Adviser says Lenihan ‘was worried guarantee mightn’t stick’

Brian Cowen did not overrule Brian Lenihan on the night the blanket bank guarantee was introduced, the Oireachtas banking inquiry heard on Thursday.

Cathy Herbert, former special adviser to the late former minister for finance, confirmed she was in Government Buildings on the night of September 29th, 2008.

Ms Herbert said she did not speak to the minister until three o'clock the following morning when he was leaving the meetings. She said he was concerned about the magnitude of the decision made but made no reference to his proposal to nationalise Anglo Irish Bank.

“He was worried; he was concerned,” said Ms Herbert. “He was worried the guarantee mightn’t stick, worried that it wouldn’t be enough, that this shot wouldn’t be enough.

“He was worried about what was facing him next morning in terms of talking to key people. And he was also conscious of the moment of the decision that had been taken, the importance of the decision.”

Ms Herbert said he had argued strongly in favour of the nationalisation of Anglo Irish Bank.On the question of an overruling, she said: “It didn’t emerge to me as a problem and I think that if it had been a problem, if there had been a serious disagreement, in other words, if he felt he had been overruled and if he had a complaint, I would have known.”

‘Probably the best decision’

Ms Herbert said towards the end of his life Mr Lenihan said the guarantee was “probably the best decision that they could have made at that time”.

The former special adviser to Mr Lenihan was "taken by surprise" by the interview given by Central Bank governor Patrick Honohan on radio on November 18th, 2009. Mr Honohan went on RTÉ's Morning Ireland radio programme to tell the public the Republic would probably apply for a bailout.

Mr Honohan’s intervention came when the Government was insisting Ireland had not applied for a bailout from the European Union and the International Monetary Fund, as had been reported by international media.

Ms Herbert said it had made for a difficult day for the minister for finance.“He was irritated by it. Brian Lenihan was only ever irritated briefly. I mean, not long afterwards he said to me: ‘You know, the governor had his own pressures. He’s a member of the ECB [European Central Bank]. He’s independent in the exercise of his duty.’ He had appointed him as governor and he got over it.”

Suspicion

The adviser also revealed that Mr Lenihan had a suspicion that the banks misled him on the problems in the institutions. She said he found it very difficult to understand whether they were not telling him the truth or whether it was ineptitude.

The special adviser said Mr Lenihan would have relished the chance to appear before the committee.

“I think he felt that he took the decisions he did in the best interests of the entire country.

“He was a great man for believing in the common good. He obviously deeply regretted the hardship that those decisions caused. He regretted some of the decisions on VAT, for instance. He felt that that was a retrograde step and it hit people, poor people, and people on lower incomes.”