Arthur Morgan (Louth, Sinn Fein)

I thank the Minister for Finance and his officials for the useful and practical briefing they gave to Opposition parties this morning. It is unfortunate that the Government does not demonstrate this type of constructive and practical approach more often because it would be more conducive to the work we do in this House. Had the Government brought forward a reasonable and practical plan to deal with the banking crisis and the broader economic problems we face, Sinn Féin would have been happy to support it. Unfortunately, that is not what we have this evening. We can demonstrate a record of supporting Government initiatives such as the guarantee scheme. We set terms and conditions for our support of that measure but because the Government did not meet them we were left with no option but to withdraw our support. I am glad we did so. The Government always has the opportunity to approach the House in a democratic manner and make it work more effectively in the interest of our public.

This afternoon the Minister for Finance told us once again that he is presenting us with the least worst option. That is patently untrue, however, because the measures he proposes represent the worst option possible. My party has proposed a substantial plan of action around nationalisation of the two major banks which would have been substantially less costly to the taxpayer than the option chosen by the Government. The Labour Party's plans contained broadly similar proposals to ours and should at least have been considered. Perhaps I should implore the grace of God when I say that even the Fine Gael option would have been substantially better than the Government's proposals for curing the banks. Again, however, we face a steamroller which the Government calls democracy. Democracy my backside. We certainly are not holding the proper parliamentary deliberations which would allow us to tease out these matters or holding a rational debate on how we can do what is best for the public and the taxpayers whose money is being shovelled into these dysfunctional banks.

The Minister does not have the authority to implement a bank bailout of this scale. Technically, he could argue in the same way as one could for a half legal moneylender who is squeezing his her victims, that a narrow technical point allows him to proceed but there is no moral basis for his course of action. If the Government has any confidence in the proposal, it should put it before the people as its election platform in a general election. These proposals would impose a huge financial burden on Irish people for generations to come and that is grossly unfair even if it is technically legal in a parliamentary sense.

The Minister is introducing the harshest cuts in decades in an attempt to reduce a €20 billion deficit while simultaneously adding hugely to Government borrowing for this bank bailout. The financial ramifications of what is happening today will be felt by generations to come. Why is the Government spending all its energy on the banking crisis when so little effort is being put into getting the rest of the economy back on track? Why is so little being done to tackle unemployment? We are spending hours on a discussion of the Government's mishandling of the banking crisis instead of debating solutions to unemployment. For the economy to get back on track we need a functioning banking system but 18 months after the bank guarantee scheme we are no nearer to achieving this objective. The Minister admitted that we face many more years of pouring billions of euros of taxpayers' money into these banks. The Government opposed nationalisation and, as many predicted, is now being forced to nationalise by stealth.

During the past 18 months it has completely taken its eye off the ball when it comes to job creation and stemming the rise of unemployment. During that period Sinn Féin put forward a range of proposals to retain and create jobs. In recent weeks we put forward a specific set of proposals to deal with unemployment among the under 25s on the live register. This fully costed and constructive plan would offer hope to members of our population who are essential to future economic growth and stability. Instead, however, the Government is set on a disastrous course for employed and unemployed citizens.

Think of the productive use that could be made of the money the Government is throwing into the black hole that is our banks. The €22 billion being spent on the banks could purchase a youth jobs fund to create 20,000 or more jobs; the delivery of key infrastructure such as universal broadband, the western rail corridor, cancer centres north of the Dublin-Galway line and class sizes of 20 or fewer; a reversal in the pay cut for public sector workers on low and average incomes and cuts to social welfare, including the Christmas bonus; some 10,000 new community employment places; investment in key sectors of the economy such as information technology, tourism, agri-food and green technologies; a free preschool education system; an end to social housing waiting lists; conversion courses for graduates; a future in their own country for the young unemployed; and a functioning health system with adequate numbers of doctors, nurses and other front line staff to meet patients' needs.

The scale of the mess that Fianna Fail must take responsibility for is astounding. It should not be forgotten how vociferously Ministers rejected criticisms from those of us who warned that the economy was not built on solid foundations, that a property bubble was developing and that the Exchequer was overly dependent on taxes from construction and consumption. There was time to act and to turn things around but there was no will to do so. If we could see these issues, how can those who were in Cabinet during that period claim not to have known? Why did they turn a blind eye to the actions of bankers and developers? Does a party that has such close ties to many of those at the top of Anglo Irish Bank really expect us to believe it knew nothing of what was going on?

