Paschal Donohoe (Fine Gael)

The issue is how we create a banking environment and structure so we never end up with an interest, particularly the banking sector, becoming so powerful it can challenge the democratic institutions of our State. It is so powerful that the democratic institutions of this State have no choice but to weigh in behind it, do all they can to support it and take extraordinary gambles on its behalf.

My fourth point concerns an issue that has not been discussed but which I believe will be discussed in the coming years. It is something that has moved from the horizon as we move towards the establishment of NAMA. It concerns the decision this House made last October regarding the operation of the banking guarantee scheme. This is something we will have to explore again when the NAMA legislation is passed and this body is up and running. What will be the interplay between this institution, which will remove the toxic loans from the balance sheets of the banks, and those same banks that are operating under a guarantee provided by the Irish taxpayer? How will those two aspects work? How will they gel together? Will the creation of NAMA and the actions it will take provide a need upon which the banking guarantee scheme was created and extended? It is crucial that any business plan, which this organisation depends on, that is predicated upon house prices or asset prices rising again is something that must be challenged here.

A book entitled This Time is Different: A Panoramic View of Eight Centuries of Financial Crises has just been published. It is a history of eight centuries of financial bubbles and it makes the point that every time a government or a society is dealing with the consequences of a financial collapse or a banking industry collapse it says that the next time around it will not make the same mistakes. The question we must ask ourselves as we examine this legislation is whether NAMA, the business plan upon which it is based and the assumptions in terms of what will happen to house prices in the future are not based on what happened to us in the past four or five years.

Where do we go with this legislation? One lesson we have learned from it is that we can never again have a situation where the economy is the sole master in terms of where society is heading. I am not a member of the Labour Party. I believe in the potency and, at times, the supremacy of free markets but there is no doubt that that potency can only happen in an environment of regulation and one that recognises, as other speakers said, that the human spirit, human understanding and the way we look into the future is fragile. Nobody has a crystal ball. Nobody can predict what will happen in the future but we should ensure that the future we are carving out, which is what this legislation is all about, is not based on the bubbles and the increases in prices that led to our country getting into this deplorable state in the first place.