Friday 24 February 2017

Heads must roll, says Jim Mitchell

Jody Corcoran

Jody Corcoran

THE chairman of the Dirt scandal inquiry has called for heads to roll as a result of his committee's damning findings and has clearly indicated that the Governor of the Central Bank should be the first to consider his position.

THE chairman of the Dirt scandal inquiry has called for heads to roll as a result of his committee's damning findings and has clearly indicated that the Governor of the Central Bank should be the first to consider his position.

Adopting his strongest position to date since the publication of his committee's scathing report last week, Mr Jim Mitchell yesterday significantly upped the ante by unambiguously stating that resignations would now have to follow.

He told the Sunday Independent that it was not his place to say who should resign.

He added that he was ``shocked and horrified'' at the ``careless and reckless'' manner in which Governor Maurice O'Connell had allegedly quoted false statistics to the Public Accounts subcommittee.

Mr Mitchell also said that a central plank of Mr O'Connell's argument that to act on the bogus non-resident accounts would have led to a flight of capital was shown to be ``fundamentally flawed''.

Asked if he thought that Mr O'Connell should resign, Mr Mitchell said it was a ``matter for the authorities to decide''.

But he added that what he could say was that the Government's habit of appointing senior Department of Finance civil servants to the position of Central Bank Governor should be discontinued.

``My strong personal view is that in the future we need independence of thought and action at the Central Bank,'' he said.

Mr Mitchell said that Mr O'Connell and his predecessor, Maurice Doyle, have told the Public Accounts Committee that at the time under review, between 1986 and 1998, inflation was running at between seven and 21 per cent.

Mr Mitchell said: ``The fact is that in this period, inflation was never at more than four per cent. I think the Governor of the Central Bank was careless and wrong to state what he did.

``This, in my own personal view, was the sort of lethargic analysis that was being applied to the question of Dirt. That is to say, there was no rigorous analysis.''

He added: ``This was something which shocked and surprised me. To quote statistics in the manner in which he did, Mr O'Connell and Mr Doyle actually shocked and horrified me. It was careless and reckless, quite appalling.''

Mr Mitchell's subcommittee found that bogus non-resident accounts were breaches of Exchange Control and the Central Bank took no action.

The subcommittee found that Exchange Control could have had a role to play in tackling the problem of bogus accounts.

The Central Bank had responsibility for defending the exchange rate in its protection of the integrity of the currency.

The subcommittee found there was no evidence that the Central Bank ever built economic models of capital movement, currency speculation or currency crises that incorporated the demonstrated immobility of bogus non-resident accounts for exchange rate policy purposes or for regulatory purposes.

The subcommittee found that the ``flight from disclosure'' hypothesis was recognised within the administrative system and that there was also empirical evidence to support the hypothesis. The possibility of using Exchange Control in an attack on the problem was examined and was rejected.

It found that the constant intrusion of the capital flight theory into discussion of the problem was inappropriate. ``The more relevant hypothesis was not capital flight but flight from disclosure and flight from taxation tax evasion.''

The subcommittee found that there was no evidence given to support the view that the Central Bank was engaged with deposit-takers in working out the problem of bogus non-resident accounts. The evidence suggested that the bank saw itself as having no role in tackling the problem.

It found that the Central Bank had an ``inappropriate and outmoded'' approach to supervision, given the growing sophistication of banking and the changing role of banks in society.

There was an ``insufficient concern'' with ethics and supervision, other than from the standpoint of a traditional and narrow concern with prudential supervision in the Central Bank.

The subcommittee found that the bank knew of the problem. ``It was, with the other two agencies, Revenue and the Department of Finance, conscious for an extended period before and after the introduction of Dirt of the existence of evasion.''

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