|Taoiseach Enda Kenny. Source: Google Images|
We are just a few days away from the fifth anniversary of probably the most important event in Irish history
since we won our independence.
You don’t remember what it is? That’s not surprising because it’s something we’d all like to forget.
But this is something that won’t go away, a disastrous decision that is still dragging us down five years after it was made. It’s one that has had catastrophic repercussions for the country, repercussions that continue today, five years later, and will continue to be felt for at least the next decade.
Yes, of course I’m talking about the blanket guarantee given by the last government
here to all the Irish banks at the end of September 2008.
This guarantee covered all the loans, deposits, bonds and other liabilities of all the Irish banks. It guaranteed that if the banks could not pay back everything they owed, the Irish state would step in and do it for them.
The reason this was necessary was because in the wake of the collapse of Lehman Brothers bank in the U.S. a couple of weeks earlier, a major flight of capital out of the Irish banks which was already in progress accelerated dramatically. By the end of September 2008, at least two of the Irish banks were facing immediate collapse and the others were under severe pressure.
So the Irish government stepped in and guaranteed the Irish banks. It was a bold, comprehensive move, deliberately designed to put an end to growing international concerns about the safety of leaving money in Irish banks.
Unfortunately, at the time no one in Ireland was aware of the huge scale of the liabilities of the Irish banks, and no one knew just how far the Irish property market — on which most of the lending of the Irish banks depended -- would fall.
What happened, you will remember, was that within two years the state bank guarantee had bankrupted Ireland. We had got to the stage where the international money markets simply would not lend us any more. The bank debts were so huge that the markets knew they were dragging the Irish state down.
A huge budget deficit had also opened up because the revenue from the property boom was gone.
In a word, we were bust.
Faced with the prospect of state collapse, the government had to sign up for an €85 billion bailout from the EU-IMF and enter a four year program of economic
austerity, monitored every three months by an EU/IMF team sent to Dublin. The program was aimed at putting our national finances back in balance again.
Less than a century after we had won our independence, we had lost our economic sovereignty. We had been shamed before the world, exposed as being unable to run our own affairs.
The anger among ordinary Irish people about all this has been immense. They threw out the previous government which had presided over the boom and bust. The rout of Fianna Fail, once the giant of Irish politics, was so severe that the party may never recover from it.
Apart from the humiliation, the Irish people have been faced with higher taxes and cutbacks in state services as the austerity squeeze has tightened over the past few years. Each budget since the collapse has added to the misery, and the next one is now just weeks away.
There has been great pressure here for answers. How did the banks get themselves into such a mess? How did the Central Bank and the regulators allow it to happen?
Why did our politicians and top civil servants not realize that the boom was out of control and that at some stage the bubble would burst? Why is the ordinary Irish taxpayer left carrying the can for all the debts piled up by banks, developers and speculators? How come no one has been jailed for what happened?
The present government initially promised to renegotiate our bailout deal with the EU-IMF, and also promised to make those responsible for our economic collapse accountable for what they did.
The bailout renegotiations have been only partly successful, with the result that the Irish taxpayer is still carrying the enormous burden of our bank debt. The promise to expose those responsible for our economic collapse has not been successful either.
A lot of the bankers, regulators and politicians involved are gone, mostly on fat pensions. Although criminal cases are underway against one or two bankers, no one has gone to jail so far.
And despite all the public anger, there has been no pubic inquiry into the disaster.
Last week Taoiseach (Prime Minister) Enda Kenny finally announced in the Dail (Parliament) that an official inquiry is to be held under new legislation called the Oireachtas Inquiries, Privileges and Proced- ures Act 2013.
Which Dail committee is to hold the inquiry has still not been decided. But it hardly matters because committees of the Dail have little or no power, even with this new legislation.
Unlike in the U.S., our parliamentary committees are toothless wonders. Because of a Supreme Court decision here a few years back, they are unable to make adverse findings against any individual who is not a member of the Irish parliament.
They can’t force people to give evidence, or even to turn up for hearings. They can apply moral pressure on people to appear, but that’s hardly likely to weigh heavily with our bankers, as we have learned.
There is also a further complication. The rogue bank which was the main driver of the property bubble here, Anglo Irish Bank, cannot be part of the inquiry for some time because of a current court action against its former boss which could drag on for a year or more. Holding committee hearings into what went on in Anglo might prejudice his trial so that is out.
This means we would have the farcical situation that a public inquiry into the banking crash here would not include the bank that instigated the crazy lending spree which was our downfall. The Anglo collapse alone is responsible for debts that are close to half of the bailout.
It’s also possible that executives from other banks may refuse to be questioned by members of the Irish parliament, almost all of whom have made scathing comments about the banks in the Dail over the past few years.
The bankers, when it suited them, would be able to claim that the politicians are not objective and therefore are unsuitable to carry out an Inquiry.
And don’t you just know that there are posses of expensive lawyers just waiting to defend their banking clients and bury the work of an inquiry with a succession of court actions.
Of course there is the added worry that very few, if any, or our parliamentarians have the qualifications or experience needed to explore the complexities of the banking collapse.
We have already had two or three expert reports into what happened here over the past few years, but none of these has provided the public with an adequate explanation of what went wrong, why, and above all, who was to blame?
That can only come from a public inquiry with real teeth. And that is something we are not getting.
Kenny was putting a brave face on it in the Dail last week. He said he wants the inquiry up and running as soon as possible and he wants it to cover three areas — the bank guarantee and the events leading up to it; the role of the banks and their auditors; and the role of state institutions.
“The objective should be to determine, without fear or favor, and with dispassion and integrity, all of the facts that led to the collapse of the banking sector,” Kenny said.
Don’t hold your breath.