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Understanding the rewritten history of the Banking Inquiry


John McCarthy, Dept of Finance

John McCarthy, Dept of Finance

John McCarthy, Dept of Finance

Was it gallows humour or canny calculation that saw the Johnny Logan Working Group established by the Department of Finance to look for a year's funding during the lead up to the bailout? They can take away our sovereignty, the thinking might have went, but they will never take away our Eurovision glory years. Shay Healy's lyrics were perfect for the situation - "what's another year for someone who's lost it all?" A schmaltzy soundtrack was probably needed to counterbalance all that soporific financial detail. And Johnny is still big in Germany, which can't hurt when you're trying to scrounge a few more quid out of Berlin; a bowl cut to go with the begging bowl.

The inquiry's 'Eurovision moment' came in a week which perhaps debunked one of the popular myths of the banking crisis: That the government was blindsided, that the tide was coming in until it was neck deep in water. In his evidence last week, Kevin Cardiff said that he had made "discreet" inquiries about how to access an IMF bailout as early as September 2008.

Secret contingency plans were also made to deal with Ireland being "unceremoniously shown the door" from the euro. He also recounted a conversation he had with one of his opposite numbers in another European country: "Kevin, are you working on such and such [code for a euro exit]?" they asked. "I said: 'No, of course not, how could I be working on that?' And he said: 'Well, could you have whoever is not working on it (in your office) telephone whoever who is not working on it in my office?'" Cardiff also revealed that "discreet" inquiries had been made about entering an IMF programme in 2008, well before that came to pass, and at a time when the government was sticking to ludicrous phrases like "the fundamentals are sound".

John McCarthy, the then chief economist in the Department of Finance, painted an even more vivid picture of the don't ask-don't tell atmosphere. He told the inquiry that "the horse had bolted" by 2005, but that this information didn't cause concern because of the "silo approach" that different government departments took towards each other. Those who raised concerns in Finance earned the department the nickname "the boy who cried wolf." And yet there seemed to have been people all along who knew more or less what was going on.

Even on the night of the guarantee itself, the chickens weren't quite as headless as we'd thought: they even arrived with a press release already drafted.

With the reams of evidence so far failing to throw up anything resembling a definitive smoking gun, it is perhaps these admissions, taken together with last week's evidence, that count for the inquiry's most surprising revelations so far. The popular narrative up to then had been that it was one fatal night of political blunders that yoked us with our intolerable debt burden; that Lenihan and Cowen gave away the keys to the castle. In fact, all the evidence we've heard has pointed to the conclusion that on the night of the guarantee itself, under considerable pressure, Cowen and Lenihan made the best decisions they could to prevent us falling further into the abyss.

That was the good news. The bad news was that instead of one concentrated burst of ineptitude it was a long, slow drip of fundamental mismanagement; People afraid to stand up to their bosses; politicians who only understood very complex financial issues in terms of slogans; deep systemic problems which meant that nobody was truly holding anyone else accountable.

The evidence that came out of the inquiry this week mirrored an Ireland most of us will recognise: with different departments in one workplace acting like rivals instead of collaborators, with bosses subtly demanding the answers they want, with people resorting to a little black humour when they detect the unmistakable stench of shit hitting a fan. Which of us can't relate at some level to John McCarthy's description of the "silo" the Department of Finance became? Now imagine for a second the forces entrenching you in that group-think bunker were not merely pressure from above but from without; a media which was still in full-on boom time cheerleader mode and a public not exactly baying to hear that the party was over.

Imagine the usual office politics is heightened by the fact that your masters are all, well, politicians. And imagine how pointless pushing back against all of that must have seemed.

Perhaps in a sense we should be becalmed by this, since the point of the inquiry is to understand what happened. The banking crisis may well contain some larger lessons about the perils of rabid capitalism and political hubris but at its heart it was also about something smaller and more mundane: very shoddy administration. And perhaps knowing this can point us to a better way of viewing politicians. Maybe instead of voting them in on their connections and charisma, we must force ourselves to see them as what they are: high level administrators.

We should think of a sitting Taoiseach as less of a shamrock-exchanging condolence-expressing figurehead and more of as what he is: the most senior civil servant we have. When the clouds of the financial storm gathered, we would have been better off with people who were clever and dull, system wonks who might have had an inkling that they weren't getting the whole story from their departments. Instead, our two most important leaders were men who happened to get into politics because that was what their fathers did. We had a finance minister who, as a barrister, could definitely sell a story but who had no background whatsoever in finance. They presided over a culture in which they couldn't even be told the full story by the people who reported to them and they didn't seem to know the difference anyway. They were the wrong people to be doing those jobs. Lenihan was said to have not been able to "bear" economists and there doesn't seem to have been many of them working for him.

But we put him there, or at least elected him until he could be put there by his party. We got what we deserved. And after we got rid of Cowen, we installed another guy, whose father happened to be a politician. Perhaps he has better advisors. Perhaps, as we were reassured this week, senior civil servants are now more inclined to pipe up when things don't look right. But if the inquiry changes the way we think about the qualities we want in the people who run our country, then it will have been worth every penny.

Sunday Independent