THERE is a compelling need for an official inquiry into the collapse of the banking system and the roles played in bringing about that situation by those in positions of authority. Some €50 billion of taxpayers’ money will be used in the coming months to purchase good and bad assets from various institutions. Further investment may be needed to recapitalise the banks. The inherent risks for this and future generations are enormous. There is a compelling case to identify the causes for the breakdown and guard against a possible repetition.
Last August, economist Colm McCarthy advocated an inquiry as a necessary cathartic exercise in addressing administrative and operational failures. Since then, the governor of the Central Bank, Patrick Honohan has supported an inquiry. And retiring Financial Services Ombudsman Joe Meade has criticised excessive secrecy by the Office of the Financial Regulator.
As always happens on such occasions the Government has tried to buy time, hoping the impact of an inquiry will be blunted by a drawn-out process - taking place long after the original scandal. A similar strategy was employed when those being investigated by tribunals launched a succession of judicial challenges and caused prolonged delays. In the circumstances, few would fault Taoiseach Brian Cowen for not establishing yet another tribunal. But something has to be done. And questions remain over the suitability of an Oireachtas inquiry.
The Dirt inquiry of ten years ago was successful because the initial investigations were conducted by the Comptroller and Auditor General. What was shocking was how little it affected subsequent government behaviour. That Oireachtas investigation into bank-facilitated tax evasion reported on “a particularly inappropriate relationship between the banks, the State and its agencies.’’ It found the State and its agencies were too mindful of the concerns of the banks and too attentive to their lobbying. Nothing has changed in the decade, except that property developers were admitted to the inner circle.
Mr Cowen initially resisted an inquiry. The Green Party demurred. After Professor Honohan’s intervention, Minister for Finance, Brian Lenihan accepted an inquiry would be necessary, but not before the work of Nama was completed in mid-year and not by way of an Oireachtas committee. Fine Gael and the Labour Party are now committed to the Oireachtas route. They want a financial expert to set the scene by conducting a preliminary investigation into what went wrong.
The Dirt inquiry felt that Oireachtas committees were unsuitable “to probe issues that are essentially of a political or policy nature.’’ But policy and politics have contributed largely to the current financial crash. Control mechanisms and administrative oversight failed comprehensively. An explanation for what went wrong is urgently required. But what financial expert would do the investigative work for another Dirt inquiry? That is the only question.