Kevin Cardiff: leading figures pushed for guarantee

A number of leading political and financial figures told the Central Bank and the department of finance that it should consider a guarantee of the Irish banks in the months leading up to the decision actually being taken on the night of September 29th, 2008.

This has emerged in evidence today from Kevin Cardiff, a former secretary general of the department who was head of the banking unit at the time of the guarantee.

In April 2008, Mr Cardiff said Sean FitzPatrick made a representation to the then governor of the Central Bank John Hurley about “some guarantee” being needed.

One week later someone referred to in his notes as “DD” made an approach to Mr Hurley.

On May 3rd, the former minister for finance Charlie McCreevy told Mr Cardiff that some form of political statement needed to be made by the Government to calm market concerns about the Irish financial sector.

In July, he described a meeting with Davy stockbrokers where they said “look lads, probably if things get worse you might consider a guarantee so why not now?”

Mr Cardiff could not remember who represented Davy at the meeting.

In September, leading Irish financier Dermot Desmond rang Mr Hurley saying: “I’m in this market. I see things happening. I think you might need a guarantee.”

He said there was also a consultation with Michael Somers, then the head of the National Treasury Management Agency.

Gillian Bowler, former chair of Irish Life and Permanent, also suggested that the Government do something at a meeting, Mr Cardiff added.

On September 25th and 26th, he said Brian Goggin told David Doyle, the then secretary general of the department, that he did not want a bank guarantee.

His position had changed by the night of the guarantee, Mr Cardiff said.

In relation to the European Central Bank’s position on the guarantee, Mr Cardiff said the ECB made it clear to Mr Hurley that Ireland would have to look after its own problems.

He said the ECB sent a message back that “you have to make sure your own banks are dealt with by your own government”.

Mr Cardiff said a “lengthy set of options” had been drawn up in advance of the Government’s pressing the button on a blanket guarantee.

“It wasn’t that we turned up on the night without preparation,” he said.

This included nationalisation, emergency liquidity assistance, the possibility of giving “extensive loans” from the Central Bank or exchequer, loans from the National Pension Reserve Fund, and a liquidity swap arrangement, which would have involved converting bank assets into Government assets.

Mr Cardiff said the liquidity option was at an advanced stage of preparation. “It was ready to go.”

“That was the sort of list we could do on immediate notice,” he said, adding that it was not possible for the Government to cost these various options.

“They can’t be costed because each costs zero unless something goes wrong,” he explained.

Mr Cardiff said AIB and Bank of Ireland provided a draft of how the guarantee should be phrased.

He said several copies of this were made provided to everyone in the room on the night of the guarantee.

When questioned as to why the Government allowed the banks to frame the guarantee rather than having some wording of its own in preparation, Mr Cardiff said a senior figure, possibly the Taoiseach or the attorney general, said it should be drafted in line with what the banks “have given us” so as to not cause problems for them with markets.

It was a case of “let’s keep this right in market terms”, he said, adding that the banks were out of the room while this was being done.

This appears to contradict evidence given previously to the committee by senior executives of both AIB and Bank of Ireland who were in Government Buildings on the night of the guarantee.

On why Mr Cardiff had advocated nationalisation for some Irish banks on the night of the guarantee, he said: “I thought they were shot…in terms of their future business. They had a property-based business when property was slumping. Who were they going to lend to? What was their profit flow going to be?”

“It seemed to me that those institutions [Anglo and Irish Nationwide] would have to be managed down so they would have a lesser balance sheet all the time,” he said.