Wednesday, 1 October 2008
Credit Institutions (Financial Support) Bill 2008: Committee Stage.
Jim O'Keeffe (Cork South West, Fine Gael)
I hope the system being put in place by the Minister for Finance and the Government works. I hope it withstands the vicissitudes of the marketplace and the legal challenges — which no doubt are being considered at home and in Europe — to the Bill's provisions. In many ways an Opposition in a situation such as this has to take a Government on trust. We must don the green jersey in what is presented as an emergency situation. We hope this trust will be well-founded in the coming months and years.
The one major defect in the Credit Institutions (Financial Support) Bill is its democratic deficit. The Oireachtas has been asked to write a blank cheque for the Government and Ireland's financial institutions. In doing this, we must bear in mind the background to these events.
Alan Greenspan spoke about irrational exuberance at the time of the dotcom bubble. Everyone accepts that over the past several years we have had irrational irresponsibility on the part of Irish lending institutions. Lending practices were in place that were absolutely outrageous from the point of view of any prudent banking system. What is worse is that no one shouted "Stop". That is the real concern for the future. The Central Bank and the regulatory authority issued reports now and again, raising a cautious voice about what was happening in the financial sector. Yet no one shouted "Stop", or anyone who raised a whisper about these practices was simply not heard. That contributed substantially to the difficulties which now confront our financial institutions.
Could it happen again now that we are providing this underwriting guarantee? If it does, will there be a cost to the taxpayer? Yesterday, the Taoiseach said there was no exposure to the taxpayer in this scheme. That was a rather simplistic interpretation of this legislation. Already there is an indirect cost to the taxpayer in that the level of interest payable on Government bonds is creeping up. If this guarantee was called in at any stage, undoubtedly the taxpayer would be exposed to substantial costs.
Who will look after the taxpayers' interests? I am a bit old-fashioned but in a democratic system I always regard parliament as the body that looks after the taxpayers' interests. Apart from giving this blank cheque to the Government, Parliament has become functus officio. It has a few small responsibilities regarding positive resolutions on motions and regulations but no direct function or role. It does not have the watchdog role I believe it should have regarding the exposure of the taxpayer arising from this legislation.
That is why I strongly believe that what is needed is a public accounts type banking committee of the Oireachtas. We need a committee of the Oireachtas to which the various bodies can report. This would provide a platform for the Central Bank, the Financial Regulator, officials from the Department of Finance or the Minister for Finance to express their views; a platform through which the interests of the taxpayer could be protected. One issue that could be raised in opposition to such a proposal, which I will counter straight away, is that in many instances sensitive information, commercial or otherwise, could become public knowledge improperly. However, that issue has been dealt with in other countries. Basically we should believe in a system of openness, transparency and accountability. In so far as there is any sensitive information to be protected, it can be dealt with by committees in this House in the same manner as in other countries.
As someone who has been a Member in this House for some time, I agree that we must support this legislation and I hope it will work. However, I would like to see the major defect I am highlighting, namely the democratic deficit, addressed. I am putting forward a concrete proposal as to how that might be done, through the establishment of an Oireachtas public accounts type banking committee. There is enough expertise in this and the other House to provide that kind of safeguard for the taxpayer. I ask the Minister to consider that proposal.