Dáil debates

Wednesday, 14 May 2014

Establishment of Joint Committee of Inquiry into the Banking Crisis: Motion

 

4:00 pm

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I move:

(1) That, having regard to section 12 of the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013 and Standing Order 107C, a Select Committee be appointed, to be joined with a similar Select Committee of Seanad Eireann to form the Joint Committee of Inquiry into the Banking Crisis, to develop a relevant proposal for conducting a "Part 2 Inquiry" into certain aspects of the banking crisis for submission to, and evaluation by, the Committee on Procedure and Privileges under Standing Orders 107B and 107D.

(2) In developing the relevant proposal, the Joint Committee shall consider—(a) the appropriate scope and terms of reference for any such Inquiry to be conducted, including the method by which the initial investigation into the matter the subject of the Inquiry should be made,

(b) the functions and powers required to be delegated to the Joint Committee to allow it to conduct such an Inquiry, and

(c) such other related matters as the Joint Committee considers necessary.(3) (a) The Select Committee shall consist of seven (7) members, of whom—
(i) notwithstanding Standing Order 90, the Chairman of the Select Committee shall be Ciaran Lynch T.D., and

(ii) the other members of the Select Committee shall be Deputies Pearse Doherty, Stephen S. Donnelly, Michael McGrath, Eoghan Murphy, Kieran O'Donnell and John Paul Phelan,
and the provisions of Standing Order 92(2) and (3) shall not apply.

(b) The Chairman of the Select Committee shall be the Chairman of the Joint Committee.

(4) The quorum of the Joint Committee shall be five (5), of whom at least one shall be a member of Seanad Éireann, and that quorum shall be present for the duration of all meetings of the Committee.

(5) The Joint Committee shall have the following powers:(a) the powers defined in Standing Order 83(1), (2), (2A), (4), (5), (7), (8) and (9); and

(b) the power to nominate persons to assist it in its deliberations; and such persons shall attend such meetings as the Joint Committee may determine."
The Irish people have suffered great hardship due to the banking crisis. Hundreds of thousands of people lost their jobs. Many more have suffered pay cuts, while more again have been forced to emigrate. A generation of people has suffered the consequences of negative equity and the following collapse of the construction sector. Ireland lost its economic sovereignty and had to be bailed out. The country was placed under the supervision of the troika while difficult decisions were taken to return the public finances to order.

In these circumstances, the Government believes that the Irish people are entitled to a full account of the banking crisis. While there have been a number of useful public reports, and much public commentary, we believe that an investigation through an Oireachtas committee is the most appropriate way to establish the full truth about the collapse of the Irish banking system. It is important that people know the facts. It is for the Oireachtas to establish the facts behind the policy and administrative failures that led the banking system to the edge of collapse.

The matters the committee will be investigating are important and serious. As Members of the Oireachtas, elected by the people, we have a duty to ensure that the origins of the crisis are thoroughly investigated and understood. It is clear that there was a breakdown in corporate governance and risk management in the financial sector. It is also clear that there were failures of public policy and regulation by the Government and public service. We need to learn the lessons to ensure that a crisis of this nature can never happen again.

Since coming into office in March 2011, the Government has been working to facilitate an effective banking inquiry. Deputies will be aware that a Bill to amend the Constitution to establish an Oireachtas inquiry system was published in the summer of 2011 but the referendum held in October that year was defeated. As a result, new legislation was required and the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Bill was passed in July 2013.

In September 2013, I announced in the Dáil that a banking inquiry under the Act was the Government's preferred option. New Standing Orders required under the Act were approved by the Dáil and Seanad in January and February 2014. These Standing Orders create the parliamentary framework for establishing an inquiry. The Committee on Procedures and Privileges will have the power to receive submissions from committees, provide guidelines on how to conduct inquiries, give compellability consent, have oversight powers over the inquiry, and report to the Dáil before it votes on any terms of reference for an inquiry.

They also set out a mechanism for dealing with a perception of bias on the part of a member of an inquiry committee. This provides for the Committee on Procedures and Privileges to consider any allegation of bias and, having taken appropriate evidence on the matter, to make recommendations to the Dáil. In February 2014, all political parties and the Technical Group were offered a briefing by Oireachtas officials on the new Standing Orders.

On 30 April the Tánaiste and I announced our intention that an Oireachtas inquiry be established under the Act. As set out in the motion, the inquiry will be undertaken by a dedicated joint Oireachtas committee chaired by the Chairman of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, Deputy Ciarán Lynch. The Government Chief Whip recently consulted with the other political parties and the Technical Group about this proposal and signalled his intention to bring this motion to establish such a committee before the Dáil. It is intended that the joint committee will have nine members, comprising seven from the Dáil and two from the Seanad.

It will be for the new Oireachtas committee, once established, to submit proposals to hold an inquiry, including draft terms of reference for the Committee on Procedures and Privileges to consider and recommend for approval by the Houses of the Oireachtas. To be effective, the inquiry should have very clear terms of reference. It will be necessary to put the necessary administrative and procedural supports in place for the inquiry committee. The next phase will involve gathering relevant information, after which the committee will need to analyse the evidence and conduct oral hearings. The final phase involves the preparation and submission of a draft report to both Houses.

While a considerable amount of work has already been completed at official level, a lot more detailed work will now have to be undertaken by the inquiry committee before public hearings can actually commence. Estimates of the cost will also need to be prepared by the committee for the Houses of the Oireachtas Commission to agree with the Department of Public Expenditure and Reform.

While the terms of reference of the inquiry is a matter for the members of the Oireachtas committee to consider and for the Oireachtas to approve, I believe that the inquiry should focus on issues surrounding the banking collapse that have never been fully explored and establish the facts. The inquiry provides an opportunity to consider the public policies and regulatory decisions which allowed the crisis to emerge; the actions of banks, auditors and other parties which led the banking system to the verge of collapse; and how the crisis situation was managed when it happened.

Those who made the policy decisions and those responsibly for the implementation of those policies should come before the committee and explain their role.

Likewise, those in positions of responsibility in the banking and financial sector should explain their actions. Compellability powers are available to committees under the Act. I believe this is an appropriate role for the Oireachtas as the elected representatives of the people. This will be an all-party Oireachtas committee. The Oireachtas committee system has been reformed in recent years and the committees have a proven track record of working on a cross-party basis, including investigations and the new pre-legislative scrutiny arrangements.

As Members are about to embark on this inquiry, it is timely to reflect briefly on the progress the Government has made in restoring the country's economic stability. After three years of sacrifice, hard work and rebuilding, Ireland successfully exited the EU-IMF funding programme last December. Ireland was the first country inside the euro area to emerge successfully from an EU-IMF bailout, which was a significant vote of international confidence and an important milestone. The Government has completed its phased return to the international bond markets at historically low interest rates. Moreover, Ireland has regained lost competitiveness and has rebuilt its international reputation as a brilliant location for investment and jobs. The economy is growing and unemployment has declined from a high of 15% to 11.7% at the end of April, which is the lowest level for five years. While still unacceptably high, the rate is moving in the right direction with the private sector now creating more than 1,000 new jobs a week. Finally, the Exchequer returns for the end of April show the Government is ahead of its fiscal targets for 2014 and on track to reduce the deficit below 3% in 2015.

While the Government has no intention of taking its foot off the pedal, it is gratifying to see that the efforts and sacrifices of the people are paying results. Confidence in Irish banks is returning and has helped to reduce reliance on Eurosystem funding and to bring an end to the bank guarantee in 2013. While much remains to be done in areas like mortgage arrears and credit for small to medium-sized enterprises, SMEs, we are well down the path to a normalised banking system. In addition to the significant overhaul of bank boards since the crisis, a new fitness and probity regime has been put in place for all regulated financial providers requiring prior approval by the Central Bank of key posts. The Central Bank and Financial Regulator has been comprehensively overhauled and its powers and resources significantly increased. In addition, major changes to financial regulation are taking place at European Union and eurozone levels.

In parallel with its response to the economic crisis, the Government is implementing an ambitious programme to reform the way politics and Government works in Ireland. This includes comprehensive legislation to protect whistleblowers, which currently is making its way through the Oireachtas, as well as reform of Ireland's freedom of information regime to remove the substantive restrictions introduced in 2003 and to extend freedom of information to all public bodies. It also includes the development of legislative proposals to regulate lobbying, work to overhaul the legislative framework in Ireland for ensuring ethical conduct by public officials, a significant extension in the remit of the Ombudsman, two phases of Dáil reforms, including an enhanced role for Oireachtas committees, as well as legislation for the establishment of a register of corporate donors, public disclosure of political donations and an obligation on political parties to publish accounts.

