Brian Hayes (Dublin South West, Fine Gael)

The first requirement of any economic recovery is a clear and clinical analysis of how and why we got in the mess. The Government wants us to forget the recent past while the Taoiseach and his Ministers would have us believe our economic problems were caused by foreigners. Only as late as last week, the Taoiseach blamed the difficulties of the collapse of Lehman Brothers. This is not true. Our problems are very much home-grown.

The economic crisis in Ireland was caused by the Galway tent school of economics. Central to this ideology was the belief that we could build a sustainable economic future on the back of an unsustainable property bubble. The property bubble was supported by a raft of tax incentives and tax dodges introduced by the then Minister for Finance, Charlie McCreevy, and kept in place by his successor, Deputy Cowen, for four years. Its true nature was expressed in Charlie McCreevy's infamous phrase, "If you have it, spend it". Spend they did.

Now Fianna Fáil wants us to forget about the Galway tent. We all heard the story about how many claimed to be in the GPO in 1916. The Galway tent is like the GPO in reverse, with Fianna Fáil Ministers claiming they did not like the Galway tent, that they never spent much time there and it was all a very long time ago. The biggest cheerleader of all for these reckless days was former Taoiseach, Deputy Bertie Ahern. Nobody in Fianna Fáil shouted "Stop". Those who pointed out that the emperor had no clothes were advised to commit suicide.

Why was this allowed to pertain? Encouraged, supported and cheered on by the Government, property developers and bankers went on orgy of speculation, borrowing, lending and grossly extended leverage. The banks themselves became property speculators through special investment vehicles which were kept off balance sheets. A further risk was added when many senior bankers, across our banking system, became property speculators in their own right in addition to the day job. Any sense of a conflict of interest was abandoned. Our bankers lost all sense of proportion, showed little or no understanding of risk and did not seem to realise that the value of the assets they used as collateral was grossly inflated by the easy credit lending of the banks. In the words of Morgan Kelly, "property bubbles are the consequence of abnormal levels of bank lending. Once the bank lending that fuelled the boom returns to its usual levels, prices return roughly to where they started before the boom".

These incompetent senior bankers believed their own foolishness and convinced themselves that they deserved their huge salaries and bonuses. Never has failure been so grossly and brazenly rewarded. Across the whole Irish banking sector there was a failure at board level and a failure at senior management level. The directors of Irish financial institutions turned out to be very expensive mushrooms, fed manure by the senior managers they were supposed to supervise. It is right and fitting that there be a clear-out of board members in Irish banks. There will also need to be a clear-out of senior managers who led the banks over the cliff and who are still in denial about the scale of the problems facing the Irish banking system.

All the while the Central Bank and the Financial Regulator allowed a Frankenstinian monster to grow. Our banking supervisory system was governed by the principles of "hear no evil, see no evil, speak no evil". This supervisory system was hatched by the former Minister, Charlie McCreevy, and the current Minister for Health and Children, Deputy Mary Harney. The current Minister for Finance proposes to radically change the system which has existed for only a few years.

Banking supervision is not rocket science. In October 2006 the Bank for International Settlements published a very useful document entitled Core Principles of Effective Banking Supervision. It is not complicated and is only six pages long. If these principles had been applied in recent years to the Irish banks we would not be in this mess. I commend them to the Minister.

The collapse of Northern Rock in 2007 should have been a wake-up call for all banks, banking supervisors and the Government. All of these entities stayed in denial about the situation for another 12 months. Indeed, the Government and the regulator kept on reassuring us that our banks were well capitalised. Decisive intervention two years ago would have lessened much of the present damage. Instead Fianna Fáil focussed on itself and its crisis of leadership.

Many warning signs were flashing regarding the quality of financial supervision in Ireland but senior members of the Government actively supported and encouraged a light touch approach to regulation. The former Minister and present Commissioner McCreevy boasted on many occasions about the lack of regulation and went on to preach the same stupid message in Europe for several years. Despite high profile corruption cases involving companies based in the IFSC, neither the Government nor the regulator took any action. The Government stood idly by while Ireland's reputation for financial probity was trashed in the international economic arena. Despite the high profile court cases, the loss of reputation and the warning signs the Government sailed on regardless.

