Joan Burton (Dublin West, Labour)

The purpose of this amendment is to ensure the Minister for Finance outlines the details of the scheme to the House. Before the Act comes into operation the Minister should lay before each House of the Oireachtas, for its approval, full particulars of the terms and conditions set out under section 6(4), including the terms and conditions of any scheme.

This scheme is being toasted by bankers and financiers not just throughout Ireland but in Europe. There is now a suggestion that every European government should unconditionally guarantee the loans of its banking houses and financial institutions. The costs of that will be enormous. I am reliably informed that the figure involved is €400 billion, although nobody as yet has confirmed the figure so perhaps the Minister will do so. If the State steps in as the final guarantor of banking probity, underwriting banking deposits and borrowings to that extent, we need to know the terms and conditions of the scheme. In particular, we need to know that the reckless behaviour of the banks that led to this situation will be reined in.

For a number of years we have experienced a carnival of capitalism, partly because of globalisation and partly in the fever of ultra-deregulation which has swept through western economies going back to the time of Ronald Reagan and Margaret Thatcher. Banks and financial institutions have been free to expand and to make money on a scale previously unheard of. The only parallels which come to mind are the eras of Gatsby, the Weimar Republic and France in the 1930s, when capitalism made unbelievable profits and acted with neither restraint nor any social, national or international responsibility. Ultimately those systems came crashing down and some people may feel that might provide a bonus for left-wing politics but the legacy for later generations in Europe was fascism and, in eastern Europe, an ultra-Stalinist form of communism remaining in power for 30 or 40 years longer than it should have. This has been an historic stage in the story of western democracies, in which banking institutions have had things all their own way, which has led to a collapse and the requirement that they now be reined in.

The Minister has said he wants to support the banking framework and we support him in that. He wants to support the core system in which deposits are taken from individuals and institutions but we want that money to be lent out in an orderly, valuable and structured way for businesses, for employment creation and young people starting businesses, and for science and technology. We also want it to be lent out to people investing in a property in which to live, rather than as a speculative vehicle. The Minister says he is guaranteeing the lifeblood of the financial system but he is providing a guarantee of unbelievable value and he is either unable or unwilling to tell us the conditions and regulations under which the guarantee will be given.

Members on the Government side are fond of talking about moral hazard. When people's homes are damaged in a flood but they have no insurance the Government does not bail them out because it does not want to set a bad example, encouraging other people not to take out insurance. I first heard about moral hazard from no less a doyen of international banking than Mr. Peter Sutherland when I debated with him the idea of forgiving Third World debt. Mr. Sutherland, who was well educated by the Jesuits, who originated and refined the concept of moral hazard for generations of Catholic businessmen, said that to forgive Third World debt would be to encourage every reckless country in Africa or elsewhere to repeat their mistakes. There is no perfect answer to that point but schemes and regulations can be put in place to save people from themselves.

I worked for an international accounting firm for seven years during the early part of my career and I carried out a lot of work with different banks, many of which do much valuable work. If, however, we do not impose regulations on the banks they will do the same again. They will look for the next boom in the cycle, from which they will make their money while our successors will have to come back in ten years time to clean up the mess. Given that he is giving a guarantee on behalf of every taxpayer and person in Ireland it is not unreasonable to ask that the Minister lay the scheme before the Houses so that those elected by the taxpayers have the opportunity to judge if the scheme is reasonable and to ascertain the risks associated with it, as well as its upside and downside elements.

I am worn out listening to lectures from some parties on the "polluter pays" principle, which has become a common phrase in economic and political life. The people who have polluted and ultimately wrecked the banking system are not the ordinary Joe and Josephine Soaps who put their money on deposit but the bankers and the leaders of financial institutions. If they have caused the current collapse within banking I suggest the Minister take a leaf out of his own book and apply the "polluter pays" principle. Yesterday, the Taoiseach mentioned figures of €600 billion in assets and €400 billion in borrowings. If one were to buy an insurance policy on the commercial market, such as from AIG, to cover that amount of assets and debts, one would not get it for less than €1 billion per year inclusive of fees and insurance cover. That may even be a conservative estimate. Parents who part-guarantee loans for young people buying houses pay 1.5 percentage points on top of the loan rate for loan guarantee insurance policies, when they can get such a policy. They are very difficult to get nowadays. The cost of insurance is very significant. We want to hear from the Minister for Finance if his officials have evaluated a commercial cost and value to the insurance scheme. Has the Minister worked out a scheme whereby the banks will contribute to the cost, rather than what was indicated where the banks will only pay something if and when they have to dip into the scheme? That would be like, as the leader of the Labour Party said earlier, the case of someone affected by a flood being told to pay the insurance premium after the flood and then the claim will be accepted. This is a very valuable commodity and we want taxpayers to get value for their money. Another reason for having the levy at a commercial rate is that it is one of the ways that bankers acknowledge a requirement to change behaviour.

The second area we want addressed is the issue of bank compensation packages. Unlike other people, senior bankers do not get paid. They do not get salaries or wages; they get compensation for their strenuous efforts on behalf of the banks. We wish to see what the Minister for Finance proposes to do to rein in the climate of recklessness that has infected the banking system in Ireland and around the world. I will provide an example, which concerns the construction industry in Ireland.

At least two of the banks on the Minister's list to get the guarantee have been widely written about in the newspapers and in the Irish media now, probably for several years. These are the last two banks on the list. They, more than anyone else, are heavily exposed to construction industry lending. In some cases they are heavily exposed to speculative loans for land purchases and construction projects widely believed by the business community to be extraordinarily and excessively risky. If the Minister for Finance gives them a free pass with this guarantee, what is there in the scheme — we wish to know before we vote on it — to caution these people so they cannot go out and do it again next week or the week after? It is a very important question and I am unsure now that the Irish taxpayer is going to rescue them. I do not expect them to be grateful, but I expect them to have a more cautionary approach to their behaviour. There is nothing in the Bill to indicate that such a measure will be inserted as a precondition which will be understandable to Members of the House. Will the Minister for Finance state the position regarding banks' capitalisation? Does the Minister have a view on this matter?

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