The Government also recently published a draft national risk assessment for consultation. This aims to help avoid mistakes of the past by ensuring and encouraging open debate on the risks Ireland faces and how these can be mitigated. I hope the work of this inquiry will identify if any other reforms are required to Ireland's financial, political and public service systems to ensure the people are never again failed so badly by the institutions of the country.

As I was preparing this statement, I recalled the words of Albert Einstein that are quoted in the programme for Government in the context of the Government's commitment to honour the trust vested in it by the people, namely, "Learn from yesterday, live for today, hope for tomorrow." I believe these words are apt as Members begin the process of establishing all the facts regarding the banking crisis in order that the mistakes of the past are not repeated. I am confident that the proposed all-party Oireachtas committee, which will be chaired by Deputy Ciarán Lynch, will prove an appropriate and effective means of achieving this objective. I therefore commend the motion to the House.

4:10 pm

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

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

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

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

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

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

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

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

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

4:20 pm

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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On at least half a dozen occasions since this Dáil was convened, the Government has announced the imminent start of an Oireachtas inquiry into the banking crisis. Now that such an inquiry will finally happen, we need to be very clear about what the inquiry will seek to achieve. My party welcomes an inquiry and has said from the first day of this Dáil that we believe it has an important role to play in dealing with the aftermath of the effective collapse of our financial system and its damaging long-term impact. This does not mean we will support efforts to politicise the inquiry, to narrow its focus and to indulge in a highly selective approach to a serious national issue. We have had elements of that already in the Tánaiste's contribution and in some of his remarks which prejudge this inquiry. It has been our stated preference in the interest of openness, fairness and transparency to have an independent Leveson-type inquiry. If this Oireachtas inquiry is to serve any positive purpose, if it is to answer a clear public demand, and if it is to reflect well on the Houses, it must mark an end to the cynical and partisan approach which has dominated how the Government has approached it.

In the six years since the crisis emerged as a public issue, there have been countless debates about it. These debates have added little to public understanding of the crisis because they have been driven by people putting politics first. Public disillusionment with politics has been actively fed by a response which has mainly been about trying to exploit the crisis rather than to understand it. I refer to the many debates in this House on the banking crisis since September 2008. They record Deputy after Deputy lining up to say that they knew exactly who is to blame.

Photo of Arthur SpringArthur Spring (Kerry North-West Limerick, Labour)
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Not true.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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In addition, there has been the active promotion of conspiracies and a refusal to accept clear evidence which disproves these conspiracies. Most cynically, there has been the constant attack on the motives of individuals and the making of snide, misleading and cynical comments. This is not a limited concern. All the evidence is that the public have grown wary of how parties in this House behave. The public have come to doubt whether politicians are interested in understanding the crisis or just exploiting it.

The establishment of this inquiry is unique in our history, not just because it is the first inquiry under a new statute but more fundamentally it follows the rejection by the people of a constitutional amendment which the Government intended as the basis for stronger powers for this specific inquiry. In promoting the failed amendment, the Government said repeatedly that its first use would be in a banking inquiry. The only issue which arose during that referendum campaign was whether Members of the Oireachtas could be trusted to behave impartially when making findings about individuals. The answer was "No". The people did not trust that politicians would use their new powers fairly.

The tendency to prejudge issues before an inquiry has begun is one which has a long history in this House and, unfortunately, the inquiry is being established against the backdrop of repeated comments giving a direct party political judgment. The Taoiseach's comments last week are just the latest in a long list in which he and his colleagues have already announced an answer to the question this inquiry is supposed to answer.

I wish my constituency colleague, Deputy Ciarán Lynch, well in his appointment by the Government to the role of Chairman of the inquiry. It would have been a better precedent if the Government had been willing to consult on this matter, given that the inquiry is supposed to be non-partisan. I know that Deputy Lynch will acknowledge that he has previously made statements in this House and elsewhere, giving his fixed opinion about the banking crisis. His speech in this House in January 2010 on the very issue of a banking inquiry left no doubt that he believed it was already known what had happened and who was to blame. It would be a good start to a genuinely non-partisan inquiry if instead of just claiming impartiality, he and others would expressly explain how past words will not be allowed to prejudice the inquiry.

The public want to understand what happened, why it happened, what would have stopped it happening and how to stop it happening again.

It is not true to state that six years on we know nothing or nothing has been inquired into. On top of independent expert reports, countless accounts have been written and a large number of documents released, of which the three principal ones are the Regling-Watson, Honohan and Nyberg reports. While the Nyberg report was conducted in public, it was comprehensive in its account of a range of issues. We also have six years of experience of the context in which the banking crisis emerged and the actions that have restored stability here and throughout the eurozone.

There was a deep regulatory failure here and in much of Europe and the United States. Activity took place that either bordered on illegality or was allowed to continue when it should have been stopped. As I have stated repeatedly in the past six years, the Government bears its responsibilities. This House failed to show any real interest in the regulation of the banking sector before the crisis. Financial regulation was not an issue in any general election before 2011.

There was a wider complacency informed by large numbers of independent assessments, both domestic and international. Vitally, there was the European context of a new currency and central bank being established without any uniform approach to regulation or bank resolution. If the inquiry is to address the demands of members of the public rather than party interests, it will have to fulfil two general conditions. First, it must be genuinely independent and objective and, second, it must inquire into the full range of issues behind the banking crisis, not only political areas that have been cherry-picked.

The committee will begin its work against a backdrop in which the Government has not demonstrated an eagerness to allow real independence by committees. The campaign last year to leak material against Deputy John McGuinness and to try to remove him as Chairman of the Committee of Public Accounts was as crude as it was political. Thankfully, at least one Government Deputy was willing to expose the behaviour of the Government in that case. Deputy McGuinness has continued to show independence in his role, even in the face of aggressive attempts by the Government to limit his committee's work.

As I stated, the announcement by the Government that it had chosen the inquiry's chairman was a poor start. Equally, the Taoiseach's attempt to make it an explicitly political inquiry did nothing more than reveal what has been a standard tactic. If the Government wants the inquiry to be genuinely independent, the committee should adopt a formal rule, to be agreed with the Government, that Ministers will not communicate with members about the committee's work. The Government should also inform the Secretary General to the Government that Ministers should not be informed of requests for documentation or other evidence that are submitted by the committee.

I have followed up the Taoiseach's deeply cynical and crude statements that files concerning the bank guarantee were disappeared "behind radiators" or otherwise. Following a correspondence with the Secretary General to the Department of the Taoiseach, who is legally responsible for the protection of all public records in that Department, he has confirmed that the Department is in compliance with is responsibilities under the National Archives Act.

There is no great mystery about the decision on the guarantee. Deputies may disagree with it if they wish but the implication that those involved or anyone else have hidden something is despicable, baseless and the lowest form of politics. It reflects badly on those who indulge in such behaviour and if it is continued in this inquiry, it will undermine the public standing of the inquiry.

I completely reject the idea that to be robust in inquiring into this issue, one must question the good faith of those who took critical decisions. While legitimate criticism must always be allowed, equally, the good faith and public interest of individuals cannot be pushed aside for party purposes. If this is to be a genuinely independent and useful inquiry, it will need to have significant expert advice available to it. This does not mean that its members need people who can write politically effective questions for them but qualified individuals who can help guide them through highly technical issues, as well as help ensure that they focus their work on issues which address the root causes and course of the banking crisis, rather than just those areas where media attention is easiest to secure.

If the inquiry is allowed to be genuinely independent and non-partisan and behaves as such, it will receive the goodwill of all sides of the House and, more important, of the people. This is not enough, however. The inquiry must not have its terms of reference fixed to focus on a handful of events. Only a broad inquiry is capable of going wherever the evidence leads and addressing a crisis which cannot be understood through soundbites.

While the Taoiseach has pre-judged the root of the regulatory failure underpinning the crisis, this clearly has to be a central element of the inquiry's work. If one looks back at the debate on the 2003 Act, one finds that the opposition to the proposed regulatory framework was entirely based on the inclusion of consumer protection in the work of the Financial Regulator. No one predicted that what was being proposed would fail in the manner it did. While the deficiencies of principles based regulation are now clear, what is not clear is that any then established regulatory approach would have prevented the bubble and subsequent crash.

