Pat Rabbitte (Dublin South West, Labour)

The Honohan report continues:

The scope of the Irish guarantee was exceptionally broad. Not only did it cover all deposits, including corporate and even inter-bank deposits, as well as certain asset-backed deposits and senior debt, it also included ... certain subordinated debt.

It continues to indicate "The inclusion of subordinated debt in the guarantee is not easy to defend against criticism."

It is difficult to imagine how a serving Central Bank Governor could be more critical. It is cynical in the extreme for Government speakers who know better to attempt to misrepresent the Honohan report. One Member, the former Taoiseach, Deputy Bertie Ahern, even still clings publicly to the explanation that the crash is due to the Lehman Brothers collapse – an explanation that gets short shrift in the Honohan report. Professor Honohan notes that "a detailed review of the ensuing discussions is hampered by the absence of an extensive written record of what transpired." We know that to be the case from the Committee of Public Account papers, as there are significant gaps and much of what transpired is not recorded at all.

As a result we do not know to this day who advised the Taoiseach and the Finance Minister on that fateful night of 29 September 2008 to give a blanket guarantee. We know, as the Honohan report records, that "the note prepared the previous weekend by the Merrill Lynch advisers had explicitly envisaged exclusion of dated subordinated debt from the coverage". We know from the Committee of Public Accounts papers that Merrill Lynch did not recommend a blanket guarantee. Further, it seems to be the case that the officials in the Department of Finance did not recommend a blanket guarantee. The Taoiseach told the House that any cost attaching to the blanket guarantee would be borne by the sector but Merrill Lynch had pointed out – and it is a point corroborated in the Honohan report – that the cost of borrowing "would likely be affected by the contingent liability, estimated at over €400 billion, associated with the guarantee".

Most pertinently, the Honohan report records on page 119 that "as the discussions regarding procedures for crisis containment started to unfold, early on a clear consensus view emerged that no Irish Bank should be allowed fail". The report goes on to instance that there is no such prescription in the textbook. It states: "This strong view departed from the textbook view that only systemically important institutions should be candidates for such protective treatment". This decision that no bank could fail was the major influence on the decision taken on the fateful night on 29 September 2008.

In ease of the Government, may I put on the record Professor Honohan's conclusion. He states: "Given the position the authorities found themselves in on that night it is understandable why, given the extreme time pressures, all efforts were devoted to finding an immediate way to save the Irish banking system from looming disaster." I said at the time in this House that the Minister for Finance was put in a position analogous to the bomb disposal expert; he had a blue wire and a red wire and he could not afford to cut the wrong one.

The question remains of why the Minister for Finance found himself in that position. Why did the regulatory and administrative systems allow the Minister for Finance to be placed there? Why did his predecessor allow Deputy Lenihan to be put in that position? What was going on between the collapse of Northern Rock some 12 months earlier and 29 September 2008? What was going on between the March share price collapse and September date? Even allowing for regulatory capture, how could the Minister for Finance of the day allow such a potentially explosive position to build up?

According to the Honohan report, "There is no doubt that from mid 2007 onwards Ireland increasingly faced a potentially serious financial crisis." It is an injustice to the Governor of the Central Bank, who has been hauled in in extremis to try to restore this country's reputation internationally, to be so misrepresented, along with his report, in this House. He makes the point in the report that as far back as the 2004 Financial Stability Report, the following position obtained. That report notes: "The risk of a substantial fall in residential property prices ... is the risk that poses the greatest potential threat to the health of the financial system." That was in 2004, and the Minister for Finance was being warned about the threat posed to the health of the financial system. Such warnings were ignored. What action was taken? We continued the tax incentives, opened new ones and extended others. When such a warning did not immediately materialise, it induced a complacency that can only be equated with grave dereliction of duty.

The examination by the Committee of Public Accounts shows clearly that towards the end not even the Department of Finance believed the story that we were dealing only with a liquidity crisis. Yet, between the failure of Northern Rock and the fateful night of 29 September 2008, the then Minister for Finance and later Taoiseach took no effective action. He failed to send anyone into the banks to stress-test the veracity of their assertions. Twenty years from now historians and economists will still be attempting to measure the sheer scale of that dereliction of duty. Deputy Seán Power is correct: the Taoiseach is haunted by his knowledge of the responsibility he bears for that dereliction of duty.

A generation of our people will pay the price for this. It is not yet clear if our economic sovereignty will survive the consequences. Now the talk is of consensus, shared analysis and mock humility. The analysis is in the Honohan report. In no other country in the world would the same politicians be still in charge. There can be no recovery until they are gone.

In 1997, Fianna Fáil and its Progressive Democrats allies inherited an economy in surplus. Twelve years later the economy is bust, our society broken. For a dozen years, those at the top of Fianna Fáil lived high on the hog because they thought they were worth it – Deputies Cowen, Martin, Dermot Ahern, Dempsey, Ó Cuív, O'Donoghue and O'Dea. Today their reputations are in shatters, their legacy turned to dust. Some of them are so delusional they will fight their seats again while others will slink away into obscurity. The damage they have done will be reviled wherever green is worn.

Obscurity would be a fitting end when compared to the unseemly antics of the man who presided over them. To end up in a Rupert Murdoch cupboard is the final insult to a people who gave him a lot of rope. Members may remember the note scribbled to the then Taoiseach, Deputy Bertie Ahern, before the 2002 general election by Fianna Fáil adviser Marty Whelan: "I think our friends in the News of the World still like us, Taoiseach. I suggest you drop them a thank you note." With O'Reilly and Murdoch supporting him, he thought he was unbeatable. Indeed, he was. Now, it is payback time with the former leader of the republican party ending up playing hide-and-seek in a television advertisement for a British tabloid. One could not make it up.

There can be no recovery until they are gone. To hell with phoney consensus. We need a fresh start. We need a new government with a mandate, not some behind-closed doors formula for paralysis.

See this speech in context