David McWilliams to give evidence at the Banking Inquiry - time changes

Kieran O'Donnell

How many times did you meet him?: twice - 17th of Sept and 4th October - not before or since
How many phone calls? 10
What did you discuss? I was in China, I did not know what was going on?

21st Sept article: A blanket guarantee

28th @Sept: You repeated it. When did you write it.

It's almost identical.

McWilliams: I was never a civil servant or advisor. I was one individual writing about what was going on. There were dozens of paid advisors deep in the system. They missed the whole thing.


I said I wasn't sure if it would work, but it was the only option.

O'D: How do you reconicle that with "Burn the bondholders"

McWilliams: The history of guarantees. ..

O'D: You Bondholders should be burned - but you recommended a blanket guarantee - all depositors and creditors - The banks would come crashing down. This is at variance with your previous view.

Mc Williams: You are really mixing things up. another rigmarole

(At last someone is really probing him )
O'D - what happened at your meeting of 4 October where your relationship obviously went sour

McWilliams: Nothing . I kept saying "make it conditional. Don't be openended. We don't want to pay off risk capital.
 
Senator Susan O'Keeffe (Labour)

(I missed the question)

Only 4 people can pay for a bank
1) the taxpayers of Ireland
2)the taxpayers of Europe
3) The ECB
4) The creditors
.
O'Keeffe - Did no one ever say to you over the years: You are right.

McWilliams: No, but now it's very gratifying when people come up to me in a pub and say "thanks. I was going to buy a house but decided not to after watching your programme"

In 2005, Enda Kenny asked me to address the TDs

2006 - I met Joe Higgins and his party. So the extreme left and the extreme right.

O'Keeffe : How did he leave your house after the coffee and garlic
McWilliams: I felt sorry for him. How did I feel: If he was not apprised of the facts, we would have a crisis.
 
Senator Michael D'Arcy

McWilliams: Reality was denied at every stage

I thought why did Gormley not have his own advisors. He called me and I told him I was in china. It struck me as odd why did he have to ask a guy in china what was happening in Ireland

I told him that everything he had been told was wrong. Soft landing. Good economy.

D'Arcy : Did you get the impression that there was the expertise available in the Central Bank and Dept of Finance
mcWilliams; Obviously there wasn't.

D'ARcy : You didn't see the PwC reports.
McWilliams: I had no private access to documents.

D'Arcy : Feb 2009 - there was a 50% write down in NAMA. How do you reconcile that?

McWilliams: I can't.

D'Arcy: What about the put downs in the public domain - how did you respond?

McWilliams: It was very hurtful. My mother - Irish mammies read this stuff - People write very nasty personal stuff. But I get emboldened by that sort of carry on. We are big boys.

D'Arcy - the 14 blanket guarantees. How does the Irish rank?
McW: Average cost was 27% of GDP. Ireland will also be around there.
 
Eoghan Murphy Is there a relationship between donations and political decision making

McWilliams: You wouldn't give sweets to children without expecting something back. [ BB: what a weird point!]

Murphy: You say that 71% of donations [to FF?] came from property developers.

McWilliams: This is not exclusive to FF. The former leader of FG had debts written off by AIB.

[ It's all very repetitive now]
 
John Paul Phelan again


McWilliams: The best banks will go insolvent if you they become illiquid

Phelan: You said in your book "The MInister indicated that the problem was in AIB" did that not indicate an insolvency issue.

McWilliams: Not it was an illiquidy issue

Phelan: In 2009, The minister said: " He said he contacted me through my brother Conor. "
 
Doherty: You said it was obvious for anyone with training.

In Jan 2008, UBS indicated a sell recommendation on AIB and BoI. 34% of the worth of the Irish banks were stripped off within an hour.

McWilliams: UBS would have had a bank analyst.

Doherty: Is there any excuse for those who did not see it?

McWilliams: If you are an immunologist and you miss a plague , what do you think that people will think of you?

Doherty: In 2008, you said it was a coup d'etat. Can you back that up.

McWilliams Played an extract from Prime Time in 2003 again)

Doherty: Where is your evidence that the government supported this coup d'etat.
 
Chairman

There is another reason for not nationalising. You have to be careful with taxpayers' money. The beauty of a guarantee is that you use no money not a penny.

McWilliams: That article was explicit. It said it does not carry any cost right now.

Chairman: Do you think that they underestimated the cost of the guarantee.

McWillams: No, because I was talking about the immediate cost

chairman: Did you ever get anything wrong

McWilliams: That is a trick question.

Chairman: Give me an example

McWilliams: I get things wrong every day.

Chairman: What is your outlook for the future.

McWilliams: We were unprepared in 2008. We are better prepared now.
 
Jayz Boss how do you type that quickly

Initial reactions.

Despite his best efforts this was no lap of honour for McWilliams. What an ego! The chairman kept telling him to rein him in. Only his mother could love him

The Chairman was good, Phelan was good, Matt McGrath was good, Fierce Doherty disappointing, Higgins and the rest only put McW back in his comfort zone of talking about historical metaphors and how he was a lone voice.

