Sir, – The economist David McWilliams's appearance at the banking inquiry on February 26th was very important ("Crisis was 'absolutely preventable', says McWilliams", February 27th) as the then government's decision to adopt a bank guarantee on September 29th, 2008, appeared to follow closely the option he had forcefully advocated in a Sunday Business Post article of September 21st, 2008, "State must act as a safeguard".
As we know, he was consulted informally around that time by the minister for finance Brian Lenihan, and spoke on one occasion with the leader of the Greens and minister for the environment John Gormley, but I do not wish to suggest that his was the only advice taken into consideration.
In the McWilliams article, the argument for the blanket guarantee was that “the Irish government would be using its well-earned reputation as a sovereign entity, not its hard-earned cash, to solve this crisis”.
He did indeed also argue in that article that “the government could do this for a limited period – let’s say two years”.
However, he overstated his case at the inquiry, when he denied that he got anything wrong in relation to the bubble and the crash.
The entire recommendation in his September 21st, 2008, article, like the guarantee itself, was based on the premise that insolvency was unlikely and that the banks were facing a liquidity crisis.
His Sunday Business Post article concluded with the statement: "If we act now, quickly and with confidence, a potential insolvency won't escalate beyond a temporary problem of illiquidity and will be sorted without panic or long-term consequences".
Mr McWilliams has been arguing since that the decision would have been the right one for the government to take, despite the misdiagnosis, if only it had been time-limited.
But if the problem was solvency, not just liquidity, how could the then government have withdrawn from it, even if it had been made conditional from the start, without the danger of a collapse of confidence and of the entire Irish banking system?
As we know, the mere statement of intent by German chancellor Angela Merkel and French president Nicolas Sarkozy at their Deauville summit in October 2010 that from 2013 creditors should be bailed in accelerated the loss of market confidence that led to the bailout and the advent of the troika the following month.
Could one respectfully suggest that expert witnesses would serve the public and the inquiry well, if, following the admirable example of John FitzGerald of the ESRI ("FitzGerald admits ESRI 'totally wrong' on banking collapse", February 11th), they could explain not just the many occasions where they were right and farseeing but also where they went wrong? – Yours, etc,
MARTIN MANSERGH,
Tipperary,
Co Tipperary.