John Gerard Hanafin (Fianna Fail)

I welcome the Minister. In supporting the Bill I am very cognisant of the fact that we will adodpt an integrated approach. I share the views of my colleagues who spoke about light touch regulation and the subsequent events which proved that this was not the correct way to proceed. Now that this has become apparent, we are proceeding on a different line.

The purpose of the Bill is to provide for the creation of the Central Bank commission, the dissolution of the Irish Financial Services Regulatory Authority, the establishment of a new management structure within the bank and the introduction of new accountability measures, especially enhanced accountability to the Oireachtas. Each of these measures is to be welcomed. There seems to have been a shared responsibility and there are always difficulties when this occurs. The Central Bank, the paymaster, should have been the body in control at all times.

People now think there should not have been light touch regulation. Clearly, we agree that this is the case. However, one cannot look back and say that at all times people knew and had warned that this was not correct. That simply did not happen. In fact, it was the international practice. The policy of Mr. Alan Greenspan, the head of Federal Reserve in the United States, was to increase and decrease interest rates according to need. There was an immediate and severe decline in the US economy after the events of September 11 2001; interest rates were reduced to zero and the economy turned around quickly. Similarly, Mr. Gordon Brown was quoted as saying the United Kingdom had seen the end of boom and bust economics. Therefore, this was not something that just occurred in the Irish economy, it was international best practice.

There is another element to the difficulties experienced in the financial sector, the supra-national nature of international funding. It has also become clear that where a foreign institution has a large interest in the economy, this should automatically be regulated by the Central Bank to the extent that it is able to impose conditions to prevent malpractice. I am thinking in particular of hedge funds.

The correct action was taken on 29 September 2008. I agree with Senator Ross who has explained at every turn, in every possible way, how we arrived at this difficulty. We would not have started at this point if we had known that this was going to be so difficult. We did not know whether the world economy would survive. Many talk about Lehman Brothers, but it was not just Lehman Brothers; it also involved Goldman Sachs, AIG, Freddie Mac, Fannie Mae, UK banks such Northern Bank, Lloyds TSB and other major funds. The world economy was on the precipice. On the night of 29 September 2008 we started to take the correct road, supported by Fine Gael but not by the Labour Party. At every turn since we have made the correct decision. Having made the correct decisions, one commentator after another has written about how the economy has been managed, including The Wall Street Journal, the Financial Times, the European Union, the OECD and the IMF, and they have all said we are doing it right.

The positive sign is that technically we are out of recession. I cannot mention this without mentioning job creation, but I will come back to this. Being out of recession means that we now have the opportunity to regulate as necessary, whether it is local or international banking. We must implement decisions to ensure we will never face this situation again because financial memories are short. The lessons of the early 1930s were not learned; the warnings given at the time about the extension of credit and the use of merchant banks to extend credit were not heeded in time. The overuse of credit facilities was not and is not an answer to our economic difficulties.

We now have a strong handle on the economy. There has been an appreciation in the value of the US dollar by 15% and sterling by about 8%. Given that we export 50% of everything we produce, we have the most open economy in the world, excluding the city states of Singapore and Hong Kong.

The outlook for the future is positive. It is time we started saying it is possible. When the Americans started from the same position, they believed and said, "Yes we can". We started to say, "What would you expect?" If we expect all that is best, we will get what is best. We will deal with whatever difficulties we will face in the financial services sector. The Central Bank Reform Bill 2010 is part of that process.