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Dermot McCarthy, former top government official, 'burdened' by economic mistakes

Published 15/07/2015

The government considered nationalising Anglo Irish Bank in September 2008, Mr McCarthy said
The government considered nationalising Anglo Irish Bank in September 2008, Mr McCarthy said

Ireland's top government official during the boom has spoken of being "burdened" by failings which helped plunge the country into an historic economic crisis.

But Dermot McCarthy, chief adviser to former Taoisigh Bertie Ahern and Brian Cowen, said his regrets are soothed by his belief that he did his best in high office.

Before the Oireachtas Banking Inquiry, the former secretary-general to the Government and to the Taoiseach said he agreed with the findings of an official report into the crisis.

The Nyberg report, written by Finnish banking expert Peter Nyberg, was a "broadly convincing" account of failings by a wide array of people, including the public service, he told the hearing.

"Everyone who was in a senior position in the public service over the relevant period, including myself, is burdened by these failings and the deep awareness of their human consequences," he said.

Mr McCarthy said looking back now on the decisions he made as the country's most senior civil servant ahead of the banking collapse, he was forced to ask himself if he did the right thing.

"Like others, I'm challenged by the question as to whether I could have done more to avert the damaging outcomes from the crisis," he said.

"My regret is tempered only by the belief that I performed my duties to the best of my ability."

During his testimony, he pointed to Central Bank analysis at the time which predicted Irish banks were well buffered enough to withstand even extreme shocks.

An IMF report in 2007 reflected the absence of any sense of impending crisis, he added.

Echoing previous evidence at the inquiry by Mr Cowen, Mr McCarthy said the then Fianna Fail-led government considered nationalising Anglo Irish Bank at the height of the turmoil in September 2008.

But that was ruled out because of the risks involved, and it was agreed the lender could be taken into state control at a later stage.

Instead, the bank was covered by the infamous late-night blanket banking guarantee, which will cost Irish people 64 billion euro (£45.4 billion).

Asked about the two-year duration of the guarantee, Mr McCarthy said it may have contributed towards Ireland seeking a punishing EU/IMF/ECB bailout two years later.

"It may have done," he said.

"A time limited guarantee was always going to create an exit issue."

Mr McCarthy said problems with ending the guarantee were expected from early on in the scheme.

"There were attempts to avert that cliff situation from emerging but I think in practice it did contribute to the build up of those liquidity pressures in the latter part of 2010," he added.

However he said that did not mean the two-year time period was "inappropriate".

Mr McCarthy said he disagreed with reported remarks by Mr Ahern in October 2009 that the decision to create a financial regulator, separate from the Central Bank, was one of the main reasons for the banking collapse.

Asked if he took any responsibility for the model of regulation adopted in the lead up to the crash, he said he did not.

Mr McCarthy retired in 2011 with a pension package worth 713,000 euro (£505,250).

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