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Fatal guarantee by Finance was 'heroic': Hurley


Central Bank boss backed political masters to the hilt

JOHN Hurley, the hapless governor of the Central Bank during Ireland's property bubble, has described the response of Ireland's senior officials in the run-up to the blanket guarantee of its toxic banks as "heroic", newly released confidential documents reveal.

The Department of Finance has finally released the documents following a two-year Freedom of Information battle on the release of key interviews with the Wright Commission in September 2010 as part of its probe into why the department failed to prevent, act or manage the financial crisis properly.

Hurley ended his disastrous seven years in charge in 2009 with a taxpayer-funded pension of €175,000, a €525,000 lump sum, and has said nothing publicly since. The documents show Hurley believed that guaranteeing Anglo, Irish Nationwide and the rest of Ireland's toxic banks was the right thing to do.

"At that time no pan-European response mechanism had been put on the table," he said. "[It's] important to judge what happened in the context of the time. All agendas were open and the response could only be described as heroic."

Two months later, Ireland lost its economic sovereignty when it was bailed out by the EU/IMF/ECB troika.

Hurley also admitted that the government spent money and pandered to trade unions "at the edge of prudence" during his time in the hot seat.

He said social partnership "damaged" flexibility and "fiscal discipline and the prism of competitiveness was lost".

The Department of Finance refused to release Hurley's interview and others on so-called public interest grounds. The Information Commissioner rejected its position.

Despite long interviews with Brian Lenihan, the former Minister for Finance, and Brian Cowen, the former Taoiseach, the department said it had no records of what they thought. The department also claimed it had no record of what Kevin Cardiff, its then secretary general who was in charge of banking during the boom, thought.

The documents do, however, show that David Doyle, the department's former secretary general, blamed his old boss Brian Cowen for not listening when he was Minister for Finance.

Doyle, who got a golden handshake of €575,000 on his retirement, said Cowen was told repeatedly in 2005/2006 that the economy had "dramatically overheated" and "the country was depending on unsustainable tax revenues".

"The department did not agree with massive spending increases and made this clear to the minister. Political events had an impact on policy," he said.

Charlie McCreevy, the former Minister for Finance, said the department was "good" at forecasting when he was in charge and gave "sound, independent, and well-argued" advice. He does not explain why everything then fell apart under Cowen.

McCreevy said there needed to be a "radical rethink" of how civil servants were employed to prevent permanency becoming a "disincentive to performance".

Frank Daly, the chairman of Nama and former Revenue Commissioner, said he believed there was only a "quite late engagement," by the Department of Finance with the financial crisis.

"The Department relied on the Financial Regulator and the Central Bank and was let down by them," he added.

Daly said the department responded "fairly well" when it eventually did but it "didn't have the information to determine that there was a liquidity and a solvency problem; whether the banks knew this is moot".

Sunday Indo Business