Economists bring style contrasts to banking inquiry

The slow march of the Oireachtas banking inquiry continued yesterday with economists Peter Bacon and Alan Ahearne appearing before the committee.

Bacon has a confident swagger about him. The former stockbroker wore a pinstriped suit and a dark- coloured duffle coat not dissimilar in style to Paddington Bear’s.

On departing the committee room after more than two hours of testimony, he announced that he wouldn’t be doing any media interviews. “There’s more to life,” he said brusquely.

Bacon is an economist for hire and makes no apologies for it. “I stopped looking at it when I stopped getting paid,” he said in response to a question on one of his reports to Government.

Booms very popular

Ahearne is less colourful. He’s a quiet chap although he drew a few chuckles when he said “booms are very popular”. “When it’s happening, it’s fantastic,” he said in a nod to the amount of cash swilling around the Irish economy in the years before 2008.

Ahearne was a naysayer at the fag end of the boom and bust. He’s counted 44 bubbles in 18 developed economies since 1970 and puts Ireland’s in the top three with the Netherlands and Japan.

Bacon wrote three reports for government on the housing market. His measures resulted in the pace of price growth halving from the first quarter of 1998 to the same period of 2000. This was largely undone in 2001 by the then minister for finance Charlie McCreevy when the measure to exclude interest deductibility was reversed.

“Thereafter prices re-accelerated, despite a supply response rising to 90,000 units annually, as speculative forces gathered increasing momentum,” Bacon said.

An economic adviser to Bertie Ahern for three or four months in 1991, Bacon answered a newspaper ad to secure the contract for his first report in 1998.

Subsequent to three housing market reports, he worked as a director for four property developers: Ballymore, Treasury Holdings, Bovale and one whose name he couldn't quite recall.

Ahearne (an adviser to the late minister for finance Brian Lenihan from March 2009 to March 2011) said the bank guarantee of September 2008 was a complicated issue.

It was “absolutely right” to avoid a “disorderly bailout” of the banks and it was important to “safeguard deposits” but he was “puzzled” at the time by the decision to guarantee subordinated debt.

He figured there must have been a good reason for this, made by people with a lot more information than he had at that time. If only.