Joan Burton (Dublin West, Labour)

It is entitled, "A Race on Hy Brazil". The Government is permanently sequestered on Hy Brazil. I do not even think "A Race on Hy-Brazil" by Yeats is providing them with inspiration because they just do not get it. The measures announced today indicate that the banks are laughing all the way to the bank because the Government has yielded to them on almost every point. The small measures that the Opposition sought which would make so much sense for business and employment and put manners on bankers are not included. The Government is in Hy-Brazil and we have not been answered. The Bill contains no measures to get credit flowing or apply conditionality to the injection of the sum of €7 billion, which is essential. It is good that the banks are coming forward with clear and honest statements of what has been happening. Inevitably, with the scale of losses they have incurred, how will they provide funds for existing and new businesses to sustain employment? It is incredible that this matter does not feature in the Minister's speech.

I repeat what I said on 30 September and in early October. The Labour Party has a very simple proposal, which is that bankers' salaries, compensation or whatever they call it should be capped at the same salary and compensation package of the Minister for Finance. That salary stands at approximately €250,000. Ministers receive expenses of €60,000 to €70,000 and have a chauffeur driven car. In my language, that means a Minister's total package is worth approximately €350,000 which is remarkably similar to the figure President Barack Obama has come up with for bankers in the United States. In order to incentivise the people concerned — if they only understand incentives — a review clause could be inserted stating that after two or three years when they have brought the banks back to health we could consider giving them a Christmas box or something like it. It would not be a bonus but something modest that would reflect our thanks for what they had done. We want a capping of bankers' remuneration to be provided for in the Bill.

The Minister has announced today that he will hit the people with a mini budget, probably by the end of March. The people need reassurance that these masters of the universe are to feel some pain. While I cannot feel it, I can understand the pain felt by Mr. Goggins when he announced that his earnings would be cut to below the €2 million mark. Yesterday standing under the painting "A Race on Hy-Brazil" Mr. Sheehy was devastated that his income was falling to €700,000. I can understand that if one's lifestyle is pitched around earnings of €2 million, €700,000 does not sound fantastic. The people, like most Members, believe is an extraordinary amount of money, that it is excessive and that it should be reduced. I do not care what the CIROC is doing. It just needs to do it and bring bankers' salaries down. They need to be capped in order that the little people who will be asked to cough up in a mini budget will see that the bankers will also pay. As they are wealthy, they should pay proportionately more than those on small modest incomes.

We have had no detailed figures from the Minister to indicate why he believes the €7 billion recapitalisation figure is adequate. I am concerned that more will be required and that the Bill does not require the Minister to come back to the Dáil. We want a clause inserted in it requiring him to come back to the Dáil for approval. The terms of the Bill describe them as directed investments. Once these investments are made in the banks we want an annual report to be laid before the Houses of the Oireachtas. In effect, after we have invested €7 billion in the banks, we will own them. They will be nationalised in all but name because the device used is one of preference shares.

We are also concerned that the recapitalised banks will be protected against acquisition until the State has recouped its money. It would be quite possible for a clever capitalist — a hedge fund or private equity operator — to decide to buy ordinary shares. While we know it would be subject to the credit institutions financial support scheme, what is to stop a high flyer in a private equity or hedge fund buying up stocks of the two banks at very cheap prices, then taking over the banks — because that is what is provided for in the Minister's scheme — and saying to the taxpayer, "Off to Hy-Brazil with you. You are getting nothing." Where is the upside for the taxpayer? From the details of the Bill, there is no evidence that we are protected.

During the two-year but renewable lifespan of the guarantee for the covered institutions, the Minister will have the power to revoke the guarantee if an institution is taken over. Article 13 of the scheme states the Minister may revoke the guarantee in whole or in part after consultation with the governor and the regulatory authority. However, section 5 of the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Bill reverses section 7 of the Credit Institutions (Financial Support) Act. I am not sure whether this has become clear to the Minister. In other words, the special rules relating to the merger or takeover of guaranteed credit institutions do not apply to the investment by the pension fund on the Minister's behalf in the two banks. However, these special rules will continue to apply to a subsequent merger or takeover if it is only the State investment that is not covered by the rules under section 7.

Section 7 of the Credit Institutions (Financial Support) Act is a good example, which is worth highlighting in debate, of how rushed law makes for bad law. Its purpose is to modify competition law in its application to covered institutions. This was intended to facilitate mergers by providing for ministerial rather than Competition Authority scrutiny and approval. The mistake in the section is that it creates a special procedure to fast-track approval by the Minister of mergers and acquisitions to which the section applies in covered institutions. However, it defines mergers and acquisitions to which the section applies by reference to the Minister's certified opinion that:

(i) the proposed merger or acquisition is necessary to maintain the stability of the financial system in the State, and

(ii) there would be a serious threat to the stability of that system if the merger or acquisition did not proceed,

In other words, the Minister cannot consider a proposal for a merger or acquisition unless he is first notified of it, considers it, seeks additional information on it, if necessary, consults the Minister for Enterprise, Trade and Employment, the Central Bank and the Competition Authority, invites submissions, appoints a competition adviser and ultimately decides whether to approve or refuse the proposed merger or acquisition. This elaborate procedure only applies to mergers and acquisitions to which the section applies, being ones which the Minister has decided are necessary for the stability of the financial system of the State. The definition puts the cart before the horse. On the basis of our legal advice, if the provisions of the section were ever invoked, it would be absolutely unworkable. It is another example of rushed legislation being bad legislation.

I am also disappointed that the Bill only applies in regard to the investment in the banks in terms of the financial stability of and the financial crisis in the State. It makes no provision whatever for investment, for example, in necessary elements in the State such as required public infrastructure. In other words, what is left of the fund will continue to invest in equities throughout the world, from Hong Kong to Australia to the United States, in products as diverse as armaments, cigarettes and anything else one fancies, because it is all managed in diversified funds by fund managers who get handsome fees amounting to approximately €20 million a year. In the meantime, while there are very good projects in this country with an absolutely recognised and viable rate of return, there is no way of using anything from the pension funds to invest in those particular projects.

I am extremely disappointed by the Bill the Minister has produced. In a democracy, there must be public and social consent for what happens. As I said, today's announcement is the ninth attempt in terms of banking and stabilising the public finances. We seem to be set on a course where the banks have got everything they wanted in this recapitalisation proposal whereas the modest proposals put forward by us to cap bankers' pay and insist on conditionality being put in place in regard to credit for small and medium businesses in particular, as well as larger businesses, and have this addressed either by way of designated funds or otherwise by direction of the Minister, have been left out. It is difficult for people not to be very cynical about how partisan the Government has been when it is continuously on the side of rich bankers, not on the side of families working hard to put their children through school and build a life for themselves.

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