Updated 17.35
THE BANKING INQUIRY continued its recent trend for grilling high-profile Oireachtas members from the beginning of the financial crisis this afternoon.
Tánaiste to Bertie Ahern and former leader of the Progressive Democrats Mary Harney made her inquiry bow, with John Gormley, former leader of the Greens when they formed part of a coalition with Fianna Fáil following the 2007 election, in attendance also.
The standard for politicians appearing before the inquiry has seen a general level of contrition in their opening remarks. In this case, Harney was a little more contrite in her opening statement than Gormley.
She said she was “proud of our achievements in government” but admitted that “we made mistakes”.
“I regret those mistakes deeply,” Harney said.
Gormley for his part said that two-thirds of the necessary fiscal adjustments made following the banking crisis were put in place by his Green Party.
“We made these adjustments knowing it would lead to our own governmental annihilation,” he said.
In 2011 the Greens lost every seat they had at the general election in a total wipeout.
He said that poor regulation and zoning practices led in part to the property bubble that emerged in the late 2000s. He also acknowledged the important part played by economist David McWilliams in bringing about the bank guarantee that was put in place on 30 September 2008.
He added further that he believes the inquiry should call his Green party colleague Eamonn Ryan before it as he chiefly dealt with the party’s financial policy during the crisis.
In truth, the session had a slightly jaded hue to it, with little or no fireworks on show. Perhaps the controversy over the DPP and former Anglo Irish Bank CEO David Drumm’s potential testimony to the inquiry had sapped the inquiry members’ spirits.
Whose fault?
First up to question the two was Fine Gael TD John Paul Phelan.
In response to his line of questioning Harney asserted that, more than anyone, “the failure of the banking system must rest with the bankers”.
When asked if she thought enough had been done in the interim to prevent a reoccurrence of the crisis Harney said “I hope so”.
The Oireachtas is now far more questioning and robust than it was in its approach to the financial institutions.
But if you ask me can I put my hand on my heart and say it will never happen again, then no I can’t do that.
Harney added that “if you want credibility in the global financial markets then you need good regulation”.
Misled
A key thread of the questioning by Fianna Fáil’s spokesman on finance Mattie McGrath was that the government was misled as to the gravity of the financial situation in late 2008 by the banks.
“Well certainly some people in the banking industry must have known that things were fairly dire,” said Gormley.
Harney said that she recalled worry being expressed by then finance minister Brian Lenihan as to whether or not he was getting the correct information from the banks.
Returning to a popular theme for his testimony, Gormley repeatedly referred to the “McWilliams Option”, that being the full guarantee of the Irish banks by the government, in reference to economist David McWilliams, himself a witness to the banking inquiry.
“At the time Minister Lenihan was a man who played his cards very close to his chest – I often found out what was going on in his mind from David McWilliams,” said Gormley.
McGrath then asked Harney whether there had been much conversation at cabinet level about the pressures building up on the financial system in the months leading up to September 2008.
She replied: “As I recall we were assured all was well with the financial system”.
When the crisis hit it all happened very quickly to the best of my memory.
Lobbyists
Fianna Fáil senator Marc McSharry, who had been particularly boisterous in his questioning of Enda Kenny, Pat Rabbitte and Joan Burton at the inquiry last week, was a little more restrained this time round.
He wanted to know whether or not many groups had lobbied the government of the time as to tax cuts or increased budget spending.
Both witnesses agreed that lobbyists are something you deal with on a daily basis when in power.
“Certain lobby groups have huge access to the corridors of power,” said Gormley.
Gormley was at pains to remind those watching however that at the time the Green Party operated without a whip system, with all decisions being made “by consensus”
Under questioning from inquiry chairman, Labour TD Ciaran Lynch, as to why Anglo Irish Bank was nationalised and not recapitalised as initially planned in January 2009 Gormley replied that it had long become clear that the bank was insolvent and that recapitalisation would have been pointless.
This line of questioning appeared to discomfit the former Green leader a lot more than Harney – he repeatedly said that his former colleague Eamonn Ryan was a lot more privy to what was going on with the banks than he was, while a reference to David McWilliams was never far away.
Liquidity
Lynch then wanted to know whether or not the guarantee of September 2008 had any effect on the entering of Ireland into the troika’s bailout programme two years later.
“I have no evidence that that was the case,” replied Gormley.
I believe the seeds of our destruction were sowed in advance of 2007, not after.
You want a narrative that the bank guarantee was the worst ever decision in the history of the Irish state, that Fianna Fáil were up to dodgy dealings with Anglo, and that the Greens had no clue what was going on.
I can’t back that narrative.
To the same question Harney acknowledged that the two events are “certainly inter-related”.
“At the time of the guarantee the issue was liquidity as far as we knew,” she said.
Subsequently we would have become aware that the real issue was insolvency.
When asked when she became aware that Anglo was insolvent Harney replied “around the same time as deputy Gormley”, which was “in the run up to that bank being nationalised”.
Morgan Kelly
Under questioning from Fine Gael senator Michael Darcy, Harney said that the information available to UCD economist Morgan Kelly (who infamously predicted the worst of the financial bust at the time) was not available to the government.
“But it was a case of ‘he was right and you were wrong?’,” persisted Darcy.
“As it happens, yes,” the former Tánaiste replied.
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