The Guarantee

The film will be aired tonight at 9pm.  The film is good and well worth watching for those who missed its cinema run before Christmas. 

It must though be considered in the light of being a drama and not a documentary.  Unsurprisingly it differs somewhat from the stage version, Guaranteed!, with additional characters and less emphasis on a number of the alternatives that may have been considered. 

Obviously some of the characters and most of the dialogue is fictional and we can’t be sure that the stance of individual characters is accurate, particularly in the Cowen-Lenihan exchanges.  Overall it is a good dramatisation and will probably be more accurate than the debate which is due to following the airing.

I am looking forward to The Bailout later this year.

15 replies on “The Guarantee”

This invaluable contribution from the giving the timeline and what was said subsequently by various players may add to the experience.

Two extracts go to the heart of the matter.

First 28 September

“Lorenzo Bini Smaghi: “We always had discussions with the (Central Bank) governor and we had discussions with the prime minister (Taoiseach). [Their] argument was we had to do it. No, I think it was not the right decision, such an announcement would have been credible only if it had been made jointly by all.”

Brian Lenihan: “It should be remembered that there was no coherent European policy in existence on banking or bank failure on the night of 29 September and this is a very important point which must be taken into account when passing judgment on what the Government and the Oireachtas did on that occasion.”

Second 30 September

Alastair Darling: “It meant the Irish government was effectively underwriting its banks in a way that no other country in the world had done…. I knew full well that if the Irish government’s bluff was called they would be bankrupt. It was a promise on which they could never deliver.”

The bluff was called.

What is most extraordinary, however, is the lack of comment until this point – or any real realisation of its significance – on the action taken by the German government to make its own banks safe; in the sure and certain knowledge that its bluff would not be called.

“Actions announced first by the Irish government and then the German government were both unclear and unco-ordinated and led effectively to a ‘beggar thy neighbour’ policy which froze the international banking system,” said a Bank of England minute from October 2008, a fortnight after the guarantee.

@ Seamus Coffey
Thanks for advising on film. Very well worth watching.

Peter Coonan was excellent as Drumm, though sometimes I find it hard to hear what he says. It was a pity that he was also cast as Neary (was it Neary or Hurley?) as it disturbed the continuity.
The female actor (Kate Walsh) advising Lenihan was excellent, as was David Murray as Lenihan.

The film brought home the sheer unplanned, rudderless nature of the Irish State in crisis; and the reality that the Irish Central Bank, playing both its roles, might not have as its primary concern, the stability of the Irish State.
That should be of concern to all citizens.

I have watched half so far and am enjoying it greatly. It is a little bit unfortunate that it is out of kilter with the evidence in the Anglo trial insofar as Sean Fitzpatrick was a lot more peripheral than he is shown but it is an excellent dramatization (so far) all the same.

@50% GNP methinks the whole affair was odiously obscene … and continues to be so.

No developed country on record has taken such a banking system hit and prospered.

The map is not the territory.

First The Guarantee, now apparently The Bailout?

To complete the trilogy, I suggest: ‘The Triumphant Return of the Celtic Tiger’.

After this week’s figures there can no longer be any doubt.

(a) Professional jobs advertised up 33% y-o-y in November.
(b) Industrial output up 35% y-o-y in October-November.
(c) Services index up 7% y-o-y in October-November.
(d) PMIs in December going through the roof – by far the highest in the EU.
(e) Tax receipts in December up 19% y-o-y.
(f) Live Register in December down 40k y-o-y.
(g) New car sales up 30% y-o-y in first week of 2015.

Although we need to wait for December’s industrial output figures to be certain, if they are anything like the October and November figures, y-o-y GDP growth in Q4 2014 is going to exceed even the exceptionally high Q2 2014 figure. Throw in the 55% fall in oil prices, which (if maintained) will add 3% to Ireland’s national income, and we are looking at explosive growth that will certainly merit the title ‘Celtic Tiger’. The only thing in doubt is how long it will last. Will it be a couple of years or a couple of decades like the first Celtic Tiger?

