Seanad debates

Wednesday, 25 February 2009

4:00 pm

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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I move:

That Seanad Éireann recognising that:

reckless and incompetent management, regulation and oversight of the domestic Irish banking system has damaged domestic and international confidence in Ireland's economy;

the Irish economy cannot recover from the deepening economic depression without a functioning banking system that enjoys the trust of depositors, international markets and the community at large;

there is a public perception that the resolution of this banking crisis is being manipulated in the interests of powerful and wealthy elites and that unless the Government addresses this suspicion in an open and transparent manner, it will not have the legitimacy needed to gain the necessary support for the painful measures needed to put our public finances and economy back on a sounder footing;

calls on the Government to:

take more decisive action to restore the reputation of the Irish banking system as a prudent and responsible manager of investors' capital and depositors' savings and as a reliable source of credit for Irish businesses;

replace the current board and senior management team of the Irish Financial Services Regulatory Authority, IFSRA;

give the Office of the Director of Corporate Enforcement the lead role in all investigations into recent transactions by banks, their investors and directors that may have breached both company law and financial regulation, given that IFSRA itself was at the centre of many of these transactions;

reveal the names of the 'Golden Circle' of ten investors in Anglo Irish Bank, and outline what steps the Government and the bank are now taking to recover the associated €300m in debts on behalf of the taxpayer;

open up the appointment of the next Governor of the Central Bank to open international competition and scrutiny by the Oireachtas;

set a cap of €250,000 on the salaries, including bonuses and share options, of senior managers of financial institutions whose liabilities have been guaranteed by the State and-or in which the State has invested until the guarantee has expired and the State investment has been repaid; and

require the banks to acknowledge the true scale of their likely loan losses over the coming years and to reflect these losses on their accounts.

The motion is another element of the ongoing debate we are having on the economy. It is amazing to look back at the transcripts of debates over the past six months to see how quickly everything has changed for the worst day by day. While there is a global recession, we are not only in a financial crisis but also a political crisis. When the financial elements of the crisis are addressed, we must bear in mind what is happening politically and in wider society. The old battlegrounds of rich and poor, private and public sector, North and South and left and right are surfacing again in a way that is more divisive and emotionally charged and, on occasion, the debate has become more irrational and unpredictable. Like many others, I am concerned about the political crisis emanating from the financial crisis in recent weeks.

However, we are forgetting the big picture. Ireland needs to borrow €30 billion to deal with the banking crisis and the crisis in the public finances. The gap between taxes, which is the Government's income, and what it must spend, will be €20 billion this year. Tax revenues have reduced by more than €10 billion in one year, which represents an amazing deterioration in the public finances. The Government has still not succeeded in getting that message through to the public, which is one of the reasons for the unrest we have witnessed on the streets involving many groups and organisations who are clearly suffering. If the public finances are not addressed, we face an economic meltdown which could happen faster than we think. The Government's response thus far is akin to a customer paying off the minimum amount on his or her credit card bill while, at the same time, continuing to spend at the same rate while his or her income drops like a stone. In a short period of two to three years, we could lose all the gains made during the Celtic tiger era.

Our future is going backwards so fast, as it were, that it is not funny anymore. The Government parties have not addressed the crisis in the appropriate manner. They throw around statements about the need to borrow for €20 billion this year and €30 billion next year while implying they will be able to get their hands on these amounts. However, the US will not provide this money because its Administration has its own issues to deal with and the former eastern bloc countries and the Baltic states of Lithuania, Latvia and Estonia have similar economic problems to us. I attended a few European Parliament meetings recently and I had the sense the western European countries such as Sweden, Germany and Austria are more concerned about what is happening in the eastern bloc and Baltic states than about what is happening in western European states such as Ireland. They are seriously concerned about what an economic meltdown might mean for the other countries. They are worried not only about social unrest but, as the old fault lines of Europe reopen, such as the east-west divide, an increasing sense of nationalism and social and political unrest in the eastern bloc and Baltic states as well. This is a major concern for the more stable western European states because this will have a significant knock-on impact within their own countries.

Commentators who suggest Ireland can borrow billions of euro from the European Union think we can tap into an endless pot of gold but that is not the case. I do not get a sense from the Minister for Finance or the Taoiseach that they have a plan to inspire confidence in international investors that we can overcome our problems. Ireland is subject to disproportionately negative media coverage internationally regarding its economic problems in comparison with other countries. Many European power brokers are taking their lead from English newspapers, which are painting Irish in a great light, and they are not being challenged. There are many dirty bankers and toxic banks throughout Europe and the rest of the world, yet we are getting unbelievably bad press.

