No remorse from public sector dog who could have barked


It was reassuring to see experts - some of them at least - recently admit their failure to foresee the crisis, writes NOEL WHELAN

THERE WAS a confessional mood at times at the MacGill Summer School in Glenties in Donegal the week before last - at least among the non-politicians.

MacGill provides an opportunity to reflect upon the issues of the year in a calmer setting than that which prevails in the puppet theatre format in our parliament and many TV and radio studios.

This year politicians, academics and commentators focused particularly on how weaknesses in our politicians and/or political system contributed to our current fiscal, banking and jobs crisis. There was, unsurprisingly, a near general rhetorical consensus that recent Fianna Fáil-led governments should carry the bulk of political responsibility for why we are where we are.

However, some speakers were prepared to address their own role over the relevant years.

Among the speakers was Bridget Laffan who must be one of the country's brightest people and the type of State board appointee who would have sailed through any parliamentary vetting procedure if one existed. She is a leading academic and currently principal of the College of Human Sciences at University College Dublin, and her comprehensive paper dealt with the causes of what she described as "the very deep economic and societal challenge which we now face".

She pulled no punches, lacerated recent governments for their errors in fiscal management and cited the 2003 decentralisation project for particular criticism. She accused Brian Cowen of "blame avoidance" in his recent speeches and depicted as absurd the Government's attempt to blame the Opposition or international agencies for not telling them they were doing wrong.

Laffan was as tough on herself as she was on others. She asked why so few of the publicly-funded bodies established to advise Government failed to sound alarms. She declared herself "ashamed" of her own involvement in the National Economic Social Council's (NESC) failings in that regard.

She had been a member of NESC for five of the relevant years but in hindsight says she "had no idea what universe I was in. I read the reports, made the comments and asked all the questions. We did a report on housing and no one around the table made the connection between a housing boom, a credit boom and what was happening in the banking system. We actually weren't thinking. We suspended judgment. I look back on those five years and I think to myself 'What were you doing lady?' I think a lot of us [on State bodies] went asleep at a very high cost to this State and society."

Another speaker was NUI Maynooth economist Jim O'Leary, a non-executive director of Allied Irish Banks from 2002 to 2007. In a paper, extracts from which were published in this newspaper last weekend, O'Leary argued that while, with the benefit of hindsight, it is tempting to see the banking crisis as the inevitable consequence of the credit boom that was "not the way the future looked at the time". He said that the prevailing belief during the boom was that there would follow the much-vaunted "soft landing". O'Leary continued: "Of course bank directors understood that a much more malign scenario was possible but they trusted that the systems for monitoring and controlling risk ensured that banks would be adequately protected if such circumstances arose".

O'Leary was sceptical about the "soft landing" view of the property market but seems not to have said that often enough or loud enough at bank board level. In a passage delivered in Glenties with obvious remorse, he added, "it is a matter of profound personal regret to me that I wasn't more forceful in setting out the contrarian view and didn't work harder at analysing its implications."

One of the MacGill keynote speakers was Michael Somers who, until recently, headed up the National Treasury Management Agency, which so successfully managed our national debt and was later given responsibility for the National Pension Reserve Fund. Somers's own address was wide-ranging and philosophical but it was banking which was the focus of most of his questions and answers session.

I asked him about comments he made in an interview with Vincent Browne which suggested that he had reservations about Anglo Irish Bank in 2005 and took steps to limit the deposits NTMA placed there. Browne has since suggested to other interviewees that since Somers had such reservations, surely everyone knew there were problems with Anglo.

I asked Somers why he had this "feeling in his gut" about Anglo Irish Bank and whether he shared this queasiness with anyone else in the financial or policy-making system. I asked, if he did, what was their response, and if he did not, why not. In reply Somers attributed his reservations to instinct - a sort of banker's intuition - and said that he "certainly had not" told anyone outside the NTMA about his concerns because he would "have been blown out of the water". He suggested this was because of the standing which Anglo enjoyed in public, financial and political circles.

The NTMA had no regulatory function in relation to the Irish banking system but the fact that it, as one of the biggest depositors of Irish taxpayers' money, felt it should limit the monies it placed with that bank was significant.

It is curious therefore that Somers, who was one of the highest profile, most respected and best remunerated public servants, chose not to talk about his concerns with other public or banking officials.

In all of the recent debate about the failure of the public sector dogs to bark warnings during the boom, it was unnerving to hear one of the biggest beasts on the public sector's stage suggest that although he had concerns about Anglo Irish Bank he did not share them. It was particularly disappointing to hear him say so in a tone which, unlike that of other speakers at MacGill, suggested no remorse.