also attracted favourable comment from the public. I noticed that after Kilkenny there was a broadening in the range of people contacting my office, many of them from parts of the country that had no Labour representative. That was a good result for me, and things were starting to look better for the party.
There are times, though, when party perspectives have to be put aside. One such time had now come. It would blow all other considerations away. It was a calamity that would define Irish people’s lives for many years to follow; it would impact on the country’s viability and international standing more than any trauma since the Civil War; and determine Labour’s distinct place in Irish politics for my entire time as leader: the collapse of the banks.
At about 7 a.m. on Tuesday 30 September 2008, my phone rang and woke me from my sleep. A conversation something along these lines followed:
‘Good morning, is that you, Eamon?’
‘Yes. Hello.’
‘Brian Lenihan here. I hope I haven’t woken you too early.’
‘No, I was getting up now, anyhow.’
‘We’ve been working right through the night here with the Taoiseach and officials. We have a crisis in the banking system and the Government has made some decisions which I want to tell you about. I am also briefing Enda Kenny. We need to put legislation through the Dáil and Seanad today and we will need the cooperation of the main opposition parties, and I hope we will also have your support, as the measures are in the national interest.’
Brian went on to tell me that the Government had become aware the previous evening that there was an imminent risk to the Irish banks and immediate action was required. With the necessary legislative changes, there would be a State guarantee for all the major Irish banks and building societies.
I told him that the Labour Party would, as always, be cooperative in re-arranging the business of the Dáil to enable urgent legislation to be debated, but that I could give no commitment with regard to our support for it. The Labour Party would need to see the detail of what was being proposed and consider it. He offered to have officials brief us later in the day.
After the call, I alerted the Labour Party press office spokesperson, Tony Heffernan, readied myself for a busy day, and set out for Leinster House to meet staff and parliamentary colleagues. It was immediately clear that we first needed to know more about this guarantee. What banks would be covered? What amounts? What was the exposure for the taxpayer? Would any protection be built in for the public? Would there be changes in the banks? What would happen to non-performing loans, particularly those related to property? None of this was clear from the Government statement that was issued.
From the outset, I was sceptical about the guarantee. I think I surprised Pat Rabbitte early that morning when I told him I wanted to oppose the guarantee. Even before consulting with colleagues, I issued a statement early that morning that said as much. I said the Government was effectively writing the biggest blank cheque in history, exposing the Irish taxpayer to enormous liabilities. While the USA’s rescue package for its banking system amounted to around 6 per cent of its GNP, estimates of the potential exposure for Ireland varied between two and three times its GNP, perhaps as much as €500 billion. Aside from this, there was also a worrying lack of detail being provided as to the terms and conditions attached to such a massive guarantee. Finally, it wasn’t clear what authority the Government had to even make such an offer to the banks.
Throughout the day, my colleagues and I tried to unearth more information. Joan Burton and I went to the Department of Finance, where we were briefed by its head of banking, Kevin Cardiff. He was understandably exhausted, having been up all night, and he left us none the wiser. Indeed, he seemed unsure of what he could or could not say to us. He left the room at one stage, presumably to get instructions on such matters. He also objected to the presence of Colm O’Reardon at the briefing, which he said was confidential and intended for members of the Oireachtas only. But Colm stayed for the full meeting, and as we walked back across the car park, I said that Labour would have to oppose the bank guarantee.
By 4 p.m., we still had no details about the proposed scheme and no sight of the legislation. Meanwhile, I pressed the Taoiseach, Brian Cowen, for information at Leaders’ Questions. ‘I can see what is in this guarantee for the banks and their shareholders, some of whom have already made gains today on the strength of it,’ I said in the Dáil. ‘I can see what is in it for the six bank chief executives who between them earn €13 million a year. However, I cannot see what is in it for the people or the taxpayers who may yet have to foot the bill. If the Taoiseach is proposing to hand over the deeds of the country to bail out the banks, what are we getting in return?’
As the day wore on, through several informal meetings of TDs and staff in my Leinster House office, my colleagues and I increasingly felt that such a broad guarantee was not the right course of action and that the Party should oppose it.
The Bill was supposed to appear at 4 p.m., then at 5.45 p.m., then at 6.30 p.m.. The actual printed document was eventually circulated at around 9 p.m., with the debate to start at 10 p.m. and presumably to go on all night. By this stage, I was concerned not only about the contents of the Bill, but also about how a possibly heated, late-night Dáil debate could do further damage to the country’s reputation. I wondered about the international reaction if the debate was still going on when markets re-opened in the morning. I suggested that, therefore, only the second stage of the Bill, that is, its overall content, should be debated that night, and that the other stages be left for the following day. This, of course, would have the added advantage of allowing Labour more time to deal with our concerns and to focus public attention, for a second day, on what we now considered a very bad deal for the taxpayer. The Taoiseach and the leader of Fine Gael, Enda Kenny, agreed to the suggestion.
No vote was called at the end of the debate at about 2 a.m., so I decided to make the Labour position crystal clear the following morning at Leaders’ Questions. I told the Tánaiste, Mary Coughlan, that if the fundamental objections raised by Labour were not dealt with to our satisfaction, we would not support the Bill. ‘That would be most unfortunate,’ she replied, ‘but it is a matter for the Labour Party.’
Throughout that next day, Joan Burton, Pat Rabbitte, Michael D. Higgins and Emmett Stagg battled the Labour case, but the necessary assurances were not forthcoming. It would be some days later before we learned that so-called ‘dated unsubordinated debt’ was covered by the guarantee, amounting to a windfall for those who had been speculating in this form of bonds in the months before the guarantee.
When the vote was eventually called, there were 124 TDs in favour of the guarantee and just 18 against, all Labour. Fine Gael, Sinn Féin and Independents, including Michael Lowry and Finian McGrath, all voted with the Government. An inviolable guarantee, effectively underwriting all kinds of private debt originating in our banks, was now in place – with almost total support from the country’s two Houses of Parliament.
Sinn Féin were enthusiastic supporters of the legislation. Arthur Morgan suggested that it would ‘prove to be a move that other states will seek to emulate’, and the voluble Senator Pearse Doherty announced that his party welcomed ‘this decisive move … in the national interest’. Even as more problematic details emerged in the immediate weeks after, Arthur Morgan elaborated on Sinn Féin’s reasons for supporting the scheme: ‘We did so because we believed it was necessary to stabilise the State’s banking system. Our judgement has been proved correct. Since its implementation, Ireland has not lost a bank or been forced to bail out a bank with cash.’
How wrong Sinn Féin and the other parties were! They all focused blindly on the fact that a blanket guarantee from the
