Joan Burton (Dublin West, Labour)

Within hours it was followed by the actions of vested financial interests who saw this as a signal to carry on with business as usual, with a Government licence to back them up. There was Mr. Fingleton junior's notorious e-mail to UK depositors drumming up extra business on foot of the State guarantee. Then there was the extraordinary set of deals to manage the year-end balance sheet of Anglo Irish Bank with huge overnight transfers from another institution, Irish Nationwide, in the face of manifest failure and support from another institution. No bank can fail, was the mantra of the Minister for Finance, Deputy Brian Lenihan but he let down his guard and failed to insist on new practices, new management and a new bank culture.

Only nationalisation could have achieved that but he ran away from that option and he is still running away in denial from it. The Fianna Fáil–Green Party Government's velvet glove approach with the banks is deeply flawed and has not worked, and will not work, now or ever. Banks have become too used to getting their own way over the past decade. This can be changed only by a strong arm approach that will absolutely insist on both regime change at the top and behaviour change in their approach to corporate governance and lending policies.

The banks covered by the guarantee have teetered on the edge of bankruptcy for some time now. As institutions they have failed utterly. They have failed the businesses, the homeowners, and their own workers who have given them loyal service. There is no escaping that plain if rather inconvenient truth. Their predicament is evident from the sorry state of AIB and the continuing but reluctant admissions from it of the calamitous state of that bank's balance sheet. Sooner or later these colossal sums must be written off, the banking system must be restructured entirely and revert to its core job of accepting deposits and lending against houses and business plans, particularly for small and medium sized enterprises which rely on our banks. The Americans call this style of banking - taking deposits, lending for houses and ordinary businesses - vanilla banking, just like vanilla ice cream without any exotic flavours added.

Last September, the entire house of cards collapsed and confidence evaporated Every bank's long-term security was called into question. From that moment banks ceased to be the pillars of the economy. They became bankrupt businesses and like all other bankrupt businesses their primary interest was in hustling for money to pay their debts. Their sole claim on public aid was that they held deposits and mortgages, and were still in a position to lend, if the Government would look after them. The Government gave them a disastrous guarantee because it naïvely took at face value their assurance that they could still offer lines of credit.

It was a lie then and it is still a lie. Had the Government nationalised them on day one, on 30 September, it could have secured those deposits and ring-fenced lending to businesses and individuals, as well as protecting the shareholders' interests and those of the small savers who patriotically put their money into those shares. It would draw tears from a stone to look at the small shareholders tonight who thought that they were doing the patriotic thing and saving for their retirements. How they were fooled.

At the same time the Government could have isolated toxic debt into a managed "administration" or quarantine. Above all that would have given it control over the massive sums it was about to spend. Instead, we have heard Minister after Minister uttering pious hopes that bank directors would use their giant subsidies to lend to businesses and thus kick-start recovery, as opposed to merely underpinning their balance sheets. With nationalisation the Government would have had power to implement its declared policy.

The €7 billion of public money for AIB and Bank of Ireland was supposedly for lending. That is what the Government told us but AIB received €3.5 billion and has just announced that its debt write-off this year is €4.3 billion so it is actually a further €800 million short after the Government claimed that recapitalisation would fix it. How naïve can Ministers be and how reckless with taxpayers' money? Is there no end to their fecklessness? If one gives money to a chronic gambler he will not use it to change his ways. He will head straight to the nearest Paddy Power betting shop or poker school.

The Government has borne all of the costs of nationalisation and gained none of the advantages. That is the Labour Party's point. What was the point of giving all that money to the banks when they were never going to lend it to business? The economy needs raw spending power. Money must flow through the economic bloodstream again. That is the way to re-open shops, re-establish cash-flow, employ staff, make it worthwhile to borrow from banks and for the banks to lend.

The Government is planning to pour tens of thousands of euro for every man, woman and child in Ireland into a failed banking system, not just to pay Fingers Fingleton's obscene pension but to pay the gambling debts that he incurred in his recent banking adventures as well. The Minister claims that the days of crony capitalism are over but the public has a right to be sceptical of this claim. We have experienced for years the corrosive effects of planning corruption and the Government is largely responsible for the tax incentives that facilitated the property bubble. That corruption was so overt that public opinion is right to be wary of expensive quick-fix solutions coming from the source that created the problems.

Political influence over decisions comes in many forms. Crony capitalism may not be as overt as before but it has not gone away, it is still very much with us. Its influence can be seen in the set of attitudes that run through the National Asset Management Agency plan. What is good for the failed banks and the failed developers is deemed to be good for Ireland or so, at least, the Government appears to believe. The Minister said it bluntly himself when he described the NAMA as a bailout of the Irish economy. In other words he identifies the interests of the bankers and the developers with those of the State.

That set of attitudes and the light touch - "It will be alright on the night" - approach to regulation has failed the country at a crucial time. Why should the public put its trust now in a new system designed to suit the same people? Public trust is a fragile thing and has been sorely tested in recent months. The September guarantee was supposed to be the silver bullet and was sold to the public at the time as such. It failed in its express purpose. Now this new silver bullet is on offer but the public is more cautious. The Minister for Finance faces a brutal public backlash if he proceeds with the NAMA in the manner he and Dr. Bacon have proposed. There is a huge loathing at the prospect of yet another bailout for the golden circle of Fianna Fáil's developers and the bankers.

The Labour Party has three problems with the Bacon proposal. How are the troubled assets to be priced in a transparent manner that commands public confidence?

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