Saturday 22 July 2017

NTMA team was left watching TV on night of bank guarantee

Clodagh Sheehy and Ailish O'Hora

A team from the National Treasury Management Agency (NTMA) was ignored in discussions on the night of the government bank guarantee.

Despite being in a room next to the talks for four hours in Government buildings on the night of September 29, 2008, the NTMA representatives were never consulted.

Brendan McDonagh,chief executive of NAMA, arriving for the Oireachtas Banking Inquiry meeting at Leinster House yesterday. Photo: Tom Burke
Brendan McDonagh,chief executive of NAMA, arriving for the Oireachtas Banking Inquiry meeting at Leinster House yesterday. Photo: Tom Burke

Brendan McDonagh, now head of Nama, but who was Director of Finance at the NTMA at the time, described to the Banking Inquiry how himself and a colleague were left in an adjoining room from 9pm-1am and only told about the guarantee when the decision had been made.

"We didn't know what was going on. We were not part of the discussions," he said.

His most abiding memory of the night was being left in this room, which had a portable TV in the corner stuck on CNBC showing the Dow Jones Index had fallen by 700 points.

"We could see the world was collapsing, not just Ireland," he added.

Mr McDonagh said he had arrived home from work at about 7.45pm that night and got a phone call from Kevin Cardiff, Secretary General of the Department of Finance to come in to Government Buildings.

He said Mr Cardiff would not explain why he was being called in. Mr McDonagh was called because others in the NTMA were away on business. He said himself and NTMA colleague Oliver Whelan arrived at Government Buildings at 9pm and were shown into a meeting room.

William Beausang, assistant Secretary General of the Department of Finance, was in the room with a representative from Arthur Cox, Padraig Ó Riordáin. They were not told anything until Mr Cardiff came into the room at 1am and said the government had decided to give a bank guarantee.

Asked by inquiry chairman Ciaran Lynch if they were aware that a bank guarantee was being worked out in an adjacent room, Mr McDonagh said: "No."

He said he was "surprised because I suppose there was no substantive discussion before that. It just seemed such a big decision."

He said that it was his personal view that the banks were insolvent on the night of the bank guarantee. He explained that the NTMA had been giving technical assistance to government from mid-September 2008 onwards and while "there was a lot of discussion going on about additional funding to the banks but there was no discussion around a bank guarantee".

Mr McDonagh said when they were told at 1am, they were then part of a discussion as to how it would be explained to the money markets when they opened at 7am.

Taoiseach Brian Cowen and Attorney General Paul Gallagher were still there but Finance Minister Brian Lenihan had left, as far as he could remember. He had not seen him, he said.

He understood later Mr Lenihan had gone home to get some rest before the press conference organised for 6.45am.

Mr McDonagh said he had a technical discussion on one issue with Mr Cowen, which "lasted about 90 seconds".

This related to whether or not overseas subsidiaries of the Irish banks should also be included in the guarantee.

Sceptical

Mr McDonagh and Mr Whelan left the building between 3.30am and 4am. The former NTMA Finance Director felt it was "very telling" that the press release announcing the guarantee made no mention of the NTMA.

Asked by TD Pearse Doherty if they had questioned Mr Beausang about what was going on, Mr McDonagh said they had asked but his recollection was that Mr Beausang did not know.

He said he personally had been sceptical about the business model of Anglo Irish Bank and Irish Nationwide Building Society in the run-up to the guarantee.

Mr McDonagh said he met Mr Lenihan with colleagues several times afterwards to help design the structure of the guarantee. He said Mr Lenihan had never expressed any reservations to him about the guarantee.

 

The night of September 29, 2008

How the night of September 29, 2008, played out according to current Nama chief Brendan McDonagh:

7.45pm

Brendan McDonagh - who was the director of finance at the National Treasury Management Agency (NTMA) at the time - arrives home from work. He receives a phone call from Kevin Cardiff, secretary general of the Department of Finance, to come to Government Buildings immediately.

9pm

Mr McDonagh and his colleague Oliver Whelan from the NTMA arrive at Government Buildings and are shown into a meeting room.

William Beausang, assistant secretary general of the Department of Finance, is also present in the room.

9pm - 1am

Nobody comes to tell any of the people in the room why they are there and what is expected of them. Their opinion is not sought on any issue, according to Mr McDonagh

1am

Mr Cardiff comes into the room and announces the decision to implement a bank guarantee.

1am - 4am

Mr McDonagh and Mr Cardiff are involved in discussions about how the guarantee will be explained to the money markets when they open at 7am.

4am

Mr McDonagh and Mr Cardiff leave "to prepare for the opening of the markets".

Irish Independent

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