Tuesday 24 October 2017

Trichet must tell if he threatened Ireland into paying bondholders

Banking Inquiry needs to find out if ECB exceeded its powers by imposing costs on Irish taxpayers, writes Colm McCarthy

FRANKFURT’S WAY: Finance Minister Michael Noonan and former president of the European Central Bank Jean-Claude Trichet
FRANKFURT’S WAY: Finance Minister Michael Noonan and former president of the European Central Bank Jean-Claude Trichet
Colm McCarthy

Colm McCarthy

The Oireachtas banking inquiry is finally reaching the interesting part of its deliberations. From about the year 2000 until the balloon went up in September 2008, the Irish banks engaged in an extraordinary, and out-of-character, lending splurge which resulted in one of the most damaging banking busts ever to occur anywhere.

More than seven years later the systemic collapse of a traditionally conservative banking system has not been satisfactorily explained. A banking collapse on this scale requires imprudent borrowers. It also requires that the three lines of defence against an unsustainable credit bubble fail simultaneously.

The first line of defence consists of the boards and managers of the banks themselves, the second of the bank regulators and supervisors, and the third of the public officials, including elected officials, charged with the ultimate oversight of the financial system. Only this last line of defence, which failed, has been brought properly to account, inescapably through the ballot box in February 2011.

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