Monday 25 September 2017

Hurley cuts a sad figure at Banking Inquiry

John Hurley
John Hurley

Shane Ross

Gone were the chauffeur, the gofers and all the other trappings that used to surround the human powerhouse of the civil service. Gone were the hangers-on, once mandatory for the top mandarins. Gone, too, were the sense of entitlement, the lofty disdain that the elite once exuded when confronted by the elected.

The unremarkable little man who sat alone at the Banking Inquiry on Thursday cut a sad figure. Grey suit and grey hair added to his insignificance. You would never look twice at him in a gathering of accountants or solicitors. He would melt into any crowd. Yet John Hurley, former governor of the Central Bank, is anything but insignificant in the history of Irish banking. His humble stature disguises grim reality.

Hurley has been invisible of late. He retired from the Central Bank in September 2009. He has hardly surfaced since. Anyone observing his long day at the inquiry on Thursday might have wondered what sort of a pittance this poor creature, a leading actor in Ireland's financial ruin, was living on. The answer needed a bit of digging. In the end, the Central Bank provided the information.

"Governor Hurley's final salary, excluding the taking of the voluntary 10pc reduction that commenced in November 2008, was €410,087 per annum (€369,078 after voluntary reduction).

"Superannuation terms attached to governor Hurley's salary in 2009 were in accordance with the terms of the Civil Service Superannuation Scheme, yielding a lump sum on retirement of €615,130.50 and annual pension of €205,043.50. Governor Hurley's pension has been reduced by Financial Emergency Legislation and is currently €163,551.36 per annum."

No doubt, he will receive a refund under current Haddington Road negotiations.

Governor Hurley did not look like the last of the big spenders on Thursday, but in the good old days, he earned more than the current chairman of AIB, Pym the Pauper.

Hurley initially received four grand a week as a pension. Today, it is down to €3,100. He will not be able to spend more than €450 a day, unless he dips into his €615,000 crock of gold, the farewell present given to him on retirement in recognition of his service to the State.

John Hurley has done the State no service. The State has served John Hurley.

Hurley rose through the ranks of the civil service to the surprise of many colleagues. He led a charmed life, landing the job as secretary general of the Department of Finance in 2000 after catching the eye of Taoiseach, Bertie Ahern. From there, he ascended to the throne of the Central Bank, as all sec gens of the finance department automatically used to do.

He is the ultimate anonymous mandarin. The Central Bank's culture suited him. There was always something of the dark about the Central Bank. It has improved under Patrick Honohan, but its oxygen has always been secrecy.

It hid behind the old chestnut of "commercially sensitive" information. Its press office made complaints about unwanted - and supposedly unpatriotic - publicity. So, it was useful to see the curtain slightly opened by Hurley on Thursday.

Hurley delivered a carefully crafted defence of his 2002-2009 tenure in Dame Street: the original fault lay with the 2003 Central Bank Act. The Central Bank's powers had been divested to the new financial regulator, an "autonomous body" given responsibility in the offending act for the key area of prudential regulation.

On page one of the former governor's script, the lethal parcel of responsibility for regulation had already been passed. Or, as TD Joe Higgins said, the governor " dumped" on the regulator. The boss was free; his powers had been wrongly removed; the impostors who inherited them must be asked the awkward questions this week when deposed regulator, Patrick Neary, arrives.

Hurley vigorously denied that he was pointing the finger at anyone. He defended his stewardship vigorously. He had always believed, with others, that there would be a soft landing. His quarterly financial stability reports had warned of the property bubbles, the high level of credit growth, the likelihood of an external shock, but the Central Bank had faith that, in the years before the crash, the inevitable rise in interest rates would cool the market. Indeed, as early as 2004, they had been proactive in persuading the government that property tax breaks should be phased out. The government responded in the 2006 Budget.

It was a feeble defence. His entire strategy was based on the nonsense that the Central Bank, deprived of the poisoned chalice of financial regulation, dealt only with the macro stuff. The financial regulator, not he, had to slum it down in the micro-management of the banks. It would have been wrong for the Central Bank to stray into the territory of the regulator. With the benefit of hindsight, perhaps they should have been more vigorous, but hindsight...

Hurley resisted challenges from Michael McGrath, Michael Darcy, Pearse Doherty and Eoghan Murphy about his assertion that he had no power to intervene. The appearance on the inquiry's screen of the part of the Central Bank Act allowing an intervention by the Central Bank in setting principles and policies failed to faze him.

He ploughed on through the morning session, sticking to the same mantra. He even relied on the old canard that it was the "interaction" of the Irish property market with the collapse in the US ( God bless the global fall guys at Lehman Brothers) that caused the disaster. He blamed the "principles-based" supervision, but it was in accord with the philosophy of the time. He demanded that the Central Bank's performance should not be judged on today's framework but on the basis of "the orthodoxy which applied at the time".

His half-admissions of fault were almost insulting. He regretted, but never apologised. It was all a matter of degree. "In hindsight," he uttered grudgingly, "the response of the Central Bank, and indeed all other agencies, would have been more robust if it had foreseen the scale of the events that were to unfold."

He blamed the European Central Bank, the Federal Reserve, the forecasters in the Department of Finance, the Economic and Social Research Institute, banks and stockbrokers.

All the thieves and knaves, the usual suspects of the financial world were dragged down with the drowning Central Bank chief.

Reminders of dissident voices like Alan Ahearne, David McWilliams and Morgan Kelly were brushed off by the star witness. Hurley talked out the morning session with sickening self-justification.

The afternoon slot, billed as the highlight, was a damp squib. The mandarin was in his comfort zone, explaining the comings and goings of the night of the bank guarantee.

He added little to the story, assuring the questioners that the nationalisation of Anglo was believed to be too risky, that Brian Cowen had not overruled Brian Lenihan on the Anglo issue, that subordinated debt was included in the guarantee by consensus.

He made the evening of high drama sound dull, asserting that decisions were made after all options had been considered. He even described the activities as " well-organised".

I doubt that. But does it matter a hoot? On RTE's Late Debate on Thursday evening, economist Cormac Lucey rightly debunked the fascination with the night of the bank guarantee. It may be good theatre, already the centre of many dramas, but the actual event is far less relevant than the years of mistakes, greed and governance failures which climaxed that night.

While the high jinks in Merrion Street on September 29, 2008, may have spawned volumes of fact and fiction, it is the causes of the systemic problems of the years leading up to that day that are far more important.

John Hurley was one of the principal players in those years. After Thursday, we are unlikely ever to hear from him again.

Another big player of the banking collapse has escaped with a lump sum and a fat pension.

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