Pat Rabbitte (Dublin South West, Labour)

When this series of debates started at the time of the bank guarantee, I stated in the House that recapitalisation was really the issue, so I must say that I hope it works. I hope that what the Government has done with the €7 billion actually works. It is very difficult to answer the question on whether it is enough. Until we know the extent of the bad loans, we will not be able to answer that question. However, I suspect the question asked outside of this House is whether it will start normal credit lines flowing again. Will the credit lines be unfrozen for businesses that require overdraft facilities in order to keep people in employment and generating wealth?

It is not helpful when one looks at what has happened in other countries. Recapitalisation has not caused that to happen so far. It is profoundly worrying that the precedent is not good. Is that because insufficient capital was put in originally? Is it because deleveraging is going on not just in the banks but in the business sector as well? Is it because banks are reducing their reliance on the wholesale market and on capital markets, and that there is a return to old style banking in which they finance loans out of deposits? If that is the situation and if that retrenchment in lending is happening, then our last stage is arguably worse than our first. If the banks' priority is to manage half-hidden dodgy loans and husbanding the capital they have, rather than getting lending moving again, then we have a real difficulty.

What kind of bargain did the Government strike with the banks? The impression is that since 29 September, the Minister has been obstructed at every turn. He seems to have had to fight for every minor concession won. When one examines the bargain that has been struck, as outlined in the Minister's speech, one has to ask whether it contains hard and precise commitments to assist small and medium-sized enterprises. Is there any money in it for start-up companies? Does it deal with executive pay? Does it require the banks to face up to the losses that have resulted from the write-down of bad loans? If one goes through each section of the document setting out the bargain, one will find that it does not contain hard and precise commitments. There is a commitment to enhancing a certain "lending capacity"? What does "lending capacity" mean in this context? If a certain percentage is being provided under the heading of "lending capacity", can it be accessed and drawn down according to sound business criteria? I do not know. We have been told that a fund of €15 million is being provided for start-ups, but the credit unions provide more than that to start-ups.

What has been done in respect of executive pay? I just listened to Mr. Goggin on the radio. He took €2.9 million last year. He said on the radio that he will take a great deal less this year. When he was pressed, he said he thinks it will fall below €2 million. In the name of God, on what kind of alternative planet are these guys living? Mr. Goggin's predecessor, Mr. Soden, came on the radio after him to say he would have been gone — he would have handed in his badge because he could not have continued — as soon as the shares dropped below €5 or €6. He said that senior management would have had to do likewise. That has not happened. Next year, we will maintain a level of executive pay of €1.9 million to Mr. Goggin.

The concessions that have been won are limited. The critical concession would involve a demand on the banks to face up to their reckless lending in the past. We will not get out of this crisis unless we are given a clean sheet. As Deputy Timmins said, we have not heard from Allied Irish Banks about its estimated write-down. We have heard from Bank of Ireland on its worst case scenario. We will monitor it to see if it comes to pass. At a cost of €6 billion, it is frightening. Deputy Burton has inferred that the relevant figure in the case of Allied Irish Banks will be more than €7 billion. That bank will not come out and tell us what will happen.

I wish to speak about regulation. I have great sympathy for the Minister for Finance, who is being pushed and pulled as he tries to deal with a range of extraordinarily serious issues. I suspect that the number of people advising him who are of the calibre that is necessary is quite small. Those advisers who are of the sufficient calibre are overstretched. We need to deal with the issue of regulation and the role of the Financial Regulator in the context of what was revealed yesterday. During the DIRT inquiry, Deputies asked the banks about their responsibilities to consumers. The Acting Chairman, Deputy Ardagh, was a member of the relevant committee. The representatives of the banks said that consumer care was not their problem. They claimed their only task was the prudential supervision of the banks. I will remind the House of what happened thereafter. We put in place a new architecture of regulation. I argued at the time that it was a mistake to leave it within the mindset and structure of the Central Bank. In this debate, I have to ask whether a blind eye was turned to certain practices to maintain the stability of the banking system. How can a man of the intelligence and training of the Minister for Finance have failed to read the critical section of the report? I do not think we know the answer to that yet.

In an extraordinary and obscure three-line statement, Irish Life & Permanent has claimed that "during a period of unprecedented turmoil in global financial markets there was an acceptance that financial institutions would seek to provide each other with appropriate support where possible". What does that mean? What is "appropriate support"? Does the kind of carry-on that was revealed yesterday constitute "appropriate support"? Where was the "acceptance" that is mentioned in the statement? On the part of whom was there "acceptance"? Was it "acceptance" on the part of the authorities? Was it "acceptance" by the regulator? Is that the reason the Minister was not told about the critical section in the report? Was a decision made not to tell the Minister to make sure he was not implicated? Was a blind eye turned to the practices that were exposed yesterday? I refer to the lodging of moneys on the final day of the financial year, six hours after the guarantee was given by the Government.

I cannot accept that the 388 intelligent people who work for the Financial Regulator, at a cost of €58 million, did not see the Seán FitzPatrick business or the Irish Life & Permanent business. I do not think it is as simple as that. I think a blind eye was turned to some of these practices. That is part of the reason for the absence of confidence in the Irish banking system on the part of the international investment community and others who know more about these matters than the average person on the street. If that is the case, it is a sad day. We need to get to the bottom of it. An all-party commission of this House should be established to examine what has gone on in the banking system and to make recommendations for the future.

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