PRESS CONFERENCE:THE BANKING reports by Prof Patrick Honohan and international experts Klaus Regling and Max Watson shattered "a number of myths" regarding the Government's response to the crisis, Taoiseach Brian Cowen said.
He told reporters at Government Buildings: “I believe the reports strongly vindicate the approach taken by this Government in dealing with the banking crisis.”
He conceded the reports made clear that, along with mistakes by banks and regulators, “mistakes were also made by successive governments, some of which reflected fundamental errors in projections by the Central Bank, the IMF, the OECD and others”.
Asked if the Regling and Watson report was “a damning indictment” of his performance as minister for finance, Mr Cowen said the government decisions taken then were based on the advice available at the time, but he added: “The outcome that we now face is a very challenging one for all our people and I deeply regret that.”
In an opening statement, he said: “The Governor’s report demolishes the contention that a widespread guarantee was not necessary and highlights the enormous damage which would have resulted if a bank was let fail.”
He added that the Honohan report, “finds that Anglo Irish Bank was systemically important as this Government has contended. Opposition parties have strongly argued that it was not a systemic institution. Governor Honohan confirms that a disorderly failure of that bank would have brought down the whole banking system.”
Mr Cowen said: “As a former minister for finance, I want to respond to the criticisms of fiscal policy in the report and especially where this relates to the role of property-based tax incentives.
“I want to emphasise that prior to the crisis, the Government took action to reduce the vulnerabilities of the banking sector to the property market, although I fully accept that, in hindsight, it was not sufficient.”
Minister for Finance Brian Lenihan said it was important to bear in mind that the two reports were prepared as “scoping exercises for a banking inquiry”.
It was the Government’s intention to bring the terms of reference for a commission of inquiry before the Houses of the Oireachtas and have them approved before the end of June. There would be a six-month time-limit on the work of the commission.
The draft terms of reference related to January 1st, 2003, to September 28th, 2008, when the bank guarantee was introduced.
Mr Regling and Mr Watson were meeting the Oireachtas Committee on Finance and the Public Service to discuss possible terms of reference on Friday: “And I know that next week, arrangements are being made for the Governor to discuss matters with the committee.”
When it was put to Mr Lenihan that both reports identified government fiscal policies at the time as key contributory factors in the crisis and that these should be part of the terms of reference for the commission of inquiry, he replied that this was “not an area which was highlighted for investigation” in either document.
“They didn’t view those issues as being susceptible to judicial analysis or being very much in controversy.” He pointed out that the Taoiseach had answered questions on issues of fiscal policy in the Dáil three times a week since the crisis had fully developed in the autumn of 2008.
Asked if it was open to the Oireachtas committee to expand the terms of reference for the inquiry to include fiscal policy, Mr Lenihan said: “First of all, these reports have looked at the fiscal policy. The Government has accepted their conclusions on fiscal policy. It isn’t as if there is some huge matter of controversy that has to be examined.”
But he added that, “of course”, it was open to the committee “to suggest to the Government how the terms of reference can be improved and the Government will take and entertain very seriously the views of the committee before any final proposals came to the Dáil”.
Green Party Minister for Communications, Energy and Natural Resources Eamon Ryan said the reports showed “a systemic failure in our political system, in our regulatory system, in our banking system that has cost us dear”.
“The Green Party wasn’t in government for the long period in which these failings developed but we are responsible for the actions of this Government and the response to try and get us out of the difficult circumstances that we find ourselves in.” Mr Ryan added that he looked forward to “a quick, open and thorough inquiry” into the banking crisis.