The boom-time Fianna Fáil-led government had at least three opportunities to prevent or reduce the economic crash in the seven years before it happened but failed each time to take on board clear warnings from financial experts.
However, the then Fine Gael-Labour opposition made the same mistakes by failing to flag concerns, while state watchdogs did not stop excessive bank lending despite having the powers to do so and at times “edited” facts to hide the threat facing the nation.
The findings are made in the bank inquiry report, finally published yesterday after months of internal concerns that the year-long investigation into what caused the crash was destined to never see the light of day.
However, the report — which says “no single event or decision” caused the crash — has already faced a backlash it is deliberately spreading out the blame for what took place in order to ensure the final report could be agreed by members, leading to claims it has failed to find out what it was set up to examine.
According to the 375-page report, which is based on evidence given by 131 witnesses over 400 hours last year and thousands of previously unreleased documents, the Fianna Fáil government had at least three clear opportunities to stop or lessen the crash between 2001 and 2008.
In 2001, the European Commission wrote to Ecofin asking it to “censure the government” for its reliance on cyclical taxes and property income. While this plan was ultimately withdrawn, the inquiry said the “early warning” was “a missed opportunity as the underlying message remained valid”.
Between 2002 and 2004, the report said “abolishing property tax incentives” was originally planned and could have resulted in “the severe overheating from 2003 to 2007” being “mitigated”. However, the policy failed to be introduced.
And the report is equally critical of the then government’s approach to other tax issues, saying its “erosion” of the income tax base before the crash failed to result in “sufficient concern” — a mistake allegedly being repeated by the current Coalition — while internal Department of Finance budget warnings were repeatedly ignored and spending ceilings exceeded.
However, despite the criticism of the then government the report has also heavily criticised the then opposition, accusing “all the main political parties” of the same approach.
The report places further blame with then financial regulator Patrick Neary and the Central Bank, saying Mr Neary had “sufficient powers” to revoke licences, suspend banks and impose lending limits but banks were “allowed through the inaction of theregulator to breach sectoral lending limits on property without fear of any consequences”.
It also states the Department of Finance was “too reliant” during the boom on external European Central Bank advice, which in turn relied too heavily on the Central Bank, which was unaware of its exact responsibility and “did not do sufficient analysis of risks”.
This failure, the report said, included “editing and reducing the risks highlighted in the international reports and in speaking notes for the minister” to hide the threat facing Ireland.
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