Friday 22 November 2019

The professor who shouted stop - but was drowned out by the sound of a boom

Professor Alan Ahearne arrives at the Oireachtas Banking Inquiry at Leinster House yesterday. Photo: Tom Burke
Professor Alan Ahearne arrives at the Oireachtas Banking Inquiry at Leinster House yesterday. Photo: Tom Burke

Lise Hand

Alan Ahearne is an unlikely Cassandra. Neatly groomed and quietly spoken, the professor's about as far removed from the image of the beautiful prophetess of Greek mythology whose doom-laden predictions fell on resolutely deaf ears.

No-one wanted to hear tidings of bad news in mid-Noughties Ireland when the rivers were filled with vintage champagne, when gold doubloons poured into and out of every bank vault and when swinging cranes obscured every skyline.

The only bubbles to be contemplated were the sparkling ones fizzing in elegant crystal flutes as bankers and developers toasted each other's continuing prosperity. And certainly no loose talk of property bubbles was to be countenanced.

"Booms are very popular when they're happening. It's fantastic - the amount of money coming into people's pockets is just brilliant," explained Alan Ahearne to the attentive members of the banking inquiry.

The NUIG prof was before the inquiry yesterday to gaze into the entrails of an uncomfortable and still-too recent past. Alan had been advisor to former finance minister, the late Brian Lenihan, during the terrible turbulent days after the economy toppled over the cliffs while handcuffed to the banjaxed banking sector.

These days there are signs that those dark days are receding: the mercury is slowly creeping up from endless zero, there's a grand oul' stretch, this week's unemployment figures have descended to just above 10pc, and the Celtic Tiger is fighting a final rearguard action along the Vico Road.

But any recent oh-so cautious optimism is a far and distant cry from the boom times when nobody wanted to listen to the small coterie of Cassandras issuing warnings that the round-shaped shadow on the horizon was in fact a bubble.

Alan Ahearne sounded several notes of caution - but he was whistling into the wind. For the boomiest boom in the history of the State was sweeping the country.

"It was extremely popular - a lot of people were making money from it," he explained.

"In the property boom many different stakeholders were getting lots of money out of it, those selling the land, the banks themselves, the property sector, construction workers," said Alan. And of course the biggest stakeholder of all was the government, whose coffers were bulging with moolah.

"The Exchequer was taking a huge amount of money from the property bubble in the form of capital gains, and dishing it out left right and centre. It felt great at the time," recalled Alan. It's no wonder that any amount of cold water couldn't dampen the fevered exuberance.

"There were some people who were saying there's something wrong here, there are risks and this could all go pear-shaped. But people just didn't want to hear," he recalled. Before he became advisor, Alan Ahearne went to Brian Lenihan's office for a meeting in August 2008 - just weeks before the global banking system began to totter. Over about an hour-and-a-half, they discussed various banks, including Anglo and Irish Nationwide.

"I didn't know much about Irish Nationwide and I remember his saying to me that this bank was extremely exposed and that was news to me," he said. "I knew very little about that bank. He mentioned that Anglo was highly exposed and therefore troubled, but 'it also has some good stuff'. He said something like that, which sort of surprised me because everything I was hearing - all the rumours at the time - was that it was a complete basket-case". But no amount of rumours was going to derail the gravy-train in 2005 and 2006 - and certainly not any of the politicians who were basking in the boom in the run-up to the 2007 general election.

"None of the political parties were recommending the sort of policies we would've needed to stop the bubble," said Alan, adding that if any party had written down policies that would have prevented the boom, such as tax increases, they wouldn't have been elected. It was a subdued session. The questions were polite rather than probing. Nobody comes out of that unedifying period smelling of roses.

The economic Cassandra could have said I told you so. But he really didn't have to.

Irish Independent

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