Sean Barrett (Independent)
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That was a quote from a Nobel prize winner, the late Professor Stigler. Public interest directors would form the subject of my first question. Public interest directors were supposed to deal with that. My impression is that they are useless, like a lighthouse on the Bog of Allen. Do they ever come to Professor Honohan? They were meant to redress that balance between the public and the interests which had captured the regulator, such as in the case to which the Vice Chairman referred.
Professor Honohan mentioned that we have 13,000 plus cases, or 15%, resolved. Does that mean there are 85,000 to go? That is question two.
When the bankers were in, I asked Mr. Boucher his present policy. He is lending up to 90% of the value of the property and up to 4.7 times income. I would put the question to the Governor that this is unsustainable. The 10% deposit should be 20%, which, as Professor Honohan will be aware, works much better in Denmark where there is a much lower rate of default, and it should be 2.5 times income. If, however, Mr. Boucher is operating in this way, does this mean a problem will occur? There are already signs of a property bubble. As principles regulation does not work with those without principles, the Central Bank should have quantified rules, such as the ones I have mentioned, where if the Governor feels the market is overheating, he would want to raise the 10% deposit requirement to 20%, which I would certainly do, and reduce 4.7 times income to 2.5 times income. Otherwise we will always have this problem.
That brings me to the next question. Where borrowers have gone widely outside even those limits, which I regard as too loose, have we ever made the decision that the bank loses because it was engaged with reckless lending, that is, lending somebody multiples of income where the income was not properly checked? Professor Honohan mentions in his presentation that too often the relationships were "frequently verbal in nature" and "affordability assessments were often not evident on files reported as sustainable". Bankers have to bear some of the responsibility in these matters and we should at least be able in the theoretical case of Mr. Bloggs, where the bank was totally irresponsible and there was no way Mr. Bloggs could ever have repaid the loan, to decide against the banks in that instance.
On the buy-to-lets, Professor Honohan mentioned property rights. We have to be insistent on that. The debt is against the person who borrowed, not against the person who lives in the house. Professor Honohan should, as the regulator, tell the banks they may pursue whoever built the buy-to-lets, but if we can prove the person has been paying his or her rent the whole time, they cannot evict, directly or indirectly, that person. It is a long time ago since Charles Stewart Parnell was looking for fixity of tenure in Parliament.
As we have Professor Honohan here, I ask that the Setanta Insurance issue would be pursued in Malta, not here. I am getting tired of bailing out insurance companies, as I am sure is Professor Honohan. We have had Quinn, PMPA and ICI. Professor Honohan may have seen an article in The Sunday Business Posttwo Sundays ago about how Ireland has made a great leap forward and is a wonderful place for insurance, and then two days later yet another insurance company goes bust. I hope there is no case that the Irish would have to bail out a company that was regulated in Malta.
On all the mistakes we saw to which the Chairman alluded, I presume we have rules that one does not play golf, dine or socialise with the sector one is supposed to be regulating, minutes are kept, persons are checked in and out, and it is put on a proper basis. Knowing Professor Honohan as a former colleague, I am sure he is doing all that, but the public needs assurance. This was not loose touch or light touch regulation. It was merely non-supervision. It has done €64 billion and counting worth of damage. Professor Honohan even mentioned we have been at this for five years. I am disappointed at the progress. This Parliament has been here for three years. We really need to have more than 15% of the cases resolved at this stage.
Having said all that, I wish my former colleague every success. However, we need to speed it up. The problem Professor Honohan must address with all his 1,300 staff is that the tradition of regulatory capture, which was appalling, has no place ever again in the regulation of the financial sector in Ireland.