Friday 20 April 2018

Banking inquiry: Cowen calls on Gilmore to withdraw charge of 'economic treason'

Daniel McConnell

Daniel McConnell

Former Taoiseach Brian Cowen has called on former Labour leader Eamon Gilmore to withdraw a charge of economic treason made in the Dail.

Mr Gilmore, while in opposition, accused Mr Cowen of economic treason by putting the interests of well-placed property developers ahead of the national interest.

Mr Cowen reacted furiously at the time to the charge, describing it as "beyond the pale" adding he would never accuse any other Irish man of what he had been accused of.

At the Oireachtas Banking Inquiry, Mr Cowen called for the charge to be withdrawn from the record, saying his acted honourably through his long career in politics.

Under questioning from Fianna Fáil TD Michael McGrath about Mr Gilmore's comments, Mr Cowen said he rejected the charge.

He said it was a matter for those who made the remarks to consider having them withdrawn.

"That is not correct that is not true I would like that stricken from the record. There is no evidence of that, there are no grounds for that," he said.

Earlier today, the former Taoiseach denied he “overruled” Finance Minister Brian Lenihan on the night of the Bank Guarantee.

Read Brian Cowen's opening statement here

Mr Cowen has told the Banking Inquiry that at the private meeting between the two that night, after which Mr Lenihan changed his mind “there was no question of our conversation being in any way adversarial or confrontational with each other.”

Mr Lenihan had been against a blanket guarantee for six banks before that meeting but subsequently changed his mind.

Mr Cowen emphasised today “We were talking the issue through. Both of us were deliberating with each other and striving to find the best course of action for the country at this point”.

He said he had explained his reservations to Mr Lenihan  and “reassured him that nationalisation (of Anglo and Irish Nationwide banks) was something that we could not rule out in the future”.

He said he told the Finance Minister it would remain an option.

“I also told him that a time limited guarantee seemed to me preferable than giving an open-ended guarantee which a full nationalisation would entail”

When the main meeting resumed “the representatives from the banks confirmed that the position was every bit as bad as the Government believed and immediate action was necessary to address what was happening.

“We were informed the money markets had decided that Irish banks were to be avoided”.

Mr Cowen also told the banking inquiry that letting Anglo fail was not an option.

Mr Cowen added that the four pillar banks were concerned about INBS and Anglo and without stating it openly “it was clear to me they wanted those two institutions nationalised and a guarantee to be provided for their institutions.”

He said while these two banks were finding it difficult to get money to keep going “There was certainly no indication from either bank that they felt they were in any way exposed to the extent and level that they believed the other institutions were.”

Mr Cowen gave substantial detail as to why he disagreed with Brian Lenihan on whether to nationalise Anglo Irish Bank that night.

 He was asked to respond to evidence given to the Inquiry by Central Bank Governor Patrick Honohan that he overruled Mr Lenihan.

 In response, Mr Cowen said: "It was a difficult situation. It was Wall Street 1929 stuff, volatile situation. There was no one right answer. It was a political judgement," he said.

 "I don't think it is an accusation, Governor Honohan said that is what Brian said to him and I don't have an issue with that," he added.

The former Taoiseach said he did not comment on the presentations  made by the banks but said they would consider their views and they left the meeting.

It was clear at this point that “all the banks were running out of cash and depending on the run rate, it could now be days rather than weeks.”

He added: “The liquidity problem was the essential initial hurdle that had to be jumped for us to have any chance of getting through the first stage of the crisis.

“The market was going to react to whatever initiative was put out there: our collective hope was that it would react the right way.”

Mr Cowen told the committee: “Eventually I put it to the table that it seemed to me that a full guarantee option provided the best prospects of addressing the urgent liquidity problem and of sending a clear message that Ireland was standing behind the financial system which would be understood by the markets.”

He stressed how “We hadn’t much room to manoeuvre. It would have the benefit of being an impactful measure which could solve the immediate and pressing problem.

“ It is my recollection that I then asked everyone could we run with a guarantee only approach in principle.

“There was agreement on that. Further details would now have to be worked out.”

