Daniel McConnell: As Lenihan dithered, Cowen called the shots on disastrous guarantee
The finance minister was overwhelmed and paralysed by the Anglo crisis
FORMER Taoiseach Brian Cowen directly over-ruled his then finance minister, the late Brian Lenihan, into proceeding with the infamous bank guarantee this day five years ago, fresh testimony given to the Sunday Independent claims.
Throughout the key period of the night of September 29, 2008, Lenihan was leaning towards a more limited form of State support for the banks. But Cowen flatly refused to consider nationalising Anglo Irish Bank and insisted on pushing ahead with the bank guarantee.
Previously unheard accounts of what happened that night from several sources in the room at the time have all confirmed that Lenihan, who died on June 10, 2011, was "deeply indecisive" that night and "couldn't make up his mind".
From 6pm that night, Lenihan "struggled to stay in control" as events ratcheted up and he was wary of signing a blank cheque to the banks without knowing the state of their loan books.
One source told the Sunday Independent: "People often speak of Lenihan's strengths as a barrister but his weaknesses came to the fore that night. Realising a decision was needed and coming from the deliberative and nuanced world of the Law Library, ultimately he couldn't make his mind up. It was infuriating."
A second source was far more critical of Lenihan. "He later sought to be a leader of his party but his performance that night was pathetic. Certainly not a leader of men."
Sources have said Lenihan's caution that night was partly driven by his legal background, but also because – unlike the Taoiseach, who had been in Finance for the previous four years – he was a novice minister. Many of the officials in the room had worked for Cowen and Lenihan was "naturally suspicious" of them.
Further significant details of the night's events have emerged which confirm that it was Cowen, and not his finance minister, who ultimately made the call to proceed to the guarantee.
But the significance of a key phone call by Cowen at the height of the crisis that night, shortly before midnight, to his financial adviser friend Alan Gray, of Indecon consultants, has come back under scrutiny.
In a statement given to the Sunday Independent on Friday, Gray confirmed that he received a call from Cowen that night in which he sought his advice on the bank guarantee.
Referring to himself in the third person, Gray said: "On the night of the government guarantee, Gray confirms that An Taoiseach contacted him by telephone to obtain his views as a director of the Central Bank on the likely market reaction if a government guarantee was introduced."
To date, all Freedom of Information requests seeking the release of the phone records of Cowen and Lenihan have been refused, but such information could emerge during the pending Oireachtas banking inquiry.
It has been confirmed that Gray, who was also present at the infamous Anglo dinner at Druids Glen with Cowen and Sean FitzPatrick in July 2008, raised concerns over whether the guarantee would comply with European law.
He also said that a fee should be charged from the banks in return for the guarantee and that it should be only for a limited period of time.
It is likely that Cowen also called a number of other individuals for advice on the night, but these have never been identified.
Despite being the 'elephant in the room', there were no representatives from Anglo Irish Bank present in Government Buildings.
Lenihan believed the banks had funding to last them a couple of weeks.
But sources said that Lenihan was told that Anglo would not open the following morning unless something was "done tonight" – and the other banks warned that this could bring them down with it.
Lenihan later told how "one of the bankers raised the possibility of nationalising Anglo". The banks wanted to take Anglo Irish Bank out of the equation.
According to sources, it was at this point that Cowen slammed his hand on the desk and said: "We're not effing nationalising Anglo."
One source present on the night said: "Cowen was adamant from the start that nationalising Anglo wasn't a runner. Not under any circumstances."
Lenihan was given the Merrill Lynch report, which warned against a full guarantee, at 6.43pm the evening before the guarantee was announced. But sources said the minister was overwhelmed by the range of differing views and the avalanche of complex information engulfing him.
"Lenihan was already dizzy with conflicting views. His head was spinning and he was nervous. He couldn't make up his mind, he was dithering," another source told the Sunday Independent.
The finance minister's caution and hesitation proved to be well founded, as the banks clearly misled the Government about the state of their balance sheets.
Several sources from that night have said that the worst-case scenario put the likely exposure to the State of bailing out the banks at less than €2bn. To date, the bailout has cost €64.1bn and a further €30bn to establish Nama.