US feared global banking collapse if Anglo Irish Bank failed

Treasury Secretary Tim Geithner warned Europe to bail bank out

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U.S. Treasury Secretary Timothy Geithner was petrified that the now-defunct Anglo Irish Bank would default on its financial obligations and create a massive new recession.

He and European officials looked at the bank’s problems as “the most serious global banking issue” since the collapse of Lehman Brothers in 2008 according to The Irish Times.

Geitner urged the European Union to flex its muscle during a G20 summit meeting in Seoul, South Korea on November 11, 2010, 10 days before the Irish government applied for financial aid from the EU and the International Monetary Fund.

Geithner was well aware of the mounting Irish crisis, particularly as it related to Anglo Irish Bank’s difficulties.

European officials feared the Irish government wasn’t taking the growing problem seriously enough, with many of them looking at Anglo Irish as the next Lehman Brothers.

Geithner urged Europe to exert control over the Irish crisis during a meeting with the finance ministers of the G7 nations – the U.S., Germany, France, Britain, Canada, Japan and Italy – during the G20 summit in Seoul a year ago.

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The stunning downfall of Anglo Irish Bank, and the EU-IMF Irish bailout that followed, had been predicted by European authorities as early as September of last year, according to a new account of the Irish financial crisis in today’s Irish Times.

The paper reported that Irish finance officials were fearful of the country’s balance books during the early part of September 2010, as borrowing costs were rapidly reaching dangerous levels.

The Irish minister for finance at the time, Brian Lenihan, who passed away earlier this year from pancreatic cancer, was informed of the situation by
officials at the Irish Department of Finance and the Irish Central Bank. 

Together with the EU economic commissioner Olli Rehn, Lenihan agreed to liaise with the IMF about Ireland’s finances.

“I would say that latest, from mid-September in my thinking, the probability of Ireland avoiding a rescue package was very small,” said Rehn, according to the new account of the pre-bailout drama published in the Times.

At the time, the Irish government, led by Prime Minister Brian Cowen, denied that Ireland would need IMF help with its finances, though the truth was finally revealed on November 21 of last year when Ireland made its formal application for a bailout.

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