Alternative to bank guarantee a ‘certain disaster’

The most powerful civil servant during Ireland’s boom and bust has revealed the then government tried to extend the bank guarantee in 2010 because the two year cut-off point was helping to push the country into a bailout.

Alternative to bank guarantee a ‘certain disaster’

However, he has rejected claims the guarantee was a “mistake”, despite admitting “with the benefit of hindsight” if government knew then what it does now, the blanket guarantee may not have been considered.

Former Department of the Taoiseach secretary general Dermot McCarthy, who held the position from 2000 until 2011, made the remark at the latest banking inquiry meeting yesterday; but said that having no guarantee at all would have been a “certain disaster”.

Speaking last night after hours of delays due to the separate whistleblower controversy, the one-time right hand man to Bertie Ahern, Brian Cowen, and Enda Kenny said the two-year timespan “may have” caused the bailout.

Responding to inquiry chair and Labour TD Ciarán Lynch, Mr McCarthy said the issue was “anticipated early on” as the September 2010 cut-off point meant the market appeasing State support would run out at a specific point.

He said then finance minister Brian Lenihan considered a guarantee “variant” in 2009 and extension in 2010 to “avert that difficult situation”.

However, ultimately this was not possible, leading to the bailout “cliff”.

The official — who is in receipt of a €100,000-a-year pension after retiring at 53 in 2011 — also told Fianna Fáil senator Marc MacSharry he initially thought the guarantee meeting was only a pre-cabinet “briefing” and that banks first suggested the two-year deal. He could not explain to Fine Gael TD Eoghan Murphy why the plan went from guaranteeing €10bn given to Anglo by rival banks to a system-wide safety net — and said it was not made clear the National Treasury Management Agency was against this.

Mr McCarthy said “I can’t recall” businessman Seán Quinn’s Anglo issues being raised and did not remember when he was told, despite Mr Cowen being told in March 2008.

He rejected claims Mr Cowen had a guarantee “pre-disposition” or that anything was agreed during a special cabinet meeting on Sunday, 24 hours earlier, adding he was not with the then taoiseach when he consulted with Anglo-linked Central Bank director Alan Gray that night.

Asked by Fine Gael senator Michael D’Arcy if the guarantee was a “mistake”, Mr McCarthy said no, but admitted if banks’ true health was known, the blanket guarantee may not have been considered.

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