The situation was confirmed by the Department of Finance’s secretary general at the time of the economic crash, David Doyle, at the banking inquiry yesterday.
Speaking to the cross-party group after similar claims were made in the leaked witness statement from his replacement Kevin Cardiff – who is due to attend this morning – Mr Doyle said Mr Lenihan was “very strongly of the view Anglo should be nationalised” and not included in any guarantee on the night it was drawn up.
The now-retired senior official, who was secretary general from 2006 to 2010, said Mr Lenihan and Mr Cowen knew of draft legislation available that night to nationalise a bank, a document that was used months later to nationalise Anglo.
However, after being asked by Mr Cowen – who Mr Doyle said is an “upfront character” and put the blanket guarantee option “on the table” – to step outside for a private “chat”, the then finance minister’s opinion changed.
“The taoiseach nodded to the [finance] minister and said “come on, let’s go out and have a chat”.
“Eventually, the taoiseach came back in and said they had decided to recommend a guarantee and that Anglo was not being nationalised,” Mr Doyle said, adding pointedly: “I’m pretty certain he [Mr Cowen] said ‘for the moment’.”
The official said it is his understanding Mr Cowen raised concerns nationalising Anglo could “undermine the guarantee and call into question the need for further nationalisations”.
After hearing this, Mr Doyle said he believes Mr Lenihan “changed his mind”. However, he added that “several times over the course of the night the minister went back to the same issue” and was “acquiescing.”
Mr Doyle said the government of the time was in an “impossible situation” at the time due to the threat of “economic chaos” and that the guarantee had “no practical alternative”.
He said a “disorderly” nationalisation could have caused a Northern Rock-type scenario of customers queuing outside Anglo Irish to remove their deposits, and that there was “slim to no” chance of keeping the other option of privately providing emergency liquidity assistance to prop the bank up quiet.
When asked if the guarantee was directly connected to the subsequent bailout two years later, he said it “played a part”.