“Shadows never go away.
Might be you don’t see them,
but they’re always clinging to your heels.”
A Song of Ice and Fire
When I was a child in primary school my way of dealing with Irish class was to find a word in the question that matched a word in the text and hope for the best. The sentence I would find would be the one I’d read out. Sometimes it worked, sometimes it didn’t. But, it was a plan, and it helped me get through the hour.
In the absence of any understanding of the grammar, of the way the words actually relate to each other, you grab what you can and try to make sense of the situation.
In terms of the bank guarantee and bailout, and the different narratives that are being thrown out there, we can’t really do this – we can’t just pick out single words, single events, and use them to make our story. We need to have enough of an overview of the dynamics at play in order to make sure we don’t stray from the path as we go forward.
In other words, we need to understand the grammar that holds it all together, and one of the objectives of the bank inquiry is to fulfill this role.
It helps, of course, to have witnesses that understand this, and with Professor Patrick Honohan last week I’m not sure it did.
On paper the purpose of Honohan’s appearance before the Bank Inquiry Committee was to discuss his 2010 report, which looked at the regulatory and operational failure within the Central Bank and the Financial Regulator’s office. On the day itself, however, the proceedings were dominated by talk of the 2008 bank guarantee – the decision itself and supposed cost.
Honohan initially said that the net cost of the guarantee would be somewhere in the region of €40 billion. When he was challenged on this he revised the figure and, indeed, the parameters, acknowledging that his figure wasn’t for the guarantee alone but for the subsequent bailout. Even with this, Honohan had not factored in added costs such as interest repayments. The moment he gave the definitive-sounding figure of €40bn, though, he had handed the journalists the following day’s headline.
He followed his €40bn with another brash statement – that Brian Lenihan had been ‘overruled’ by a more senior politician with regard to saving Anglo Irish Bank. It was obvious that the ‘more senior politician’ he was referring to was Brian Cowen.
The sole piece of evidence he had for this was a conversation he said he had held with Lenihan – a conversation that cannot be collaborated as Lenihan has since passed away. The ‘overruled’ statement had the added effect of handing the journalists in the room the prefect narrative – the urbane and intellectual Lenihan shot down by the gombeen Cowen.
Honohan also said that to his knowledge there was no phonecall from Trichet strong-arming the Irish government into a blanket guarantee. This is from his exchange with Deputy Pearse Doherty:
Pearse Doherty: … Was there a phone call between Trichet and the Minister, Brian Lenihan, as the latter said publicly in the RTE documentary, where he left a voicemail on Saturday the 27th, which he heard on the 28th, and which said, “You must save your banks at all costs”. Does the Governor believe that came and was it verified to him?
Professor Patrick Honohan: … I do not have clear visibility into this. It was very late in the day when I started hearing this idea that Trichet had said the Minister must save the Irish banks. I think it is an extrapolation from what I heard which was that there was no European network and the Minister would have to look after our own banks, which is different.
Pearse Doherty: Has the Governor asked Trichet, with whom he served on the ECB?
Professor Patrick Honohan: Yes. He said he spoke to the Irish the same as he spoke to everyone to the effect that there was no system and they had responsibility for their own banks.
Pearse Doherty: Just to be clear, this is in an RTE documentary where Mr. Lenihan says there was a voicemail.
Chairman: Was it the drama or the documentary?
Pearse Doherty: It was the documentary. Did the Governor ask him about the voicemail specifically?
Professor Patrick Honohan: No, I did not ask him about voicemail specifically. That is his recollection and there is no way he said there was to be a guarantee. Nobody is saying that. “Look after your own banks” is what was said.
Pearse Doherty: It was the late Brian Lenihan himself who said in the documentary that Jean Claude Trichet left a message on his phone on Saturday the 27th, which he received when he picked up the voicemail the following Sunday, and it said “You must save your banks at all costs”. Is that not a case of “We are giving you a blank cheque to do whatever you wish”?
Professor Patrick Honohan: That would be to say for example “I do not want Anglo Irish Bank to close on Wednesday, so do something about that”. What could that be? It could be ELA. He did not say “Do not worry, you have a blank cheque”. No, no, no.
