Banking Inquiry: Five plans mooted to cope with a crisis from late 2007

The government’s chief legal expert during the crash has confirmed that officials were “constantly” discussing five specific ways to cope with crisis from November 2007 and knew the risk was “systemic” from April 2008.

The State’s former attorney general, Paul Gallagher, revealed the situation hours before ex-taoiseach Bertie Ahern claimed nobody told him the impending scandal was anything other than a liquidity issue before he quit.

Mr Gallagher, who was attorney general from June 2007 to March 2011, said that from November 30, 2007, there was potential crash “interaction” among government departments, ministers, and senior officials.

He said while officials were “looking at a range of possibilities”, five plans were discussed 10 months before the night of the bank guarantee on September 29, 2008. They were:

• Nationalisation of troubled institutions being discussed “from an early stage”;
• Ensuring the Central Bank could give emergency liquidity assistance if needed;
• A private sector solution which would have to be Competition Authority approved;
• Transferring assets from the banks;
• Secured lending through the NTMA.

Mr Gallagher said the issues were constantly raised and that “things began to change in September 2008 after a number of bank failures” internationally.

He said the Lehman Brothers collapse on September 15, 2008, left officials in no doubt that all banks were at risk.

Mr Gallagher said “every resolution solution was available and ready to go” months before the night of the bank guarantee, and that the first time he was asked to “look at” a blanket plan was on September 26, 2008.

He revealed the situation despite stressing his support for the government decision.

He said the threat of Ireland being sent back “25 years” if the “entire financial system” collapsed was a “bleak and unforgiving picture” to the forefront of officials’ minds.

He said the New York Stock Exchange was not expecting the Irish market to open the following day, and that the crisis meant “while nobody said it”, everyone was asking “was [Irish] society going to survive”.

Mr Gallagher also said Ireland “stood alone” and that his “abiding memory” was the “sense of isolation”.

He added that bondholders were not burned due to “contagion” fears and because the troika said it was “forbidden” during the November 2010 bailout talks.