Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)

The Irish people are sick of the myths and mistruths about the economy and especially about the banks, being peddled by this Fianna Fáil-Green Government to suit its own political agenda. This morning, I was speaking to a customer who had just received a letter from Bank of Ireland. Her home insurance premium is about to increase by more than 50%. Despite never making any claim on the policy, her premium is going up from €375 to €577 per annum. On top of that, the excess on the policy is being increased from €152 to €350 and even €600 for many circumstances covered. This must be an April fool joke. Bank of Ireland has been instructed to raise some of its own capital but gouging and screwing ordinary customers who are already bailing out this bank via their pay cheques, is not the way to do it. This is happening in a situation where property values have dropped significantly and therefore, the cost of replacement or repair in the event of claims, has also decreased. Is it any wonder that the Minister in his speech on Tuesday singled out Bank of Ireland as the most profitable of the banks. He stated it has "a strong future" and that recapitalising Bank of Ireland will, "support our economic recovery". I suggest the Government tells that to the customers who are trying to recover this morning from the shock of the arbitrary increases placed on their home insurance premia.

The consumer price index notes an increase in insurance premia of 13% over the year. Why is Bank of Ireland, in which the taxpayer has been forced to take a growing share, hiking its premia by over 50%? In return for their massive subsidies, what control have the taxpayers been given over the banks to stop this kind of robbery? The answer is, nothing, thanks again to the incredible incompetence of this Government. We have been told repeatedly that it would be more expensive to wind down the zombie Anglo Irish Bank than to pursue this current course. Leaving aside the fact we are, in all likelihood, witnessing a protracted wind-down, where is the cost-benefit analysis that shows this is indeed the more cost-effective option? So far, €4 billion has gone into the bank, another €8.3 billion is needed immediately and then another €10 billion. What happens then? Where does the splurge on Anglo Irish Bank end? It is clearly insolvent, owing approximately €2 billion in subordinated debt. AIB is being described as a dead bank walking by several economists. Rather than declaring both of these banks insolvent, the Government is doing everything possible to protect bond holders who provided equity at their own risk. That is the nature of their business. Allowing them to take a hit on their risk would not entail the end of Ireland as we know it. Throwing €80 billion into a black hole while inflicting it as debt on the Irish people, will devastate this State's economy. The Minister argues that he has moved as fast as he could on this issue and needed to put relevant pieces in place. However, as financial newspapers have pointed out, our banking system is one of the last to be recapitalised and we are recapitalising zombie banks. As the Central Bank report showed yesterday, the rate of lending fell again in February. These banks have paralysed the economy for more than 18 months while the Government has stood by and watched.

The figures being discussed by the Department of Finance regarding the amount the State will spend on recapping are misleading. For example, of the €7.4 billion need by AIB that we know of — at least for now — the Government hopes money can be raised from the sale of AIB's foreign subsidiaries. This is nonsense. Sale of a subsidiary considered an asset turns the asset into cash; it does not increase the bank's assets, particularly if that subsidiary goes for less than its value. The bank might shrink, making its relative capital requirement smaller as a percentage. It is not a magic solution, nothing of the kind.

There is also the myth that the Government is hard-balling the banks and their management. Hard-balling baloney. The annual accounts of Anglo Irish Bank released yesterday show that last year the bank made the largest corporate loss in Irish history. Most of this loss was incurred from the writing-down of loans. Most of this loss was incurred from the writing down of loans, among which were loans worth €85 million to its former chairman Seán Fitzpatrick. The bank expects it will never see €68 million of Mr. Fitzpatrick's loans. The figure for former chief executive David Drumm was just over €8.3 million, with the bank setting aside €6.7 million for possible non-repayment. Most of this is linked to a loan given to Mr. Drumm to buy shares in the bank. William McAteer, former finance director, owes the bank €8.5 million, of which more than €7.6 million is not expected to be repaid. This money also relates to a loan given to buy shares in the bank. The figures show that almost €13.9 million was jointly lent to Mr. FitzPatrick and former director Lar Bradshaw to facilitate an investment in oil exploration. The bank has set aside €11 million to account for possible non-repayment of this money. Some €3.1 million was also lent to Mr. FitzPatrick to fund a hotel investment. Provision has been made for the possible non-repayment of almost €22 million of the €27.3 million in loans to Mr. Bradshaw.

The Government is writing down these loans via NAMA and recapitalising the bank. Where are these men who benefited from the loans? Seán Fitzpatrick spent 24 hours in a police station in Bray. Is that the going time for someone who has effectively stolen €65 million from the State?

The Minister has a lot of questions to answer. For example, how much money in hard cash will be added to the budget sheet this December as a result of draw-downs on the recapitalisation promissory notes in 2010? I ask this because the Minister will start preparing us for this budget in September with his usual salvos of tough times and belt tightening. When he is making his sounds about further cuts to social welfare and nurses' and teachers' wages or hospital wards being closed because he has promised the EU to take another few billion euro off the deficit this year, how much will be added to the deficit for the banks? Will it be €1 billion or €3 billion? The public deserve to know how much pain they will be asked to take while this Government, supported by the EU, spends Irish taxpayers' money on the likes of Anglo Irish Bank.

The Minister also needs to answer the question being asked by several economists regarding the discount on NAMA loans. We know the first tranche is being discounted at 47% but that only applies to €16 billion of the €81 billion to be transferred. What discount will be applied across the board? It will hardly be 47% on average across the rest of the loans because surely that would require higher recapitalisation in certain banks. How certain can we be that the sums being done on AIB's sheets completely and adequately reflect the write down of their bad loans?

The Minister will know that people are holding their breath to see if the shocking figure of €80 billion announced yesterday is the final amount to be put into the banks. I fear that will not be the case, however, because it does not allow for further falls in property prices or defaults. AIB's interest rate hike represents the beginning of the squeeze on residential and business loan holders. The sad reality is that the Government's refusal to nationalise in order to put everything on the table for once and for all is dragging out the problem and potentially hurting this economy beyond repair. This Government is riding headless into the morass.

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