CABINET AGREEMENT on introducing a bank guarantee was reached the day before the late night negotiations in September 2008 and was based on “expert advice”, according to Minister for the Environment John Gormley.
Mr Gormley acknowledged that the details of the guarantee might have been decided late on the Monday night but “the broad thrust of what had been agreed had actually been discussed in detail on that Sunday”. On that Monday night in September 2008 the €440 billion blanket bank guarantee was decided.
Mr Gormley said “you can only go with the best advice at the time”. He referred to the subsequent report by Governor of the Central Bank Patrick Honohan.
He said Prof Honohan had pointed out that the bank guarantee may have been too broad in that it included subordinated debt, but it was absolutely essential because of the systemic importance of some of the banks.
In his report on regulatory failures leading up the crisis, Prof Honohan said: “It is hard to argue with the view that an extensive guarantee needed to be put in place, since all participants [rightly] felt that they faced the likely collapse of the Irish banking system within days in the absence of decisive immediate action.”
But Mr Honohan added: “Nevertheless the extent of the cover provided [including to outstanding long-term bonds] can – even without the benefit of hindsight – be criticised inasmuch as it complicated and narrowed the eventual resolution options for the failing institutions and increased the State‘s potential share of the losses”.
Mr Gormley, speaking on the Marian Finucane Show on RTÉ radio on Saturday, said the principle of the guarantee had been discussed in detail at a Cabinet meeting on the Sunday before the late night meeting on Monday between the Taoiseach, Minister for Finance and bankers at which the blanket guarantee was introduced.
“You couldn’t just make a decision on the spur of the moment. You’d have to discuss it for days in advance,” Mr Gormley said.
When it was put to him that the general view was that the decision was made that night by the Taoiseach and Minister for Finance, Mr Gormley said: “Of course not, Everybody had to be involved in what is the best thing to do under these circumstances. The arrangements had been made the previous Sunday. We had gone into that in quite a bit of detail. This was the expert advice to go down the guarantee route,” he said.
Asked if anyone in the Green Party regretted the guarantee, Mr Gormley said “hindsight is a wonderful thing”.