I am disappointed when Ministers make simplistic remarks that Opposition Members should not talk negatively about the economy because of the impact that has on international investors when they could not give a hoot what we have to say in either House. We are trying to wake the Government up to our concerns in order that something is done about them. Adopting a policy similar to paying off the minimum amount on one's credit card bill will not work forever. The Government was supposed to have saved €2 billion this year through cutbacks but that will not happen. There is a sense the Government is not selling the crisis to the public but, at the same time, an early budget will be announced this year, probably shortly after we resume following the summer recess. The Government will need to increase taxes while continuing to reduce spending because the gap currently is unsustainable for a small, open economy. I do not sense concern about this from the Taoiseach or the Minister for Finance.

No matter what is said in this debate regarding Anglo Irish Bank, the Financial Regulator, friends of the major political parties and what may have gone on in other banks, these are sideshows relative to the greater issue. However, these sideshows highlight for the people the rotten core of our political and financial sectors. I would like a greater focus from the Government parties on how to deal with this. They need to get rid of those who regulated the system over the past decade to restore public confidence in it. There is no way the Financial Regulator has any credibility in investigating what went on in our banks. No one in the Central Bank has credibility when dictating to the people what needs to be done. The Central Bank's reports highlighted concerns in 2007 but its officials only squeaked and they did not make an alarming call on Ministers. They were too close to the Government to say what had to be said loudly enough to make a difference and Government Members were more occupied with winning elections and political gain than putting the country's interests first. That is why we find ourselves in our current position.

That Government Members now want the Opposition to bail them out of their problems, despite having no respect for what the Opposition offers, is galling. All we hear is that the Opposition is attacking and unwilling to work with the Government, but we worked with it on the bank guarantee a few months ago. We have clear policy differences in that we believed that Anglo Irish Bank should have been wound down because it was not a suitable going concern. We are being proven right in that regard, but the Government has landed itself in a mire.

There are rumours that the Government wants to nationalise AIB and Bank of Ireland, but it is not making their bad debts clear to the people. For example, AIB is one of the few Irish banks that is heavily exposed to lending in eastern Europe, in this instance to the tune of billions of euro. In terms of debt, it is not considered to be one of our safer banks in eastern Europe. AIB and Bank of Ireland have loaned heavily in the English property market, the substantial losses from which are in addition to the losses that they will suffer in this jurisdiction, but we have not heard what the Minister for Finance has to say about those issues. The Government is covering them up to some degree because it does not want to spook the markets. Given those banks' share prices this morning, the markets could not be spooked further.

It is time that we move together, be more realistic and decide on what to do about the state of the economy and how to get out of this mess. We will not access the billions of euro that the Government hopes will arrive during the next two years. We must make serious decisions on the economy.

Public and private sector unions are discussing striking in one month's time unless partnership talks are re-entered. Ministers have a role in redefining what those talks are about. In recent years, it has been easy for both sides to be involved in those talks, but it is no longer that easy. When the Government begins partnership talks, perhaps the public should be included and fully informed of what is occurring. The Government must carry the people with it because they must carry the heavy burden that will face everyone in the coming years. It should be done immediately.

Photo of John Paul PhelanJohn Paul Phelan (Fine Gael)
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I second the motion. I welcome the Minister of State, Deputy Mansergh, who is a regular visitor to the Seanad, for this important and timely discussion. At the start of the week, a number of Senators, including Senator Hanafin, referred to the need for a debate on regulation and part of this motion deals extensively with that matter.

As Senator Twomey pointed out, Ireland is at a grave juncture economically and socially. On the Order of Business earlier this week, a number of Senators, particularly Senator Ross, discussed the problem that we will face if we believe, as the Government persists in doing, that our European friends will somehow bail us out and that money from Germany or the International Monetary Fund will save our banking structure. The indication is that Germany is looking eastwards and the IMF will be left stretched by its upcoming commitments during the coming months.

The economic indicators are stark. The unemployment rate is 9%, which includes an increase of 38,000 in January. We are witnessing the opening stages of social unrest. A protest occurred outside today and the building will be picketed tomorrow. Those actions are part of a continuous stream of people with concerns about the direction in which the economy is going. Tax revenue this year is projected to decline by as much as €20 billion. As Senator Twomey pointed out, the Government will need to borrow approximately €30 billion. It costs us twice as much as Germany to borrow money. Of every €3 spent by the Government domestically this year, €1 will be borrowed. On top of all those difficulties is the calamitous banking situation, which is making our credit rating worse.

