Kieran O'Donnell (Limerick East, Fine Gael)

I wish to share time with Deputy O'Dowd. I want to bring the debate back to the Fine Gael amendment to the motion on the regulatory failures of the system. We have had much uncertainty on Anglo Irish Bank and the Minister for Finance will have to clarify a number of points. It appears that Anglo Irish Bank gave €4 billion of an inter-bank loan to Irish Life & Permanent when the bank guarantee scheme was put in place. Irish Life & Permanent passed this on to a non-bank subsidiary company. That company invested it as a deposit in Anglo Irish Bank. Anglo Irish Bank reflected that €4 billion in its financial statements as a customer deposit, which it was entitled to do because the subsidiary company of Irish Life & Permanent was not a bank. However, Anglo Irish Bank also had a €4 billion inter-company loan to Irish Life & Permanent on the balance sheet at the same time.

That is window dressing. That €4 billion deposit was a repayment of the inter-bank loan. That must be clarified. This gave a false impression. I would like to know if that inter-company loan will disappear when Irish Life & Permanent's consolidated accounts are produced. That €4 billion may appear nowhere in the consolidated accounts of Irish Life & Permanent but appear as an asset, an inter-company loan for Anglo Irish Bank and also as a customer deposit, when it is a repayment of an inter-bank loan. It was done in that form to give a false impression to the financial markets that Anglo Irish Bank had €4 billion extra deposits when it was nothing more than a repayment of an inter-bank loan, which appeared above and below the line. That is deception and must be examined.

The Financial Regulator has been investigating this since last October. Were any other issues referred to the Financial Regulator on foot of the PricewaterhouseCoopers report involving the other banks? We understand from reports that this was done with the knowledge of the Central Bank. Irish Life & Permanent stated that. What specific knowledge did the governor of the Central Bank have on the form in which this was done? Anglo Irish Bank had its own money accounted for as both an asset and a liability. It routed the money out through Irish Life & Permanent, which facilitated it. This must all be clarified.

A number of points on the Government's proposed scheme will have to be clarified. The Government speaks about 10% extra capacity for small business and 30% extra capacity for first-time buyers. What is meant by "capacity"? We need to know what specific level of extra funding they will provide. We need to know what specific level of extra funding they will provide. Does "capacity" mean a bank which offers it to a small business person who might not be able to take it up can claim it made the offer? We need to know how many people they offer it to, the amounts they offer, whether the person receives it and the amount.

Last night the Minister announced that of the €7 billion that is being put into the banks, €4 billion is coming directly from existing resources in the National Pensions Reserve Fund while approximately €3 billion will come from front-loading of the Exchequer contributions for 2009-10. That means the Government will borrow at the expense of taxpayers to put money into the two main banks. Does that mean if any further recapitalisation is required, the Government will borrow? It will not come from the National Pensions Reserve Fund. There will be €3 billion of fresh borrowing at the expense of the Irish taxpayer. In addition, €7 million is being taken away from special needs assistance while Mr. Patrick Neary receives a €630,000 pay off. People watching are saying this is madness. Why is the Government accepting this? It should take Mr. Neary's claim to the courts. We cannot reward people for incompetence. The financial regulation system in this country has failed.

On the radio this morning the Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern said the Government went to the banks with the Fine Gael proposal and they did not like it. The banks are in no position to pass judgement. They got us into this mess. We propose an initial cap on executives' remuneration of €250,000. The Government proposes a 33% reduction in salaries and no increase in salaries or bonuses up to 2009, but the Government guarantee scheme is in place until 2010. The cap of €250,000 should be in place until the capital advanced by the taxpayer is repaid.

The PricewaterhouseCoopers report should be brought into the public domain. Bank of Ireland speaks of increasing its bad debts provision by nearly 60% to €6 billion. That has been backed up by a firm of independent risk consultants the bank brought in itself. I see no mention of what was provided for in the PricewaterhouseCoopers report. That is supposed to be in the independent review commissioned by the Government and that report should be published.

Fine Gael proposes we take AIB and Bank of Ireland and establish a new AIB and Bank of Ireland alongside them. We transfer the good assets to the new banks, leave the toxic assets in the existing banks and allow them to wind down as we proposed for Anglo Irish Bank. Suppose one bought a box of oranges at the market and the oranges on the top layer all looked pristine. If one took the box of oranges home and found that many of the ones underneath were rotten, would one not want to pick out all the good ones, leaving the rotten oranges in the existing box? If not, they will fester and infect the other good oranges. It is the same with loans. The biggest problem is that we are playing Russian roulette with taxpayers' money. We do not know how much bad debt is within the banks. We still have not been given an idea about the PricewaterhouseCoopers report.

We want the Government's scheme to work. I would be delighted if it worked, but it cannot work. We are paying out €7 billion of taxpayers' money when we do not know the full extent of the situation. Perhaps the Government knows from the PricewaterhouseCoopers report. The time has come to restore trust in our banking system. We need to ensure we have full transparency, which we do not have at the moment. The problem is that we have a system of regulation that has not worked and is not working now. With regard to what has happened at Anglo Irish Bank, Irish Life & Permanent has major questions to answer. It would appear to have facilitated the routing of €4 billion through its books so that Anglo Irish could give the impression it had higher customer deposits than it actually had.

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