Brian Cowen says attempts made to ‘bounce’ Ireland into bailout

Former taoiseach Brian Cowen has said he believes attempts were made to "bounce" Ireland into making a decision on entering a bailout programme in 2010.

Speaking before the Oireachtas banking inquiry (LIVEBLOG here), Mr Cowen said discussions about a bailout programme for Ireland in 2010 had only begun when European officials started to brief the media.

The former taoiseach said he felt this was an attempt to “bounce” Ireland into a decision and created an image that the International Monetary Fund (IMF) was in town, when the talks had just started.

Mr Cowen said the briefings created an impression the government was trying to hide the reality of the problem.

Mr Cowen said: “That perception was further reinforced when the Central Bank governor gave an interview with RTÉ from Frankfurt on the morning of the meeting in Dublin by saying while it was a matter for the government in the first instance, he said he believed that a deal would be done and a loan would be agreed.

“This development showed the government in a bad light because of the interpretation given to events that we were keeping what was going on away from people.

“In fact we were trying to put ourselves in the best position we could, before formally requesting assistance.We wanted to know exactly what we were getting into before we agreed to formally apply for any programme.”

The radio interview was followed by a letter from ECB president Jean Claude Trichet on November 19th.

Mr Cowen described Mr Trichet’s letter as “threatening withdrawal of ECB funds in the absence of a formal bail out request”.

He added: “This was not well received by us.”

The country officially applied for a programme three days later.

Mr Cowen said it was made clear there would be no programme if the country attempted to burden share with senior bondholders.

Bank guarantee

Giving evidence in his first session of the day, Mr Cowen said the government hoped it would not have to give any money to the banks on the night of the guarantee.

He said the idea was to give them the guarantee, to stand behind the system and to make them pay on that basis.

The former taoiseach said: “No matter what decision you made that night, it would have cost you.”

The former taoiseach earlier said allowing Anglo Irish Bank to fail was not an option of the night of the bank guarantee.

He said the Financial Regulator assured the government the banks were solvent on the night of September 29th, 2008.

He said allowing the bank to fail would have had implications for the whole system.

He said: “The costs involved in terms of causing a run on other banks as well would put the whole payments system at risk and cause irreparable damage to the economy as a result of a banking meltdown.

Mr Cowen confirmed then minister for finance Brian Lenihan was in favour of the nationalisation of Anglo.

He said it too carried risks and said it could have created a scenario where other institutions would want a similar expectation.

He said: “The options were narrowing down to a nationalisation plus a guarantee or simply a guarantee of the system itself. The other options referred to by Merrill Lynch which had been discussed were discounted by then.

“It has to be emphasized no decision was risk free.

The former Taoiseach said “an immediate and dramatic” intervention was required to stop the outflow of money from the banks.

Mr Cowen said he was sorry there was no documentation of the night the guarantee was agreed.

He said he was chair of the meeting and did not take an account of the discussion.

Private meeting

Mr Cowen confirmed he and the then minister for finance Brian Lenihan had a private meeting to discuss the options. He said he was not in favour of nationalisation.

He said: “ I explained my reservations about it and reassured him that nationalisation was something that we could not rule out in the future and would remain an option available to us.

“I also told him that a time limited guarantee seemed to me preferable than giving an open-ended guarantee which a full nationalisation would entail.”

Mr Cowen denied this was an “adversarial or confrontational” meeting and said the two men were striving to find the best course of action for the country.

Mr Lenihan did not favour a broad guarantee but after the meeting, he agreed with Mr Cowen, he said.

He said the presentation from the bank officials confirmed that the problem was as bad as the government had imagined.

The former Fianna Fáil leader said it became clear the institutions were running out of money and it could be days rather than weeks.

Mr Cowen said he eventually put the option of a guarantee on the table and send a message that the country was standing behind its banks.

Speaking about the decision to nationalise Anglo, Mr Cowen said he was on a trade mission in Japan when Mr Lenihan contacted him.

Mr Lenihan said the decision was necessary to protect the banking sector and must take place immediately.

Mr Cowen said the government could not allow the collapse of the bank, which would have forced the government and the taxpayer to face the prospect of having to pay out billions of euros to customers who had deposits.

Golf outing

Asked by Sinn Fein’s Pearse Doherty about a golf outing with former chairman of the Anglo Irish Bank Sean Fitpatrick, Mr Cowen said the suggestion came from his friend Fintan Drury, who was a non-executive director of Anglo.

Mr Cowen said Mr Drury had invited them to play a game of golf in July 2008 to discuss the economy.

“There was nothing more in it than that,” he said.

Mr Cowen said nothing untoward was discussed at that outing or a board dinner with the Anglo Irish Bank executive.

He said this was a question of his integrity and said in the two decades of public life, he never conducted his affairs in that manner.

Mr Cowen said: “If people want to set it up that something happened, I can’t do anything about it. It is not the way I operate. I make up my own mind on issues of importance.”

Mr Cowen was also asked about an article in the Irish Times this morning about emails between officials about resolution methods on the day he met Anglo officials for a board dinner.

The former Taoiseach said he wasn’t aware of the the content of the emails and insisted he did not discuss any business on the night in question.

Mr Cowen said: “The important point is the evidence I gave to this inquiry was truthful and accurate. I didn’t discuss anything with Anglo.”

Mr Cowen insisted he was not copied into the email and said any correspondence for him was screened by his private office.

He said the possibility of the need for a guarantee became known in April 2008 and said the email was not the first time this was discussed.

Mr Cowen was asked about a phone call he had held with the then UK Prime Minister Gordon Brown around the time of the bank guarantee.

He said Mr Brown had expressed a concern about the contagion this could have on British banks in Ireland and whether they should be included in guarantee.

The former taoiseach said it was a civil and appropriate conversation between the two men. He said the guarantee had already taken on a lot without taking on any more.