Feargal Quinn (Independent)

I welcome the Minister of State, Deputy Mansergh. I also compliment the Minister for Finance, Deputy Brian Lenihan, on his grasp of the various challenges facing the economy. I have been impressed by the manner in which he has handled developments. He appears to be in control of what is a fast moving situation.

I have found myself on a steep learning curve as I am not well informed about most of the issues that have arisen in recent times. I have followed commentaries in newspapers and journals on the Internet to ascertain how often Ireland's handling of its problems has been challenged.

It is interesting that the Fine Gael Party will oppose the Bill on the grounds that it is being rushed through the House rather than because of its contents. I understand the legislation will allow the National Pensions Reserve Fund to invest in companies which are not listed on stock markets. This would allow the Government to acquire a 100% stake in Allied Irish Banks, thus wiping out shareholders' investments and removing the bank from the stock market. The National Pensions Reserve Fund could still be used to recapitalise the bank. The logical conclusion is that AIB will be nationalised before the year is out and all its shares written off.

Many others and I argued many months ago that Allied Irish Banks and Bank of Ireland would need to be nationalised. The Government was afraid of the word "nationalisation" and insisted the banks did not need to be nationalised. While I was not enthusiastic about the prospect of nationalisation, the Government should have taken the step it now proposes at the outset.

I ask the Minister to make clear what his plans are with regard to the nationalisation of Allied Irish Banks. Is this the reason Mr. John Bruton, wearing his IFSC hat, is in the Middle East? Is he trying to flog Irish banks to Arab sheiks or others in the region who may consider acquiring them? If that is the case, he has a challenge on his hands.

Sections 28 to 32, inclusive, appear to give power to the Minister for Finance to make debt for equity swaps with holders of subordinated debt. The Minister appears to have come around to the idea that investors' stakes may be swapped for shares in the banks. Many experts argue that Ireland should also adopt this approach to senior bondholder debt. In other words, we should swap senior bondholders' investments for shares in the banks and allow them to take control of the banks. They would then have good reason to ensure the success of the bank in which they hold equity. If the Government adopts this approach, it will mark a policy U-turn by the Minister.

Who pressed for losses to be taken by holders of subordinated debt? Was it the Minister or the European Union? Given that debt for equity swaps take place every day in the world of business, why can they not work in the case of our senior bondholder debt problem? Some economists argue that the honest course of action would be to pass a bank resolution Act to swap the debt for shares. Such a debt for equity swap would remove a liability of €120 billion from the national and international balance sheet. A bank resolution Act was introduced in the United Kingdom last year and new legislation, the Dodd-Frank Act, was recently passed in the United States. Is the Minister coming around to the idea of introducing bank resolution legislation? Its introduction would allow us to start addressing the real problems in the economy.

The Financial Times has just predicted that the next Government will renegotiate the terms of the bailout, in other words, it will default on some debt. This appears especially likely, given that senior figures in the European Union have indicated that an amendment to the founding treaties is imminent to enable senior bondholders to take a hit in the future. The Bill appears to leave the door open for later amendments to provide that senior bondholders will be treated in the same manner as subordinated bondholders. If the Government is so concerned about the markets, is it not logical that investors would be more wary of investing in Ireland in the light of the treatment of holders of subordinated debt, as provided for in the Bill, and the possibility that senior bondholders will be compelled to take a hit in the future? I am interested in the Minister's view on this issue.

The interest rate on the £3.25 billion, 7.5 year loan from the United Kingdom is estimated to be 5.9% for the first of the eight tranches to be disbursed in September next year. This is slightly higher than the average rate of 5.8% on the overall €85 billion bailout package from the European Union. I was struck by reports that Iceland yesterday negotiated a ten year loan to repay bank debt held in the United Kingdom and elsewhere at an interest rate of 3.2%. One newspaper, the EU Observer, states: "Repayments will also be capped at a rate linked to a percentage of Icelandic economic growth, giving the country room to improve its economy rather than spend all its energy on paying back foreign debts". Will Ireland have an opportunity to reinvigorate its economy rather than paying a much more punitive rate than that provided for Iceland? While I accept that Iceland negotiated its rate with Britain rather than the European Union, could our interest rates not be linked with economic growth? This would be the most logical solution. We should have had much more hard-nosed and business oriented negotiators bargaining down the incredible interest rate applied to the bailout.

I read only yesterday that the Government has injected a further €525 million into the Educational Building Society. I wonder whether the fact that AIB is to be given €3.7 billion within the next two weeks has been obscured to the public by the wider EU-IMF bailout. I have seen little mention of this injection of funds to AIB. I also wonder about section 53. Some legal experts say is unconstitutional as it replaces the powers of the Oireachtas with ministerial powers. The Minister touched on this matter. A future Minister could find himself or herself open to challenge very soon.

As regards the bonus issue, especially the bonuses being claimed by AIB employees, it would be interesting to know the legal costs of the 90 employees taking a legal action against the bank, which is owned principally by the Irish taxpayer. I was interested to hear the bonuses being described as discretionary and contractual. If they are contractual, surely they should be described as a commission. In other words, if I sell something on commission I have a right to that commission. That is the deal I have, as an employee. If the bankers claim their bonuses are a commission, they would have a right to them, but if that is the case, I do not understand why the bonuses were described as bonuses. If a bank becomes insolvent and only functions because of investment by the State and a future commitment of almost €10 billion, surely such insolvency should mean there should be no payment of bonuses. If I may be cynical for a moment, I suggest the Minister knows the Government has no control over the payment of bonuses and is waiting until the new Government comes in and is left with that burden and embarrassment.

I support the Minister's good intentions with regard to this Bill although I could argue it is two years too late. However, it is right that we have it. I regret it is being rushed through at such speed but that is not reason enough to vote against it. I support it although I am disappointed by the length of time it has taken. At least we have taken this step. Like other speakers, I express my disappointment we did not have more time to consider this Bill and must rush it through in one session.