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Mary Harney 'regrets mistakes' over financial crisis

Published 29/07/2015

Former tanaiste Mary Harney told the Banking Inquiry she could not rule out another financial crisis hitting Ireland
Former tanaiste Mary Harney told the Banking Inquiry she could not rule out another financial crisis hitting Ireland

Former Tanaiste Mary Harney would not rule out another cataclysmic financial crisis striking Ireland, she told an inquiry.

The ex-Progressive Democrats leader said she deeply regretted her mistakes in power during the run up to the crash.

Before the Oireachtas Banking Inquiry, she also admitted a raft of failings while in Cabinet.

These included allowing cheap credit to spiral out of control, trusting regulators who were responsible for keeping reins on the banks and also splurging public money.

Although she believes controls have been significantly tightened since then, she told the hearing she could not rule out a repeat of the economic collapse.

"If you were to ask me if we could have another crisis, I can't put my hand on my heart and say no," she told TDs and senators on the inquiry.

"But sitting where I sit now, I think we've done everything so far possible to avoid that."

Ms Harney said she was proud of many achievements in several coalitions before the crash.

But she admitted her governments should have foreseen the risk of an explosion on cheap credit caused by Ireland's entry into the euro.

Furthermore, the ex-tanaiste said political leaders were "very trusting" and "placed undue confidence" in financial regulators and should have been more sceptical about the consensus at the time.

Thirdly, she admitted her governments allowed public spending to "grow too quickly" on the back of taxes rushing in from builders during an unsustainable construction boom.

"We failed to pursue the hard remedies that might have avoided some of the pain our citizens had to endure," she said.

"I deeply regret all of those mistakes ... I regret in particular that we did not dig deeper and ask harder questions."

Ms Harney said the scale of reckless lending by banks could not have been imagined by government ministers "in our wildest dreams".

While she refused to be drawn on whether lenders lied to the Cabinet about the depth of their problems, she said former Finance Minister Brian Lenihan told her once "he was worried about whether he was told the truth".

Also before the inquiry, former Environment Minister John Gormley said his Green Party signed up to several austerity budgets in full knowledge it would lead to their "political annihilation".

The Greens had no part in creating the housing bubble but were forced to make the most difficult decisions ever foisted on a small party because of the fall out from it, he told the hearing.

"I regret we were forced to make these decisions," he said.

Mr Gormley blamed banking deregulation, poor oversight, property tax incentives, reckless lending and huge increases in public spending for the catastrophe that followed.

Corrupt and irresponsible property zoning practices also played a significant role, he added.

The former Green Party leader said they were met with condescending responses when they flagged concerns about the property market careering out of control during the boom years.

His party was told they did not understand banking when they highlighted the "economic insanity" of 110% mortgages, he said.

At one stage, he said he asked Mr Lenihan if there were contingency plans in place for Ireland in the event of a major financial upset.

"He told me matters were in hand," said Mr Gormley.

The former minister also insisted he was "across the issue" more so than other members of Cabinet, bar then Taoiseach Brian Cowen and Finance Minister Mr Lenihan.

He had challenged the consensus and taken a contrarian view, he told the inquiry.

Mr Gormley said he believed the banks knew they were insolvent but had misled the government at the time.

"I believe there were individuals in the banks who must have known there was a problem," he said.

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