As you have probably heard RTE R1’s This Week’s Colm O Mongáin interviewed Central Bank governor Patrick Honohan, on the phone from Basel, Switzerland, about the Morgan Kelly article (which tore him a new one in Saturday’s Irish Times).
Patrick also tells a joke about academics.
Honohan: “Morgan always has very interesting and perceptive things to say about the Irish economy. He expresses himself in somewhat, I guess, hyperbolic language. He also lashes out at people, whoever they are. Em, but that doesn’t mean that you don’t take him seriously. So I always take him seriously and I think that a lot of his analysis is absolutely spot-on in the article. There are, em there are some serious errors in it. There are some errors of fact. One big error of analysis, eh, and a lot of things that, the story he spins somewhat incomplete. But em, I mean, maybe what I would like to start with is the most startling assertion is that I – and he does put it down to me rather than to any institution.”
O Mongáin: “He mentions you about 12 times in the article.”
Honohan: “He probably thinks that as an academic I like to be cited a lot so, that may be the em, his reason for that.”
“I just want to address the question, was there some moment of opportunity, was there some miscalculation that I or somebody else made that meant that we missed out on a point where we could have done something to pull ourselves out of the debt problem – which I acknowledge that we face – and the answer is no.
“He starts his article with the statement that a disorderly, disruptive bankruptcy of the Irish state must be avoided at all costs, something like this. I fully agree with that. But he then seems to suggest that repudiating the famous old bank guarantee would have been something other than falling into a disorderly bankruptcy. There’s where he’s wrong. I mean I took a lot of legal advice on this and other matters, but there was no way of walking, having the government walk away form that very formal guarantee, endorsed by the Oireachtas. It would have been the same as – the government would have been treated as a bankrupt right away…”
[Later, addressing Kelly’s comment that ‘Honohan’s miscalculation of the bank losses has turned out to be the costliest mistake ever made by an Irish person…’]
Honohan: “Yeah, em. Heh. The… Look. There were, obviously it was an evolving process of discovering the extent of the loan losses. It’s a story which we can go into in any level of detail you want. It did not affect – the fact that we didn’t have precise numbers. We knew we didn’t have precise numbers, we had best shots and they were subject to revision. The fact that we didn’t have final numbers did not affect the decision on honouring the guarantee at all. The guarantee would have been honoured even if the numbers that we look at now, which include a very generous stress amount, if those numbers were there, the same action would have been taken.”
Listen here
Honohan Defends Decision To Defend Bank Guarantee (Irish Times)