Bernard Durkan (Kildare North, Fine Gael)

I welcome the opportunity to contribute to the discussion on this important issue. It is interesting to hear the inputs from Members on different sides of the House. The Minister for Finance, Deputy Michael Noonan, set out a potted history of the crisis. In outlining the strategy adopted by the previous Government he observed:

The second stage consisted of a statutory commission of investigation. The establishment of this commission was approved by Dáil Éireann and Seanad Éireann on 8 July 2010, and an order formally establishing the commission was made by the previous Government on 21 September 2010. The commission's terms of reference, which covered the period 2003 to 5 January 2009...

This period, from 2003 to the beginning of 2009, was critical in terms of the crisis we face. From the start of 2003 it was patently obvious to any observer of what was happening in the banking and property sectors that the country had gone off the rails.

The former Minister for Finance, Deputy Brian Lenihan, is a decent guy. He called issues and sought advice, but it seems the advice he received was poor. He might not admit this in the House, but the reality is he received bad advice. A critical lesson we must learn is that when expert advice is sought, it should be questioned before it is relied upon. No expert should be able to walk away and say, "That was my best opinion at the time." Such expert opinions can be changed at a later time, as we all now know. Every Minister - any person in management in any organisation - should always remember, regardless of how expert an opinion may be, that advice should be questioned.

As well as an over-reliance on expert opinion, there was an over-reliance on audits which turned out to be inadequate in many instances. The odd aspect is that some years earlier, during the DIRT inquiry, it was shown that audits had failed, where and why they had failed. This was pointed out to the banking fraternity and financial services sector and anybody else who wanted to see it. I do not accept there was no failure in terms of compliance with the Companies Act; on the contrary, there was clearly a serious failure in terms of an avoidance of the principles of that legislation. There was malfeasance and misfeasance. People must have known what would happen. There was clearly an abdication of responsibility, about which nobody was concerned.

There is no use in saying what was happening was not known. All of the principles of lending and borrowing established internationally in the last 100 years were turned on their head. We all know that is the case, including the former Minister, Deputy Brian Lenihan. Why was it allowed to happen? Of course, there was greed. However, another factor was the historically low interest rates which were of great benefit in terms of economic expansion but in respect of which control and oversight were required to defend against inflation taking off in all directions. The European Central Bank seeks to control inflation through interest rates manipulation. That is not the right approach, given the regional differences across the European Union. We must have a methodology for controlling inflation which does not apply the same measures across all borders. I will never understand the reason credit controls were not introduced at a time when property prices had inflated by 300% within a three or four-year period. It is unthinkable this could have happened. What really happened is that where the banking system used to control property values and property was the collateral, the positions were switched, whereby the banking system became the collateral and the property became the bank. Members now know why and how it happened, as well as the sequence in which it happened and the issue now is how do we get out of it. While one could continue in this vein, I do not wish to hold up the debate, but suffice it to state-----

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