Advertisement

We need your help now

Support from readers like you keeps The Journal open.

You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.

If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.

As it happened: Brian Cowen comes out swinging at the banking inquiry

The former Taoiseach discussed his time as finance minister.

iPhone/iPad users: click here. Streams provided by HEAnet.

FORMER TAOISEACH BRIAN Cowen appeared before the banking inquiry this morning  to answer questions about his time as Minister for Finance.

We were liveblogging the lengthy morning and early afternoon session, but you can catch-up with all the important points and the very latest here.

Cowen starts with an apology: “I accept full and complete responsibility for our role in, and response to, [the] crisis.”

Cowen says the government was left “in no doubt” that burning bondholders would have meant no funding from the Troika, stating: “It was one or the other.”

In terms of the guarantee, he said it was a case of taking the least worst option available. 

Cowen on property prices, an issue of contention at yesterday’s hearing with Charlie McCreevy:

“When I was Minister for Finance, I shared the positive view of our prospects which was held by all the main research and international agencies. But contrary to what some are now trying to suggest, I was concerned about the potential vulnerabilities and risks arising from the rapid escalation in property prices which was a recurring theme in risk assessments.”

It has since been alleged that no action was taken by our Government to deal with these risks. This seems to be based on a view in some quarters it seems that I was in some way beholden to property market interests. This is simply not true. The facts are that prior to any signs of an emerging international crisis, there were four important actions taken to attempt to minimise the potential vulnerabilities in the banking sector related to the dependence on highly valued property.

The four actions taken were:

(i) The decision in December 2005 to abolish a very wide range of property based tax incentives.

(ii) The refusal by the Government to abolish or dramatically reduce stamp duty.

(iii) The decision of the Financial Regulator in early 2007 to increase the capital requirements on banks for speculative property lending from 100% to 150%.

(iv) The decision by the Government to allocate 1 per cent of GNP every year into a National Pensions Reserve Fund.

Here are Cowen’s thoughts on stamp duty:

In late 2006 and up to the General Election in June 2007, I was also the subject of sustained criticism for my decision as Minister for Finance to resist widespread demands to abolish or dramatically reduce stamp duty on property.

At that time, I accepted that the levels of stamp duty in Ireland were among the highest in the world and that this meant real consequences for people buying houses. While I agreed that some adjustments were appropriate, I realised that the high levels of stamp duty were a break on the escalation of property prices and acted as a disincentive to greater property speculation.

I felt that calls for the abolition or serious reduction of stamp duty were simply irresponsible in a context of rapid property price growth. I therefore strongly resisted such demands.

There is no doubt abolishing/reducing stamp duty at that time would have been politically popular. But it also would have increased the vulnerabilities of the banking system and the Irish economy to overvalued property. I therefore refused to go down this route. I was subject to much criticism for this. It is hardly surprising today that the cheerleaders for the abolition of stamp duty, or its radical reduction, are now silent on what would have been the impact on property prices or the resultant impact on the scale of banking crisis had I heeded their calls.

Hmmmm…

Cowen on *that* report by Morgan Kelly:

“I was not aware of contrarian views within the Department of Finance which differed in substance from the Department’s overall assessment.
Regarding external contrarian views, the most notable was a research paper by Professor Morgan Kelly of UCD which was published by the ESRI when it launched the ESRI Summer Quarterly Economic Commentary Review of the Irish economy in July 2007.

“In an interview on publication of the review, ESRI economist, Dr Alan Barrett made it clear that the ESRI did not share Professor Kelly’s prognosis that house prices in Ireland over the following 8 years could drop between 40% and 60% in value.

“Whilst the ESRI thought that house prices were overvalued by 15%-20%, it did not believe there was going to be a sharp fall in house prices. It was forecasting a house price decrease of 3% for 2007 with it stabilising the following year. The ESRI view was that economic growth would be 4.9% in 2007 moderating to 3.7% in 2008, a growth rate which they said was consistent with a degree in stability in house prices in 2008.