The reforms introduced in 2010 by our late colleague, the former Minister for Finance, Mr. Brian Lenihan, remain the only significant changes to the regulatory system that have been enacted in the last six years. This being so, Fine Gael and the Labour Party clearly cannot claim that there is an alternative regulatory blueprint which has been neglected.

Every independent expert has pointed to the centrality of European policies in the credit bubble and collapse and their implications for national finances. The progress that has been achieved is considered to be overwhelmingly the result of the major changes made to European Union policies in the past three years and the radicalism of the President of the Central Bank, Mr. Mario Draghi. The impact of now abandoned European policies on Ireland must be included in the inquiry's work and so too must an honest evaluation of the specific constraints under which decisions were taken at various points. The old rhetoric of simply telling Frankfurt and others to get lost is long past tired. Freedom of action is nice for political speeches but an illusion if one wants an honest understanding of a crisis such as this.

The inquiry should take a detached look at the assessment of risk and preparation of economic forecasts. The Government has taken a number of initiatives in this regard. These remain unproven and, in the case of the Irish Fiscal Advisory Council, its recommendations have been ignored. What we need is an honest assessment of how the forecasts were so consistently wrong. This is not just an Irish issue. The European Commission was very bullish about Ireland in 2007 and early 2008. In 2007, the OECD studied our property market and stated that prices were reflective of strong fundamentals.

In terms of the work of the Oireachtas, the inquiry should examine how the Oireachtas failed to play a role in at least advocating policies to prevent the crisis. In the years immediately before the crash, the House spent more time debating greyhound doping than the prudential regulation of the financial sector.

4:30 pm

Photo of Peter MathewsPeter Mathews (Dublin South, Independent)
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Hear, hear.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Nearly every significant debate involved calls for policies to spend more and tax less. The manifestos of the main parties, including my own, for the 2007 general election were all silent on the impending crisis.

As I stated, if the inquiry is allowed by the Government to be independent and expert in its work and operate under broad rather than narrow terms of reference, it could make a major contribution to increasing public understanding of the banking crisis. I have nominated Deputy Michael McGrath as my party’s representative to the Dáil element of the committee’s membership. As he indicated, he will do his work in the spirit of helping to ensure that it is a rigorous and meaningful inquiry.

Let the inquiry be free of the partisan politics we have seen in the past. Let it avoid the trap of claiming revelations where information is already known. Let it be genuinely expert and driven by a wish to understand rather than exploit this deep and damaging crisis. It is in this spirit that the Fianna Fáil Party supports the proposal before the House.

4:40 pm

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Cuirim fáilte roimh an deis labhairt ar an ábhar seo. Cuirim fáilte freisin go bhfuil, ag deireadh thiar thall, an rún seo os comhair an Tí inniu agus go bhfuil muid ag cur tús le coiste le breathnú ar cad a tharla agus ar an ngéarchéim eacnamaíochta a tharla sa tír seo suas go dtí 2008 agus ar na cinntí a glacadh ag an am sin agus ar na himpleachtaí don tír seo agus do cáiníocóirí agus saoránaigh na tíre seo a thit amach as sin.

I am glad finally a motion has come forward from the Government to set up a banking inquiry. I am conscious also that we are having this debate a week from an election but I believe we will see genuine movement in this regard over the next several weeks. It is important this banking inquiry is dealt with robustly, that it is fair and gets to the core of what was going on in the regulatory system at the time, in the circle of politics and among developers and the banks. It is important to get to the bottom of what led to the decisions taken by those in relevant authority and why we continued with those same decisions later on when it was clear they were in error.

The Government has talked a very good talk about this inquiry but it has taken three years to get here. The Taoiseach spoke about the 2011 constitutional referendum on Oireachtas inquiries, which we supported, but which was rejected by the people, as is their democratic right. However, quite some time has elapsed since the referendum. I was convinced the reason we were not having an inquiry was because of the Anglo trial and other trials involving that bank that are yet to commence. In fact, I was quite surprised this motion was tabled this week, given the fact there is an impending trial involving Anglo Irish Bank over the next several weeks. Hopefully, those with responsibility for bringing wrongdoers to account will be supported in their efforts. We never know; there may be other trials. One concern for committee members is that the efforts of the inquiry could be halted or frustrated as a result of other developments in the courts.

The investigation and inquiry that we are about to commence can be no substitute to criminal investigations into those who may be guilty of wrongdoing in the lead-up to the banking crisis or even its aftermath. It will not be any substitute to meaningful convictions of those who have been found guilty of misconduct. A banking inquiry conducted by Parliament will always be limited. The public will be frustrated by those limitations, however. Today, I was asked how some of the senior bankers involved are seldom convicted and, even when they are, lenient sentences are handed down. Not to be political, an analogy made to me was the recent incident involving a Labour local election candidate and a woman annoyed with all politicians who ripped up the candidate’s election literature in front of him on her own doorstep. The following day the litter warden was on her doorstep with a fine for €150. Much of the frustration out there is that there seems to be one rule for a certain cohort but another for others. It is important we actually deal with those expectations from the very start and ensure people realise no one will be convicted as a result of an inquiry and that it is limited in its scope.

The terms of the inquiry will be crucial. Deputy Martin has addressed the whole issue of confined terms of reference for the banking inquiry. Everyone comes to this committee with their own opinion, background and experience. I do not want to see the terms of the inquiry expanded so much that we actually do not get down to business. There are also issues, however, such as the fact the banking guarantee expired in 2010 but was renewed by this Government. This Government also gave a large injection of capital into the banks, as well as making the first promissory note payment. There are issues the committee will have to deal with itself. I welcome the fact the terms of reference will be left up to the committee because this is a serious issue affecting so many of our citizens that we need to get this right.

My party will support the nomination of Deputy Mathews to the committee of inquiry. If the Government actually engaged with us at the start about the number of members, we would not have this amendment to the motion. I will also support his motion that calls for the bankers to be compelled to come before the inquiry and account for their practices. Who would not? With respect to the Deputies who put their names to this motion, however, it is playing politics with an issue that is too serious. The committee should be allowed to define its own terms of reference. If this is the only term of reference that we are going to agree here tonight, then it just makes a mockery of the inquiry from the start. On the matter of compelling the banks to attend the committee, I will support such a move at the committee. Accordingly, I and my party will support this motion here this evening.

It is important the issue of bias is dealt with. There has been a major discussion about this in the media. There has also been discussion, provoked by elements in political circles, that certain Members would not be fit or proper to serve on the banking inquiry. My own name has been mentioned. I am glad I was nominated by my party to represent it on this inquiry. However, it has been five years and nine months since the banking crisis began. In that time, we have lost economic sovereignty, had an early and bitter general election in which we saw the then Government parties, Fianna Fáil and the Green Party, virtually decimated from the standing they had until then, and the Taoiseach’s party swept into power on the basis of bank reform and accountability. Who has not made a comment on bankers? I recognise the issue of bias must be dealt with. However, it cannot be so tight as to prevent the majority of Members taking part in the inquiry. It does allow for any citizen, any banker or any regulator to challenge a member of this inquiry on bias. There may be people from past government parties who may believe there is nothing bad to say about bankers. There are many others, however, who genuinely believe that some of the actions of those in authority and financial institutions were reckless.

There is also an irony in that the Minister of State, Deputy Kehoe, who brought forward this motion, was the most outspoken in this Chamber on bankers. In a debate on 13 October 2009, he called a certain banker “a gangster”. Later he said he would not withdraw it because he believed in his heart and soul that is what the banker was and then went on to name another banker. Looking back at the Official Report on 13 October 2009, not one Member, including whoever was in the Chair at the time, actually raised an issue about the Minister of State, an Opposition Deputy at the time,-----

Photo of Paul KehoePaul Kehoe (Wexford, Fine Gael)
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The Chair did.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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It is not recorded in the Official Report. It shows the opinion of people at the time, as well as the frustration. It is important that those who ask the questions at this committee are those who are placed with the authority of this House.

I have many concerns as to how we will actually progress a banking inquiry. There are some who do not see the point in this inquiry while many others suspect it will be another fudge by politicians.

