Honohan at the Finance Committee Post author By Karl Whelan Post date June 16, 2010 Here‘s the transcript of Governor Patrick Honohan’s appearance before the Oireachtas Finance committee on Tuesday. Categories In Banking Crisis Tags Honohan report 14 Comments on Honohan at the Finance Committee ← Fault Lines → Considine and Duffy on Expansionary Fiscal Contractions 14 replies on “Honohan at the Finance Committee” Couldn’t find it. Honohan has been at the kool-aid it seems. Who wants to know what happened? We all know. The “system” is designed to serve the needs of those who manage it, not those who own it. Until accountability is reinforced by prosecutions there will be no changes. How did Australia avoid these problems? Patrick Honohan seems to be so happy with his own report that he wants to slow things down. Maybe as governor of the CB he wants to play for time in terms of “limiting” the damage to our banking system, ‘going forward’ as the politicians like to say. Restoring confidence in banking and investigating what happened are different things. We were told, it was essential to find out what happened in order to restore confidence in our banking system. However, this self congratulatory stuff is getting in the way of the truth. There undoubtedly will be more shocking revelations and possible criminal proceedings. This will damage the banking system even more, to argue that this process should be stifled in some way because we already know enough is unjustifiable and could lead to the accusation of cover up. Patrick Honohan has done his job, to the best of his ability and to the limits of his own personality. Now he needs to let others build on his efforts. Justice is different from finding out what was wrong with procedures or seats. The hundreds of billions of share holder value wiped out, the life savings invested and destroyed the 450,000 unemployed, 100,000 emigrants needs more than; this was light touch, 75% home grown, unfortunately the regulator was too deferential…. The “scoping” exercise has not uncovered anything new. Yes, it has given the media enough sound bites and ammunition to sell papers. They seem delighted that none other than a professor has confirmed that the crisis was indeed self-inflicted and home grown. In its own way this is the same deferential stuff that our society reeks of. Unfortunately, common sense does not have any professor representing it and nobody does PhDs in it. What we need uncovered is, the extent of the nexus, between politicians and loan givers and how this played backwards into the framing of national economic and fiscal policy with such disastrous consequences for decades to come. A proper explanation for instance into why BoI loan book increased from 100bn in 2004 to 200bn just 4 years later. Who authored this gravity defying stunt? We have a right to know if these people now taken up residence in some other part of the system? Are they sorting out the NAMA loan book? Are they advising or involved with Anglo? Are the self same bankers, auditors and valuers now to be allowed plot the countries way forward having completed their “on the job” training? Patrick Honohan told Vincent Browne that he was “least interested in the who”. He is interested in “process”. That’s fine, and he is a fine academic and a nice man, but he must not try to delay or impede the necessary expansion of this enquiry which needs to uncover many, many facts and truths not yet revealed and which people involved in litigation are entitled to. As with the Committee hearing involving Regling and Watson, the primary purpose of this exercise for the main opposition spokespersons was to seek confirmation of personal conspiracy theories or generate further political point scoring opportunities. Deputies from the government side in turn scratch around in the dust looking for nuggets in defence of the actions and policy decisions of their own political taskmasters. They didn’t get very far with the Governor who was well able for them. The exchange over the ‘golf balls’ issue was very funny, but indicative of the farcical nature of much of the proceedings: Deputy Joan Burton: …. On RTE the other evening, Seán O’Rourke produced a very expensive golf ball with the logo of the Financial Regulator. Is this what financial regulation in Ireland is all about? Did the Central Bank have golf balls with its own logo, or teaspoons or anything else? Professor Patrick Honohan: I am not sure whether it would make the Central Bank better or worse if it had its own golf balls. Deputy Joan Burton: The Governor’s report refers to excessive deference and diffidence. Can he explain the mindset of a public regulator in this scenario? Anglo Irish Bank had cupboards full of golf balls and other golfing material, such as umbrellas for a rainy day. Of course, the rainy day only came for the general public – it did not come for bankers. Is this appropriate behaviour? Has the Governor of the Central Bank sent a memo to staff forbidding golf balls carrying its logo? Professor Patrick Honohan: I think the message has been received and the golf balls have now been handed out to RTE correspondents. I do not know of any golf balls or umbrellas in the Central Bank any more, so one does not have to write memos. Deputy Kieran O’Donnell: It is out of stock. Professor Patrick Honohan: Yes. We are completely out of stock. The Governor’s view that a Commission of Inquiry may be unnecessary or, at the very least, should be delayed for a few months so as to allow for proper consideration of what purpose it might serve, provided an interesting twist to the proceedings. If that view were to gain any traction , the Minister for