Monday 24 October 2016

We are haunted by bankers' sins

Published 03/05/2015 | 02:30

Patrick Honohan
Patrick Honohan

The departure of Patrick Honohan from the Central Bank has provided Michael Noonan with another political headache. Mr Honohan may have been the source of some heartache for his political masters over issues as diverse as the new rules for mortgages and his announcement in 2010 of an imminent bailout, over which most of the then government appeared to be in a state of denial. However, he was, in the public mind, the archetypal good civil servant, who always put the public interest above the interests a political class which is far too anxious to serve a well-entrenched nest of vested interests. Good public servants of the calibre of Mr Honohan, who can make hard choices whilst retaining the trust of the public, can be very difficult to unearth... particularly when it comes to our domestic administrative elite.

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Mr Noonan's choice of replacement will be watched all the more closely, and be all the more critical, given the ongoing high profile of our banking system. The more intelligent wing of the Coalition will be acutely aware that, in an otherwise temperate political landscape, the past of our rogue banks and the consequences of that past is continuing to haunt the Coalition. Curbing the intractability of certain banking institutions over variable rates represents a real political challenge. Fine Gael and Labour need to find a way to teach our banking slow learners that the evolution of man, from Greek democracy through to the Enlightenment and mass democracy, was about creating the sort of state where banks serve the interests of the citizen - as distinct from the current barbarism, where the relationship of the citizen to the bank is that of a Mexican share-cropper. It will not be an easy task.

The danger that the ongoing backwash of our bankers' sins poses to the Coalition is encapsulated by the performance of a banking inquiry, which is so legally circumscribed, it sometimes appears to be the case that the man with a placard shouting in the street has more powers. Last week's cross-examination of Mr Trichet, where our inquiry supplicants were allowed to briefly disturb the equanimity of the inhabitants of the top table, did little to dispel such concerns. This was a hurried, unsatisfactory event, where questioning was conducted without benefit of oath or the discretion for anything other than the most minimal exploration of the issues.

Unsurprisingly, the denouement consisted of a series of unresolved contradictions. Mr Trichet has emphatically denied that he phoned Brian Lenihan three days before the bank guarantee to insist that the Irish government save its banks at all costs. The deceased Mr Lenihan claimed the opposite. Mr Trichet also denied the claim that he told the current Coalition that a bomb would go off in Dublin via the withdrawal of ECB liquidity if some bondholders were burned in March 2011. Finance Minister Michael Noonan has consistently said that his desire to inflict losses on senior bondholders in 2011 was thwarted.

The credibility of the banking inquiry will be defined by its capacity to resolve these differences. Those who believe that, like fairy tales, all inquiries end well, should take note of the fate of the Mahon Tribunal. In the case of the Coalition, the capacity of the banking inquiry to avoid a similar denouement is a defining test of the health of the democratic revolution. Given that inquiries finish in the manner that they start, the omens are not good. Mr Trichet's performance did not improve them.

Sunday Independent

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