Some home truths from the Governor
Published 10/04/2015 | 02:30
The Governor of the Central Bank, Patrick Honohan, has given an overview of the Irish financial crisis to an influential conference in Paris, setting out what he see as the facts, the partial facts and the myths associated with the financial collapse and the subsequent bailout.
Mr Honohan lays the blame squarely with the directors and managers of the Irish banks, saying that it was their "unrestrained and reckless behaviour" that destabilised the economy and public finances.
As we face into a crucial phase of the Banking Inquiry in the coming weeks, Mr Honohan says that with greater prudence by the boards of these institutions, the property-fuelled bubble could not have happened.
However, while the behaviour of bankers may have been reckless, it was "unwise rather than criminal" and he calls for legislation to be strengthened to take account of what he calls "egregious recklessness in risk-taking by those who were in charge of failed financial firms".
While this is of little use to us now, it must be worth noting for the future.
Addressing what he calls the 'myths' surrounding the financial crisis, he debunked the theory that the bailout caused the recession. "The economy had already pretty much hit bottom by the bailout," he says.
He also stoutly defended the government's belated decision to call in the EU-IMF consortium to fund the Irish economy. Without it, the Irish government "would have had to constrain spending suddenly and drastically" and we would have had to withdraw from the euro.
As sectors of the economy boom again, it is worth noting that, seven years on, there is little, apart from bitter memories, to preclude Ireland from going down the boom-to-bust road once again.
It is perhaps a little late for the Governor to lay all the blame at the doorstep of the banks and, to some extent, borrowers, particularly property developers.
After all, we did have a Central Bank and the Financial Regulator and, while he admits they were ineffectual, it does not absolve them from a fair share of blame for a crisis they could and should have prevented.