Brian Lenihan Jnr (Dublin West, Fianna Fail)

I want to address again the issue of the punch bowl because the Central Bank was not in charge of it. Since we joined the euro, we have had very low interest rates. That is the fundamental cause of the overheating which occurred in the economy. In the circumstances in which we now find ourselves, we must make a principled decision about which direction to take.

I am pleased Senators have welcomed this measure and are in broad agreement with it. The State faces a difficult choice in this area. On the one hand, it has the option of stepping aside, acknowledging the primacy of moral hazard at all costs and deciding that in appropriate circumstances a bank, as a private institution, should be allowed to go to the wall and be liquidated and wound up. We could have proceeded on the basis of this view which is one that has been taken in the United States and is still strong in Congress. However, if we, as a small, exposed globalised economy, had done so, we would have done incalculable harm to this country's trade and commerce and the goodwill we enjoy around the world. When one exercises this option, one has default and this undermines the security of credit. In a small country such as Ireland, this would dramatically reduce the confidence others have in dealing with us.