Tuesday, 20 January 2009
Anglo Irish Bank Corporation Bill 2009: Committee and Remaining Stages
I move amendment No. 1:
In page 6, line 24, after "Minister" to insert "on behalf of the Oireachtas".
This amendment concerns the issue of accountability. I am trying to ensure the Oireachtas has a substantial say in the operation and in any major decisions, particularly at a policy level, of this new bank we will shortly own. The history of banking in recent times demonstrates clearly that there is a need for such oversight of, and diligence in regard to, what is going on.
This morning in the Mansion House we heard many fine speeches, almost all of which referred to accountability, transparency and the open nature of the first meeting of the first Dáil on 21 January 1919. This is an excellent opportunity to deliver on those fine words and to bring that level of accountability and scrutiny to the Oireachtas. I hope the Minister will see fit to do so.
There are examples of institutions established by the Oireachtas but which are not accountable to it. The Health Service Executive is a perfect example. It does not have a shred of accountability to this House, the Minister for Health and Children or anybody else. That is completely unacceptable.
We want to ensure there is a strong corporate policy in place to ensure a finance stream to small and medium-sized indigenous enterprises and that the credit crunch these businesses are currently experiencing is ended. I also mention those whose homes may be under threat, although not in the case of this institution. The bank must follow the policy course we all want it to which is to deal with issues such as mortgages and the funding of small businesses.
To facilitate debate, I will conclude by saying that my amendment represents an opportunity for the Oireachtas to have a scrutiny role in the policy-making decisions of this bank, which is only appropriate.
I welcome the opportunity of speaking to amendment No. 1. I support this sensible amendment because it focuses on the issue of accountability, which is required in the legislation as a priority. The public and taxpayers demand that type of accountability in respect of this debate. It is such a serious issue we must all be responsible but we must also reflect the views of the people who elected us to the Dáil.
The points developed by Deputy Morgan are very relevant to the debate this morning in the Mansion House to celebrate the anniversary of the First Dáil. That First Dáil was led by men and women of great vision and courage and they would want us to ensure we have accountability, transparency and a system in place that protects the interests of the people and taxpayers.
I was extremely disappointed that not one Independent TD or Senator was allowed to address the debate on the anniversary of the First Dáil. This was a sad day for this country. It was also sad that the First Minister, the Deputy First Minister and MLAs from the Northern Ireland Assembly were not allowed to participate. In talking about honouring the men and women of the First Dáil we should have considered that. The only reason I attended this morning was to honour the men and women of the First Dáil but I was extremely disappointed and saddened by some of the procedures.
On the amendment and regarding the broader issue, I accept the serious position the Minister for Finance, Deputy Brian Lenihan, is in. I will support the legislation because it is in the national interest. It is important people look at the issue in a clear and objective way and decide what is the right thing to do for our country.
The Minister said earlier that Anglo Irish Bank had a balance sheet in excess of €100 billion but he also made the important point, on which I agree with him, that we should focus on the customers who are providing funds for employment in areas such as retail, office, leisure, health care, tourism and other services. I would also like to reflect and support the views of the many staff members who contacted me and asked me to do the right thing. They are concerned and annoyed about much of what went on in the bank but they want us to make the right decision to protect the interests of the company, the country and the people associated with this bank. I strongly support the amendment because it focuses on accountability and it is common sense.
Deputy Morgan proposes that the nominee should be approved by and take directions from the Oireachtas. The nominee is a person to whom the Minister, in effect, delegates his shareholding. The nominee could be the National Treasury Management Agency or a vehicle established for the management of the company and clearly it is inappropriate that the Minister's nominee should be appointed by the Oireachtas because the nominee's line of accountability would be with the Minister in respect of the shareholding the Minister has. The nominee is stepping into the shoes and acting on behalf of the Minister and I would then become accountable to the Oireachtas for my actions and the actions of a nominee were I to have one. That is the position.
I do not accept that. Nobody is asking that the Oireachtas would have a role in the day to day operation of the bank. That is not the case. I cite again the example of the Health Service Executive, which is allowed to do more or less what it likes, and it suits the Government politically to distance itself from some of the madness that is going on. In regard to the HSE, I need not outline to Members of this House the catastrophic position in accident and emergency departments over the Christmas period and early in the new year. I do not want to see another financial institution on that model. There is a reasonable case to be made for an Oireachtas input at policy level and I ask the Minister to reconsider that.
I cannot add much to the fact that under the legislation the Minister acquires the share and were there to be a nominee, the nominee would be standing in the shoes of the Minister. We do not govern the company through a committee, and it is important we keep the various arm's length aspects of these transactions in place.
I move amendment No. 2:
In page 6, before section 2, to insert the following new section:
2.—(1) The Minister may, and shall if required to do so pursuant to a resolution under this section passed by both Houses of the Oireachtas, apply to the High Court for an order under the Companies Acts for the appointment of one or more inspectors to investigate the affairs of Anglo Irish Bank, having regard in particular to the questions as to whether:
(a) its affairs have been conducted with intent to defraud its creditors or the creditors of any other person or otherwise for a fraudulent or unlawful purpose or in an unlawful manner or in a manner which is unfairly prejudicial to some part of its members, or that any actual or proposed act or omission of the company (including an act or omission on its behalf) was so prejudicial;
(b) persons connected with the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards it or towards its members;
(c) that its members have not been given all the information relating to its affairs which they might reasonably expect; or
(d) such additional grounds as the Minister specifies in his or her application to the High Court.
(2) For the purposes of subsection (1), the Minister has all such powers as are necessary to enable him or her to apply to the High Court for an order of the kind referred to in that subsection and the High Court shall hear and determine that application as if the Company Law Enforcement Act 2001, in respect of applications concerning Anglo Irish Bank, vested those powers concurrently in the Minister and in the Director of Corporate Enforcement, so as to be capable of being exercised by either of them.
(3) Notwithstanding subsection (1), the Minister is not required to make an application under that subsection if he notifies both Houses of the Oireachtas that the Director of Corporate Enforcement has applied to the High Court for an order under the Companies Acts for the appointment of one or more inspectors to investigate the affairs of Anglo Irish Bank.
The purpose of this amendment is to provide and make provision for the appointment of an inspector to examine the affairs of Anglo Irish Bank. The Minister said there is some kind of investigation by the regulator going on into various matters regarding Anglo Irish Bank but the regulatory system as it applies to Anglo Irish Bank has failed because the regulator has been unable to answer and give confidence to the market that serious issues which pertain to Anglo Irish Bank have been addressed.
There are two issues in particular to which I would like to draw the attention of the Minister. The first of the two serious events regarding Anglo Irish Bank which are in the public domain is the affair of the loans of the former managing director and chief executive officer, Mr. Seán FitzPatrick, subsequently the chairman of the bank. We all know the sad story. Apparently over an eight year period he warehoused his loans in another Irish institution, which the Minister also guaranteed, namely, Irish Nationwide Building Society. The figure was not small. These were loans that ranged between €87 million and over €120 million during the eight year period.
First year accountancy or auditing students are introduced to the way directors can manipulate accounts and the key way directors can manipulate accounts is to move transactions off the balance sheet at the year end date. That is the reason, in regard to Enron, people became very familiar with the notion of off-balance sheet items either in the jurisdiction or offshore. Essentially, a few days later they go back on the balance sheet. That is a fundamental way of misrepresenting the true and fair view in accounts and I cannot understand why this event is not subject to prosecution under the Companies Act. It seems to me that there is a desire to protect the person involved in this in order to protect Anglo Irish Bank and the larger banking system. Even if the Minister believes that is a noble and reasonable objective, it is a wrong objective because we will only restore our international financial credibility when we are seen to have put a line under this type of event.
Why was the director of this bank getting loans of this amount? That is a serious issue and that is the reason we need an inspector. A regulator is not good enough. It must be remembered that in the case of National Irish Bank an inspector was appointed while the bank continued to trade normally. In fact, the entire culture of the bank was changed and the matters addressed.
This is not a tribunal. This is an inspector but the inspector would have the power of the courts. It would take some period of time but it would send a message to investors internationally that we were addressing whatever has gone wrong in this bank, that there is no hiding place for unacceptable practices and that we were rebuilding Ireland's credibility.
During the period I was in Government from 1992 to 1997, first with Fianna Fáil and then with the rainbow coalition of Fine Gael and the then Democratic Left, the Labour Party went into Government at a time when the fortunes of the Irish economy were very low. Everybody in Government worked very hard in that period to build Ireland's reputation. Unfortunately, the succession of banking affairs, particularly the events in Anglo Irish Bank, has done unbelievable damage to Ireland's reputation. It is very difficult to recover from a damaged reputation. I cannot understand why the Minister has faith in the regulator and the Director of Corporate Enforcement. These issues are much bigger than those officers.
I referred to the second issue previously. There was an astonishing financial event which started perhaps a year ago where an individual sought to acquire 25% of the share capital of the bank — it was the Quinn family or Quinn associates or the Quinn group or Mr. Seán Quinn. I do not know how to describe it properly but that is how it has been described in various statements and by the regulator. Apparently, they initially sought to acquire 25% of the share capital in the third largest bank in the country by means of contracts for difference, CFDs, which is basically a form of stock market gambling. In April 2006, I raised this issue in the House and published statements stating that turning the Irish Stock Exchange into a casino for CFDs was crazy.
