ANALYSIS:Powerful voices have recently called for a public inquiry into what happened at our banks, writes HARRY McGEE
IN NOVEMBER 2008, the boss of bankrupted Lehman Brothers was hauled before the House of Congress oversight committee on Capitol Hill and subjected to a humiliating public grilling.
Richard Fuld was subject to verbal assault and battery from the indefatigable Henry Waxman, the chair of the committee. He put the clearly uncomfortable Fuld to the sword on his enormous salary over eight years.
“You get to keep $480 million. I have a very basic question – is that fair?” he barked.
The most powerful aspect of the above exchange was that this full-scale congressional hearing took place within a month of the collapse of Lehman Brothers.
The collapse of the Irish financial system took place at roughly the same time. It has been almost a year since it happened. Yet, unlike the US, there has been no public inquiry into the banking crises and the circumstances that led to the collapse of Anglo Irish Bank and into why five other institutions, including the two big banks, were rushed into intensive care.
There are ongoing investigations by the Garda and the Director of Corporate Enforcement. But they are being conducted in private and – given past experience – are likely to take some years before reaching a conclusion.
The case for a public inquiry was made most prominently by the governor of the Central Bank, Prof Patrick Honohan, to an Oireachtas committee last week. “I expect that the Oireachtas will decide to authorise some form of inquiry to try to understand the underlying causes of this crisis.”
Former Labour leader Pat Rabbitte has also argued that there is a compelling case for an Oireachtas inquiry into the banking crisis.
“As well as learning the lessons that ensure it wouldn’t happen again, an inquiry into the banking crisis would be cathartic. The public needs to know why one small bank was allowed to grow like Topsy to such an extent that it threatened the entire banking system.
“And to find out why the two old-fashioned banks, that have been there in one guise or another for 200 years, joined the stampede?”
It is generally agreed that there are two reasons why no public inquiry has been launched.
The first is that there is no inclination by Government to initiate one. In the Dáil last week, Taoiseach Brian Cowen gave a kick-to-touch response with the standard reply that it would have to be carefully considered before any commitment be made.
The second, and more problematic reason, is the Supreme Court judgment that stopped the Abbeylara inquiry in its tracks over a decade ago. That case arose from a parliamentary inquiry into the circumstances surrounding the shooting dead of John Carthy by gardaí after a siege in Longford. The Supreme Court held that the committee had no power to conduct an inquiry which could lead to “adverse findings of fact and conclusions” (including a finding of unlawful killing) in relation to a named person not a member of the Oireachtas.
The judgment was seen as delivering a fatal blow to parliamentary inquiries.
In 1999, two years earlier, the Public Accounts Committee had held a speedy, comprehensive and cost-effective inquiry into the banks’ treatment of Dirt and the setting up of bogus offshore bank accounts for clients. Backed up by a report from the Comptroller and Auditor General, the Public Accounts Committee (PAC) inquiry was seen as providing a template for the future.
However, the Abbeylara judgment ended that. Only one public examination since then – the PAC inquiry into Fás – has come remotely close in terms of standing up for the public interest.
However, Gerard Hogan SC, an authority on the Constitution, is of the opinion that Abbeylara, while causing difficulties, did not slam the door shut as many believe.
“The Supreme Court said that it was unconstitutional for the committee to make a finding that a named person committed an act of homicide. It was saying that a committee could very easily operate as an alternative criminal justice system with very profound implications for the reputations of people.
“The Supreme Court was right to draw attention to the difficulties inherent in that. That is overlooked in the debate.”
Hogan says an inquiry into the banking system could comfortably operate provided it was not making findings that “somebody engaged in nefarious criminal conduct”.
He said there is no problem if a committee adopts a commonsense approach. In other words, there are limits to the findings it can make, but not oppressive limits. A finding could censure somebody for failing in their duty or omitting to carry out an act. At the same time, it could not find that the failure or omission was criminal in nature.
Rabbitte agrees. He has been working on a Bill for some time that he says will restore the rights of parliamentary committees to hold inquiries. He believes legislation is required.
What he envisages is a two-step inquiry. The first would be a collection of evidence and materials to be compiled by a person or body with expertise. The committee hearings would be based on that report or materials.
He also argues there would be no problem in compelling the banks and their executives to give evidence, in addition to Government departments, the Central Bank and the office of the Financial Regulator.
“The view is that given the crucial role of the banking system, not just in our economy but for all individuals in our society, and given the significant investment of taxpayers’ money, there’s more than enough capacity to make them amendable.”
The chairman of the PAC, Bernard Allen, believes that his committee would be best suited to the task. He said the PAC would need strong terms of reference which would require legislation in order to compel witnesses to attend and secure the release of documents.
Allen also suggested that a constitutional referendum would be required to allow the committee “to issue findings pinpointing individuals”. This suggests that Allen would favour stronger findings that would bring the committee powers up to the borderline between civil and criminal law.
Rabbitte is not so sure that the PAC is the appropriate forum, saying that asking the CAG to compile a report for the committee might divert him from his own work. He favoured an expert, even one from outside the jurisdiction, reporting to a well-resourced and powerful committee.
There is general agreement that tribunals of inquiry are too unwieldy, time-consuming and outrageously expensive.
The problem with the Commission of Investigation model is that the hearings take place in private, which would be inappropriate for this type of hearing.
The final decision is seen as resting with Government, especially if enabling legislation is required.
On the evidence of his comments last week, the Taoiseach is in no rush.