There are some who believe that it will be merely an attempt to have a good go at Fianna Fáil and the Green Party, and their decisions.

I have stated already that I believe this inquiry is important. I believe it is far above party politics. However, there are issues on which we have to go into the political sphere because it is Ministers who made these decisions. There were meetings that happened with the then Taoiseach, former Deputy Brian Cowen, and others who were in senior positions with senior bankers where it was not fully revealed what was said at that time, and these issues will have to be dealt with at any banking inquiry.

The success of any inquiry will be measured on the information that it manages to attain, whether from individuals such as bankers, politicians, regulators or officials, but also the documents pertaining to the period of the banking crisis. I revealed in the past that some of these most sensitive documents have gone missing. Deputy Martin and the Taoiseach have had their regular exchanges about documents going missing down the back of the radiators, etc., with Deputy Martin suggesting that has not happened, but it is has now been proved categorically that certain sensitive documents that related to the recapitalisation of Bank of Ireland have gone missing. I refer to a document which was written to the then Minister for Finance, the late Brian Lenihan, at the time by somebody who happened to be an accountant or adviser to the former Taoiseach, Mr. Bertie Ahern, in regard to the recapitalisation of Bank of Ireland. That document has gone missing within the Department of Finance. We know that. They owned up to the fact it has gone missing. The copy of that document which was also sent to Bank of Ireland has gone missing within Bank of Ireland. There has been talk about conspiracy theories, etc., but when two sensitive documents go missing in two different institutions that, one expects, do not leave documents lying about, then it fuels those who have questions as to how could this happen and what are the chances of it happening. These issues have to be either dealt with and knocked on the head or dismissed and the inquiry will have to do that.

Recently The Irish Timespublished an article dealing with the recollections of the bankers involved in the run-up to the guarantee which were recorded. I have questions about these recollections. One aspect that was common to those involved is that they all stated that they took minutes in hard copy - indeed, some of them stated that they took digital recordings of the meeting that they attended that fateful night. At the same time, however, there are others in the highest places of society, whether those in the Regulator or politicians, who have selective memories or memory loss when it comes to those areas.

The issues surrounding the compelling of witnesses to attend and what the committee compels in terms of materials will be crucial to the inquiry and it is important that there is no obstruction to the committee's inquiry. For example, there has been a debate raging in this State about the Trichet letter. In response to Ms Martina Anderson MEP of Sinn Féin, the ECB has stated that the Government should not release the Trichet letter to the banking inquiry if it is asked to do so without first seeking the approval of the ECB, and Mr. Trichet has stated that he does not intend attending the committee hearings if he is asked to do so. While Deputy Martin spoke about the Government not being involved, it is important that this is an inquiry on behalf of the State and those partners, such as the ECB, should be fully supporting, and co-operating with, this inquiry.

If we are to reach the full potential of a banking inquiry, then all of the members of that committee will have to leave their party allegiances at the door and become representatives of the Irish people in their questioning, not defensive of the role of their party in the banking crisis. If we want the committee to operate in that fashion, then it needs to be designed in that fashion.

I look forward to working with the other members of the banking inquiry, defining the terms of reference and, hopefully, outlining a process on how we can uncover some of the truths of what went on in the lead-up to the banking crisis, the decisions that were taken and the reasons for those decisions, and the consequences afterwards. It will be hugely challenging. I hope we will not be frustrated in our efforts. It is something the Irish people demand and deserve and, hopefully, we can live up to that challenge.

4:50 pm

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Deputy Ross is sharing time equally with Deputy Donnelly.

Photo of Shane RossShane Ross (Dublin South, Independent)
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I see every reason why the Irish people should find out what happened to the banks, and what is happening to the banks currently, and that the veil of secrecy which surrounds those events which have been outlined to us by the Tánaiste and Minister for Foreign Affairs and Trade should be lifted. Indeed, it is essential that those who wish to know about it should find out about it and that there should be transparency introduced to those decisions, how they were made and why they were made because of the danger of these mistakes happening again. We should know what happened. However, I am doubtful about the way that this inquiry has been set up, not only the timing in that it has taken so long in that it is nearly six years after the guarantee but about the capacity of this House and its Members to make a judgment on an event in which they are so pivotally involved and interested.

The main controversy surrounding this inquiry has been the issue of bias. I may be the only Member of this House who immediately eliminated himself from this inquiry, not because I would not have been on it anyway but because I felt, having written a book about bankers which was pejorative in the extreme, I was not objective. The book was condemnatory. It revealed matters which I did not know when I started to write it. It gave me a certain view of bankers and the banking sector which was undoubtedly biased. Let me say here now, I am biased against bankers. I have an in-built, but learnt, bias against bankers. I believe the way that the bankers behaved at that time and continue to behave now is indefensible and I believe that I am unsuited because of that bias to be the judge or jury, or to ask questions, at an inquiry of this sort because I would be coming from a certain position of hostility. That may be a somewhat extreme case, but it is there and it is documented.

What I worry about in this area is that virtually everybody in this and the other House comes into that category to a greater or lesser extent, not to such an extent as I do. I am aware, because I have done some work on it, that virtually everybody who knows anything about this subject who has written or spoken about it in this House has come from a certain position and has reached conclusions, none of which could be described objectively as balanced. I happen to think they are right, but they are not unbiased. The conclusions to which they have come follow reading a great deal about the biggest controversy to have been inflicted upon the Irish people, maybe in the history of the State. They are biased in the sense that they are anti-banker, and God bless them that they are so. That is what politicians are paid to do - to take positions on situations of that sort. They would not be able to leave their policies or the political parties, and park them, when they go into a committee of that sort. With the best will in the world, nobody in this House ever behaves like that. They may be able to disguise them for a certain amount of time, they may try hard to be impartial, but they are politicians. We all have opinions and we do not park them when we embark upon a given course of action. We still have those opinions and we come from those positions.

I suggest the decision to allow politicians to take this inquiry immediately gives those who want to discredit it ammunition and also gives bankers who will be asked hard questions a great excuse for taking them to court and for saying that there is bias, because there is bias. I want to see an inquiry with credibility, not an inquiry where those members of it will be the focus of the attention of many of those who will be the witnesses immediately questioning begins.

In such circumstances, the issues would be disguised and camouflaged. The deplorable decision to provide for a Government majority on the committee will mean the banking inquiry will be controlled by the Government. It will be politically controlled. The terms of reference will be set by politicians with an obvious and plain agenda. Although I have great respect for the Deputy who will serve as chairman of the committee, I do not think a Government representative should have been chosen. This body will be politically controlled by the coalition. When controversies arise over the terms of reference, as they undoubtedly will, the Government will decide what happens - what is allowed and what is not. The first indication of this is already with us, in the form of the decision not to extend the committee's terms of reference to the present day.

The focus of the Tánaiste's speech was on the night of the bank guarantee, which was a night of great shame for the Government of the day. I have just read his speech, which suggests "we need to know which Ministers were involved". Although he is right - we will want to find that out - it ill becomes him to focus on that when introducing this motion. It looks like the Labour Party intends to use this inquiry to nobble Fianna Fáil. I have no time for Fianna Fáil or the Opposition and I never have done, but I see this as an unashamed attempt to put a particular party in the dock for political reasons. I expect the timetable for this inquiry to be structured to ensure that party's most high-profile people are put in the dock in the run-up to a general election. Decisions on when witnesses do and do not appear will be made by Fine Gael and the Labour Party. That is what is going to happen and that will discredit this inquiry. I deeply regret the fact that the Government, in establishing this inquiry and accepting that politicians will participate in it, did not allow people who are seen to be politically impartial to take precedence. Rather than politicians taking all the seats on the inquiry, I would like citizens to be selected to serve on this inquiry on the basis of a jury as was done in the case of the Constitutional Convention.

5:00 pm

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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I think we need an inquiry into what happened. I listened carefully to the Taoiseach's opening statement, which I broadly welcome. I think the Tánaiste strayed unnecessarily into politics right at the start. It was an unnecessary tone with which to open the debate. I felt that the Taoiseach got the balance reasonably right.

