Friday 15 December 2017

Banking Inquiry: Economist David McWilliams says collapse was 'absolutely preventable'

David McWilliams
David McWilliams

Clodagh Sheehy

The banking crisis and property bubble were both "predictable and absolutely preventable", economist and broadcaster David McWilliams told the Banking Inquiry today.

Mr McWilliams said that many ordinary people could see what was happening and they were "forced to play a game where the dice is loaded against them."

He did not believe the country was taken by surprise and described the housing market at the time as a "scam funded by overlending".

The bank guarantee and the bailout  were "all the consequences of pathetic policy in 2008"he added.

The Irish banking system and by extension the Irish economy was set up to fail, said Mr McWilliams.

"I saw this earlier than anybody else and spent best part of a decade trying to warn as many people as possible"

He felt that as someone with a speciality he had "something like a patriotic duty or moral imperative" to say things were going to lead the country into "catastrophe".

Mr McWilliams added he believed that hundreds of thousands of ordinary people would end up in negative equity, debt, in a situation where their lives would be destroyed and would end up being the people to pay.

The economist said the crash was "inevitable because of the way in which the banks were financing themselves".

The "panic of September 2008 did not have to happen.  It was not anything that was pre-ordained and it could have been fixed very early."

He described the bank guarantee and the bailout as "the consequence of bad economic policy, not the cause.

Mr McWilliams insisted that the banking crisis had begun in 2000 and the destruction of the Irish balance sheet had happened before 2008 "that's the rub".

He compared the crisis to a forest fire which had been set by a pyromaniac - in this case the banks.

The forest was the general economy and the firefighters were the regulators who at first looked and said it will blow out.

When it engulfed not just the forest but the village beside it the elders, the politicians had to use everything at their disposal to try and put it out.

The banks had started the fire by giving credt and when they ran out of deposits, they borrowed other people's money - from France and Germany - "to give us money to buy houses"

Light touch regulation meant you were almost guaranteed the baking system would implode.

He said Irish people were different.  Normally when house prices rose demand fell but in Ireland the opposite happened and people panicked and bought more.

Asked by Chairman Ciaran Lynch  if he ever thought before the bust that he could have been mistaken, Mr McWilliams replied: "No in fact I became increasingly certain".

Asked if anyone in Authority ever consulted him in the run up to the crisis he  said : "no not one, never once was I asked for my opinion, formally or informally."

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