Skip to main content

Cowen's 'Homemade Meltdown'...

Cowen on rack over 'homemade meltdown'...


THE banking meltdown that cost taxpayers billions of euro was a result of "homemade" decisions and a government that thought "the party could last forever", two official reports revealed yesterday.

In hugely damning findings, one report by two international banking experts pointed the finger of blame squarely at Taoiseach Brian Cowen for economic policies when he was Finance Minister.

The reports will now be used by a commission of inquiry and an Oireachtas committee to look at what triggered the crash.

But the inquiry will not be looking at a string of calamitous government budgetary policies to which Mr Cowen was central and it is not clear if the Taoiseach will be called before the committee.

Former International Monetary Fund officials Klaus Regling and Max Watson said alarm bells should have sounded when the property boom and lending trends in the banking sector expanded -- as far back as 2003.

They added that vote-winning economic policies during the boom "heightened the vulnerability of the economy" as the then Finance Minister -- Mr Cowen -- began spending money while taxes were cut.

And in a separate report, Central Bank governor Patrick Honohan blew a large hole in Mr Cowen's claims, which mirrored those of former Taoiseach Bertie Ahern, that Ireland's collapse began with the fall of US financial giant Lehman Brothers.

"The collapse of Lehman Brothers did not cause the Irish banking crisis," he said.

Professor Honohan also said the popularity of Anglo Irish Bank bosses, such as Sean FitzPatrick, who were "well-liked in political circles", may have contributed to them being left in their positions after the September 2008 bank guarantee.

The clear-out of Anglo management only began in December 2008 -- three months after the bank's woes almost caused the collapse of the entire system.

Mr Cowen attended a private dinner with the Anglo board earlier that same year when he was Finance Minister.

Policies

Prof Honohan found that economic and budgetary policies contributed significantly to the economic overheating, relying to a clearly unsustainable extent on the construction sector and other unreliable sources of taxes and encouraging the property boom via incentives geared at the construction sector.

"This helped create a climate of public opinion which was led to believe that the party could last forever," he said.

In his report, Prof Honohan says the system of regulation was characterised by excessive deference to the banks and timid responses when problems were found.

He said inspections discovered numerous problems with the banks, but the Financial Regulator did not follow up with rigorous actions that could have headed off the banking crisis.

In their report, Mr Regling and Mr Watson found:

*The Government's budgets during the boom years with lots of giveaway spending left the country vulnerable.

*Careful management and supervision of the public finances and banking sector could have helped steer the country towards a "soft landing" when the recession came.

*But rather than keeping a tight control on the boom, the Government spent the money -- from taxes on property and consumer spending.

Mr Cowen's 2007 budget is singled out in both reports. Mr Regling and Mr Watson concluded that overall fiscal policies encouraging the boom, particularly 2007, added "markedly to the overheating of the economy".

His spending splurges before and after the 2007 General Election were pointed to by Prof Honohan, who described them as "an unfortunate late burst of spending which boosted the underlying deficit at almost the worst possible time".

Among the most damning findings of Mr Honohan's report were:

*Excessive deference was shown to the banks by the regulators, whose responses were timid when problems were found.

*Inspections found numerous problems, but the regulator did not follow up with rigorous actions that could have headed off the crisis.

*Bad lending choices and falling property values meant that at least two banks were going to go bust anyway and two more might just have traded through, if there was no international crisis.

*The September 2008 bank guarantee was justified, but should probably not have included subordinate bonds.

Mr Cowen expressed "regret" at what happened to the country -- but he said he accepted responsibility for his decisions.

"The outcome we now face is a very challenging one for all our people and I deeply regret that. There's no Taoiseach or no politician who would have responsibility during that time who wouldn't be reflecting that reality and that fact," he said.

The opposition parties were scathing of Mr Cowen's record.

Fine Gael finance spokesman Richard Bruton said the independent experts had passed their verdict and the Taoiseach was "guilty of spectacular and catastrophic policy failures".

The former financial regulator Patrick Neary refused to comment on the contents of the report last night.



Report - Irish Independent.

Popular posts from this blog

Ireland's Celtic Tiger Excesses...

'Bang twins' may never get to run a business again... POST-boom Ireland is awash with cautionary tales of Celtic Tiger excesses, as a rattle around the carcasses of fallen property developers and entrepreneurs will show. Few can compete with the so-called Bang twins for youth, glamour and tasteful extravagance. Simon and Christian Stokes, the 35-year-old identical twins behind Bang Cafe and exclusive private members club, Residence, saw their entire business go bust with debts of €9m, €3m of which is owed to the tax man. The debt may be in the ha'penny place compared with the eye-watering billions owed by some of their former customers. But their fall has been arguably steeper and more damning than some of the country's richest tycoons. Last week, further humiliation was heaped on them with revelations that even as their businesses were going under, the twins spent €146,000 of company money in 18 months on designer shopping sprees, five star holidays and sumptu

I fear a very different kind of property crash

While 80% of people over 40 own their own home just a third of adults under 40 do. This is disastrous for social solidarity and cohesion Changing this system of policymaking requires a government to act in a way that may be uncomfortable for some. Governments have a horizon of no more than five years, and the housing issue requires long-term planning. The Department of Public Expenditure and Reform was intended to tackle some of these problems. According to its website its remit is to “drive the delivery of better public services, living standards and infrastructure for the people of Ireland by enhancing governance, building capacity and delivering effectively”. So how is the challenge of delivering homes for people in 2024 and beyond going to be met? The extent of the problem is visible in the move by companies, including Ryanair, to buy properties to house staff. Ryanair has, justifiably, defended its right to do so. IPAV has long articulated its views on how to improve supply an

Property Tycoon's Dolce Vita Ends...

Tycoon's dolce vita ends as art seized... THE Dublin city sheriff has seized an art collection and other valuables from the Ailesbury Road home of fallen property developer Bernard McNamara. The collection will be sold to help pay his debts. The sheriff, Brendan Walsh, is believed to have moved against the property developer within the past fortnight, calling to his salubrious Dublin 4 home acting on a court order to seize anything of value from his home to reimburse his creditors. The sheriff is believed to have taken paintings from the family home along with a small number of other items. The development marks a new low for Mr McNamara, once one of Ireland's richest men but who now owes €1.5bn . The property developer and former county councillor from Clare turned the building firm founded by his father Michael into one of the biggest in Ireland. He is the highest-profile former tycoon to date to be targeted by bailiffs, signalling just how far some of Ireland's billionai