CENTRAL BANK GOVERNOR Patrick Honohan got rather animated today as he answered questions at the Oireachtas banking inquiry.
Honohan was appearing before the committee to clarify comments he made in January.
“What I said was not clear – I interrupted myself, as I do all the time,” Honohan said of his previous appearance, noting he didn’t always finish sentences and used colloquialisms.
Honohan confirmed that the former secretary general of the Department of Finance, David Doyle, contacted him about his initial appearance.
The governor clarified that he had not spoken to Doyle about a note he had sent to the Department of Finance’s former assistant secretary general, Kevin Cardiff, in September 2008 saying Anglo would need €8.5 billion.
Sinn Féin’s Pearse Doherty questioned Honohan on this issue several times until he said the TD’s line of questioning could put him in a position where “I look like I don’t know anything”.
Honohan banged the table, leading Doherty to state: “I’m sorry we appear to be at loggerheads.”
At this point, committee chair Ciaran Lynch stepped in, asking: “Was there a discussion with Mr Doyle or Mr Cardiff?”
Honohan said he did not talk about the note with Doyle, but stated: “There was possibly a discussion with Mr Cardiff.” However, he stressed that if a discussion took place it was not significant as it would have been two years after the fact.
Bank guarantee
Earlier Honohan told the inquiry it is important to keep the impact of bank guarantee “in perspective”.
The decisions on the night of the guarantee did of course have consequences for Ireland. But there has been a tendency to overstate the extent of the impact of that night’s decisions on the subsequent welfare of the nation.
Honohan said “at least 80-90% of the overall hardship that followed the bursting of the bubble, was – albeit unbeknownst to the decision-makers that night – already inescapably embedded in the situation”.
“The damage had been made unavoidable by the unrestrained credit and property boom.
The fiscal austerity measures that have had to be taken are not just due to the €40 billion or so in additional net debt that can be linked to the guarantee, but also reflect the far larger impact of the ending of the construction boom on the government’s tax revenue and spending needs.
Honohan said the need for “austerity measures” such as “tax increases and expenditure reductions that have proved necessary since, could have been reduced somewhat, but not all that much, by anything done at the end of September 2008″.
The governor said he remained of the view that both Anglo and Irish Nationwide should have been nationalised “by the end of that week”, adding that leaving them in the hands of management was “very risky”.
Hunter vs hunted
Joe Higgins asked if Honohan understands why people might be annoyed with his view that the guarantee didn’t cause most of the country’s financial hardship.
Honohan people shouldn’t be “shocked” with his view as “other things were wrong in society”, noting the pain “would have been severe” with or without the guarantee.
This led Higgins to use an African proverb:
At this stage, Lynch just wanted to wrap things up – replying in jest:
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