To paraphrase Franklin D Roosevelt, September 29, 2008 is a night “which will live in infamy” yet, unlike the bombing of Pearl Harbor to which he referred, we are no wiser after the event.
Like the fourth secret of Fatima, the infamous night of Ireland’s bank guarantee remains shrouded in mystery, according to a report by the Oireachtas Public Accounts Committee.
This is despite the fact that €122m has already been spent on consultancy costs for financial, legal and accountancy services linked to managing the financial crisis that ensued. There are at least some things that are now clear: the Department of Finance was way out of its depth in dealing with the bluster of bankers and allowed itself to be bullied into submission. It had neither the wit nor the wisdom to challenge the assessments being made by the banks. It even accepted what the banks were saying, even though — unbelievably — there were no written proposals brought by the senior bankers to the department.
It is also clear that senior bank officials lied copiously to ensure that the guarantee would be put in place. The PAC report puts it more delicately, referring to “erroneous” statements given by bank chiefs prior to the guarantee.
The brazenness of the banks was exemplified by Anglo Irish. Anglo made a formal presentation to department officials on September 18, 11 days before the guarantee, showing the bank’s business model in “a very positive light”, claiming it continued to be “highly profitable”.
As the report states: “Either senior Anglo executives were deluded or they reckoned they could get away with presenting what they must have known was data that could at best be described as inaccurate.”
Politicians and civil servants were not the only ones fooled by the less than truthful banks. Just a day before the guarantee, external advisors Merrill Lynch told the Government: “Liquidity concerns aside, all of the Irish banks are profitable and well capitalised.”
We now know just how wrong that assessment was. We also now know that the worst effects of the bankers’ duplicity might have been avoided if the office of the financial regulator was doing its job properly. But it clearly wasn’t.
According to PAC it was “exercising inadequate supervision” and a proper analysis of loan books of the banks was not done.
It is an appalling indictment of all concerned with the guarantee and the fallout from that fateful meeting in September 2008 that not a single one of those directly involved is prepared to give a full, unbiased account of what went on.
The fallout from the decisions made on that night have been astronomical and will continue to live in infamy. At the date of the guarantee, Ireland enjoyed a triple A credit rating, the highest possible. Moody’s then cut it five times, reducing it to junk status.
It would be easier to accept the mistakes of the past if we could be assured that something like this could never happen again and that our laws and oversight regulations are now adequate to deal with any wrongdoing. But, as the PAC report reveals, this is far from being the case.
We are still weak on white-collar crime and we still have no laws that specifically deal with reckless trading or sanctions against directors of failed banks.
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