In December 2005 at the annual IFSC lunch Deputy Micheál Martin, then Minister for Enterprise, Trade and Employment, assured his audience that he was further weakening the already lax regulations in this area and that the law would be further eased. He said he would "be less prescriptive about methods a company uses to review compliance procedures and in not requiring a review of the compliance statement by an external auditor".

The Minister for Finance would have us believe that there is no alternative to NAMA. This is the same Minister who believes that Anglo Irish Bank is of systemic importance to the Irish economy. How many economists can he quote to support his opinion? The newly appointed Governor of the Central Bank does not support his opinion.

In addition to being a bad bank NAMA will be one of the largest property developers in the world. It is interesting to briefly look at the other bad bank which the Government owns, Anglo Irish Bank. The Government has already invested €3.8 billion in it and may have to invest more. According to newspaper speculation at the weekend that could extend to €10 billion by the time the bank is fully recapitalised. What are the realistic prospects of getting this money back? Eight months after nationalisation the bank has been unable to produce a business plan. We learnt from recent court cases that it was prepared to roll over all interest to the Zoe group up to 2014.

Even more alarming was the willingness of Anglo Irish Bank to lend a further €68 million to the Zoe group to finance the development of a new headquarters for the bank, and all this for a building that does not even have planning permission. What justification is there for Anglo Irish Bank to build a new headquarters in the present climate? What justification is there for it to receive further funds from the Irish taxpayer when it is a dead bank walking? It has no future but the Government is bent on continuing to put taxpayers' money into the bank. This makes no sense.

How is the public interest being served by these revelations from Anglo Irish Bank? What is the Minister doing to stop this crazy behaviour in a bank that we now own? If it is our bank why can he not ensure proper answers to these questions, rather than letting it continue on a course which offers no future for the bank or the taxpayer?

With regard to the Minister's valuation model for assets being acquired by NAMA, Eoin McDermott, chairman of the valuation division of the Society of Chartered Surveyors, wrote in The Irish Times on 1 September, "From a chartered surveyor's point of view, it will represent a departure from conventional valuation that has been developed and well tested over a period of 40 years". The Irish Times last week published a report to the effect that Irish Life had reduced its asking price for three Dublin properties by 50% since May 2008. That was one year after prices peaked. Who is likely to have a better understanding of the Irish property market - Irish Life or NAMA? No one believes that we have reached the bottom of the market. Over-valuing these impaired assets at this stage has extraordinary implications for this society.

Why is the Minister not putting pressure on the banks to sell valuable overseas assets? AIB and Bank of Ireland have substantial assets which could be sold. For example, AIB owns almost 25% of M&T Bank in America. As of yesterday the value of that shareholding was of the order of $1.75 billion, a not insignificant sum of money. Nobody can say that M&T Bank is part of AIB's core assets. AIB would be wise to sell its shareholding in its banks in Poland and elsewhere in Europe as a means of stabilising its Irish business. All the Irish banks have made such a bad job of managing their Irish divisions it is impossible to have any confidence in their management of their overseas divisions. It is quite likely that landmines lie buried in their overseas operations.

The Minister has yet to tell us how he will make sure that the banks start lending again when their balance sheets have been cleaned up. There is nothing in the Bill about that. The Minister has had months to announce a scheme, which should have been brought before this House, in which moneys which are to be put on to the balance sheets will improve liquidity. These are not the IOUs to which the Taoiseach referred but real cash that we must pay back. Unless there is a guarantee that this will lead to some improvement in liquidity why are we taking this gamble? It is bizarre that the Minister did not set out a scheme, either in his speech to this House last week, or in the accompanying documentation, whereby he can prove to the House that the moneys the banks obtain will improve liquidity for Irish business. There is no evidence from his statements last week or from any Government announcement that he has a new scheme and can show beyond doubt that the money the banks get will go to small and medium sized enterprises, householders and businesses that want to survive. Businesses need money now but none of this will come to pass until the middle of next year. Many thousands of jobs will go to the wall and another opportunity will have been lost.

I hope the Government will allow the Opposition to tease out the entire Bill on Committee Stage in the plenary session of this House rather than in a committee of the Dáil. Given the importance of the Bill it is essential that commitment be given.

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