Nationalising Anglo would not have saved money - McDonagh

Nationalising Anglo Irish Bank on the night of the blanket bank guarantee on September 29th, 2008, probably would not have saved the State any money in the long run, according to Brendan McDonagh, the former finance director of the National Treasury Management Agency (NTMA).

“It’s hard to see if it would have saved taxpayers money, because the bank had so many problems,” Mr McDonagh told the Oireachtas banking inquiry on Thursday.

Anglo ultimately received a bailout of close to €30 billion before being liquidated by the Government in early 2013.

Mr McDonagh said the NTMA, which manages Ireland’s national debt, was “always sceptical” of the business models of Irish Nationwide and Anglo, particularly their heavy exposure to property lending.

No involvement

Mr McDonagh, who is now chief executive of the National Asset Management Agency (Nama), said the agency had “no involvement” in the decision to introduce the blanket guarantee but it was the agency’s “strong view” that Anglo and Irish Nationwide should have been nationalised.

He said the NTMA had been engaged in discussions with the Department of Finance from April 2008 about the provision of emergency liquidity in circumstances where the Irish banks could not meet their funding requirements from the wholesale markets.

In terms of placing deposits with Irish institutions, the NTMA had made the decision around August 2007 to stop placing money with any bank. Instead it moved maturing bank deposits back to the Central Bank. “We referred to it internally as ‘safe harbouring’ deposits,” he said.

Placing of deposits

In mid-December 2007 the NTMA was invited to a meeting with the department and the Central Bank to discuss placing deposits within existing credit limits with Bank of Ireland (€200 million), AIB (€200 million), Irish Life & Permanent (€50 million) and EBS (€50 million).

An existing deposit of €40 million with Anglo Irish Bank, with a maturity of one year, had been in place before the NTMA made its decision to cease placing deposits with the banks.

The then minister for finance, Brian Cowen, wrote to the NTMA’s chief executive, Michael Somers, on December 19th, 2007, directing the NTMA to place deposits with Bank of Ireland, AIB, Irish Life & Permanent and EBS.

In a separate session of the banking inquiry on Thursday, Mr Somers said he found out about the State’s decision to issue a blanket bank guarantee only by way of a text message the following morning.

Mr Somers, who retired as NTMA chief executive in late 2009, said he was in the United States on business with his deputy, John Corrigan, on the night of the guarantee decision and he found out about it via a text from a colleague.

He had not been aware of any pending crisis at the time of travelling to the US. “If we had been, we would have stayed [in Ireland],” he said.