Despite Government efforts to reassure the markets by the announcement in early December 2008 to support a €10bn recapitalisation programme for financial institutions “negative market sentiment towards Anglo continued” said Mr Cowen.

An important factor in the decision to nationalise Anglo was the concern that corporate governance issues could destabilise the bank itself and threaten the stability of the wider financial system, he said.

NAMA was set up to remove systemic risk to the Irish banking system, he explained.

In dealing with the downturn crisis “The Government took every remedial step it could to reduce the gap which opened up between what the Government was spending and what revenues were coming in” he said.

“We strove strenuously in the design of the four budgets we produced to spread the adjustment as fairly as possible.

“The four year National Recovery Plan we published in November 2010 formed a central plank of the EU/IMF financial assistance programme which has now been successfully implemented resulting in an exit from the Troika programme.

Mr Cowen admitted these measures were “highly unpopular" but said  they "were absolutely necessary as part of the process of bringing order back to the public finances since 2008 to date.”

The former Taoiseach explained that “Broadening the tax base, creating new sources of revenue and cutting back Government spending were essential features of our budgetary policy.

“Restructuring the banking industry was also a core objective of public policy.”

During this time “There was no change in my relationship with these two sectors (banking and property) from the time I was Minister through to my time as An Taoiseach.”he stressed.

Contingencies also had to be put in place if Anglo needed support the following day and the bank representatives were brought back to the meeting to discuss liquidity support for Anglo.

“My recollection is that their response was very cautious as it was a technical issue”

They went on to discuss what way the guarantee would be structured.

In relation to the senior bondholders he said “we decided that if these bondholders were disadvantaged by not being included, the system would end up relying exclusively on new bondholders to lend their money to the financial institutions.”

This could  drive away existing funders at a time when confidence in lending to those institutions was so low.

Given the uncertainty in the market it was also decided to include union bondholders as “we wanted to maintain maximum market access to the financial system.”

He remembered a drafting process for the working of the guarantee decision and Assistant General Secretary Kevin Cardiff voicing concerns about the draft working given by the banks as b being “to vague”.

Mr Cowen said that Alan Gray, the only outside person he sought advice from on the night of the guarantee, did not inform him that Anglo Irish bosses Sean Fitzpatrick and David Drumm called to see him hours before.

 Under questioning from Pearse Doherty, said Mr Gray did not make any mention of the decision of the two Anglo bankers to call on him to inform him of the bank's deep financial trouble on the day.

 Mr Cowen repeated that Mr Alan Gray, an economist and board member of the Central Bank, was the only outside voice he sought as to introducing the guarantee.

 "I hadn't my mind made up as to what we were going to do," he said.

 Mr Cowen said he didn't recall being lobbied by anyone calling for the introduction of the guarantee in the months before it happened.

 Mr Cowen said it came up in the context of if we had a system wide threat, but he said he had no one coming to him calling for a guarantee.

"I never discussed that with anyone in any of the banks about that," he said.

He said the financial community would have dealt with the Department of Finance.

Mr Doherty pressed Mr Cowen as to when was the earliest he remembered the idea of a guarantee being seriously considered.

"I was aware of the multitude of the options may be very early on, but I wasn't going around saying I can't wait to bring in the guarantee," he quipped.

When asked again, Mr Cowen said it was "April or May".

Mr Doherty also quizzed Mr Cowen about the golf game with Anglo bosses in July 2008 in Druids Glen.

He said it happened in the context of  the worsening economy.

"I was talking to Fintan Drury (former Anglo director), can we get a few people together to see how the country was going. He suggested he could get a few people together," he said.

Drury said to Cowen:  'Would you fancy playing a game of golf while you are doing it,' and Cowen responded by saying: 'Fair enough, I haven't played in a long time.'

Mr Doherty pressed him that his version of events stretched credibility that the state of Anglo Irish Bank wasn't discussed.

Mr Cowen said he couldn't be responsible for the conspiracy theories that other people engaged in, but said the informal get together was to discuss the economy not the bank.

"As God as my witness that is the truth,"  he said.

Irish Independent

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