Chairman: I need to move on.
Here’s the clip from the RTE documentary, Freefall, that Deputy Doherty mentions in his questions:
This framing of events as down to a clash of social class and personalities had already been put forward in the drama, The Guarantee, and challenged by Eoin O’Broin on The Vincent Browne Show as taking away from the actual facts of the bank crisis. There’s a link below to Eoin talking about the bank guarantee.
The video serves as a short, succinct summary of part of the analysis which underpins Pearse Doherty’s contribution to the bank inquiry, namely that from the late Summer of 2007 the Irish authorities had been discussing, and ruling out, various ways of dealing with a possible crisis involving Irish banks. This isn’t about a panicked meeting at 2am, but a long and detailed process stretching back at least a year.
Getting back to the inquiry itself, Pearse Doherty brushed aside Honohan’s attempts to dictate the story and instead focused in on the substance of Honohan’s report, much to the governor’s discomfort.
Deputy Doherty asked about the ‘non-intrusive’ regulatory environment set up to facilitate IFSC banks in Ireland and how this affected Irish banks, and he also made the following point regarding Depfa, a German-owned bank with a full Irish banking licence and regulated by the Irish financial regulator from 2002 to 2007.
This is from Deputy Doherty at the inquiry:
One of the things that the banking inquiry is looking at, which is the nexus, is the relationships between the State, between banks and between being regulatory, development and so on. The reason I asked about DEPFA is that on the weekend of the decision of the guarantee Professor Honohan has said that the minds of the authorities were concentrated by the issue of DEPFA.
A director in DEPFA was second assistant general in the Department of Finance. He was the professor’s predecessor because he was Governor of the Central Bank. He was also a director in one of the biggest banks that went bust in this State. What does that relationship mean in terms of the overall problems in the banking crisis?
The regulation of the IFSC (or lack thereof) had a knock-on effect with regard to Irish banks, but there is more going on here in terms the inquiry. In the case of Depfa, we have a way in to the type of social, political and financial relationships which operate at the highest level in the Irish state.
The point about the relationships that operate with regard to power in Ireland is a key element of the Banking Inquiry. Its terms of reference state clearly that it is required to look into,
[the] relationships between State authorities, political parties, elected representatives, supervisory authorities, banking institutions and the property sector”.
With Depfa and the Irish Banking Inquiry, the focus is not so much on the causes and cost of Depfa’s collapse but on the light it throws on the nature of economic, political and social power in Ireland.
On Friday 16 January Pearse Doherty was on the Pat Kenny radio show on Newstalk where he summed up the reasons behind asking about Depfa, the IFSC and regulation. As with Eoin O’Broin, it’s a short clip and well worth listening to in order to get a sense of the overall thrust of Deputy Doherty’s line of questioning on the Bank Inquiry.
In terms of the bank inquiry, in order to make it a story that is more than just a scrambled synchronization of seemingly random events, we need to have a sense of the grammar that underpins the 2008 bank guarantee and 2010 bailout.
Each week we’re getting more and more of a sense of that grammar, and from Deputy Doherty’s questions and analysis we can see that this includes:
1. Mapping the regulatory framework
2. Uncovering the profit-seeking strategies of finance and speculators
2. Following the social and political relationships which enveloped this world.
By the end of the context phase the bank inquiry should have enough of a grounding in these areas to enable it to go forward and ask questions that relate to the overarching story of the bank guarantee and not just to events ripped from their context.
Latest posts by Irish Left Review (see all)
- DDCI calls on New Government to Strictly Regulate Vulture Fund Acquisitions - May 4, 2016
- Historic Screening of Mise Éire and Saoirse - March 10, 2016
- Book Launch: Margaretta D’Arcy’s Memoir, Ireland’s Guantanamo Granny - February 11, 2016
- LookLeft 23 is Out Now! - December 10, 2015
- The Portuguese election: quicksand in the center, an emboldened left and a desperate president - October 27, 2015