Central Bank In Constant Denial Over Banking Crash
In this recent BBC interview the governor of the central bank Patrick Honohan said that he doesn’t count out the possibility of another financial meltdown because the Irish people do not seem to learn lessons from previous disasters.
He believes “the processes that led ordinary people … to make catastrophic mistakes … need to be burnt into people’s psyches so that they won’t take risks like that again”.
“…And it wasn’t just silly people. It was people who were hailed – and I know of them – as intelligent and clever people running the banks. They too made horrendous mistakes.”
The problem we see here is that there is a total disconnect from reality and from responsibility for this financial disaster. Patrick Honohan is basically blaming the silliness of the ordinary people and a few of his friends in the banks for causing the boom bust cycle. At the same time he is painted as a whistleblower warning the crash was coming. But this is all a distortion.
The people did not make bad decisions. The people just worked hard, saved, paid their mortgage and car loan, put their kids through school, because the government and the banks told them everything was fine. The people were not reckless or silly and were not in unsustainable debt. They are now though.
The truth is it is the Central Bank and the Financial regulator that did not do their job. They did not enforce their own regulations on banks and allowed this crisis to happen. They did not hold banks accountable and rein them in. They still have not done so, and it is being left to lay litigants to raise the lack of enforcement by the central bank in court in defence of their own homes. This is the ludicrous situation that exists.
The central bank seems to be very good at abdicating it’s responsibility in this whole story and nobody in government or the media is holding them to account. Not surprising from the government considering their own culpability in deregulating the entire system and talking up the economy despite warnings.
Patrick predicts the banking inquiry will reveal nothing (as expected). This is the crux of the problem. We have an inquiry stuffed with political establishment who are culpable in the investigation and very cosy with the politically appointed regulators. So he speaks from a position of assured self-confidence. We hope we are wrong and there will be people in the inquiry who will raise the issue of the failure of the central bank, and we will be supplying them with all the information we can find from our own and our friends investigations.