Cantillon: Banking inquiry becomes Night of the Differing Memories

It speaks volumes about the chaos in Government Buildings on the night of the guarantee in 2008 that the chief executives of the two main banks left in the early hours of the morning with completely different understandings of what the Government was going to do.

Eugene Sheehy, the then AIB chief executive told the Banking Inquiry on Wednesday that when he left at 3.30am he understood that four banks would be guaranteed; his own, Bank of Ireland, Irish Permanent and the EBS. Anglo Irish Bank and Irish Nationwide would be nationalised, he thought.

On Thursday, Brian Goggin (above), Sheehy's then counterpart at Bank of Ireland said that when he left in the early hours all six banks would be guaranteed. Goggin said that to the best of his recollection both men were briefed at the same time in the same room.

At a minimum it speaks of the absolute confusion and panic that was stalking the corridors of Government buildings. The clock was ticking with Asian markets due to open and the pressure must have been enormous.

At worst, it hints of a Government that had lost control of the situation.

A more prosaic explanation may be that the Government was anxious not to show its full hand to the banks for fear they might seek to take advantage of the situation. It has to be remembered that few, if any, in Government grasped the enormity of the problem and the majority seemed to believe that the closure of the credit markets was temporary and the banks fundamentally solvent. The banks themselves appear to have believed it up to the bitter end.

The resulting lack of clarity about the Government’s intention – referred to as constructive ambiguity in public service speak – may well explain the mixed messages coming out of Government Buildings. Presumably when the the other main players on the night come to give evidence it will all become a bit clearer.