Joan Burton (Dublin West, Labour)

Professor Honohan enjoys an enviable and deserved reputation among his peers at home and abroad. That reputation was enhanced by the report he presented last week on the cause of Ireland's banking collapse and he is entitled to have his findings treated with respect and due consideration by everyone in this House. I was pleased when the Minister for Finance, Deputy Brian Lenihan, chose Professor Honohan to be Governor of the Central Bank. It was a courageous and enlightened decision and I welcomed it immediately and publically on behalf of the Labour Party.

Yesterday, Professor Honohan expressed scepticism on the value of a special commission of inquiry. His reservations should be discussed by all parties represented in the House, perhaps in a private meeting with the Governor, and there could be common ground thereafter on how to proceed. The Minister should give due consideration to this.

The Governor enjoys confidence at the moment but that confidence could be eroded easily if Ministers act as they did yesterday and this evening to deliberately distort what he wrote last week. English is a flexible language but yesterday the Taoiseach stretched the ordinary meanings of words beyond belief to extract vindication for his past actions and policies from sections of both reports that quite unambiguously said the exact opposite.

I go back again to the section on the bank guarantee. I have read it again and again because I believe the decisions that have to be made about an exit strategy from that guarantee in a few months constitute some of the most critical decisions to be made this year, of equal significance to the budgetary decisions before December. If Ministers read the Honohan report with no motive other than to claim they were right all along on every banking decision they made, then they have a mindset that is truly frightening and dangerous for our country and our people.

On 30 September 2008, the Government gave a blanket guarantee to the major domestic players in Irish banking, including Anglo Irish Bank and Irish Nationwide. The Labour Party dissented that day from the blanket nature of the guarantee offered though we broadly supported a policy to protect depositors. I wrote to the Minister, Deputy Brian Lenihan, a week or two prior to knowing the bank guarantee was coming, to suggest that to him, and it is on the public record. Fine Gael was foolish to offer unconditional consent to the Government that day and ought to have joined the Labour Party in seeking to limit the scope of the guarantee. At the time the term I used was not to give a blank cheque and Fine Gael was foolish to offer Fianna Fáil a blank cheque in this respect.

What does Governor Honohan say about the guarantee decision in his report? Yes, he acknowledged that some level of guarantee was required. He uses the words "extensive guarantee" to describe what was necessary in the light of the undoubted turmoil in the international markets at the time. So far so good for beleaguered Ministers. This is where they choose to gild the lily and to twist the meaning of the Governor's words for their own purposes. The plain word "extensive" has been stretched to a wholly new meaning. "Extensive" in the Fianna Fáil vocabulary now means "total" or "blanket", which in his report the governor positively excludes.

Yesterday, the Taoiseach was barefaced in his arrogant twisting of language when he claimed the Governor's endorsement of an extensive guarantee means total support for the specific blanket guarantee. If one were to read the entire section of Professor Honohan's report one could not fail to get a very different view. This section concerns far more than the issue of subordinated debt. That part of the guarantee was bad enough in itself but as people have stated it amounted to only €12 to €14 billion, which is a lot of money but nothing compared with the totality of €440 billion. However, Professor Honohan goes much further than this and questions the nature of the given guarantee in a far more fundamental way than the question of subordinated bonds.

I want to read into the record the full paragraph which states:

The scope of the Irish guarantee was exceptionally broad. Not only did it cover all deposits, including corporate and even interbank deposits, as well as certain assetbacked bonds (covered bonds) and senior debt it also included, as noted already, certain subordinated debt. The inclusion of existing long-term bonds and some subordinated debt (which, as part of the capital structure of a bank is intended to act as a buffer against losses) was not necessary in order to protect the immediate liquidity position. These investments were in effect locked-in. Their inclusion complicated eventual loss allocation and resolution options. Arguments voiced in favour of this decision, namely, that many holders of these instruments were also holders of Irish bonds and that a guarantee in respect of them would help banks raise new bonds are open to question: after all, extending a Government guarantee to non-Government bonds has the effect of stressing the sovereign to the disadvantage of existing holders of Government bonds; besides, new bonds could have been guaranteed separately. The argument for simplicity also is weakened significantly by the fact that an actual dividing line between covered and non-covered liabilities was drawn at as least an equally arbitrary point; moreover, such instruments were held only by sophisticated investors.

How can anyone with a grasp of plain English interpret these words as a wholehearted endorsement of Government policy? He clearly objects to the inclusion of subordinated debt. More than that, he explicitly questions the wisdom of extending cover to pre-existing bonds. Certainly, it was important to guarantee new bonds from that date but to give cover to existing bonds simply added to the level of State exposure to losses.

The Government and the Department came around to that view with the ELG scheme for which they got permission from the European Union in recent times.

Ministers have repeatedly asserted that the Irish guarantee policy was followed by many other countries, which is not true. The Irish decision to guarantee the full stock of existing debt was unique and reckless. Many countries certainly covered new bond issues but not in the way the Taoiseach did and his particular Irish solution to an Irish problem has left our taxpayers on the hook for all of Anglo Irish Bank losses. Who did not hear Mr. Mike Aynsley today who said €22 billion is gone? The Fianna Fáil members whose eyes were going through the roof of whatever hair they have left could not believe it. He repeated it two or three times. He said we need to face up to the fact that €22 billion is gone. Think what €22 billion would do in Wexford.

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