we are not the decision makers."

"There was a generalised failure - including by the department - to join the dots between the property market bubble and financial stability," he said.

Former Department of Finance general secretary Kevin Cardiff told how, in November 2010, when the Government was in discussions with the Troika, the International Monetary Fund (IMF) was saying it might make burden sharing with senior bondholders a requirement of any deal. Ireland was told that Dominique Strauss Kahn, then head of the IMF, believed he could get Europe and the US to agree to this.

There was even a hint through Mr Strauss Kahn that the secretary of the US Treasury, Timothy Geithner, "was showing himself to be a little bit in favour", said Mr Cardiff.

However, he added that, following a phone conversation, "the message we got back was exactly the opposite, very negative".

Irish Independent

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