Cowen’s resignation was curious. He talked, it seems, to none of those to whom he usually turned for advice that crucial afternoon, but, it seems, after holding back from challenging, he now felt obliged to contest the vacancy. It was a pointless exercise always doomed to failure. Micheál Martin, who had resigned a week earlier when his challenge to Cowen’s leadership had failed, was set to be the beneficiary, such as it was, of the Fianna Fáil leader’s resignation. Lenihan had been damaged by association with the bailout and by suggestions that he had conspired against the Taoiseach.
When I did get hold of him early that evening, he was dealing with departmental matters, but he realised that he needed a base from which to do some leadership campaigning. I invited him out to our house, in Ranelagh, where he spent three hours simultaneously negotiating a new timescale for the Finance Bill with the Greens and ringing Fianna Fáil TDs seeking their support for his leadership candidacy. In most cases, he was calling his party colleagues several hours after Micheál Martin or the other leadership contenders. Feeling a need for momentum in his already stalled and doomed leadership bid, he decided to call a press conference for the following morning. I worked up some words for that press event – the only lines I had ever written for him in fourteen years – and Cathy Herbert reworked them with us over email. In framing those few short pages, it was apparent to all three of us that Brian, damaged by the bailout and limited by his diagnosis, had little to offer Fianna Fáil TDs and Senators as leader, except to front a containment mission in the forthcoming election.
The following Wednesday Micheál Martin won, as predicted, and he did so decisively. There was further humiliation for Lenihan in the fact that a cohort of Brian Cowen loyalists threw their support behind Eamon Ó Cuiv in the leadership vote (not at Brian Cowen’s instigation, it should be said) and Lenihan was nudged into third place.
Brian Lenihan decided to stay and fight the 2011 election, although he knew Fianna Fáil would be out of power and he himself would struggle to be re-elected. He was privately critical of other senior Fianna Fáil figures, who he felt had walked off the pitch in the final stages of the match. He enjoyed that one last campaign and had a sense of reconnecting with his voters in what he used to call ‘the barony of Castleknock,’ but he was philosophical throughout, as Marie Louise O’Donnell captures in her essay in this volume. Brian was touched by the fact that the voters re-elected him and took it as a mark of the regard in which he was held locally. He knew also that there was an element of sympathy in that support: the voters of Dublin West had decided to shield him from one final blow.
For the short few months in opposition after the 2011 election, Brian was sanguine. He enjoyed the additional time at home greatly. He continued to visit Leinster House regularly and jokingly reminded colleagues and opponents that he had not yet gone away.
In late April 2011, we had our last chat in person over a quiet cup of tea in the Westbury Hotel. His form was very good, his mind was sharp, but his physical presentation was weak. Among the things we discussed that afternoon was his need to get down on paper his own account of some of the events of the previous years. We talked, in code, about how he should do so while the events were fresh in his mind, but, of course, we both knew it was for the purpose of the historic record before time ran out on him.
He was content that he had already given his take on the background to the Bank Guarantee at the meeting of the Joint Oireachtas Committee on Finance and the Public Service on 26 February 2009. He had also dealt extensively with the economic and international dimensions of more recent events in an off-the-record interview with Dan O’Brien, for BBC Radio Four, some weeks previously. He had cleared a short extract of that interview for broadcast in a documentary O’Brien made on the bailout and he was shortly to receive a transcript of the entire interview to decide what to do with the rest of it. He had a sense, however, that he still needed to give his perspective on the political dimensions to many of the key events. We agreed that, when the Whit break in the court calendar came in early June, he would come and sit before a tape recorder in my offices near the Law Library and I would prompt his recollections on his time as minister and get it typed up for him. It was not to be; fate had a different momentum.
As we said our goodbyes outside the hotel, he to head to Leinster House and me to the courts, I took a last minute notion to walk with him over to Kildare Street. I was concerned, I suppose, in part, that he might not be physically up to getting there safely, but concerned, in reality, I think now that I might not see him again. As we strolled the few blocks, I noticed that people stopped as he passed – in their eyes I saw recognition, then affection and then concern.
After that I didn’t ring him, but waited for him to ring me for fear I might be intruding. We spoke a couple of times on the phone. They were short conversations, in which he struggled to be animated and, in which, I dared not ask him whether he was at home or in the Mater because to hear he was at home would probably have been more upsetting. The last such call faded out on some talk of a Fianna Fáil front bench reshuffle.
1 THE DOCTOR ON DUTY
ALAN AHEARNE
BY THE TIME BRIAN LENIHAN arrived at the Department of Finance in May 2008, the Irish banking system was doomed. Over the previous five years, the domestic Irish banks had ballooned their loan books to a staggering €400 billion from €150 billion in 2003. Most of this new credit was extended to the property sector, including a nine-fold increase in lending for speculative development and a doubling in mortgage lending. Lenihan remarked that unlike other capital cities around Europe, there were no foreign buyers of property in Dublin during the boom years – a tell-tale sign that real estate was overvalued.
The banks funded this lethal expansion in credit by borrowing on international money markets. They attracted corporate deposits from all over the world and sold large amounts of bonds and commercial paper. They pumped this money into the Irish economy, thereby fuelling a surge in consumer and government spending. Ireland’s banking bosses gambled everything on the expectation of a soft landing in the property sector and continued benign conditions in international funding markets. Few people shouted stop. The domestic property crash and international financial crisis revealed in the starkest terms the recklessness of the banks’ business models and the failures of those tasked with regulating the banking system.
Now the chickens were coming home to roost. Ireland’s banks were about to hit the wall. Lenihan would spend nearly the next three years performing radical surgery on the Irish banking system. The international experience with systemic banking crises provided some guidance, but the complexity of the emergency facing Lenihan was unparalleled. Ireland’s banks were unusually large, with loans standing at more than twice the country’s total annual income. They had grown exceptionally dependent on international funding markets, just as the global financial system plunged into the most severe crisis since the Great Depression. An additional dimension to Ireland’s crisis was the country’s membership of a poorly constructed – and at times dysfunctional – currency union. The external environment and the rules of the game were constantly changing. Decisive, courageous and difficult decisions would be required to stave off disaster.
THE BANK GUARANTEE
I first met Brian Lenihan at his office in the Department of Finance in August 2008. Property values were already falling, the construction sector had come to a ‘shuddering halt,’ and the banks were struggling to fund themselves on money markets. During a wide-ranging discussion, I found Lenihan remarkably frank. It was clear to me that he was working on a plan. Among other things, we discussed the pros and cons of using money from the National Pensions Reserve Fund to strengthen the banks’ balance sheets. We agreed it was crucial that Lenihan had an accurate picture of the financial condition of the banks. We spent some time discussing the prospects for Anglo Irish Bank and Irish Nationwide Building Society – the two financial
