Note: This piece was originally published on 29 September 2013 to coincide with the fifth anniversary of the bank guarantee. We republish it today as the Banking Inquiry gets underway.

“THE DATE OF Tuesday, September 30 2008 will go down in history as the blackest day in Ireland since the Civil War broke out.”

Finance Minister Michael Noonan’s summing-up of the decision to issue a blanket €440 billion guarantee of all liabilities in the Irish banking system five years ago this week is one of the more dramatic but accurate summations.

Ireland’s banking collapse has cost taxpayers some €64 billion and as we prepare to hear from the central players it’s worth remembering – over six years on – how we got here.

Based on interviews, book extracts and evidence given to Oireachtas committees, this is an in-depth account of the days and weeks leading up to the 30 September 2008 – the day Ireland’s social, political and economic course changed forever.

With interviews and research by Hugh O’Connell, Michelle Hennessy, Sinéad O’Carroll, Aoife Barry, and Daragh Brophy. Estimated reading time: 35 minutes.

(Note: Interviewees’ titles refer to their positions at the time)

The build-up: “There was a ‘fundamentals are sound’ period”

Eamon Ryan, Minister for Communications, Energy and Natural Resources: “I remember we, as the Green Party, went into the Irish Banking Federation in 2005 and 2006 saying that the banks were overblown, that the mortgage market was false, that the whole thing was precarious. We were told the standard mantra at the time: that we didn’t understand the fundamentals.”

Joan Burton, Labour Party Spokesperson on Finance: “The thing at the time that was heavily signalled by the government was that house prices wouldn’t fall and that there would probably be a ‘soft landing’. That was the terminology of the time.”

Eamon Ryan: “I remember trying to buy and sell a house in mid-2006 and realising that the market had hit a peak and was starting to go down… AIB refused to give me a mortgage, a bridging loan, even though the house we were selling was roughly the same we were buying.”

Kevin Cardiff, Second Secretary General, Department of Finance (1): “Obviously, there was an assumption that a falling market would continue to fall for some period but there is no information available to us that suggested that this was likely to be of a scale that would be as catastrophic as it turned out to be.”

Tom Lyons, Sunday Times Senior Business Correspondent: “I remember meeting a well-known developer, one of the top 30 guys, and him saying he was shorting Anglo Irish Bank because he said: ‘Look, I’m a big borrower and I can see I’m in trouble and every day. Smaller developers are turning up and asking me to buy their assets and I can’t afford to do it.’

“I remember thinking: ‘This guy is shorting Anglo’. Again, he didn’t predict Anglo was going to go bust but he predicted the share price could fall by €10 and that’s what he was doing. I remember finding that quite frightening. This guy owed €400-500 million… to various banks, not just Anglo.”

Joan Burton: “The collapse of Northern Rock in September 2007, to me that was a seminal event and for me it was a total wake-up call… You had a bank which had become heavily over-leveraged, having started as a much more modest financial institution doing home mortgages and stuff like that.”

Kevin Cardiff: “The Northern Rock position was regarded as somewhat one of a kind, but I am not sure that turned out to be the case with the passage of time.”

Brian Hayes, Fine Gael TD: “At that time there were people beginning to queue outside the bank (Northern Rock). There was a question mark [as to] whether the banks had the cash to provide. So it was quite clear that the issue was on the agenda from then on and that we were heading towards some kind of a crash.”

George Lee, RTÉ Economics Editor: “On 16 March 2008, Bear Stearns, which was the sixth largest financial institution in the United States, went wallop. From that moment on, the die was cast.”

Joan Burton: “Then you had in relation to Anglo the St Patrick’s Day massacre, when the Anglo shares in early 2008 took the hit, and you had the Bear Stearns event.”

Brian Lenihan, Minister for Finance (2): “The reason for the fall in Anglo Irish Bank’s share price (on 17 March 2008) was that Halifax Bank of Scotland (HBOS) in the United Kingdom was under very significant pressure on account of its reliance on wholesale funding and specialisation in property lending… “

“Investors read across into Anglo Irish Bank as a result of the decline of the HBOS share price in the UK and sold their shares… The Bear Stearns position was very volatile as well internationally at the time. That was the cause of that difficulty.”

George Lee: “I was in the middle of writing a book… I had written about 80,000 words, I had a very good advance on that book. When Bear Stearns collapsed, I phoned up the publisher and said ‘I’m not completing the book’.

“They said ‘Why?’ and I said: ‘This book is going to come out in October, November, December and I guarantee you the entire stage will have changed by then’. The tone in my book was ‘wake up, wake up, there’s trouble coming’. “People don’t want to hear that after the bomb is gone off.”

