The decisive action to guarantee bank deposits marks a turning point for the Government, writes Noel Whelan
'IT'S 3AM and your children are safe and asleep . . . but there's a phone in the White House and it's ringing. Something is happening in the world. Your vote will decide who will answer that call . . ."
So ran the voiceover for a controversial but effective TV ad put out by Hillary Clinton during the Democratic primaries of the US presidential election.
This week the American political system dropped the receiver when a 3am call to save the financial system came.
The US presidency is currently hobbled. President Bush has no credibility in communicating the scale of the national crisis or advocating solutions to it.
That's why the Paulson rescue plan got bogged down in congressional bargaining as the national interest played second place to localised political considerations.
At 3am last Tuesday morning, this country faced a similar national crisis. Our political system worked. There may have been a power vacuum on Capitol Hill and Pennsylvania Avenue but thankfully, for this country at least, there was decisiveness on Merrion Street and real cross-party parliamentary leadership in Leinster House.
The Cowen Government came of age this week. After some faltering initial steps pre-summer, the new Taoiseach and his Minister for Finance proved up to the task. There was an extent to which Brian Cowen and Brian Lenihan had no option, but the timing of their decision and the audacity of their solution defines the move. The close monitoring of the banking situation in recent months and the working through of scenarios prepared them for the enormity of the decision forced on them by the pace of events on Monday.
Weak or insecure leaders, nervous about a public onslaught against the proposal or anxious to massage media opinion before announcing it, might have opted for delay.
Overly cautious leaders might have persuaded themselves - or allowed conservative officials to persuade them - that they could afford to wait to see how the markets fared for the first few hours of Tuesday's trading.
This would have been fatal.
Cowen and Lenihan, however, made the decision promptly and then quickly designed the announcement strategy so as to ensure that before the nation got to its breakfast table on Tuesday morning - and before financial speculators got to their desks - the Irish banking system was fenced against further onslaught and buttressed against collapse.
Given the current turbulence in international financial markets it would be foolhardy to predict with certainty that the Government's solution will work but initial developments suggest it will. If it does Ireland could end up being the only country affected by this crisis which will not have had to spend public money buying a bank. Indeed, if the insurance given to the banking system is not called upon, the Government finances will turn a substantial profit from the levy charged for the guarantee. Even if difficulties arise and some of the guarantee scheme is drawn down, the Government is determined that those costs will be borne by the wider banking sector rather than the taxpayer.
The only hiccup in the Government's presentation on Tuesday was the fact that drafting issues delayed the start of the Dáil debate.
Frankly, an extra few hours work on the Bill in the Attorney General's office was probably more important in the long term. The markets knew that, once made, the Government's decision to guarantee the banks would be implemented because in our political system governments have a parliamentary majority.
In fact, the procedural delays did little more than provide fodder for those media elements who prefer to write stories rather than dealing with the content of proposals. If this mechanism works, then economic and political historians looking back on Tuesday, September 30th, 2008, will be focusing on the quality of the decision-making in the early hours rather than when precisely in the day the Dáil debate started.
One person who deserves particular recognition for the role he played this week in the national interest is Richard Bruton. He was not only unequivocal in his support for the principle of the Government initiative, but he was also articulate in the cause.