Not only did the Minister's predecessor, the Taoiseach, Deputy Brian Cowen, allow that to happen but he had a proposal to tax CFD transactions on the stock exchange to the tune of 1%. However, he withdrew it because he was lobbied by the banks and stockbrokers. It was a Gordon Gekko time, when "Greed is good" prevailed. The Irish Stock Exchange was to be a casino; we do not have casinos in Ireland so the attitude was, "let us make our stock exchange one". It was crazy, and the system of regulation utterly failed. Bear in mind that an ordinary investor who buys shares, be it a pension fund, a fund manager or a single individual, pays stamp duty on those shares. In fact, the investor who was buying with a longer perspective was obliged to pay a tax while the CFD dealer did not have to pay anything. This Government actually incentivised this crazy behaviour. There are products in the worldwide financial markets that people do not have a description of and which are not regulated, but we broadly know what CFDs do.
In this case, the bet on the CFDs appears to have gone wrong. Instead of the share price rising, it fell. We have heard suggestions of very large exposures and losses by that particular group in the context of the share prices. The regulator then issued a statement about a fine being imposed with regard to a sum of more than €200 million that was transferred from the insurance company in the Quinn group to the Quinn family interest — again, I do not know if I am describing them properly — to support the CFD gamble that had gone wrong. An insurance company is almost a bank. When one buys insurance, one pays in advance and hopes that on the rainy day the insurance company will pay out. An insurance company is a cash cow. It is full of the cash customers pay in advance to ensure that if there is an accident with the car, they can claim from their insurance. It is of the utmost importance, therefore, that insurance companies are regulated in a rather conservative way and that they maintain large cash balances.
Deputy Barrett is in the Chamber. I recall when the Bill to establish the Financial Regulator and IFSRA was being discussed. It was thought that the Financial Regulator would come down like a ton of bricks on insurance brokers because it was believed they should be regulated as tightly as possible. Many changes were made and many of them have cost individual brokers a great deal of money. In the long term, they are probably worthwhile but they caused much pain. However, in this case an insurance company was removing large wads of money and putting them into a family company to shore up purchases on CFDs. That is absolute lunacy.
Before Christmas I sought a meeting with the regulator and his staff. I met the regulator, who was accompanied by various important people in the regulator's office. I asked him about the Quinn affair. He effectively challenged me to prove what had happened in that affair. The public papers had contained an announcement that the Quinn family had built up a stake of 15% in Anglo Irish Bank through this rather unusual method. Normally in a publicly quoted company, particularly a bank, if a shareholding goes above 5%, it is supposed to be notified. However, the regulator challenged me to prove how those holdings were held. How could I possibly do that? That is the job of the regulator.
In this case, he was regulating Anglo Irish Bank on the one hand, in which a 15% holding had been built up but in ways that did not have to be advised, while on the other he had fined the other entity he regulated, the insurance company, several million euro. It was the largest fine ever imposed by the regulator. However, he could not helicopter his view over the two and say what was wrong with the insurance company putting money into funding share acquisitions in the bank in a particular manner. Talk about Chinese walls — the man had a Chinese wall running down the middle of his brain, so that what he knew from the insurance company could not transfer over. It is no wonder the Seán FitzPatrick loan affair got locked behind some other Chinese wall for seven or eight months.
We want to restore probity. In capitalism, the big sin is to undermine the freedom of the market. If one finds a way of doing things that essentially interferes in the freedom of the market, it is a big sin. What else did this extraordinary arrangement do? It sent a terrible message about this country. What happens when the Minister does not share information with the Opposition to some degree, on a bipartisan basis, leaving personal details out of it, which I support? Many people work as clerks in these companies. The regulator pops around and there are people working in the bank and in the insurance company. They are all sending out different versions of what really happened. Those versions get picked up and end up on the media and, of course, Ireland's reputation gets trashed. What type of country has that system of regulation?
I subsequently wrote to the Minister and enclosed a copy of a letter I sent to the regulator after my meeting with him. It stated that I was deeply dissatisfied with the explanation he had given me about the Quinn affair. The only reason I am interested in that is that it comes up for mention time and again in international magazines and so forth.
We are offering the Minister a mechanism in the amendment whereby he can put in an inspector to get to the bottom of exactly what happened. My fear as an auditor is one the markets work with as well. When one encounters the non-disclosure of loans by the senior chief executive and subsequent chairman over an eight year period where the loans are warehoused, that sets alarm bells ringing. What happened in the Quinn affair should have set every alarm bell off. The next question one asks is: "If this was happening at a very senior level in the bank, what does it mean?" At any stage with any of those loans, either the director, Mr. FitzPatrick's, loans or the Quinn group transactions, were any of the counter-party transactions to do with supporting the purchase of shares in the bank? That is another big sin. These are the questions the international markets have been asking.
This amendment offers the Minister a mechanism to have an inspector appointed without preventing the bank from continuing its operations under its new business plan as envisaged by the Minister. It would, however, get to the bottom of the issue and stop the rumours. The inspector would also have the authority of the court to examine other issues relating to the manner in which the loan business of the company was conducted and whether foolish and risky preferential treatment was given in connection with these loans. I am aware of the reputation of Anglo Irish Bank for keeping records and so forth.
Many bright young people joined Anglo Irish Bank in recent years. In the past decade, rather than encouraging young people to become engineers, we encouraged them to become financial engineers. Many of these bright, hard-working people ended up in Anglo Irish Bank. Given that much of their pay was made in shares, their rewards have also gone down the Swanee. We need to draw a clear, blue line under this issue and state that the disgraceful practices which took place at Anglo Irish Bank must be sorted out and explained.
Many of the shareholders who attended the meeting held in the Mansion House last week were elderly people who had invested their pensions. While they may not get their money back, they are entitled to an explanation. The advice they received was that there was nowhere safer to put their money and they should be patriotic and invest in an Irish bank. I feel sorry for these people.
On the affair regarding directors' loans, in most jurisdictions the practice in which Mr. FitzPatrick engaged is a five letter word, namely, fraud. First year auditing classes are taught about moving sums off the balance sheet and parking them somewhere. In this case, a sum of €87 million was moved into another financial institution. Unless the loans in question were disguised through the use of other names, a number of people in the bank must have known about them. If they were in the name of the director, members of the loan committee, credit committee and board of directors as well as senior executives in the key management group should have been aware of them.
Even in Anglo Irish Bank at the height of the Celtic tiger, the amounts involved — between €87 million and €120 million — were significant and would not have escaped scrutiny. This gives rise to fundamental questions. Was Anglo Irish Bank facilitating people on the inside track? What about the loans to other directors? It was suggested in media reports at the weekend that directors' loans may have averaged €10 million. It is possible that only one or two directors received much larger loans. In any case, the markets need to have this information. Traditionally, bank directors received loans to buy a larger house rather than to trade. They certainly should not receive loans in any way connected to the acquisition or disposal of shares in their bank. This should not have happened, if it did happen, and the mechanism of the inspector will offer the Government a vehicle to clear up the matter.
We heard from Deputy Morgan that one of his constituents went to jail for not having a dog licence. As the Minister will be aware, people in Dublin West regularly opt to spend a few days in Mountjoy Prison because they do not have a television licence. I try to sort out the problem and advise such persons not to go to jail as they will acquire a criminal record which would, for instance, prevent them from visiting the United States. If such persons get an angry judge on a bad day, they will be given a month in prison, although they will be released from Mountjoy relatively quickly.
I have described the activity in which a person engaged. The relevant sections of the Companies Act are clear in this respect. What is wrong with the system of regulation that those involved in it, the Financial Regulator and members of the regulatory authority, did not feel anger about this or try to find a way to bring this guy to account? Transparency and accountability are needed in this matter. As I stated, once upon a time we had Ansbacher man. We now have Anglo man, the principal one being Mr. Sean FitzPatrick. I advise the Minister to accept the amendment.
I strongly support the Labour Party amendment as it puts customers, staff and the interests of citizens first. The key proposal, to appoint one or more inspectors, is positive and constructive. The amendment refers to fraud and other misconduct, practices which have been taking place and must be tackled head on. The issue here is one of accountability and fair practice.
During my time as a principal of a small school in the north inner city, inspectors from the Department of Education and Science regularly visited to examine the school's books. If one was one penny over budget, one was hauled over the coals to provide an explanation and ensure taxpayers' money was properly spent. Hundreds of small schools in disadvantaged areas are coming under pressure. They must be accountable and operate within their budgets or they will be assessed and criticised by inspectors from the Department. I make this point to emphasise that while many people treat public money with respect, others have not treated money belonging to investors, customers and small businesses with the same respect. Many of these people hammered politicians for the past seven years, arguing that they could run the economy without the support of politicians. These right-wing capitalists have been out of control for the past 11 years.
This debate must be about stopping people from getting away with such behaviour. There seems to be one law for the rich and one for the poor. A number of Deputies referred to individual cases. I recall that during the row over bin taxes a number of those who fought for a fairer taxation system were sent to jail. The type of carry-on which has occurred is not acceptable.
I welcome the sensible proposal to give the inspectors powers to go after fat cats. The amendment refers to cases in which not all information has been provided. In recent weeks, it emerged that people in high positions failed to provide full information. This is not acceptable given that these same people have demanded accountability for years. We now demand accountability. The amendment, if accepted, would at least provide some protection to citizens as well as the customers and staff of Anglo Irish Bank.