Eamon Ryan: “The collective sense in summer 2008 was that there’s a real problem. We did an emergency adjustment of €1bn in July 2008, that’s not normal.

“There was an agreement then to bring the Budget back to October, that’s extraordinary, I mean nobody wants that.”

Brian Lenihan: “It is worth noting at this stage that questions of liquidity were not to the fore or were not of huge concern. The Department had been concerned in a general way about liquidities from the onset of the credit crunch the previous year, but there was no specific concern expressed about liquidity at one particular institution as against another.”

Tom Lyons: “Then as the summer went on it just kept getting worse and worse. There was a sense that year, that liquidity was a big issue… for all of the Irish banks. But it was very hard to nail down and find out the facts because all the official sources would deny it.”

Joan Burton: “We also had in July and in early September, a succession of bankers being lined-up – almost like in a beauty contest – and coming into the Finance Committee… I think was it Mr [Patrick] Neary (the Financial Regulator) who coined the phrase: ‘The fundamentals of the Irish banking system are sound’. So there was a ‘fundamentals are sound’ period.”

George Lee: “The whole issue was: ‘Did our regulator have a good handle on it?’ Again and again, the message kept coming that our banks [were] well capitalised.”

Brian Hayes: “You know, the banks were bust and the information that Brian Lenihan had was clearly [that] it was simply a liquidity problem and it wasn’t a fundamental problem. But that came completely from a complete bum read on the part of the banks to him.”

Joan Burton: “[There was a] worry that a golden period in the Irish economy was coming to an end, but the rhetoric on that was ‘soft landing’.

“As we moved into September then it became more and more obvious that that was not the case.”

George Lee: “One thing that was absolutely clear from the beginning of September on and even before that was how terrified people in official circles were about what was developing.”

Early to mid-September: “The impossible happened and Lehman’s collapsed”

Friday, 5 September 2008

Patrick Honohan, author of banking crisis report (3): “The publication of a very adverse rating agency report on Irish Nationwide on 5 September 2008 heralded the final stage of the run-up to the guarantee.

“More frequent and higher level meetings between the agencies… took place imbued with a growing sense of urgency. Early on a clear consensus view emerged that no Irish bank should be allowed to fail, in the sense of having to close its doors and not repaying depositors and other lenders.”

Simon Carswell, Irish Times Finance Correspondent (4): “In a secret internal memo William Beausang, a senior official at the Department of Finance, told Lenihan that the building society [Irish Nationwide] expected to lose €200 million in deposits as a result of the credit-rating downgrade, and that there was potential for more difficulty if there were further downgrades.”

Also on that day, Reuters published a story that Irish Nationwide (INBS) was in talks with its lenders ‘to avoid insolvency’. The story was denied by INBS and later retracted by Reuters but was hugely damaging to INBS’ position.

Brian Lenihan: “Issues had arisen in public comment about Irish Nationwide… and Reuters had reported that Irish Nationwide was in distress but Irish Nationwide had contradicted this report. It therefore had been in the news in September and as a result of the Reuters report there was an understandable concern about deposits at Irish Nationwide.”

Kevin Cardiff: “Due to the specific difficulties associated with Irish Nationwide at the beginning of September 2008, the specific work carried out (Department of Finance proposals for nationalisation) for a week or two was tailored to Irish Nationwide.”

Saturday, 6 September 2008

David McWilliams, economist and journalist (5): On ‘Saturday View’ – the RTÉ radio show – the Minister for Finance and the opposition spokesperson on finance, Richard Bruton, discussed the faltering economy…There were two commentators on the panel. I was one of them and my colleague in the Irish Independent Brendan Keenan was the other…

“… [I] said that the whole discussion on the economy was missing the single biggest most important fact: we would definitely have a banking crisis in the coming months and one of our banks would be bust by Christmas.

Seán FitzPatrick, chairman of Anglo Irish Bank (6): “Anglo, in tandem with all the other Irish banks, were in a situation where they were seeing global liquidity drying up… It was a liquidity [issue].”

Anglo Irish Bank employee, working in operations: “Information was cascaded down to us. We had one point of contact. He would have been our area manager and he would have been getting calls from Dublin and then through him that info came to us. But before we heard something from him, we would have read it in the papers.”

Sunday, 14, and Monday, 15, September 2008

David McWilliams: “Money continued to flood out of Ireland and our banks over the following week and, as the mid-weekend of September approached, the markets began to freeze…Lehman Brothers, which had just survived the Bear Stearns collapse, was extremely vulnerable. Few thought the US authorities would let it go under.”

Joan Burton: “The impossible happened and Lehman’s collapsed.”

