AN inquiry into the circumstances surrounding the 2008 banking guarantee is to be held. Judging by the previous inquiries we've had, I wouldn't expect too much in the way of actual action against those directly involved, though previous inquiries (Moriarty, Morris, and Mahon being prime examples) have produced lots of paper and generous lawyers' fees as less than useful by-products.
What should the scope of this inquiry be? What should be asked of the people likely to be involved in such an inquiry? And what gain, today, will there be from the findings of any inquiry?
First we should understand that the Government intends to alter the nature of how inquiries are conducted in Ireland. The present system was reviewed in 2003 and 2005 by the Law Reform Commission, which reported on the extremely slow and costly nature of some inquiries, and proposed a series of reforms the Government is likely to enact in any change.
Regardless of the specific type of inquiry the Government decides to use, the crucial decisions will be around the inquiry's terms of reference. These terms of reference set the ground rules for the inquiry, they define its nature and scope, and ultimately the boundaries of what can be considered by the inquiry team. Normally the government minister responsible for setting the inquiry up decides its remit.
Let me suggest that the minister asks the people of Ireland for input into this process via social media and other public fora. This would give the process an instant legitimacy, and fulfil the promise of transparency and open government that the Government was elected on.
In 1966, the The Salmon Royal Commission on Tribunals of Inquiry wrote: "It is essential on the very rare occasions when crises of public confidence occur, the evil, if it exists, shall be exposed so that it may be rooted out: or if it does not exist, the public shall be satisfied that in reality there is no substance in the prevalent rumours and suspicions by which they have been disturbed. We are satisfied that this would be difficult if not impossible without public investigation by an inquisitorial tribunal."
I think it's clear that any inquiry of our banking collapse should fulfil this function. One way to stop the 'rumours and suspicions' is to open the terms of reference and scope of the inquiry to the people.
In a speech describing the run-up to the crisis, Brian Cowen wrote: "If we are to learn from the crisis it is necessary to understand why many of the actions taken seemed sensible at the time. This is not as a basis for defence but as a guide to understanding and all involved need to approach this in an open way." I agree 100pc with him. (Yes, I'm as shocked as you are.)
What should be asked of those likely to give evidence? First, rather than tackling the nature of the decision to guarantee the banks' assets and liabilities, let's focus on the information those in power had at their disposal running up to that fateful decision.
What advice existed, given by whom, and how was that advice taken? What advice wasn't taken? Why? We know quite a bit about the advice given to the government thanks to the work of the public accounts committee in 2011.
We know that in this advice, for example, in late 2008, loan losses in Anglo Irish Bank were estimated at between €7.5 and €8.5bn. This would have meant Anglo was insolvent on the night of the guarantee, yet it was treated as being solvent by the Irish and European authorities. Other advice clearly shows that those giving that advice thought a blanket guarantee made no sense at all.
Yet Brian Cowen, in his speech, talked about the need to "... deal with this crisis in real time. Our view at the time was that we would get one shot at calming the markets."
An inquiry should clearly map out who knew what, and when, and how much they trusted that information. Crucially, the inquiry should uncover whether, and perhaps why, those in power went against the advice on the night.
I don't expect heads to roll as a result of this inquiry. This is Ireland, after all. But perhaps one thing we can do is finally cap our experience of the guarantee, perhaps contain some of what Michael Noonan calls the 'toxic language' we've grown accustomed to in recent years: bondholders, IBRC, promissory notes, Anglo, the bank guarantee; all of it.
Perhaps an inquiry will help us to disinfect the national psyche of these obsessions, to move forward, at least partially, from that awful night.
Dr Stephen Kinsella lectures in economics at the University of Limerick