We already know a few things. We have had three reports. The report that was published by Klaus Regling and Max Watson in 2010 looked into the macro-situation and the institutional conditions that led to the crisis. In the same year, the Governor of the Central Bank, Patrick Honohan, looked at the Central Bank's regulatory failings. In 2011, Peter Nyberg produced a report looking at the policies and practices of the banks, the public authorities and the auditors that drove the country towards the bank guarantee. I hope we will not spend too much time there because there are many things we do not know. There would be great value in knowing some of them. There are many questions to be asked about specific events leading up to the guarantee, such as the failures of the Cabinet, the Department of Finance and the Dáil. A reference to the role of the Dáil was absent from the opening statements of both the Taoiseach and the Tánaiste. They referred to the Cabinet and the Government of the time. I remind Deputies that Dáil Éireann is constitutionally obliged to hold the Cabinet to account. I hope the Dáil is looked at as well. There are questions to be asked about what the Dáil did. We should also focus on the foreign actors, including the ECB, foreign Governments and foreign banks. I would like to see these things discussed.

We do not know the rationale for the guarantee being so wide. Regardless of the decision to offer a guarantee on the night, I think the public is very interested in the nature of the guarantee. I would certainly like to know why it was so wide and why it went backwards. In his report, Patrick Honohan raised the many unanswered questions regarding the rationale for continuing with the guarantee. He concluded that he could broadly understand the rationale for the guarantee that existed on the night, but that the decision to implement such a broad guarantee year after year was inexplicable. That is why it is so important for the rationale for the decision of this Government and its predecessor to make payments to bondholders to be examined as part of this inquiry. There could be an awful lot of public value to be had from such an examination.

It is entirely possible that this inquiry is going to fail. Many Members of the Oireachtas will spend a great deal of time on it. It is entirely possible that we will fail. The inquiry could be taken off track by political point-scoring and bickering on the part of those who might try to defend or attack. The timing of the inquiry is extremely unfortunate. The establishment of a banking inquiry in the fourth year of this Government's term is a huge mistake. It is entirely possible that the inquiry will continue until shortly before the next general election. That would make it very difficult for people not to get political, especially if former senior Fianna Fáil Ministers or current Ministers are called around that time. The timing is unfortunate. This inquiry should have been held two years ago.

I was pleased to see the representation on the committee. I have worked with several members of the committee and I know other members of it. I do not know who the two Senators on the committee will be - this was not covered in the introductory remarks - but I hope, in the interests of getting the right skill set, that Senator Seán Barrett is still being considered. I know he is keen to be involved. It would be a great shame if the Oireachtas were to decide not to avail of an offer from a professor of economics to sit on a banking inquiry. Obviously, that is a decision for the Seanad. I hope Senator Barrett is still being considered.

The banking inquiry could be incredibly useful. I recently sat down very late at night to write a piece about the inquiry with an instinctive bias that it will be a complete waste of time. I really tried to challenge my thinking, however, with the result that the piece I finally wrote said the opposite. I convinced myself at approximately 2 a.m. not that it will work, but that it could work. I listed four areas in which real value for the future could be achieved if we can pull this off. First, I hope we will be able to demonstrate that the Government, the Civil Service and the regulators need to be transparent and accountable. Second, I think we will be able to investigate and might be able to show that there is a need for a Parliament that holds the Executive to account, as per the Constitution. Third, I hope we can examine Ireland's case for retrospective recapitalisation because it is important to examine whether there was deception from the banks, as per the Anglo tapes in which a policy of entrapment was suggested. Fourth, we can investigate whether this Government and its predecessor came under much foreign pressure to pay bonds and honour guarantees, etc. In addition, we can look at the level of potential culpability of the banks in the mortgage crisis. We have talked about whether they abandoned prudential lending. Some of them have said they did so. There are many areas in which we could succeed and in which we have potential, but of course many people expect us to fail.

When I was preparing for this debate this morning, I looked at the Edelman trust barometer, which compares the level of public trust in business, institutions and governments across various countries. Last year, Ireland was ranked sixth from the bottom. This year, we were ranked third from the bottom, with Poland and Russia being the only countries to get a worse score. Only the Polish and the Russian people have less trust in their institutions than the Irish people. Given that this year's figures were compiled before the recent revelations about the administration of justice in this country, it is possible that we have fallen below Poland or Russia. Who knows? It is a pretty bleak situation. According to this independent comparative analysis, there has been an almost total collapse in trust between the Irish people and the institutions of the State. The Oireachtas is obviously one of those key institutions. I think people expect us to fail and to descend into bickering and political opportunism. I hope that does not happen.

I would like to conclude by putting two suggestions to the Minister of State, Deputy Kehoe.

The Government could do two things to set this on the right footing and which it might consider before the vote. First, it could add an eighth, non-Government member to end the Government majority. Rightly or wrongly, the Government majority has many people thinking this is a set up because the Government can out-vote the non-Government members on any issue. Adding one non-Government person would get rid of any lack of trust. Second, could the Government, and the other parties, Fianna Fáil and Sinn Féin, not state publicly that they are removing the Whip from their members on the committee?

5:10 pm

Photo of Peter MathewsPeter Mathews (Dublin South, Independent)
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Hear, hear.

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
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That might be a very powerful signal. I know, work with and have great respect for many of the committee members. Might the Minister of State, Deputy Kehoe, ask the Taoiseach and Tánaiste to announce that no Whip will be applied to the Government members of the inquiry and let them do the best job they can on behalf of the country?

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I am pleased to have an opportunity to contribute to the debate on the motion establishing a joint committee to hold an inquiry into the banking crisis. Although I very much support the holding of such an inquiry, this is not the type of inquiry I would have established. It has one hand tied behind its back before it starts because it will be, by definition, a political inquiry conducted by politicians. Some of the commentary, right up to the level of the Taoiseach, in recent months leads me to believe some people have prejudged the inquiry before it has even held its first meeting.

The Tánaiste's opening remarks today were laced with politics and political innuendo, which does not set the right tone for the commencement of a very important Oireachtas inquiry. The entire Oireachtas system is on trial. If we are incapable of demonstrating that we can act independently and conclude an inquiry into a matter of significant public interest, we will, again, have failed the people and further fuelled the growing disenchantment with politics.

The other reason I believe the inquiry is starting with one hand tied behind its back is that we are unable to make adverse findings against any individuals. Many people will feel disappointed and let down by the outcome of this inquiry. It is important we lay out in very clear terms the expectations of this inquiry. Nobody will go to jail, lose their jobs or have their pensions reduced as a result of the inquiry. As Deputy Pearse Doherty said, it is no substitute for criminal proceedings and for actions to be taken by the State authorities against those who are guilty of wrongdoing. By virtue of the Abbeylara judgment, this inquiry will not be able to make any such adverse findings but is likely to inquire, record and report. The most we can hope to achieve is to hold to account in a public form all the actors involved in the different aspects of the crisis. This will not be an insignificant achievement and it is vitally important we do it.

The inquiries that have been conducted so far, particularly the statutory inquiry by Mr. Peter Nyberg, were conducted in private. People want to see bank employees, the Financial Regulator staff, Government members, professional advisers, auditors and all those who played a role in the crisis being held accountable in a public forum. If, through asking the right questions, we can achieve a comprehensive compendium of everything involved in this banking crisis from beginning to end, we will have provided a level of service to the people who want us to do that.

There are some fundamental aspects that must be included in the inquiry. The policy response to the crisis in September 2008 and the decision of the bank guarantee by the then Government will be a very important part of the inquiry and we will need a detailed account of how the decision was made, the advice received, the considerations taken into account, the reasons for the decision and the consequences. However, it will be a missed opportunity if we do not get a proper handle on the factors that led up to the crisis, not in an abstract way. We must find out what was going on in the board rooms of the financial institutions concerned.

Photo of Peter MathewsPeter Mathews (Dublin South, Independent)
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Hear, hear.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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They must be brought before the inquiry and asked the hard questions by the members of the team as to why they radically departed from the traditional banking model in the years leading up to the crisis. What were the credit committees doing? Why was there no proper assessment of risk in those institutions? Why were they relying on cheap money on the inter-bank markets and lending it out long term substantially to one sector of the economy, the property sector? The role of the Financial Regulator, which had statutory responsibility for the regulation of the institutions, will be a crucial aspect of the inquiry. Some of the evidence in the recent Anglo Irish Bank trial concerning the Financial Regulator was extraordinary. I can say no more than that for fear of being accused of bias. It is vital we get into that in detail.

All the institutions had clean audit reports in the years leading up to the crisis. The external auditors, who were paid handsomely during those years, also need to be held to account for their role and the decisions they made. The professional advisory firms, which advised the Government and State agencies on the health of the financial institutions, must also be held to account for their role and the advice they gave.

