Enda Kenny (Mayo, Fine Gael)

I am sure I speak on behalf of all Members in welcoming the Minister back to the House. I wish him every success in his personal challenge. I apologise to the House for the absence of Deputy Bruton but he had undertaken to fulfil an engagement in County Cork today some time ago and he agreed to do so.

We are having this debate arising from a realisation by the Government that there should be an inquiry into the banks, which has been driven by a public perception of a false summit between the Green Party and Fianna Fáil. I had the doubtful privilege of launching the Edelman international trust barometer for Ireland in 2008. It deals with trust in corporate affairs, business people and public life. For the first time ever, political representatives were above bankers on the ladder of trust. Bankers were trusted less than politicians arising from all the difficulties in recent years.

Banks have moved on in other countries and people are in jail. I am conscious two inquiries are under way under the auspices of the Garda fraud squad and the Director of Corporate Enforcement but Fine Gael has made it clear, as has the Labour Party, that it is not intended that the inquiry we seek should infringe on either of these inquiries, which will result in the law taking its course. They should proceed more quickly and where prosecutions are necessary, they should be taken with the law taking its course.

The principle has been accepted by the Government that there should be an inquiry but the difficulty is it has sidelined the Oireachtas entirely. The Minister said the Oireachtas will be consulted and briefed by the Governor of the Central Bank. Nobody has a difficulty with Professor Patrick Honohan but he may need an inquiry into the Central Bank because it was one of the organisations telling us for a number of years that we had the best capitalised banks in the world and everything was rosy in the garden. Nobody would quibble with Professor Honohan's credentials or his capacity to do the job we expect.

The banking crisis has resulted from the biggest failures in Government, public administration and private sector governance in the history of the State. If we are to move on from this economic disaster, the Dáil must be seen to fulfil its responsibility and to ensure accountability by those in positions of trust and responsibility. According to the IMF, the direct losses for Irish shareholders and taxpayers from the banking crisis are likely to exceed €24 billion. It will be many months before we know the final cost of recapitalising our broken banks and many years before we know the final bill from NAMA. However, it is clear that a very large proportion of these costs will fall upon taxpayers who had neither a moral nor a legal responsibility for the mistakes that were made; that is why the Oireachtas should be able to step into the breach and conduct this inquiry. People are furious because the taxpayer is being made to pay the piper for the damage that was done.

Shareholders in the banks certainly suffered. Many of the big earners who managed the reckless expansion have been able to go off into the sunset with massive bonuses untouched and golden handshakes to top it off. Their parting shot is always that nothing unlawful was done. The indirect costs of our failed banking and regulatory system for our country are likely to be much larger in terms of the damage inflicted by the credit crunch on jobs, small business and our international reputation for economic management. This is why the collapse in employment and the economic depression in the country have been and will continue to be far longer and deeper than those suffered by advanced economies since the Second World War.

Some of the causes of the Irish banking and wider economic crisis are known in broad terms. Put together, the dangerous concentration of the banks' loan books in property, reckless loan to value ratios for first-time buyers and a banking model that became 60% reliant on foreign sources of liquidity created a toxic mix that lost the confidence of investors, depositors and the money markets following the collapse of Lehman Brothers. The banks themselves must accept responsibility for these mistakes. The property bubble was pumped up by a drive on the part of banks for short-term profits without proper regard for the risks involved. Consider the words uttered yesterday by a High Court judge who stated that he was astonished at the laxity and flexibility in giving out loans of €550 million merely on a letter of security. The banks, their managers and the boards failed miserably in their responsibility to invest savings prudently and to manage risk responsibly with obviously catastrophic consequences for hundreds of thousands of people throughout the country.

Traditionally, bankers received respect, which they earned through an austere frugality in a sphere that was always shrouded in mystery. When I was young, bank managers were looked up to because they managed people's money. Whether it was greed, flexibility or all following one out the gate they all went down the same road. People in the country completely lost the run of themselves. The austerity and mystery have been stripped back to reveal a banking system that was easily corrupted by buccaneer methods, that paid obscene bonuses for short-term profits and that had comfortable auditors and boards that offered no resistance. Many of the bank boards did not know what was going on and could not have known what was going on because they were not in possession of the information to ask the relevant questions. There is no appetite among the taxpayers of the country to return to that type of comfortable world.

It is clear that the lending process, corporate governance, accounting, risk management, compensation and funding practices and systems of financial institutions must be examined carefully by a bank inquiry as must accounting practices and the quality of internal and external audits. That is where the fundamental failures occurred. The debt-fuelled property bubble did not occur in a political or policy vacuum. It is much too convenient for the Government to blame the financial crisis on greedy and incompetent bankers alone. This crisis has as much been a failure of the politics of Government and public administration as it was of the private markets. Confident that their institutions were too big to fail, bankers always had an in-built incentive to take excessive risk. That is why it was the responsibility of the Government and its regulators to protect the economy from excessive risk-taking and speculation by banks whose failure would inevitably have systemically damaging consequences for the wider economy, and that has now happened.

Far from protecting economic stability and the taxpayer, those in public office - and the Taoiseach was the Minister for Finance for a number of those years - actively encouraged the debt-fuelled property bubble or did nothing to stop it. Short-term electoral gain and not long-term prudence was the order of the day. Toothless regulation, too many tax breaks for property speculators, developer-led land planning, inflationary fiscal policies, overt political support from the main governing party for the property development industry and the arrogant dismissal of any critic who warned of the dangers all added to this situation.

This is why we need a bank inquiry and why I differ from the Minister for Finance. I genuinely believe that the committee of the Dáil should set the terms of reference for the collection, collating and scoping of information on the chronological series of events that led to the current situation. The Dáil committee, composed of respected and experienced people would then be able to analyse and determine, supported by proper resources, the causes of those regulatory policy situations. I state this with all of the understanding that the House and personnel within it have this capacity. This is the difference between what the Government proposes and what the Opposition requires in terms of accountability, transparency and the stepping up to the plate by the Oireachtas to state that we can do this, as happened years ago following the provision of information by the Comptroller and Auditor General when the DIRT inquiry was conducted by Jim Mitchell.

If we are to restore any sense of trust and capacity in politics it is imperative to have an all-party committee conduct this inquiry, as I know it can. Supported by proper resources it would make the system watertight so the Minister can tell international banks and lending institutions, the European Central Bank and the European Commission that we have analysed what happened in our banking system, that we know the regulatory failures in the Central Bank and the regulator's office and that we have ensured that it cannot happen again.

We propose to have a committee of inquiry at the same time as the Central Bank and the regulator's office are to be amalgamated by law, without even finding out what were the fundamental reasons for failure. It is partly due to politics because the same party has been in government for all of this. However, it is also partly due to a looseness that crept in, where rolled-up interest of €60,000, €70,000, €80,000, €100,000 or €200,000 was allowed to accrue on a weekly or monthly basis and where people lost the run of themselves.

Those being asked to pay are the ordinary taxpayers whose pensions have been wiped out, who are in negative equity and whose mortgages are unable to be paid. They are living in distress and with the pressure of something outside their control. It may well be that in the second or third quarter of this year the European Central Bank will raise interest rates as other European countries progress economically. We are very much behind the curve. I would have expected the Taoiseach and the Minister for Finance to step to the front and state that we can do this as an Oireachtas. Let the committee set the terms of reference for the experts to gather the information but let the politicians deal with the issues, analyse them, make recommendations and implement them in the interests of everyone in the country.

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