The substantive point in this regard is that a thorough investigation is required to get to the bottom of this matter. If necessary, a High Court inspector must be appointed. I support the principle underpinning the amendment. Decisions and behaviour in the banks have exposed taxpayers to significant risk, destroyed shareholder value in the banks concerned and damaged the employment prospects of those working in Anglo Irish Bank. We must have public accountability, whether through the vehicle proposed in the amendment or another vehicle proposed by the Minister.
It is essential that we have accountability. We should be conscious of the changing corporate status of Anglo Irish Bank.
I wish to make a declaration of interest. Unlike many, I am in the fortunate position of not being a shareholder in Anglo Irish Bank. In case anyone accuses me of not making a declaration of interest, I have earned no money from the dreadful debacle that has occurred. The law firm with which I still have a connection has received inquiries from shareholders as to where they stand on their entitlement to compensation.
I have had conversations with two or three journalists about the issue. Someone may say in the future I contributed to the debate in circumstances where others in the law firm with which I am associated may act on behalf of shareholders; I do not know whether or not that will come to pass.
We should be conscious of the new structure to be put in place. It is useful to discuss this amendment in the context of the scandalously truncated debate we had on Second Stage. It gives us an opportunity to address the conduct of those involved with this bank.
This bank is going into State ownership. As a consequence, there should be no obstacle to a proper examination of its books, its historical dealing and its paperwork relating thereto. Regarding Mr. FitzPatrick, there should be no obstacle to a clear examination as to how it came to pass that, as shown in the books of the bank, substantial sums of money were borrowed, seemed to disappear out of sight in September each year before the bank came to the end of its financial year, found their way into the books of Irish Nationwide Building Society and were then transferred mysteriously back into the bank after 30 September each year.
The usual reason for appointing an inspector is when a company has its own identifiable independent legal status and requires an external investigation to ascertain what has happened within the company. I assume the Minister will confirm to the House that all necessary information will be accessed.
We have been told the Director of Corporate Enforcement is conducting some type of investigation. There are limits to where that investigation can go. I understand there is a separate and identifiable function for the Garda fraud squad. Can the Minister tell us if he envisages the Garda investigating the dealings within this company?
We know of the borrowings conducted by Mr. FitzPatrick through this company, but we do not have the full details. There were some revelations at the extraordinary general meeting held last Friday and others were discussed in the media, but we do not have the full detail.
One revelation we do know is that some of the borrowings relate to the acquisition of shares in Anglo Irish Bank. Those borrowings were off the books, never acknowledged, used to stimulate public confidence in the bank — presumably to persuade those who already held shares to retain them or buy more — and act as a catalyst to shareholders acquiring shares.
A particular criminal issue arises in those circumstances. Irish Nationwide Building Society should not be exempt from any investigation conducted. It may be acceptable that many millions of euro borrowed from a chairman or former chief executive of a bank be transferred from one financial institution to another for one year. There may be a business reason for doing so. It is reported this happened eight years in a row and always coincided with the end of the financial year for the other institution. The moneys were then transferred back.
Irish Nationwide Building Society and its management have serious questions to answer and I am astonished that, to date, they have not publicly explained their conduct. It is essential that conduct is explained.
There are many people who invested in the Irish stock market and purchased reasonable, not huge, amounts of shares in Anglo Irish Bank. Many were retired and relied on the dividend. They assumed investing in Anglo Irish Bank was investing in a company which was blue chip as any other bank, until the recent disasters which have taken place. I believe such people have been defrauded of their money.
Anyone who invests on the stock market must accept risk and understand that the value of shares goes up and down. By and large, if one makes the wrong judgment, money is lost and if the right judgment is made, money may be made. Shares have been artificially boosted.
Information has been excluded from accounts, there have been extraordinary failures by the auditors of the company and negligence on the part of the regulator who, even if the authority was unaware of what was happening for many years, knew exactly what the position was by December 2007. One section of the regulatory authority did not give the other side the information.
Many people face serious financial difficulties as a consequence of what has happened within this company. It should be completely unacceptable for a chairman or chief executive to arrange a loan book in this way and engage in the type of conduct we have seen.
We still do not know what assets are backing up the borrowings taken out. We do not know if the moneys Mr. FitzPatrick was moving by way of borrowings between Anglo Irish Bank and Irish Nationwide Building Society were borrowed by him for his own business purposes or if he was a front for making moneys available to other persons. We do not know the answers to any of these questions.
I would like an assurance from the Minister that there will be a proper investigation and follow up of these issues. I listened to the ramblings of the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, and the vain attempt by the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, to distance the Green Party from responsibility of any nature. It is as if the Green Party only went into government six months ago.
There was a failure of corporate regulation of enormous proportions. The banking crisis we are confronted by continued to be stirred and contributed to by the Government in office. During its first 12 months, it did nothing to tackle the obvious difficulties which arose regarding public expenditure and the collapse of the property market. All of these matters are affecting our economy.
I do not want to make a Second Stage speech but I am interested to hear what the Minister has to say about this proposal and what steps he and the board will take to ensure the sweetheart deal Mr. FitzPatrick organised on his behalf for borrowings is investigated.
Corporate misconduct has undermined not just the credibility of Anglo Irish Bank but of this State and has done damage to other banks. What will happen to ensure those who engage in what I believe is not merely criminal but reckless conduct are fully and properly investigated?
Action should be taken on behalf of the good name of this country, the shareholders of this company who have been betrayed, the pension schemes which have lost money, affecting thousands of people who have also been betrayed and the employees at lower levels in Anglo Irish Bank. They sought to do business in a decent and honest way and were betrayed by those in charge of the company and the incompetence of directors, some of whom have now resigned and should have gone earlier.
It is very interesting that the purpose of this section refers to functions performed in the public interest. The public interest is not served by ramming legislation through the House in four and a half hours. This is a serious matter that could have long-term effects for our other major retail banks who are concerned on a daily basis with overdraft facilities to enable businesses to survive and remain in business. It should be remembered that we are talking about an investment bank and that throughout the world investment banks have generally been the main cause of collapse in the banking system. As individual Members of the House representing the people who sent us here, we are asked to walk through the lobbies and vote in favour of purchasing a bank about which we know nothing, in respect of which we do not know the value of its liabilities, assets or debts. We are asked to do that following four and a half hours of debate.
If, when this debate is over, I am asked by a constituent why I voted in favour of buying this bank, whether I know something about it that the constituent does not know, I would have to say I know nothing about it. My constituent might well ask why I voted to buy it on his or her behalf. In effect, that is what we are doing. We are buying this bank on behalf of the ordinary punter in the street. I find this extremely disturbing. Under no circumstances will I vote for this Bill on the basis that in the long term it will affect the other two major retail banks. Nobody in business would dream of buying a business they know nothing about. If they did they would not remain too long in business. I have been in business for more than 35 years and I certainly would not buy a share in a company about which I knew nothing. The first thing one would do is conduct a thorough investigation of the company. We have not been given an opportunity to do that.
I serve on the Oireachtas Joint Committee on Finance and the Public Service with my colleagues here, and we have been totally misled on two occasions by bankers, including the Governor of the Central Bank who told us — I believe it was last September — he had stress-tested these banks and was happy with them.
I asked questions about land banks and about the value of land banks. Who in their right mind would invest in banks without knowing the amount of land lying there and the amount of money paid for it, its current value and how one will dispose of it? Who is going to invest in those banks?
Exactly. We are going to invest in banks blindfolded. We do not know anything about that bank. What a way to run a shop. This is typical of the way the State traditionally has operated.
We have got ourselves into a mess. We sat back and allowed the PMPA to engage in indiscriminate underwriting. Ultimately, the taxpayer had to bail it out. A former Minister for Finance, Mr. Alan Dukes, who is now one of the directors of Anglo Irish Bank, had to bail out AIB because of its reckless trading with ICI. There is no change proposed to regulations dealing with how banks should perform their duties.
The Minister should remember that plumbing is for plumbers. If everybody stuck to their own trade we would not be in the mess we are in. What is wrong is that building societies want to become banks, banks want to become insurance companies, and insurance companies want to become banks. Everybody wants to be something else and yet there is no question of introducing new regulations to confine people to the business they are supposed to perform. Banks are there to give a service to the public, to fund development for the future of this country and to give jobs to people. No change whatsoever is proposed to the regulations but we are asked to blindly purchase this bank without knowing how we are to dispose of it in the future, what liabilities we will inherit, how we are to fund them, how it will affect the reputation of this country.
This will instil fear in people investing in the two retail banks which are vitally important. We are nationalising one bank and now we are investing in AIB and Bank of Ireland. In a months' time the Minister may be back here asking us to approve a further purchase of shares in AIB or Bank of Ireland. What private investor would invest in banks when they do not know the future direction of those banks?
I am sick of listening to Ministers telling us we should act responsibly as an Opposition and think of the future of the country. Nobody gives us an opportunity to debate issues such as this. The Minister has the cheek to come in here and ram this legislation through in four and a half hours and expect us to act in a patriotic way and look after the interests of the country when we cannot even debate a topic of such seriousness, the takeover of a bank by Irish taxpayers without knowing what its liabilities are. This is a total disgrace and I will not vote in favour of this legislation.
