Saturday 1 October 2016

'We could see the world was collapsing, not just Ireland' - How NTMA execs locked out of bank guarantee talks watched TV next door

Clodagh Sheehy

Published 22/04/2015 | 18:09

NAMA CEO Brendan McDonagh
NAMA CEO Brendan McDonagh

A team from the National Treasury Management Agency were ignored in discussions on the night of the Government Bank Guarantee.

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

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”.

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. 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, Padraic 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 this decision 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 understood later Mr Lenihan had gone home to get some rest before the press conference  organised for 6.45am in the morning.

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.

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 Deputy Pearse Doherty if they had questioned Mr Beausang about what was going on, Mr McDonagh said they had asked him 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.

He had not had an opportunity to say so formally but he believed that senior officials in the Department of Finance would have been aware of the view of himself and some of his colleagues on the issue.

Earlier the NAMA chairman mounted a strident attack on boom time property developers who rarely put cash into their projects and left the banks with 100pc of the losses.

The Inquiry also heard that NAMA hopes to be able to pay an estimated surplus of €1bn to taxpayers by 2020, the Banking Inquiry has also been told.

To date fewer than five of NAMA’s 772 debtors have repaid their loans in full, NAMA chief executive Brendan McGrath revealed.

Mr Daly in his evidence accused big borrowers during the boom  used paper profits from other developments as equity for new loans.

“In effect the banks were providing all of the real cash funding for both acquisitions and development”, he added.

Both Mr Daly and Mr McDonagh agreed they were “shocked” by the extent of the bank loans when NAMA began its work.

 “ I would contend that if Nama had not reduced its debt as expeditiously as it has, Ireland could have been in a second bail out as market concerns about the contingent liability would have been very real.”

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