Seán FitzPatrick: “Lehman’s went into liquidation. Unbelievable. Then you had AIG being nationalised. Then you had HBOS doing a deal with Lloyds. Then you had Wachovia being bought by Citibank.”

George Lee: “When Lehman’s collapsed we were hanging on by our fingernails anyway.

My heart was broken watching the whole thing to be honest.”

YouTube: media1512

Anglo employee: “I can remember we had a large screen TV in reception and I remember Lehman staff leaving with their boxes and everyone thinking that was going to be us, that’s what was going to happen here. It was just a period of uncertainty.

“Anglo was always seen as too big to fail. But then Lehman’s went.”

Tom Lyons: “One of the moments for me was post-Lehman’s… the great row that Anglo was going to save Irish Nationwide provided it had some form of guarantee.

“Anglo was very heavily spinning this, [that Irish Nationwide], being the little rogue society, they needed to manage it correctly. In turn, this little rogue society was saying it was solid as a rock and that the problem was the big boys – Anglo and AIB.”

Tuesday, 16 September 2008

David McWilliams: “I went on Prime Time with the head of the Irish Banking Federation… This time ‘dangerous talk’ [from me] had turned to ‘loose talk’. I was accused of ‘loose talk’. Anyone who doubted the robustness of the Irish banks was engaging in ‘loose talk’…

“I repeated that the Irish bank system would implode if we didn’t do something quickly.”

Seán FitzPatrick: “Banks depend on confidence and there’s no questions about it confidence was being eroded by various comments and by various people in the street saying: ‘Is my money safe?’”

Wednesday, 17 September 2008

In his book ‘Follow the Money’, David McWilliams recalls in detail what happened when Brian Lenihan paid a visit to his home in Dublin on this Wednesday night:

David McWilliams: “I didn’t know what to think but when you have the Minister for Finance of a country that is going down the tubes sitting opposite you at your kitchen table, about to wolf down raw garlic, you have to suspend your disbelief…

“I felt sorry for Brian Lenihan that night. He looked exhausted. He had been working day and night and he was trying to understand everything…

“… On the table from the Department of Finance was a plan for the two big banks (AIB and Bank of Ireland) to take over the smaller and out of control Anglo Irish Bank and Irish Nationwide. I reminded the Minister that they were all at the same game and merging then wouldn’t ease the liquidity crisis.”

Tom Lyons: “Did we expect there would be a blanket guarantee? Not until the David McWilliams article started appearing.”

David McWilliams: “I showed him (Lenihan) an article I had written earlier that evening for my regular column in the Sunday Business Post which outlined the bank guarantee plan….

“He was worried that the guarantee was too radical… I told him… [that] he simply had to guarantee everything for a limited period to make sure than illiquid dilemma didn’t lead to an insolvency catastrophe.”

Tom Lyons: “Suddenly this concept appeared and it got popular very, very quickly. There wasn’t too much debate around it, it just appeared and, next thing, it seemed to be a great solution because it cost nothing.”

Eamon Ryan: “My colleague [Green Party leader and Environment Minister] John Gormley was involved with the Minister for Finance at that point and we had been approached by the likes of David McWilliams and others.

“His (McWilliams’s) stuff [was] out there saying that this sort of approach had to be taken. I remember vaguely, the analysis – and I think it’s borne out in what I’ve read since – was that the standard operating procedure in financial crises like this is guarantee, sort out assets, capitalise.”

John Gormley, Minister for Environment, Heritage and Local Government (7): “If you want to talk about the bank guarantee the fact is that we got advice from so-called experts, we listened to them… And by the way, we also consulted with the ECB (European Central Bank), and you know as far as the ECB was concerned this was a means of stopping the contagion.”

Lorenzo Bini Smaghi, member of the ECB Executive Board: “The ECB learned about the issue and we found it was very surprising that a country comes out by itself – even in a situation in which the Irish were in, with a large banking system – to guarantee everything. It was surprising… It was surprising that someone would embark on blanket guarantee by itself. It was a dangerous gamble.”

Late September: “I never grabbed his attention”

Thursday, 18 September 2008

Tom Lyons: “The big discussion was around would Anglo take over Irish Nationwide and would there be some partial guarantee brought in to stabilise those two banks?”

Simon Carswell: “With deposits flooding out the doors of Anglo, FitzPatrick sat down with Brian Lenihan… This was his first meeting with Lenihan.”

Brian Lenihan: “At that point he (FitzPatrick) outlined to the Secretary General of the Department and me a plan he had to amalgamate or consolidate Anglo Irish Bank with the Irish Nationwide Building Society.

