Liam Twomey (Fine Gael)

The debate on this legislation is reminiscent of a patient presenting himself to one with a large unsightly abscess. One has two options to treat such a patient. One can start him on antibiotics or, if it is a particularly difficult case, one can lance the abscess to release the underlying pus. I have the impression that all that has been done this week thus far is to start the patient on antibiotics and time will tell whether that will be enough. While Members will be obliged to go through a number of amendments on Committee Stage, they should consider the background. Although Fine Gael fully supports this legislation and has done so in the Dáil, it is timely to begin to examine the background to what has happened. Members are trying to control a very large pyramid-style scandal. The developers and banks forced thousands of Irish people to buy houses that were highly expensive. The Government did nothing about this scandal because it got a large cut from the outcome and was thereby allowed to fulfil its own agenda in the budgets of recent years. It is regrettable that some of the bodies under discussion, the Central Bank and the Financial Regulator, failed to fulfil their remit by preventing this scandal. That will become more obvious later as we continue to discuss the matter.

There will be a serious backlash from the public concerning this crisis. People realise that the legislation was needed because the banks lent money irresponsibly to a small group of individuals. I heard a comment earlier in the Dáil to the effect that only 40 individuals are involved in half of the considerable loans and property deals under discussion. To some degree the Government, the Central Bank and the Financial Regulator were complicit in what went on. We must face up to that. The sad thing is that it is the ordinary taxpayer who is left with a potentially high bill at the end of it all. Taxes will increase and people will suffer in the future with poorer services, whether in education or the health services. That goes without saying and anyone can understand it.

It was the toxic mix of developers, banks and complicit Government that led to this problem. The toxic failure of the Government, the Central Bank and the Financial Regulator got us into the mess and, unfortunately, it is the same toxic trio on which we must rely to get us out of it. During the debate and discussion of amendments we must discuss this issue further. Can we really trust the Government, the Central Bank and the Financial Regulator to change the practices that we now condemn in both Houses? There will be significant changes from now on in how the banks are regulated and how we conduct our business with them. Some people believe it is a matter of making small changes only and then it will be business as usual. It will not be business as usual and can never be so again.

It is only three months since the Irish Banking Federation came to the Joint Committee on Finance and the Public Service. I have with me the presentation they made to us, including the slides they showed us. The representatives told the committee that the Irish banking system was competitive, well capitalised, profitable and had a strong shock absorbent capacity. They said there was negative exposure to sub-prime markets and that Irish banks had a clean bill of health from respected agencies. They told us this only three months ago and said there was nothing that should worry us. They admitted to some concerns about negative consumer sentiment and said there was a correction in the housing market, but they gave no indication throughout their presentation that there was anything to worry about in the Irish banking sector. Three months later we find ourselves in the middle of a considerable banking crisis. People can say that liquidity changed quickly over the summer but we must be straight in our discussion here. The time has come to talk about it. We have saved the banks with this legislation but there is need to discuss these matters, not to hide behind the argument that the crisis occurred because of international causes. International factors alone did not lead to this crisis.

The Minister of State should discuss what might come out of this and what might be the next step. At issue are six institutions in the Irish banking sector which are being protected. What does the Minister of State believe may happen in the next three or four months? Is it possible that Irish banks will be merged? How would that affect Irish taxpayers, who may be supporting many of the loans involved? What approach will be taken? The proposals under discussion in America constitute a €500 million bailout of the banks there. Members have witnessed what happened in Japan, where the authorities failed to lance the aforementioned abscess. They allowed the problem to drag on, which kept the Japanese banking system in a state of almost permanent recession for more than a decade. Members have been informed that the Minister is following events in Sweden in the early 1990s in the context of his current actions. It might be important for him to come into the House and broaden the discussion to clarify what ideology he is following when he contemplates going down this road. He should state what were the positive points of what transpired in Sweden, how they emerged from their problems and what fears he might have, were we to fail to make the correct decisions in the next few months.

The Irish banking system contains a great amount of toxic debt, about which something must be done. All that has been done up to now is that we have stated we will guarantee depositors. It is highly important to so do because it maintains the confidence of those who put money into the banks. However, we must deal with the issue of toxic debt. This is about giving loans to banks to improve their liquidity and ensure the banking system can crank up again and begin to operate. However, one reason the banks are in this position is that they are carrying what they consider to be incredibly bad or dodgy debts. The Minister should provide Members with an indication of the figures involved. While it appears as though billions are involved, how many billion? Such information would have an important impact on the acceptance of this legislation by the public who need to know exactly how much debt there is about which the Minister considers something must be done.

As much of this debate has been aired in the Lower House during the last two days, Members will not try to reinvent the wheel here. However, for their information, it might be worthwhile to hear the Minister's views on what will be the next two or three steps after the passage of this legislation. The banking system has been protected and confidence restored. However, if we begin to prevaricate or cover up, the people will become worried again, which will perpetuate the crisis. As I noted, markets can handle ups and downs but they cannot handle uncertainty, which is what happened before last Monday. There was uncertainty and people began to withdraw their deposits from the Irish banking system. In order to better inform Members, the discussion now should be on the next steps beyond this legislation. The Minister of State should fill Members in on the thinking behind the Minister's actions.