The Oireachtas Public Accounts Committee has placed a number of documents online that were given to it by the Department of Finance in relation to the government’s deliberations prior to its decision to issue a guarantee on the liabilities of the Irish banks in September 2008. The documents can be found here. Section A has the most relevant but there’s also some interesting stuff in Section B, which has material from a joint Finance\Central Bank Standing Group on Financial Stability.
Update: There’s a lot of material in the documents and I haven’t looked at it all. However, thus far, my impression is that while the documents are useful in shedding light on the extent of the government’s lack of understanding of the scale of the solvency problem in the banks, they are not very useful in explaining why the government decided to issue such a blanket guarantee.
Take a look at document 5 from part A. This contains notes from a meeting on Friday September 26 involving the Minister for Finance and representatives from the Central Bank, Financial Regulator, Department of Finance and the government’s advisers, Merrill Lynch. The notes state: “On a blanket guarantee for all banks — ML felt could be a mistake and hit national rating and allow poorer banks to continue.”
Moving on a couple of days to document 3 from part A, a blanket guarantee is one of the options presented to the government by Merrill Lynch on Sunday, September 28. However, the note questions the credibility of this approach, again mentions the implications for sovereign debt ratings and also points to a negative reaction for other European countries. The document is a bit inconclusive but the blanket guarantee still does not appear to be the preferred option of the govenment’s advisers.
Then on September 29, the government decided to introduce an almost-blanket guarantee. These documents do not make it clear why this decision was taken.