Lenihan admits error over bank debts scheme

 

MINISTER FOR Finance Brian Lenihan yesterday admitted to making a similar error when describing bondholders during a live interview to the mistake that he lambasted Fine Gael’s finance spokesman Richard Bruton for making on RTÉ 10 days earlier.

During the course of a robust exchange with presenter Mark Little on Primetime on Thursday night, Mr Lenihan said that no subordinated bondholders were covered by the State’s bank guarantee scheme.

Yesterday, Fine Gael leader Enda Kenny wrote to Mr Lenihan to “remind” him that the scheme actually provided that one class of such debt, dated subordinated debt (Lower Tier 2), was a covered liability.

The Minister responded by letter yesterday evening admitting his mistake.

“In answering the question on subordinated debt, I should have stated that not all types of subordinated debt are covered by the State guarantee,” he wrote.

The error will be seen as embarrassing for the Minister for he used a mistake made by Mr Bruton on RTÉ’s This Weekas the basis of a sharp attack on the party’s solution to the banking crisis.

Mr Bruton mistakenly said the European Central Bank had instructed Anglo Irish Bank not to pay interest on senior debt, when he should have said subordinated debt. Mr Bruton said it was a simple slip of the tongue, but he acknowledged it at the meeting of the Oireachtas Joint Committee on Finance last Monday.

In his letter to Mr Lenihan yesterday, Mr Kenny borrowed some of the language the Minister used in relation to Mr Bruton’s mistake.

“I am writing to you to ascertain whether this was a simple verbal error on your part under the pressure of a television interview, or whether this was an indication of Government intention to [remove this class of debt] from the guarantee,” Mr Kenny wrote. He said it was important that Mr Lenihan reply urgently “in the interests of financial market confidence”.

Mr Lenihan replied: “As I am sure you noted, the interview was robust and I was not given much opportunity to complete my replies to the questions. I entirely agree that we should strive for accuracy throughout this public debate.”

The exchange of letters followed the conclusion of the third Cabinet meeting this week to discuss the Bill to establish Nama.

Government sources yesterday said Ministers have been looking very closely at the issue of risk-sharing and the two-tier model that has been suggested by Patrick Honohan, the incoming governor of the Central Bank.

One of the options given serious consideration, said the sources, was the creation of two classes of bond. This approach provides for one class of bonds to be issued immediately and the other to be deferred and paid at a future date if it were shown the scheme was working. However, it is understood that discussions have not yet moved to the question of what percentage would be made available immediately.