Last week in Dublin the Irish parliament, and thus the Irish people, finally got a chance to examine the greatest financial threat to their State’s existence when the official Inquiry into the country’s recent banking crisis finally got underway.

Generally, these events in most countries can be dull affairs with bankers and analysts trading figures and incomprehensible jargon about transfers, trading conditions, margins and oversight.

But this Inquiry is different. The Irish banking crisis is directly connected to the country’s economic crisis and this open and public cross examination is truly is a chance for the country to look into its soul about what happened during the period of the boom, and then the crash.

It is early days, but hopefully this Inquiry will not just be a bureaucratic exercise in which politicians can point-score, and officials evade hard questions. It is a chance for the Irish, as a people, to find out what happened when the country’s banking system, and then its economy went over a cliff.

The events of the bank guarantee night in September 2008 and the subsequent bailout of the entire Irish economy in December 2010 are discussed every day in Irish life, society and politics. The consequences are vividly with us and we will not be able to move on from them for some time to come – if ever.

The infamous overnight guarantee loaded €64 billion in debt onto the backs of the Ireland people, even though the then Government wasn’t to know this at the time. In fact, Merrill Lynch estimated the bailout to cost €16.4 billion but it would soar to an estimated €64 billion!

But Merrill Lynch weren’t dealing with the full picture, and even the bankers didn’t know what the full picture was. So there are lots of questions to be answered, and although we don’t expect this 11 person committee to come up with all the answers, at least it will give us a chance to ventilate the discussion.

Granted the committee has limited powers. It will not be able to make charges about persons, or ask ‘leading questions’ and it will have to respect cabinet confidentiality. The prospect of former bankers from the European Central Bank (ECB), who forced us to take the hit for the entire European banking system, appearing is remote. But, no matter. We now have a forum for discovery and it’s the best chance we will get.

As the chairman of the Committee, Ciaran Lynch TD put it : this is ‘an opportunity to shine a light on a dark and painful recent time in our past, an opportunity to piece together the events of that time, an opportunity to learn from the mistakes that were made and an opportunity to ensure that those mistakes are not repeated."

This is because the massive overexposure of our banking sector is intimately connected to the way we, as a people, behaved in the boom years – with the property bubble, the escalation of private debt, the ramping up of public expenditure. So this is no mere inquiry into financial services. This is a soul searching exposure of the very psychology of the Celtic Tiger - and its demise. We may not have ‘all partied’, but a lot of us did and that includes the trade unions, the social partners, the public sector and, most notoriously and recklessly, the bankers.

Promisingly, at the first public hearing yesterday, Finnish academic Peter Nyberg, author of a previous report into our banking crisis, embraced this ‘big picture’ approach. He said that a decade ago Ireland was gripped by “real estate mania", but that this was not a phenomenon limited to Ireland.

Not everyone ‘partied’, Nyberg stressed, but a lot of people in many different ways enjoyed benefits from the bubble. Ireland's banking crisis was systemic but was not unique, he added and the Irish banks had been ‘pretty good’ at misjudging the risk of their lending policies. Or so we thought. In fact, the decision to offer a €440bn blanket guarantee to all our banks, including even the toxic Anglo Irish bank was, said Mr Nyberg, ‘the culmination of years of mistakes.’

On the Friday, another foreign expert who has written a report into the Irish banking crisis appeared at the Inquiry, and was equally damning. This was Rob Wright, former secretary of Canada’s finance ministry, and his criticism was of Ireland’s Department of Finance and its relationship with the then Irish Government. There was very little formal written advice between public servants and the Government at the height of the crash, he said, and even senior officials would have to go home and find out from the TV news what was in the budget they were supposed to have produced.

Although officials cautioned on more moderate policies than the politicians in Government, there was very little written advice, or written warnings about the pro-cyclical policies that the Irish Government was notoriously pursuing.

“You could get snippets here and there” said Wright “but on something as vital as that - particularly when you have regular engagement with international institutions like the IMF, the OECD and the EU where concerns had been expressed - you would have anticipated a consistent flow of advice.” But Wright could find little evidence of that.

The Canadian expert also echoed Nyberg (and a lot of Irish commentators now wise after the event) in reminding us that although the process of Social Partnership – a grand national ‘deal’ involving unions, Government and extra public spending - had achieved a great deal for the country, it also led to huge excessive spending which was so big it overwhelmed fiscal framing for Government.

These were awkward truths already well known in Irish society, but to have them said so starkly in a formal public setting was both purgative and therapeutic, as was the blunt assessment of how almost all of Irish society bought into the economic ‘miracle’ of the Celtic Tiger, buying up foreign properties and, for public servants, getting unrequested pay increases in a controversial process known as ‘bench-marking.’

So although there was some disappointment at the lack of fireworks on the first day, and at the fact the Banking Inquiry is now to take its Christmas break and not resume work until mid-January – some political habits in Ireland remain thoroughly unreformed! – there was still much satisfaction that at last we were getting some answers on how one of the world’s fastest growing economies became one of the world’s biggest banking crisis.

So it was a good start for the people’s banking inquiry, but the post-mortem is only beginning and very many hard questions remain.

 

Better late than never as sorry saga of the Irish banking inquiry unfolds.Photocall