FINANCE Minister Brian Lenihan was last night involved in an extraordinary disagreement with celebrity economist David McWilliams over the controversial 2008 bank guarantee scheme.
In his new book, Mr McWilliams claims he hatched details of the scheme with Mr Lenihan over midnight tea and biscuits in the kitchen of the economist's home.
Mr McWilliams details in his book how the minister made a secret night-time visit to his home on September 17, 2008 -- days after the spectacular collapse of US bank Lehman Brothers.
But the Department of Finance said the idea of a bank guarantee scheme was already being looked at by officials and Mr Lenihan had consulted many economists, including Mr McWilliams.
The unilateral decision 13 days later to guarantee all bank deposits triggered fury across Europe, with Britain and Germany leading the criticism.
As Irish banks hovered on the brink of failure, Mr Lenihan agreed to visit Mr McWilliams at home on September 17 last year in a search for solutions to a crisis that was spinning out of his control, the economist claims.
Mr Lenihan, who during the meeting ate cloves of raw garlic to keep alert, shocked Mr McWilliams as he discussed the financial crisis and divulged officials in the Department of Finance "just don't get it".
Mr Lenihan also said he seriously doubted the advice he was getting from the Financial Regulator and the governor of the Central Bank who were telling him the banks were "fine" and well stress-tested.
But a spokesman for Mr Lenihan last night said the minister frequently praised his officials who had already been aware of different types of bank guarantee schemes.
"He has thanked them especially for the work they have done over the last 18 months in ensuring the stability of the banks.
"The minister has always consulted widely with many economists including Mr McWilliams, Phillip Lane and Alan Ahearne among others."
Mr McWilliams appeared on a radio programme some weeks earlier and warned Irish banks were going bust but Mr Lenihan later accused him of 'dangerous talk'.
Mr McWilliams, writing in 'Follow the Money' -- serialised in the Irish Independent -- also claimed Mr Lenihan revealed it was AIB, the State's biggest bank, not Anglo Irish Bank, that posed the biggest threat to the stability of Irish banks.
"Ireland's biggest bank was actually our biggest problem. . . What I didn't know was the bank that was pretending to be the most prudent was possibly the most delinquent. We were on the precipice."
A senior department of finance source disputed this recollection last night and added: "Some of the specific details in the book in relation to some of the banks are not correct."
Mr McWilliams says Mr Lenihan painted a picture of utter confusion and paralysis among his most senior officials over what to do next. "He leaned over and, in a hoarse voice, almost whispering, he said: 'What would you do?'," Mr McWilliams wrote.
Most damningly, as the two chatted until 2am, Mr Lenihan said he seriously doubted the advice he was getting. "He gave me the impression that he was quite isolated," Mr McWilliams wrote.
"He repeated again and again, 'They just don't get it'."
"It was also obvious that he was at best sceptical about the advice he was getting. Given the spin that was coming out of the government, I wasn't too surprised and I was quite relieved that he doubted the regulator and the governor of the Central Bank when they continued to parrot platitudes about the banks being fine."