One would be wrong not to acknowledge the global economic downturn, but one would equally be wrong not to acknowledge the fact that we have contributed considerably to our own difficulties through Government property decisions in the past seven or eight years. The Celtic tiger had two distinct incarnations. Its early years saw foreign direct investment and job creation in domestic companies, but in the past seven or eight years concentration has been on construction. We were good at building houses and selling them to one another, but such an economic basis could never have been strong.

Last week it was estimated, conservatively, that €10 billion left the country in light of the most recent Anglo Irish Bank revelations. The jobs, careers, lives and future of 20,000 workers in the IFSC depend on some semblance of stability in the banking structure, but that is missing. Part of the problem is the Government's failure to realise its role in undermining our banking system in recent years. For too long, there has been a cosy cartel between the Government, regulators and the banks.

The motion refers to the golden circle. I would like to know who its members are, but the necessary information on the substantive issues surrounding the contracts for difference fiasco is in the public domain. The regulator, the Central Bank and, in some shape or form, the Government knew. The Taoiseach, the then Minister for Finance, knew of a difficulty surrounding contracts for difference and the Quinn Group shareholding. Extraordinarily, the Central Bank and the regulator charged Anglo Irish Bank with solving its own problem and a number of months later they were told that the problem had been solved.

A first year economics student in college knows that if a problem with so large a shareholding in a public limited company was supposed to have been solved, the share price would have fluctuated. However, the Taoiseach has asked us to believe that he did not have a clue as to what was occurring. He did not ask why there was no fluctuation despite the alarm bells that should have been ringing in his and the regulator's heads. This question has never been answered, but perhaps the Minister of State will do so. It makes no sense.

There must be a clear-out in terms of the regulator. I support the notion that foreign expertise on banking regulation should be introduced in the Central Bank and the office of the regulator. The system cries out for that expertise.

At times, I have been a critic of social partnership, but it will and should have an important role in determining where we go from here. Senator Twomey was correct in that it has been very easy in recent years to be involved in social partnership, but difficult decisions must be made. I was struck by the Taoiseach's comments today, namely, that baggage must be left outside the door in the renewal of social partnership. Was he referring to his own baggage or the political baggage of successive Governments in the past ten or 12 years that has left us in this position?

While I might share with other Members some of the cynicism attached to the Garda raid on Anglo Irish Bank, it was something to be welcomed. I remember from my school days, a famous man named Ernest Saunders, of whom the Minister of State may have heard, who went to jail because of his involvement in an attempt to manipulate share prices. There appears to be some resemblance between the case under discussion and the events in which he was involved and for which I understand he served six years in prison.

I spoke to a school tour group here yesterday and it saddens me that their futures are at stake in the midst of all this. I was fortunate enough to be born in 1978, to benefit from the abolition of third level fees and to get a third level education. Thankfully, I have a job here for at least another few months.

Photo of Cecilia KeaveneyCecilia Keaveney (Fianna Fail)
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However, the Senator's time has expired.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Was the Acting Chairman referring to the Senator's speaking time?

Photo of John Paul PhelanJohn Paul Phelan (Fine Gael)
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I think in particular of hundreds of people of my age who were sucked into construction in the past ten years and whose futures now lie in ruins. I remember a famous comment made by Deputy Cowen when he was Minister for either Foreign Affairs or Finance, to the effect that if we build enough houses, they will become cheap. While I distinctly remember him making this comment, I cannot recall whether it was to me in this Chamber or elsewhere. His policy and that of the Government in recent years, has been partially responsible, together with the global situation, for bringing this to the present juncture. I am delighted to support this motion and the Government should take on board some of the constructive suggestions contained therein as a way to move us out of the quagmire in which we now are.