He couldn't escape his basic contradiction on the blanket guarantee. If he was so convinced that this was a massive bubble, then he would have to be convinced that this was more than a liquidity problem, it was a deep hole in the banks' balance sheet. He squirmed and squirmed when asked was it a solvency or a liquidity problem.

I don't think anybody bought his flimsy argument that the guarantee was not the one that he advocated. He pedals this ridiculous line that he wanted a conditional guarantee. Let's see how this would play: "we guarantee all the liabilities so long as the banks are not insolvent", yeah that would have worked, I don't think

He wouldn't even with hindsight admit that he had underestimated the cost of the guarantee - his reply "it didn't cost anything immediately". Pathetic.
 
Duke of Marmalade said:
Jayz Boss how do you type that quickly
Click to expand...

I had plenty of time. He actually said very little. It was mainly long stories, which I did not need to reproduce.

That was the very first I heard of the "It will not cost anything... immediately".

I don't like the format of the enquiry. A barrister would have skewered him.

Brendan
 
He was more right than wrong which is the best most commentators hope for. For 3 hours on the platform, he did pretty well and he was a voice in the wilderness for a long time.

"He squirmed and squirmed when asked was it a solvency or a liquidity problem."............. but he did answer it in a way that most could understand.

He was not on trial.
 
Hi monagt

I defended him in the past on house prices, but it was pointed out to me that he had been saying we were in a bubble since 2008. House prices rose by 250% before falling back by 50%, so he was clearly wrong initially.

He has no idea about tracker mortgages. Look up his tracker time bomb comments.

And he was hugely wrong on the guarantee. He is trying to rewrite history but he won't get away with it under any sort of analysis. It's easy enough for him to outtalk the Banking Inquiry. But compare what he wrote at the time to what he now says he wrote and you will see that he clearly intended to include all bondholders and that it would cost us nothing. He is qualifying that now by saying that it he meant to exclude subordinated bonds as he considered them shareholders and he meant that "there would be no immediate cost".

What's worse is that he is not consistent. He claimed that the house price bubble would bring down the banks, but then he said that the banks were solvent and should be guaranteed.

Brendan
 
y He didn't answer it, he was worse than any politician, he kept answering a different question and he didn't fool a committee full of politicians. He kept answering that without the guarantee the banks would definitely be insolvent. That was not the question. Did he think the were insolvent at that time with or without the guarantee?

McWilliams' big ego problem is that his perceived biggest mistake is that the blanket guarantee was in fact his "masterstroke" although he himself applauded Lenihan for it. He has spent the last 5 years trying to wriggle off that hook. He has concocted a completely unconvincing revision which says that it was not the guarantee as he envisaged it. His masterstroke would have made the guarantee conditional on the banks remaining solvent. So:

1) What sort of guarantee is it which says we will guarantee you so long as it doesn't cost anything? McWilliams says he meant the guarantee to be a holding plan until the facts were known, and then when the facts did become known, the guarantee could be pulled. How can McWilliams think anyone will swallow this line?

2) By his own analysis over the previous years the banks were going to end up hopelessly bust. Yet it is clear that he actually thought they only had a liquidity problem. He did not after all think they were bust.

3) So the very legitimate question is did he, in recommending the masterstroke, think the banks were insolvent as he predicted they would be?

The chairman harried him at the end to name any mistake he had made. Normally I would regard that as a bit unfair but the fact is McWilliams made one terrible howler over the guarantee and no-one on the committee were at all convinced by his attempt to wriggle out of that. What a stark contrast to John Fitzgerald who had the grace to admit he got it wrong.
 
RTE reports very fairly on the performance

http://www.rte.ie/news/2015/0226/682945-banking-crisis/

He later told the inquiry that he suggested to Mr Lenihan a holding blanket guarantee to buy time to find out the facts, but he said the guarantee should have been rescinded some months later.


He also said at no stage did he suggest it should include subordinated debt.


Mr McWilliams said that in March 2009, he wrote that the guarantee should be rescinded as he was worried that an emergency measure to protect depositors would be used as a cloak to protect bank creditors.


It doesn't look as if the other media are going to challenge him

http://www.independent.ie/business/...apse-was-absolutely-preventable-31023747.html

http://www.irishtimes.com/business/...s-crisis-was-absolutely-preventable-1.2118324
 
Duke of Marmalade said:
What a stark contrast to John Fitzgerald who had the grace to admit he got it wrong.
Click to expand...

That is a really good point.

I didn't watch John Fitzgerald, but I gather he got hammered for doing the decent thing, and admitting that he made mistakes.

Whereas McWilliams rewrites history and, although the politicians probably didn't believe him, he has probably gotten away with it.

It will be interesting to see how the TV and radio news deal with it.

