Patient shows classic signs of selective amnesia ...

TAOISEACH Brian Cowen has lashed out at those who rewrite history by seeking to selectively blame his term as finance minister for the economic crisis.

However, the facts which were left out of his lengthy speech to the North Dublin Chamber of Commerce suggested an equally elaborate effort at revisionism.

These are the main areas he selected to back up his record but his omissions implicitly point to his failings.

Housing

What he pointed to:Brian Cowen correctly said he instigated the abolition of some key property tax incentives, but admitted this should have been done sooner.

He also resisted the most aggressive calls to eliminate stamp duty altogether.

What he ignored:

In his first budget he exempted first-time buyers from stamp duty in the case of lower priced homes, this was to help them get on the property ladder and gave legs to a limping market.

Immediately after the 2007 General Election he scrapped stamp duty for all first-time buyers and reduced it across the board. He did not eliminate it – as had been called for by the media, the Opposition and his coalition partners.

However, at various other points through shared ownership and affordable housing the Government’s policy put false bottoms on a fake market.

From 2006 onwards the then finance minister, his taoiseach Bertie Ahern and their housing minister Noel Ahern, were repeatedly asked about their housing policy.

While Mr Cowen was not as bullish, the government’s message on limiting loans to the market was articulated by the younger Ahern brother.

“Our policy in recent years has been to encourage supply because only by having supply to meet demand can the problem be solved. We are doing everything to maximise supply,” he said.

Banking

What he pointed to:

Brian Cowen said the Government backed the financial regulator’s decision at the start of 2007 to increase the need for cash reserves behind speculative loans. He said it was a decision he “strongly supported.”

What he ignored:

He and the Government stood by and watched as the banks became increasingly reckless in their lending to home-buyers.

The Government refused to boost the policing staff available to the Director of Corporate Enforcement.

In the face of 100% mortgages and 40-year borrowing terms, Mr Cowen said he was satisfied there was a framework in place to keep the market in check.

He said the regulator’s consumer protection code and the publication of fact-sheets boosted the borrowers’ rights.

He said it would not be appropriate for him, as finance minister, to dictate the demands of customers.

In the area of Contracts for Difference, Mr Cowen exempted these stock market gambling techniques from stamp duty, after the Revenue Commissioners tried to raise revenue from the “back-room to back-room” deals.

This was in response to lobbying from the Irish Stock Exchange and by the London Investment Banking Association.

It was these CFDs which Sean Quinn used to gamble on the fate of Anglo Irish Bank, which caused the initial storm in Irish banking.

Rainy days

What he pointed to:

The Taoiseach said the Government had acted by allocating 1% of GDP to the National Pension Reserve Fund.

“The facts are we recorded budget surpluses in 10 of the 11 budgets up to the when I left office as finance minister,” his speech script said.

What he ignored:

Surpluses were certainly in abundance. However, Mr Cowen did not tell the North Dublin Chamber about the €16 billion structural deficit last year.

This was caused by, on one side, vanished property revenues and, on the other, rampant spending.

Between the budgets of 2005 and 2008 current spending jumped from €39bn to €44bn with no new source of sustainable revenue.

This was worsened by a troubled public sector benchmarking deal which was still being paid up until September 2008.

When the revenues collapsed and the bills increased he had to raid the pensions reserve fund to bail out the banks.

Advice

What he pointed to:

He said the International Monetary Fund in 2007 considered the Irish economy to have strong fundamentals and was expected to remain robust.

He also recalled the Central Bank assessment which said the Irish banking system continued to be well placed to withstand shocks.

What he ignored:

As far back as 2004 the then governor of the Central Bank, John Hurley, warned that a fall in house prices and an increase in defaults would seriously threaten banks.

Mr Hurley’s annual stability reports contained a series of doomsday predictions, however they were usually sugar coated in general assessments that a soft landing was on the way.

Similarly the IMF and the OECD chided certain aspects of Ireland’s property and public spending policies.

Mr Cowen cherry-picked the rosier advice for his speech on Thursday night.

His Government acted similarly throughout its management of the property bubble.