By any yardstick, Mr. FitzPatrick, and all who were complicit in or who knew of his activities, have serious questions to answer. It is time to call a spade a spade. The actions we know of — and more may come to light following full investigation — were, without question, criminal. I do not make that charge lightly. We see the credibility of not only a single financial institution but of the combined banks and other financial entities working within this economy faced with the most serious situation presenting in our lifetimes, with all of the serious consequences that represents for ordinary citizens who have placed their trust in these entities over the years and who are now paying a serious price for the mismanagement and outrageous conduct of the individuals who were at the helm of some of these institutions. It is a very serious situation.
I support Deputy Burton's amendment No. 2, which seeks a full investigation. In his response, will the Minister tell us clearly what investigation is under way? Is it intended to fully expose the facts? We are not privy to the full facts. The Minister is asking us to buy a pig in a poke on behalf of the citizens of this State. He is asking us to give our imprimatur as elected representatives to this legislation, but that is not likely. I have listened carefully to the Minister's contributions but has he advised the Members of this House of all the information he has and knows pertaining to the historical and contemporary affairs of this banking institution? He should consider his response carefully. Has he been forthright with Members concerning all the information and detail that has been brought to his attention about Anglo Irish Bank's affairs, the conduct of its business and the conduct of those in positions of trust, either engaged or as members of its board? I am asking the Minister to be clear in his response to those questions because they are important.
The thrust of the motion before us not only concerns the investigation of Anglo Irish Bank. As regards the affairs of Mr. FitzPatrick, is it not clear and obvious that there were at least two financial institutions involved in a shadowy exercise of disguising that person's business affairs and whomever else he may have been acting on behalf of? Is Irish Nationwide not equally complicit in that whole exercise of deceit? Where would the Minister draw the line in investigating the financial institutions that have operated, and continue to operate, in this State? He cannot do so. If we are truly to get to a new beginning, a point where the people can have confidence in the financial entities operating in this State, we need a full and rigorous investigation of each and every one of them to affirm their adherence to absolute best practice and corporate governance now and in future. Nothing less will restore the confidence of the people or, indeed, investors in other jurisdictions, in the financial institutions in this State.
I ask the Minister to accept Deputy Burton's amendment and take on board the points that have been made. He should accept and appreciate how Opposition Members feel about what is being put to them here today. He is asking us to adopt a proposition over a truncated period of time, about which at the end of the day he does not claim to know the full facts. I would like to hear the Minister say that he has been absolutely unequivocal in sharing all the detail he knows pertaining to the business of this entity which he now proposes to place in public ownership.
Credibility is at the heart of this amendment and it is at the heart of this debate also. It is hard to get credibility for a strategy if those of us who are making the decision do not have the fullest information. The Minister is in effect asking us to make a decision about the nationalisation of Anglo Irish Bank without providing us with any information to enable us to make such a decision. Quite frankly, I do not know whether it is a good proposal or a bad one because I do not have enough information on which to measure it. I do not want to personalise the debate. I think the Minister is a truthful person, but that is not the issue. The issue in the markets is whether people believe him. Truthfulness is not the issue either with the Central Bank, the regulator or the Government — it is whether the Minister is believed. If the markets say that this blue carpet is pink, one will have to prove the opposite or they will operate on the basis that it is pink. That is the trap the Administration is falling into now. Deputy Barrett went through some of the reasons for this. As late as last September, the governor of the Cental Bank and the regulator's office addressed committees of this House assuring them that everything in the banking system was fine. They said they had stress tested the loan book and there was no cause for concern. They said that Ireland was different from the United States in that there were no bad banks here and no bad mortgages. They said the banks were able to cover any bad debts we had, they were sufficiently capitalised and everything was fine. Then there were a series of statements by various Ministers, including the Minister for Finance, indicating a strategy for a guarantee on the banks. There was an absolute debacle when we discovered what Mr. FitzPatrick was up to and how the regulator's office mishandled it. It had the information about it since last January but did nothing. Is it any wonder therefore that there is a lack of credibility?
Just before Christmas, the Government said it was not nationalising Anglo Irish Bank. The Minister has told us today that he was preparing the legislation back in September and that one of the options at that time was to guarantee four banks and maybe nationalise Anglo Irish. Then he decided that the guarantee was sufficient. Before Christmas he was talking about recapitalising the bank. He mentioned the figure of €1.5 billion, yet now he is nationalising it. It does not give any sense of credibility when the policy keeps changing with events. I am worried about the country at the moment and I do not think I am alone in that. It is going to be difficult to restore the economy to viability and get people back to work. It will be difficult for the Government to bring in the necessary fiscal correction. However, nothing of a viable, long-lasting nature can be done unless the banking system is put right. Unless we have a credible banking system it will be impossible to rebuild this country's economy and restore employment.
The problem is that the Minister has not put enough information on the table to give credibility to today's process. The PwC report must have a lot of the information the House requires but the Minister says that for reasons of commercial sensitivity he cannot publish it. In his speech the Minister said the Jones Lang LaSalle report supports the PwC findings, but he cannot tell us anything about what is in that either.
Anglo Irish Bank must have a draft annual report for 2008 with a full balance sheet. I understand it was to be published in about two weeks time. I also understand that publication of the annual report has been deferred. The benign interpretation is that it is being deferred so that more, and fuller, information can be put into the annual report. When the Minister replies to this section, I would like him to give us a guarantee that with the changing status of Anglo Irish Bank, the nationalised bank will still proceed to publish the annual report, that the full balance sheet will be available and that the auditors' comments on the balance sheet will also be made public. There should be no holding back on the information or on the bank's intention to provide extra information above what it would normally put in an annual report.
It is a pity that this debate came before the publication of the annual report. If we had that report, together with a full balance sheet, a certain amount of our questions could have been answered. However, we might get some insight into the loan book at that stage. What is going on in the markets this evening, as yesterday, where the main bank shares are being written down again, arises from the same credibility problem. Bank of Ireland and AIB are good banks with a proud tradition in this country. They are certainly not fly-by-night people and they have been prudent in their banking. They are sound but the Minister must convince the international markets of this. He has been unfortunate this week but he restated his position on recapitalising the banks earlier. That will not run. The problem faced by the Minister and the Government all the time is that they are behind the curve on the debate. Things move and they are left behind.
I will outline what is wrong with what the Minister said. He stated he will proceed with recapitalisation, as intended before Christmas, and put €2 billion each into AIB and Bank of Ireland. However, because they were not able to raise funds on the markets, particularly in north America, the Minister intends putting another €1 billion into each of them. It is unfortunate that the announcement regarding Anglo Irish Bank was made while AIB representatives were engaged in a roadshow in the US, as they failed to come up with €1 billion from the private sector because of this coincidence. It is also coincidental that the British authorities yesterday decided that the 12% return on the preference shares they were putting into their banks was too onerous. It was affecting their liquidity and they were unable to fund business in the UK and, as a consequence, they are switching from preference shares to ordinary shares. The essential difference is ordinary shares proffer ownership whereas preference shares do not.
The market is taking a view on the Minister's statement that he will also be forced to take ordinary shares instead of preference shares in his recapitalisation programme. If the Minister gives the €3 billion he has announced to each bank, he will own approximately half of each bank. Whether one calls that nationalisation or not, as soon as he owns approximately half of each bank, the value of shares held by existing shareholders will be diluted by 50%. Is it any surprise the value of Irish bank shares fell by 50% yesterday? Their value was diluted because the market is taking a view that the Minister will have to go down the ordinary share rather than preference share route and, as a consequence, he will own approximately 50% of these banks, slightly more in the case of one and slightly less in the case of the other. Share values have reduced as a result.
Since share values are so low in the banks, they do not matter a great deal in the debate currently. If a share in one of the major banks falls from 60 cent to 30 cent, a shareholder who bought when the shares were valued at between €17 and €23 will lose his or her money anyway. It might be a 50% drop from 60 cent to 30 cent but it is a 100% increase when the reverse occurs. However, that does not matter. The fellows on floor eight trading in the bond market matter more than the fellows trading on the ground floor in New York. They are deciding whether to invest €400 million in bonds in AIB or Bank of Ireland and they are taking a view on the banks because of the perception that has been created. The Minister's earlier statement accentuates that problem and he needs to bring his thinking up to date. Anglo Irish Bank is the third bank in the State. There would be a great deal of grief if the bank went under but it is not fundamental to the Irish banking system. However, if anything happened to the main clearing banks, one would not be able to cash a cheque and there would be serious grief. We must get real about this.
A significant element of the problem with the banks, the Government, the Central Bank and the regulator is the withholding of information. If the information was made available, at least there would be a sense of reality and people could measure what is happening. If these are sound banks anyway, as I believe, it is in everybody's interest that the fullest information be made available in order that a false crisis is not created and we will not have to return to the House in a few weeks to take more serious action regarding the main banks.
I agree with many of the comments regarding the behaviour of the former chairman of Anglo Irish Bank. If one walked down St. Stephen's Green tonight and threw a brick through the window of the bank, one would probably be jailed but the chairman could transfer money in and out and present the balance sheet in a way that disguised the real position while people bought and sold shares on that basis. That has to be fraud. On the day he resigned, the then chairman made a self-serving statement in which he said nothing illegal had occurred and by midday this was echoed by the Minister's colleague, the Minster for Social and Family Affairs on "The One O'Clock News". Anyone with a sense of right and wrong knows that while a section in company law might not specifically state if one rigs a balance sheet, it is an illegal act, the wider issue is a fraud and questions arise under common law. It has to be a criminal offence, which must be scrutinised. Whether that is done through this amendment or otherwise, it must be investigated.