“The mainstream view remained amongst most commentators that house price increases had been underpinned by many factors including a strong economy, increases in employment and earnings, reductions in taxation and lower interest rates resulting from
participation in monetary union.

“Professor Kelly’s more pessimistic view proved to be more accurate as we now know although in his paper he saw the main macroeconomic effect of this as being higher unemployment due to reduced house building activity as prices fell over the period in question. He states in the paper that he remained of the view that Irish banks were well capitalised at the time.”

Those were the days, eh?

Cowen on his “appropriate” relationship with the banking and property sectors:

“The relationship of the Department of Finance with the banking sector and the property sector was primarily through their federations: the Irish Banking Federation (IBF) and the Construction Industry Federation (CIF)

“Individual banks dealt with the Department through contact with the relevant officials. My own interaction with banks was seldom and infrequent. Every year the Minister for Finance would receive many pre-budget submissions in writing from economic and social actors including the IBF and CIF. The main groups would be met every year by the Minister for Finance at meetings attended by officials where oral presentations would amplify the written submissions put forward.

“The incumbent Minister for Finance would always be a guest speaker at IBF annual dinners or an industry awards ceremony.”

In my time as Minister for Finance, I regarded my relationships with these two sectors as being appropriate. Their access to the Department was in no way different from how other organisations of economic importance were dealt with.

Cowen says he thinks he was experienced enough to become finance minister given the other portfolios he handled, but admits: “I’m not a qualified accountant, which probably is helpful.”

Committee chair Ciarán Lynch asks Cowen if then Taoiseach Bertie Ahern informed him ahead of time about an April 2007 Sunday Independent interview about changes he planned to make to stamp duty if Fianna Fáil was returned to power.

Cowen replies: “Absolutely. We were very close.”

Earlier, Cowen noted that he resisted increasing pressure to abolish stamp duty.

Cowen admits that a property bubble did develop during his time as finance minister, but said it was due to a number of factors – not just property tax reliefs.

Things are getting a bit feisty, as Cowen clashes with Fine Gael’s Kieran O’Donnell about why he repeatedly increased spending.

Cowen says he was looking at Ireland’s long-term future by investing in skills, people and infrastructure.

He said this resulted in the “most-educated generation in this country, thankfully who’ve been able to bounce back from the very calamitous situation”.

With hindsight, Cowen says “of course” he would have done things differently.

Cowen says times were good, and whoever was in power would have spent money.

Feelgood hit of the summer, anyone?

No? Okay.

When Joe Higgins asks Cowen about the Financial Regulator and IFSC, Cowen says Ireland’s problems began “on main street, not in the IFSC”.

Cowen stated that the government “didn’t set up a statutory framework that meant jobs couldn’t be done”, adding jobs weren’t done – for various reasons.

Screenshot 2015-07-02 at 11.19.55 AM

Higgins then accuses Cowen and co of “encouraging the worst excesses of the banks”.

The former Taoiseach strongly denies this.

Higgins quotes lines from a speech Cowen gave at the annual dinner of the Institute of Bankers in Ireland on 2 November 2006:

“Of course, not all of these brave new initiatives are successful. It’s a hard game, but there’s all to play for. Of course that’s easy for me to say because you are players on the field and I’m just an ardent supporter on the sidelines. I will continue to wear your colours.”

Screenshot 2015-07-02 at 11.23.36 AM

Higgins says Cowen, as Minister for Finance, wasn’t on the sidelines.

***GALWAY RACES TENT ALERT***

When Higgins raises the issue of Fianna Fáil’s infamous hospitality tent at the Galway Races, Cowen says some people viewed the tent as a cover for “collusion”, but this wasn’t the case.

“There was no big deal.”

You couldn’t pick a winner in the Galway Races tent, never mind anything else.

“You’re setting me up as some sort of guy who is promoting cowboy speculators … I don’t travel in those circles.”

As the committee meets in private session for a few minutes, let’s ponder this:

Fianna Fáil Senator Marc MacSharry asking if ministers have a tendency to be more probing when they are first appointed, but lose this streak somewhat a year or two into the job.

