It was Ireland’s “best kept secret” that the economic bubble burst in summer 2006 not 2008, but the situation was effectively masked by politicians focussed on the 2007 general election and vested interests who did not want to break the silence.
Prof Alan Ahearne, the head of economics at NUI Galway and a recently appointed adviser to the IMF, made the claim at the latest meeting of the Oireachtas banking inquiry.
In a detailed discussion on how the clear signs of a “lethal” impending crisis failed to be acted on, the leading expert — who insisted in an April 2007 Future Shock RTÉ programme there was no such thing as a “soft landing” — said the damage could have been lessened but that no one wanted to speak out.
Prof Ahearne said he and others could name 44 cases of property booms quickly turning into busts in 18 countries since the 1970s.
He said that after his 2007 comments he was asked to attend a Fine Gael conference but “didn’t speak with many officials” and said he remembered being told by an acquaintance “‘a lot of guys are gunning for you’. Jokingly, I thought”.
He was later told by a person in the financial sector that “actually the bubble burst last summer, this has been the best kept secret for nine months”.
However, despite this reality Prof Ahearne said politicians, some news outlets, and financial experts continued to insist that the issues were under control as “booms are very popular when they’re happening” and that “it felt great at the time, people didn’t want to hear something was wrong”.
He said political parties had an obligation to counter this by putting in responsible policies such as income tax rises because they “wouldn’t have gotten elected” in May 2007.
When asked about Fianna Fáil, Fine Gael, and Labour’s approach he said “if you took the [manifesto] covers away it would be difficult” to see any differences.
He declined to answer specific questions about 2008 advice he gave to the late finance minister Brian Lenihan under this stage of the inquiry. However, he said the Fianna Fáil TD seemed to discuss the possibility of closing Anglo Irish and Irish Nationwide when he mentioned taking down two “dominos” but keeping two more in place, and appeared to think there were still “good things” at Anglo, “which was news to me because the rumours were it was a basket case”.
Meanwhile, the inquiry has revealed the times and dates national newspaper editors will attend the investigation next month.
Irish Examiner editor Tim Vaughan will be the first editor to attend at 2.30pm on March 25.
At 9.30am the following day the former editors of the Irish Independent and The Irish Times — Gerry O’Regan and Geraldine Kennedy — alongside Independent News and Media’s former financial director Michael Doorly and The Irish Times’ former managing editor Maeve Donovan.
Later that afternoon, former RTÉ head of news and current affairs Ed Mulhall and RTÉ’s head of commercial operations Paul Mulligan will also meet with the body.
Former adviser: Fianna Fáil helped cause crash
Fiachra Ó Cionnaith
A one-time adviser to Bertie Ahern who is credited with designing Nama has said the Fianna Fáil-led government helped cause the 2008 economic crash by reversing his measures to calm the over-heating property market in 2001.
Peter Bacon made the claim at the Oireachtas banking inquiry yesterday.
The author of the 1998-2000 Bacon reports, who advised Mr Ahern in 1991 and the late finance minister Brian Lenihan in 2009, was asked if his recommendations were implemented.
He said they were, but the decision to roll back on them by cutting stamp duty to investors in 2001 was “too early” and created a resulting price surge.
He confirmed he was not asked for his opinion.
The former stockbroker agreed his policies “hurt investors”, but declined to comment when asked by Socialist Party TD Joe Higgins if they were reversed because these people have “political clout”.
Mr Bacon was critical of the fact banks ignored mortgage principles, stating while he did not want “to use colourful language, it was not adhered to”.
He came under pressure over the fact a public report he wrote for Government on the creation of Nama in 2009 estimated loan losses would be €34bn when an unedited version said it was far higher.
He also rejected suggestions his advice to place Nama under the control of the NTMA was due to his connections to the group, and said Nama was not living up to its potential as it was acting like a debt collector instead of “maximising value”.
He said “I’m an economist, not a moralist”. When asked what concerns he had now, he added: “why in heaven’s name seven or eight years after the collapse do we still have mortgage arrears issues”.
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