Report 'understands' bank guarantee, but FG puts focus on tough talk, writes HARRY McGEE

THE REPORT of Finnish banking expert Peter Nyberg emphasises the systemic nature of the Irish banking crisis, concluding it was very difficult to pinpoint any one institution above another for blame. But it is clear that as far as the previous Fianna Fáil government is concerned, a line from George Orwell's Animal Farmapplies as far as culpability goes: "Some animals are more equal than others."

Fianna Fáil latched on to the commission’s conclusion that it “understands” the then government’s decision to provide a broad guarantee for the banks on the fateful night of September 30th, 2008. Nyberg based that finding on the deficient information available to the government from the Central Bank, the Financial Regulator, the Department of Finance and the banks. Essentially, all advised that the problem facing the Irish banking system was a temporary liquidity problem.

Having said that, as Nyberg himself pointed out yesterday: “The government is responsible for everything that happens in a country.”

Fianna Fáil portrayed the findings as placing it in a less culpable position than the regulatory authorities and the Department of Finance, and on an equal footing with other parties.

Fianna Fáil finance spokesman Brian Lenihan, minister for finance on the night of the guarantee, said he supported the report’s analysis that there was a systemic failure of regulation. “The report is a direct challenge to what it shows to have been a wide consensus through that period, which looked at the property market primarily in terms of the need for more houses and expectations of rising prices.

“The report is also correct in pointing to the political consensus, involving all parties, which saw the main issue at the time as being the expansion of public services. Fianna Fáil accepts its responsibilities in this regard, but the question remains whether Fine Gael and Labour will now recognise and acknowledge their role,” he said.

Lenihan’s successor Michael Noonan took a different view, saying he did not accept that the report absolved the previous administration. He said Nyberg had written in a diplomatic manner that seemed mild at first reading. But he continued: “It’s very tough in content. There’s an argument that it was a false consensus that drove banking and country to the edge of the cliff.

“A former taoiseach has told people they would be better off committing suicide. That would have been in Peter Nyberg’s head. Also, the government fuelled it. He was thinking of various tax breaks. On a number of occasions he hits very hard on political responsibility.”

Certainly, the report’s “understanding” of the guarantee is tempered by criticism that, given the massive amounts involved, it might have been useful to tap temporary funding and gain time to consider whether a blanket guarantee was the best option. But Nyberg accepts such a delay could have had a negative effect on the markets, which were extremely volatile immediately after the collapse of Lehman’s.

There is criticism too of the “piecemeal basis” of policies to restructure the banks. Other aspects which fall into the political sphere, of which Nyberg is critical, are the heavy reliance on transactional and cyclical taxes and continued tax breaks.