Peter Mathews (Dublin South, Fine Gael) | Oireachtas source

Some €65 billion in the traditional commercial mortgage lending into the property and property related market had to be written off, eventually. The first prudential capital assessment review, PCAR, was in 2010. The next was in 2011. On both occasions I suggested it was not enough. Why was that? The problem, or swamp, we are now stuck in, and from which the banks are not extricating themselves, is that they are not getting on with the job they could have got on with, which is to recalibrate loans to the repayable amounts to allow for normalised remainder spending of household budgets.

The banks are not extricating themselves from this. They are not getting on with the job they could have got on with, which is to recalibrate loans to repayable amounts to allow for normalised remainder spending of household budgets, to which Deputy Higgins referred.

Banks need capital to do that. The first donkey-simple way to get capital was from the State but it is not now because the people who invested in the banks and backed them were bond investors, who were totally exonerated. They got all their returns, including their principal. We are offering ourselves up as paschal lambs to the euro system. It is nuts. As Deputy Higgins said, Ireland has only 1% of the EU population and accounts for 1.2% of its GDP but we have taken 40% of the banking losses to date in the euro system. It is the biggest failure, yet we are the people holding the whole structure together.

I do not believe Professor Honohan. As he said on page 2 of his submission, a series of judgments was made. The judgments were not good. I am not patting myself on the back but I said at the time it would cost €100 billion because that is what the facts and figures indicated. When six small banks lend €400 billion in four years, €100 billion will not be collected hail, rain or snow and, therefore, the provisioning should have been immediate and the creditors should have been brought in and sat down. The creditors are the very people the Governor is talking about, including the euro system, his bank and the ECB in turn. He said in reply to Deputy O'Donnell that the ECB is not in the business of giving grants. Of course it is not but if the ECB is a bank, it also has to make provisions if it made bad loans. Professor Honohan said we accepted frameworks but all of them have got us to where we are. Now we have to engage in some fresh thinking. It is again a judgment call but I do not believe the consequences would be hell, brimstone and firewater. The banks would have to start solving the problem from first principles. Deutsche Bank only a month ago had to admit to the Securities and Exchange Commission in the US a potential overstatement accounting fraud of €12 billion on its balance sheet. This is stinky stuff.

We have to get on. Deputy Fleming is correct that the banks need to engage in write-downs to collectible amounts. At the end of his contribution, Professor Honohan said: "In fact, what we have designed from our side is, I believe, largely in the interests of the euro system as a whole." This raises two questions. First, what has he designed? Unless it is a replacement note with zero interest in perpetuity, which is effectively a write-down or write-off, it will be useless. Second, the euro system is an accepted framework that has not served us well or morally fairly, as Deputy Higgins pointed out. Let us get real. I have said ad nauseamto the Governor and to the Minister for Finance that they should speak up and make the case that Deputy Higgins outlined. He was the first man to present the case to President Barroso in the European Parliament two and a half years ago and the President lost his cool. The Deputy, who never uses strong or bad language, gave him the facts. He presented what he outlined earlier and Mr. Barroso went ballistic because it was the truth.