It has been a common narrative since 2008 that the decision to guarantee the banks was a late night decision, taken perhaps in the heat of the moment for fear of the entire banking system collapsing if we did nothing (or acted on a set of alternative proposals provided by Merrill Lynch).
However in another tape released by Tom Lyons and me yesterday in the Sunday Independent this narrative is somewhat dented. In the days prior to the guarantee, and in a phonecall likely made between September 24-26, 2008, John Bowe from Anglo spoke to a senior official in the Central Bank.
Bowe: …[The Regulator has been asking]’So when are you going to run out of money’? And this is our best guess as to how these things unfold.
Bowe: Making assumptions obviously contractual stuff is rolling off and then we’ve made assumptions around the customer stuff. And that, that if you like gives us a point of time which is, which is Monday.
[Silence] Official: That, that by Monday you will be out of collateral?
Bowe: By Monday, we would, yeah, exactly.
Official: Ok, em.
Bowe: We will be out of cash and collateral.
Anglo were projecting they would run out of money on Monday, September 29, 2008, and if they survived Monday via money market funding they said they would certainly be in trouble on Tuesday September 30, 2008. How well prepared was the Department of Finance for this eventuality? How did they factor this news in, if at all? How panicked was the decision to guarantee?
This information is by no means a smoking gun, but it does add to our understanding of events that week.