Brendan
 
The RTE News at One unfortunately focussed on McWilliams lap of glory - how he predicted it all. The committee were far more focussed on his role in the guarantee. I got the impression that they had allowed him his lap of glory as a sort of concession so as to be able to quiz him on his relationship with Lenihan. It is clear the witnesses get advance notice of the tone of the inquiry. Thus McWilliams used most of his long winded pre-amble to set up a case that the damage was all done from 2003 on and that what happened in September 2008 was by that time almost inevitable. In that I actually agree with him. I think he did call the bust, albeit it was the tenth bust out of one that he did call and I actually think that the blanket guarantee was, if not quite a master stroke, inevitable. Sure it could have been fine tuned to exclude subbies and maybe even Fingers' outfit but by and large this guarantee was needed. And if I was on that stand I would state clearly that (a) I believed the auditors etc. that it was just a liquidity problem and (b) even if I knew then what we all now know about Drummer's outfit I still would have thought that something like a blanket guarantee was needed. Letting Anglo go bust would have caused absolute mayhem.

It is the fact that, seeing the widespread populist belief that the blanket guarantee is the cause of all our woes, McWilliams is desperately trying to distance himself from his baby I find so nauseating. David, you were by and large right, have the guts to stand up to the populist narrative and defend your advices to Lenihan, even if it lessens your aura of infallibility.
 
The crazy lending by Anglo and Irish Nationwide were the main causes of the losses.
The cost should have been borne by the depositors and bondholders in Irish Nationwide.
The other banks should have been guaranteed and the loss would have been much smaller, and might even have cost us nothing.
The McWilliams full guarantee of everything put the cost onto the taxpayers.

My problems with McWilliams is
1) He said at the time that the guarantee would cost nothing - he was wrong.
2) He now claims that he never said it would cost us nothing, just that it would cost us nothing immediately. This is the first I have heard this argument.
3) He says that he did not intend for the guarantee to include the subordinated bondholders. However, that is not what he said at the time. He clearly said "Everyone except the shareholders". Bondholders are not shareholders. And anyway, I don't think we lost that much to the subordinated bondholders. The big losses were due to paying the senior bondholders and the depositors.
 
I'm assuming that the Committee supplied 2 chairs at the hearing. 1 for David and 1 for his ego!
To a large extent I accept that for years his was a lone voice in the wilderness and when I read his book "Popes Children" in 2006 I was impressed by the truisms underlying his illustrations of high living and over-spending.
His problem is that he is a "One trick pony". Very similar to Shane Ross he iterates and re-iterates the same mantras and is totally unwilling to accept that he did at time get things wrong. To go back to our friend "Chicken Licken" if you constantly sound the warning klaxon sooner or later you will be proved right. However, it's the more astute person who rather than repeat the "I told you so's" starts to work on finding solutions after the sky does fall! DMcW has now lost his relevance and much of his credibility and would be better served to look towards the future and how to improve matters rather than complain that our problems would not have happened had we heeded his advice in the past.
 
Didn't get to see this. But the main thing that interests me is (1) did he mention he worked in the Central Bank and (2) did he make any reference to soccer / football? It seems EVERY article he writes contains one or both of these...
 
Firefly said:
Didn't get to see this. But the main thing that interests me is (1) did he mention he worked in the Central Bank and (2) did he make any reference to soccer / football? It seems EVERY article he writes contains one or both of these...
Click to expand...
Yes to both

The really incredible part of his revisionist view of what he was advocating is that he claims it was only to buy time until the facts were known. Now that means either one of two things:

a) By time he meant only a few weeks or months. But he admits that two years was acceptable to him, so if he really meant a few weeks or months that means he intended the State to rescind the guarantee at its discretion, once the facts are known.

b) By time he meant the full two years. But that's exactly what happened. By the time the two years were up the bondholders had flown.

I think he means the former. He keeps harping on the fact that he wanted a conditional guarantee. Let's not confuse that with the subbies, which is the real red herring in this whole debate. From his evidence this morning he seems to have meant "conditional on the banks being solvent". In other words he wanted a guarantee for a while until we look at the books. He even claims he was right in that the liquidity crisis was addressed but that the guarantee should have been structured to be rescindable once the "facts are known". But that is preposterous. What sort of a guarantee is that?

A bad day at the office for David, I fear.
 
Get out of here Firefly.........you must have seen it??!! Otherwise, you should go into the prediction business yourself!

There was one part of the enquiry structure that I particularly didn't like - which was the way that each member of the committee had an allocated time. It often took a large amount of this allocated time in order to contextualise some key point - in part due due to the time required by McWilliams to remind us how lucky we all are that he liveth among us. This meant that before the specific pertinent question could be asked, the Chairman was already out with the stopwatch. All this meant that McWilliams could waffle on and not be repeatedly and robustly challenged on key issues. Accordingly, I think it would have been way better if the committee had agreed between them, in advance, the key elements that they wished to address and then pursued these more thoroughly - rather than everyone having their 5 minutes of fame approach.
 
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