Sunday 15 December 2019

Bombshells, brickbats and banter at inquiry

Ahead of the Banking Inquiry report publication today, Clodagh Sheehy picks out the highs and lows of the evidence

Former Taoiseach Brian Cowen
Former Taoiseach Brian Cowen
Finance Department secretary general Kevin Cardiff. Collins Dublin, Gareth Chaney
Inquiry chairman Ciaran Lynch
Brian Lenihan’s former adviser Cathy Herbert
Former Financial Regulator Patrick Neary

Clodagh Sheehy

From keys thrown across boardroom tables to secret breakfast meetings before golf and frantic attempts to stop the country tumbling over the financial cliff, the revelations of the Banking Inquiry have ranged from the predictably mundane to the totally bizarre.

Details of serious decisions have been tempered with the images of the Central Bank Governor Patrick Honohan cowed by a carpeting from Brian Lenihan, or the picture of Anglo staff hiding customers in back rooms so a queue would not form outside their doors.

Although the committee was hindered by legal constraints, the evidence, littered with deep expressions of regret, gave some insight into the crisis.

The big issues

Former Taoiseach Bertie Ahern was pleased "that I did get a lot of things right" although he apologised for his mistakes and said: "If hindsight was foresight, I'd be a billionaire." He conceded that while he did not get everything right during his three terms as Taoiseach, he could "honestly put my hand on my heart and say I did try my very best to do the right thing by the Irish people".

Brian Cowen, as former Taoiseach and Minister for Finance, defended the bank guarantee but admitted "as minister, I should also have been more doubting, more questioning by challenging the broad consensus of opinion that had developed on these matters".

He insisted he never discussed banking or Anglo's impending collapse during an infamous golf outing at Druids Glen just months after a catastrophic collapse of Anglo's shares. Despite playing golf with Anglo boss Sean FitzPatrick and bank non-executive director Fintan Drury, Mr Cowen said there was never any "material discussion" about Anglo.

Evidence from Gary McGann, former non-executive director at the bank, later revealed that the group which included Mr McGann had a meeting in Mr Drury's house before the golf game.

Late Finance Minister Brian Lenihan was "suspicious" of the banks but could not determine if they were deliberately misleading him or just inept, his former special adviser Cathy Herbert told the inquiry.

Warnings of criminal sanctions were given to former Finance Minister Charlie McCreevy, when he refused to answer a question about the property bubble. The warning, by chairman Ciaran Lynch, came after a 17-minute suspension of the session to seek legal advice.

Asked if, with hindsight, he should have heeded the warnings from the Central Bank about excessive growth and overheating and been more cautious in taxation and spending, Mr McCreevy said "No".

"A country where no one was in charge" was how Klaus Regling, MD of the European Stability Mechanism, described Ireland, saying lack of banking supervision was "the bottom line".

The burning of bondholders at the time of the economic crisis was effectively stopped by ECB boss Jean-Claude Trichet, said former Finance Department secretary general Kevin Cardiff. The bank guarantees for subordinated debt were "clearly a mistake", said former Central Bank governor Patrick Honohan and the Irish taxpayer could have been saved a lot more "if subordinated debt was left out of the equation".

Finance Minister Michael Noonan confirmed he had been put under pressure by ECB President Jean-Claude Trichet not to burn the bondholders. In a phone call from Mr Trichet, which he said "rattled" him, Mr Trichet told him if bondholders were burned "a bomb would go off".

Mr Noonan had been going to announce the plan to the Dáil but decided against it after the phone call. "I thought the risk was too high. You have to make decisions like that as minister."

Ireland ignored European Commission warnings about the economy overheating, said Marco Buti, head of the Commission's Economic and Financial Affairs.

Ajai Chopra, the man who designed and monitored Ireland's rescue plan, accused the ECB of pushing Irish public debt higher than necessary. The former deputy director of the International Monetary Fund said this had happened because the EC and ECB often put euro-wide concerns "above what is appropriate for the individual member State even when this resulted in higher Irish public debt".

A "dispiriting experience and utterly valueless" is how David Begg, former general secretary of the Irish Congress of Trade Unions, described meetings with the Troika.

Mr Begg, who is also a former non-executive director of the Central Bank, added: "My impression of the Troika was of an uncaring technocracy of neoliberal zealots devoid of empathy".

Former financial regulators were all sorry for what had happened. Patrick Neary was deeply sorry the supervision was not sufficient to meet the challenges posed by the banking crisis. He blamed the banks for a primary role in the crisis as they were "best placed of all to assess their own risks and business models". John Hurley accepted "the Central Bank's share of responsibility for what occurred".

The first of the major apologies to the Irish people came from former AIB chairman Dermot Gleeson, who confessed his bank had lent too much to individual developers who said controls were not "savage" enough and "we have to take the blame".

Bank of Ireland Group chief executive Richie Boucher also apologised and said while his bank did not need a guarantee, the errors it made were "similar in some or all respects to those made by virtually all banks operating in Ireland" during that period.

When it came to political party leaders, Taoiseach Enda Kenny laid the blame for the economic crash firmly on the Fianna Fáil-Green Party coalition government.

Tánaiste Joan Burton blamed reckless bank lending that fed the property bubble which was inflated by "extraordinary" property-based tax breaks for the wealthy. Light-touch regulation "facilitated the banks in their reckless behaviour", she added.

The inquiry refused to let former Anglo Irish Bank CEO David Drumm give evidence by video link from the US, where he is fighting extradition proceedings back to Ireland. They also refused to publish his statement.

A team from the National Treasury Management Agency was left in a side room watching a portable TV on the night of the government bank guarantee, former NTMA director of finance Brendan McDonagh told the committee. "We could see the world was collapsing, not just Ireland," he added.

Light moments

Former Central Bank governor Patrick Honohan told of being reprimanded by Mr Lenihan for announcing the bailout on RTÉ's 'Morning Ireland' programme ahead of the minister.

He ended the phone call with Mr Lenihan "with my tail between my legs", he admitted

Anglo Irish Bank staff rushed to usher customers off the street into back rooms to avert a run on the bank after the collapse in bank shares in March 2008, according to Peter Fitzgerald, the bank's former director of Corporate and Retail Treasury.

"We were moving customers that called to our savings branches off the street and into meeting rooms in the back of the building to avoid precipitating a crisis by people seeing a queue outside the bank on St Stephen's Green," he said, explaining they had to field thousands of phone calls from concerned customers.

The CEO of a large bank threw a bunch of keys across the table to the Financial Regulator, asking him if he wanted to run the bank, according to a former chairman of the Regulatory Authority Brian Patterson. The exchange occurred during "extremely robust" interaction with senior bankers.

Kevin Cardiff also revealed the existence of the "Johnny Logan Working Group" set up in the department to extend national funding by a further year during the bailout. The name of the group was based on Mr Logan's Eurovision-winning song 'What's Another Year'.

Irish Independent

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