First Trichet. As the head of the ECB at a crucial juncture in the way of the cross of the Irish economy, he was always someone who was going to have to be involved in the banking inquiry. A problem he faced, and it is an unpalatable but real one, is that the ECB is (nominally) independent. It does not report to , well, anyone really. That is the nature of a central bank that designed to not be simply a sot touch for a broke government. Lets leave aside for a moment that the ECB has only slowly, haltingly and seemingly grudgingly taken on board the trappings of a real central bank. Trichet was never going to talk to the Oireachtas and be seen to be held in some way accountable.
The IIEA compromise was one that was perhaps the best that could be gotten. That said, whoever there agreed to the layout should hang their head in shame. A patrician, dismissive, tetchy Trichet literally looked down on the penitent row of humble petitioners. Flanked by the elders of the tribe who had been Romanised, and defended by the natives who had decided to become elders of the colonia, he cut a remote and arrogant figure. Not that he cares. He fairly and squarely blamed the mess on us, and the guarantee on the shoulders of Brian Cowan. Lenihan was called a liar, but he is conveniently dead so cant defend himself. The ECB did nothing wrong, ever. He didn’t answer and more astonishingly wasn’t asked about the ongoing waste that is the promissory note. He was unaware of the details of the imminent collapse of Anglo and seemed even in retrospect not to care. No roman proconsul attending a meeting of a local town council as the natives complained about some sheep stolen by the legions could have been as dismissive. But that is what an independent central bank (or monetary authority) does. It rides over and above local concerns. Veni, Vidi, Vitavi.
The lack of any democratic control, oversight or even feedback to the ECB was laid bare yesterday. We should be in no doubt as to our place in the world. We didn’t matter, all that mattered was our potential for causing trouble via bonds, which of course the ECB merely suggested, hoped, desired, we not burn. Veni, Vici, Voluit. Ever helpful, we took on board the suggestion and have been paying for it ever since Perhaps his suggestion was more in the line of an offer that cant be refused than a genuine dialog.
We also saw the lack of democratic oversight in action with Patrick Honohan, soon to be departed to make way for someone more pliant. In the heady days when the IMF were camped in the 5 star Merrion Hote,l getting increasingly concerned at our profligate ways, he came on the radio and cut the government off at its elected, bumbling, clownish knees and announced that we should enjoy the luxury brand flakes as it was thin gruel from thereon in. That may have done the state some service in assuring us that at least one senior official was conscious but it perhaps was not his place (although someone had to). Honohan is a soft but blunt person, who has a brain and is not afraid to use it. Unlike many senior public servants he is aware that he has a duty to think and speak. Throughout the bailout he spoke truth, and that is something we should appreciate. Too much of the ruin we saw emerged from the lack of independence of the central bank. A long history as the Dame Street retirement home of the Department of Finance eviscerated its limited independence. Honohan;s appointment marked a sea change, and it was clear that he took the remit seriously. We saw recently a faceoff on mortgages. He didn’t back down (at least not all the way) in the face of severe, unevidenced, politicised government interference. It is hard to imagine many of his predecessors acting the same way. Whatever about the European stage, domestically he was a strong and independent banker. As for europe, we will never know how strongly or otherwise he argued against the madness of the promissory notes (the arguably illegal ones that FG/Labour so kindly converted into actual real national debt, as a gift like to future generations).
These two issues show the tension. We need independent central bankers to stand up to the worst instincts of populism. They need to take away the punch bowl just as the party gets going. Veni Vidi Vitanda.
But that is neither popular nor politic. What should be the case is that the independent central banker is humble (not a feature one could accuse Jean Claude Trichet of possessing), thoughtful, evidently intelligent and as open as possible as early as possible. If we cannot have oversight then we must settle for hindsight but it should be delivered early and openly. Not late, grudgingly and haughtily.
A version of an Irish Examiner Column 2-May 2015