Michael Kennedy (Dublin North, Fianna Fail)

Tá me buíoch as an deis seo a bheith agam labhairt ar an mBille thábhachtach agus ba mhaith liom comhghairdeas a dhéanamh leis an Aire Stáit nua, an Teachta Mary White. I thank the Acting Chairman for the opportunity to speak to the Bill. I congratulate the Minister of State, Deputy Mary White, as it is my first opportunity to do so and I wish her well in her new post.

I welcome this Bill and our thanks are due to the Minister for Finance, Deputy Brian Lenihan, for the diligence he has shown with regard to banking activities and the sure hand he has kept on the tiller over the past number of years. The public recognises that the Minister knows his job and is taking action in the best interest of the Irish taxpayer.

The enhancement of regulatory issues is badly needed. A banking inquiry is necessary and will come about as promised by the Government. We do not want a repeat of the activities that caused these grave difficulties. I speak for all colleagues on this side of the House in saying that the actions of rogue bankers in Anglo Irish Bank, Irish Nationwide and other institutions were reprehensible. I welcome the fact that Garda investigations are progressing and I am sure I speak for everybody in the House in saying we look forward to court cases where guilt can be apportioned or otherwise.

Mr. Michael Fingleton's fee should be paid back and the Government has given a commitment to do all in its power so that the money is recovered. The new chief executive of Irish Nationwide has confirmed that he is pursuing the issue on behalf of his board. The public will be happy to see that money repaid.

There is no doubt that a lack of proper regulation and competence in certain regulatory staff has contributed to the issues. The public wants the Government to take action to ensure we never see a repeat of what has happened. There is no doubt it has been painful and everybody in public life knows what the reaction of constituents has been. Our actions have been difficult but they are necessary in the national interest. People have seen the circumstances surrounding Mr. Boucher's pension top-up in the past couple of days and find it difficult to accept that he should have a significant pension, which is one and a half times the Taoiseach's salary, paid to him at the age of 55 years.

I was on the public record on radio last Tuesday night calling for Mr. Boucher to forgo that pension top-up and looking for the board to ensure that it would not be paid over. I acknowledge the actions and opinions of everybody in this House, trade union leaders and people like Mr. Kieran Mulvey. It all contributed to ensuring that Mr. Boucher would do the honourable thing, which I welcome.

We have had many discussions on whether to bail out the banks, no matter what Bill has been brought forward. I do not have any personal doubt that there is no other option; it may be the least worst option and unfortunately, it is one we must take in the national interest. I have a business background with over 30 years experience in the insurance business. I have worked in the credit insurance departments and any client who ever had a default saw that stay as a blot on the copybook forever. I have personal experience of dealing with clients endeavouring to obtain credit insurance.

Equally, in the ordinary course of simple insurance policies, where companies would allow a deferred payment system over 12 months on the premium, any default would remain on record. If a party seeks the same facility in subsequent years, it may find that the insurance company, on the instructions of the financial institution, would not be prepared to give such a deferred payment system. We do not have an option except to deal with these bail-outs in the best possible fashion. As I have indicated, it is the least worst option.

President Obama will deliver a speech later today on US Government reforms. It is worth noting the comments from President Obama as one can see a parallel with what the Irish Government - and other governments in the EU - are doing. In the speech, he will talk about holding Wall Street to account, saying that the financial crisis was the result of a fundamental failure from Wall Street to Washington. That embraces politicians as well as bankers.

A statement on the White House website indicates:

Wall Street took irresponsible risks that they did not fully understand and Washington did not have the authority to properly monitor or constrain risk-taking at the largest firms. When the crisis hit, they did not have the tools to break apart or wind down a failing financial firm without putting the American taxpayer and the entire financial system at risk.

That is a very strong statement and reflects exactly the difficulties we have found in Ireland. It is also indicated in the statement that Wall Street must be held accountable and pay taxpayers back for costs. A levy is proposed for the banking system, which we should consider. The public would like to think that when banks return to profitability, they will endeavour to pay back the substantial moneys given by the Government.

The statement argues:

The only way to end bail-outs is serious reform. No firm should be "too big to fail". We must constrain the growth of the largest financial firms; restrict the riskiest financial activities; and create a mechanism for the Government to shut down failing financial companies without precipitating a financial panic that leaves taxpayers and small businesses on the hook.

That is exactly the position in which the Irish Government has found itself. President Obama has also referred to the protection of consumers. That statement continues:

We must establish an independent consumer financial protection agency to set and enforce clear, consistent rules for the financial marketplace. A single consumer agency will set clear rules for the road and will ensure that financial firms are held to high standards.

I believe this also is the road on which the Minister for Finance, Deputy Brian Lenihan, and the Government are proceeding. The website also states:

Today, there are seven different regulators with authority over the consumer financial services marketplace. Accountability is lacking because responsibility is diffuse and fragmented. In addition, many mortgage lenders and mortgage brokers were almost completely unregulated.

Does this not ring bells with Members with regard to recent events? The President also proposes to close the gaps in their financial system and the website states, "We must address the gaps that led to regulatory failure - at its peak, the shadow banking system financed almost $8 trillion in assets". This certainly is a horrendous sum, as while we talk in billions, the Americans talk in trillions. The White House website also makes reference to the fact that market discipline is not enough and notes that "relying on market discipline to compensate for weak regulation and then leaving it for the Government to clean up the mess is not a good strategy for economic growth nor financial security". It also states:

Our financial systems need clearer accountability. There is no substitute for vigorous, consistent enforcement of the laws governing the financial system. But each regulator should have a clear mission and the authority to execute that mission.

