Joe O'Toole (Independent)

I welcome the Minister of State, Deputy Kelleher. I suppose I should comment with regard to the trade union leader but I did not know of the comments to which Senator O'Malley referred, so I will put that back until the next opportunity.

In fairness to the points made by Senator O'Malley, as a disinterested observer, I must say that the criticism of Deputy George Lee was unfounded and unfair. I disagree with most of what he says but he does not talk in the way that was suggested. He has a rational view that I happen to disagree with much of the time. It was unfair to say otherwise.

In terms of what Fine Gael has decided to do, it had said it was prepared to go with 15,000 fewer staff in the public sector and it worked out the cost of achieving that. That was real, and those figures are agreed to by the Department of Finance. Fine Gael also said it would abolish the upper limit for PRSI, which I would find far more acceptable than cutting the lower levels of social welfare. There are many things which Fine Gael suggests that are doable, and there are also many things the Government suggests which are doable. I do not stand here as a critic of everything I hear. I listen to everything and I try to come to a conclusion on it.

In terms of where we are going as a country, I supported the Government's view on the credit guarantee scheme for the banks in September 2008 and the NAMA project, and I also had no difficulty with the special purpose vehicle. I liked those because they were big decisions and, while we will not go into the point about why we found ourselves where we were, we did find ourselves there. They were big, brave decisions and I thought they were necessary decisions. They were not the only decisions, however. Fine Gael also had proposals at the time. I thought the Government proposals were more doable and because they were in power, I also felt it was better to support the Government. However, I would not rubbish the Fine Gael suggestions, nor did I. I simply said that, of the two, I preferred the position being put forward by the Government.

However, I now look at the Government and, in the words of Padraic White on Sunday, find it very disappointing, lacking stimulus and lacking strategies for stimulus. Mr. White is a person who has been working on behalf of the State under many Governments over the years, and that is his view. The Government lacks imagination. With regard to the debate on the credit guarantee, all through the debate on NAMA and all through any public utterances I have made, the Government - I will be careful not to say it was dishonest - has not explained the question of credit. I have said time and again that no amount of support for the banks will make credit available until the banks reach the tier 1 level of assets they need in order to let money out. I heard the Minister on budget day again say he will put forward guidelines to the banks. He can do that all he wants. I spoke to three bank directors who told me they would have a look at them but they will only do it if it serves their purpose.

There are other things we could do and I ask the Minister to consider them. There are plenty of different debt instruments, economic instruments and finance instruments that could be used. To take a perfect current example, the biggest or second biggest aeroplane manufacturer in the world is Boeing. Yesterday, it produced its new plane, the Dreamliner. It has advance orders for 800 planes, which is put in context by the fact only 1,000 747s were ever sold in all its years.

One might wonder where the money is coming from. Here is what is done. The United States established a bank called the Export-Import Bank in the 1930s in order to make credit available for export or, in certain cases, for exporting companies to pay for the importing of raw materials which would then be exported. It does that through a number of instruments and it works as follows. Let us say the Irish Government owns the bank in the Irish situation. The bank guarantees a loan for exporting, separate to the normal banking operation. It knows that an Irish business will export an aeroplane to an airline company based in, say, Africa. The problem for the African company is that it cannot get the money to buy the plane, although it wants to do so. The exporter is prepared to take certain risks in order to sell it. What the exporter does is to make available certain collateral to the bank, which makes the money available to the company buying the plane, which might be done directly or by way of buying a bond, and the bank can then chase the money if there is any problem afterwards by chasing the borrower and the exporter of the plane.

In the past 18 months, this has been happening in many areas because many of the Boeing planes are being financed in this way. Here we talk about export guarantees because politicians will never do their homework on these matters and that is the only term they understand. I am simply suggesting there are many ways of doing this. The Department of Finance should be showing a lead in this regard. It should be looking at the different vehicles, special purpose or otherwise, and looking at the different kind of debt instruments, bond instruments and financial instruments that can be used to support proper exporting and viable exporting companies. That is not happening and we are having a huge problem as a result.

We will not be able to force the banks to lend but the Government can organise a set-up through the bank it owns, or another bank that is set up for this purpose, and it can guarantee the bonds through the bank. It is like the deposit guarantee except it is the guarantee of a bond. It is no different than us selling our bonds in Europe and having to buy them back. It is a similar process to that - a kind of reflex process - but it allows us to support exports in a way that is financially acceptable. What might happen in these cases is that the bank we are talking about, call it the export-import bank, produces a bond which it can sell to Irish investors. Senator Donohoe referred earlier to the number of Irish investors who have invested in bonds in the US and probably in Europe also in the past number of months. There is money available and people will put it into viable projects.

Relying on the banks as we know them to start making credit available will not happen for a long time and, while it will happen eventually, there are different ways of doing it. I do not see any sign of anybody in the Department of Finance coming up with new instruments. Part of the problem is that sub-prime lending has become a dirty word. There is nothing wrong with sub-prime lending, the whole credit union organisation is based on it, where a loan is given to someone on the basis that he would not get it somewhere else but that organisation trusts him to pay it back. In the local credit union the loan and the liability will be managed all the way through. If it gives someone money to build a butcher's stall and it is not built, it will be on the case two weeks later.

What happened with sub-prime lending in the United States was that as soon as the loan was made to Joe O'Toole, it was sold to someone else, who bought the loan expecting me to make the repayments except I could not and no one cared. The original lender no longer had responsibility for the debt or for the exposure. There is nothing wrong, however, with sub-prime lending if it is correctly managed.

Another issue is securitisation. This is a simple, straightforward issue. Someone with a constant income sees a debt capitalised. It is then worth something and can be sold for a discount of that amount. These instruments exist so that if there is a good loan that can be guaranteed, where someone we can trust will pay it back, and we can give an additional guarantee on top of that, that securitised loan, which is capitalised to a certain extent, is a marketable product.

None of this is happening. The problem with the banks is they are dull in the head, they do not have it up there. There is no imagination, creativity or understanding. They are bankers but they are often confused with business people, entrepreneurs and risk takers. The whole business of banking is no risk.

This Fine Gael motion has raised important issues. I listened to the Minister's speech and I agree with many of the things said, the things that must be done and what we are trying to achieve but it will not happen without stimulus and without shaking up the whole banking system and financial services to bring out new products and to give support while taking more controlled risks than was the case before.