Cowen's meetings and Anglo problems

Right at the end of Leader’s questions last week, and with reference to his meetings in 2008, Mr Cowen said:

That would have been organised by Fintan Drury who organised the golf outing. It was about being able to sit down with people at the end of the day and having a chat about the economy. The Deputy will recall we had a mini-budget and saw recession on the horizon and a big slowdown in our economy. As Taoiseach, I was there chatting to see if there were ideas and to find out other people’s views of things and to see if things could be done which might be helpful. As the Deputy will know, those people would have some views on that. That was basically the total sum of it.

Except the ‘mini-budget’ was not held until April the following year, almost 10 months after the golf outing. I also don’t recall much in the way of pre-recession planning in the works by FF in the summer of 2008. As I recall the party was still getting over the euphoria of a new party leader and new Taoiseach. The way the Taoiseach talks about it here, one would be left with the impression that the mini-budget had happened, the economy was spiraling out of control, and he was seeking the views of some businessmen/bankers on what to do.

But the meeting took place before Lehman, before FF realised the extent of the crisis and before the recession took hold. This means that either Brian Cowen doesn’t remember the meeting, or else when it took place. Or he is just spoofing.

In relation to the NTMA, Vincent Browne also raises some interesting questions in relation to Michael Somers’ interview last week:

So now we know the following:

In 2007 the NTMA came under considerable pressure from the Department of Finance to deposit more funds with the banks;

So severe was the pressure that the then head of the NTMA, Michael Somers, sought legal advice on what he should do;

The NTMA did not buckle under the pressure;

The bank, perhaps the only bank that needed funds urgently in 2007, was Anglo Irish Bank;

David Drumm, then CEO of Anglo Irish Bank says Brian Cowen had been asked to help with the NTMA and had expressed annoyance about the obduracy of the NTMA;

Brian Cowen denies he made any representations on behalf of Anglo.

Interesting.

However this document has also been doing the rounds lately, as released to the Public Accounts Committee (worth a detailed look):


And just one more thing. If as early as 2007 Anglo Irish Bank was having liquidity problems, as now seems clear, and if the NTMA refused to increase deposits at the bank, who then, provided liquidity? (most likely around the time of the Northern Rock crisis, a bank with similar issues to Anglo).

Perhaps a clue lies with our own Central Bank. For around that time, the ‘Other Assets; of the Central Bank increased dramatically for a period of three months. Here’s a graph of the those assets from September 2006 (around the property peak) to late 2008 (pre Anglo nationalisation but post guarantee)

Interesting. In July 2007 the other assets stood at €3.8bn. By late September they had almost quadrupled to €12.3bn. Just what was this for? At the time this was a record for the Central Bank, a record that in recent months has long since passed (other assets in December stood at €51bn).

Northern Rock was forced to go to the Bank of England for funding on September 14, 2007. Was Anglo also receiving funding, and was a quiet bank run underway? How aware was the Department of Finance and the government of problems at Anglo in September 2007 and the months that followed?

1 thought on “Cowen's meetings and Anglo problems”

  1. While there wasn’t a mini budget, there was a set of mid-year cuts announced in early July. It’s revealing that Cowen thinks of this as a mini budget, since even at the time, there was thinking that a full budget was needed. The forecasts in the Minister’s announcement of course look naive now.

    One point of interest in the NTMA memo is that it reveals some mental block that the government had in the central bank providing more liquidity assistance, which it was already doing at the time and is doing on massive scale now. Why did they think they might need NTMA as well?

Leave a Reply

Your email address will not be published. Required fields are marked *