“He inquired whether the State would be interested in supporting such a move. We indicated that we did not see it as a realistic proposal because the entire banking system was coming under considerable stress at that stage.”

Kevin Cardiff: “They knew they were in trouble and they felt that the two large Irish banks would be able to trade in the market on their too-big-to-fail status, that they would be able to raise funds on the basis that they would be able to declare the Government to be behind them or at least implicitly so.”

Seán FitzPatrick: “I never grabbed his attention”

Kevin Cardiff: “They got a reasonably sceptical response from the Department.”

Brian Lenihan: “I understand he did not think highly of the approach we adopted at the meeting…. It was not a significant proposal.”

Simon Carswell: “Word had spread around Dublin business circles that Anglo was pitching a takeover of Irish Nationwide with state support and I called the department to ask whether there was any truth in the story.

“After receiving my call, [Eoin] Dorgan (Lenihan’s spokesperson) spoke to Lenihan, who told him that FitzPatrick was just leaving after their meeting and cheekily suggested that Dorgan could put the query to the chairman of the bank directly.

“Dorgan approached FitzPatrick in the hallway of the department and asked him if Anglo had made an approach to take over Irish Nationwide and was seeking government support for the move. FitzPatrick feigned surprise and said no.”

Joan Burton: “By then as well there was some discussion on Joe Duffy going on, as there had been the previous year over Northern Rock.”

On the same day, RTÉ Radio 1’s phone-in programme, Liveline with Joe Duffy, was taking call after call in which listeners said they were withdrawing money from their bank accounts.

Simon Carswell: “Lenihan telephoned the director general of RTÉ, Cathal Goan, to express his outrage at the trouble Liveline had caused the Irish banking system.”

Eamon Ryan: “I was listening to Joe Duffy too. The start of what was effectively a run on Irish banks… There was a clear understanding [that] the Irish banks literally couldn’t get liquidity from the interbank market.”

Seán FitzPatrick: “Money had been moving in and out because what people were doing [was] they were spreading their money. So we were receiving money in from other banks where they [were] caught to the maximum [limit of the deposit guarantee scheme] of €20,000 and we were losing money where say, we had €100,000 on deposit. We were losing €80,000 with four cheques going out to four different banks. So it was that type of movement. There was a fair movement but nothing of a very serious nature. “

Saturday, 20 September 2008

Brian Lenihan announced that the government had decided to increase the statutory limit of the deposit guarantee scheme for banks and building societies from €20,000 to €100,000 “to protect the whole financial system, secure its stability and ensure that all deposits in Irish financial institutions are safe.”

Seán FitzPatrick: “Well that sort of calmed things down but that was geared at the local market but the big, big issue going all the time, which wasn’t really well-heralded and wasn’t spoken about and wasn’t reported on, was the global crisis which wasn’t aiming anything at Ireland in particular or certainly any of the banks.”

Tom Lyons: “There was the €100,000 [guarantee brought] in and people expected that could rise across all the banks and that they would have to come up [with] some special solution for Anglo and Irish Nationwide. They were seen as the problem.”

Tuesday, 23 September 2008

Simon Carswell: “The Department of Finance carried out a brainstorming session to consider more radical options to save the Irish banks.

“Various forced mergers and takeovers were suggested, including the takeover of Irish Nationwide by Anglo… A merger of the two biggest banks, AIB and Bank of Ireland, was also considered, as was a tie-up of Irish Nationwide, IL&P (Irish Life & Permanent) and EBS.

“AIB and Bank of Ireland had each been asked over the previous weeks whether it would could take over Anglo, but the idea wasn’t a runner. With a balance sheet of €100 billion, Anglo had grown too big for either AIB or Bank of Ireland to save.”

Seán FitzPatrick: “I would have spoken to Brian Lenihan [four or five days before the guarantee]. I am not exactly sure of the date… I think I was explaining the difficulties and he was explaining the difficulties that they had and there was lots of things being discussed by lots of people in different ways.”

Brian Lenihan: “It should be remembered that the liquidity problems at that stage, which were severe in the case of Anglo, were serious for the other institutions as well so there was no assurance that nationalisation would lead to the kind of inflow of funds we needed in our banking system at that stage.”

Seán FitzPatrick: “My sense was this: That this was not caused by any one bank, it was not caused by any one issue with any one bank. This was caused by the global crisis and we as banks were going to fall eventually if we didn’t get money…

“Therefore the government were the only place we could turn to and why shouldn’t the government ask because if we didn’t turn to them and they didn’t act we could end up with no banking sector being Irish-controlled and that could not be a good situation for all us going forward. He (Lenihan) saw that very clearly and very readily.”

