In response to Minister for Finance Brian Lenihan (July 31st), I would say either he doesn’t understand matters or else he’s being deliberately misleading.
This is the kind of confused thinking and manipulative talking that’s been promoted since he and the Government chose to introduce the far too extensive, far too long-lasting two-year (now further extended) blanket bank guarantee scheme and the hugely costly Nama Project.
Mr Lenihan asserts that “Merrill Lynch also recommended a blanket guarantee of Anglo Irish Bank, including, incidentally, subordinated debt”.
This statement is simply untrue.
This can be checked by re-reading carefully all the notes, draft preliminary analysis, memos and records presented to the Oireachtas Public Accounts Committee in relation to Merrill Lynch’s advice.
In regard to the report to Minister Lenihan by the Governor of the Central Bank on The Irish Banking Crisis – Regulatory and Financial Stability Policy 2003-2008, the conclusions are clearly set out on pages 134–136.
In the matter of the guarantee, nowhere in the conclusions, does the quotation “it is hard to argue . . . in the absence of decisive action”, cited by Mr Lenihan, appear.
It does appear that Mr Lenihan has made an inductive reasoning mistake which can easily happen, such as confirming that the sun rose today because a cock crowed at dawn!
Mr Lenihan concludes
“I agree with Mr O’Toole that governments should be sceptical. But they most assuredly should not be reckless.”
Of course governments shouldn’t be reckless. But his Government had been notably recklessly complacent for years leading up to the crisis.
If they hadn’t been so recklessly complacent for so long, the emergence of the full-blown credit bubble banking crisis and the ensuing panic would have been avoided.
It was such reckless complacency, the dereliction from duty by the Government and the supervisory and regulatory bodies to maintain regulatory and financial stability policy, that led to the September 29th panic and the sub-optimal decision to introduce the blanket guarantee for all the banks.
That panic decision, while understandable (to use Prof Honohan’s word) was not excusable.
That’s the point, but Mr Lenihan has missed it entirely.