It is time to overthrow a culture that has existed in this State for far too long. A wealthy elite have been pandered to by successive Governments and has for decades enjoyed a position of privilege and undue influence over Government policies. People want answers to how and why the Government policies which fuelled the property bubble were allowed to continue when the damage they were doing was obvious. This is not about a rogue group of bankers and developers; it is about a parasitical section of our society wedded to the two largest political parties in this State and Fianna Fáil in particular. We will not get rid of this culture of exploiting ordinary people, like those who were injured or killed on the unsafe building sites owned by Liam Carroll as he lined his own pockets, until we get beyond Fianna Fáil and Fine Gael led Governments. Let us be absolutely clear: the elite, those who made up the golden circles and stuffed their pockets at the expense of ordinary workers, are now in self preservation mode and have the Government doing their dirty work. This is what NAMA and the bank bailouts are all about. Nothing has changed. The people this Government pandered to when it implemented policies that created the current crisis are still being pandered to. This is the true reason the Government would rather cut dole payments than introduce a wealth tax. Will Liam Carroll experience life on the dole or live in one of the sub-standard, shoe-box flats he sold to desperate first time buyers? Those at the top of the Civil Service are part of this elite group as well, such as Rody Molloy who, despite wasting vast amounts of public money, will never pay any price for his actions. In fact, he has been further rewarded for his actions.

The Dublin Docklands Development Authority is an example of the rot that existed in the State during the Celtic tiger years. Fianna Fáil cannot distance itself from this debacle and it must be held to account. Among those involved in the debacle relating to the Irish Glass Bottle Company site was Joe Burke, one of the closest associates of the then Taoiseach, Deputy Bertie Ahern. The authority is a microcosm of all that went wrong in this economy, comprising a toxic mix of Fianna Fáil and cronies around the then Taoiseach such as Mr. Burke and Bernard McNamara and Anglo Irish bankers such as Seán FitzPatrick and Lar Bradshaw, who were co-opted on to the board of the authority.

We have yet to get the full information regarding the murky goings on in these affairs but in all of this one thing should not be forgotten: a productive business, the Irish Glass Bottle Company factory, could have been saved with Government intervention. Jobs could have been saved. Now, having paid a much higher price than it would otherwise have had to pay to save those jobs, the State has a plot of derelict land which is worth a fraction of what was paid for it. The former Taoiseach should be forced to make a statement to the House outlining exactly what he knew about all of this. I challenge the Taoiseach to instruct Deputy Ahern to make such a statement without further delay. What took place at the Dublin Docklands Authority is the reason we are where we are and in the mess in which we find ourselves today. Almost half a million people are out of work and billions of euros in taxpayers' money is being put into the banks while public services and welfare are being cut. This is crazy.

It has taken the Minister too long to resolve the banking crisis, which first came to the fore in the summer of 2008. Since then, the real economy has plummeted and the banks have played no small part in this as a result of their refusal or inability to extend credit. Businesses have closed their doors and householders face repossession. The only action banks have managed to take is to hike up charges and interest rates and to fight off calls for cost-cutting among their higher paid staff members. The 0.5% mortgage interest increase from AIB yesterday, at a time when the ECB's rates remain stable, is testament to that. The bank may be borrowing at a higher rate on the wholesale market but what has it done to ensure security for its customers? When people referred to the State taking a higher stake after recapitalisation, all of a sudden the bank suggested it could sell its foreign assets. Should it not have done so before push came to shove? The failure of the Government to put a stop to the rate increase is shameful.

The banks may be borrowing at a higher rate on the wholesale market but if they squeeze already under-pressure mortgage holders, we will be looking at another tranche of bad loans in the residential property market further down the line. This domino effect will grip the Irish financial sector and taxpayers will be hit doubly for the failures of the Irish banking system. This will take place not only through the cost of recapitalisation, but through the increase in mortgage interest rates and personal loan and overdraft rates. What fruits will be borne on the other side? Will there be a nationalised State bank capable of offering individuals and businesses credit at a fair rate? Only partially. The people will be offered more or less the same. Slowly the system, if left to commercial devices, will slip back to its old unregulated ways. The banks will continue to refuse to accept responsibility for what they have done. The only stakeholder that should be given due consideration is the taxpayer. Whatever the banks wish for is completely irrelevant at this point. In any other sphere of business these banks would be in receivership or liquidated at this stage. The attitude of self-importance is the same as that which prevailed in the lead up to the crisis and there is no basis for it to be allowed to continue.

Let us consider what the banks did to bring us to this point. They were not alone; the Government and the regulators, which effectively looked the other way, were cheerleading them. The details emerging now reveal a banking system where lenders had casual and personal relationships with borrowers, where documentation was frequently incomplete or ignored and where basic financial calculations were overridden by bank strategies based on winning market share. For example, during a court action last year Bernard McNamara claimed he was actively pursued by banks to borrow money from them on exceptionally generous terms. The financier Niall McFadden, who is facing judgments running to tens of millions of euros, claimed in court that National Irish Bank accepted a personal guarantee for a €6.3 million loan without ever meeting him. Personal guarantees were the currency of Irish borrowing during that time.

