David Drumm: ‘There is a witch hunt ... I convince myself that this will pass’

An Irish Central exclusive interview with the former Anglo Irish Bank boss now in US

We came to the 30 of September, the 29 of September and we run out of money and I was down at the Central Bank and they said OK you are going to have to ask for emergency funding. Fine how do I do that? They sent me a draft of letter, I got it typed up, I signed it, we need two billion tomorrow to be able to open the doors. So signed that letter and then that was a long day, as you know. I could talk all day about that. We were down at BOI asking them to merge with us. But the end of the day was asking the Central Bank for the emergency funding, two billion. I went home, I ate my dinner and I went to bed and when I woke up in the morning I had several voicemails and messages on my phone and one of them was from Pat Neary to tell me that the government had guaranteed. Then of course I heard it on Morning Ireland. Anglo Irish did not ask them to do that, we asked for a secured loan.

What happened was Allied Irish Banks and Bank of Ireland went down to the Government and obviously talked them into provided a blanket guarantee.

NOD: Do you think that was a mistake?

DD: Most definitely.

NOD: How did they manage to convince them?

DD: Because I think everyone was trying to figure out what to do and it was panic. I am not criticizing them, everyone was panicking. So what did they do? Individual rescue packages or lending packages into the banks, which is what we were trying to achieve for Anglo might have staved it off, might have fixed it. They went with a sort of nuclear option, out of the bag, out of the box and we were, don’t get me wrong, we were extremely grateful. When we woke up that morning our problems were solved and we thought they were brave. The problem with the guarantee was it signed them up forever, they had no way back, it was blind. And then the thing they did next was self damaging, like Nama.

NOD: Did they think the entire debt was like seven or eight billion? Did they know what the real debt was?

DD: They knew they were issuing  a guarantee to the effect of 500 billion, because that was the size of the liability. But they reasonably and it was reasonable to believe there wouldn’t be the level of bad debts in the banks, because they weren’t looking forward as to what might happen and what have you.

I think that is probably a reasonable view at the time. It was very brave to give the guarantee, but it was based on the  banks are OK, Merrill Lynch and what have you. The two things in 2009 that then made that look like a poor decision, one was NAMA, because they fashioned that rod for their own back, they created losses in the bank they had just guaranteed.

Which I still cannot understand why anyone would do that. The second one would be the Irish economy did go into a real hockey stick dive, starting in the first quarter of 09 and then the loans started to deteriorate.

NOD: Did BOI and AIB mislead Lenihan and Cowen that night?

DD:  No, I don’t think they mislead, I don’t think any of the banks believed there was anything like the bad debts that came afterwards. What they did know was that Anglo had run out of money, because we had been down to both of them, we had been down to BOI and we had talked to AIB but  they were also running out of money and they wouldn’t last much longer. What pissed me off is they planted it entirely at the door of Anglo, Anglo owned a proportion of it, but they planted the whole thing at the door of Anglo and got themselves a guarantee. BOI told us they were having the same problems. ‘Were the big bank, but we’ll be OK, look at him, you better issue a guarantee, because he is going to bring us all down’. But they got the guarantee for their own benefit as well. They had actually very successfully pinned it all on Anglo, don’t mind some of it, but they pinned it all.

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