Thursday, June 24, 2010

Dept. of Finance: It's Not Our Fault!

Instead of creating an impetus for nailing those who caused the crisis at the banks, the scoping reports have generated a debate over questions that can never be resolved conclusively, much less result in any accountability at individual or institutional level. Perhaps this suits the lead actors just fine, but as taxpayers, this is terribly disappointing.

The Dept. of Finance, which was accused of giving bad advice, has defended itself in predictable terms:
THE DEPARTMENT of Finance says it warned the Government from 2005 onwards about the dangers of a property bubble, internal official documents show.

It also defends the department’s performance in failing to forecast the extent of the downturn, and points to similar failures by institutions such as the ESRI, Central Bank and the private sector to predict the magnitude of the slowdown.

It also points to the Central Bank’s performance, stating that while it warned that the share of residential investment was too large, its stress tests concluded that “Irish institutions were well-capitalised”.

Similarly, the department says that bank and stockbroker economists repeatedly concluded residential investment in Ireland was sustainable and prices were justified by fundamentals.
The department is also defensive about its record in economic forecasting. However, in 2008, for example, it forecast a deficit of €1.5 billion, while the actual deficit was some €13 billion. Its forecasts for 2009 were also overly optimistic.
The material states that economic forecasting is an “inherently uncertain process” and this uncertainty was heightened by the openness of the economy as well as structural changes in recent years.
The documents also state that the department’s forecasts were criticised for being overly cautious in the period leading up to 2007. It lists extracts from individual private sector commentators in NCB, Ulster Bank, AIB and Goodbody who felt its tax forecasts were too cautious.

In other words, we were just as wrong as everyone else. The external review of the department announced by Minister Lenihan will just be more finger pointing leading to nothing. Why this distraction when the main task is to pursue the wrongdoers?