Eamon Gilmore (Dún Laoghaire, Labour) | Oireachtas source

I am pleased to support this motion to establish an Oireachtas committee to inquire into the banking crisis. Ireland is now into the sixth year of a crisis that has inflicted untold hardship and disruption on the people. The Government has spent the last three years picking up the pieces of a disastrous banking crisis and the equally disastrous response to it. The people have endured a long and deep recession, it has been necessary to take painful and difficult measures and for three full years, Ireland had lost full control of its destiny because the then Government was forced to seek assistance from an EU-IMF programme. When the Government came to office, the live register was heading for half a million people. At its peak, the unemployment rate exceeded 15% and the cost of Government borrowing peaked at 14%. Today, the Government has stabilised the situation, with bond yields at approximately 2.7% and unemployment having fallen for 22 consecutive months. The Government's focus has been and continues to be on dealing with the problem, fixing the economy and looking to the future.

As a country, we need to move on. We must move on to the next stage of realising the fruits of recovery. We need a national renewal that is based on ensuring that recovery is felt in the lives of the people. However, that does not mean we can gloss over the past. If we fail to learn the lessons of history, we are doomed to repeat them. While there have been a number of reports and studies into the crisis, there has been no publically-conducted inquiry into what took place. I believe the people are entitled to see and hear from those directly involved in this saga. I believe they should come before an inquiry, set out their own understanding of what took place and answer questions on it. I also believe those involved are themselves entitled to a hearing in the public domain. I am acutely conscious that during the crisis and in the aftermath of events such as the bank guarantee, various accounts were in circulation as to what occurred. Some political figures have been able to give their account of events but others have not and many public servants, some of whom are now retired, were never given an opportunity to explain what happened from their point of view. It is important, in the interests of fairness, that these people have a chance to tell their story. While the committee that Members are establishing will have powers of compellability of witnesses, I have no doubt but that many witnesses are not just willing but are anxious to tell their story.

I am pleased that Deputy Ciarán Lynch has agreed to take on the role of chairing this committee. I have no doubt that this is an onerous task, which will require a lot of commitment on the part of the committee members. Significant preparatory work already has been done by the staff of the Houses of the Oireachtas, including on the important logistical matters that must be addressed. The work of the inquiry also will present a challenge to the staff of the Houses of the Oireachtas and I wish them well in that work. The preparation of detailed terms of reference for the inquiry is a matter in the first instance for the committee and I do not wish to prejudge their deliberations in any way. My own view is that the task confronting them is to establish an efficient inquiry which gets to the heart of a number of matters quickly and fairly.

The purpose of the inquiry should be both to cast a light on what has happened and to learn from it. The Government already has introduced a number of important reforms to strengthen regulation and to prevent another crisis. Vital changes have taken place in the European financial architecture which mean that were another banking crisis to arise here or in another European Union member state, it would be handled differently. Indeed, it might be said that Europe has learned quite a lot from the Irish experience, if somewhat belatedly. However, we must be sure that all the right lessons have been learned here and we will only do that through a proper inquiry. A number of questions stand out, which I hope and expect the committee to examine. We all know at this point that the crisis had its origins in an unsustainable property bubble that was fuelled by inappropriate tax incentives. There were several moments when this could have been reined in but it was not. We also know the property bubble was pumped up and driven by bad lending decisions in banks. In effect, what came into being was a toxic triangle between politics, property development and banking. We need to know why this developed as it did and why it was not stopped. We also need to know why the problem became a crisis and why a crisis became a disaster. We need to know more about how and when the problems in the banking system were first identified and what was done about them.

We know, for example, from Nyberg and others, about the work of the domestic standing group, which was established to look at contingency plans in the event of financial instability. We know that the possibility of a special resolution regime for banks was mooted, but a decision appears to have been made not to pursue this option. This was particularly unfortunate, in light of what was to follow. Most important of all, we still know very little indeed about what happened on the night of the blanket guarantee. We have some hints and a number of stories but we are yet to hear directly and in a structured fashion, from the people involved about what exactly happened that night. We need to know why the decision was made in such an atmosphere of crisis. We need to know which Ministers were involved. We need to know why one of the most important decisions in the history of the State was apparently made after an incorporeal Cabinet meeting. We need to know what options presented themselves and why such a far-reaching guarantee was the option chosen.

Some of this ground has been partially covered in the Nyberg and Honohan reports, but only part of it, and critical questions remain unanswered. We need far more than the dry narrative of a technical report. We need to understand how events came together that led to that decision which fatally linked the Irish State to a failed banking system, apparently with such little understanding of the implications that would follow. We need to know also why Anglo Irish Bank was allowed to continue to operate for several months after the guarantee, with it not being nationalised until February of the following year, a period of months when the State had guaranteed a rogue bank but did not exert control over it. We need to know what influence was brought to bear on the Government's decision that night. What was the role of the banks that came to be covered by the guarantee and what were their expectations about what would happen to Anglo Irish Bank? Did the immediate impact of the guarantee mean that even at that stage hard decisions were dodged and people sought to avoid dealing with reality? We need to know more about the role played by external actors, if any, and what pressures Irish decision-makers believed themselves to be under. We should look at the decision to establish NAMA which in many ways led to the undermining of the State's credit rating, as the enormous execution risks involved in the NAMA strategy undermined confidence in the both the banks and the State.

The story of the Irish crisis is one of a country that in the 1990s began to achieve a previously unknown prosperity. It was a country that was growing and creating employment on the back of an exporting economy and doing the right things to promote growth. That sustainable growth was then taken over by a different growth pattern which saw the emergence of a property-led economy where prices and costs were driven up by an expanding property sector, where jobs and incomes were generated by an unsustainable cycle of selling property to each other. It led to new jobs and higher tax revenues from transaction taxes that could not be sustained. The country was exposed to increasing levels of risk, such as the risk of jobs being lost in construction, the risk of knock-on consequences for the wider economy, the risk of large losses in the banks, the risk of financial instability, and the risk to the State of the link between bank debt and sovereign debt that was not adequately appreciated at the time. The problem for our country is that all of these risks were realised all at once. The great question that faces us is why, in the face of all these risks, the decision was taken to link the fate of the banks to the fate of the State. We need to know the answer to this question, not just because of the risk that it might happen again but because of the risk that some other problem will be allowed to build up without being adequately addressed.

This Government has introduced a national risk assessment process, but the really key question is why such a large problem built up, with no one shouting "Stop", and why, when the moment of crisis arrived, the needs of the banking system were protected and the people were ultimately left vulnerable.

After years of deep crisis, the country is finally in recovery mode. Throughout our history, Ireland has seen too many examples of where boom is followed by bust. Of course, we are affected by the normal business cycle, but too often the hard work and enterprise of the people, including the good work of the public service, has been allowed to be squandered by bad politics and bad policies. There has been too much pain and too much hardship just to move on without devoting the time and resources to learning the lessons. This is a task that it is right for the Oireachtas to take on. There is plenty of cynicism about politics and politicians, but there is no doubt in my mind that the Oireachtas is the right place to hold this inquiry. I have no doubt that Members of the Oireachtas have the capacity and the skill to take on this task. I commend the motion to the House and I wish the members of the committee every success in their work.

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