Thursday, 25 September 2008

Simon Carswell recounts in his book ‘Anglo Republic’ that there was a major meeting at government buildings involving Brian Cowen, Lenihan, their officials, John Hurley and Tony Grimes from the Central Bank, Michael Somers and John Corrigan from the NTMA and the Attorney General. Merrill Lynch, PriceWaterhouse Coopers, the Department’s legal firm Arthur Cox, and an Irish Nationwide advisor from Goldman Sachs were also present.

Simon Carswell: “[Financial Regulator Patrick] Neary told the meeting that the issue was liquidity, not solvency. There was ‘no evidence to suggest that Anglo is insolvent on a going-concern basis’, he said, ‘it is simply unable to continue on the current basis from a liquidity point of view.’ He felt the same way about Irish Nationwide…”

Friday, 26 September 2008

In his book Carswell also notes a meeting involving Lenihan, senior Department officials David Doyle and Kevin Cardiff, the Financial Regulator’s Con Horan and advisors from Merrill Lynch who outlined a range of options “to tackle the deteriorating situation at the banks”.

Simon Carswell: “One option was a blanket state guarantee of the banks’ liabilities – its deposits, bonds, and other borrowings – but Merrill Lynch said that such a move could damage the creditworthiness of the state and threaten its AAA credit rating…

“… It raised the possibility of Anglo and Irish Nationwide being nationalised… setting up a ‘bad bank’ to take problem loans out of the banks.”

Patrick Honohan: “It was felt by some that nationalising Anglo Irish Bank – which was facing by far the most serious liquidity crisis – would reduce the reputational damage that it was causing to the Irish banking system.

“This bank‘s business model was also thought by many to be irrecoverably broken; although few participants were even beginning to think it might have actual solvency issues.”

Kevin Cardiff: “It would have been reasonable to think that if one’s preferred option for a single institution in trouble was a nationalisation option, by the end of that day one really had to consider whether that would be the preferred option if there were multiple institutions in liquidity difficulties.”

Brian Lenihan: “Had we nationalised Anglo Irish Bank… the signal might well have been first, that the entire system was under severe stress and other institutions could have come under stress.”

Patrick Honohan: “Among the arguments against an overnight nationalisation was the fear that it could present undue operational risks and that it might have a destabilising effect on markets. In the event, by the end of the week, the inflow of liquidity took the matter off the agenda.”

Simon Carswell: “In the end, though, Merrill Lynch described a blanket guarantee of bank liabilities as the ‘best, most decisive, most impactful’ solution from the market’s point of view.“

George Lee: “I don’t think anyone in their wildest dreams could have anticipated the government would have given such a guarantee. I didn’t anticipate it was going to be so expensive because I never anticipated that they would do such a thing.”

Joan Burton: “We then had discussions over the weekend and rumours of discussions in the Department of Finance.”

Saturday, 27 September 2008

Brian Lenihan: Mr [Jean-Claude] Trichet [ECB President] rang me, and hadn’t been able to get through to me. I was at a racecourse in County Kilkenny at a Fianna Fáil event on the Saturday. So I caught up with on Mr Trichet’s message the following day which was that ‘you must save your banks at all costs’.”

Seán FitzPatrick: “Leading up to the 29th of September things were real bad. I mean real bad. It got real bad treasury end and financial end, meaning our liquidity. The Central Bank might have been thinking of giving us money but they said they didn’t have money to give us. They could only lend so much because they couldn’t get it. We said: ‘Don’t be so stupid, will you not get the ECB to lend money to us?’”

Sunday, 28 September 2008

Brian Lenihan, having caught-up with Trichet’s messages, went to meet with officials at the Central Bank as well as consulting with the ECB.

Brian Lenihan: “We consulted the European Central Bank and I was contacted by Mr. Trichet that weekend. The strong advice we received from the European Central Bank was that we should save our banks at all costs.”

Lorenzo Bini Smaghi: “We always had discussions with the (Central Bank) governor and we had discussions with the prime minister (Taoiseach). [Their] argument was we had to do it. No, I think it was not the right decision, such an announcement would have been credible only if it had been made jointly by all.”

Brian Lenihan: “It should be remembered that there was no coherent European policy in existence on banking or bank failure on the night of 29 September and this is a very important point which must be taken into account when passing judgment on what the Government and the Oireachtas did on that occasion.”

John Gormley: “The arrangements had been made [that day] and we had gone into that in quite a bit of detail and said ‘Yes, this was the expert advice to go down the guarantee route’…. It was a Sunday, we had a Cabinet meeting and we had gone through it in quite a bit of detail.”

Eamon Ryan: “I suppose I’d already talked to John and in that sense our understanding of that was the process was going to be: a guarantee was going to be needed.”

