Cowen comes out swinging to defend time as minister for finance

Following Charlie McCreevy is developing into a theme for Brian Cowen. Having taken over from McCreevy in 2004 as finance minister, Biffo on Thursday found himself following McCreevy as a witness in front of the Oireachtas banking inquiry.

Unlike McCreevy, Cowen accepted that mistakes were made on his watch. He took “full and complete responsibility” for his role in responding to the financial crisis and was “sorry” for the “hardship and distress” caused by the austerity measures introduced post 2008.

Not that he was a pussycat in front of his 11 inquisitors. He came out swinging in the early morning session, giving as good as he got with Fine Gael's Kieran O'Donnell, Joe Higgins of the Socialist Party and Sinn Féin's Pearse Doherty – oftentimes requiring chairman Ciarán Lynch to step in and separate them.

These sessions in front of the inquiry are Cowen’s chance to rehabilitate his reputation with the Irish public, who blame him for the crash and the financial havoc it has wrought in their lives.

Prepared extensively

Clearly, he had prepared extensively for his appearance – his opening statement lasted 40 minutes, the longest at the inquiry to date. He flagged as the day went on – no surprise given that his evidence lasted for more than 10 hours.

He did not mismanage the crisis as minister for finance between 2004 and 2008, the period he was quizzed on in the first of his two appearances in front of the committee.

Cowen accepted that there probably should have been a lower level of current spending in the boom years but this still wouldn’t have saved us from the crash, he said. With some justification, he said it would have been hard to justify cuts in health, education or transport spending or not giving pensioners a pay rise, when the coffers were overflowing. He wanted to make sure that “working people got the benefit of some of this prosperity” and that we developed a “first world” infrastructure.

Cowen also rejected the suggestion that he did nothing during his time as minister for finance to cool the economy, particularly the property sector. He cited four actions – the decision in December 2005 to abolish a wide range of property-based tax incentives; the refusal to abolish or dramatically reduce stamp duty; the decision of the Financial Regulator in early 2007 to increase the capital requirements on banks for speculative property lending; and the decision to continue to allocate 1 per cent of GNP every year into the National Pensions Reserve Fund.

Penny dropped

Remarkably, it was the autumn of 2008 before the penny dropped that the Irish banks were in trouble. This in spite of queues outside local branches of Northern Rock in September 2007 as Irish people sought to get their money out from the troubled UK bank. Two months later, the domestic standing group within the department was warned of potential liquidity issues in the Irish banks into 2008.

Alarm bells also didn’t ring when Anglo Irish Bank’s share price tanked in the so-called St Patrick’s Day massacre of 2008. This was in spite of a phone call around this time from Anglo’s chairman Seán FitzPatrick. Cowen told him to speak to the “authorities” – in other words the regulators, who we know were asleep at the wheel.

Anglo dinner

The following month, Cowen took up an invitation from his friend of 20 years and then Anglo director Fintan Drury to attend a dinner with executives of the bank. It was a social occasion and there was no chat of the bank’s difficulties at the time, he said. Cowen went to the dinner without a minder from the department, leaving him exposed to all sorts of claims when the crash came.

This is the first part of Cowen’s evidence. Next Wednesday he will return to answer for his time as taoiseach from May 2008 to February 2011. The committee is likely to seek granular detail on the blanket bank guarantee of September 29th, 2008, and Ireland’s entry into an EU-IMF bailout programme.

It will be another marathon session.