Brian Lenihan Jnr (Dublin West, Fianna Fail)

They operated under a statutory mandate laid down by this House. I thank the Members for the work they put into that legislation. These agencies worked with my Department and the NTMA to resolve our banking crisis. We now know the problems we have, we have faced up to them and we have put in place a pathway out of them. Today provides for once and for all a solid basis for confidence in the future of our financial system.

The Government is recapitalising the financial institutions so that the system as a whole may return to its rightful role as provider of credit to the real economy. Inevitably, there is an upfront investment by the State because we have forced the banks to recognise their losses upfront and to rid the system of the scourge of these speculative loans and the mismanagement of the banking system.

Deputy Bruton questioned why, as an alternative to recapitalisation, the Government does not just let Anglo Irish Bank fail. Many other Deputies questioned the systemic importance of Anglo Irish Bank and why it was guaranteed at all. Anglo Irish Bank was much larger relative to the Irish economy than Lehman Brothers was relative to the US economy. The disorderly failure of Lehman Brothers brought the global financial system to its knees. The disorderly failure of Anglo Irish Bank two weeks later would have had the same effect on the entire Irish banking system. I understand Deputy Bruton referred to Washington Mutual. The resolution mechanism in that bank cannot be applied to a bank in this country because the bank's senior bonds were issued not by the bank itself but by a separate holding company. That corporate structure allowed the US authorities to treat senior bondholders and depositors differently.

Deputies raised points concerning the treatment of bondholders. When talking about this jurisdiction, it is important to bear in mind that those who provide funds to Irish banks are not exclusively from other countries.

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