Would the Minister for Finance have been prepared to unconditionally guarantee the deposits of Anglo Irish Bank, along with the deposits of the five other Irish-owned banks, last September if he had known of the FitzPatrick loans?
To say that Lenihan was livid when he found out about the hidden loans would be an understatement.
At the very least, Neary's failure to let the Minister know about the loans meant that Brian Lenihan was taking very important decisions, which exposed the taxpayer to potential liabilities of almost half a trillion euro, on the basis of materially incomplete information.
Neary's defence for not telling the Minister about the hidden FitzPatrick loans is that he didn't know about them either. From reading Neary's convoluted statement announcing his retirement last night, it would appear that he didn't find out about the loans until shortly before Lenihan was told on December 10.
That his own staff failed to tell Neary, their boss, about such an important matter for almost 11 months is astonishing.
While Neary's departure was hardly unexpected, the questions raised by this affair remain unanswered. The seven-year delay in detecting the FitzPatrick loans followed by the further delay in alerting the Minister for Finance caps a disastrous 18 months for IFSRA.
Even more worrying than its apparent mishandling of the FitzPatrick loans, was the fact that the organisation seems to have been completely blindsided by the collapse in the Irish property market and the disastrous effect this has had on the quality of the banks' loan books. This points to massive systemic failure at IFSRA.
To state matters bluntly, given that the Irish banks, which it was supposed to be regulating, went bust on its watch, is IFSRA fit for purpose? On the basis of its performance since at least August 2007, almost certainly not.
The 1999 McDowell report recommended that the job of financial regulation be given to an independent organisation. However, the Central Bank, aided and abetted by its parent, the Department of Finance, launched a furious and ultimately successful lobbying campaign for control of the new organisation. The result was that IFSRA started life in 2002 as an offshoot of the Central Bank, staffed almost exclusively by Central Bank lifers such as Neary.
Seven years later, the fears of those of us who worried that a Central Bank-controlled IFSRA wouldn't be up to the job have been borne out in spades. However, instead of going for root and branch reform of the regulatory system, the Government seems content to opt for mere window-dressing instead.
While the unfortunate Neary is clearing his desk, the Government announced on Thursday that his boss, Central Bank governor John Hurley, a former secretary general of the Department of Finance, had been re-appointed for a second seven-year term.
By reappointing Hurley, Finance Minister Brian Lenihan has demonstrated that he has yet to comprehend the fact that Irish financial regulation is completely inadequate.
Unless and until he does so, stand by for more disasters ahead.