Brian Lenihan Jnr (Dublin West, Fianna Fail)

I listened to the Senator and I am entitled to reply. The agreement on the guarantee was welcome but thereafter we decided to quarrel and turn it into a political football. The Senator's party specifically decided to raise the issue of dishonouring senior debt. I will be clear about this matter. If one decides to torch that house, the house next door is called "deposits". One should not be surprised that a large quantity of deposits have left the Irish banking system over the past two years. For some time now, there has been a large amount of irresponsible commentary both in the Houses and outside them in regard to banking issues. I agree that confidence has to be restored to the sector but that requires us to pull together, which we have not done in the past two years. All of us should examine our consciences in that regard.

The Senator raised a political charge I dealt with previously in the media. I never used the words "the cheapest bailout". I was interviewed on my way into a conference in Dublin several months after the guarantee was introduced and at a time when the United Kingdom Government was investing substantial sums of money in its own banks. I simply stated that it had been the cheapest bailout so far. The Senator can check the record of my comments. It was a cheap bailout at that stage. On the night of the guarantee, I indicated that we would have to go very deep into the banking system.

The Senator also raised the question of Anglo Irish Bank and the political charge that somehow the Government or I have particular affection for that bank and want to preserve it. That is certainly not the case but the collapse of the bank would have collapsed the country's economy. That prospect is not understood or accepted by some who have consistently argued against it even though Professor Honohan's report on the guarantee specifically stated that Anglo Irish Bank was of systemic importance. It was not systemically important in the sense that it has branches in every part of Ireland, like AIB, but because it was of such a large size that its failure would have huge implications for Ireland, the sovereign and the other banks in the financial system.

I have endlessly rehearsed these arguments in the past two years but certain Opposition politicians, including Senator Buttimer, simply want to repeat the same old charges. The Senator is not particularly bad in this regard but that has been the character and quality of the debate on this subject. If he is in government, he will get a wake up call very quickly. If I am a Member, my party will support Government policy and ensure they are restored. We have to be more responsible on this issue than we have been heretofore.

A national debate on default continues to take place in the media despite the fact that every schoolchild knows that one cannot stage a default without the support of a central bank. When certain bonds are dishonoured in the United States, the Federal Reserve immediately moves in to protect the institution in question. The European Central Bank made it clear to us in the recent negotiations that it would not countenance a default on senior debt. That is the position of our Central Bank. The response is that the ECB is being unfair in refusing us this easy way out but it has already loaned more than €100 billion to the Irish banking system at a rate of 1% rather than 5.8%. Our banking system has become highly dependent on that collateral but it cannot continue indefinitely. We have to take structural measures to reform the banks.

I apologise to the Senator if I seem somewhat vigorous in replying to him but he personified many of the arguments we have heard in the past two years. These arguments have not brought us anywhere on this subject and that is why I responded vigorously.

In regard to amendment No. 1, I have already explained that we are following the wording of a Community law directive because that ensures recognition by other European countries of court orders made under this legislation. That is important because many of our banking instruments are expressed in the law of other European countries. The more international recognition we can obtain for our court orders, the stronger and more virile these orders become. That definitively does not mean this Government is committed to restoring Anglo Irish Bank.

The Government is free to do as it pleases in this matter. I have already outlined our policy but I will do so again for the House. It is intended to use the powers in relation to assets and liabilities to deal with the bank's assets and liabilities. It is also intended to merge Anglo Irish Bank and Irish Nationwide Building Society into a single entity and to work out their assets over time. That is clear.