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Irish Prime Minister, Brian Cowen

Cowen blamed for Irish banking crisis in two 'devastating' reports

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Irish Prime Minister, Brian Cowen

Two "devastating" reports into Ireland's banking crisis single out Irish Taoiseach (Prime Minister) Brian Cowen for blame.

The two reports accuse Cowen of overheating the economy and failing to deflate the property bubble when he was Finance Minister.

One report is from Central Bank Governor Patrick Honohan and focuses on the failure of the regulatory bodies while the second is from global banking experts Klaus Regling and Max Watson and examines the effects of Irish policies.

Senior coalition sources told the Irish Independent that the reports were "devastating".

The reports also single out bank directors for doing little or nothing as the crisis began and also targets the Financial Regulator for being too lax.

The reports say that the Central Bank should have acted to stablize the banking system and crucially finds that several organizations made utterly inaccurate economic projections.

They point out that even as late as 2008, highly respected bodies such as the OECD, IMF, and ESRI were all predicting a soft landing for the Irish economy.

The reports also question why the Irish Government treated the property-related income as permanent when it was clear that such huge gains could only be temporary.

In addition, the reports attack bank directors for their inability to prevent such a vast financial crisis and questions why no internal red flags were ever raised.

Honohan says: "At no point throughout the period did the Central Bank and Financial Services Authority of Ireland staff believe that any of the (banking) institutions were facing any underlying difficulties, let alone potential insolvency problems -- even at a late stage as the crisis neared."

The reports also target the new banking regulation which were introduced by the Fianna Fail-led Government in 2003 as a major player in the banking crisis.

Regling says: "The twin-headed bank regulatory framework in Ireland from 2003 onwards was a hybrid, by global standards.
 

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