The Tánaiste's remarks very conveniently excluded any policy decision or development since the current Government came to office. It would be a mistake for the inquiry to do the same. The role of the international authorities, particularly the European Central Bank, must be an important part of the inquiry. It might suit some to blame the bank guarantee for everything, and say it was the sole reason that €64 billion of losses fell on the shoulders of Irish citizens. However, at the end of the bank guarantee, in September 2010, some €20 billion of senior bonds which came out of guarantee and were completely unsecured, were paid in full. The role of the ECB was very significant in that regard and correspondence exists from November 2010 on that matter. That must be brought to the floor of the inquiry and those involved must be questioned. The Government saw it but failed to impose losses on those same senior bondholders and was rebuffed by the ECB. I take a very dim view of what we are hearing from Frankfurt, that the ECB may object to the release of the relevant correspondence.

Photo of Peter MathewsPeter Mathews (Dublin South, Independent)
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Hear, hear.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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The former president of the ECB does not seem inclined to come before the inquiry. While there is national responsibility and all the parties must be held to account, there is also international responsibility, particularly regarding the role of the ECB.

As a Fianna Fáil representative on the inquiry team, I am not going to protect anybody. When former members of the previous Government come before it, I will hold them to account without fear or favour, as I will do with every witness who comes before the inquiry. We must all go into the inquiry with that attitude. The Taoiseach must also be invited to come before the inquiry because, as Deputy Donnelly said, the role of the Dáil is critically important and he must substantiate his specific allegation about an axis of collusion between one bank and my party and be held to account for his assessment of policy from 2002 onwards, when he was leader of the Opposition.

This cannot be a one-dimensional inquiry.

We must all enter this process with a spirit of independence and impartiality. We will be charged with the very onerous responsibility of asking the right hard questions of those who come before us. My party will support the amendment before us that Deputy Peter Mathews be included on the inquiry team because of the very specific skill-set and experience that he has with banking matters. Embarking on an inquiry like this without somebody like Deputy Mathews would be akin to starting a match with the best player on the substitute bench. We must ensure we have the right and best people taking part in this inquiry from the outset.

I welcome that we are holding an inquiry, although this is not the type we would have established. I would much rather see the inquiry conducted outside the reach of politics by a High Court judge, for example, and public confidence in such an inquiry would be far greater as a result at a time when public confidence in politics generally is so low. We should be under no illusions in thinking those involved in the banks and public authorities will just come into the inquiry and ask what we want to know. They will of course bring their lawyers, as is their statutory right, and there is a major concern that this issue could lead to legal wrangling and get bogged down. We need to deal with that issue from the outset.

I wish Deputy Ciarán Lynch the very best in his role, as he will have a very tough job. He has been an effective chairman of the Oireachtas finance committee, although I reiterate my view and that of my party that the chairperson of this committee should be outside of politics, as should the entire inquiry. That horse has bolted and the decision has been made. We will co-operate fully with the inquiry and conduct our own questioning robustly and without fear or favour.

5:20 pm

Photo of Seán CroweSeán Crowe (Dublin South West, Sinn Fein)
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I apologise if I caused any delay. We welcome the motion, the content of which has been discussed since the Government came to power, and its hand has eventually been forced by public opinion. It is hard to believe, especially by the people who have suffered, but it is approaching seven years since the first signs of this crisis became visible. As pointed out by many commentators, we have had four reports dealing with the events of the period, with countless inches of newspaper column space. We have also had books and television programmes produced about it, with experts coming and going. We have heard much but seem to know very little about what happened in the period. Finally, it appears the Oireachtas, the elected Members of the people, are set to examine what happened over that time, and I hope the required information will eventually emerge.

Many people outside do not believe the truth will ever emerge, and they think facts will be covered up, information will be lacking and people will not remember circumstances. The feeling is we will hear all sorts of excuses. I spoke to a group of people before coming to the Chamber and when I mentioned I would discuss this motion, I was told we would never get the truth of what happened. We are approaching this on the assumption that many sound people will be part of this committee, and I hope the truth will finally emerge so we can get a sense of what decisions were made and the reasons behind them.

This motion is a technical setting up of the committee and leaves the nitty-gritty of the detail of terms of references and house rules to the committee. My party has nominated Deputy Pearse Doherty, our finance spokesperson, to the committee. He will be thorough and fair in his actions at all points of the committee work. We need to be honest about what this bank inquiry can deliver, as it will be no substitute for criminal investigations into those who presided over the banking crisis and fall-out which destroyed so many families and individuals. It will certainly be no substitute for convictions of bankers and prison sentences for those whose greed, avarice and incompetence brought this State to its knees; these people include bankers, politicians, speculators and developers. Nor will any inquiry make up for the mistakes of the past or lift the unjust burden from the people. We are still paying for Fianna Fáil's incompetence and Labour and Fine Gael's blind commitment to that policy of not standing up for Ireland and its people. That is a matter for the inquiry to investigate and I hope the facts will emerge.

There has been no progress whatsoever on recapitalising our pillar bank debt through the European Stability Mechanism, ESM, despite the Government's announcement in June 2011 of a "game changer" and a "seismic shift". Additionally, this Government has formalised as sovereign the toxic Anglo Irish Bank debt and burdened future generations with a debt that is not the people's, never mind that of people not yet born. The country as a whole and small and medium enterprises and households in particular are still drowning in debt and this Government has no plan to deal with it. Rating agency Fitch released a report today indicating Irish mortgage debt is at its highest peak yet. Six years into this crisis and householders are still bearing the brunt of bad decisions.

There is a very cruel irony in thousands of people now living under the threat of eviction or so-called voluntary surrender because of the economic collapse caused to some degree by some of the same banks that are now sending thousands of letters to working people across this State telling them they must leave their home. We must always remember the human effects that the banking crisis has brought us, and let us not pretend that we would be facing water charges, the universal social charge, property and household charges now if there had been no banking bailout. If the Government goes ahead with its plan to bring in another €2 billion in cuts and taxes, we will reach the €32 billion mark in cuts and taxes under Fianna Fáil, Fine Gael and Labour. That is more or less the same amount of debt from Anglo Irish Bank and Irish Nationwide with which the people were burdened by Fianna Fáil, and now thanks to this Government we will be burdened with it for generations.

That is the context we must always remember. It is one of increasing poverty. I attended an event yesterday where I heard about 0.5% of an increase in the poverty rate. At the same time, supports for people in poverty are slowly being filleted, gutted and removed. There have been attacks on the community sector and people who worked with those at a disadvantage. We also have mass emigration, which is tearing the heart from rural Ireland in particular and 136,00 households which cannot pay their mortgages. It is the equivalent of one person leaving the State every six minutes because of a lack of hope, jobs or prospects. This context concerns people who are struggling to pay their bills or send their children to school who will now be asked to pay for the water they drink. That is not the fault of the banks but rather the fault of the two bad Governments we have had and their poor choices. Sinn Féin opposes austerity and will continue to oppose bad decisions and provide realistic alternatives. No banking inquiry will distract us from that. There is genuinely a better and fairer way and we have been joined by others in that analysis.

We support this motion and my party hopes to play a full role in the committee by asking the questions the people want to be asked. It needs to fully empowered to compel witnesses as necessary. To get to the truth we need the full co-operation of all parties, including the various sheltering account bodies and firms which played a central role.

I would particularly like to hear the Taoiseach's thoughts on a recent reply from the ECB to my party colleague Martina Anderson MEP, expressing great alarm at the idea of its role and in particular the role of former President Trichet in our crisis. Will An Taoiseach, as Head of this Government, insist that the November 2010 letter from Trichet to Brian Lenihan is released?

Many people want to know exactly what happened during that period. There is a great deal of cynicism in the general public about the prospect of a real inquiry that will get to the bottom of this matter. There is a feeling that those in power will protect their friends and those who were in power at that time. We have a huge responsibility. If we fail in this task people will never forgive us, particularly those who are suffering so much, who did not create the problem, played no part in it and who did not party day and night during the Celtic tiger period. We have a responsibility to those people, the working poor, who are carrying that unfair burden. Hopefully this banking inquiry will give them some answers. I look forward to the inquiry being set up. Like everyone else we will follow it on our TV screens, in this House and through the print media. People are crying out for answers and hopefully those answers will come.

