BRIAN LENIHAN has complained that the Department of Finance lost power and influence in the run-up to the credit crunch that fuelled the current banking crisis – when it was run by Brian Cowen.

“The powers of the Department of Finance were substantially reduced during that long lead-up period to the actual economic difficulty,” the minister said.

The comments – to be broadcast on Today FM’s Sunday with Sam Smyth show this morning – have caused a stir in government circles with a source being forced last night to defend them.

“I think [Lenihan] was referring to the fact that a lot of power was transferred to the Taoiseach’s department,” the source told The Sunday Times.

“When you’re in an overblown economy there is huge pressure to spend more and more money and it’s politically very difficult to say ‘no’ to demand on hospitals or schools.”

Lenihan did not solely reserve criticism for the role of his own department, however. In the interview, he also slams officials from the Central Bank, who backed up the ultimately incorrect views of former Central Bank governor Patrick Neary about Anglo Irish Bank.

He denied, however, that he was trying to make excuses for decisions made at the time, drawing a peculiarly aquatic analogy:

Money was freely available for a long period of time… it’s only when the water went out of the lake, if you like, that various islands became exposed as not having a proper foundation.