Larry Butler (Fianna Fail)

I welcome this timely debate. I note much time has been spent on the investigation into the banks, which is terribly important. Senator Norris is correct that we must ensure our banking system is of the highest standard and has the highest standards the public will accept. It is also important to have international standards in order to have standing internationally.

At the time the banking crisis occurred the Government did the correct thing. First, it stabilised the banks to ensure the banking system would not fail. That was the purpose of the Government's stance. It has done an important job in that regard. We have now stabilised the banks. We all know why we had a failure in the banking system. Banks lent too much money. They borrowed cheap money from Europe. The squeeze on the banks to send that money back began when Lehman Brothers crashed. It was very simple. The over-borrowing from outside the State will be evident when we hold the inquiry. The world banking crisis caused our banks to collapse because they had over-borrowed. We must ask why the management in the banks over-borrowed. That will be what the inquiry will set out to do.

I have observed people from the banking world attend Oireachtas committees. I do not believe some committee members are up to scratch in terms of asking the right questions. A specialist organisation is required to carry out the scoping inquiry which will flush out all that happened behind the scenes. That is vital. The Government has correctly identified how that can be done. When the information comes to light in the report, which it will do, then it can be discussed in public. This is the whole question of credibility on which this inquiry should stand or fall. Whatever is found will be discussed publicly in the Oireachtas, which is very important.

I do not want to spend any more time on the inquiry because the banks have a more important function than that. Our whole industry and commerce, and the life of the country, depends totally on a good banking system and how it functions. We all know there has been a credit squeeze since the banking crisis. All small businesses and industry have been badly strapped for cash. Small companies which could normally have traded themselves out of difficulty, even with the world downturn, have found that, because of the short credit situation, they have had to lay off staff. This has been particularly seen in the construction industry, which has collapsed.

The construction industry played a major role in the strides we made for some ten to 12 years. However, it must be said that developers and builders over-built with regard to the supply that was required in the market. When something like that happens, it is because of bad business decisions. It is important to examine both banking and the construction industry in conjunction. When construction was doing extremely well, as we all know, anything up to €25 billion in tax was coming in from that industry. While nobody was complaining about that, everybody had a fair idea this could not last, but nobody was prepared to shout "stop". Now, in an example we heard last week, a lady running a small business in Wicklow who had not paid €250 on her account was threatened with the closure of her business account. We cannot allow that type of thing to happen in a banking system which the Government is supporting.

I wish to refer to the EBS-Bloxham Stockbrokers report on mortgages. We have a major problem in that 35,000 people are more than six months in arrears on their mortgages and a further 20,000 people are more than a year in arrears. The Government cannot stand idly by and not ensure that proper regulations are put in place in the banking system on the basis of the EBS-Bloxham report. There is an opportunity with the Finance Bill to legislate for sub-prime lending. The banks we are supporting at present are going along with the regulation we have put in, although we have not put in enough regulation. However, we need to regulate the whole banking market and there is an opportunity to do so through this inquiry to ensure a better, fairer banking system.

Joe Public, who is supplying the money to keep the banks in business, must have a fair shake. We are not suggesting for a minute that people should default on their mortgages or that mortgages should not be paid. We are suggesting that a moratorium of at least two years be introduced to allow people to add on to the end of their mortgage. Also, we must ensure this operates across the whole banking system, not just for these six banks, because it is mainly the other banks which are causing us problems.

We must ensure that good regulations are in place in the banking system when the inquiry is finished. We generally know how the whole situation has happened but it is important we do not make the same mistakes again, and that we put checks and balances into the system to ensure we have a more hands-on approach to the banking system. This is an opportunity to do that.

It is important the inquiry is carried out and it must be done in a proper, methodical way. We have all seen what star chambers do. We have had inquiries for the past 12 or 14 years but what did they do? They made already wealthy people in the legal profession wealthier. We need to be very careful in future to ensure we do not have a similar episode, with inquiries running for so long and costing the taxpayer close to €1 billion, which could happen. What we were doing in Dublin Castle, chasing people for £100 here or £500 there that they got as political donations, was crazy. The really criminal situation, if one read the newspapers last week, was that 20 or 30 people became millionaires over and over through making inquiries into people who were getting £100 or £500. That is the scandal. Hopefully, we will ensure we do not have a continuation of that because it was the worst value for money the taxpayer ever got. This is proved by the fact most people are saying we should close that inquiry down.