Tuesday 26 January 2010

Inquiry must examine political acts that stoked crisis

WHEN WAS it decided to call this inquiry into our financial crisis a banking inquiry? By limiting the description of what is under scrutiny, the perception may arise that the Irish banking and regulatory systems are the sole focus of inquiry, writes ELAINE BYRNE

In the Dáil last week, Brian Lenihan spoke of the need for “a comprehensive analysis, which will enable us to understand the origins of the crisis and help us to learn lessons . . .”

This absolutely includes a thorough, honest examination of the political decision-making which facilitated the circumstances responsible for the worst financial crisis in the history of this State. A credible inquiry must embrace an analysis of systemic governance and policy failures. This would include:

1. A complete list of tax reliefs/incentives granted by the Government to developers, investors and first-time buyers which stoked up the price of land, inflated the boom and overheated the market. For instance, the rural renewal schemes which contributed to 300,000 unoccupied houses in ghost estates and the property incentives for new hotels which Peter Bacon estimates has caused an oversupply of 15,000 hotel rooms nationally.

2. A detailed breakdown of the cost of these tax incentives. The 2000-2007 Special Incentive Tax Rate for developers has cost the exchequer €800 million, for example.

3. All documentation held by the relevant Government agencies and regulatory authorities relating to the decision-making processes which granted these tax incentives and that are relevant to regulatory policy. Why was long-term macro public policymaking forfeited for short-term micro interventions? Did Government routinely ignore the policy advice of senior officials or was such advice inadequate? Would an inquiry reveal malfeasance within internal Government decision-making as the Ombudsman’s recent report on the Lost at Sea scheme seemed to suggest?

4. The appointment procedures and legislative framework which allowed retired regulators to move on to bank boards and the practice of cross-directorships where chief executives became chairmen of companies, contrary to corporate governance guidelines.

5. A declaration of the financial liabilities of politicians. How many politicians, or their close associates, received interest-free loans or mortgages on favourable terms or loans received outside of normal lending practices? Prime Time Investigates outlined, for instance, how Charlie McCreevy, minister for finance from 1997-2004, was fast-tracked a €1.6 million mortgage. Standard banking procedures were also ignored in relation to loans to former Fianna Fáil senator Don Lydon, current Fianna Fáil Senator Francie O’Brien and Celia Larkin.

6. An examination of local government zoning decisions. John O’Connor, An Bord Pleanála chairman, described local councillors as responding to the “special pleadings of landowners and other vested interests” in his 2007 annual report.

7. The structure of local government funding which facilitated the financial dependency on development levies (worth nearly €600 million in 2005 and nearly €700 million in 2006) and if this reliance influenced erroneous planning decisions.

8. A full picture of how local and national elections are funded. The Council of Europe body, the Group of States against Corruption (Greco), issued 10 recommendations yesterday on the transparency of Irish political funding and “trading in influence”, also referred to as legal corruption.

Greco noted that it was “crucial that full party accounts, including itemised information on the total annual income and expenditure, debts and assets of political parties, are also made publicly available”. The failure to do so was “a significant shortcoming” by Irish political parties.

When interviewed for this report last year, I gave Greco my study of all disclosed donations made to the standards commission from 1997-2007. Of the €10.1 million spent by parties and candidates in the obligatory three-week accounting period before the 2007 general election (never mind that spent in the previous two years!) just €1.3 million was disclosed to the standards commission. That’s €8.8 million in undisclosed donations.

The study also showed that 40 per cent of Fianna Fáil’s disclosed donations came from developers and construction-related donors and that Fianna Fáil received about £68,000 (some of the money was in Irish pounds, some in dollars) from financial institutions between 1998-2000 including Anglo Irish Bank, the Seán Quinn Group, AIB and Irish Life. Why were banks donating to a Government party?

Greco concluded that “full transparency and openness” would help “strengthen public trust in political parties and political representation in Ireland”. Lenihan, by the way, failed to mention trust even once in his Dáil speech establishing the banking inquiry.

The Treasury Select Committee in Britain held an inquiry to “identify lessons that can be learned form the banking crisis” and received more than 6,000 written questions from the public. These questions were distilled and formed part of the public questioning of the chancellor, the governor of the Bank of England and the regulatory authorities.

John McFall, chairman of that committee, told RTÉ’s This Week “public engagement was hugely important . . . because the public are saying, wait a minute, the banks have gone belly up and we are paying for it. What’s the situation? How did we get into this situation?”

The Irish public does not have any such opportunity to engage in an inquiry which from the outset is perceived to lack legitimacy because of the decision to hold the investigation in private, unlike similar inquiries in the US and Britain. To that end, I have registered the domain name www.bankinginquiry.ie and perhaps the governor of the Central Bank, Patrick Honohan, would use it to ask the public what questions they believe should be asked.

Irish Times


No comments: