Richard Bruton (Dublin North Central, Fine Gael)

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann declines to give the Central Bank Reform Bill 2010 a second reading because:

I. It has not been rooted in any proper investigation of what has gone wrong, nor any serious attempt to make key players accountable for the errors committed, both of which are necessary to determine whether this Bill is an appropriate response.

II. It infers that the most urgent reform is to change the architecture of the existing regulatory bodies, when there is no verifiable evidence that such architecture was in any significant way responsible for the shortcomings of the regulatory system.

III. It preserves the system of appointment of Directors to the new Central Bank Commission exclusively to Government with no proper scrutiny by the Oireachtas or any other external body.

IV. It does not give the new Commission the necessary 'bank resolution' powers needed to put failed banks safely into a managed administration when that is the most appropriate policy outcome.".

It is sad to say that once again we are being asked by the Government to accept on faith that it knows best when it comes to what is to be done to resolve the banking crisis. Here, it is telling us that, without any investigation of what went wrong, it knows exactly what the new architecture ought to be and knows what sort of engine will drive a new regulatory system, although it does not know the destination of the new regulatory system, which powers it needs, what it is to investigate or what it must hold to account.

That is an extraordinary approach, that we start off by designing the engine and then find out what sort of terrain we must bring it across. That, however, is the Government approach. If we have learned one thing from the debate about banking to date it is that such faith in Government is simply not justified. We must treat these faith-based solutions with extreme scepticism.

We were told when the banking guarantee was introduced that it would be the cheapest bail-out of any country. The Government then extended the guarantee to bond holders. The present Governor of the Central Bank was explicit in his view that money that could leave the banking system - deposits - should have been guaranteed, and that the guarantee should have been extended to new investors entering the market in bonds for banks. The Governor of the Central Bank is now regarded rightly by the Government as the source of some expertise in handling banking crises, but where was the consultation with him when this guarantee was designed? It was supposed to be the cheapest bail-out of any country and is proving to be anything but.

We were also told that we must keep Anglo Irish Bank and the Irish Nationwide building society as going concerns and that such an approach was a pillar of a banking solution. The estimate of the cost of keeping Anglo Irish Bank going was €4 billion and we thought Irish Nationwide might cost €1 billion. However, we know now Anglo Irish will cost €22 billion, and rising, and the cost for Irish Nationwide is €2.7 billion. The truth is that 70% of the recapitalisation money we are sinking into those banks will not result in one red cent of new credit going to businesses that might build a future for this economy. That is the reality but the Government continues to insist that these are banks and institutions of huge systemic importance that must be kept afloat at all costs.

The third element of the banking strategy, on which we were given assurances time after time, was to trust NAMA because it would get credit flowing. Yesterday we heard from Irish Nationwide Building Society that it will not get one ounce of credit going and it is clear that the €2.7 billion will be used immediately to pay bondholders. From the same stable that produced all these wonderful solutions to our banking crises and about which we are now learning the true cost, we have this latest prognosis.

The important point is that this Bill is about ensuring this will never happen again and that never again should we have to cross this threshold. It defies belief that we should start a "never again" process without knowing what went wrong and without having the results of the investigation. The genesis of sorting out the architecture of the solution comes from the school of thought that says we should circle the wagons and get back to what is known as business as usual as quickly as possible. That is what many people in the banking system want to happen. They do not want a lot of awkward questions but want to get back to business as usual, blaming the problem on some kind of architecture that was misdesigned back in 2002. They believe that whoever designed it back then got it wrong. It was the Minister's predecessor, Mr. McCreevy, who designed it, with the help or hindrance of his colleagues, the then Deputy, Michael McDowell and Deputy Mary Harney, now Minister for Health and Children. It was a camel produced by different groupings that came up with the idea.

