Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am grateful to Deputy Rabbitte for giving me the opportunity to deal with the material that appeared on page 14 of The Irish Times today. I referred to it cursorily in opening the debate on Second Stage. The article suggested that on 29 September, when the Government decided to extend the bank guarantee to six financial institutions, a Bill was in existence to rescue only four institutions and that the sudden liquidation of Anglo Irish Bank was contemplated by the Government. That is simply untrue. The only legislation before the Taoiseach and I on that evening — the members of the Government were consulted incorporeally — was a Bill which, in all material terms, is the same as the Bill before the House today. The only decision the Government had to take was whether we would proceed to guarantee all six institutions or whether we could contemplate the nationalisation of this institution, as we are doing, and guarantee the rest of them. We took advice on this matter and had a discussion with the Governor of the Central Bank, the regulatory authority and the officials of my Department. There was a balance in the argument, as there is in all arguments, and the balance of the argument and the unanimous view of all those who advised us was to extend the guarantee at that stage. The reason we decided to do so was the grave shortage of liquidity in the Irish banking system at the time. A decision to nationalise one institution could have caused a systemic run on all other institutions. That was the decision taken, which I subsequently explained in the House and in public comments.

One of the issues that arose in the context of this legislation was whether there should be a ceiling on the withdrawal of deposits above and beyond what a bank had obtained by way of security. That provision was in the original legislation, the Bill from last September, because of the chaotic conditions that obtained last September and the need to take such precautionary measures. The provision was kept in the Bill as it was submitted and circulated to members last Friday but the precaution was unnecessary. The best commercial and legal advice we got was that it should not be included in the legislation.

Deputies will understand, given the conditions that obtained in late September, the necessity to include such a provision. Deputies will say that legislation in haste is always dangerous. While I accept that the House must deal with this speedily, the legislation has been under preparation for a considerable period and has been gone through on many occasions by officials at my Department. While I accept that we are legislating in haste, I assure the House that the legislation has not been prepared in haste. Members will appreciate that the existence of legislation of this character cannot be disclosed to the public without raising concerns about financial institutions. Since September, there has never been an opportune time for me to arrive in the House and propose a nationalisation Bill that we should enact as a precautionary measure. In current banking conditions it would not be wise for me to invite the House in the abstract to provide for a Bill that granted me power to nationalise a bank at any time I saw fit.

The Danish authorities studied our guarantee scheme and were impressed by it. The Danish finance Minister introduced legislation a few weeks afterwards providing for a guarantee but also providing for the option of nationalisation. It is not correct to say that Government policy is incoherent but I am glad Deputy Rabbitte asked the question. It has given me the opportunity to deal with this particular item, which caused me considerable distress. The suggestion that I did not take the advice of my officials is untrue. This is linked to a later suggestion that the bank existed purely as a vehicle for property speculators who are of systemic importance to my party. I was never in the tent at the Galway races and never visited the Galway races, nor did I receive representations from developers or bankers about this particular financial institution. I can assure the House that I have worked extremely hard on this matter since late August to ensure the stability of our financial system.

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