The pending return of the Dáil will refocus public attention on the planned Oireachtas inquiry into the banking crisis which is expected to begin work later this year.
Public support for the inquiry is entirely justifiable, given the widespread dissatisfaction and anger that those responsible for the debacle have not been publicly called to account. Leaving aside the broader question of whether the inquiry can be expected to be sufficiently non-partisan in its work, it is important to minimise the costs involved and maximise the benefits where possible. Various constraints also have to be recognised up front, including those arising from the Supreme Court Abbeylara judgment, the regrettably limited availability of official documentation on some key aspects, and (last but not least) the fading memories of those involved on events that took place some five to ten years ago.
To avoid wasting taxpayer resources and help sharpen the focus of the inquiry, a thorough analysis beforehand of the extensive material already available is an essential first step . This will also help build greater public understanding as to why the crisis occurred and which institutions (and their leadership) should be held most accountable.
The reports of the governor of the Central Bank Patrick Honohan in 2010 and of Finnish expert Peter Nyberg in 2011 (the present author was a member of both inquiry teams) together provided comprehensive assessments of the widespread failures that led to the crisis. The reasons why banks were allowed by an accommodating regulator to engage in ultimately disastrous lending, the unwillingness to recognise the property bubble for what it was, and the underlying "supportive" domestic (and external) political and policy environment were described in detail.
An important aim of the new inquiry is to address two perceived shortcomings of these investigations, namely, that they were conducted entirely in private and the reports themselves did not name specific individuals.
It is useful to be aware of the considerations that appear to have motivated the earlier approaches. The objective of the Honohan report was to find out what happened and why, rather than to assign personalised blame to former or (then) serving Central Bank/Regulatory staff. In his report, Nyberg indicated that naming persons publicly could deter their willingness to speak openly.
Bureaucratic environment
Nyberg also suggested that in a collective bureaucratic environment( where key persons come and go) it is difficult to apportion blame to specific individuals. This consideration may also arise in the current inquiry. That said, Nyberg stressed that "by virtue of their position, decision-makers and leadership in the various institutions must carry a large share of the immediate blame for the crisis".
Contrary to some media speculation, it seems unlikely that the inquiry will unearth one or more “smoking guns” that could significantly alter existing understanding and analysis. Both Honohan and Nyberg had full access to all available information – in Nyberg’s case, some 20,000 documents were examined and 120 individuals were interviewed.
It may prove difficult to loosen the existing legal confidentiality constraints on the public dissemination, via an inquiry, of certain Central Bank , Department of Finance or Cabinet records. Similar constraints surround the European Central Bank's internal discussions and its communications with the Irish authorities. On the other hand, the key elements of these institutions' thinking are already widely available publicly so that little may be lost from the non-availability of every internal document in its entirety.
The inquiry and the public could benefit from the fact that several key witnesses may now welcome the opportunity to explain directly to the wider public the background to their thinking and decisions, since relatively few are familiar with the detailed Honohan or Nyberg findings. Former taoiseach Brian Cowen has recently expressed such a view.
Many witnesses may emphasise that even at end- 2008, none of the “expert” domestic or external institutions (such as the IMF, EU, and OECD) were predicting anything other than a “soft landing” for the property market. The consensus then was that Irish banks were not facing any fundamental dangers.
The Abbeylara judgment that circumscribes findings of an adverse nature by an Oireachtas inquiry could constrain the nature and extent of interrogative questioning of witnesses. The new Oireachtas inquiry – the first since Abbeylara – will have to navigate some potentially complex procedural and legal issues involving unavoidable financial and time costs.
The inquiry is likely to focus much attention on the September 2008 bank guarantee. The considerations involved , including the pros and cons of alternative options, were also dealt with extensively by both Honohan and Nyberg (as well as in this author’s recent book written jointly with Antoin Murphy).
Contrary to some commentators’ expectations, an inquiry is unlikely to reveal dramatic new information on the background to the guarantee. Judgments will continue to differ as to the wisdom of this controversial decision.
Underlying substance
This inquiry can be expected to help crystallise for the general public the "style" of interactions among key players that prevailed in the lead up to the crisis. However, this may not necessarily affect the underlying substance. For instance, although the Anglo tapes revealed much to the public about "banking culture" , arguably their content did not add significantly to what was already known about the nature of the banks' thinking at the time.
In conclusion, serious preparatory work can help maximise the potential benefits from the forthcoming inquiry . The costs as measured in euro and in the time and attention of officials, politicians and decision-makers, the media and the public will become readily apparent as the process unfolds. In the end, the public will be the judge of whether the benefits outweigh these costs.
