Joan Burton (Dublin West, Labour)

What caused this flip flop in Government policy? Ministers were proud to say they did not consider any form of guarantee for the borrowing requirements of the Waterford Glass group. The same issue of moral hazard came centre stage when banks starting to fail internationally. They took reckless risks with some mortgage products and practices. The job of Government was to minimise both short-term harm to important financial institutions while protecting the taxpayer from long-term costs. At first the US and British Governments tried a modest programme to contain the fall-out. It was not enough and gave way to a plan to refinance and guarantee mortgages to a limited and controlled amount. That was still not enough. Then we had the bigger bail-outs with which we are all familiar, namely, Northern Rock, Bear Sterns, Fannie Mae, Freddie Mac and AIG. These measures have only fuelled the panic.

In the United States of America the Bush Administration chose to throw in the towel and is using taxpayers' money to take responsibility for entire debts in a desperate effort to avoid a complete meltdown. We are being asked in this House to follow George W. Bush's lead and offer even greater guarantees, relatively speaking, than the Bush White House. We are being asked to offer greater guarantees to Irish banks. "Moral hazard be damned" had become the centrepiece of the new orthodoxy. The core issue is the accumulation of unmarketable mortgage-backed securities and complex financial products of dubious value. I see no reference in his legislation to the regulation of dubious financial products or even the description of dubious financial products. Now it seems governments, including our own, will set aside potentially billions of the people's money to acquire these assets, taking them off the private sector's hands to allow financial institutions to resume routine borrowing and lending without the fear of becoming stuck with worthless paper. The Exchequer, or some specially created public agency, may become an owner of vast amounts of dodgy debts and the property associated with them.

The Minister should be in no doubt that there is more than the powers of a guarantee in this legislation. We understand what the Taoiseach spelled out earlier today about guarantee but the powers are much wider and if the Minister chooses to exercise wider powers than merely the guarantee described, I am not satisfied that there are sufficient requirements in the legislation for him to come in and clear that with the House.

I do not doubt that drastic action, national and international, is necessary to stabilise the situation. We agree with that. The Labour Party wants the lines of credit secured to protect the jobs, the employment prospects and the firms that employ working and middle class Irish people. We share that objective with the Government but the Government has a duty to uphold the nation's financial system. We accept that. The issue is the cost to current and future taxpayers. Many difficult questions remain and the Minister must give answers in the Dáil this week before we have a simple, dump it all on the taxpayer proposal. He says we will do this now and we will get the invoice in the post in the long term. That is not good enough.

The Taoiseach spoke today about this simply being a guarantee in regard to bank deposits and lending made by the banks from the European Central Bank and other secondary tier lending, as it is referred to, but it must be remembered that this is just one side of the bank equation. On foot of guarantees in respect of bank deposits and bank borrowing, banks can then lend out multiples. Nowhere in this legislation does the Minister make it clear how he proposes to regulate the lending practices of these banks to ensure they are saved from reckless actions in the future because those reckless actions, after this legislation, will have a cast iron, golden guarantee from the Irish taxpayer. We want an explanation in that regard.

What is the impact of this legislation on the national debt? The Minister's officials are suggesting it is a little note to the bottom of the national debt stating that our national debt is approximately €46 billion, which is low, but we have another €400 billion of exposure to the Irish banking system. That makes the figures gallop quite quickly, so to speak.

As well as regulating senior financial executives' pay in these banking institutions, will we finally see, for instance, the end to the practice that caused much of the construction bubble in Ireland, namely, the tax breaks that fuelled the speculative bubble? Can the Members opposite wean themselves off that at the same time they propose to bring in extra regulations for the banks?

The basic approach of the Minister has many defects. The Labour Party wants to join with the Government in protecting the legitimate interests of Irish taxpayers, Irish workers, Irish companies and Irish firms, but we are not writing a blank cheque to people who lived high off the hog during the years of plenty and did not contribute very much. We want to see them pay up and to see that clearly set out in the legislation. Nothing less than that will satisfy this party.

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