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Sunday 10 December 2023 Dublin: 8°C

'We've spent hours in the basement of Leinster House trying to find out what happened'

The final report from the banking inquiry is to be released today.

THE ANTICIPATION OF the release of the report of the Joint Oireachtas Committee of Inquiry into the Banking Crisis has not matched the anticipation preceding the setting up of the committee.

The Irish people deserve answers as to why the banking system collapsed, with so many repercussions for the citizen. More than that, they wanted reassurance that such a crisis would not reoccur, and that systemic political and economic failures were being addressed.

This was the general understanding of the purpose of the Banking Inquiry. However, over the course of the committee’s proceedings, it has become clearer and clearer to members that the inquiry’s scope would be severely restricted and that the finished product would be far from satisfactory.

Making sure it never happens again

The majority of my time over the last 12 months was spent in the committee rooms in the basement of Leinster House trying to find out what happened to the Irish economy and how to prevent it from happening again.

Unfortunately, while the past was very clearly taken apart for analysis, the necessary questions were never addressed with respect to the future. Much of this had to do with certain logical fallacies, that are sometimes called “brain bugs”.

This is where people think they are being sensible, but in fact are very methodically walking into the wrong answers and decisions. This has unfortunately become part of how policy formation takes place in Irish politics.

Leinster House is not particularly open to the clash of ideas or to the critical analysis of different policies.

Policies, be they budgetary or legislative, are served up like room service by the Civil Service courtesy of their Minister. The Government expects nothing more than a brief perfunctory and cursory acknowledgement and that business will not be disrupted by too many hard questions. When discussions take place they often take the form of the depressing “Punch and Judy” show that infuriates citizens and does little for the dignity of parliament.


This is in part due to the iron grip of the whips and a tradition that rejects a politics of ideas for poll-booth pragmatics. This rather unfortunate situation was highlighted recently by the OECD, which found Ireland’s parliamentary oversight of budgeting to be the worst in the OECD 30.

It is little wonder that secret legislation that would eventually destroy the country’s economy could be drafted months before the guarantee.

The inquiry did not even recommend how to prevent a re-occurrence. A large part of this is party discipline.

Fundamental change is needed 

To make parliament truly accountable and engage in useful scrutiny of policies, fundamental changes to the whip system would be needed. The “room service” approach to policy would have to end. Such changes would be abhorrent to both the senior cabinet members and the senior ranks of the civil service.

The fear of facts is important to consider. Here, facts that would contradict presupposed conclusions are to be avoided at all costs. One of the major flaws in the final report of the banking inquiry is the lack of reliance on empirical data.

While the move in most jurisdictions has been towards “evidence-based policy” the unwillingness to face and deal with facts and information in Ireland is stark.

Civil servants and bankers also developed allergic reactions to maintaining and creating their own data in the form of minutes or aide memories of crucial meetings with ministers, senior officials or on the night of the guarantee. The final report lacks data.

The crisis itself was brought about by a lack of data and the inability to analyse and interrogate the data that existed at the time. In the original draft the importance of testimony was so paramount that errors made by witnesses were allowed to stand unchallenged.

Ireland Financial Crisis Peter Morrison Peter Morrison

Desire to avoid a paper train

The only solution was to excise the text if errors were not to be given credence. The desire to avoid a paper train was extremely strong in the past and the inquiry’s final report makes a minor recommendation on this point, but does little else to change this cultural habit.

Another brain bug that dominates the Irish policy-making community is that of the outsourced brain, an outsourcing which very quickly leads to an outsourcing of responsibility. Here the desire to be glic versus cliste results in a denigration of the technocratic skills required to govern a modern state.

It became apparent that in the past and as well as in the present, the Irish policy-making community delegated or relied very heavily on outsiders to do their thinking and decision making. Sometimes this took the form of consultants, especially for very complicated work beyond the capacity of a generalist civil service.

This was clear in the guarantee. In most cases this outsourcing of thinking was to the European Commission and ECB. The Commission especially was seen as the font of knowledge and policy. The eurozone was entered without much thought to its implications. The operation of the currency from 1998-2008 was not questioned locally and when the crisis happened solutions were sought and recommendations followed from Europe.

The Irish policy maker was the local agent of ideas formed elsewhere. Part of this was due to the size of the Irish economy relative to the eurozone as a whole, but much of it was the result of not having officials and ministers that were capable of debating with their European counterparts.

river (8) Patrick Neary

The preference for deferring to European authority still remains and much of the inquiry’s lack of engagement with the new Banking Union has as much to do with it taking place in 2014/15 (ie outside the terms of reference) as the fact that Ireland feels that it has such a limited role in the new financial architecture of the Europe.

The fear of legal action 

The final brain bug relates to fear of legal action. It makes perfect sense to avoid litigation, but when it becomes your raison d’etre then you have lost the case already.

The legal profession has successfully ensured that the power of parliament to investigate and make findings of fact has been reduced to near nil.

While I would never advocate that the separation of powers be violated and the parliament take on judicial powers I believe that parliament has a role to play in developing policy and that requires making findings of fact and conducting investigations.

The US Congress and UK Parliament have both shown how important this process is to public accountability and better regulation. The additional fears of violating the right to one’s good name has caused the secretariat to use circumspect language and to avoid the inclusion of many comparisons and items of information due to litigation concerns.

This is not how a healthy separation of powers operates with the legislature living in fear of the judiciary.

All these brain bugs resulted in a report that is rather anodyne and lacking in real policy recommendations.

Ultimately, the banking inquiry did not put in place recommendations and findings that would enable policy to change in Ireland. The facts were largely known. The true details are still hidden in the documentation collected for the inquiry. The value of the process was that we received a glimpse of how problematic the system of oversight and scrutiny in Ireland was and remains.

The dysfunctional cultures in official organisations, the disregard for facts and differing viewpoints in the public and private sector and a legislature that is encouraged not to think, argue or investigate is visible for all to see.

In order to truly move on from the disastrous years of 2008-13 and never lose our economic sovereignty again those fundamental “brain bugs” must be quashed.

Business as usual has become the order of the day, reform fatigue has set in and the seeds of the next crisis are already being cultivated. I have published a paper, A Way Forward: The Future of Irish and European Union Financial Regulationwith my concerns on the inquiry in more detail and welcome any questions on that and on the process as a whole.

Senator Sean D Barrett is an Independent member of Seanad Eireann for the University of Dublin, Trinity College constituency. He was a Senior Lecturer in economics at Trinity College Dublin for nearly 40 years. He is a member of the Committee of Inquiry into the Banking Crisis. 

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