There will be a kerfuffle when the Dáil returns tomorrow over the form that the banking inquiry will take. Most of the Sunday broadsheets yesterday reported that the Government is veering towards a Commission of Inquiry model.

That’s the concept brought to us by Michael McDowell. And, yes, it works. Very well too. But it’s not a utility player as such. It’s specialist. Worked well with Judge Murphy’s investigation of how the Dublin Archdioices responded to allegations of clerical sex abuse. It was also effective when inquiring into the death of a young boy whilst in custody.

It won’t work for a banking inquiry though. Not for it all to be conducted in private and then for a report to be issued in two years time just the wrong side of a General Election.

Cowen will be up for a lot of criticism if he pursues that kind of inquiry. That’s for sure. He was the Minister for Finance for four years. Yes, it is true that he tried to brace the public for an end to the property boom. But his choice of language and his confidence were completely out of kilter. He spoke of a ‘soft landing’. What it was was an emergency ditch that made us luckly to survive. He’ll seem like a pilot who’s reluctant to make the black box records public.

Having said that, is the Government relaly gearing itself up for a Commission of Inquiry.

The Government Chief Whip Pat Carey was on the Week in Politics last night.

What  he said didn’t suggest a Commission of Inquiry to me.

Here are the relevant quotes from Carey:

“Hearings can be heard in private initially as an evidence gathering exercise but it is important ultimately that the Dail is involved in discussing how all of this happened.”

A little later: “[We are] talking about an independent panel of experts possibly some of them from outside the State.”

He also did not rule out holding the inquiry in public:

“The Minister for Finance will be outlining the framework which the Government intends on Tuesday afternoon. The opposition will have an opportunity to counter that if they wish and then we will proceed from there.”

My own impression is that the Government are flying a few kites to gauge public reaction. It’s like Robbie Keane’s method of taking a penalty. As you approach you slow down, check a little, force the goalkeeper to commit himself. When he begins diving, you slot it in the other side.

But it’s a high risk strategy. The goalkeeper might stand his ground. Or dive too late. That might force you into a weak shot.  Or a fluff. It could easily make Cowen and buddies look like vacillators. Again!

I’ve heard ministers use the word ‘scoping investigation’ over the weekend. That word always fills me with dread. It’s just a euphemism for an authority figure kicking something out of the stadium.

If Carey is taken 100 per cent literally on what he says (an investigator draws up report, Dail then inquires in public) then Labour will have nothing to complain about. That’s the basis of what Pat Rabbitte is proposing.

Of course, the terms and scope of the Government inquiry might be far more restrictive than what is envisaged by Labour.

Postscript:

By the way, if you have a chance read the New York Times’ columnist Paul Krugman’s latest column (find it here).

What’s interesting is that he’s not talking about any middle-ranking banking. He’s talking about the heads of the two most powerful Wall Street banks in the world.

The bonuses these guys pay themselves and their staff is unreal. I read a column over the weekend that said that all (very close to 100 per cent) of the bonanza profits made by global Wall Street banks in the run-up to the crash were purely from leveraging. In other words, they were getting cuts of loans that were diced up but that essentailly used other loans as collateral. And those other loans in turn were collateralised against other loans. And all eventually lead back to loans of several hundred thousand dollars give to poor people to buy over-priced property with money they could never aspire to have, and then allow them to take out loans using as equity the property they would never be able to afford to buy.

I’m not an expert in this area. But the reason that the likes of Goldman Sachs and JP Morgan Chase are making such super-profits is that the competition has all disappeared and they are the only banks still standing because they were bailed out by Government.

On top of that, they are the only ones in a position to profit from the trillions of euro that Governments throughout the world are pumping into their economies as a stimulus.

The bonuses are always: Heads I win. Tails You lose. Even in bad times they get super duper bonuses. The way the system is structured: it encourages them to take huge risks with other people’s money. There is no downside. Even if it the investment goes south they don’t lose out. They still get their bonuses.

The bonus in Goldman Sachs averaged out at $380,000 per employee.  How many of them are worth that? Very few. Banks say they worry they will lose their best people to hedge funds if they don’t pay the bonuses. But it was the same best people who created the mess. There’s something terribly wrong with the system that allows those financial houses take such vast slices of the action, while bearing none of the risk.