Screenshot 2015-07-02 at 12.53.10 PM

Cowen says he doesn’t think this is the case, denying he and the government were in power so long they were on “autopilot”.
MacSharry asks if ministers become too “reliant and trusting” of the advice of others, to which Cowen says people in government, like any organisation, soon realise whose advice they can rely on and who isn’t up to the job.

Cowen says the current government uses a system of “social dialogue”.

In his opening statement, Cowen said the Department of Finance didn’t see its role as “second guessing the work and assessments of the Central Bank and Financial Regulator’s office”.

Screenshot 2015-07-02 at 1.01.27 PM

“The Central Bank and the Financial Regulator’s office had significant resources in dealing with the supervision and regulation of the lending institutions.”

Screenshot 2015-07-01 at 4.29.12 PM

Again the line of questioning has turned to spending increases he introduced.

Yesterday, when Charlie McCreevy was asked if elections impacted the budget, he said: “Of course … We are politicians and we actually like to be re-elected.”

Screenshot 2015-07-02 at 1.11.24 PM

Cowen echoed this sentiment, noting that to claim otherwise would be “nonsense”.

He said Fianna Fáil’s approach was based on “spreading the benefits of prosperity to more people”.

Sinn Fein’s Pearse Doherty asks Cowen what he did to try and stem an “explosion of credit in the financial market” and the “massive increase in house prices”.

“What did you do to curtail the property bubble?”

Screenshot 2015-07-02 at 1.29.05 PM

In response, Cowen says it was the the Financial Regulator, not him, who had the statutory authority to step in in relation to lending growth “if they felt it necessary”.

He said he was glad when they acted and sorry they hadn’t done so sooner.

In terms of what he DID do, Cowen noted that he initiated an “orderly wind down” of property tax incentives.

How to lose friends and alienate people:

In response to Cowen saying his friends are not well known, Labour Senator Susan O’Keeffe asks him about the “frequent” visits of former Anglo director Fintan Drury to his office while in government.

He says they have been friends for nearly 20 years and didn’t discuss banking during those conversations.

As the inquiry is now in private session before breaking for lunch, we’re going to wrap up the liveblog. Thanks for staying with us.

You can follow @TJ_Politics for updates this afternoon.

Screenshot 2015-07-02 at 2.43.08 PM

Follow @TJ_Politics for updates on Twitter. 

Related: Was Brian Cowen a good finance minister?

Read: Banking inquiry suspended as Charlie McCreevy clashes with Pearse Doherty

Read: Patrick Honohan: Brian Lenihan was “very cross” before I made THAT phonecall

Readers like you are keeping these stories free for everyone...
A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation.

Close
87 Comments
    Install the app to use these features.
    Mute KingBen
    Favourite KingBen
    Report
    Mar 24th 2017, 10:59 PM

    These people are known to authorities yet they still roam free? Should all known potential terrorists and their families and friends just be rounded up and deported? It would free up plenty of social housing and save tax payers money.

    126
    Install the app to use these features.
    Mute Ted Logan
    Favourite Ted Logan
    Report
    Mar 24th 2017, 11:01 PM

    Deported where? He was British.

    166
    Install the app to use these features.
    Mute Scorpionvenomm
    Favourite Scorpionvenomm
    Report
    Mar 24th 2017, 11:11 PM

    @Ted Logan: he wasn’t British

    36
    See 8 more replies ▾
    Install the app to use these features.
    Mute The Guru
    Favourite The Guru
    Report
    Mar 24th 2017, 11:12 PM

    @KingBen: are you aware of what it costs the taxpayer to monitor even one person? It’s completely unfeasible for them to keep all potential terrorists under surveillance.

    35
    Install the app to use these features.
    Mute Terry McClatchey
    Favourite Terry McClatchey
    Report
    Mar 24th 2017, 11:15 PM

    @KingBen: A person born Adrian Elms (or Russell or some variation thereon) born in the County of Kent in England. To where are you proposing to deport “these people”? I don’t think the Australians are still accepting convict ships. Have you a proposal to make or is that just ignorant and uninformed prejudice?

