Nicky McFadden (Fine Gael)

I welcome the Minister of State. I would have seen the pension fund as our security or our inheritance. It is the last remaining morsel of the Celtic tiger economy. I regret that it is necessary to invest €3.5 billion each in AIB and Bank of Ireland. In view of the AIB figures released yesterday, I wonder if €3.5 billion will be enough, given our great expectation that this recapitalisation will keep the banks solvent and liquid. Does the Minister of State believe it will be enough?

Fine Gael has always agreed that the banks must be capitalised to maintain liquidity and solvency. My colleagues, Deputy Richard Bruton and Deputy Kieran O'Donnell, have agreed on this for a long time. Since last July our party has made very good suggestions and while I welcome the invitation to the Opposition parties to examine the books, some of those suggestions have fallen on deaf ears. This is particularly the case with the proposed good bank model, which is that we establish a good AIB and Bank of Ireland as well as a bad AIB and Bank of Ireland. The bad bank would effectively operate as a debt collection agency and no longer function as a commercial bank. This would allow the good bank to function and people could have confidence in it. The new bank would be seen as a new start and could take off with fresh investment.

A number of friends and elderly people have approached me expressing concern about where they should move their money. They are taking money from one bank and putting it into another. Elderly people, in particular, are experiencing severe anxiety. I fear people will start keeping money under their mattresses if the proposed new model, under which we would have a "good" and "bad bank", is not introduced. As to the question of how one would fund a bad bank, the new institution would be self-funding if it were to act as a debt collection agency.

I welcome the instrument introduced under section 12 on contracts of difference. We are all aware of the serious difficulties the Financial Regulator encountered with regard to a number of debtors of Anglo Irish Bank who were not obliged to disclose their dealings.

The Minister of State indicated the banks have committed to increasing lending capacity to small businesses and first-time buyers by 10% and 30%, respectively. Senators will have read reports published last week on a survey carried out by the Irish Small and Medium Enterprises Association which found that 48% of the association's members had been refused credit by banks. I ask the Minister of State to ensure small and medium-size enterprises are guaranteed access to funding and bank credit.

Under the sound financial leadership of Deputies Bruton and O'Donnell, the Fine Gael Party has made a number of excellent suggestions, which I do not propose to repeat. The bottom line is that we need to obtain value for money for taxpayers who, after all, own the funds being used to recapitalise the banks. If the position of AIB is desperate, how will small and medium-size enterprises secure access to a flow of money?

Senator Butler, for whom I have great respect, indicated the State is investing in rather than bailing out the banks. We are being forced to bail out the banks. One invests €7 billion in a company with an expectation that one will get value for money and substantial rewards. I do not envisage the State being rewarded for bailing out the banks. In addition, an investment is a transaction in which one freely participates. This is not the case with this proposal. While I accept the necessity to recapitalise the banks, we must secure value for money for taxpayers and a guarantee that small and medium-size enterprises will have access to cash flow to allow them to operate their business, employ staff and get the economy rolling again.

What course of action will the Government adopt if, several months from now, AIB, Bank of Ireland or another bank decides to seek further money? This is a genuine concern. I wonder if €7 billion will be sufficient and, if not, what other resources are available to the State.