PATRICK Honohan took a bit of a battering at the Dail's Finance Committee last week. The Governor of the Central Bank emerged from the encounter no longer the tribune of a people struggling for a saviour to lift them out of the banking morass. Last Wednesday, Honohan was exposed as a mere mortal.
Admittedly, some TDs have scores to settle with the TCD professor. Back in 2010, was it not he who rang RTE to spill the beans on his political masters? Did he not tell the nation that we were being hoodwinked by Fianna Fail ministers about the imminent arrival of the Troika at the door of the Department of Finance?
That was Patrick's finest hour. Last Wednesday was one of his worst. He spent much of his time with the TDs sounding like an apologist for the Government.
Independent Central Bankers are only of value if they are prepared to challenge governments, both publicly and privately. That is why Patrick was appointed by the late Brian Lenihan. He has integrity and independence. A long, but rotten, tradition was broken when he arrived at the fortress in Dame Street, the first Governor not to be plucked from the ranks of senior mandarins, deeply embedded in the doctrine of the Department of Finance.
At the outset of the proceedings, the professor explained that his biggest domestic problem was mortgage arrears while his major international headache was the Anglo promissory notes. He proceeded to give little comfort on either topic, mostly mimicking the Government's stance.
Perhaps the Government is so enamoured by their bearded protegee that they take his advice without question. Perhaps, but the evidence from the Committee is that it might be the other way round. Has the TCD professor finally been captured by the same mandarins whose nose was so out of joint when he was appointed? Sir Humphrey gets everybody in the end.
Sean Fleming, the financially literate Fianna Fail TD from Laois-Offaly, set the tone when he asked Honohan about the mortgage arrears nightmare. He seemed to surprise the Governor when he warned of the sword of Damocles hanging over the banks' balance sheets in the shape of the unspoken underprovision for the collapse of house prices.
Fleming was tackling a taboo. Silence is the normal response to anyone unhelpfully exposing the biggest elephant in Ireland's financial firmament. The banks and the Government have been turning a blind eye to the mortgage timebomb ticking away on the banks' balance sheet. While the banks are slowly addressing individual cases, they have been happy to pretend that their overall provisions for writedowns are adequate, hoping that a rise in the price of property will rescue them from a second Armageddon.
So far they have been diabolically lucky: despite compelling anecdotal evidence to the contrary, no one can conclusively actually prove that property levels are lower than the banks are pretending.
There is so little activity in the market that property prices are a movable feast, making the bankers' underprovisions for write-offs impossible to disprove, even if they lack an iota of credibility.
Fleming made an awkward, but telling, point. At the end of March, the Government is due to be given a pretty objective nationwide valuation of all domestic properties. God help them, wearing their financial stability hat, that is the last thing the great pretenders want. The conspiracy between the Government and the bankers could be unmasked.
Fleming wanted to know what Honohan was going to do when the Revenue Commissioners had done their dirty work, valuing every house in the State for the purposes of the wretched property tax.
Fleming suggested — and he is undoubtedly right — that many of the taxman's property valuations would be far lower than the banks have provided for in their balance sheets. If the Revenue Commissioners are right, the bankers' figures will be exposed as wildly optimistic. Their provisions will be found wanting, their balance sheets will be in tatters. Fleming wanted to know what Honohan was going to do to prevent this impending disaster?
Honohan's response would have done Michael Noonan proud. Sticking his head firmly into the political sand, he waffled: "The deputy has asked a very interesting question with a number of dimensions."
He referred back to the 2011 stress tests and the capital adequacy measures taken at the time. Meaning, of course, the money stuffed into the banks to prevent their collapse. Unfortunately, house prices have tumbled further in the last two years.
Honohan tried to anticipate the lethal direction of Fleming's questions. He replied complacently that the Revenue Commissioners "will not necessarily map across in any direct way to provide new information that would surprise or alter our view as to the amount of capital needed by the banks".
The dreaded word "recapitalisation" never passed his lips. Yet that is where Fleming's questions were leading. Was Honohan facing up to the unpalatable, that the banks will soon need yet more capital?
More dangerous was the unspoken question: where was the new capital to come from? Would the Troika be revisited? Or worse still, would the taxpayer be milked again?
He promised fresh stress tests in October. He promised that the Central Bank would not be ignoring the Revenue Commissioners' work. It was merely one of many factors. He sounded every inch the politician. He has learned the art of the smokescreen.
Fleming proceeded to ask about the Anglo promissory notes. After a robust exchange, he was cut off by the chairman, reduced to protesting that he had been subjected to "five minutes of waffle".
Fleming's fears were supported on Thursday when Standard & Poor's reported that Irish banks will need more capital. The credit ratings agency specifically fingered mortgage loans as putting pressure on banks' balance sheets. Hopefully, Honohan read the report.
Perhaps the line of questioning was just the wily Fleming being awkward? Not so. He was followed by Fine Gael's Kieran O'Donnell, an equally numerate TD. In reply to O'Donnell 's questions on the Anglo deal, Honohan replied that "I do not want to say anything that will be parsed and analysed different to what the Minister for Finance has said".
Why not? Honohan was chosen to do exactly that.
Mr O'Donnell shared the growing frustration at Honohan's replies. On mortgage arrears, he accused Honohan of failing to force action on the banks. In unparliamentary language, he declared that "Professor Honohan needs to get off the pot".
The distinguished academic has probably not been addressed in such terms since he was in nappies.
Deputy Peter Mathews followed, refusing to take Patrick a prisoner, but instead sinking the knife deep into the former hero's heart. He challenged Honohan's upbeat forecasts for the banks, referring to the "swamp" in which they were stuck, but then bluntly declared: "I do not believe Professor Honohan." Sinn Fein's Mary Lou McDonald accused the committee's distinguished guest of "fudging".
Just like a politician.
No one extracted an ounce of information from Honohan until Richard Boyd Barrett pressed him on the consequences of Ireland refusing to pay any senior bondholders this year. The reply was illuminating.
While Honohan insisted that there would be unspecified "drastic consequences", he went on to admit that (for once contrary to the propaganda peddled by his political masters), "the ATMs would not be closed".
Did he let the cat out of the bag? Perhaps we should try it after all.