Arthur Morgan (Louth, Sinn Fein)

I thank Deputy Rabbitte for sharing time with me. When the Minister for Finance introduced the Credit Institutions (Financial Support) Bill before the House two weeks ago the Sinn Féin Party supported it. We did so because we believed it was necessary to stabilise the State's banking system. Our judgment has been proved correct. Since its implementation Ireland has not lost a bank or been forced to bail out a bank with cash. However, the issue was about significantly more than banking.

We stated at the time that we had reservations about the ambiguity of the guarantee's terms and conditions. Deputy Ó Caoláin and I met the Minister for Finance to express our concerns and we received reassurances that the taxpayer would receive adequate remuneration for the insurance scheme for the banking sector. When we received the document outlining the terms of the scheme last Wednesday evening we examined it on its merits, leaving aside our reservations about supporting anything produced by this Government in the wake of Tuesday's savage budget.

This is an extremely important point. If we had given consideration to the Government's presentation of the budget in the context of dealing with this issue, we would not support it. In fact, a general election should be called immediately due to the Government's total lack of leadership in the budget. It represents a complete change of direction by the Government, for which it has no mandate. The budget lacked sophistication and only succeeded in terrorising 70 year old people throughout the State. It was a scandal. Nevertheless, we put that aside when we examined this scheme.

During my contribution to the debate on the budget, I set out the terms and conditions Sinn Féin would seek in the scheme. They included a windfall payment to the State, the introduction of a banking levy and the imposition of an onus on banks to negotiate as much as possible with home owners facing repossession. I strongly advocate the establishment of a State bank as well. However, there is no return for the taxpayer from this scheme. The financial remuneration only accounts for the estimated increase in debt funding costs that arise as a result of the guarantee. If the Minister bought a car for €30,000, the average insurance broker would charge him approximately €600 per annum, or approximately 2% of its value, to insure it. This is the very least in terms of commercial interest rates that should have been applied to the banks for the guarantee, regardless of whether money is drawn down under the scheme. There is no reason that such repayments could not be paid over a longer period than the two year period of the scheme.

Furthermore, the only sanctions that appear to have been put in place for banks that abuse the guarantee is expulsion from the scheme, and even then it is only after at least 90 days notice. The scheme does not mention fines for banks that gamble with taxpayers' money, let alone provision for the State to take legal action against such an institution. Within days of the announcement of the guarantee we witnessed unbecoming conduct in one of the banks to be covered. Are we to accept that if such an event were to recur, the worst punishment the bank would receive would be its removal from the scheme?

I am hugely disappointed that the only provision that applies to hard-pressed home owners is a reference to the banks complying with the IBF's voluntary code of practice on mortgage arrears. This code represents what the lender will endeavour to do in normal circumstances, but these are not normal circumstances. There were almost 50 repossession cases before the courts last week. A panel is being established to monitor banks' practice but an arbitration committee could have been set up immediately to ensure the banks do everything possible to refrain from repossessing, even if they offer interest-only repayments in the current climate. I recognise the legal necessities associated with mortgage contracts and that not every homeowner can be given licence to withhold mortgage payments, but it does not sit well with me that, while we are throwing away the rule book on guaranteeing banks, we are doing nothing for businesses and mortgage holders who are very hard-pressed for cash at present.

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