I would like the Minister to comment, in particular, on the annual report and to give a commitment that it will be published in due course in the fullest possible way. Will he also make a commitment to try to get ahead of the debate and ahead of the game and announce a banking strategy that applies to all banks? He is playing catch up but he is falling further behind. It is a serious situation.
The vast majority of Members wish to make a contribution but most of them have been denied because of the procedures forced through the House earlier. The major shortcoming is we are debating under a shadow of ignorance because we do not know the facts and, as a result, we must exercise great caution, as legislators, in the manner in which we deal with this issue.
I do not wish to use my position in the House to name anyone, especially when he or she does not have the opportunity to reply, but the top brass in Anglo Irish Bank is guilty of national sabotage and financial treason because they have cost the State tens of billions of euro so far and we do not know the extent of the cost. I am surprised by the Minister's expression of surprise.
The Minister will see developments over the next few months. There has been a massive failure of government and legislation and a breach of criminal law, which has not been addressed.
Why has the Minister not cleaned out the banks? Why has he not demanded the resignations not only of the top brass in every bank, but also their board members? Anglo Irish Bank is not a normal bank, as it is devoid of small every day customers and private residential mortgage holders. However, the Minister knows its customers. They are the big developers and friends of Fianna Fáil whom he met in the Galway tent for many years.
That presents the Minister and his colleagues with a conflict of interest because the chickens in the Galway tent are firmly coming home to roost.
AIB and Bank of Ireland are somewhat culpable. The chief executive officer of Bank of Ireland stated yesterday that he will retire next June. What kind of cloud cuckoo land is the man living on? He should retire immediately. What will happen the bank between now and June as his fellow executives jockey for position to see who will take over?
Surely that runs contrary to the commitment given by both banks to engage actively in the process of recapitalisation since last autumn, which has not happened. I was informed by the chairman of AIB that efforts were being made. Why did the bank not dispose of its US assets? It did not happen because it is waiting for the Minister to act.
What is the Minister doing in conjunction with the Ministers for Enterprise, Trade and Employment and Justice, Equality and Law Reform to deal with the company law breaches that are alleged to have taken place? Bank executives claim to have done no wrong. I have read through the Companies (Amendment) Act 1990. There are the matters of fraud, deceit, false reporting, failure to report, failure to disclose and failure to lodge papers in the Companies Office in cases specifically where directors take out loans from their own company. It seems pretty straightforward and yet no Minister has said there might be a role for the Director of Corporate Enforcement in this regard. Can the director act without a report or a referral? Can he not act on his own initiative? Has any member of Government on behalf of the people entered into negotiations with the director to ascertain what role he has in the matter?
What about the auditors who failed to establish the facts? The fundamental role of any audit company is to exercise an element of oversight and vigilance. It seems that the big corporate group involved did not see what was going on and knew nothing. What reportage can be undertaken to the Director of Public Prosecutions regarding these corporate criminals? What message are we sending out as a Parliament to hard-pressed mortgage holders and people who are losing their jobs?
At midnight last night I left a meeting with a man in my constituency. When I told him I had received a summons from the Ceann Comhairle to attend a special sitting here today, he asked me whether I would have an opportunity to speak. I told him that, subject to the Whips, I might. He proceeded to tell me that the compensation he got from the acquisition of his farm by the National Roads Authority was invested in Anglo Irish Bank shares. What message does the Minister have today for that man and the countless other pension holders whose pensions on the advice of accountants and financial experts were invested in bank shares? We were told these were blue chip, guaranteed, gold plated and the best possible.
The rot must stop. It is time to put the entire financial system under the microscope. It cannot be done by anyone other than the Minister for Finance. However, he will need to talk to his colleagues in the Department of Enterprise, Trade and Employment and ascertain what role the Director of Corporate Enforcement has in the matter. The champagne and chocolates are finished, but the financial future of the State is threatened. The banks seem to be pulling the strings with the Department of Finance on occasions. While this Bill will be passed this evening, it is far from the end of the problems and difficulties, as the Minister knows. We cannot debate these matters under a shadow of ignorance with information being withheld. We need to know that information and the Minister is the key to it. He owes it not just to this House, but also to the people.
My dealings with banks would have involved putting money in, taking money out, trying to get a mortgage and trying to get loans for elections. At that level, the majority of people I have dealt with are very civil, courteous and nice people, who do their level best to try to help out. Having lost an election and gone back to them seeking more money for another election, if I had been on the other side of the counter I am not certain that I would have given that loan. However, the banks did. At that level there are people who are decent and hard working, and genuinely care and know their own community. That is why they are behind those counters.
There is another level in banking that none of us knows. While some Ministers may know it, I definitely do not and I doubt if I ever will. Comparisons need to be made. What is the difference between Enron and Anglo Irish Bank? The difference is that Enron was dealt with by the bastion of capitalism, America. It was dealt with because it hid from its shareholders information it should have given them. When it was discovered that it had done so, the US Government did not move in to bail it out. Its directors were not protected and did not walk away with golden handshakes. They are in jail because the one crime a company cannot commit in capitalism is to delude its shareholders. That is what happened in Anglo Irish Bank. The Anglo Irish Bank board members sat before the shareholders not at the recent EGM, but at the last AGM and did not disclose the true facts to them. If that is a crime in America, which is the bastion of capitalism, is it not a crime here? Do people have no recourse? I find it outrageous.
Other comparisons need to be made. Ireland has experienced a twofold whammy with what has happened in the building industry and the banking crisis. The very people, who have put at risk the lives and lifestyles of so many of our citizens and put at risk their homes, jobs, cars and children's futures, are exactly the same people who are riding off into the sunset with golden handshakes. I will not name any individual because it does not stop with an individual. I do not believe there was just one individual in Anglo Irish Bank; I believe there were more than that. I do not believe only one individual is involved in other areas; there are more. The Financial Regulator is about to ride off into the sunset with a big pension and pay-off. The man in Anglo Irish Bank is riding off into the sunset with a big pay-off and pension. The top man in FÁS is riding off into the sunset with a big pension and pay-off.
The people who are directly affected by this are sitting there, wringing their hands and asking us why no one is held responsible. When the economy picks up, and it will pick up, those same people will be asked to pick up the tab for the golden handshakes of the people that put them into this in the first place. Those are the things I do not understand and I am sure I am not the only one. It is outrageous that this should happen.
Putting an inspector into Anglo Irish Bank is the very least we should seek. Someone needs to go in there to find out what happened and who is responsible. As I said, I do not believe only one individual is responsible. What are we going to do about the Irish Nationwide Building Society? A director took his loan and moved it because the auditors were about to come in. I am assuming that favour did not go unrecalled. What are we doing about that? I got a feeling of déjÀ vu listening to the Minister today. Originally, the Minister said the banking system was sound, so we did not need to recapitalise. Then we were not going to nationalise. Then we did all those things. There is a fundamental problem in our banking system which needs to be dealt with. What we are doing here today, as Deputy Burton rightly said, is tinkering around the outskirts. This is not a bank in the normal sense of the word. It is not a bank that I go to looking for a loan for a house, my car or my children's education. It is not that type of bank. It is a betting shop, where people went and took gambles. For some it did not pay off, but in some cases it paid off very handsomely. When I stood up 20 years ago and said we should nationalise the banks, this was not what I had in mind. What we are now looking at is the nationalisation of a large debt incurred by people who are now walking away, having been handsomely rewarded. We are going to allow them to stroll off into the sunset, while the people who are directly affected by it will be paying for this for the rest of their lives. I do not think it is good enough that the Minister can stand here and say there are sensitive commercial reasons he cannot give us the information. That is rubbish. We are all adults here, and if we are acting on behalf of the taxpayer we need to know that information. We need to know exactly what we are doing. We cannot make decisions based on no information.
The other thing that struck me as interesting today was the speech of the Minister for Communications, Energy and Natural Resources. When he stood up to speak I genuinely felt he was reading from a chart about conflict resolution. First, one identifies the problem. Then one stops taking harmful action. Next, one asks the other party how they think it should be solved. The Minister started by telling us exactly what the problem was, although we all know what the problem is. He then went on to tell us how we should solve it with robust legislation to ensure that the Financial Regulator has teeth and can act on our behalf. I may not know a lot about banking, but I know a little bit about how this place works. Is it not the job of the Minister to bring in legislation to make sure the regulator has teeth and can take action to protect us? The Minister is telling us what he should be doing. The way this has gone is quite worrying. People out there tell me every day of the week that we need a little hope and a little trust, and above all else we need to reassure ourselves that this Government knows what it is doing. Today's performance gives us none of these.
I support this excellent amendment. One of the reasons is that it offers the Government an opportunity to tell us exactly where it stands. Does it stand on the side of ordinary small investors such as those we have seen on television attending the EGM on Friday last? Alternatively, does it stand with the Seánie Fitzes of this world and those in his gang who have been dealing with other people's money in the way they have for some considerable time? If the Minister is not going to accept this amendment, there is an obligation on the Government to tell us how it will deal with this issue. Will it send somebody after the Seánie Fitzes of this world? Will the Criminal Assets Bureau be called in? Clearly this is an excellent opportunity for the CAB to examine what exactly went on. Will the former chairman of Anglo Irish Bank be pursued for the amount outstanding on the loan, which I think is €82 million? Will the Government seek to have this repaid? Perhaps we could have some clarification on that matter.
