Paschal Mooney (Fianna Fail)

I am aware this has been gone into previously but it is important to examine the context and the background of this legislation, which is to be welcomed. A great deal went on in the past 15 years but I suggest that the virus that led to the economic collapse we and the world economy are facing goes back to the Reagan-Thatcher years when they decided that the market would decide, that light touch regulation globally was to be the order of the day, and that the markets would sort themselves out. It worked fine for 20 years but then the rot set in and we were caught up in that at the same time as we were expanding an economy by spending too much money. I recall asking the then Leader of the House, Mary O'Rourke, in mid-2006 whether she should have a debate because figures had come out earlier that week that indicated that 25% of our national wealth was being generated by the construction industry while the European average was 10%. Even at that time the warning signs were visible.

If we fast forward to the events leading up to the bank guarantee it is interesting, and I was not aware of this until I did some research on this legislation, that the Department was working on a Bill similar to the one before the House in June 2008. In fact, according to the Honohan report a discussion paper was published on 24 January - pack paper 37 - a Central Bank and Financial Services Authority of Ireland paper on this and other issues and it was discussed by the domestic standing group. The Honohan report highlighted that while the decision to introduce an extensive blanket guarantee, and many people trace that night to the beginning of the problems that are continuing to face taxpayers, was necessary at the time due to "the hysterical state of global financial markets", which is an interesting reference from a conservative banker, it complicated and narrowed the resolution options available and therefore increased the taxpayers' exposure to losses.

Mr. Peter Nyberg, in his report on the same period, states:

... preparation of a background paper in June [of 2008], the possibility of implementing such legislation was discussed ... It was concluded [rather significantly, and one would love to get into the minds of the people at the time but perhaps we never will] that the legislation would be complex and would take considerable time to prepare ... It was also thought that it might encounter legal difficulties, given the relatively high degree of protection afforded to property rights under the Irish constitution. In addition, there appears to have been some concern that any leakage to the effect that such legislation was being drafted could have had a serious destabilising effect on markets.

It is interesting that in the lead-up to the guarantee, there were commentators - the Minister of State will recall this - bemoaning the fact that Ireland did not have legislation providing for some type of bank resolution scheme. However, we were not alone in this regard; according to the various reports, such a scheme was not the norm among industrialised nations. It goes back to the Reagan-Thatcher era where a lack of discipline in the financial markets culminated in a situation where people fooled themselves into believing the markets would sort everything out irrespective of what was going on in the broader economy. As we now know, the opposite has happened. It calls to mind landing an aeroplane and the craft going into reverse thrust. That is what has happened in this and other economies in the industrialised world in the last four years. Our economy has ground to a shuddering halt and now we are trying to regain lost ground.

In that context, I welcome the Bill before us today. I will not go into the detail because it has been covered by other speakers, but I particularly welcome the provisions in respect of credit unions. Reports in the newspapers some weeks ago referred to a credit union in Bundoran which had entered into bilateral negotiations with several of its debtors who, like many others throughout the country, are experiencing difficulty in repaying their loans. While the credit union had agreed in some cases to accept payments as low as €80 or €100 per month, those payments were not being met. When credit union officials tried to contact the people concerned in their homes, they were met in many instances by younger members of the family who told the officials their parents were on holiday. Yet these people could not afford to meet a monthly repayment of €80.

The difficulty in regard to credit unions relates not only to their loan books but also to a lack of moral hazard in that there seems to be a view that they are an easy touch and that people can get away with ignoring their financial responsibilities. I do not know whether the Government can do any more in the context of legislation than what the credit unions themselves are doing. As we all know, the banks are not being tolerant towards those who owe them money. I hope the provisions in this legislation will help to stabilise the credit union sector, which we all support as a community-based service. The best case scenario is that only a small proportion of the many credit unions operating throughout the State are in difficulty and that the Government - and ultimately the taxpayer - may not have to provide the €500 million to €1 billion that is earmarked for this purpose. Will the Minister of State comment on the criteria that will apply in respect of that funding or whether it is essentially a firewall that will only be called upon in the event that it is needed?

I welcome this legislation. One might say it is long overdue but the reality is that there was no way to prepare adequately for what has happened in the domestic and global economy. We must deal with the legacy of that. I hope the Bill will help to stabilise and improve the environment for both the banking and credit union sectors.