IMF good, ECB bad. That was how the final day of public hearings at the Oireachtas banking inquiry might be best summed up.
It started with Ajai Chopra, the public and highly affable face of the International Monetary Fund's bailout mission to Ireland from late 2010, who told the committee the substantial emergency liquidity support given by the European Central Bank to Irish banks in the wake of the 2008 crash was "only grudgingly provided".
And while Chopra and many of his IMF colleagues wanted to impose losses on senior unguaranteed unsecured bondholders, the European institutions opposed this move in late 2010 because of fears of contagion across the euro area.
"Ultimatums are not the right way to conduct business," Chopra said in reference to the letter sent by former ECB president Jean-Claude Trichet to late minister for finance Brian Lenihan in November 2010, in which he warned Ireland would not be able to access a bailout if it imposed haircuts on senior bank creditors.
Later, Minister for Finance Michael Noonan told the committee how he had planned to tell the Dáil on March 31st, 2011, he intended to burn bondholders in Irish Bank Resolution Corporation – which comprised Anglo Irish Bank and Irish Nationwide Building Society – to the tune of €3.7 billion.
He had to revise his speech following two conversations with Trichet, who warned him a “bomb would go off in Dublin”.
It was left to Marco Buti, the European Commission's director general for economic and financial affairs, to offer a defence of sorts to the stance taken by the EU. He said the euro zone found itself in a "life-threatening" situation in 2010 and it would have been "too risky" to bail in senior bondholders at Irish banks, which could have led to "spillover effects" in the rest of the euro area.
Logistics of inquiry
The inquiry held 49 days of hearings spread out over 10 months and heard from 128 witnesses. Another batch of written statements has been accepted, but not that of former Anglo chief executive
David Drumm
. At least not yet. The committee continues to “consult” with the DPP on this.
There was no appearance from Seán FitzPatrick, Anglo’s former chairman, or assorted other bankers, developers or financiers. The ECB also chose not to appear.
But we did at least hear from former Irish Nationwide boss Michael Fingleton, although committee members were barred from asking about his €1 million bonus and his retirement watch.
Bertie Ahern and Charlie McCreevy came out of political retirement to entertain us with explanations of their stewardship of the economy before the crash, and Brian Cowen livened up proceedings over two days of evidence. Taxpayers also got to hear from an assortment of regulators, bank executives, developers and auditors who were on the stage at the time of the crash.
The inquiry unearthed the granular detail of the events surrounding the bank guarantee and the bailout, specifically the pressure brought to bear by the ECB not to burn senior bondholders.
We know now the then government had been looking at possible options to deal with a possible financial crisis for some time in advance of the blanket bank guarantee in September 2008.
Early discussions
We also know preliminary discussions took place as early as 2009 with the IMF on how a country might go about accessing an assistance programme. Just in case, like.
And we now know much of what happened when Cowen met Anglo executives at a couple of events in 2008.
According to Cowen, no banking business was discussed at these meetings, although Drumm’s leaked statement appears to challenge this. It seems hard to credit but Cowen swore it was the truth.
The hardest work arguably lies ahead. The inquiry’s report was to have been completed by the end of November but allegations from a whistleblower threw it off track. Chairman Ciarán Lynch hopes to publish by mid-January. A number of inconsistencies in evidence remain to be sorted out and some meaty recommendations are needed for the report to resonate with the public.
There is one sobering reality from the inquiry’s work – the cost of the banking crash will be “€30 billion or so” as per Noonan’s calculations yesterday. It’s a painful legacy of the boom.
