THE revelation on last night's RTE documentary Freefall that ministers almost certainly knew that Anglo was bust when they unconditionally guaranteed the deposits of the Irish-owned banks two years ago piles even more pressure on the Government.
Just as they were making those unconditional guarantees, potentially exposing taxpayers to a liability of almost half-a-trillion euro, Finance Minister Brian Lenihan was assuring a worried public that, while the banks faced a liquidity crisis, they did not face a solvency crisis.
Translated into plain English Lenihan was saying that, while the banks were temporarily short of cash, they weren't bust.
A liquidity crisis is a bit like someone being hit with an unexpected bill a few days before payday seeking to borrow the money to tide them over.
A solvency crisis is where someone who has been out of work for 18 months and can't make the repayments on the mega-mortgage on a home which has halved in value comes looking for a handout, which can never realistically be repaid.
Even at the time there were many observers, including yours truly, who didn't buy the line that the banks were facing a little temporary cash-flow difficulty.
And so it proved to be. By December 2008 the Government had been forced to announce plans to inject fresh capital into our bankrupt banks and a month later it nationalised Anglo, when the revelation of chairman Seanie FitzPatrick's hidden loans of more than €100m destroyed any remaining confidence in this cowboy bank.
Ratings agency Standard & Poor's now reckons that the total cost of saving the Irish banks will be €90bn. The guts of €50bn of this money will go on just two banks, Anglo and the Nationwide, with the likely cost of the Anglo debacle now likely to be at least €40bn and another €5bn-€6bn set to disappear on the Nationwide.
Up to now the Government has claimed that it didn't know Anglo and the Nationwide were bust when it unconditionally guaranteed their deposits.
Now even this flimsy defence has been blown away following the revelations in last night's RTE documentary, Freefall, on the events leading up to the deposit guarantee.
Monday, September 29, 2008 is a day that will never be forgotten by Irish bank bosses. On that day, long-standing doubts about the financial health of the Irish banks finally came to a head with the share prices of the Irish banks collapsing. Worst hit was Anglo whose shares halved in value during the day.
According to the documentary, FitzPatrick and Anglo chief executive David Drumm, realising that the game was up, sought a meeting with Bank of Ireland chairman Richard Burrows and chief executive Brian Goggin. At the meeting FitzPatrick disclosed that Anglo was insolvent and proposed that Bank of Ireland take it over. Goggin and Burrows very sensibly declined the offer.
Bank of Ireland then contacted AIB, telling its rival about its concerns about Anglo. The two banks then arranged to meet Finance Minister Brian Lenihan.
It is inconceivable that the bankers didn't tell Lenihan that Anglo was insolvent, ie bust, at this meeting. Yet he and Taoiseach Brian Cowen still went ahead and unconditionally guaranteed its deposits.
This decision, and the related decision to also guarantee the Irish Nationwide's deposits, more than doubled the eventual cost of bailing out the banks, from "only" €40bn to €90bn.
Why did they do this? Cowen and Lenihan can no longer claim ignorance.
While they may not have been aware of the true awfulness of the situation at Anglo, we now know, courtesy of the documentary, that, even at the time, they knew more than enough to make their decision to unconditionally guarantee its deposits utterly inexplicable.