Brian Cowen decision on guarantee already made, inquiry hears

Former taoiseach Brian Cowen had decided to issue a broad guarantee for the Irish banks before the discussions that took place in Government Buildings on the night of the guarantee on September 29th, 2008, according to evidence given to the Oireachtas banking inquiry yesterday by Kevin Cardiff, a former secretary general of the Department of Finance.

In response to a question from Senator Susan O’Keeffe, he said Mr Cowen started the meeting saying a “good broad solution that has a real chance” was required.

“It became quite clear in his discussion that . . . what he had in mind by that was quite a broad guarantee,” he said.

Surprise

Mr Cardiff said this “surprised him a bit” as he thought the department or the Central Bank would be asked to “ start from scratch and build up”. He later learned there was some discussion of this option at a cabinet meeting the day before.

Mr Cardiff argued on the night for Anglo Irish Bank to be guaranteed with broad support issued for the other banks. This was supported by then minister for finance Brian Lenihan, Merrill Lynch and the National Treasury Management Agency.

On why he advocated nationalisation, Mr Cardiff 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?”

Mr Cardiff said he was still not sure that his position on the night was the “right” one. “I don’t know, still, that the guarantee was the wrong option. I’m not convinced it was.”

He said no adviser advocated a liquidation of Anglo at that point. “Even now I think that would have been too dangerous to contemplate,” he said.

Mr Cardiff told the committee that waiting a few more days before making a decision was not a realistic option as there was “every possibility” of a run on Anglo while Irish Life & Permanent had just three days of cash left in its kitty.

Responsibility

Mr Cardiff, who had responsibility for bank interventions at the time of the crisis in 2008, said AIB and Bank of Ireland did seek a broad guarantee on the night of the decision in Government Buildings and provided draft wording. This conflicts with evidence from AIB and Bank of Ireland executives.

Mr Cardiff outlined representations made by various figures on the need to take action over a number of months in advance of the guarantee decision, including former Anglo chairman Sean FitzPatrick, former minister for finance Charlie McCreevy and financier Dermot Desmond.