Fianna Fáil distancing themselves from themselves at the Banking Inquiry

By Eolan De Búrca

THE FACTS AND FIGURES speak for themselves with regards to our economic collapse and the subsequent banking guarantee under Fianna Fáil's stewardship.

Fianna Fáil appear to have a narrative that they were just innocent bystanders and the world and its mother led it to our country’s financial penury. 

Fianna Fáil brought us the Troika with it’s crippling austerity and forced us to bear the cost of a bank bailout put by Patrick Honohan, Governor of the Central Bank, at €100billion and rising. 

Here's a few of Fianna Fáil’s “uncontrollable global circumstances” which led us down this path.

Deregulation  

Charlie  McCreevy  is widely criticised as one of the main architects of a deregulated, unprotected financial system that inevitably led to the economic crisis.  

During Charlie’s time as Minister for Finance he separated out the financial regulation from the Central Bank and set up the Financial Regulator.

Stripping out financial regulation from the Central Bank has been cited by many commentators as one of the reasons for lax supervision of Irish banks and the failure to spot the increase in property concentration in the run-up to the financial crash in late 2008.

The pace of credit expansion to finance the Irish housing bubble accelerated sharply in the years preceding the crisis. The relaxed and weak Irish regulatory supervision of the financial sector made the financing of excessively increasing property prices in the Irish market possible

Property bubble  

Charlie McCreevy showed absolute contempt for the Irish people when pressed by Pearse Doherty at the Oireachtas Banking Inquiry on the property bubble which was created and subsequently burst under Fianna Fáil stewardship.

During more than five hours of evidence, the committee adjourned to take legal advice after McCreevy sidestepped Pearse Doherty’s question on no fewer than five occasions. McCreevy was then threatened by the Banking Inquiry with criminal sanction for failing to answer.  

Pearse was highlighting the exceptionally generous property tax incentives which fuelled the property bubble.

Missed warning signs – How was the Department of Finance not acutely aware of these?

·         The Central Bank admitted in November 2005 that estimates of overvaluation of 20% to 60% in the Irish residential property market existed.

·         The Irish Times revealed minutes of a meeting with the OECD which indicated that while the Central Bank agreed that Irish property was overvalued, it was fearful of precipitating a crash by "putting a number on it".

·         Senior Allied Irish Bank officials expressed concerns in 2006 that Central Bank stress tests were "not stressful enough" – two years before the collapse of the Irish banking system.

·         The CBOI continually ignored warnings from the Economic and Social Research Institute about the dangerous scale of bank loans to property speculators and developers.

● Brian Cowen

Soft landing

Former Fianna Fáil Taoiseach Brian Cowen admitted at the Banking Inquiry that there was “a lack of hard evidence” on this highly controversial view.

The “soft landing” term was central to tens of thousands of families continuing to buy property as the crisis took hold.

The writing had been on the wall since early 2008 that we were in trouble after Irish institutions lost 24% of share in just two hours. Did Fianna Fáil (charged with the running of the country) just shake a magic eight ball for economic answers?

Cosy relationships

Brian Cowen stated “I don’t travel in those circles” with regards to him being beholden to property developers through established relationships. 

How does he reconcile that with the following:

·         The Galway Tent

·         35% of Fianna Fail’s disclosed donations from 1997 to 2007 was from property

·         Brian Cowen's attendance at private Anglo Irish Bank functions

● Then Fianna Fáil Taoiseach Bertie Ahern and EU Commissioner Charlie McCreevy at the Galway Races, August 2006

Further incompetence  

The Bank Guarantee socialised the cost of decade-long misadventures of runaway banks whose managers and private shareholders enjoyed the spoils of bumper profits through the boom.

At the time of the Bank Guarantee the banks were said to be illiquid (but not insolvent) by €4billion – this turned out to be an enormous underestimate.

The Government failed miserably to see the massive exposure to the state through this guarantee through lazy 'due diligence'. If they'd looked under the bonnet of the banks they could have seen the billions of loan impairments that actually existed. 

Just to reiterate – the cost of the bank bailout put by Central Bank Governor Patrick Honohan at €100billion and rising. 

Vested interests lobbying politicians for Bank Guarantee  

Last month, former Department of Finance Secretary General Kevin Cardiff said a number of banks and billionaire businessmen were lobbying politicians and senior officials to consider a bank guarantee at the time.

Brian Cowen stated “No” at the Banking Inquiry with regards to him being lobbied for a bank guarantee. It may seem very strange that the lobbying campaign spoke to so many others but not to Cowen.  

Brian Cowen attended a private Anglo Irish function a month after the St Patrick’s Day 2008 Irish Stock Exchange crisis and a fortnight before becoming Taoiseach but insisted he was never lobbied for a bank guarantee. 

The Bank Guarantee

This Bank Guarantee was provided by by the Fianna Fáil-led government in September 2008. By September 2010, the banks could not raise finance and the Bank Guarantee was renewed for a third year. This had a negative impact on Irish Government bonds, Government help for the banks rose to 32% of GDP, and so the Government started negotiations with the ECB and the IMF.

Once again, the cost of the bank bailout put by Patrick Honohan was at €100billion and rising. 

Your great grandkids are still going to be paying for the clean-up of this mess

This Fianna Fáil-dominated Government’s full-time job was the management and stewardship of the economy. Their economic policies and incompetence were at heart of the banking crisis and the subsequent ballooning of public debt.

Your great grandkids are still going to be paying for the clean-up of this mess.  

Sinn Féin economics v Fianna Fáil economics

Sinn Féin economic policy is a comprehensive and fully-costed policy by the Department of Finance which seeks to ensure  create a fairer society with sustainable growth.

If it were a choice between the two, I know which one I would pick anyway.