Much of the time the Oireachtas banking inquiry seems to take on the character of a whodunnit, writes Michael Clifford
Josephine Citizen was murdered on the night of September 29, 2008, in government buildings. The murder weapon was a sharp-edged bank guarantee. Present were a splendid cast of suspects, including fatcat bankers, clueless politiicians and inept senior civil servants. Whodunnit?
Was it Professor Cowen, leader of the boisterous cult known as Fianna Fáil? Did Dr Lenihan try to save Josephine only to be repelled by feckless bankers? Had anybody drink taken? Were the civil servants awake when the deed was done? Does any of it really matter?
Apparently so, if we’re to follow the inquiry. Yesterday, one of those who were in the drawing room on the night in question appeared before the investigating politicians.
Kevin Cardiff was a second secretary with responsibility for banking in the Department of Finance at the time. He has had a good recession. After promotion to secretary general he subsequently lifted off to a big European job pulling in 250 big ones.
Yesterday, he filled in some details about the night Josephine met her end. The bankers were out to get the best deal possible for the banks (wow!). Cowen and Lenihan had a private meeting that probably sealed the deal. There were a lot of comings and goings.
Unfortunately, Cardiff couldn’t assist in locating a smoking gun or blood- stained knife, anything that might lead to a suspect being fingered for what has been pumped up to have allegedly been the worst night in the history of the state.
He did provide one home truth that will probably get ignored. The guarantee, he told the inquiry, “was the option least likely to lead to disaster”.
In other words, far from being the source of all woe that was to follow, the guarantee was a necessary reaction to the recklessness in banking, regulation and governing that persisted for up to five years before the night in question. Such an analysis was also provided by Patrick Honohan, but it does not fit into the political and public requirement for a neat and tidy answer to a very messy question.
The most relevant issues around the collapse were asked as something of an afterthought. Fianna Fáil’s Michael McGrath wondered why the department had not looked “under the bonnet” of the banks in the summer of 2008, as disaster loomed?
“We believed the regulator had a good picture and a level of stress-testing had been done,” the witness replied. Ah yes, here we go again. Somebody was asleep at the wheel but it wasn’t me.
Delving further back into the halcyon days of the galloping Tiger, Cardiff was asked did he have any concerns about ballooning public spending on the back of receipts from the property bubble. Here, the former senior civil servant said the blame lay to a greater extent with the politicians.
“Everyone decides we see the risks, but we’ll keep spending unless things get bad. The department would have wanted a much tighter fiscal policy than government or opposition and while we would have been more conservative [than the politicians] we weren’t conservative enough.”
But what of the harbingers of doom? Chairman Ciarán Lynch wanted to know why warnings were not acted on.
“Most people who saw the crash coming saw it too late to be in a position to undo most of the damage and even those who had an inkling that things were now in a dangerous place by 2006, the quandary then was how do you climb down off the cliff without a crash.”
That told more than any drama about the guarantee. The serious damage was done by 2006, and for up to two years after it was head-in-the-sand stuff because the truth was too awful to bear.
Cardiff’s other contribution was to give a first-hand account of how Ireland was forced into the Troika bailout in November 2010. He confirmed the ECB did their best to threaten with a smile, and the US treasury secretary Tim Guithner insisted that the bailout include shelling out to the gambling bondholders.
This stuff is shocking in its contempt for democracy, and some form of redress, or at least acknowledgement, should be sought. Cardiff also pointed out that a bailout was inevitable.
During his appearance at the inquiry, Honohan said that the bailout ensured less, rather than more, austerity. Cardiff’s analysis appears to concur. But let’s not allow facts get in the way of political rhetoric that casts the Troika as the font of austerity. A whodunnit needs plenty of villains to maintain the suspense.
Michael Clifford
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