There is no doubt in my mind — I expect the Minister would agree — that this is Ireland's Enron. However, the difference is that with Enron, investigators were sent after the characters involved to bring them in and deal with them. There is no sign of that happening on this occasion. We are hearing about the Office of the Director of Corporate Enforcement, but why not the Garda fraud squad? Why not the CAB? Why not adopt this amendment, which sets up an inspector to go after these characters and examine their activities — not just in Anglo Irish Bank but also in other banks — and try to get to the bottom of this matter once and for all?
We have all, including myself, alluded to the substantial investors, property speculators and so on who are clearly embedded in this bank. However, there was another level of investors, whom we saw recently on our TV screens. Pensioners, for example, who had invested in this bank as their pension, are now sitting in the cold in the evening, perhaps with not enough money to heat their houses as a result of what has happened. I accept, as does everybody else, that when one invests in a bank or anything else one is taking a chance, but one should be taking a well-informed chance. In this instance, investors were positively and actively misled. They were told they were backing a fine filly when in fact they were backing a plough horse or a mare which was in foal and stood no chance of getting to the end of the course. That is not fair or reasonable and it is not right.
I agree with the previous speaker, Deputy Lynch, and ask the Minister whether he intends to bring in legislation to fill these loopholes if there is not already sufficient legislative provision to deal with them once and for all. In addition, perhaps he would address the issue of the auditors, which has not been mentioned by any Government spokesperson to date. Auditors have a legal obligation to pursue these matters. There is always the qualification in the last sentence, which states "the information provided to me". However, the auditors have an obligation to try to establish as far as possible that the information given to them was accurate and reasonable. Perhaps the Minister would comment on this issue and on how the auditors might be held to account in this case. This is an obvious case of corruption at several levels. It is a matter of tying it down, pointing out exactly who was involved and holding those people to account before the courts. That needs to happen soon.
With regard to the overall content of the Bill, my view is that it is the right move but the wrong bank. Anglo Irish Bank is a hopeless, poisoned institution and I do not believe it can ever be fixed.
I am addressing the broader context. However, we are still only on amendment No. 2, and there are only 40 minutes left, so I will conclude. I hope the Minister will answer some of the reasonable questions that have been asked, because we are all being asked those questions outside the House.
Tomorrow morning every man, woman and child in this country will wake up owning this bank as a result of the decision we are making today. Every child born tomorrow may also be inheriting the liabilities and costs of this decision. How we have come to own this bank may never be known, because of the way business is being conducted in the House today. Like many people watching this debate, I do not know too much about subordinate lending or about banking governance or the discourse of banking. However, I know about buying things. If Anglo Irish Bank were a car, I would want to see the log book, I would want to look at the mileage and I certainly would want to look under the bonnet. If we were to look at Anglo Irish Bank in this context, we would see that there was fraudulent reporting in the log book, that the mileage had been tampered with and that the only servicing the engine ever received was for the directors and a very select few in this society.
The State is buying a banger at a forecourt price and will be paying repayments for quite a number of years. When the House last debated the banking situation we were looking at notional costs and notional liabilities. We are now moving into the realm of real costs and real liabilities. We are into deep liabilities and deep costs. The bank which the State is bailing out through a process of nationalisation is not the type of bank with which I am familiar.
Deputy Lynch, I do not know how the debate developed while I was absent but I remind you that you must deal with the appointment of inspectors to Anglo Irish Bank in accordance with amendment No. 2 in the name of your colleague, Deputy Burton.
This is not the type of banking that most people in this country are familiar with. Returning to the amendment, this is the reason we need an assessor and a regulator for this area. The type of bank with which most people are familiar is one with a lot of customers who have loans. This bank had very few customers and a lot of loans which makes it unique in the banking sector. With this liability should come a level of governance, regulation and certainly a lot of accountability.
There are very basic principles to problem solving and the first is that the problem is put on the table but the Government has been complacent at best and is probably entwined in the problem at worst. Since the House last debated the banking crisis either nothing has been learned in that time or, more worrying, there is something in the Government's relationship with a certain sector of society that has not yet come into the public domain.
The outcome of this debate has already been decided; the worry is that the consequences have yet to be known.
I support the amendment. It is high time that inspectors were appointed and that the Director of Corporate Enforcement should be heading for the High Court on instructions from the Minister to ensure an inspector would be established under the Companies Act and that this matter could be dealt with in a proper fashion as befits taxpayers' money.
Anglo Irish Bank was the reason the Minister came into the House in the first instance regarding the original guarantees. Anglo Irish Bank was the bank going to the wall on that occasion. There was a late night visit to the Taoiseach, supported by some of the other banks and legislation was passed to give a €450 billion open-ended guarantee. The situation in Anglo Irish Bank has deteriorated still further. More information has come to our attention since that time and we are now being presented with a no-choice situation to nationalise a bank with a balance sheet in the region of €100 billion, with something in the region of €70 billion in liabilities in loans and other mechanisms. We do not know to any detailed extent what are the liabilities we are taking on.
Yes, but money has been loaned to the extent of €70 billion and we do not know what return will be received on any of this amount. We do not know the detail of any of this. The House is making a decision on behalf of the taxpayers who elected us. We are representatives, we are Teachtaí Dála who represent the citizens of this country. How can we possibly buy a pig in a poke? We must know the detail of what we are embarking on before we do so. To follow bad money with good money is not an option. It is certainly not an option to say that we are going to go down this road, pass this legislation and there will be no consequences, good, bad or indifferent, for those people who brought us to this state. There is prima facie evidence that fraud has been committed and prima facie evidence of wrongdoing. The very least both the Minister and the House owe the taxpayer is to inform taxpayers, shareholders and those with pension money, the ordinary citizen, that we will get to the bottom of this or that we will use every mechanism in our power to do so. Other people have argued that CAB, the Criminal Assets Bureau should be called in. I would have no problem with this suggestion but the difficulty seems to be that it is white collar crime. The onus is on the individual who is targeted to provide the information and to provide the evidence of where the funding has gone and where the liability is. The onus is not the other way around as is the normal rule of law.
We are not dealing with a few thousand euro here but rather with hundreds of millions which have been misused by people who were responsible for using it correctly. It is essential that we get to the bottom of this and we would be doing a very bad day's work if we left this House without doing everything in our power to get to the bottom of it.
A toxic bank situation exists and the problem seems to become more serious every time we look into it. I refer to the explanatory memorandum of the Bill:
. . .the Minister, having consulted with the directors of Anglo Irish Bank, the Governor of the Central Bank, and the Financial Regulator, has formed the opinion that the exercise of these functions is necessary to remedy a serious disturbance in the economy of the State and to preserve the capacity of Anglo Irish Bank to continue as a going concern.
What is meant by "remedy a serious disturbance in the economy"? We are in a recession. Those are the same people the Minister consulted the last time when he produced the guarantee. They would say, would they not, that Anglo Irish Bank should be bailed out again? Following on the guarantee we will bail it out in the form of nationalisation because the situation has deteriorated to a further extent. What else would they say? They are the only people the Minister has admitted to having consulted on this matter. Of course, they want to be bailed out if the bank is going to the wall and liabilities are high. The Financial Regulator has not covered himself in glory either. The consultations must be much wider.
The banks are not the economy. The Government's priority should not be saving a private bank, one that has misguided and mismanaged itself to a fraudulent extent. The priority should be in ensuring the services the banks provided are maintained. Anglo Irish Bank, as it stands, is in no position to do this and there is no sign of it being able to do so in the future. The focus should be on the main banks, Allied Irish Banks and the Bank of Ireland, to ensure they are in a position to provide cashflow that small and medium-sized enterprises require. These enterprises are the backbone of our economy and ensure jobs are created and maintained. The Minister claimed he has a vision for the banks to serve these pillars of the economy but the banks are not doing so even with the European Investment Bank deciding it would provide funding of €30 billion to Irish, as well as other, banks for this purpose.
This would have enabled the banks to provide a cashflow for small and medium-sized enterprises. Will the Minister ensure this is done?
The amendment is reasonable and modest. We owe it to the taxpayer to get to the bottom of this crisis.
I must make a declaration of interest. A member of my immediate family owns shares in Anglo Irish Bank.
I cannot understand why the Minister will not accept this reasonable amendment. It is not a partisan amendment but seeks to establish the facts and truth in this affair. It seeks to investigate how we arrived at a point where a major economic institution has brought discredit on the entire Irish banking system. The markets want certainty and to know the facts. The domestic and international financial markets do not believe what is happening with the Irish banking system. They have been consistently refusing to accept the assurances of various commentators on behalf of the different banks. The Minister knows that too.
The appointment of an inspector may not address the immediate issue. However, to use the famous words of the late Mr. Justice Hamilton who presided over the beef tribunal, if Ministers had answered questions in this House, the establishment of the tribunal would not have been necessary.
I accept the Minister for Finance has a large onus of responsibility during these difficult times but he must tell Members of what is happening rather than treating us like children or claiming it is commercially sensitive information.
