Peter Mathews (Dublin South, Fine Gael)

It is impossible in five minutes to deal with all of the matters that arise, but I will pick up on some of the comments that have been made. We are a House of 166 Members and I respect every contribution. I particularly respect the contributions of members of the Technical Group. Deputy Donnelly gave us what amounted to a tutorial on the mechanics of balance sheet financing and structuring. A great deal of nonsense has been talked on the airwaves by so-called experts, advisers and so on who do not have a clue. Deputy Donnelly is right, in that the promissory notes are a ghost asset of promises on Anglo Irish Bank's balance sheet. The corresponding credit financing comes from the Central Bank and the European Central Bank, as the depositors have all gone.

It is possible to do financial engineering, but before one does so or engages in technical mathematics in these situations, one agrees in principle what is occurring. For example, if one engages in an investment project, one decides its monetary cost and from where it will be funded. Banking is not weird and wonderful. It is quite straightforward. In September 2010, Anglo Irish Bank's balance sheet had loan assets of €72 billion, of which €30 billion owed to the make believe bubble. The value of those assets needed to be reduced to €42 billion and the reduced assets were shipped over to NAMA, leaving a hole in its balance sheet to be filled by pro-notes. As Deputy Donnelly described, the amount of money created by the Central Bank must be paid down in little bits and the pro-notes are cashed and repaid.

All of this can be changed. During our Topical Issue debate last Thursday, I asked people to do the following - pause, suspend, think, discuss, negotiate, argue and explain. Europe has been caught up in financial mayhem and volatility. Given that we have been bundled and straitjacketed into the programme, parked safely and are addressing fiscal imbalances, we are not the main problem. We have not even got Europe's attention yet. I know this. In May, I dared to write an article in the Sunday Independent suggesting that all of the margin on the programme loans from the troika should be eliminated, as it did not make sense. My suggestion was considered to be nearly out of bounds. The article was translated for Financial Times Deutschland so that people could begin to understand the principle involved.

On 30 September 2010, loan losses were only beginning to be acknowledged at a level of €50 billion, which was far too short. Even today, we are acknowledging losses of €74 billion following the BlackRock prudential capital assessment review, PCAR. It is my professional opinion, as someone who has had the benefit of working in the industry since the beginning of the early 1980s and being involved in the loan work-outs and damage limitation exercises, that the final figure will be closer to €100 billion. The reason the banks have not started to do write-downs and to collect debt at write-down levels is that they are trying to preserve the capitalisation they received last March for the next three years. Instead of getting on with it and accepting reality, they are engaged in delaying tactics. These are the issues we must explain to our partners in Germany and to Mr. Masuch of the ECB who was in Ireland last week. We must set out clearly the provenance of the whole situation.

I do not want to single out specific speakers among the various excellent contributions connecting the pain and hardship being experienced by people in this State to what went on in the banks, but Deputy Donnelly's contribution was particularly enlightening. Deputy Mac Lochlainn, meanwhile, gave the correct historical analysis of the overload of debt in the developed world and the eurozone. That is the core of the problem. There is a rehypothecation scandal which only surfaced last December and which has not yet been fully absorbed and digested. I urge Members to look up MF Global and the great Wall Street rehypothecation scandal on Google.

What the Government should do now is press the pause button. Last March, when the capitalisation of the banks took place, there should instead have been a creditor recapitalisation. I am not trying to detract from the honest efforts of Members on all sides of the House, including my colleagues in government, but there are certain indisputable facts which cannot be ignored. The credit default swap market is driving the fear that is abroad. Markets know greed and fear, that is all; there is no in-between. We must acknowledge that and ensure everything is up for discussion in Brussels.

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