Inquiry finally turns the focus on bank guarantee

World of Politics with Harry McGee

All good things come to those who wait.  And we’ve been waiting nearly four years for the banking inquiry, one of the big ticket items promised by the Government in 2011 to happen early in its terms.

So the public hearings of the inquiry began this week with appearances Peter Nyberg (Wednesday) who chaired the Commission of Investigation into banking and by Rob Wright (Thursday) who was a member of an independent review panel on finance.

That panel wrote a report on strengthening the capacity of the Department of Finance, or in other words, its lack of capacity to deal with the crisis when the bovine excrement hit the vertical rotary blades.

Both have reminded the Inquiry, and the general public, about what is known so far. It will be several months before the special committee, chaired by the capable Ciarán Lynch of Labour, will be in a position to nose its way into new material.

The Governor of the Central Bank Patrick Honohan will give evidence in January but, again, that will be based on the inquiry he himself conducted into the financial regulation system and central banking controls upon taking up his post.

The ‘meat’ of the inquiry is sure to centre on what happened on the night of the infamous guarantee in September 2008, the interaction between bankers and regulators in the run-up to the crash, and the tussles that subsequently took place between the Irish Government and the European Central Bank in the person of its former head, Jean Claude Trichet.

Nyberg, a Finn, is a former finance minister and central banker. His fascinating report was published during the first month of the new Coalition’s term in March 2011.  It focused a lot of attention on the night of the guarantee in late September 2008 and reached some surprising conclusions.

For a start it didn’t lay the blame on with a trowel for the Fianna Fáil-Green Party coalition. A month after both parties had become the electoral whipping boys for the crisis, the Nyberg Report concluded there were others more culpable than the former government.

The Commission’s report said it “understood” the then government’s decision to provide a broad guarantee, because of deficient information available from all the relevant State players and the banks.

That is not to say Nyberg gave Fianna Fáil and the Greens a free pass. He did point out in a press conference that the “government is responsible for everything that happens in a country.”

True, but while the buck stopped with government, it came a little lower in the hierarchy of culpability than other institutions. Nyberg’s core finding was a systemic failure of regulation and oversight. The phrase “groupthink” was used more than once to describe a condition otherwise known as “the emperor’s new clothes”.

For more, read this week’s Connacht Tribune.