The National Treasury Management Agency (NTMA), which manages Ireland's national debt, was not consulted by the government about the September 2008 bank guarantee, despite two of its most senior officials being in Government Buildings on the night the decision was made.
This emerged in evidence given to the Oireachtas banking inquiry by Brendan McDonagh, the current chief executive of Nama, the National Asset Management Agency. Mr McDonagh was the NTMA's director of finance at the time of the guarantee.
He told the committee he was summoned to Government Buildings at 7.45pm on September 29th, 2008 and spent four hours in a side room while the decision to guarantee the banks’ liabilities was debated by senior ministers and a number of bank executives.
“We were never consulted or asked any questions until about 1am, when we were told that the government had made a decision to guarantee the banks,” he said.
Also in the side room with Mr McDonagh were Oliver Whelan, the then director of funding and debt management at the NTMA; William Beausang, assistant secretary of the Department of Finance at the time; and Pádraig Ó'Ríordáin, then managing partner of law firm Arthur Cox and a senior adviser to the government.
Decision
Mr McDonagh was asked what he thought of the decision on the night.
“Myself and Mr Whelan’s view at the time,” he responded, “was that this would weigh heavily on the sovereign [Ireland] and would weigh heavily on the cost of money, the cost at which we could raise money in the markets. I was just a bit surprised by, I suppose, the scale of it really, to be honest.”
‘No substantive discussion’
He said he had no advance knowledge that the government was considering a blanket guarantee. He was “surprised” by the decision “because there was no substantive discussion before that”.
Mr McDonagh said his personal view was that the banks should have been nationalised rather than guaranteed.
He said he was asked to meet then taoiseach Brian Cowen at about 2am to discuss technical issues connected with the guarantee, including the overseas subsidiaries of the Irish banks.
The meeting lasted about 90 seconds, he recalled, and his advice was that it would be “very hard to limit the guarantee only to the Irish operations and not to the overseas subsidiaries”.
Mr McDonagh left Government Buildings at about 4am to prepare for the opening of capital markets in the morning.
His “abiding memory” of that night was sitting in the side room with only CNBC available to watch on a small portable television. “The Dow Jones [stock index] was falling by 700 points,” he said.
Mr McDonagh said he had been "quite sceptical for some time" about Irish Nationwide and Anglo Irish Bank in the run-in to the financial crash. "I couldn't understand their business models."
No contact
He said his presence in Government Buildings on the night of the guarantee was due to the NTMA’s two most senior executives,
Michael Somers
and
John Corrigan
, being in the United States at meetings. He did not contact either of them on the night.
“We didn’t know what was going on . . . there was no point in me ringing.”
Mr McDonagh’s role on the night of the guarantee had never previously been documented. His evidence was given at a hearing that lasted eight hours.
Timeline
Brendan McDonagh’s involvement on the night of the bank guarantee, as set out to the Oireachtas inquiry
7.45pm: Receives a telephone call at home from Kevin Cardiff, a senior official in the Department of Finance dealing with the banking crisis, asking him to come to Government Buildings.
He is not told the reason for his summons.
9pm: Arrives at Government Buildings and waits for four hours in a side room while government and senior bank directors decided what action to take on the banks.
He shares the room with Oliver Whelan, then head of debt management at NTMA, William Beausang, then assistant secretary of the Department of Finance, and Pádraig Ó Ríordáin, then managing partner of law firm Arthur Cox.
1am: Told by Mr Cardiff of the government's decision to guarantee deposits and debt securities of AIB, Anglo Irish Bank, Bank of Ireland, EBS, Irish Life & Permanent and Irish Nationwide.
2am: Meets the taoiseach and the attorney general to discuss technical issues about overseas subsidiaries of Irish banks included in the guarantee.
The meeting lasts 90 seconds. His advice is that subsidiaries would fail and there would be recourse back to the Irish parent.
3.30am-4am: Leaves Government Buildings to prepare for the opening of capital markets at 7am.
