'Lenihan took blame for bank guarantee'
The late former finance minister Brian Lenihan "blamed himself" for the decision to give Ireland's banks a taxpayer guarantee despite others sharing responsibility, according to the former head of the IMF's operation in Ireland.
The guarantee, which said the State would cover banks' liabilities, exposed the State to huge losses after Irish banks were in much poorer shape than initially feared.
Writing in a new book, the ex-IMF chief Ashoka Mody said Mr Lenihan "understood that the guarantee-based financial strategy had gone badly wrong".
"He [Mr Lenihan] blamed himself for the blanket guarantee to protect the banks' bondholders," Mr Mody writes.
"Although he was not the only one to blame for that decision, he spoke ruefully of the "Lenihan guarantee". To him, "burning bondholders" was a litmus test of his legacy. As others have recorded, together we came so close to turning that into reality."
In the new book Mr Mody writes the plan to make bondholders (investors who had loaned money to Irish banks) shoulder some of the burden by taking losses on their loans was scuppered by Tim Geithner, then the US Treasury Secretary, and the former president of the European Central Bank, Jean-Claude Trichet.
He said the IMF team in Dublin was disappointed when Dominique Strauss-Kahn, then the IMF's overall boss, rowed in behind Mr Geithner and Mr Trichet.
"It was clear that we had taken a wrong turn," Mr Mody said.
"Strauss-Kahn, who had talked a good talk until then, fell silent. He later told journalist and author Paul Blustein that when confronted by 'Tim [Geithner] plus Trichet, at the end of the day, I was too weak. It was a real pity.'
"Lenihan was furious for a few days and bravely told me that he would ignore the Tim-Trichet directives and act on his own. I knew then that it would not be so," Mr Mody writes, adding Mr Lenihan had been working quietly with a small team of officials to put together a plan to burn the bondholders.
Mr Lenihan passed away in 2011 after a battle with pancreatic cancer.
He was the only Fianna Fáil TD based in Dublin to be re-elected in the 2011 general election.