Legal Professions in Ireland versus America

@ Seamus Coffey,

I would highly recommend anyone in the community of Irish economists, if they ever find time to do so, to partake of some viewing of lectures given by some of the key law schools in the United States, and the approach over there from lawyers of various shades, towards the subject of economics and business, trade in the economy, and so on.

What we observe from the movie adaptation of the play, Guaranteed, is the extent to which the legal profession found themselves fighting at the front lines, of the international finance panic of 2008. Remember, that the two individuals portrayed in the movie, about Ireland are barrister and solicitor by profession. What we can’t ever underestimate, is the extent to which economics comes into the job that these other professionals such as barristers and lawyers do.

Unfortunately, I believe that in Ireland, we wait often, until moments of crisis to facilitate this level of interaction between business trained professionals and legal professionals.

That is kind of where, those in Irish financial institutions get the ‘upper hand’ on those in public administration and policy making in Ireland too, . . . because banks if nothing else, are quite good at combining the discussion, on both legal and financial sides of matters, . . . while those in public administration, unfortunately, and to our enormous cost, aren’t.

This all has it’s nemesis and it’s origins, in how we operate at academic faculty levels, too, in Irish universities and places of learning.

A key feature, one will observe for example, in the aftermath of the 2008 crash here in Ireland, I think is the extent to which we notice the various judges who occupy the bench positions here in Ireland, have to manage to get their heads around these financial and economic matters, in the work that they have to do, to clean up all manner of problems, that are fall out of the crisis. Not a week goes by, or a day almost, since 2008 and the crash, that we can open up our newspapers and not find some journalist reporting on some trial, some verdict or some judgement that had to be arrived at, following a process of litigation and so on, that has at its center some matter that is financial in nature.

The question therefore, that I would ask, is to what extent do we prepare our legal trained people in Ireland for this job ahead of them, and is there more than we can do, to cross-train those in a legal profession, in finance and economics, or visa versa, those who trained in finance/economics, in the basics of the law?

Going back to my original point above, about the American financial crisis, and the involvement of the legal professions there, . . . I can highly recommend, that members of the economics community here in Ireland, try to listen/read anything from Chicago school of law professors, individuals such as Richard A. Posner (US court of appeals judge, and trained economist), or guys such as Richard Epstein, also of Chicago school of law.

The point that Posner, in particular made, in a recent keynote of his, was that undergraduate courses in law at universities, maybe should not be 100%, all about the law. Posner offered a suggestion, that perhaps students could spend as much as 40% of their time as undergraduates, taking courses in things like finance, statistics, economics, accountancy or whatever.

I am sure, that based on what I have said above, . . . that Posner’s suggestion, from the point of view of Ireland too, is not a daft one at all. The question I would have for readers and contributors to the Irish economy blog, is to what extent do members of economics and business faculties in our Irish universities, ever get called upon, by the faculties of law in same institutions here in Ireland, to provide course material and access to undergraduate students of the law, to course material in departments of finance and business ? ? ?

I would be very interested in the considered response of this particular question, from some of the Irish economy blog’s contributors, and commentators.

That expression, during 2009/10/11 in Ireland, that I can remember most of all, especially in lead-up’s to general elections and around the time of the IMF/Troica interventions into Ireland, . . . was, one should never waste a crisis.

With that as the objective, I think that there are some things we can still do now in Ireland, and that we ought to try to do I think, . . . and most especially, I am reminded of this, when I view a movie such as The Guarantee, . . . that rather than wait for these crisis events in Irish public and political life to arrive on top of us, . . . and I think, these times, and their study, analysis etc, are so interesting, because they are times, when things like economics, finance, accountancy and the law, are shoved together into the same mess, . . . whether they like it, or don’t like it, . . . I think, that in Ireland, we should get used to running more of these ‘fire drills’, that involve a lot more interaction between the above mentioned parties.

That would be my own very small suggestion anyhow.

