Jim Walsh (Fianna Fail)

Senator Burke asked where it all went wrong. That reminds me of a good story about George Best, but I do not have time to go into it.

To some extent, this is a good news story with regard to the recapitalisation of Bank of Ireland. It means Bank of Ireland made fewer mistakes and was perhaps prudent - although that is probably not the right word to associate with banking given the fiasco that occurred during the past decade - or a bit more responsible than some of its competitors. They fact that it will raise this funding from the market and that this measure is oversubscribed is good. There are a few issues that arise. The amount being raised is €3.4 billion, €2.8 million net, which leaves a gap of €600,000 and I wonder what that gap will cover. I know there are certain costs attached to these, but I hope it is not only fees and costs that make up that figure.

In terms of the overall structure, the National Pension Reserve Fund is right to follow its investment by not allowing it to be diluted. That is good and it is in the interests of the return to taxpayers. It also underlines the good decision made by a former Minister, Charlie McCreevy, when Minister for Finance, in setting up the National Pension Reserve Fund. Were it not for those moneys we would be in rag order in trying to deal with the current banking crisis.

I very much favoured the structure that the Minister, Deputy Brian Lenihan, put on this initially. It was akin to what Warren Buffett did through Berkshire Hathaway when they invested in Goldman Sachs. He put in his investment in shares but he also took a very significant stake in warrants and they would yield a good deal of money. I am questioning the wisdom at this time of cashing in the warrants. Perhaps it was necessary as part of the restructuring but it might have been possible for the warrants to be exercised at a later date. Bank shares in Bank of Ireland will probably continue to rise quite significantly in the medium term and we could have got multiples of our investment because I am sure there was a price at which we could have exercised them. That is a point on which I want to hone in.

There is a need to examine the margins expanding within the banks because in respect of many people there will be collateral damage, which in turn will reflect on the banks and on their funding in the future. People who got mortgages will find it extremely difficult to meet their repayments at present and that will magnify when the margins increase. We should be getting the benefit of the ECB rate, which we are not getting, and I question that.