Finance would have to return to the Dail before the recess and seek approval for a variation to the motion passed on January 20 last and subsequently endorsed in the Seanad. He could hardly attempt such a move without facing a barrage of criticism from his political opponents and the media of an attempted cover-up and so on. Mr. Honohan may indeed, from his own perspective, know enough from his own investigations as to what went wrong but the broader public in the ‘why’ is hardly satisfied. The politicians should agree the terms of reference for the Commission, stick to the original timetable, and get on with it. ‘To some extent that tradition of the big banks that had been around since the 1800s as being able to run themselves prevailed to a great degree up to the present day. The idea that either of the two big banks could get into such trouble was not within the bounds of people’s imaginations. That is a failing but it is the context in which this occurred’ Is the Governor really asking us to believe that our distinguished professors of economics, politics, and history, as well as our most senior civil servants, had no clue what was happening ? Or no notion that there was such as thing as a bubble ? People knew fine well, but it wasn’t politic to say it, so lending to the Irish banks was a safe bet. Paddy will pay it off in due course, while D4 goes on with the hunt. No wonder the Governor is ‘least interested’ in the ‘who’ of responsibility. @paul “Is the Governor really asking us to believe that our distinguished professors of economics, politics, and history, as well as our most senior civil servants, had no clue what was happening ? Or no notion that there was such as thing as a bubble ? ” No, no, no… what the good Guv’nor is asking us to believe is that most of the people you mention are incredibly stupid and have been promoted way beyond their abilities by a seniority system that wallows in it’s own incompetence. Academia and the civil service had reached their tipping points of incompetence… Time for a new generation (I suggest you skip my one (early forties), too long the bridesmaid). I reckon I can believe in that. Honohan was obligated to attend this meeting but I find the Oireachtas is becoming more and more irrelevant. I think there are 42 committees one of which is the finance committee. Michael Sommers, in a recent interview with Marian Finucane said, capture of the minister for Finance was a foregone conclusion if that minister did not have a financial background. Lenihan’s background was legal and he was immediately taken captive end of story. There are a lot of people hiding behind Mr. Lenihan and I think we should know who they are too, and what their specific competencies are. in fact, I would like to have a certain adjunct professor in Trinity go through their figures line by line. Lets hope none of this stuff goes missing because eventually this is what will happen. Sommers had not a good word to say about the DoF. When we are paying one out of every 4 Euro to service national debt, when we wake up to the full horror of our 112bn contingent liability for public service pensions we will begin to understand why the man thinks like this. Despite his enormous experience he was kept out of the loop when it came to the bank guarantee and NAMA two momentous and rushed decisions which put the Irish tax payer on the hook for guarantees of 440bn and the purchasing of cash for trash loans totalling 81bn with various Now we are told goodbye 22bn and that Anglo had to write down 550m in loans to zero. Why was Sommers s treated like this? Could it be that Sommers is hard to convince without hard facts? They were aware that he had refused to buy into Anglo’s profligate model of banking, refusing to put more than 40 million with them on short term deposit even though they were hungary for funds. @ yogan For the avoidance of misunderstanding, as the lawyers say, I thank the Governor for a thorough and readable report. I don’t want to shoot the piano player, now that we have one at last. As we seem to be headed firmly for debt deflation, however, the public mood will become less, rather than more forgiving. and evasions and obfuscations will further damage our civic society. Unemployment sucks, so we’re going to have royal shake up of our authority structure one way or another. A bit of Schumpeterian creative destruction, and an argy bargy the like of which has not been seen here before. Lets hope our post-bubble Eire Nua is mainly peacable. One of the many things we are going to chuck out is ageism. It’s talent that counts. @paul “One of the many things we are going to chuck out is ageism. It’s talent that counts.” Normally, I would agree with you, but mine has been a greedy generation. Me fein ruled. I’m not sure it is possible to overcome that with just talent. Not without self-recognition and I don’t see many signs of that. @ yogan Victims of the Great Moderation perhaps. We’ll se how Me Fein stands up to stagdeflation. Eyes forward. “…..with various hair-cuts!” @ yoganmahew “It’s talent that counts?” That might be a bit too idealistic. http://www.irishexaminer.com/home/top-civil-service-jobs-are-a-closed-shop-121995.html @Robert Browne Indeed, and it was @paul quigley wot said it sir. I am reminded of the great Harry Enfield great sketch “women, know your limits”, except I choose to substitute “economists” in that! 🙂 (Though I might substitute many other status groups…). @ yoganmahew Apologies! Name and Shame. Well the Mr. Lenihan is determined to display some common sense. http://www.independent.ie/business/irish/lenihan-calls-for-name-and-shamestyle-inquiry-2227306.html Comments are closed.