Vincent Browne catches up with Bill Tormey on the details of the September 2008 bank guarantee

On June 11, I wrote here –

Honohan Report

Having read the report, I still wonder whether letting Anglo Irish go bankrupt in September 2008 while simultaneously guaranteeing the operations of AIB and BoI would have been the better course of action. In my view, the key miscalculation was the consensus view that no Irish Bank would be let fail. Consensus suggests a comfort zone for the participants including the minister. I don’t think they teased out the consequences of an alternative forensically enough.

Fine Gael

I thought then and I still think that FG should have had reservations about bank subordinated bond holders before supporting Fianna Fail on the issue.
About Anglo Irish, I was never in the resuscitation club. Fine Gael has spoken to the relatives, explained that the carcase is brain dead. The “Not for Resuss” sticker has been stuck on the chart.

Vincent Browne sometime later on 23rd June in the Irish Times came to a similar conclusion.

“And a further point. Patrick Honohan lets Cowen and Brian Lenihan off the hook in regarding Anglo Irish Bank as being of systemic importance to the banking system because had it been allowed to fail, there would have been a collapse of confidence in the two major banks, AIB and Bank of Ireland.

In his report, he did not canvass the option of letting Anglo Irish Bank go to the wall on the night of September 29th, 2008, while giving guarantees to the two main banks. But he did so in his evidence to the Oireachtas committee and there he said – rather limply I thought – that “It is possible they [the Government] might have said they would guarantee everything else and liquidate Anglo Irish Bank. This could be imagined, but it would not have been trouble free, there would have been terrible criticism across Europe that a big bank had been allowed to fail and that it would have destabilised everything”.

Why? Destabilised everything? And why would the Government have cared about criticism from Europe since the guarantee they gave enraged Europe because of the blanket nature of the bank guarantee?

We need to know.”