No reason to expect bank chiefs to be held to account

OPINION:IMAGINE, IF you will, that you are Brian Cowen. You are in your office in Government Buildings, it's coming up to midnight and the heads of the State's two big banks are standing cap in hand on the carpet.

They have told you in no uncertain terms that if the Government does not guarantee the Irish banks before the markets open in the morning, there will be a catastrophe. You have no choice but to take them at their word; no government can let the two biggest retail banks fail. Your first question is pretty simple: "How much do you need?" They tell you: "€400 billion." You say: "Okay."

You would like to think that your next question is: "Tell me, Mr (Eugene) Sheehy and Mr (Brian) Goggin, about the arrangements you have put in in place to minimise disruption caused by your resignations."

Was the question asked? I doubt it. Were the resignations tendered unasked? I doubt it even more. And that is a problem.

There is, of course, a need to be pragmatic in the sort of circumstances in which we find ourselves. This is not the time for pointless gestures and the unpalatable truth is that the people who steered the banks into this mess may be the best people to get them out of it.

This argument applies to all the actors in the drama, from the regulators right up to the Taoiseach himself, who was minister for finance when the property market went into hyperdrive.

Indeed the extent to which everybody in the State bought into the property boom makes it hard really to single out one or two individuals without making them into nothing more than scapegoats. I for one am not aware of anyone writing to Sheehy or Goggin and refusing mortgages on the basis that they were concerned that AIB and Bank of Ireland's capital bases might not be able to sustain them.

More pertinently, we all bought into the property market story. Along with our banks and our Government, we happily lived the fairy tale whereby a semi-detached house in Dublin was worth more than a castle in Bavaria. Indeed, you could almost go as far as to say there is something rather honest about the lack of heads rolling in the Irish bank rescue package.

In pretty much every major bank rescue that has taken place on both sides of the Atlantic in recent months, the heads of the chief executives of the banks have been demanded as part of the price. But the people who demanded these heads are the same regulators and politicians who failed to rein in the banks. The point is most neatly illustrated by US treasury secretary Hank Paulson. Having seen what was happening from the inside as the head of Goldman Sachs, he joined the Bush administration two years ago, but failed to take action.

Unfortunately, it's not really credible to argue that the reason no one is being held to account in Ireland for what happened to the banks is because of our unique national insight into the complexities of the moral hazard argument. Rather, it is just another manifestation of one of the less than attractive aspects of Irish political and business life: We don't do personal accountability.

Brian Cowen and his colleagues could hardly ask Sheehy and Goggin to pay the price for the near collapse of the banks, having let his predecessor as taoiseach off the hook for years over his increasingly bizarre explanations about how he bought his house and where he got his money.

If that sorry episode is any yardstick of the Cabinet's views on personal accountability and standards, the chief executives of the Irish banks can sleep easy.

Equally, Sheehy and Goggin belong to an elite business culture that didn't and still really doesn't understand why Jim Flavin had no option but to resign after being found to have broken the law on insider trading. Whatever pressure comes for them to take responsibility for the effective failure of their banks will not come from their peers.

And you would have to wonder if that is not one of the reasons we got ourselves into this whole mess to begin with. The failure to hold the chief executives of the banks accountable for their near collapse sends a signal that they had no obligation to manage their banks in a way that might be loosely termed responsible. They did not have to take regard of the national interest, despite knowing that when it came down to it - as it did last Monday - the taxpayer would back them up.

It also says that you can draw down a massive salary, make a mess of things and not only keep your job, but probably earn a bonus for sorting out the mess. Possibly the only justification for the massive salaries paid in banking is that if you screw up you lose your job.

We will hear a lot in the coming days about public interest and how much the banks will be paying for the guarantee.

It would be nice to hear something about accountability, but that is not the Government's strong suit.