Given his submission ran to 380 pages, we should probably be thankful that Kevin Cardiff confined himself to just 20 weeks of the financial crisis before he “ran out of steam”.
He has been waiting a couple of years to give his view of the momentous events that led to the bank guarantee being issued in September 2008, the €64 billion bailout of the banks that followed, and the State’s negotiations with the EU-IMF troika.
This was the first of two sessions that Cardiff is slated to have with the inquiry and dealt with his time as head of the banking unit within the Department of Finance between 2007 and 2009.
His view is that then taoiseach Brian Cowen had made up his mind on a blanket guarantee before the long debate at Government Buildings on the night of September 29th, 2008.
Nationalisation
Cardiff argued for Anglo to the nationalised with some form of support for the other banks, a position shared by the minister for finance Brian Lenihan, Merrill Lynch and the National Treasury Management Agency.
He was not critical of the guarantee, arguing “significant” action was needed, as Anglo faced a run on deposits, while Irish Life & Permanent was just three days away from running out of cash.
It was clear a lot of preparatory work had been done in advance of the guarantee meeting, including prepping legislation for the nationalisation of a bank or a guarantee.
Cardiff outlined five options that had been considered in detail, yet he wasn’t able to properly explain why more detailed information on the precise problems at the banks in 2008 wasn’t available to government before the guarantee decision was made.
Terms of guarantee
The committee heard that the banks drafted the terms of the guarantee and presented them to the government, putting him in conflict with evidence from AIB and Bank of Ireland executives. And the guarantee was broader in nature than originally envisaged by the government.
We also learned that some of the great and the good of Irish society had been quietly urging the government to do something to calm concerns about the financial sector, often via the Central Bank.
Cardiff said the ECB and its then president Jean-Claude Trichet had let it be known rescuing the Irish banks was our problem.
And Ireland was “pushed” into the EU-IMF bailout programme, with the ECB in particular very direct with Ireland that there would be “consequences” if we didn’t enter a programme.
In March 2011, the ECB issued what Cardiff described as “close to an instruction” that Anglo senior bondholders were not to be burned.
“We shouldn’t hide from that,” he said, while adding he had no doubt that Trichet and the ECB were sincere in their “concerns and actions”.
This was probably the civil servant in Cardiff coming out. Any implied criticism of the system or its main players was balanced with conciliatory words. As Ireland’s representative on the European Court of Auditors, he doesn’t want to rock the boat too much.
Cardiff will be back to the committee next week when he will provide detail on Ireland’s troika bailout.
