Cowen: Govt unaware of bank's multi-billion euro loans

The Government did not know about secret multi-billion euro loans given to Anglo Irish Bank by Irish Life & Permanent last September, the Taoiseach said today.

The massive payments were designed to boost the balance sheet of Anglo Irish amid turmoil in the banking sector.

The Government nationalised Anglo Irish last month after a controversy over hidden directors’ loans led to several resignations and a collapse in its share price.

Mr Cowen insisted the Government did not know about the deposits, believed to total €7bn, when it introduced a state guarantee scheme on September 30, but Labour claimed in the Dáil that Anglo tried to falsify its accounts.

Fine Gael TD Alan Shatter claimed the issue amounted to a “criminal conspiracy to defraud shareholders.”

But Mr Cowen said amid angry exchanges: “Of course I didn’t have knowledge of any untoward goings-on between Irish Life & Permanent and Anglo Irish Bank.”

Mr Cowen added that the decision to introduce the bank guarantee scheme in September was based on providing stability for the banking system and the economy, based on advice from the Central Bank, the Financial Regulator and the Department of Finance.

The Unite union, which represents about 2,000 workers in IL&P said staff were disappointed by the revelations.

“It is disappointing that the bank’s good reputation should be called into question in this way,” a Unite spokesman said.

Labour leader Eamon Gilmore accused the Taoiseach of handing over the deeds of the country to bail out the banks in a guarantee scheme without having complete information.

“If the banks weren’t telling you what was really going on in the banks at the time you were coming in here, they were making a monkey out of you,” he said to Mr Cowen in the Dáil.

“And they were making a monkey of the public that was being asked to put up the State guarantee.”

He added: “There is too much of the drip-drip going on. The public needs to be levelled with. Public money is going to be put into the banks and it will have to be used if everything goes seriously wrong.

“The people of this country, whose money you are playing with, are entitled to know when the Government of this country knew that this loan was made to Anglo Irish Bank.”

The Cabinet is meeting this afternoon to rubber-stamp a multi-billion euro recapitalisation plan for Bank of Ireland and AIB which is expected to include safeguards for mortgage holders who default on their repayments.

The strategy may also contain measures to limit pay and bonuses for executives and to boost lending to small and medium-sized firms.

The Dáil will hold a special debate on the recapitalisation issue tomorrow.

The Irish Bank Officials’ Association called for a fully independent investigation into Anglo Irish Bank in a bid to restore confidence in the sector at home and abroad.

Fine Gael leader Enda Kenny also told the Dáil: “We’re in this mess, not because Fianna Fáil policies have failed, but because they have succeeded.”

Anglo Irish Bank is due to hold its AGM in Dublin later this month when more details of its accounts are expected to be revealed.

Sinn Féin’s Dáil leader accused the Government of misleading the Dail while Labour TD Pat Rabbitte called for an all-party commission on banking to issue recommendations for the future.

“We will end up like Iceland if we allow things to proceed the way they are going,” Mr Rabbitte added.