Mary Hanafin, Minister for Social and Family Affairs (8): “I remember the day particularly well, because I was going on Questions and Answers that night.

“So, like any major television programme I was being well briefed… share prices were dropping, markets were losing confidence and as the day went on I was very well aware of a lot of meetings taking place in the Department of Finance. I recall getting a phone call from an official in the Department of Finance, saying, you know, there will be decisions before the night is out.

29/30 September: “A horrendous decision for anyone to have to make”

Monday, 29 September 2008

Seán FitzPatrick: “You had Bradford and Bingley (part-nartionalised in the UK and sold to Santandar) announced that morning, you had rumours about Fortis and Dexia. All of these banks were not Irish banks, but they were all outside of Ireland but all dependant upon global liquidity and they were facing the same problems as us….

“…. AIB and Bank of Ireland asked to see the Minister for Finance on the Monday evening, we had spoken with each other… We knew that every bank was threatened. This was not a shameful position to be in. This was a reality. It was a dangerous place but it wasn’t a shameful position because it wasn’t the creation of Irish banks. It had occurred.”

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Brian Lenihan: “What surprised me at the meeting (with the banks) was how great the funding pressures were throughout the system. That was the critical issue. The fact was that the funding available to any of the banks in the system was, at best, a matter of weeks.”

Patrick Honohan: “With Anglo Irish Bank‘s shares collapsing on the Monday – indicating a general loss of market confidence in its survival – and its apparent inability to replace further liquidity withdrawals, it became clear that Anglo could not survive another day.”

Seán FitzPatrick: “They (shares) were down 46 per cent. We were concerned as indeed all of the rest of the banks were.”

Kevin Cardiff: “One could probably identify five or six different things that went wrong that day that had not gone wrong as of the previous night. There were further banking collapses in Europe that were being worked on but I suppose we did not know about them over that weekend.

“The signal from the stock market on that day was very negative and, therefore, was likely to exacerbate that funding problem. Anglo Irish Bank actually ran out of money on that day.”

Brian Lenihan: “At that stage, having consulted with all of my advisors, I felt it was important that we meet the Taoiseach that evening.”

Kevin Cardiff: “To be honest, that evening I was delighted I was not the decision maker because it was a horrendous decision for anyone to have to make,”

George Lee: “I can guarantee you that there were people in financial circles who knew it but they did not know in the night of September – this is still annoying me- they did not know what the actual state of play in our banks were.

“They went in to give that guarantee not really knowing the full exposures. They didn’t know how many potential bad debts were there. They knew very little about them.”

Patrick Honohan: “There followed an all-night sequence of meetings, led by the Taoiseach and the Minister for Finance, and involving the Attorney General, and senior officials from the Departments of Finance and the Taoiseach and the CBFSAI (Central Bank and Financial Services Authority of Ireland); senior officials from the NTMA were also present for some of the discussions.”

Seán FitzPatrick: “I was at home. I was out for dinner with a friend of mine so I got home around about half nine, watched TV, and went to bed around about 11 o’clock.

“I knew lots of things were happening because we had discussions obviously with the Central Bank, and with the Regulator, and indeed with the Department of Finance over the previous weeks. But that particular night I was not aware of what was happening.

“I didn’t know what was happening in that I didn’t know that the meeting was taking place that night at 10/11 o’clock. I knew there was a meeting at half 4/5 o’clock. I didn’t know that it was going on for so long.”

Joan Burton: “I suppose one of the funny episodes that stood out was the story of John Gormley not being accessible that night. There was an incorporeal Cabinet meeting and he unplugged his phone or something like that at night. There was a famous quote by Pat Rabbitte about you know his bicycle was locked up in the bicycle shed and cops had to hammer down the door. It’s well recorded.”

John Gormley: “I got a call very late and Brian Lenihan said that he was in government buildings, they were now discussing this issue with the banks and I said, I remember my clear recollection was that: ‘Are we going with the David McWilliams option?’

“I remember saying that and then the late Brian Lenihan said to me: ‘Yes, that’s what we’re going with.’ So I was fairly satisfied at that stage that that was the right option.”

Mary Hanafin: “I think from half one, 20 to two in the morning was the time I got that phone call to tell me that a decision was needed in relation to the guarantee.”

Willie O’Dea, Minister for Defence (9): “I got a bit of a shock, I have to say because usually when I was consulted for an incorporeal Cabinet meeting it consisted of something very technical like the Minister has forgotten to sign something, or the Cabinet have forgotten to sign off on something fairly minor and you automatically agree.

“This was different of course. But I wasn’t in any position to argue – number one. Number two: I didn’t have anyone really to argue with.”

