Jim Walsh (Fianna Fail)

Cuirim fáilte roimh an Aire Stáit go dtí an Teach don díospóireacht tábhachtach seo. I believe it was John F. Kennedy who said that success has 1,000 fathers and failure is an orphan. I am amazed at the number of economists who are now rushing to claim credit for predicting the economic collapse we have seen in the past 14 months or so. Apart from people saying the property market was overheated I did not hear anybody predicting the likely fallout from the events that were happening on the global stage until June of last year at a meeting I attended at which the former chief executive officer of the Bank of Ireland, Mike Soden, said it had all the ingredients of what gave rise to the Great Depression in the early 1930s. At the time everybody was exceptionally surprised and probably felt that was over-egging the pudding but it turned out to be correct. When Lehman Brothers and Bear Stearns collapsed some months later, confidence evaporated from the global financial scene and that had knock-on consequences for economies and, particularly, for unemployment.

As somebody who did not have a financial or economic background but took on the challenge that faced him at the time as Minister for Finance, the Minister has shown tremendous powers of intellect in getting to grips with it, and I have told him this privately. I have said previously that it is probably a three-sided challenge for this State and for most states in that it is not only banking but also fiscal and economic, of which unemployment is the sad consequence.

In regard to banking, by taking preference shares in banks to give some element of stability and liquidity at a time when a nightmare scenario of collapse looked on the cards and the clever manner in which he put warrants into the various banks which will allow him take up to 25% of the ordinary shares, what the Minister did mirrored what Berkshire Hathaway plc did in regard to Goldman Sachs and was probably a good model to follow.

As we pass this legislation, it is imperative that in the unlikely event of the banks being able to come up with privately raised capital, they should not be in a position to redeem those shares the taxpayer has now funded. The taxpayer must be allowed to reap the profits that it is hoped will accrue from that risk investment taken and in so far as the banks now raise additional capital, it should not be against the redemption of existing investment by the State but to offset any future capital the State might be required to put into those banks. The principle of the co-relationship between risk and reward must be maintained in the interest of the taxpayer.

That is not to say there have not been many casualties from the banking crisis. It is common to point fingers at various people who caused this, but I am mindful of the comment made by Churchill in the early stages of the Second World War when he was under much pressure to open a debate on the performance of Baldwin and Chamberlain who maybe had Britain ill-prepared for the war:

Of this I am quite sure, that if we open a quarrel between the past and the present, we shall find that we have lost the future.

Our focus and concentration must be on ensuring that we extricate ourselves from this extremely precarious position.

It is no consolation that other banks and other countries are in similar situations. Ours may somewhat be exacerbated because of the unprecedented economic growth that we experienced over a decade or thereabouts, and also the significant increase in property prices as a consequence. We must recognise that the State must exercise strong influence, not only in the credit area. I raise a note a caution in that regard. We must get back to a situation where credit flows on the basis of the quality of the proposals and the risks put before them. I note the Minister is setting up an appeals system, which is probably the right way to go. It is imperative the appeals system includes experts in the field of credit control and banking risk. There is a danger in all of this that we could make a bad situation even worse.

I want to see the influence extended to the area of pay and bonuses of those who work within the banking sector. It was the short-term objectives of the bank boards and senior executives that led us to where we are. That involved an over concentration on excessive risk-taking in the pursuit of those short-term profits. That must never be allowed happen again.

I also noted that recently even bank personnel and staff down the line have been awarded a pay increase in the order of 3.5%. At a time when taxpayers are put to the pin of their collar, where most in the private sector, as a consequence of the reckless banking behaviour globally, are suffering pay cuts rather than enjoying pay increases, it is incongruous that we would allow a situation where those who work in those banks would be getting increases, particularly at a time of deflation.