Charles Flanagan (Laois-Offaly, Fine Gael)

I commend Deputy Bruton on bringing this important motion to the House. The Government now admits that Ireland is in a fight for its economic survival. If we are to come through this and survive, we must have a clear understanding of how and why we got into the mess in the first instance.

The banking and financial crisis in Ireland was not caused by sub-prime lending in the residential mortgage market, although a small amount of that did go on, and it was not caused by the creation of, or purchase of, exotic financial instruments by the Irish banks. The economic crisis in this country was caused by a particular political way of thinking. The Fianna Fáil-Progressive Democrat ideology has brought this country to its knees. This was the Galway tent school of economics.

Central to this ideology was the belief we could build a sustainable economic future on the back of an unsustainable property bubble. At the core of this Galway tent school of economics was a cosy cartel of politicians, property developers and bankers, supported by a raft of tax incentives and tax dodges. Its core principle was the pursuit of private gain at the expense of the common good. Charlie McCreevy was the cheer leader, promoter and high priest of this neo-liberal ideology. Its true nature was expressed in his infamous words "if you have it, spend it". Spend it they did. The badge of honour was the private helicopter, flying between the Galway tent and the Fianna Fáil Ard-Fheis.

Encouraged, supported and cheered on by the Government, property developers and bankers went on an orgy of speculation, borrowing, lending and indefensible practices. The banks became the property of the speculators through special investment vehicles that were kept off the balance sheets. A further risk was added when many senior bankers themselves became property speculators and developers in their own right, in addition to the day job. Any sense that there was a conflict of interest was abandoned.

The actions of the Director of Corporate Enforcement yesterday are welcome, as are those of the Garda Síochána, but yesterday's show must be more than cosmetic. The Office of the Director of Corporate Enforcement must be properly resourced and beefed up, the legislation in that regard must be changed.

There is overwhelming prima facie evidence of serious wrongdoing that should be addressed not only by the Director of Corporate Enforcement but the Director of Public Prosecutions. I refer to section 17 of the Companies Act 1990, which lays out directors' obligations, section 41, which deals with the prohibition of loans to directors, sections 42, 46 and 53 laying out the obligations of directors to notify their interest in shares, not to mention sections 197, 202 to 204, inclusive, and 242. I could go on.

As well as 11 breaches of company law, I contend serious criminal fraud has been perpetrated and should be processed. The Criminal Justice (Fraud Offences and Theft) Act 2001 must be applied in full, with particular reference to sections 10 and 11 thereof. The market abuse regulations must be applied and honoured in full. Our money laundering and financial regulation procedures must be strengthened. The failure to transpose the third EU directive on money laundering into Irish law is a dereliction of duty on the part of the Government.

The boards of directors of all our banks have failed in their fundamental obligation to supervise their managers. This was starkly exposed in the dodgy money transfers between Anglo Irish Bank and the Irish Life & Permanent. The chairperson of Irish Life & Permanent, paid more than €400,000 annually to do her job, has admitted she did not know of financial transactions at her bank of more than €7 billion. She was not informed, she did not know and she still does not have the decency to resign.

Where was the regulator when this toxic stew was bubbling away? The system of banking regulation and supervision is the creation of this Government. A light touch approach to regulation was supported and actively encouraged by senior members of the current Government and its predecessors in the Fianna Fáil-Progressive Democrat neo-liberal regime. Charlie McCreevy boasted on numerous occasions about the lack of regulation and has been preaching the same dangerous gospel in Europe for the past four years.

Despite corruption cases involving companies based in the IFSC, neither the Government nor the regulator took any action. Justin O'Brien, an international expert on corporate governance, warned the Government about this issue. He wrote in The Irish Times that international regulators were expressing "shock and dismay" that Ireland had abdicated its responsibilities for short-term advantages but no one on the Government side was listening.

Despite the high profile court cases, despite the loss of reputation and despite the warning signs, the Government sailed on regardless. In September 2005, Deputy Micheál Martin, the then Minister for Enterprise, Trade and Employment, assured his audience at the annual IFSC lunch that he was further weakening the already lax regulations in this area and that the law in this regard would be further eased. He said he would be less prescriptive about the methods a company uses to review its compliance procedures and in not requiring a review of the compliance statement by external auditors. Of course, the rod of lax regulation as applied to companies based at the IFSC was also applied to general banking, with the disastrous consequences we now see. There is an urgent and compelling case for a root and branch reform of our financial regulatory system. There is a need for some outsiders who have no baggage, who will apply the rules without fear or favour. I recommend the Minister to look at Sweden or Canada as a source of such expertise.

There needs to be a phased clear-out of senior managers at board level in all our banks. Likewise, there needs to be a clear-out of the board and senior executives in the offices of the Financial Services Regulator. Confidence must be restored and time is of the essence. We need to rid ourselves of the three "Cs" in banking: cronyism, corruption and criminality. If this Government is unable or unwilling to do the job that now needs to be done, it should stand aside and let others take over.

I commend Deputy Bruton for his foresight in this regard, not only in recent times but also for issuing warning signs and ringing alarm bells. If this motion is defeated, and the indication from the Minister of State opposite is that it will be, that will not end the debate. We need resolve on all sides of the House to deal with this banking issue before moving on to deal with the general economic crisis we now face.

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