KEVIN CARDIFF, the secretary general at the Department of Finance, told officials from the US embassy in Dublin in late 2008 that he was confident the Government would not have to bail out our banks.
This has emerged from the latest batch of secret US cables released by WikiLeaks.
In early October 2008, Irish officials were insisting to the US embassy that “herd mentality” based on “rumour and innuendo” had created the need for the blanket guarantee of deposits.
The US economic adviser wondered if Dublin had a grip on the crisis after the meeting with officials from the Central Bank of Ireland and the department.
In relation to Mr Cardiff, who was head of the department’s taxation and financial services division at the time, the cable said: “[Cardiff] pointed out that auditors contracted by his department to look at the books of at least two of the institutions under pressure came away with a ‘favourable impression of the loan books’,” the cable said. It added that he “stressed that all involved in putting together the package were confident that Government would not be forced to bail out the banks”.
Mr Cardiff, who became secretary general in January 2010, had added: “The genesis of this [the deposit guarantee] was classic ‘herd mentality’ based mostly on rumour and innuendo about Irish banks rather than any hard facts.” A spokesman for the Department of Finance declined to comment last night on the cables.
Washington’s economic adviser in Dublin warned that Ireland might be “a bit optimistic” about the financial sector’s prospects”.
Remarks by one of the regulatory officials are also recorded in the cable sent to Washington. “[Gordon] Barham [a Central Bank official] maintained that the level of impaired assets in the system stood at between 0.5 and 0.8 per cent and these are mostly confined to loans to commercial property developers. “When pressed, Barham said the media had exaggerated the level of problem assets and those that existed could be managed.”
The US adviser concluded that the Irish authorities would have their "work cut out" to rebuild the financial sector. "Against the background of the steep slump in the property market and anecdotal evidence we have picked up, it may be that government officials are being a bit optimistic in their assessment of the level of impaired assets." – (Additional reporting Guardian service)