John Gormley: “So you know all of the Cabinet ministers were at home, this was simply a courtesy call because what’s required under those situations is that you have what’s known as an incorporeal meeting and that it’s done by telephone.”

Eamon Ryan: “I mean this was not easy stuff, this was a chaotic, difficult, crisis period…It was 6 or 7 in the morning [when I took the incorporeal call]. Ridiculous, the whole thing was mad.”

Mary Hanafin: “That decision should not have been taken at 20 to two in the morning on the phone and if the Department of Finance had known for some hours that there was going to be a decision, well then I believe all Cabinet members should have been called to Dublin.”

John Gormley: “Look the actual details perhaps but the broad thrust of what had been agreed had actually been discussed in detail on that [previous] Sunday.“

Brian Lenihan: “Having weighed up the arguments, the unanimous view of the Central Bank and the regulator and the advice I received from my officials, with my own conclusion, the conclusion reached by the Government was that we should guarantee the institutions.

“This is the history of how the decision was arrived at on that night in September.”

Tuesday, 30 September 2008

Patrick Honohan: “Prior to the announcement early in the morning of 30 September, both the ECB and the EU were informed of the Government‘s action. Some concerns were expressed bilaterally as regards the lack of international consultation prior to the Irish decision and the effect that it might have on flows of funds internationally.”

Lorenzo Bini Smaghi: “I think they were surprised and it was annoying, it was an initiative not coordinated and on delicate issues. I wouldn’t say we lost confidence but certainly it was a bit irritating. It was like: everyone takes care of himself, forgetting the others.”

Seán FitzPatrick: “I slept right through it. So the first time I heard about was at six o’clock from our chief executive (David Drumm). I think he was on the phone at four o’clock where someone from IFSRA (Irish Financial Services Regulatory Authority) had rung him… I think it was kind of done on an individual basis and then of course we had to wait until the morning to flesh out what in fact had been agreed.”

Brian Lenihan: “I contacted Christine Lagarde, who was the president of the European Council of Finance Ministers at the time, and I explained to her in French what the position was.

Christine Lagarde, French Finance Minister (10): “Brian actually rang me before the opening of the stock market and I think just before he made the announcement and he told me that he felt he had no other option but to issue that sort of broad guarantee for all the Irish banks.”

Brian Lenihan: “Her reply was: ‘Oh gosh’. That’s my first memory.”

Christine Lagarde: “As I put the phone down, I thought if that happens then there can be this sort of flow of funds channelled to Ireland. That caused a bit of frustration.”

Alistair Darling, UK Chancellor of the Exchequer (13): “At six o’clock, I awoke to the news on the BBC Today programme that the Irish government had decided to guarantee all savers’ money held in Irish banks. This was the first we had heard of it.”

Joan Burton: “I remember turning on Morning Ireland to find out that this had been proposed. Subsequently I found that there was a missed call from Brian Lenihan sometime in the latter end of the middle of the night… I think that in the early morning he had managed to make contact with Eamon Gilmore, the leader of Labour Party.”

Brian Hayes: “Richard Bruton was our finance spokesperson and I remember well that we had to have an emergency front bench meeting on that morning. Richard informed us, and Enda Kenny, I think, received a call from Brian Lenihan informing him of the government’s decision… I think our view at the time was obviously to support this on the basis that the country was going through an emergency.”

Alistair Darling: “I spoke to Brian Lenihan shortly after nine o’clock that morning… I said that what he had announced put us in an impossible position.”

David McWilliams: “A little later the Minister called. He was euphoric. He guffawed, ‘The Brits are furious, so we must be doing something right’.”

Alastair Darling: “Brian apologised. He said the decision had been taken very late at night and that there had been no opportunity to tell us, or anybody else, about it. I did later find out that it had been taken at something like 2am, which smacks of panic rather than a plan.”

Joan Burton: “One of the things I felt immediately was that this would be utterly shocking in terms of the UK and our European partners because essentially we would have guaranteed our banks with high levels of deposits and what happened then was what I thought would happen: that deposits would start to float towards Ireland.”

Brian Hayes: “Why did we move ahead of other countries, especially the UK to which our banking sectors were so linked? Why we moved without greater dialogue between our European partners, that has never been fully explained.”

Alastair Darling: “It meant the Irish government was effectively underwriting its banks in a way that no other country in the world had done…. I knew full well that if the Irish government’s bluff was called they would be bankrupt. It was a promise on which they could never deliver.”

Tom Lyons: “€440 billion is a big number to get your head around so I don’t think there was a full understanding.”