    105
    Install the app to use these features.
    Mute Fiona Ní Chormaic
    Favourite Fiona Ní Chormaic
    Report
    Mar 24th 2017, 11:45 PM

    @Ted Logan: Germany are about to deport two German born men to their parents place of birth, Algeria and Nigeria!

    45
    Install the app to use these features.
    Mute Bobby wilson
    Favourite Bobby wilson
    Report
    Mar 25th 2017, 5:08 AM

    @Ted Logan:.. if these people are extreme threat to ireland or any other country in Europe i don’t care where they send too or what happens to them their. all i care about is the safety of my family and friends and ireland and Europe which is paramount ..

    19
    Install the app to use these features.
    Mute KingBen
    Favourite KingBen
    Report
    Mar 25th 2017, 7:32 AM

    @Terry McClatchey: deport him to whichever country to which he identifies himself with, maybe Morocco for example? I don’t care really but one thing is for sure he didn’t add any value to the lives of British people so why keep his like there? That OK with you and your lefty liberal feminist views?

    9
    Install the app to use these features.
    Mute Jho Harris
    Favourite Jho Harris
    Report
    Mar 25th 2017, 8:23 AM

    @Ted Logan: His nationality is British according to reports but you have to love a country, respect it’s heritage and customs and most importantly you have no need to kill your fellow country men before you can claim the right to quote your nationality. Until you have looked into the eyes of a lone wolf, you will not see hatred based on twisted hatred. A lone wolf has no religious believes not alone on a bizarre ancient and dangerous cult.

    5
    Install the app to use these features.
    Mute Gerard Henry
    Favourite Gerard Henry
    Report
    Mar 25th 2017, 9:59 AM

    @Ted Logan: of dual nationality Germany are sending back two German born citizens to Algeria where their parents come from . This is the measures that is forced on us by these terrorists

    2
    Install the app to use these features.
    Mute Alan Kennedy
    Favourite Alan Kennedy
    Report
    Mar 24th 2017, 11:40 PM

    I’ll never understand how some people bite the hand that feeds them. Reminds me of the frog and the scorpion….. It’s in their nature.

    59
    Install the app to use these features.
    Mute James Guinan
    Favourite James Guinan
    Report
    Mar 25th 2017, 12:10 AM

    @Alan Kennedy: Or maybe he is being told that everyone around him is a bigot and racist by people looking to influence individuals such as this terrorist into action.

    23
    Install the app to use these features.
    Mute Alan Kennedy
    Favourite Alan Kennedy
    Report
    Mar 25th 2017, 12:21 AM

    @James Guinan: I always had a sense of right and wrong.Are you making excuses for this man full of evil and hatred?

    35
    See 8 more replies ▾
    Install the app to use these features.
    Mute Jho Harris
    Favourite Jho Harris
    Report
    Mar 25th 2017, 10:17 AM

    @James Guinan: If the think as you suggest there are perfect alternatives to migrate to such awful countries, find one that shares your twisted religious beliefs if you will let you in. Not trusting a religion who hates you because you don’t share their view is NOT racist, it is an understanding what Sharia law wants to do with unbelievers when the time (and the population) is in your favour. If you have children have a good look at sharia and an examine of The Q book and learn what your bleeding heart is trying to achieve. If I don’t want child brides (low as 8), if I cannot stand the idea of girls being have their genitals multilayer or when they grow up to be beaten if they disobey their husbands then that sees me as a bigot in your mind but that won’t allow me to give an inch to sharia.

    5
    Install the app to use these features.
    Mute James Guinan
    Favourite James Guinan
    Report
    Mar 25th 2017, 10:19 AM

    @Alan Kennedy: How is suggesting that individuals might be giving him a reason to kill others justifying his action? What a stupid assertion.

