Bank guarantee decided without ‘substantive discussion’

Inquiry hears Nama chief did not get chance to express opinion

Nama chief and former senior official of the National Treasury Management Agency, Brendan McDonagh: “Nobody came into us or contacted us. People were coming in and out of rooms. At 1am, we were told the government had decided to guarantee the banks.”

Nama chief and former senior official of the National Treasury Management Agency, Brendan McDonagh: “Nobody came into us or contacted us. People were coming in and out of rooms. At 1am, we were told the government had decided to guarantee the banks.”

 

The Oireachtas banking inquiry has heard that there was no “substantive discussion” between the National Treasury Management Agency (NTMA) and the then government about the 2008 bank guarantee before it was decided.

Brendan McDonagh, chief executive of the National Asset Management Agency (Nama) said it was his view the banks should have been nationalised, but he did not get the chance to give that opinion on the night in question.

Committee chairman Ciaran Lynch asked Mr McDonagh about whether he was present when the bank guarantee was decided.

Mr McDonagh said he was summoned to Government Buildings by secretary general Kevin Cardiff and was placed in a meeting room.

He said: “Nobody came in to us or contacted us. People were coming in and out of rooms. At 1am, we were told the government had decided to guarantee the banks.”

Mr McDonagh, who was a senior official in the NTMA at the time, told the committee there had been contact between the NTMA and the government prior to the guarantee.

But he said there was no substantive discussion around guaranteeing the banks and the first he heard of it was at 1am that morning.

Mr McDonagh said it was his job to try and explain it to the markets the next morning when the decision was announced.

He said he did not speak to former finance minister Brian Lenihan and had a 90 second conversation with then taoiseach Brian Cowen.

He said : “There was one technical aspect which Mr Cardiff got to talk to the taoiseach and attorney general about, minister Lenihan had left at that stage.”

Earlier, Fine Gael senator Michael D’Arcy asked if it was Mr McDonagh’s view that the banks were insolvent on the night of the bank guarantee.

The chief executive said: “ I think the market made its own assessment that the banks weren’t solvent. My personal view is that the banks weren’t solvent.”

Mr McDonagh said his gut reaction on hearing the banks were to be guaranteed was surprised at the scale of it.

He said: “There had been no substantive discussion before that... It seemed a big decision.”

The now chief executive of Nama said he left Government Buildings at 4am to prepare for the markets opening at 7am.

He said he was sceptical about the operating model that had been decided and that view was well known to Mr Cardiff.

Mr McDonagh said the discussion in the lead-up to the night was surrounding whether the NTMA would provide additional liquidity to the banks.

It was his view, he said, that the banks should have been nationalised but he did not get the chance to give that opinion on the night.

Not enough detail was available that night, he went on. “On the night of the guarantee, it struck me that there was not enough information available.”

He had been, he said, “quite sceptical for some time about Irish Nationwide and Anglo Irish Bank”, adding: “I couldn’t understand their business model.”

There was a view, he added, that there was something “unusual” about the two institutions.