George Lee: “The idea that they would back everything [that] anybody who has every loaned any money to the Irish banking system, [that] we will guarantee it, without asking anybody? That was a huge, huge risk.

“When that was taken, I just felt like. I remember feeling: ‘Oh my god, they’ve blown it’. I was on the floor. I physically – this is not an underestimation – I physically felt it. My stomach fell. I felt literally ill when I knew what they had done.”

YouTube: timeline20022011

Anglo employee: “As soon as we came into work we had customers waiting to withdraw funds, although there wasn’t a run on the banks. We would have been called into a boardroom meeting and literally our area manager came off a call with his handwritten notes to try and explain what was going to happen.

“I was asked to go on reception, and without any knowledge of what I was to tell customers. Emails would have start coming through for scripts to use for phone calls: a brief outline of what the guarantee meant, and instructions to try and retain our deposits.”

Seán FitzPatrick: “We spoke during the day about the relief of all that. It wasn’t that the guarantee was a relief. It was that the government had stepped in behind the banks… Everyone was happy that that was going to be it. Suddenly we got up the next day and it was a brand-new day.”

Anglo employee: “People were angry they were considerate towards us because they were as clueless as us. There was concern about how we are going to have jobs.

“I remember getting chewed out for letting someone withdraw their funds, about a million euro… At the end of the day I told the customer to take their money. It was an elderly person who was very concerned. They said to me: ‘What would you do?’ And I wasn’t going to lie.”

Joan Burton: “In the Dáil then there was a huge amount of shock. All of the rhetoric of the boom and rhetoric of the soft landing essentially vanished overnight and the Dáil was left, if you like, to address the wreckage…

“… I was enormously apprehensive about what had been done when I was given the impression that Seán FitzPatrick and Michael Fingleton had a business model which was robust, when the dogs on the street involved in [the Department of] Finance knew that both of those financial institutions had extraordinary problems and I could not see that they were sustainable.

“So, there was a meeting, on the evening of the day of the guarantee, of the parliamentary party and there was a discussion in which I recommended, absolutely 100 per cent supported by Eamon Gilmore, that the Labour Party would not support the guarantee and we used the term that it was a ‘blank cheque’.”

Tom Lyons: “Politically, if you look back at what people were saying, Joan Burton seems very insightful. But she is one of the few. The consensus was being pushed by various interested parties.”

Brian Hayes: “There’s some terrible arrogance attached to it when I look back. I remember, the day when the legislation was going through there was, within Fianna Fáil backbenchers, there was a kind of a stupid enthusiasm for this – that we were ahead of the possé.”

Postscript: “The system failed”

Eamon Ryan: “I think – go back to the recent analysis – look at the alternatives and come back to me and show me an easier, cheaper option… I remember [at] the time the debate on radio stations with Joan Burton and Eamon Gilmore.

“They were saying ‘nationalise everything’ or they weren’t. What would that do? You’ve six pregnant daughters, but not sure exactly how pregnant, and privately I remember asking them at the time: ‘Are you sure you want to default on all this?’

“I think they didn’t know what they wanted to do. It’s a lovely position to be in politically but what’s their option? The truth of what their option is is what have they done since they came into government.”

Kevin Cardiff: “We set up a system. The general Irish system was such that we had a Central Bank and a Financial Regulator, each of which had a very independent position and had some limited independence from each other.

“The Department of Finance had a role in regard to the overall economy in terms of advising Ministers on that but was not the regulatory body. The policy makers and decision makers and so forth also had their roles, including at a political level and Oireachtas level. That system failed.”

Joan Burton: “The detailed knowledge of what happened on the night and the couple of days preceding the bank guarantee has never really been made known in detail.”

Patrick Honohan: “As regards the substance of the guarantee itself, it is hard to argue with the view that an extensive guarantee needed to be put in place, since all participants rightly felt that they faced the likely collapse of the Irish banking system within days in the absence of decisive immediate action.

“Above all, the lending decisions that generated this huge cost were made long before the point was reached of the guarantee. The damage had already been done.”

Lorenzo Bini Smaghi: “[It was] not credible given the size of the liabilities. After the markets relaxed, it turned the banking crisis into a sovereign crisis.”

Tom Lyons: “Certainly, there wasn’t enough questioning voices in the media to make them question it more. I wouldn’t blame them – their political leaders were saying it, the Central Bank were saying it, the financial regulators were saying it, the banks were saying it, the media was kind of saying it – that this was a good thing.”

Anglo employee: “In hindsight you can look at it and say the government did what Anglo did. They gave the money – they guaranteed without due diligence – they acted too quickly.

“The government acted in the same way that Anglo had done in handing out loans. Anglo were famous for speed and the government did the same.”

Credits