'I fought the good fight, but hell was at the gates'
FEW could have predicted the financial nightmare Brian Lenihan walked into in May 2008; and over the next two years and eight months, he would be forced to make some of the most momentous decisions ever sanctioned by an Irish Finance Minister.
After 15 years of a Celtic Tiger boom, the Irish economy was sinking fast. The property bubble had burst spectacularly and would soon also threaten to sink Ireland.
The Department of Finance, together with the Central Bank and the National Treasury Management Agency (NTMA), had begun to plan for a banking crisis in the months before Mr Lenihan's arrived. They considered how they might cope with a run on a bank or even worse, the collapse of one of Ireland's banks, and by September that is exactly what Mr Lenihan was dealing with.
Once Lehman Brothers filed for bankruptcy in New York, it sparked panic across the financial markets and the reverberations would be felt dramatically on this side of the Atlantic.
Anglo Irish Bank, the financial institution that had lent most money to developers for the past decade, was under pressure. It was rapidly running out of money and worried customers were beginning to take their money out of this and other Irish banks. The extent of the panic among deposit-holders was aired on RTE Radio 1's 'Liveline' show, when caller after caller rang to tell Joe Duffy how they were moving their deposits into prize bonds or putting it under the mattress as they feared they would lose everything when the banks collapsed.
Officials at the Department of Finance were quickly inundated with calls from the public and soon Mr Lenihan was on the phone to RTE director general Cathal Goan to express his outrage about the programme.
He was trying to calm the situation and prevent a run on a bank. He knew the banks were all under enormous pressure although he still didn't know just how bad things were.
Over the coming days and weeks, Mr Lenihan met all of the bank chiefs to discuss the problem. Anglo's now infamous boss Sean FitzPatrick and Irish Nationwide boss Michael Fingleton were desperately trying to save the institutions they had controlled for decades but were running out of money.
By September 8, Goldman Sachs told Mr Lenihan that Irish Nationwide would run out of funds in 11 days. At the same time, officials were monitoring how much money was leaving Anglo five times a day to gauge how close to the edge of the cliff it was.
The Lehman collapse had spooked everyone. There was no appetite for letting another financial institution fail for fear it could destabilise the entire global economy.
But as the Irish banking system was under siege, the Government resorted to drastic measures.
Mr Lenihan and his officials had talked about introducing a blanket guarantee to cover all of the banks' debts as a means to steady the ship, although Merrill Lynch, which was advising the department, told them it could be a mistake. But as Anglo was dying on its feet, its problems were already undermining the two big Irish banks, AIB and Bank of Ireland, and it wasn't long before their chiefs came to see the minister.
Late on September 29, AIB chairman Dermot Gleeson and the bank's chief executive, Eugene Sheehy, together with the Bank of Ireland governor Richard Burrows and its head Brian Goggin arrived at Government Buildings to persuade the government to protect them.
They were coy enough about disclosing just how bad things were in their own banks but were adamant the government should nationalise Anglo and Irish Nationwide and to guarantee the debts of the other Irish banks. Within a few hours, they got their way.
At 6 the following morning, Mr Lenihan called the French finance minister, Christine Lagarde, who was chairing the EU finance ministers, to tell her in perfect French of the government's decision.
She replied something like "Oh gosh," he has said, as the shock of the scale of the Irish Government's response to the crisis sank in. It was guaranteeing debts of more than €400bn -- a decision that would cripple the State. And it had done it without knowing the extent of the banks' problems.
Mr Lenihan famously described the bank guarantee as the "cheapest bailout in history" and stoutly defended his actions that night in the face of trenchant criticism. He was afraid the ATMs would run out of money, he said. It was an "emergency" situation. But rather than securing the Irish banks, the problems intensified.
As part of the banking solution, Mr Lenihan also oversaw the establishment of the National Asset Management Agency (NAMA) a so-called bad bank that would take the toxic assets from the beleaguered banks to work them out over a 10-year period. It, too, proved to be a highly controversial decision, with critics remaining sceptical of the effectiveness of its role.
As well as striving to fix the banks, the minister was grappling with the biggest crisis in the public finances in the history of the State. While his predecessors had massive Budget surpluses to play with, Mr Lenihan's lot was to deliver some of the toughest Budgets in the past two decades.
After a severe Budget in November 2008 Mr Lenihan promised there was no more bad medicine in store, but the following May he introduced a supplementary Budget, cutting more government spending and raising more taxes. And all the while the government's mountain of debt ballooned. He would go on to deliver four Budgets -- one more austere than the next -- during his short reign.
In January 2010, when he was announcing the latest Exchequer figures, Mr Lenihan said he was bringing "a positive message of hope and confidence about Ireland".
The government had stabilised the national finances, taken tough budget decisions and was winning increased confidence from investors, he said.
But as ardently as he wished this to be true, the Irish State itself was now almost bankrupt. For months, the government denied we would need a bailout.
Senior ministers and even then Taoiseach Brian Cowen were rubbishing suggestions that the country was on the financial brink.
Mr Lenihan eventually said Ireland would need "some sort of external assistance" to address those problems. The man who would lead these negotiations said he felt "no sense of shame" to be fighting in the country's best interests.
But this was an unenviable task for any Finance Minister and Mr Lenihan recently spoke of his sense of deepening horror as the country was locked out of the bond markets and had no option but to seek an €85bn bailout.
"I have a very vivid memory of going to Brussels. . . being on my own at the airport, looking at the snow gradually thawing, and thinking to myself: this is terrible," he said in an interview with the BBC.
"I had fought for two-and-a-half years to avoid this conclusion. I believed I had fought the good fight and taken every measure possible to delay such an eventuality. And now hell was at the gates," he said.
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