Banking Inquiry witnesses being given easiest time
John Hurley, who was Governor of the Central Bank from 2002 to 2009, made his long-awaited appearance before the Oireachtas Banking Inquiry on Thursday. However, anyone expecting fireworks was sorely disappointed.
While Mr Hurley's testimony didn't quite match the inquiry's trip last month to Kilmainham last month - where it lobbed pre-approved softball questions at former ECB boss Jean Claude Trichet - for sycophancy, he was still treated remarkably gently. None of the assembled TDs or senators succeeded in laying a glove on him.
Mr Hurley trotted out the usual Irish bureaucratic shtick that gets aired when something goes wrong, expressing his "regret" at what had happened but claiming that, since the regulation of the Irish banks had been hived off to the Financial Regulator in 2003, the banking crash - which ended up costing the Irish taxpayer €64bn - really had nothing to do with him.
It will be interesting to hear what former Financial Regulator Paddy Neary, who Mr Hurley implicitly blamed for the disaster, will have to say for himself when he appears before the inquiry next week.
Far be it from me to defend Mr Neary, but dumping all the blame on the designated scapegoat just will not do. There are many others, including Mr Hurley, who have serious questions to answer about their role in the events leading up to the collapse of the banking system in September 2008.
From 2004 to 2007, during which time Mr Hurley was governor, the Central Bank published an annual Financial Stability Report in which it assured all and sundry that everything was hunky dory. In the 2004 report, Mr Hurley wrote that "the Irish banking system is currently in a good state of health".
Two years later, Mr Hurley was sounding a slight note of caution, pointing to rising house prices and higher levels of borrowing as possible risk factors, but still felt able to conclude that: "The current shock-absorption capacity of the Irish banking system leaves it well-placed to withstand pressures from possible adverse economic and sectoral developments."
A year later, even as the bursting of the sub-prime mortgage bubble in the United States signalled the end of the Noughties' economic boom and the death of the Celtic Tiger, Mr Hurley was still trowelling on the optimism.
"The Irish financial system's shock-absorption capacity remains robust and the system is well-placed to cope with emerging issues," he wrote.
Even as late as July 2008, less than three months before the Government was forced to guarantee the deposits of the Irish banks - a decision that ultimately bankrupted the State - Mr Hurley was still in apparent denial.
Writing in the Central Bank's annual report, he assured his readers that the Irish banks "remain relatively healthy by the standard measures of capital, profitability and asset quality".
Given what we now know, one can only conclude that Mr Hurley was either utterly complacent or just didn't get it. Which was it? Unfortunately, the inquiry left us none the wiser. In fact, after watching its very light grilling of both Messrs Trichet and Hurley, it's hard not to be cynical about the whole exercise. To paraphrase the old Soviet-era joke, it would appear that the inquiry pretends to question those appearing before it while they pretend to answer.
Why such reticence? Could it have anything to do with the apparent last-minute extension of the deposit guarantee from the four pillar banks, AIB, Bank of Ireland, Permanent TSB and EBS, to also include Anglo and Irish Nationwide - a decision which doubled the cost of the bank bailout? Mr Hurley told the inquiry that he hadn't witnessed then Finance Minister Brian Lenihan being over-ruled on the issue.
Unfortunately, by treating its witnesses with kid gloves the inquiry is ensuring that it won't get to the bottom of the banking crisis. Mr Hurley and his fellow-bureaucrats get paid their gold-plated pensions while the taxpayer pays the price.