With my hand on my heart I can say we tabled a reasoned amendment at that stage, stating precisely what was wrong with this bit of financial regulation. It involved taking a huge bulldog clip to a heap of powers that were centred in areas of enterprise and employment and in the Central Bank. They were scattered through nine or ten different Bills. The regulation put a big bulldog clip around these powers and posted them to the new agency, asking it to look after them. Perhaps it was prophetic of me at the time but I said we needed to examine those powers to see whether they were up to regulatory best practice and capable of doing the job we were asking them to do. Mr. McCreevy was in the Minister's seat and refused to allow that happen even though Enron and All First had broken around our ears. The entire regulatory regime was seen to be challenged by weaknesses in corporate governance and the authors of the piece of legislation we are deciding now to change would not take the time to undertake that scrutiny.

That said, nobody in their wildest dreams believes that our bipartite board - two different boards with largely overlapping representation; a regulatory authority that was slightly separated from the Central Bank - was the cause of this problem. If the Minister believed that it would have been peppered everywhere in his speech that this was something with which we really must get to grips. It did not happen because it was not the cause. This makes me very suspicious of the thinking that is going on in official circles concerning what must be done to cure the situation. The thinking is that we should make a few running repairs to what is going on and then press on at all costs. That is not good enough.

It is becoming clearer to the general public that we need transformative change in banking policy. We need an entirely different culture to be applied in banking, one different from any we have seen. As recently as this week we saw that this damaged and broken culture is alive and well and still kicking down in those banks. They feel there is nothing unusual about finding €1.9 million for a pension fund for a chief executive, this at a time when people are losing their homes and their jobs and are having their pay cut. They are unable to get by and the reason is the mismanagement of those very bank executives who think it is acceptable to push on and do what they always did. There was an arrangement so they will stick to that arrangement. That is not acceptable and the sooner people cop on, not only in Government but in the wider banking circle, that the public will not wear that the better it will be.

People will not suck it up any more. They want a change of culture and approach and they want it to start now. They want accountability. That is the most crucial point. As people have pointed out, accountability is not about the Taoiseach saying he used the best advice at the time. Accountability is about asking whether that advice was adequate, whether it was taken, whether it was based on proper research and whether the people who offered the advice were sound in their beliefs because they had consulted properly with all those who might have offered an alternative view. It is about asking whether they tested the advice and offered it in good faith so that we could see it was adequate. That is the chain of accountability but no such chain is being applied here.

Coming up with this Bill is totally self-serving as far as the Central Bank and its role in the regulatory authority are concerned. This is not accountability but solving a problem that was never greatly exposed as a problem. The Minister knows as well as I do that the problem was the cosy circle. Bankers believed they could do what they liked. They could walk on water and it would come all right in the end because they were pumping up the property bubble at a great pace. Regulators accepted on faith what their betters in the banks told them and never questioned it, never sought alternative advice. They did not hold bankers up to proper scrutiny or probing as they ought to have done. The Government did not only luxuriate in the company of these titans of the property bubble but also fuelled the bubble with inappropriate fiscal policy and tax policies. Senior advisors - the permanent government of this State - were too much in thrall to the entire system and they, too, did not play their proper role of providing the right sort of expert advice to challenge what was going on or equipping themselves with the sort of advice that was necessary in the regime they were overseeing.

Yesterday the Irish Nationwide Building Society and its report reminded us of everything that was rotten. Institutions were run as personal fiefdoms. Even now, those who ran them have not suffered in any way or had any consequences for what has happened but the consequence for taxpayers, mortgage holders and people looking for jobs is extraordinary. Ordinary people have been brought to their knees and they want accountability. They want it now. They will look to other countries to see what those countries have been doing. They look to the United States where they see there are 42 bankers in jail and the banks are already paying back some of the money extended by government. They look to Iceland where the prime minister, the minister for finance, the governor of the country's central bank and the head of the regulatory authority have all been found to be negligent by a justice of the supreme court. Those cases in which they were found negligent are very similar to what we have seen in this country, such as the drive for short-term profits without regard to risk, cutting tax during a boom, policy makers ignoring an imbalance in the economy and increased risk taking in banks not being met with the appropriate regulatory response. The list continues and is very close to what went on in this country. However, in Iceland at least the people have a clear decision that there was negligence. The finger has been pointed and there is accountability. People can understand that and move on, hoping to be able to say they now know what went wrong and that they can design a structure so that it will never happen again. Here we are being asked to accept a structure without that "never again" analysis.

See this speech in context