Shane Ross (Dublin South, Independent) | Oireachtas source

There might be some sort of a case for an extension of this guarantee if the Government were prepared to take responsibility for the banks and were prepared to direct their operations. There might be some sort of a case for saying the banks need to attract further funds, that they are too fragile at the moment to be allowed depend upon the bond markets and that the Government should decide what the banks should do with the money on deposit. However, the banks are in an extraordinary situation. They are being guaranteed by the Government, subsidised by the taxpayer and allowed to run themselves as some sort of quasi-independent organisations. I cannot understand why the Taoiseach - and I am sure the Minister for Finance also - told the House it was nothing to do with the Government when AIB increased the variable rates for mortgages some weeks ago. The Taoiseach said it was nothing to do with the Government, that AIB is an independent commercial organisation and that the Government has to leave it alone. Yet at the same time, the Government guarantees the money, some of which is used to lend out as mortgages. This cannot happen unless one is prepared to defer to the banks, as every Government had done in the history of this State. I thought that perhaps the crisis would prompt this Government to take a hold of the banks and to direct their operations in the interest of the people of Ireland who, after all, own the banks. This has not happened. The banks are still allowed to do exactly what they like commercially, under the guise of being detached, even though they are fully owned by the taxpayer.

I would like to know what the Government thinks would happen if this guarantee were not extended. As other speakers have said, all the past deposits are guaranteed and only the future or present deposits would come into this category.

The only reason the Minister of State appears to have given is that the banks need breathing space. They have had a very long time to breath owing to a series of extensions, yet they are still nowhere near out of the woods and not nearly credible.

I worry when I hear Ministers state in the House that they have taken the advice of the NTMA. It is about time we took a proper and critical look at the NTMA. It is a prop for Governments. Always, when they are in trouble regarding the finances or the banks, they take the NTMA's advice. The NTMA is in the banking loop. As I believe people are beginning to realise, staff in the NTMA receive vast salaries and are joined at the hip to the banks. I am sure the Minister of State is aware that Mr. Michael Somers, former head of the NTMA, was the only public servant ever to walk away with €1 million in one year. That is a formidable achievement, but it is very difficult to understand how it happened. What is more interesting – this is why I worry about taking advice from the NTMA – is that Mr. Somers retired on a pension of €265,000. As if that were not enough for him, he was then compensated by being made deputy chairman of Allied Irish Banks, on a salary of €150,000 a year. The NTMA, therefore, is used to the banking culture and springs therefrom. Before the current chief executive of the NTMA, Mr. Corrigan, entered office, he was in AIB. Ms Eileen Fitzpatrick who was appointed as chief executive of NewERA was in AIB beforehand. Therefore, taking advice from the NTMA is like taking advice from the banks' country cousins. It is deeply involved in the banking culture and will look after the banks before the nation.

I also worry when a Minister tells us not to worry on the grounds that we and the banks are back in the bond markets. Our presence in the bond markets is fragile. While it is welcome and represents an achievement, the Minister of State will know that if one pays interest at a high enough rate, one will always get back into the bond markets. We are paying very high interest rates, as is evident from the fact that one fund, Franklin Templeton, owns 10% of the Irish bond market. This is a precarious place to be because Franklin Templeton is showing a massive profit – I believe 12% - on its investment in the Irish bond market. The fund is hanging over the market and if it decides to sell, yields will rise, bond prices will fall overnight and we will not be able to present such a cheery picture of Ireland's position in the bond markets. Our position depends on the future agreement on the link between bank debt and sovereign debt. That agreement has been promised for a long time, but it has not been reached. There is a great deal of doubt about legacy debt and not everybody believes an agreement will be reached. I would not rely on it.

The guarantee is dangerous because I worry about banking policy for the future. The Government has cleverly spun the term "pillar banks" into banking language as if these banks were in some way secure. The dependence on the so-called pillar banks is worrying. We had a duopoly in the past and are heading for it again. If we have another, involving Bank of Ireland and Allied Irish Banks, we will have a new cartel as sure as night follows day. The Minister of State will remember the unhealthy dominance of the two big banks in the 1980s and 1990s. The entry of Bank of Scotland into the market initially was good news. When it established here, the cartel on mortgages was broken. Apparently, this will not happen anymore because the Government's banking policy is now to build up the two pillar banks such that they will be virtually unassailable. This territory will not be welcome to foreign banks anymore and the two pillar banks will be able to run a new cartel. One should remember the way in which the banks overcharged, what they did in respect of DIRT and foreign exchange and how they treated whistleblowers. The banks reigned supreme and one should remember the way in which the Central Bank co-operated in this regard.

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