Dan Boyle (Green Party)

Senator Quinn has correctly noted that we must look forward as we attempt to deal with the banking crisis. We should also note examples of how other countries addressed similar crises. For the past 18 months we have been trying to develop a coherent response to probably the most difficult circumstances any Government has had to face in financial services. While the period required for a response has been the subject of political criticism, it has been well spent by the relevant arms of the State. For instance, two new officeholders, the recently appointed Financial Regulator and the Governor of the Central Bank, ensured the financial institutions were examined in detail and this scrutiny allowed the Government to make the decisions announced yesterday.

While the Swedish response to the crisis in its banking system has been cited frequently, there was a seven month gap between the advent of the crisis and the government adopting a solution to it. In the United States the response to the crisis was quicker but much of the $700 billion package for the banking system announced by the chairman of the Federal Reserve was unconditional, an issue that has been the subject of much justifiable political criticism. Our neighbouring jurisdiction took a bank by bank approach in fully nationalising Northern Rock and taking a 70% shareholding in Royal Bank of Scotland. However, even that approach has been subject to political criticism.

The series of measures announced yesterday is correct and vindicates many of the earlier decisions made by the Government. It is unfortunate that much of the debate has focused on the concept of establishing an asset management agency, in our case, the National Asset Management Agency. An asset management agency would have formed part of any decision by any Government to address the problems in the banking sector. The alternative proposals submitted by the Fine Gael Party and the Labour Party both featured asset management vehicles. In the case of the latter, the proposal was to establish an asset recovery trust.

In addressing a crisis in financial services one must first ensure clean balance sheets can be achieved to assist future reinvestment. This is the reason for the establishment of the National Asset Management Agency. If yesterday's decision shows anything, it is that the correct decisions were made on the valuation of bad loans. An average haircut of 47% indicates that NAMA is doing its job well. I am confident that it will continue to do a good job and will not incur costs for the taxpayer during its lifetime. I am also confident that as a result of the support we give to our larger financial institutions, Allied Irish Banks and Bank of Ireland, to allow them to become more buoyant and re-lend in the economy - the whole point of the exercise - we will recoup to the taxpayer any investment made.

The point of contention is the approach taken to Anglo Irish Bank. No one is happy about the circumstances surrounding the bank which has shown itself to be an odious institution. Having arrived at a point where we must deal with the mess created by its policies, no one can be pleased with how the institution worked. The choice available to the Government is whether to walk away from the problem immediately or manage it over a long period. The correct choice has been made.

Some have advocated walking away from an institution the balance sheet of which at the peak, as Senator MacSharry noted, was half the value of the economy in a given year. In contrast, the value of Lehman Brothers, a bank which collapsed in the United States, amounted to only 4% of the value of the United States economy. Allowing Anglo Irish Bank to fail would have had a cataclysmic effect on the economy and cost many billions of euro in up-front capital to pay off depositors, not only under the guarantee scheme introduced in September 2008 to provide the confidence required in the financial system but also under the terms of the deposit guarantee scheme which pre-dated September 2008. If we had paid every depositor in September 2008, we would have paid much more than what is required under the current proposals. Paying up front would have required the Government to borrow and pay interest on the borrowings. Its approach is to manage our way out of the situation.

Anglo Irish Bank will become a much different bank under the proposals. Its board of management has changed, as has its focus. It will become a smaller bank with a different focus once its remaining assets have been separated as part of a good bank-bad bank approach. This policy is welcome, as it will result in significant resources being returned to the Exchequer. If we were to adopt a fire sale approach to Anglo Irish Bank of trying to cover existing depositors and selling assets, we would be dependent on the vagaries of the market at the time of sale and would still have to repay the large borrowings required to rescue the bank. This approach is neither logical nor worthy of consideration.

The other aspect of the Government's approach to managing Anglo Irish Bank is that the process will be completed over a period. A promissory note will issue and while the money will be guaranteed, it will be invested in instalments of 10% over a ten-year period. This approach is preferable to borrowing the entire sum up front to address the problem immediately. We must take a carefully managed approach because we also need to address other funding and expenditure problems.

Political debate has been diminished by the decision of many of those who oppose the Government's approach not to accept the bona fides of individuals who have been brought into the process. These individuals have performed commendably since being appointed. I have in mind the newly appointed Governor of the Central Bank, Professor Patrick Honohan, who has an academic background and did not take the traditional route to his position at the helm of the Central Bank. His appointment signalled that the Government wanted to take a different approach to addressing this issue. In addition, the Government appointed a new Financial Regulator, Mr. Matthew Elderfield, who, in stress testing the banks to ensure they are fully capitalised institutions capable of lending in the future, has shown himself to be the regulator we did not have in recent years. His appointment also gives great confidence.

Another element of the Government's package, one on which there has been little comment, is that it will result in banks lending again. This is the most important issue in terms of public confidence. Senator Quinn referred to the difficulties which would arise from interference in State-owned institutions, for example, in directing them to make individual loans. While such interference will not take place, the Government, through various statutory instruments, may stipulate the types of lending in which the various financial institutions should engage and the various sectors to which it should lend, including in percentage terms.

I also welcome the appointment of Mr. John Trethowan, whom I met in the context of the excellent work he did on behalf of Danske Bank in rescuing National Irish Bank after its crisis. We need to have confidence in the ability of such people, their willingness to do the job and their experience of having tackled similar situations. Members of the Opposition might want to make this issue a political contest, but it is too important to reduce to normal points scoring. It is a question of the economic well-being of this country and of those who will be part of it in the years to come. Those who engage in name calling and points scoring about the approach being taken are ill serving politics. It is fair to talk about the policies that may have brought us to the point. The policies that inform the decisions being made now have been agreed on with the utmost sincerity. We believe they are needed to restore our financial services sector and to give our economy a basis for the future. Such decisions may be unpopular and unpalatable, but they are right. If I did not believe that, I would not be standing here, my party would not be in government and the Government would not be proposing this package of measures. The adoption of this policy, which has been informed by our participation, our proposals and our agreement, is necessary and right. I hope that will be accepted by others as they see notice that we are overcoming the initial hurdles brought about by this crisis. If they form an alternative Government in the next few years, they will have to adopt this policy in exactly the same way.