Information is coming to light too late but important themes are emerging
Potential benefits have been lost due to the delay in setting up the inquiry, but we now know some things we need to fix, says Stephen Donnelly
Holding the banking inquiry in year five of this Government means a lot of relevant information is coming to light too late. Nonetheless, testimony in recent weeks points to big lessons we can and must still learn. The challenge is overcoming our own political Catch 22. And the public nature of the inquiry might just be the thing to do it.
In his famous book, Joseph Heller describes a logical bind - the fictional World War II airmen of the 256th squadron could be excused from flying deadly missions if they were deemed to be crazy. But the very act of seeking to be excused from flying was taken as proof of sanity - and so back into danger they went. Recent evidence at the banking inquiry highlights weaknesses in our political system that led to the crash. Our Catch 22 is that these same weaknesses make it difficult to implement the required changes in the first place.
Had a banking inquiry been set up in 2011, benefits might have accrued in at least three important areas. First, the role of the ECB could have been explored. Did it force the guarantee? Did it apply inappropriate pressure to pay bondholders? Did it exceed its legal mandate? Any evidence would have greatly strengthened Ireland's case for burden sharing. Instead, the bondholders have now been paid in full and the 2012 'seismic shift' on retrospective recapitalisation is a faded memory.
Second, poor lending practices could have been investigated. Evidence would have backed up calls for an approach to the mortgage crisis that properly balanced the needs of borrowers and lenders. Instead we got Fine Gael/Labour's hands-off approach consigning hundreds of thousands of men, women and children to unnecessary hardship.
Third, the importance of more open government, coupled with a strong parliament to balance the power of cabinet, could have been clearly demonstrated. This might have been a catalyst for meaningful reform, in line with the 'democratic revolution' we were promised. Instead, secrecy and a further weakening of parliament have become the norm. One prominent manifestation of this culture is the fiasco of Irish Water.
Not setting up the banking inquiry in 2011 is an example of our political Catch 22 - a weak parliament failed to stand up to a cabinet acting against the best interests of the country. The political calculation was to haul the ghosts of Fianna Fail past back into the public arena a few months before the next election. It's probably worked at a political level - Brian Cowen, Bertie Ahern and many more have been across our TV screens again, and we have been reminded of the damage done. But the cabinet acting like this means important information is being discussed several years too late. A weak political system reinforces its own weakness.
So how do we overcome this bind? Much of the potential benefit relating to the ECB and the mortgage crisis is simply gone. And we're not going to see any serious political reform in this Dail. But there are at least some big themes emerging from the inquiry that should point us to the sort of changes that must be pursued.
One such theme is the need for a stronger parliament. The plan was to remind everyone of the failures of Fianna Fail - but last week something else happened too. An Taoiseach Enda Kenny appeared before the inquiry, to answer for his time as leader of the Opposition during the bubble. It turned out not to be the cakewalk that had been anticipated. Fine Gael's role, in opposition, should have been to call out the danger of what Fianna Fail was doing - but they did not. In fact, they tried to out-Fianna Fail them, promising bigger tax cuts and higher spending increases. The Taoiseach pointed out that the ability of the Opposition, and parliament more generally, to hold the Fianna Fail cabinet to account was hampered by a culture where deals were done in secret and necessary budgetary information was withheld.
This culture has not improved under Fine Gael/Labour, with many concluding that it's actually become worse. However, the public seem to have had enough, and are demanding that the Irish parliament play a stronger role, and act more responsibly in that role. In fact, such is the appetite for this that it was widely agreed Enda Kenny actually came out of the inquiry worse off than Brian Cowen.
A related theme is the need for more open and transparent government. The inquiry members have spent many hours piecing together various events relating to the bank guarantee. Who was in and around the Department of Finance doling out advice? What bankers said what to which government ministers? What was, or was not, discussed on the golf course? These questions have been asked before, but the nature of the public hearings is really driving home the culture of secrecy and access for special interests.
Again, it's hard to see how this culture has changed under Fine Gael/Labour. In this Dail, we've already got several commissions of investigation looking into this Government, be it on sending civil servants to Garda Commissioners in the middle of the night, or the sale of IBRC assets. Late Thursday evening at the banking inquiry, evidence by former IBRC Chief Executive Mike Aynsley contained the latest grenade. He declared that a Department of Finance official told IBRC of a desire that a 'named Irish business person' was not to be sold further assets. Mr Aynsley further alleged that the official accepted it would be acceptable to sell such a future asset for €100m less than could be got for it in order to keep such an asset away from this business person. This is not how you run a modern government.
A third theme emerging from the inquiry concerns the danger of short-termist fiscal management. The inquiry team have spent a good deal of time looking into the sorts of budgetary decisions that led to such an unstable tax base. This message has come from many sources over the past few years, but hearing it in the specific context of the economic collapse is particularly powerful. This Government has widened the tax base, but as we approach the pre-election Budget, it's clear that tax breaks are back on the table, targeting potential Fine Gael voters. And yet, from outside Leinster House there are growing calls for a national conversation on fiscal priorities - people are becoming wary of the usual auction politics.
With the rest of Leinster House shut down, the banking inquiry is gaining attention. While much of the potential benefit was squandered by holding it so long after the event, significant benefit could still be realised when it comes to modernising how the country is run.
Our political system is unlikely to simply fix itself, largely due to the very weaknesses in it - a culture of secrecy and a parliament that doesn't balance the power of the cabinet. However, the public nature of the inquiry hearings might just be acting as a catalyst for growing public demand for meaningful change - and that might just be enough to kick-start a programme for change that the political system simply doesn't appear capable of doing on its own. We'll see.
Stephen Donnelly is a Social Democrat TD for Wicklow and East Carlow