I asked the Minister how much this nationalisation would cost but he declined to answer. If he were to say he does not know or it would range between particular figures, I would have some regard and respect for that.
No, he did not. I did not hear it. We need to know. Markets trade on facts and certainty. The markets are in turmoil because there is no certainty or transparency.
Deputy Burton, with our back-up team, has researched the appointment of an inspector. It would give the Minister an instrument and a route that is legal and could be operated. Within a period, we would find out what went wrong with this institution so that we could learn for the future. If an inspector were to discover wrongdoing or corruption, the laws of the land could take care of that. In the absence of facts and an inspector, the Minister is compounding the uncertainty in the marketplace.
The systemic banking system we need to operate and function is not the Anglo Irish Bank model. It was a niche bank in a particular sector. The two main Irish headquartered banks are now in peril. Looking at their share prices, that is what the markets are saying. People in other markets are examining how we are conducting our affairs but the Minister is not offering any comfort of certainty or transparency. That is the Minister's responsibility.
I accept the Minister and the Department are working in difficult times but he must have regard to the consequences of not giving to the market what it can reasonably expect. Far too often in the past, the Irish players in the Irish market have codded themselves into believing they were a cosy little club and that the rest of the world did not matter. We do not live in that world anymore as the markets are globalised. The Minister is aware what the international press, from the Financial Times to The New York Times, have stated about this affair. We need transparency and facts. The Minister is in possession of these facts and he must feed them out in a responsible way.
I recall when the Minister for Finance was first raised to ministerial office, he attended the Magill summer school at Glenties. There he made the point about this House having outsourced much of its responsibility to outside agencies which he regarded as a retrograde step because the lines of accountability were weak, if non-existent. It is an issue on which you, a Cheann Comhairle, have reflected upon also. Regrettably, little has been done in addressing it.
The Dáil has outsourced, in good faith, responsibilities to the Governor of the Central Bank, the Director of Corporate Enforcement and the Financial Regulator. They have all, to various degrees, failed to execute their responsibilities. This amendment proposes that the House, in a parallel system, retains the right to act in certain respects and the powers it vests in outside agencies.
The point has been made ad nauseam that there has been much anger among the little people who pay their taxes. Many of them worked all their lives, gathered a lump sum and, in good faith, invested it in a portfolio of shares which may have included Anglo Irish Bank. These people feel betrayed and exposed by what has happened under the Minister's watch. The Minister referred to disappointment over Seán FitzPatrick's dealings but there is also disappointment with the Financial Regulator's failure. He allegedly stress-tested these financial institutions on foot of developments at Northern Rock some 18 months ago and gave them a clear bill of health. This is a clear failure of the agencies in which we in good faith have vested responsibility.
The amendment proposes to allow the House to act along the same lines it has vested in others. It is sensible to adopt it, given that the Minister has reflected in the past on the lack of accountability to the House. This affair has been a massive cost to the economy and the country's international standing among global investors. Our name has been sullied all over the globe. Here is a chance for this House, as the voice of the people, to reclaim some of the high ground in respect of what is right and proper and to apportion blame where it rightfully rests. Merely to acknowledge disappointment is insufficient in a debate as important as this. The amendment would go some way to addressing the deficiencies exposed.
What lies behind the purpose of this amendment would have the widest possible public support. People have seen a response that suggests the public is beyond understanding what has happened, that the public would not understand but more complicated people would understand. The public understands what happened very well. What the public is communicating to public representatives is that it wants a complete change in culture and some evidence that the Government has taken a decision that what has happened will be exposed, changed and its recurrence made impossible. That is the test of this legislation. Has it sufficient in it to answer the questions, to which the public is rightfully entitled? There are some that might not excite some people who had great responsibility. When asked about the banking system I recall Mr. Hurley, the Governor of the Central Bank, turning to the television camera and saying that some of the best minds in the world were working on it. This was a throwaway remark from someone in an extraordinary position of responsibility not exercised. The idea is that this is out there in the ether with great minds working on it. What had happened is that the Chicago schools model had completely collapsed in respect of the traded economy. A credit crisis had taken place internationally due to the departure of all responsibility and accountability in bad and virtual financial products. On the other side, Ireland under Mr. Hurley's gaze had advanced in creating a property bubble within another bubble and a kind of specialist bank to facilitate the property bubble.
It is a long time since I studied monetary economics but when I heard Anglo Irish Bank described as a crucial part of the Irish banking system and a systemic player, I wondered what textbook this was taken from. There is no comparison between Anglo Irish Bank and the other two main banks. There is a great deal of anxiety in the country to assume that one hopes the illegality, as now seems to be suggested with regard to compliance with auditing and reporting functions, does not prevail in other parts of the banking system.
People ask lay questions such as, in the movement of between €87 million and €124 million in loans, how much is secured in a variety of ways. It is rather like when the drunkard is asked how he spent his money and replying that he was in the pub, then the nightclub and then he met someone and they had a few more. The response is that there was property, equities and the recycling of borrowing into shares purchase involved. Is any of this secured? The House is asked, blindly, to say that we will take this big batch of uncertainty, without any questions being asked, and we will go back to the Mr. Hurley argument and the arrogance of it, to the effect that the public and the House cannot be trusted with the information.
The market knows the information because of the clique that was running the racket. What else is moving money off the balance sheet, putting it onto another balance sheet and shifting it back again but a racket? Apparently this took place under the gaze of, and supposedly with the supervision of, auditing functions. People send us here as politicians and if we are not to be dragged down with it, this is the issue at stake when I hear about the symbolic stuff we do in celebrating the importance of Parliament. People elect us to insist on getting answers to questions that are rightfully in the realm of public knowledge. When someone suggests that this is sensitive information, I could accept that argument if someone said to whom it is sensitive. Is it so sensitive to the markets or so sensitive in terms of what it would reveal? Is it so sensitive in terms of what is paralleled in other parts of the banking system? The message from here should be very simple. Those parts of the banking system that constitute Anglo Irish Bank have behaved disgracefully. What is worse is to say that one cannot answer, that the information cannot be provided and that an inspector must not be allowed to do so.
The public also knows that the person principally responsible for damaging the national interest into future generations, perhaps, in terms of trust and capacity, had the neck to go on radio and television and advise people that social welfare should be cut and that we should reduce public expenditure. The sheer, brazen shamelessness of it.
What I know, having been a sociologist for 20 or 30 years, is what it means for these little circles as they meet around town and play golf together. That is why we had these mummies sitting in a row at the meeting to which people came. The list of those present included the managing director of this, the director of that and the former chief executive officer. A succeeded B, D recommended C and that disgraced clique has not had one word of condemnation from IBEC. IBEC continually harasses teachers, gardaí and those on the frontline of public services. Every second day we get a lecture about the public service from IBEC. From IBEC, what do we get about these people? Total silence because they were the people lunching with them, drinking with them and talking to them. IBEC is silent.
What would the inspector do? The inspector would draw the poison of a system that has damaged this country and create the clean conditions in which we could have an accountable culture of banking.
It is not mysterious. There was one time people understood finance clearly. It is knowable, there is no mystery about it. The mystery came about when right-wing thinking suggested everybody could be a shareholder and that their greed was financed by dividends, which were governed by performance in products that were running out in number. Therefore, bonuses came from inventing fictions of risk and investment. That is what happened internationally and few people have the courage to say it. Bank people who had been banking and investing went on, not just speculating but gambling into the future, gambling on unsustainable levels of risk.
That is why no one can answer the question I am asking. Regarding the bank the public will now own, what is the status on the day-to-day advances made to that bank by those who have lent to it? The Minister said it would be just like it was before but that is not much of an assurance because the inspector would have told us what it was like before.
Let us hope that other agencies of the State will do it. How is it that one can say to a board or, in preparation of documents required by company law, that one has borrowed X amount when one has transferred to oneself and moved on and off the balance sheet ten times that amount?
When I think of the event earlier today, celebrating the First Dáil, and the kind of people who built Ireland, can we recall what we do to someone involved in any kind of misdemeanour regarding the movement of money in a social welfare office or a post office? Look back at all the sanctions imposed on postmasters or postmistresses who made mistakes. Generations of a family worry about what it has done to its reputation.
Now, all of these people are too complicated for Mr. Hurley, who has the greatest minds in the world working on the future of economics and banking. I do not know how many years ago it was but I remember giving lectures on economics. The idea that a governor of a central bank would not know that all of this was going on is either because he is in a state of mind that all banking is a saintly activity which he cannot possibly touch or that it is so arcane that he cannot understand it. He should have understood it. The fact that he is still there is a disgrace. He should be gone and the Minister should see to it that he is gone.
The Minister is resisting amendments that would allow inspectors to find out what the basis of all of this was so that we might set up an entirely new system. At the same time, Mr. Hurley sits there waiting for the storm to die down so that we can go back to the way it was. No one in the country wants it to go back to the way it was. They want the full lot of sanctions to fall on all those who have damaged us and damaged the name of the country irreparably. They want them to be treated no differently from how the State has treated any other poor person involved in thievery. This is what would happen in a republic. Why should these people be immune from investigation, an inspector or anything else?
When we are finished with them, we still have the business of intelligently structuring a financial system. There might be a lot of dead wood who cannot think like this. Get that dead wood out of the way. This country is full of responsible, morally inclined decent graduates in all of these subjects. Let the inspector in and let us find out what went on. Let us not imagine that these people made mistakes. It is not the malfunction of a system that was working. It is the deliberate, corrupt and dreadful activity of people working a system that was wrong.
