What we can learn from the US answer to Brian Cowen
I hadn't quite realised that Timothy Geithner, former finance minister (treasury secretary) to President Barack Obama, was something akin to an American Brian Cowen. So reviled was Mr Geithner apparently, that at the traditionally humourous first press conference after his re-election, Mr Obama joked that he was house training his pet dog so as to avoid even more use of Mr Geithner as a fire hydrant.
For fire hydrant, read lamp-post in our doggy stories. One wonders does Mr Geithner know that he has been subject to this treatment in Ireland as well. He is the man blamed for insisting to ECB President Jean-Claude Trichet that Anglo Irish Bank should not be allowed to fail and must repay the debts due to its bondholders.
Every so often his name comes up when people are complaining about the bank guarantee – although really they should be complaining about the repayments to those who were not guaranteed. This is believed to have been Mr Geithner's firm position.
He will hardly worry too much about what we think of him in Ireland. But his unpopularity in the US stems from his insistence that American banks should also not be allowed to fail and that government money should be used to prevent this happening.
The rescue was of the banking system, rather than individual banks – many of which did collapse – and the system has survived. It is even prospering and Washington says the money it put in has been more than recovered from the banks.
Mr Geithner, though, still feels hard done by. In contrast to Mr Cowen's wounded silence, the former treasury secretary has written a book defending his policies and accusing his critics of dangerous naivety.
The core issue is the collapse of Lehman Brothers. Mr Geithner is in a rather awkward position arguing that a shaky banking system must be propped up when he presided over the failure of Lehman's – the event that is generally held to have threatened the entire global financial system.
At the time, he was in charge of the New York Federal Reserve, which gave him a key role in the crisis on Wall Street, and Mr Bush was president. Mr Geithner maintains that he wanted to save Lehman's but found it legally and politically impossible to do so.
This is quite different from the common assumption that Washington allowed the investment bank to fall to make the point that the taxpayer would not stand behind every bank. The book is a bit confusing on this point, suggesting that this was, in fact, the position of then treasury secretary Hank Paulson.
This is not just about Wall Street. It is about the tangled, dysfunctional relationship between banks, central banks, regulators and government. A former investment banker, Mr Paulson was prepared to think of letting Lehman's go, but the central banker was appalled at the prospect.
There is also a regulator in the story. The last hope for Lehman's was a sale to Britain's Barclays Bank. At the last moment, Calum McCarthy from the UK regulatory body raised objections. The deal fell through, and so did Lehman's.
Imagine the consequences for Britain – and Ireland – if, as well as the disasters of Royal Bank of Scotland (owner of Ulster Bank) and HBOS (destroyer of the Irish mortgage market), Barclays had ended up owning Lehman Bros just before it went bust.
Another relevant question is why Bob Diamond, boss of Barclays, was not shown the door after that bust, on the grounds of gross incompetence, rather than eventually falling victim to the Libor interest-rate rigging scandal.
We can easily transfer these issues to the Irish situation. The Central Bank stands behind the banking system and, for it, other considerations are secondary. I use the present tense because I do not think this has changed. But no one was responsible for the secondary considerations, such as taxpayer risk, and perhaps still isn't.
That responsibility belongs to the Department of Finance. That means it and the Central Bank have different roles and ought to differ quite a lot. At the very least, the practice has to stop where the bank is seen as an adjunct to the department and retired secretaries-general go down to sit in the Governor's office and enjoy the view (soon to be even nicer in the riverside putative Anglo HQ).
Regulators should be even more the opponents of central banks. That was what the row was about in Charlie McCreevy's time and the Central Bank won. Regulators must have the kind of authority central banks would hate – the power to name and shame a bank, halt it from doing new business, or suspend its chief executive. They do this all the time with little lenders and investment houses. The idea of doing it to big banks remains unthinkable.
This is the power of money, which has greatly superseded political power in the last 40 years. I remember being struck by the way an investment banker derided the credit rating agencies in Michael Lewis's book 'The Big Short'.
"At a conference, you always know the guys from the rating agencies. They're the ones in the cheap suits." Regulators were even further beneath their contempt.
It is not as difficult to make banks less risky as is often made out. The first step is to restore power to where it belongs and find a new breed of politicians willing to exercise it. The second step, which makes the first one necessary, is to recognise that banking systems will not be allowed to fail, and the state, like it or not, stands behind them. One must deal with the consequences of that, rather than just complaining.
In Ireland, as we saw last week, the crash and bank rescue are still toxic politics. The banks remain fragile but no one would dream of suggesting, say, that the national pension fund billions might be better used putting more capital into the banks and forcing them to write down debt, rather than providing another line of credit for the SME sector.
Mr Geithner described these dilemmas neatly. "The inconvenient truth of financial crisis response is the actions that feel right are often wrong."
In Ireland's case, actions that felt wrong may well have been right. If we could at least admit to that possibility, that the only alternative to where we are may have been to end up somewhere even worse, we might be able to start thinking about what on earth we do next.