IT could be said of Central Bank governor Patrick Honohan, who, surprisingly, will quit the job by the end of the year, that he has done the State some service.
It could also be said that he is leaving when he’s ahead of the game. Going on the bank’s annual report, showing unprecedented profits of €2.1bn last year and bringing its profits over the last six years to €8bn, he could hardly depart on a more positive note. Its handsome profit on trading in bonds means the bank will pay the Exchequer, in other words the taxpayer, a whopping €1.7bn this year.
Characterising the relaxed, if forthright, manner of his relationship with the media and the public during his six-year term of office, a most refreshing trait in a public official, he has given Finance Minister Michael Noonan six months to find the right man or woman to succeed him in this vitally important role. According to Mr Noonan his impending retirement marks the end of an era and leaves an “enduring legacy in his contribution to the stability of the country which is now beginning to strengthen and grow”.
In an unusual twist, there are no rows behind his decision to step down. As he said himself, he is not getting any younger and will be 66 in October. Pondering on the best time to go, he believes it is now, when the bank is undergoing a period of change, moving from crisis management to a phase of consolidation.
Whoever replaces him will have a hard act to follow. A safe pair of hands, his achievements are acknowledged internationally. An inspired choice by the then finance minister, the late Brian Lenihan, the former academic has laid the foundations of change in the ethos of the bank, making it a much stronger institution to protect the banking system and prevent it from collapsing.
A key qualification in the CVs of those who apply for this job was perhaps best described almost half a century ago by William McChesney Martin, former chairman of the US Federal Reserve Board, who famously said his role was to take the punch bowl away before the party began. There can be no denying that if this motto had been taken on board by Ireland’s financial regulator when Fianna Fáil-led governments began losing the run of themselves, the country would be in far better shape than it is today.
Unfortunately, the regulator sat on his hands amid the blatant profligacy of bankers and developers, egged on by irresponsible politicians. He failed utterly to put a stop to the wild party that was going on around him. Nor, it has to said, did the Central Bank cover itself in glory at that time, acting more as an onlooker than a fiscal policeman while the country and the banks were on the greasy slope to ruin.
Echoes of that crash were again heard yesterday when taxpayer-owned AIB announced miserly interest rate cuts on both occupier and buy-to-let mortgages by a miserly 0.25% for some customers and 0.38% for others. Though taxpayers have also bailed out other financial institutions including Bank of Ireland, which repaid the money, the refusal to cut obscenely profitable rates is an acid test of this Government’s muscle.
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