Central Bank ‘watered down’ warnings of property bubble
Tom O’Connell told the Oireachtas probe into the financial crisis his weekly calls to rein-in the banks because “things are going crazy” were “blocked” from reaching the top of the bank because of the political and property interests on its board of directors.
Mr O’Connor who was assistant director general of the Central Bank until 2009 said the institution was heavily weighted with political supporters of the Fianna Fáil government and its chairperson was too close to the Finance Department.
The bank’s former chief economist insisted the crash could have been avoided if its top brass had acted to stem the clear “property mania” in the five years before the 2008 crash.
“As land and property prices escalated to bizarre and absurd levels, I had written, in a low key way for the bank’s comment in its quarterly bulletin, that there was a need to consider the issue of rezoning more land for building in order to increase housing supply.
“That was blocked from reaching a higher level in the bank in the light, in my view, of political and property interests on the bank’s board,” Mr O’Connell told the Oireachtas hearing.
Mr O’Connell said the Central Bank had “little or no contact” with the Irish banks, adding: “In the Central Bank, we had no knowledge of the large exposures of the banks to individual developers — such data were rigorously concealed from my level in the bank.”
He insisted it was wrong to suggest no one noticed that a bubble was developing.
Mr O’Connell said one member of the Central Bank’s board did have “grave doubts” about what was happening. “His words ring in my ears to the effect that ‘it was all a house of cards and would all end in tears’.
However, his views appear not to have had any impact on policy-making in the bank,” Mr O’Connell said.
The Oireachtas committee also heard from former acting financial regulator Mary O’Dea that when she took over the body in 2009 it was in “crisis”. Ms O’Dea said the regulator’s reporting of transactions involving Anglo to gardaí in 2009 added to a strained relationship with the bank.
“Sending a full investigative team into Anglo elicited what I believed was a defensive response, and early in the investigation I required the full Anglo board to meet with me in relation to my concern about the level of co-operation,” she said.