These incidents highlight the lackadaisical approach the banks took in respect of security for loans. Most of the big property deals were funded by groups of banks and now total confusion is emerging over which bank controls which assets. This emerged today in discussions with the Department. This is clear from NAMA and one of the reasons the agency has not functioned up to this point. It simply has not been able to get down to the root and branch details of where responsibility for these loans rests. During the boom AIB lent €550 million to Liam Carroll with only a solicitor's letter and the deposit of title deeds as security. Let us imagine what business people who approach the banks these days must be thinking when they hear that. Court actions have also exposed flaws in the valuation of property assets by basing transactions on a loan-to-value ratio that was too high. The banks did not allow themselves any wriggle room in case property values fell.

The Government has bent over backwards to prevent the nationalisation of the two larger banks. Given the guarantee, the initial recapitalisation, the establishment of NAMA and further recapitalisation now, we have almost spent the past two years witnessing the Department of Finance create policy the sole intent of which is to prevent the banks being nationalised. The only bank the State leapt to nationalise is the only bank that nobody wanted nationalised. There can be no doubt that the speed with which Anglo Irish Bank was dealt with was a reflection of the Government's desire to hide the machinations at the bank, which would have come to light a good deal quicker and in greater detail had the bank been allowed to fold. Instead, we are getting a drip-feed of information from a bank no longer functioning as such but which is costing the State billions of euros. The bank could require a further €9 billion in recapitalisation in the coming months, twice what the Government attempted to cut from the deficit last December. It was disgraceful when the Government chopped social welfare payments and mercilessly took away the Christmas bonus from pensioners but this is what it gives to its bailout friends.

The Minister for Finance stated that the country is in a better financial position now to deal with the funding needs of the banks, which is astonishing. The State is carrying a €20 billion plus deficit, which the EU has ordered us to reduce dramatically. According to the Government, we do not have a red cent for investment purposes, but we can use the National Pension Reserve Fund, NPRF, to recapitalise the banks after NAMA takes the bad loans off their books at an even sharper deal. At the last count, the NPRF had a value of approximately €13 billion and a further €7 billion has already been taken from the fund by the Government to recapitalise AIB and Bank of Ireland. If the Government has its way, the entire National Pension Reserve Fund will be made up of bank shares. It would be ironic if the State, after all its procrastinating, is forced to fully nationalise the banks but the largest shareholder to get burned at that point would be the Irish taxpayer.

These banks are not being hard-balled by the State. They would be defunct had the State not stepped in. They have a Government content to do everything to help them while allowing them to remain in private ownership, a Government willing to socialise their debts while allowing them to continue to privatise their profits. This is the Government that lifted the bank levy, that allowed regulation to become lax. It is the political system that bailed out AIB in the 1980s and turned a blind eye again in the 1990s. Some 70% of AIB is a majority stake in that bank, but it is not full nationalisation. How much influence the State will use while holding that stake is unclear. Certainly, we got no more clarity from the Minister this afternoon. To date, the Government has shown nothing but reluctance to interfere, as they call it, in banking conduct.

Over the past three weeks we have seen revelations that the Government's convoluted and complicated approach to the banks is also mired in secrets and unfairness. The revelation that 78 employees of Anglo Irish Bank had been awarded pay increases is the second of its kind in the past few weeks. This news comes against the backdrop of a 70% pay increase for the chairperson of the board of NAMA. When the public servants all across this land, front-line workers, are having their salaries slashed, there is this 70% increase and significant increases for other board members. Simultaneously, the Government is pushing through pay cuts and attacks on public services. It is clear that the Government values the work of the banking sector over the work of other front-line public sector workers such as gardaí, nurses, teachers.

We must look now at what reform we will get. For example, the Financial Regulator has waived capital rules for EBS, allowing the building society to fall below the threshold dictating the minimum amount of capital that a financial institution must hold in reserve. The so-called new, improved and harder-headed regulation has granted the building society a temporary derogation until 31 May, allowing it to hold less than the minimum core tier 1 capital ratio of 1%.

Any literature on the financial crisis points to the absence of these thresholds as central to the magnitude of the collapse of the banking system. This seems to be the first step in a clawback to the old system. Some might say it is only a temporary measure, propagated by the need to discount the loans. However, when the Government and the Minister for Finance signed Ireland and each and every person of this State to NAMA and bank recapitalisation, reform was promised. Now it seems reform has been short-lived.

The worst of it is that we do not have the full facts of what this will all end up costing us. The loans being taken by NAMA have received an even further discount since the legislation was announced, in recognition of the falling property values. They are falling, which means there is no guarantee that this is the best deal for the State. The Minister is pushing the State down a path of debt and we do not know where it will end. The Minister is opening Pandora's box. Today will go down in history , and the Minister and the Government will not come out of this well.

I do not know what it will take to completely overhaul the culture that persists here. It is not fair, reasonable or rational that at the biggest crisis of generations the Government simply comes in here with a proposal on a banking crisis largely ignoring all of the other fault lines in the economy to bail out these banks in this fashion. It is time the Government at least listened to some of the debate, took on board some of the points that were being made by the Opposition and we all tried to ensure that there is a proper system put in place which will not cost future generations billions of euros through the disgraceful bailout of these bankers and their friends, the developers.

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