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The decision taken on Monday night, 29 September 2008 and the early hours of Tuesday, 30 September 2008 to recommend to the Cabinet that a blanket Guarantee should be introduced was examined in detail by the Joint Committee. Over twenty witnesses gave evidence on the basis of their involvement in different aspects of the day’s activities which culminated in that recommendation. Much of the evidence given was based on recollections. Some notes taken by people at the time of these events were made available to the Joint Committee.
The Joint Committee sought to establish what happened on the night of the Guarantee and why an incorporeal cabinet decided to guarantee all six banks.1
The following participants were in attendance at all or part of the meetings:
The following people participated from 21:30 as requested:
Standing by in Government Buildings were:
No official minutes were taken of the meeting that took place in Brian Cowen’s office in Government Buildings on the night of September 29/30. No official documents have been made available to the Joint Committee. A small number of personal unofficial contemporaneous notes were made available to the Joint Committee.
Brian Cowen, who chaired the meeting, commented on the impact of not having a note of the meeting: “I have to take responsibility, I am sorry that there isn’t an accurate, full note of that meeting. It would be the protection of all of us, if there were.”2
The meeting appears to have started sometime between 18:00 and 19:00. Dermot McCarthy recalled that: “I think I was notified that there would be such a meeting earlier in the afternoon and I arrived at it, I think, some short time before 7 p.m.”3 His expectation in joining the meeting was that: “… this would be a matter of hearing a briefing and to prepare what might be put to Government.”4
John Hurley was asked about the meeting on the night of the 29 September 2008:
“My recollection is that the preliminary meeting that I described … the first plenary meeting, there was a very broad discussion on the options and the view was that we should tease out the different options.”5 He said: “I think I went over to Government Buildings probably around 6.30 p.m.”He outlined that the first meeting: “…started with a detailed discussion on the liquidity position, on the threats facing the system, how the individual banks were.”6
Patrick Neary outlined his recollection of events:
“We advised the meeting that on the basis of the information available to the authority, all banks were in compliance with their required capital ratios, were in a position to meet their obligations on a going concern basis, but liquidity was becoming a critical issue for them, especially Anglo.”7
Brian Cowen said that:
“Mr Neary and Mr Farrell, from the regulator’s office, outlined their serious concerns. I recollect that they were of the view that something significant had to be done immediately to stabilise the situation. In that respect, they spoke of the need for introduction of a Guarantee…”8
The Joint Committee wanted to establish whether the idea of a bank guarantee had been discussed at any time before the guarantee meeting. Brendan McDonagh, had been directly involved in negotiations and conversations about the growing crisis during September. In his evidence he observed:
“The first and only reference to a blanket Guarantee throughout all the engagement in September 2008 was an email... at 1.26 p.m. on Friday 26th of September 2008… the NTMA view on, inter alia, the potential sovereign implications of a blanket bank Guarantee.”9
“there was no substantive discussion involving myself – and as far as I am aware with my senior NTMA colleagues – about a bank guarantee in the months, weeks or days leading up to 30 September...”10
Kevin Cardiff e-mailed Government advisors, Merrill Lynch, when he realised that the guarantee option was now emerging as the preferred solution.
“I noted, being aware of their views and also having emailed Merrill Lynch as soon as it became clear that a broad guarantee approach would be a key focus of discussion, that Merrills and NTMA, our advisors, would be likely to advise against the broad guarantee option, on balance.”11
Head of European Financial Institutions at Merrill Lynch, Henrietta Baldock replied to him immediately with reference to the Merrill Lynch Memorandum from the previous day, Sunday September 28. The Memorandum attached to her email reiterated that:
“It is clear that certain lowly rated monoline banking models around the world, where there is concentration on a single asset class (such as commercial property) are likely to be unviable as wholesale markets stay closed to them. This has inevitably had an impact on our conclusions and we believe it is important to act quickly to deal with these institutions to avoid a systemic issue.”