I am not criticising the fact. I am merely commenting on the basis on which I will prepare my reply.
I wish to return to the purpose of this amendment. Many harsh things were said, as were many true things, during the debate this afternoon about the banks, shareholders who lost their pension funds investing in these institutions, the quality of the management of these institutions and the specific misconduct engaged upon by the chairman of the particular institution with which we are dealing today.
I avoided the word "misconduct" initially and used the word "disappointment" which I have used frequently since. I avoided it initially because my concern, as Minister for Finance, was for the financial stability of the banking sector. With regard to the matter of which complaint was made, Deputy Burton began the debate by pointing to extremely serious issues of corporate governance with regard to this particular company. She referred to the loans to directors, which I know the chairman explained at the extraordinary general meeting but about which questions remain to be answered. I understand the regulator is examining this question——
——and I understand that the Office of the Director of Corporate Enforcement is also examining these issues. I do not have the power to direct CAB or the Office of the Director of Corporate Enforcement.
The amendment is not necessary in light of the extensive legal powers which the Office of the Director of Corporate Enforcement has. I am confident the director will conduct a thorough examination of the unacceptable corporate governance practices——
——which have come to light in Anglo Irish Bank and which have rightly caused such grave public concern. It does not come from this House because the Director of Public Prosecutions does not come from this House either. Deputies should know that the director and his staff have shown a strong commitment to their compliance remit and bring parties who have not met their legal obligations under the companies legislation before the courts in appropriate circumstances.
The office has secured the conviction of more than 140 company directors and other persons for company law offences. The office has had disqualification orders imposed on more than 70 persons and approximately 800 directors have been restricted by liquidators following reports made to the director's office. The director and his staff will undertake a professional job in examining the recent events in Anglo Irish Bank and I look forward to seeing the results of various examinations which he no doubt will have to make as a result of what has come to light.
I have discussed the powers of the Director of Corporate Enforcement with the Minister for Enterprise, Trade and Employment. It is essential that the director has the fullest possible powers to investigate this matter. As an immediate measure, I have requested that the regulator, who has more extensive powers of surveillance with regard to the banking system——
——should at his request provide for him any information that may be required. It is essential that these matters are investigated and dealt with and that those responsible are brought to account.
With regard to the investigations taking place, in the case of this particular institution the decision of this House to take the bank into State ownership means that a clear blue line can be drawn between the future of this institution and what went on in the past. This affords us the valuable opportunity of dealing in an open way with everything that has passed.
I want to touch on another matter raised in a number of contributions, which is the question of what the taxpayer is obtaining. As I indicated earlier, following the guarantee a firm of accountants conducted a detailed analysis of the loan books of all of the institutions and, in particular, the loan book of Anglo Irish Bank in estimating the future losses of a bank. As I pointed out several times in recent days, the position is that the current loan book of Anglo Irish Bank remunerates the deposits. In other words, there is sufficient income derived from the loan book to pay for the operation of the bank and to pay for the deposits at the bank. This is a fundamental and important point. Much of the public debate has suggested that the bank is not in a solvent position. The bank is solvent and it is now coming into State ownership.
I was advised by the Governor of the Central Bank, other financial authorities and my officials. The Government weighed up the arguments at official level with me in conference and subsequently I advised the circumstances to my colleagues that the balance of the argument favoured nationalising this institution. The situation could potentially be a systemic risk to the Irish banking sector and the economy. This potential has not yet materialised and this is an important point.
With regard to the examination conducted by PricewaterhouseCoopers, having examined the loan book, the bad debts and the future potential profits that could be taken by this institution from the performing loans it had, it estimated that as a private concern to put the markets beyond doubt about its future viability required a €4 billion recapitalisation. We do not have to do this recapitalisation. As a result of the doubts expressed by Members of this House today and which I also entertained in early December, I was not prepared to go beyond €1.5 billion to give immediate confidence to the institution in the context of considerable market scepticism following the revelations about the chairman.
The position now with regard to public ownership is that while there is exposure, and I have been asked frequently about this in recent days, the exposure is not to any immediate commitment to funding for the bank. Were there difficulties, the State would have to provide working capital and were it provided the State would be entitled to extract it from any profit the bank might accrue. This is the position with regard to the exposure of the taxpayer.
I appreciate the point made by Deputies on the question of the systemic character of this bank and this raises two fundamental issues. One is the number of depositors, which I outlined to the House earlier. There are 300,000 retail depositors, 72,000 of whom are in the country, and 12,000 corporate depositors, 3,500 of whom are in the country. That is a fundamental question of systemic importance in the economy and a balance sheet of such size. There is, however, a wider issue up to which we will have to face and in regard to which the Government will perform its responsibilities in the coming days, that is, the whole question of how, to the outside world, we manage our finances. To the outside world, Ireland must be seen as a country which honours its debts and obligations. As a country, we cannot afford to have the message going out that we will let a bank fail and, consequently, dishonour the depositors who have invested their money in it. We constantly point out how exposed we are to global trends. We are equally dependent on international goodwill. Whether in regard to the Lisbon treaty or this particular matter, we cannot afford to impair our credit in the outside world.
That is a fundamental reason I proposed to my colleagues in Government, who agreed, that we had no option but to put the seal of full State ownership around this bank to ensure that the taxpayer was fully and comprehensively protected in regard to the management of this bank and in respect of the guarantee the State gave to it.
I refer to the guarantee because the point was raised by Deputy Rabbitte earlier. Irrespective of whether we had given a guarantee, we would be obliged to nationalise this institution. Indeed, the nationalisation of this institution was a matter to which we gave some attention in September but for the reasons I outlined earlier in the debate, we decided, on the balance of arguments, against it at that stage.
I am required to put the following question in accordance with an order of the Dáil of this day: "That in respect of each of the sections undisposed of, that the section is hereby agreed to in committee, the Schedule and Title are hereby agreed to in committee, the Bill is accordingly reported to the House without amendment, that Fourth Stage is hereby completed and the Bill is hereby passed."
The Dail Divided:
For the motion: 79 (Bertie Ahern, Dermot Ahern, Michael Ahern, Noel Ahern, Barry Andrews, Chris Andrews, Seán Ardagh, Bobby Aylward, Niall Blaney, Áine Brady, Johnny Brady, John Browne, Thomas Byrne, Dara Calleary, Pat Carey, Niall Collins, Margaret Conlon, Seán Connick, Mary Coughlan, Brian Cowen, John Cregan, Ciarán Cuffe, Martin Cullen, John Curran, Noel Dempsey, Jimmy Devins, Timmy Dooley, Michael Finneran, Michael Fitzpatrick, Seán Fleming, Beverley Flynn, John Gormley, Noel Grealish, Mary Hanafin, Mary Harney, Seán Haughey, Jackie Healy-Rae, Máire Hoctor, Billy Kelleher, Brendan Kenneally, Michael Kennedy, Tony Killeen, Séamus Kirk, Michael Kitt, Tom Kitt, Brian Lenihan Jnr, Tom McEllistrim, Finian McGrath, Mattie McGrath, Michael McGrath, John McGuinness, Martin Mansergh, Micheál Martin, John Moloney, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Darragh O'Brien, Charlie O'Connor, Willie O'Dea, Noel O'Flynn, Rory O'Hanlon, Batt O'Keeffe, Ned O'Keeffe, Mary O'Rourke, Christy O'Sullivan, Peter Power, Seán Power, Dick Roche, Eamon Ryan, Trevor Sargent, Eamon Scanlon, Brendan Smith, Noel Treacy, Mary Wallace, Mary White, Michael Woods)
Against the motion: 67 (Bernard Allen, James Bannon, Seán Barrett, Joe Behan, Pat Breen, Tommy Broughan, Richard Bruton, Ulick Burke, Joan Burton, Catherine Byrne, Joe Carey, Deirdre Clune, Paul Connaughton, Noel Coonan, Joe Costello, Simon Coveney, Seymour Crawford, Michael Creed, Lucinda Creighton, Michael D'Arcy, John Deasy, Jimmy Deenihan, Andrew Doyle, Bernard Durkan, Damien English, Olwyn Enright, Frank Feighan, Martin Ferris, Charles Flanagan, Terence Flanagan, Eamon Gilmore, Tom Hayes, Michael D Higgins, Phil Hogan, Paul Kehoe, Enda Kenny, Ciarán Lynch, Kathleen Lynch, Pádraic McCormack, Shane McEntee, Joe McHugh, Olivia Mitchell, Arthur Morgan, Michael Noonan, Caoimhghín Ó Caoláin, Kieran O'Donnell, Fergus O'Dowd, Jim O'Keeffe, John O'Mahony, Brian O'Shea, Jan O'Sullivan, Willie Penrose, Ruairi Quinn, Pat Rabbitte, James Reilly, Michael Ring, Alan Shatter, Tom Sheahan, P J Sheehan, Seán Sherlock, Emmet Stagg, David Stanton, Billy Timmins, Joanna Tuffy, Mary Upton, Leo Varadkar, Jack Wall)
Tellers: Tá, Deputies Pat Carey and John Cregan; Níl, Deputies Paul Kehoe and Emmet Stagg.
Question declared carried.