    2
    Install the app to use these features.
    Mute James Guinan
    Favourite James Guinan
    Report
    Mar 25th 2017, 10:22 AM

    @Jho Harris: What are you on about with migration? I am refering to our medias in the west constantly on about how awful the west is and all the islamaphobia they claim we constantly produce. On top of islamist preachers advocating for action in name of their horrible religion. How can you not understand such a simple comment?

    4
    Install the app to use these features.
    Mute Alan Kennedy
    Favourite Alan Kennedy
    Report
    Mar 25th 2017, 10:25 AM

    @James Guinan: Badly worded original comment James.

    1
    Install the app to use these features.
    Mute James Guinan
    Favourite James Guinan
    Report
    Mar 25th 2017, 10:27 AM

    @Alan Kennedy: How so? On review of it, it says exactly what I intended to say as concisely as possible. Maybe don’t assume everyone is an Islamist apologising progressive.

    1
    Install the app to use these features.
    Mute Dave O Keeffe
    Favourite Dave O Keeffe
    Report
    Mar 25th 2017, 11:51 AM

    @James Guinan: there can be little doubt that the flames of anger are stoked by others, possibly those that converted him.

    3
    Install the app to use these features.
    Mute James Guinan
    Favourite James Guinan
    Report
    Mar 25th 2017, 12:01 PM

    @Dave O Keeffe: I agree and I would speculate that it is not merely just stoking of those who converted him, but also an environment which lead him to be converted, in regards to the main stream media perpetuating false notions of rampant hatred, racism and various phobias. Not to mention how evil we are and complicite in the actions of the military and political figure ideolouges.

    4
    Install the app to use these features.
    Mute Dave O Keeffe
    Favourite Dave O Keeffe
    Report
    Mar 25th 2017, 11:02 PM

    @James Guinan: the flames are also stoked by those that actually do wonder about their daily lives threatening anyone that looks foreign. Remember the post Brexit postcards that people got in their letterboxes?

    1
    Install the app to use these features.
    Mute Peedur Dante
    Favourite Peedur Dante
    Report
    Mar 25th 2017, 12:19 AM

    Another unstable person has been manipulated by the isis internet cult and has committed multiple murders using mundanely legal weapons. The usual purpose of these type of attacks is to scare the general population into hating a minority and thereby force vulnerable members of that minority already on the fringes of society into the recruitment of the terrorists. London will keep a stiff upper lip, ignore the minuscule minority of terrorists and get on with things, and so should the rest of us.

    70
    Install the app to use these features.
    Mute George Roche
    Favourite George Roche
    Report
    Mar 25th 2017, 6:45 AM

    Wishy washy words

    17
    Install the app to use these features.
    Mute Peedur Dante
    Favourite Peedur Dante
    Report
    Mar 25th 2017, 10:48 AM

    @George Roche:
    Great insight there george, thanks for adding to the debate

    4
    Install the app to use these features.
    Mute Agrippa
    Favourite Agrippa
    Report
    Mar 25th 2017, 12:17 AM

    We should be reading about the victims not inadvertently glorifying this fcuk wit!

    69
    Install the app to use these features.
    Mute Ian Moloney
    Favourite Ian Moloney
    Report
    Mar 24th 2017, 11:03 PM

    Looks like the Californian three strikes and you’re out has unforseen benefits.

    32
    Install the app to use these features.
    Mute lez ferguson
    Favourite lez ferguson
    Report
    Mar 25th 2017, 6:56 AM

    At least one of them in Ireland is being deported

    19
    Install the app to use these features.
    Mute Amy Wallis
    Favourite Amy Wallis
    Report
    Mar 25th 2017, 11:00 AM

    @lez ferguson: the man’s British. There’s nowhere to deport him to.

    2
    Install the app to use these features.
    Mute Just Me
    Favourite Just Me
    Report
    Mar 25th 2017, 11:04 AM

    @lez ferguson: I’ll believe it when it happens.

    2
Submit a report
Please help us understand how this comment violates our community guidelines.
Thank you for the feedback
Your feedback has been sent to our team for review.
JournalTv
News in 60 seconds