The Irish media benefited from property advertisement during the time of rising house prices prior to the economic crash, the Oireachtas banking inquiry has heard.

Former environment editor of The Irish Times, Frank McDonald, was asked by Fine Gael deputy John Paul Phelan if he felt other sections of society including the media were "willing participants or beneficiaries of the explosion in house prices".

Mr McDonald, appearing at the latest public hearing of the inquiry on Thursday, referred to property supplements in his answer and said it was true the media, including The Irish Times, had "benefited enormously" from property advertising.

“The media then were leaving themselves open to the accusation that they were cheerleaders in some sense for the property bubble not least because of the revenues that they were earning from it,” he said.

However, he said in defence of the paper, the downsides were also highlighted in various articles. “I don’t think it’s fair to say that the media were uncritical about what was going on,” he said.

Galway Tent

Earlier in the hearing, Mr McDonald said that the "Galway Tent" became a symbol of the relationship between the construction sector and politics in Ireland which had already been well established. He said the tent had become "notorious in its own way".

However, he said, the situation had existed since the 1960s and drew particular attention to the role local councillors played in rezoning land through city, town and county development plans.

“They had the power in other words to transform the value of the agricultural land anywhere in Ireland multiplying it by a factor of ten or more,” he said.

Consequently, between 1963 and 1971 the value of land in the Dublin area soared by 530 per cent and speculators scrambled to purchase. Efforts to curb such speculation came to nothing.

“It was inevitable then under these circumstances that land speculation would continue and that zoning would become tainted by corruption,” he said.

“Allegations that, quote ‘brown envelopes’ unquote, were changing hands first surfaced in 1974 but a Garda investigation got nowhere.” Subsequent investigations also proved unfruitful.

Findings by the Flood, and later Mahon, Tribunal were found to be technically unsound, but Mr McDonald told the inquiry: “I have no doubt personally that corruption lay at the heart of Dublin County Council’s most contentious land rezoning decisions.”

There was “massive over-zoning” during the boom period and pressure to do so reached a “fever pitch” by 2007. “It was little short of a frenzy,” he said.

The entire process was abetted by lucrative tax incentives in the sector while other factors, such as the rollout of motorways, helped usher in the development of ghost estates.

“So many of us were caught up in the bubble that we could not see it in perspective or at all. It became normal that a fairly average semi-detached house could be worth a million euro or more.”

Culture of deference

Earlier, the inquiry heard a culture of deference by banks toward politics was established long before the boom.

Dr Elaine Byrne, an academic and specialist on corruption and governance with particular reference to white-collar crime, regulation and political finance, addressed the issue in the context of Ireland's four historic tribunals - McCracken, Moriarty, Mahon and the Beef Tribunal.

As one example, she said the Moriarty Tribunal had found a "marked deference" in the treatment of former taoiseach Charles Haughey by AIB.

She said that between 1975 and 1979, his debt to the bank had spiralled from £188,000 to £1.1 million.

On his election to taoiseach in 1979, his personal debt was 77 times that of his £14,717 annual salary. However, his financial advisor was still able to negotiate a £393,000 write down of that debt.

This was described by the tribunal as “somewhat unorthodox” and amounted to one third of his overall arrears. It was, it said, a “substantial benefit on Mr Haughey in circumstances referable to his political office”.

Dr Byrne said the McCracken and Moriarty tribunals noted “a distinctive overlap between prominent financial donors of Mr Haughey and individuals within the banking and property sectors”.

Donations

Examples such as this show a “culture of deference between State authorities, political parties, elected representatives, supervisory authorities, banking institutions and the property sector was already well established by the 1990s”.

With regard to the general elections of 1997, 2002 and 2007, she said not all donations were legally required to be declared and that as such it was “impossible to present” a complete picture of the relationship between politicians and donors.

After the Beef Tribunal, which exposed the nature of donations from the industry to politicians, legislation was introduced in 1997 which, for the first time, capped donations.

This was established as €634 for individual candidates and €5,078 for parities. Limits on overall donations were added later.

Quoting research, she said that between 1997 and 2009 - a period incorporating three general elections - it was found that donations “significantly increased” in election years.

Fianna Fáil candidates in 2002 and 2007 received almost twice as much in donations as candidates from all the other parties combined. However, that statistic is tempered by the fact the party traditionally runs more candidates, she said. It appeared “more attractive” to donate to candidates than parties.

In relation to overall donations, she said the rules allowed for much of the money, donated under the legal threshold, to remain anonymous.

For instance in 2007, of the €10.1 million spent by political parties during the election, €8.8 million had no obvious origin. This gap allowed “an unnecessary perception that something unorthodox is happening”.

Examining a detailed breakdown of declared donations to Irish politics, Dr Byrne said: “It appears the property barons of the 1990s and 2000s replaced the beef barons of the 1980s.”

Dr Byrne said it would be useful for the inquiry to examine a list of tax incentives extended to developers between 1997 and 2007 and what influence the sector might have had on government.