5:30 pm

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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I thank the Leas Cheann Comhairle for the opportunity of speaking in this urgent debate on certain aspects of the banking crisis. For many years I have made my views on this issue known, nationally and locally, so I have ruled myself out of the proposed banking inquiry. I have major concerns about this inquiry, that it will become too political and not deal with the real issues, the causes, the effects and the urgent need never to let such a crisis happen again. It needs to deal with the core issue of greed and rampant capitalism. People should not be afraid to say that in this debate.

It gets up my nose to hear some commentators say that we all went mad during the boom, borrowing and spending during the Celtic tiger years. Many did not do that. They got on with their lives and tried to stay out of debt even when we were bombarded with letters from banks and lending institutions, egging us all on to borrow or buy apartments in Abu Dhabi or elsewhere. That is how it was but many ignored the pressure and now they are paying for the actions of others. This should be said of the majority of decent people who go out to work every day and those who are unemployed, who did not get involved in this rampant greed. That to me is a grave injustice and people need to accept that reality.

Let us quit the spin and the waffle and deal with the truth and the facts. The Government may spend €20 million on this inquiry but we find it difficult to get €100,000 for an excellent child care service to save 260 children in the Darndale area and for 100 jobs in an area that needs jobs and investment. I raised this issue here a couple of weeks ago. That is the kind of front-line service and debate we should have. These services have suffered and should not be excluded from this debate. Last night, €30 million was granted to Páirc uí Chaoimh in Cork yet the Government cannot find €100,000 for a child care service in Darndale, money for housing or €100,000 for a football stadium. We need to be realistic and get our priorities right. We need to be open to different ideas about the type of inquiry we should have, many of which could be very effective.

According to "Brian’s Blog" on planware.org:

We need is [sic] a new type of inquiry which is a mix of tribunal and commission and provides for membership by politicians and others. It should have subpoena and discovery powers, take evidence under oath, make findings, exclude lawyers, be open to public and televised, have an independent chairperson, engage expert support staff, hold private hearings by exception, have power to refer to . . . [the] Gardai and so on. There are plenty of examples of this type of inquiry including the US's Financial Crisis Inquiry Commission which is examining a much more complex crisis than Ireland's and required to report by the year end...

The Government needn't spend three months scoping its flawed approach to a banking inquiry. Instead, it should look at the terms of reference for the Financial Crisis Inquiry Commission. Most of them are relevant including role of regulator; monetary policy and availability of credit; accounting practices; tax incentives; capital requirements; credit rating; lending practices; concept of "too-big-to-fail"; corporate governance; compensation structures and levels; legal and regulatory structures; quality of due diligence; and fraud and abuse. To these, I'd add role of media and commentators; role of ministers and government departments; and relationships between politicians, developers and bankers.

Needless to say, a proper inquiry would not stop at September 2008 and should investigate the basis for the bank guarantees (relating to liabilities exceeding €400 billion), Nama (cost to taxpayer unknown but could exceed €10 billion), nationalisation of Anglo Irish Bank (€4 billion injected and another €6+ billion to follow) and provision of €7 billion in preference shares to Bank of Ireland and AIB (at a time when their combined market capitalisation was a fraction of this) with billions more to follow.
These are the types of financial transactions that have to be examined by inquiries.

Writing in thejournal.ieDamien Kiberd reminds us that we have already had:

(1) the Honohan Report

(2) the Regling-Watson Report

(3) the Wright Report; and

(4) the Nyberg Report.

The authors of these reports had much in common. They were largely academics and senior public servants. They were not business people or even bankers.
There is also the problem of Deputies and Senators running a bank inquiry. Time is a huge problem.

According to Eoin O’Malley writing in thejournal.ie:

TDs and Senators simply do not have the time to conduct many inquiries properly themselves and perform their roles as legislators/ representatives fully. Even in normal committee proceedings TDs line up to ask the same question but often don’t even hang around to listen to the answer. If you look at one of the reasons for the success of the DIRT Inquiry it was because previous work by the C&AG had already established many of the facts of the case.
That is being said behind closed doors. Many Deputies will spend two days a week on this and will be off the pitch for legislation and their local communities. We need to address this because it will be a very time-consuming project. O’Malley continues:
The Commission of Inquiry is a better model. There are issues about whether it should be in public or if it should be chaired by judges or a group with expertise in the area. The Nyberg Report on the banking crisis was a good example of a commissioned inquiry working. But the main issue that is rarely considered in popular commentary is who commissions the inquiry.

The 2004 Commissions of Investigation legislation that the Nyberg Report was a product of has at least one major flaw. Commissions are set up by the executive, exactly who parliament is supposed to scrutinise. It’s for this reason the excellent (but not very juicy) Nyberg report wasn’t able to venture too deeply into government decision making.
I put forward those proposals because it is important that we hear different views and dissenting voices on this issue.

The Technical Group has nominated Deputy Donnelly. I would not get involved because I have made many comments on the banking crisis in recent years. I commend Deputy Donnelly as the representative of the Technical Group and I know he will do an excellent job because, as he told me, one of the main reasons he was elected was to push this issue.

Someone who has been excluded is Deputy Peter Mathews who also has a major contribution to make to this issue. He should be included as a member of the select committee of inquiry. A parliament that excludes people who have a special knowledge, skill and interest in the issue of the banking crisis and the financial services and that does not include people like Deputy Peter Mathews is making a major mistake. It is not an inclusive democratic parliament if people like him are excluded from this, particularly when it would be acknowledged across all parties that Deputy Mathews has made a major contribution to the debate on the banking crisis and the financial crisis. I appeal to the Minister and the Taoiseach at this late stage to add an additional place to the select committee to include him in order that it can get on with the job. We nominated Deputy Stephen Donnelly who is a man of great ability.

I will conclude with a quote by Damien Kiberd with which I totally agree. Recently he wrote:

This country is suffering from paralysis by analysis. The only people to gain are lawyers. They're the guys who keep the meters running every time you hear the words "Tribunal, public inquiry or court case. [...]

The bureaucrats who were responsible for economic management and the regulation of banking from 2000 to 2010 have almost all retired, as have the key political figures. Almost all of the major bankers have moved on too.
I welcome this debate and urge the Minister and the Government to listen to some of the sensible proposals in regard to the banking inquiry that have been put forward today.

5:40 pm

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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The next speakers are Deputies Shortall and Mathews who are sharing time.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Independent)
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In the time I have I want to make two brief points. First, there seems to be a view forming that the Government does not want the inquiry to go beyond the date of the blanket guarantee and certainly not into its period in office. The decision of the Government to continue the previous Government's policy of repaying in full the senior bondholders of the banks needs to be investigated and understood. In terms of the financial cost to the State, that decision was probably the second most important decision taken, and yet it is one where we know almost nothing to explain it and explain why both Government parties felt they had to do a U-turn on their election promises. It seems fairly certain that this Government came under external pressure to make that decision, but without an investigation we do not know and we will not be able to determine how fair, or otherwise, the pressure put on them was.

Second, it is certain that Patrick Neary as regulator, the then senior people in the Department of Finance and the Central Bank, senior bankers and Fianna Fáil and Green Party politicians will be brought before the committee, but there has been very limited reference to senior ECB officials being called before the committee, in particular Jean-Claude Trichet. His period as head of the ECB spans both the current and previous Governments' terms of office and his evidence would be very helpful in understanding the crisis. Mr. Trichet's dismissive response to this proposal is completely unacceptable and must be challenged. A serious concern about this inquiry is that it is more about politics than establishing the truth. Ensuring the entire period of relevance would be inquired into would help to allay some of those concerns. I ask the Minister to consider that.

I strongly support both amendments to the motion before us.

Photo of Peter MathewsPeter Mathews (Dublin South, Independent)
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I move amendment No. 1:

To insert the following subparagraph after subparagraph (3)(a)(ii):"(iii) that Deputy Peter Mathews be an additional professionally qualified member of the Select Committee of Inquiry into the Banking Crisis,"
I put on the record that I wish to thank the Ceann Comhairle because there was a great danger that this debate may have gone ahead without any of the Independent Deputies who do not belong to the Technical Group having a voice. That would have been travesty of this Parliament. I thank the Ceann Comhairle for that and I appreciate it. It was with reluctance that the Government conceded that yesterday.