This is exactly what the Irish Government is doing at present by putting in place new regulations, having appointed a new regulator. I congratulate Mr. Elderfield on his actions to date. He has shown clearly what he is made of and that he has the taxpayers' interests at heart and I certainly wish him well and continued success in his job.

Referring back to the subject of President Obama's speech later today, reform is critical to market certainty and stable growth. Reform is central to providing a foundation for stable growth. The website states, "Our financial system is most competitive when our system is stable, resilient and transparent". It continues by stating, "reforms will make the financial industry and the markets they operate in stronger, safer and more competitive". It also refers to clearer accountability in the supervision and regulation in which financial firms may operate, whereby there will be a coherent set of rules and expectations within the regulatory arbitrage. It also states:

Comprehensive reform is important to generate innovation and economic growth. A key test of a strong financial system is whether or not it effectively channels savings to finance future innovation. Today's system produced waves of credit bubbles and real estate booms followed by severe financial shocks and damage. We need a financial system that is not only interested in short-term profits, but in long-term growth, entrepreneurship, and in savings.

Finally, it comments on leading the way on international financial reform and states:

We are working in parallel with our international partners to make sure that as we move to reform and strengthen our financial systems at home, the G20 is moving to implement reforms to achieve a level playing field.

In that context, we in Ireland are working with our European partners and all the actions of the Government over the years have been taken with the knowledge and acquiescence of the European Union, the European Central Bank, the International Monetary Fund etc. Consequently, these actions, which the Government proposes to take in a clear, concise and coherent manner, are backed up by our European partners.

While I have made this point previously, it is worth reiterating the point that in the United Kingdom, the authorities have paid out £850 billion in a bailout of its banks. In the United States, the bailout thus far has cost $12.4 trillion. Consequently, when one discusses whether Ireland's bill may be €30 billion or €40 billion, while that is a massive sum of money in our context, ours is not the only Government that is obliged to do this. The £850 billion being paid by our neighbours across the water also constitutes an enormous amount and it is worth pointing out which institutions actually received that money, and how much. A total of £76 billion has been paid to purchase shares by the Government in the RBS and Lloyds banking groups. The indemnity the Bank of England has given against losses incurred in backing up liquidity support cost £200 billion. The guarantee for wholesale borrowings by the banks to strengthen their liquidity cost £250 billion, while £40 billion has been provided to Bradford& Bingley and the financial services compensation scheme. Moreover, £280 billion is needed to provide insurance for bank assets. These costs add up to £850 billion. In the United States, there is a litany of organisations, many of which would be unfamiliar to Members were I to name them, but the overall total is $12.4 trillion.

In the few minutes that remain to me, I wish to refer to the year 1985. I note Deputy Noonan is in the Chamber and he would have been a member of the Fine Gael-Labour coalition Government at the time. Allied Irish Banks owned an insurance company called Insurance Corporation of Ireland, which got itself into financial difficulties. That coalition Government introduced emergency legislation similar to that which the present Fianna Fáil-Green Party Government has been obliged to do in recent years. The position in which the Government of 1985 found itself was exactly similar, in that it could not countenance the idea of a bank collapse because of the effect it would have on the entire economy. I am sure Deputy Noonan remembers this well. Some of the media comment from that time is interesting because it parallels exactly what is happening today. For example, the late Dick Walsh, who was a reporter from The Irish Times referred to the Opposition Fianna Fáil Deputies, who were led by the late Charles Haughey, making quite a fuss about it at the time. Equally however, backbenchers from Fine Gael and the Labour Party were greatly concerned. Ultimately, they all voted for the legislation on the basis that it was necessary in the national interest.

It is no different in 2010 from it was 1985, in that banking failures for small countries like Ireland are not an option. Our credit rating is at risk, as is our ability to borrow. As I noted, I come from a financial services background in which I know what a credit rating and worse, its loss, means. Moreover, in 1985 certain actions were taken by bank directors. For example, a director of AIB at the time, a Mr. Gerry Scanlon, bought 50,000 shares on the day before the Government bailout. The bank shares rose by 25% on the following day and he made a substantial profit. Consequently, in respect of a Government being obliged to bail out banks and being obliged to accept that certain bankers take inappropriate actions and abuse their powers, it was no different from under the aforementioned Fine Gael-Labour Party Government. While both Fine Gael and Labour Members are castigating the Government's actions today, they should look at the mirror and reflect on what they did when in power and should reflect on the reasons they took that action.

I do not think being obliged to bail out banks is nice. Like every other Member, this involves my taxes, as well as those of my family and all my constituents. However, in the national interest, the Government must take this action. Last year, we borrowed €24 billion at reasonably competitive rates. This year, the figure will be in the order of €20 billion. If we reneged on bank debt, we would not get that amount of money and we would pay much more for what we got. Greece is a prime example, in that its Government decided some weeks ago that it would allow failures. It was told in no uncertain terms by the German Chancellor, Angela Merkel, that Europe would not assist it. The Greek Government has come around to the belief that one must work with Europe and endeavour to deal with situations in a realistic manner.

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