Questions, have been asked too, in a wake of austerity, here in Ireland, why academics from areas such as sociology, don’t receive an equivalent level of profile in debate, as do economists and financial commentators, . . . at least on a national scale. Academics such as Richard Epstein, in the United States, have cast at least some light on that matter as well, and I remind those readers here, to consider listening to some of the American legal academics talk, or writings about economics, if they have a chance. BOH.


I hear that you are running for Fianna Fail in a North Dublin constituency! Thoughts of a MinisterJohn?

Any suggestions as to who might play you in the ensuing blockbuster of the troika, “The Celtic Tigress”?

Excellent drama, and IMHO quite accurate. Drummer was superb, then we have the tapes to easily portray this most venal person. Couldn’t quite place the girl advisor of Lenny, was she just thrown in to add a bit of skirt?

Even Comrade Gurdy in the ensuing “debate” had to admit that by the time of the fateful night there was really no choice.


“After this week’s figures there can no longer be any doubt”

about what? That the right decision were taken all along to get us to this point? that we were right to assume to crippling debt of private creditors? that the fundamental problems with the euro regime, central to Ireland and others downfall, remains fully in tact? that we are on the brink of a housing crisis of a different kind….?

“Former ECB president Jean-Claude Trichet warned ex-taoiseach Brian Cowen of the consequences of the blanket bank guarantee in a previously unseen 2008 letter released under Freedom of Information.
In the letter marked “urgent” and sent to Mr Cowen by special courier on October 16th, 2008, Mr Trichet urged Mr Cowen to exclude short-term deposits from the scheme initially agreed the previous month but subsequently extended……..

…“I would wish that the Irish Government would maintain such an exclusion until this matter has been fully co-ordinated throughout the euro area Member States, in order to avoid distortions in the implementation of the euro area single monetary policy.”
Mr Lenihan wrote back to Mr Trichet on November 14th, 2008. He said Irish banks had a high degree of reliance on interbank deposits of a relatively short maturity for meeting their ongoing liquidity needs.
“In this context, there was a concern that any change in the scope of the guarantee at a late stage could impact adversely on the liquidity and stability of the Irish banking system and indeed on the credibility and reputation of the guarantee overall,” he wrote.”

The question as to whether the Guarantee was the right decision is still very much a live question. NAMA looks like it is going to turn a profit, and the banks are back in the bond markets as is the country. The final cost was high but it could have been worse. Who knows if it could have been better?

Apart from the national accounts, the political effects of the guarantee are also far from certain and may be playing out slowly. There is a much clearer understanding of the relationship between the tax payer and the banks, and there is deep anger that the banks have in large part got away with it. There is huge scepticism about how government and indeed Irish society functions. there is also huge scepticism about the EU and the EZ in Ireland.

It may be that Irish people will remain supremely pragmatic and will determine that we played the best game we could in a world that was under huge strain. They may even determine that the boom was not wasted and that we have come along way from the late 1980s. On the other hand, the losers may tire of the misery without fairness and may start to look to those who provide simpler political messages and conspiratorial explanations.

The bubble, the crash, the guarantee and the recovery were all so huge that it will be a long time before we will be able to understand, let alone see all the results that will flow from them.

re: Trichet’s ‘friendly advice’.

I saw that report this morning and thought it was best have a look at what concerned Trichet: Here is the relevant extract from Trichet:

““I am writing to underline the importance that the ECB attaches to the exclusion of interbank deposits with a maturity of up to three months from the liabilities covered by the draft scheme,” he told Mr Cowen.”

In other words, Trichet did not want Ireland to get any edge as far as short term interbank deposits were concerned. Trichet’s only concern was that the guarantee might reverse the deposit runs from Ireland to core country banks, that had already happened.

Mary Minahan ( IT) who wrote the article might study it a little better in order to get a full appreciation of whose side Trichet was on.

Re the film I was surprised with the amount of RTE and TV3 news and current affairs coverage from the time that was used in the film.

Had to laugh at the absolute shock on Jim Power’s face during the 2007 Prime Time debate with Morgan Kelly.

I would hate to be the sort of person who is seething with frustration that we might just get out of this mess and that the wealthier in our society in particular have been spared what looked at one stage like certain meltdown.

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