This is an extremely important landmark for this country and it should be done honestly, openly and transparently, setting aside politics. The reason is that since 2009 when the crisis exploded into the destruction that was left, 250,000 people have emigrated, 385,000 remain on the live register of the unemployed, which is a total of 635,000, which is equivalent to nine stadia the size of Croke Park full to capacity or 16 stadia the size of the Aviva Stadium full to capacity. Moving on to the families in mortgage arrears, which number 135,000 to 140,000, that equates to nearly 500,000 based on there being 2.7 people per household. If we add the 90,000 on the housing waiting lists, we begin to get some sort of feel for the hurt, distress and financial destruction that followed from the collapse in 2008.

The Taoiseach said in his contribution that we want to have the origins fully understood. That is actually quite easy and straightforward to do but it has been avoided so far. All one needs to do is to look at the balance sheets of all the licensed deposit-taking banking and building society institutions starting in 2001 through to 2008 at six monthly intervals and one will see the evidence. They are the facts, not opinions. It is not like an artist or a sculptor giving his or interpretation of things. They are the cold facts. Those balance sheets show that the greatest credit pyramid in the history of Europe was building up in Ireland. Iceland, a little island, had it at ten times smaller than us, but we had it. The evidence is there. If we end the picture with the collapse in 2008 and the bank guarantee, which will be another thing to examine and inquire about, the boards of directors of the institutions of which they are the directors and the stewards have prudential responsibility to make sure that the balance sheet management of the assets they create from the deposits that they take are properly managed prudentially and that loan to deposit ratios, which are the fractional reserving principle, are adhered to, so all we have to do is bring in the boards of directors from between 2001 and 2008, sit them down and their auditors behind them, present the balance sheets and ask them to make their observations on the history - the journey - from 2001 to 2008. One cannot have a credit bubble which supports an asset price bubble unless there is a pyramid building up. To take, for example, Bank of Ireland's balance sheet at 2008, it had a loans to customer deposits ratio of 158% instead of 90%. In addition, it had senior secured bond funding on its balance sheet of €61 billion - 40% of the Irish national income. That is crazy stuff.

I will not go into further details but we can see how simple it is if we know the questions to ask, and they have been there but nobody wanted to hear those questions. Being left off a committee in July of last year, I did not get a chance even to make a contribution. I have sat in and listened to other people and witnesses, whether it was Patrick Honohan of the Central Bank or management from the banks, talking about different things and I could not ask questions because the Whips and the Government said I could not and that I was off the committee. It was absurd.

I thank the various Members from the other parties and from the Technical Group for supporting the amendment to include me on the select committee. I wrote to the Taoiseach and to the Ceann Comhairle, as Chair of the Committee on Procedure and Privileges, in January saying that I would very much like to serve. This is a matter of service for the people. It is not politics. In some ways I am glad I am no longer in a party and that I can do this - on the face of it totally objectively - namely, help by asking the right questions during the course of the inquiry.

There is the next stage which is the how the bank guarantee came about, the consequences of that and, as Deputy Shortall said, what sort of pressures were put on the previous Government and so on. We need to inquire about the prudential capital assessment reviews as well.

I will give a little anecdote. In July and August 2009, before Professor Honohan was appointed as Governor of the Central Bank, I was in his office in Trinity College showing him the analysis of the up-to-date balance sheets of the six Irish-owned banks. There was no chance that the figures produced by the so-called experts for the loan losses that would be associated with the NAMA transfers would be correct, but it was again dismissed. Mr. Elderfield has also left his position. It is funny how many people have left after completing less than half their terms of office in the Central Bank or the Financial Regulator. He claimed they had the models from BlackRock Solutions, Boston Consulting Group and Barclay's Capital which showed that the capital assessment requirements were accurate. I said that if one looked at the balance sheets and remembered that €200 billion of extra turbo-charged lending was done in less than four years by six Irish banks, there was no possibility that when everything stopped more than half of that would be collected. That was the true indicator of the scale of the losses, but it was dismissed.

We need to be objective. Luckily my training is in auditing and I can be objective. The facts speak for themselves. The bits of the jigsaw are in the box and it is a matter of placing them out there and getting all the directors of all the institutions to show us whether individually or collectively they understood what they were doing. More than 1.5 million Irish people are distressed as a result of the consequences and they need to hear it. They do not have the time to read Watson-Regling, Honohan or Nyberg reports. They need to see visibly those people who had the fiduciary responsibility.

I ask that the amendments be supported in the interests of the people we are here to serve. I believe we should take off all our political clothing for the purpose of this inquiry and do it professionally, honestly and well. It can be done and it should be done.

5:50 pm

Photo of Ciarán LynchCiarán Lynch (Cork South Central, Labour)
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Today, we as parliamentarians are being provided with an opportunity to demonstrate that this Parliament can carry out a fair and balanced inquiry that will answer many of the key unanswered questions behind the banking crisis that has impacted heavily on Ireland and the people.

The people have waited a long time for this inquiry to be established. Today is the first step and a journey of work remains ahead of us. I acknowledge many of the comments made in today's debate about public expectation with regard to this inquiry. It will certainly not be a replacement or a substitute for, or an alternative to the courts. This is an inquiry that will operate within its own terms of reference.

First, the committee must draft an inquiry proposal and terms of reference, and develop an inquiry plan. It is then a matter for the Committee on Procedure and Privileges and the Houses to approve the inquiry proposal. Today, we are at the beginning of a process, not at the end. While an inquiry has been long in coming, I urge people to be patient as we prepare for the public part of that inquiry. As we move on, certain aspects will draw further media attention, but there is a job of work to be done to prepare to be in that space and I ask people to be prepared in that regard.

This is the first time that an inquiry of this type will be carried out under the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013 and it is an opportunity for our Parliament to demonstrate that it can carry out a fair and balanced inquiry to answer the key questions that remain behind the banking crisis. It is crucial that the inquiry should be understandable in what it will set out to achieve and measurable in its objectives and terms of reference. A key element is that the inquiry should be conducted in an open and transparent manner.

It is incumbent on us all to ensure that this parliamentary inquiry is communicated as widely as possible using the many public information services such as Oireachtas television, a dedicated parliamentary inquiry website, webcasting and social media. The benefit of doing so is that it allows for a first-hand account to be given by those involved in one of the major events in the history of the State and allows the people to see and hear those people called on to give their evidence in the public domain.

The inquiry must have clearly set out timetables and timeframes. It must not just look to the past, but must examine how our current systems are operating and ensure that we have a financial services infrastructure, along with oversight institutions, that are robust and fit for purpose into the future. This will ensure that the crisis is not revisited upon us again.

We need to approach this inquiry with open minds. Nobody has the monopoly on wisdom and no one should prejudge the outcome of this inquiry. This inquiry gives us an opportunity to demonstrate an example of Parliament at its best. It is an opportunity to leave our club jerseys at the committee room door and do an important job of work on behalf of the people.

Amendment put:

The Dáil divided: Tá, 34; Níl, 85.

Tellers: Tá, Deputies Peter Mathews and Mattie McGrath; Níl, Deputies Paul Kehoe and Emmet Stagg.

Níl

Amendment declared lost.

6:05 pm

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Does Deputy Peter Mathews propose to move the second amendment?

Photo of Peter MathewsPeter Mathews (Dublin South, Independent)
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I do.

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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Could he formally move the amendment, please?

Photo of Peter MathewsPeter Mathews (Dublin South, Independent)
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I move amendment No. 2:

To insert the following paragraph after paragraph (5):

“(6) That, in relation to the banking inquiry, the terms of reference include that all the members of the boards of directors of the licensed deposit-taking banking institutions and building societies during the years 2001 - 2008 inclusive, including the six Irish owned institutions (AIB, Bank of Ireland, Permanent TSB, Anglo Irish Bank, EBS and INBS) and the foreign owned banks (ACC Bank, NIB (later Danske Bank), Ulster Bank, KBC Bank, Bank of Scotland Ireland and First Active), be compelled to attend the banking inquiry to answer questions on the balance sheets and funding and lending policies of their institutions during the years 2001 - 2008 inclusive.”

Amendment put:

The Dáil divided: Tá, 35; Níl, 85.

Tellers: Tá, Deputies Peter Mathews and Mattie McGrath; Níl, Deputies Paul Kehoe and Emmet Stagg.

Níl

Amendment declared lost.

Question put and agreed to.