The Merrill Lynch Memorandum also asserted that State protective custody would protect depositors, senior creditors and dated subordinated debt holders (via a State guarantee) and would mean:
“equity holders and undated junior subordinated debt holders would receive nothing, providing a capital cushion of €1.4 billion in the case of Irish Nationwide and €7.5 billion in the case of Anglo. lt is important that all other creditors are reimbursed to avoid a contagion effect with the other Irish banks…”12
Brian Cowen confirmed that Brian Lenihan was involved in the discussions at this stage and “agreed with the analysis and the up to date position given by the Governor. He indicated that he [Brian Lenihan] felt part of the solution would be the nationalisation of Anglo Irish Bank.”13
Brian Cowen described how, following a discussion:
“The options were narrowing down to a nationalisation plus a Guarantee, or simply a guarantee of the system itself. The other options referred to by Merrill Lynch which had been discussed, were discounted at that stage.”14
The Joint Committee wanted to understand whether the ECB and/or its President Jean-Claude Trichet played a role at the meeting. Brian Cowen said:
“Governor Hurley had been in touch with the President of the ECB, Jean-Claude Trichet, over the weekend and confirmed to the meeting that there was no euro-wide initiative in the offing and just as other countries had to take decisions on their banks, it was clear that we were on our own, we would have to deal with this at a national level.”15
David Doyle was questioned on the ECB position. He replied:
“On the core question [whether the ECB would allow a bank failure] the view of the ECB as quoted to the meeting by the Governor on the night was that Mr Trichet had advised him that no bank failure could be allowed, or words to that effect.”16
John Hurley was asked whether the ECB knew about the potential for the Irish Government to put a guarantee in place. He replied:
“It would have been one of the options but it would have been mentioned as an option that might have to be considered. But there was no specific pre-dialogue on specific options but there would… in the context of discussions, there would have been an understanding of the broad options that would have to be considered.”17
The former President of the ECB, Jean-Claude Trichet stated in his opening address to the Joint Committee:
“… it is also important that the Guarantee was introduced by the Irish Government without any co-ordination with the ECB, or with any other European partners, and I was the witness of that, or any other international partners.”18
He was asked:
“… if you could just clarify, in the period of … prior to September 2008, were the ECB engaged in any way with the Irish Government, the Irish Central Bank or Irish financial services in any manner related to the implementation of the design or the structure of a guarantee?”
Jean-Claude Trichet replied:
“No contact between the Irish Government and either me or the ECB or to my knowledge, their governments, because I had myself the other governments calling on me and saying, “What’s happening?” …We were not kept abreast of any development in Dublin by the Irish authorities, and as regards the Guarantee, we learned of the Guarantee through the media.”19
Jean-Claude Trichet was asked if he was aware: “…that Anglo Irish Bank was virtually certain to default the next day?”20
He responded: “Again, it was not the responsibility of the ECB to survey the banks… So no memory, No, I would say, responsibility in this domain.”21
Paul Gallagher was asked if he accepted the rationale as stated by Trichet regarding the role of the ECB. He said: “The ECB is forbidden to bail out any banks and the European institutions are forbidden to do so...”22
When questioned on whether it was a fact that the banks were the “State’s responsibility”, he replied “I think that was the significance, that you shouldn’t let a bank fail, the responsibility is yours, that was something that the Government already knew.”23
The Joint Committee asked Kevin Cardiff:
“can you outline the individuals and organisations who suggested that a broad legal guarantee approach before the night of the guarantee? Who sought the views of those individuals and organisations?”
He replied:
“Okay. End of April, Sean Fitzpatrick [to] John Hurley... a few days later, maybe a week later somebody and, unfortunately, and in my notes it just says DD suggested the idea of a broad guarantee ... I’m not sure whether legal or political, quite possibly at that stage political... A lot of these approaches were to John Hurley. May ... 23 May, I think, to me. I was at a seminar at which Charlie McCreevy was speaking and he said, “Kevin, look I think you need to make some sort of broad statement.” So political... In July, there was a meeting of some sort with ... with Davy stockbrokers. I can’t remember just now who, but I probably could find it in notes, if was necessary. And they said, ‘’Look lads, probably if things get worse, you might consider a guarantee so why don’t you just do it now?”... But all of these were conversations; you wouldn’t read too much into them. These were ... of their nature, they had to be a little bit exploratory so I’m not saying that, you know, anyone was nailing their colours to a mast at any of these points.”24
When this was put to Charlie McCreevy, he said:
“I have no recollection of the meeting or the conversation. He said he attended an event at which I was presumably the guest speaker, I’m presuming it took place in Dublin. And I don’t know whether ... after the event, whether sitting around and having a cup of tea, whether I asked him ... I told him or he asked me for an opinion. But, so I’ve no recollection of what I said then. But I would have a clear view as to what I would’ve been thinking around that particular time... there was all this emphasis on Ireland, so, as Kevin said at the ... the thing, and I’d say it’s very accurate what he said, I said more or less to him “I think it’s time”, I probably said “Someone should make a broad statement about the situation”.”25
John Hurley was asked if he remembered any specific lobbying for a guarantee and said:
“No ... lobbying, I think, is ... I know what lobbying is, having been a secretary of a number of Departments. I know specifically what it is and I would have acute antennae out in relation to it. I never felt I was lobbied in relation to a guarantee but I would ... any Governor or any secretary of a Department would have had numerous contacts during this particular period, and any time I was contacted, and there was something significant, I would have told the Minister.”26
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