Inquiry fails to find cause of Irish financial system failure

The Times

John Walsh Ireland Deputy Editor

Conspiracy theorists looking for a cause for the collapse of the Irish banking system have been disappointed by a long-awaited parliamentary inquiry.

Even the appearances of Bertie Ahern and Brian Cowen, the former prime ministers, before the parliamentary banking inquiry failed to provide answers to what led to the economic crash and the near-total collapse of the banks.

Mr Ahern, who was the country’s longest-serving leader, from 1997 to 2008, has shouldered much of the public blame for the €64 billion taxpayer-funded rescue of the banking system and the European Union-International Monetary Fund bailout in November 2010.

The 11-strong inquiry committee questioned Mr Ahern this month about the alleged nexus of politicians, bankers and property developers that fatally undermined the Republic’s economic sovereignty. The Mahon tribunal, which was set up to look into corruption in Irish politics, published its final report in 2012 and found that Mr Ahern had accepted undeclared payments from businesspeople during his time in office.

The former prime minister told the banking inquiry that he did not have any inappropriate relationships with bankers or property developers while he was in power.

He blamed the collapse of the banking system on inadequate and poorly enforced financial regulation as well as membership of the euro, which triggered a flow of cheap credit into the country.

The central bank was independent and removed from the influence of government, he said.

He gave a qualified apology and said he wished that he had done some things differently. “Of course, I apologise for my mistakes but I am also pleased that I did get a lot of things right,” he said.

Mr Cowen faced two days of scrutiny for his role as finance minister between 2004 and 2008 and prime minister between 2008 and 2011. In September 2008, Mr Cowen’s government introduced a blanket guarantee of about €400 billion of bank liabilities, which soon led to a loss of investor confidence and pushed Irish borrowing costs to unsustainable rates.

Mr Cowen said that the government had no option other than to guarantee the banks because it was faced with an imminent collapse of the sector. He denied that the decision came at the behest of bankers or anyone else.

Mr Cowen also gave a qualified apology, accepting responsibility for allowing spending to run out of control when he was finance minister. However, the main cause of the of the economic crash lay with international factors, such as the sub-prime mortgage crisis in the United States that resulted in heavy defaults, he said.

None of the international bodies, such as the IMF, the Organisation for Economic Co-operation and Development or the EU Commission, had forecast that the Irish economy was in a bubble before 2008, he added.

Even though there was intense sparring during both men’s appearances, no committee member came close to landing a knockout blow.

Enda Kenny, the present prime minister, from the centre-right Fine Gael party, appeared before the inquiry last Thursday. Clearly in election mode, he claimed that the Fianna Fáil government, which was in power between 1997 and 2011, “caused the lion’s share of damage” because its policies led to an erosion of competitiveness, a property bubble and a bloated public sector.

A wide range of bankers, politicians, businesspeople, and officials from the department of finance and the Central Bank of Ireland have been called before the inquiry.

Although there have been few revelations, it has provided detail on the lax regulatory standards, loose fiscal regime and cronyism within banking that prevailed in the years preceding the 2008 crash.

The inquiry is itself under investigation, after claims from a whistleblower that the central bank and the department of finance had received preferential treatment after secret meetings between the two institutions and inquiry officials.

The inquiry, which commenced last November, is set to conclude its hearings in September. Its findings will play a prominent role in the next general election, which must be held by next April at the latest.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: