Arthur Morgan (Louth, Sinn Fein)

It is now 80 days since the Minister for Finance announced his bank guarantee scheme in the House. Even though he then promised he was not "protecting the interests of the banks" but was instead "safeguarding the economy and everyone who lived and worked in this country" there has been an air of inevitability about recapitalising Irish banks. Over the past two months we have seen one state after another launch a recapitalisation scheme to save their deteriorating economic circumstances, while the Government dithered. Worse still, there is no good news for struggling mortgage holders today as home repossession rates soar, and neither for SMEs, the backbone of our economy, which are shedding workers daily.

The warning signs were there long before September and yet again the Government did nothing. Earlier this year Permanent TSB became the first of a series of banks to withdraw 100% mortgages and cut the maximum percentage of the cost of a house they were willing to lend for to 80% of the property value.

The reason for withdrawing the 100% mortgage was that the bank wanted to have "a more prudent lending policy" — somewhat late, I suggest.

In July Bank of Ireland, BoI, and Irish Life and Permanent, ILP, began to cut back on commercial lending and in the case of Irish Life and Permanent, an early July slump in share prices saw it lose a quarter of its value in a week. Newspaper reports at the time said ILP had driven its lending business not through growing deposits but by borrowing from other banks and lending that money to home buyers in the buy to let market. The Daily Telegraph reported in the first week of July that Bank of Ireland told British customers it would take on no new commercial lending for three months. In the same week BoI disclosed that it was unable to predict future profits because of the slowdown and the problems being faced in loan repayments by some of its business customers.

The Irish Wind Energy Association reported in late June that wind farm operators were finding it difficult to finance new projects as banks were only willing to fund 70% to 75% of the construction costs compared to over 80% before the credit crisis and the smaller wind farm operators were being hit hardest. Faced with all these realities of a growing crisis the Government did exactly in July what it is doing today — it went on holidays. Given the amount of time that has elapsed, one would have thought the Government would be in a position to provide details of a clear and comprehensive recapitalisation project that would boost confidence in our financial institutions and inject much needed credit into our economy. What we got in last Sunday's announcement, however, was a vague statement that inspired little confidence in the Government's ability to deal with one of the greatest economic challenges to face us in a lifetime.

Rather than a decisive plan of action, the latest Government announcement has been described as an "approach to recapitalisation", with broad parameters that have left us in the dark as to what exactly it all means. The Government has reiterated that the interests of the taxpayer are paramount. Based on certain signals it has made, however, I remain far from convinced that this is the case. Among my core concerns is the Government's reiteration that it will "supplement and encourage" private equity investment. The involvement of corporate raiders in the Irish banking——

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