Sean Barrett (Independent)

I welcome the Minister of State to the House. Every day realises the damage that banks have done to this country. In one sense, they have achieved political unanimity in the Joint Committee on Finance, Public Expenditure and Reform under the chairmanship of Deputy Alex White. Every member of the committee, from Deputy Richard Boyd Barrett to this Barrett, agrees that the banks do not realise the damage they have done to the country and have been largely insulated from the consequences of what they have done. The lesson is that Parliament in general must watch what the regulators are up to. The regulation of Irish banks was appalling.

The meeting in late September 2008 was not a proper Cabinet meeting; it was incorporeal and that is not the way to do business. The guarantee that was given surprised Madame Lagarde and the UK Chancellor, Alistair Darling, in its generosity. During the committee meeting one of the bankers said, in reply to Deputy Pearse Doherty, that he had been subject to unfair criticism. Relative to GDP, this was the biggest case of regulatory capture and the largest guarantee ever given. We suggested that they had got off lightly although the criticism was deserved. This was the failure of financial regulation in Ireland.

The defective design of the euro was pointed out from Japan today. We must consider these faults. They are putting in temporary money but we must reform it. There is no exit mechanism and there was a one size fits all design, which gave us low interest rates and a property boom when we needed higher interest rates because the economy was doing well. The IMF is keen on a mechanism where, if a small country such as Ireland faces massive capital inflows from a country such as Germany, there are methods of sterilising the money before it destroys the real economy, as it did here.

Yesterday, we debated legislation to ensure that people in a field were of good repute, professional competence and good financial standing. It referred to bus drivers and truck drivers and it is a pity we did not have it for banks. It is a pity we still do not have it for the banks. The reform of banks, and the criteria for people to be directors of banks, has been promised by Mr. Elderfield but is now overdue. The other reform we need is after the chartered accountants regulatory body, CARB, reports. Accounts were prepared for the banks whose representatives walked into Government Buildings in September 2008 and walked away with a huge guarantee. Where are the accountants? Small accountants down the country are charged with producing misleading accounts for a vegetable business. If we are to restore any credibility, those accountants must come up with some decision about the accuracy of the accounts prepared for the banks we had to rescue.

The idea of too big to fail turns out to be too costly to save. As with other Senators, I am a sceptic about the pillar bank idea. Page 4 of the document refers to the fact that new institutions may apply. I hope not and I hope this is a period we have put behind us and that we never get caught in this exercise of extending such a provision. The Minister referred to outflows from the banks. The banks must reflect on how they conduct themselves in this House when they appear before the Joint Committee on Finance, Public Expenditure and Reform and the way they treated their shareholders with contempt. AGMs of the Soviet party under Mr. Joseph Stalin treated the members of the audience with more respect than the banks treated their shareholders. It is no wonder that people pulled their money out.

I welcome the statement on page 14 of the Minister's speech that there is a revival in unguaranteed deposits but the Parliament must assert itself. We should not have had those Cabinet meetings. People say that we should now reflate the economy once again but we now know some of the costs. One of them is that the banking system becomes obsessed with lending to Government and loses all contact with the real economy. We must try to restore banks to do what they are supposed to do.

I refer to the power of the lobby groups. The debt mountain grows each time and absorbs more tax revenue, which builds up a huge bureaucracy. We do not need to go back to the markets but back to balanced budgets. I support the Minister's proposal. This is a period in Irish economic policy from which we need to learn many lessons of regulatory behaviour, the behaviour of banks, the need for more competitions, the behaviour of lobby groups and their easy access to Government, along with the way Parliament was bypassed. With regard to the way we will reform the Seanad, checks and balances and scrutiny of events such as this will be part of the continuing active role of this House in Irish public life. This is an episode, the like of which, from every point of view, must never happen again.