Thursday, 5 March 2009
Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Bill 2009: Second Stage (Resumed)
Larry Butler (Fianna Fail)
I welcome the Minister of State. I support this vital legislation. Last October, the Government introduced the guarantee scheme which has proven to be the most important pillar put in place to support the banking system. The scheme has provided protection for the system, for depositors and those who invested in the banks. The Bill before the House is no less important than that scheme. The Government has decided to influence the way in which the banking system will develop in the coming years. It will do so by way of investment rather than by engaging in a bail-out of the banks. There are certain individuals who, on each occasion on which they are interviewed on radio, state that the Government is bailing out the banks. There will be no bail-out. The two main banks in which taxpayers' money is being invested will be obliged to pay for that assistance.
Without a banking system, we would not have an economy. We must ensure that our economy and the 1.8 million people who are in employment have access to a banking system that serves them well. In addition, it must serve small and large businesses. There is also a need to ensure that credit flows will be in place when the economy begins to recover.
We are being obliged to underpin a system that was failing. This problem is not peculiar to Ireland; the banking system worldwide has failed. In that context, the American Insurance Group, AIG, the largest insurance corporation in the world, announced further major losses last week. While the situation in this country may be bad, that which obtains in other jurisdictions is worse.
It is the Government's job to lead and it has been very successful in doing so in respect of this matter. However, it is important to think outside the box when considering the various financial sectors. There is a particular sector which has not really been mentioned and to which not much consideration has been given. I refer here to the credit unions, which have approximately €13.5 billion in deposits on their books. These institutions could be encouraged to play a greater role in respect of the current crisis. For example, a Government bond scheme in which they might invest could be introduced. This would be better than investing on the open market, which gave rise to major difficulties for them in the past two years. A Government bond system such as that to which I refer could be a means to bring additional money into the banking system at a lower but safer level, particularly in view of the fact that credit unions are tied to more co-operative and local management support structures. There is no doubt that additional cash is required. In that context, a national bond scheme in which people might invest should be introduced. When money was required in the past, ordinary citizens supported such a scheme. The time is right to introduce a national bond scheme.
In the context of how we might move forward, people have posed the question as to whether further recapitalisation will be required in respect of the banks. The answer is probably yes. I would not rule out the prospect that the banks may eventually need to be nationalised. No one has been able to solve the crisis currently affecting global financial markets. Ireland has probably been more cautious than other countries, some of which were quick to invest in their banks. The latter course of action does not appear to have had a positive impact. It is only now that Ireland is making an investment in its two main banks. This is a timely development. The banking system must now provide the flow of credit necessary to keep the economy going.