Dáil debates

Thursday, 17 September 2009

National Asset Management Agency Bill 2009: Second Stage (Resumed)

 

2:00 pm

Photo of Peter PowerPeter Power (Limerick East, Fianna Fail)

Like the Tánaiste, I am delighted to have an opportunity to contribute to what history will, no doubt, record as being perhaps the most important debate to have occurred in this Chamber for many a long year. There are those who say this Chamber lacks relevance or that it does not debate issues which impact directly on the lives of ordinary citizens, but this important discussion does not bear out that popular perception.

Our recent political history is littered with examples of where we have not faced up to really difficult problems. We have shied away from them and, more often than not, have taken the easy solution. This crisis, however, requires an altogether different response. It requires really decisive action, but more importantly, it requires a workable solution no matter what one's ideological perspective. It also requires the Government, of whatever composition, to act with real courage and conviction to produce the right results. Our history also shows us that the most workable solutions to the problems and crises that face this country are often the least popular. In addition, the most popular solutions are often the least workable, which is the case concerning some of the proposed solutions to the crisis in which we find ourselves.

As a relatively young Member of this House, I deeply resent the questioning of my motivation, or of anybody's here, concerning the proposals that have been brought forward. The innuendo that we are all part of a grand conspiracy or cosy cartel to protect vested interests in this society is, frankly, unworthy of those making the accusations I have heard across the floor of this House. We should be mature enough to engage in a debate about a crisis facing the country without resorting to that level of debate. We should also recognise that this debate is taking place not just in an Irish context but also in a global one. Virtually every developed economy is facing a distressed banking situation in one shape of another. The situation in the United States arose from complex derivatives, while distressed assets in Britain were caused by other reasons. Ireland's particular situation in the banking sector has been caused to a large extent by greed and the failure of the regulatory authorities.

As regards the solution, the Government is proposing a number of matters. If we are to understand the nature and importance of the guarantee which we installed and undertook almost a year ago - which practically every other country in Europe followed to one extent or another - its real effect was a clear national statement that we were not prepared to let the Irish banking system fail. If we were in any way to weaken our resolve in that important national policy position, it would certainly cause enormous difficulties for our banking system.

As regards the Fine Gael proposal, there is a seductive attraction in the idea that maybe we should punish the bankers and let those people who invested in our banks suffer a little more. However, the implication in the guarantee is that we will protect our banking system. That will involve difficult and unpopular policy choices, but not to do so would be the ultimate disservice to taxpayers.

We share common objectives across the floor of this House. We want to have a modern, functioning and well regulated banking system that serves the real economy. The question we must resolve, however, is what solution works. Three solutions have been proposed. The Government solution is an asset management agency which seeks to resolve a current crisis in a way that has worked in other jurisdictions. The Labour Party proposal for nationalisation, blanket or otherwise, has major problems as far as we are concerned. Fine Gael's so-called good bank - or bad bank, certainly if it does not work - has major flaws. I wish to address the problems associated with the proposed solution by Fine Gael. In his speech this morning, the Fine Gael leader, Enda Kenny, pointed to the French financing corporation, the SFEF, as an example of a new and successful wholesale bank, along the lines of what his party is proposing. Deputy Kenny does not seem to realise that if a similar entity were to be brought into force here it would be completely redundant. By citing the French example with approval, Fine Gael is effectively trying to piggy-back on a solution which does not address the real issue in the Irish situation, namely, the distressed loans on balance sheets of Irish banks. The SFEF model simply does not do it and to pretend otherwise is walking away from reality. Why does it not do so? The SFEF is effectively a pass-through financing entity between financial markets and the French banks, which was established in 2008. The SFEF raises funds for the banks by selling government-guaranteed bonds on financial markets, and lending those funds to the banks. French banks, of course, can issue their own bonds in the normal way, but the difference here is that the French do not have a state-guaranteed scheme like ours, and these bonds are not government guaranteed. Therefore, the SFEF, which Fine Gael quotes with approval, is merely a mechanism to provide a state guarantee to normal commercial banks' funding. The funding of Irish financial institutions is currently guaranteed by the State under the scheme introduced last September. That is the essential difference between the French and Irish situations, and it is why Fine Gael's attempt merely to copy what is a successful model would not solve the Irish problem. I have not heard one economist saying that it addresses the major distressed assets on the balance sheets of Irish banks. However, there are other differences between the French model and Fine Gael's proposal.

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