Photo of John Gerard HanafinJohn Gerard Hanafin (Fianna Fail)
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I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

"— notes that the Government has taken determined and decisive action to restore, through the bank guarantee scheme, recapitalisation and otherwise, the health and reputation of the financial system;

notes that the Government has engaged with the European Commission and the ECB on the development of a common framework on capitalisation and has contributed to the development of a common approach to bad debt resolution;

notes that the current board of IFSRA is engaged in an extensive and personnel intensive investigation of issues that have arisen in Anglo Irish Bank in co-operation with the Office of the Director of Corporate Enforcement and the Garda authorities;

notes that the ongoing investigation has a criminal dimension and urges all Members of the Oireachtas to exercise the restraint essential to any successful prosecution as appropriate and otherwise;

affirms that the Irish economy needs a functioning banking system that enjoys the trust of depositors, international markets and the community at large in order to withstand the current economic and financial position; and

supports the Government's structured and measured approach to the issues facing the financial sector as representing the best way to secure the position of the financial services sector generally while keeping in mind the requirements of the EU and the interests of the State. This approach includes:

the guarantee on deposits up to September 2010 to stabilise the funding position of the banks and add a further level of protection for depositors;

recapitalisation programme of Allied Irish Banks and Bank of Ireland and the commitment to look at the needs of other institutions;

the nationalisation of Anglo Irish Bank, necessitated by particular circumstances at the time, to provide protection and support;

consideration of further interventions, including possible extension of the guarantee for limited purposes and the reduction of risk associated with assets;

review and reform of the structures, role and functioning of the Financial Regulator and the relationship with the Central Bank in light of the current situation. The stated intention of the Minister for Finance is to bring proposals in this regard to Government as a matter of urgency;

the ongoing commitment to work with the EU to frame a common approach to the issues faced by the financial services sector;

to progress work already commenced in respect of remuneration of senior executives and board members in Allied Irish Banks and Bank of Ireland in light of the report of the committee, headed by Mr. Eddie Sullivan, which is due to report on this matter by 5 March 2009, and which will include a cap on the salaries of senior executives; and

expresses its confidence in the Government's measures to stabilise and revitalise the banking system."

I am highly conscious that in the financial markets, especially perhaps in the City of London, the word was that the only difference between Ireland and Iceland was one letter and six months. Such commentators were wrong as the difference is eight letters, namely, "currency". As part of the euro, Ireland is part of the largest economy in the world. Moreover, that commitment, through the euro, has been reinforced today by a member of the European Central Bank and the head of the Bundesbank in Germany, who has confirmed that it would be possible for countries such as Ireland to have a bond that would be taken out in the joint names of Germany and Ireland, were this to be necessary, thereby mitigating the additional necessary two and a half percentage points. Ireland is highly fortunate to be part of the euro. I am highly conscious that the Lisbon treaty is on its way again and I have one question for those who will oppose it. Were we to vote "No" to Lisbon again, what interest rate do they think we would pay?

It has been suggested in the House today that international markets do not watch what Opposition parties do but that is incorrect. Whereas I might disagree with Opposition Members from Fine Gael on many matters, they did support the bank guarantee scheme, whereas the Labour Party did not and neither did they support the taking over of Anglo Irish Bank. However, it was unhelpful that the Labour Party's spokesperson for finance stated that the reason the Government was bailing out Anglo Irish Bank was to assist the friends of Fianna Fáil. Such comments cannot help internationally and were incorrect. If the four names that appeared in The Sunday Times are correct, I did not recognise any of them. This is interesting from one perspective because, having been a fundraiser for Fianna Fáil for a number of years, I would know. It begs the question as to what misrepresentations are circulating in the marketplace.

The Government acted highly responsibly in the bank guarantee scheme. It was necessary at a time of unprecedented upheaval in the international markets. Some of the figures are quite difficult to comprehend because they do not merely refer to billions but in some cases refer to hundreds and thousands of billions. This is somewhat beyond the normal understanding of finance to hear how much, and how badly, the international markets were pirated. As I have mentioned in the House previously, I remember the Big Bang in London and the introduction of financial deregulation. However, I never thought it would mean no regulation. As I have noted previously, Captains Blackbeard and Kidd, the pirates of the Caribbean, were better regulated than some of the carry-on associated with sub-prime lending, hedge funds and the amount of money that was lost. White-collar crime is not victimless and I am conscious that any wrongdoing that took place in Ireland will come before the courts. The Government is determined to bring those involved before the courts and from that perspective, this is to be welcomed.

International regulation is required because had there not been an international crisis, Ireland would have got through this recession. There inevitably would have been a downturn in Ireland and Members in this House debated whether there would be a soft landing or otherwise. However, they did not anticipate that the international banking institutions would begin to collapse. Some major banks fell and others were nationalised, both in America and the United Kingdom, some of which had branches here. While difficulties existed in the Irish market, some of which have come to light recently, the main problems, and the vast majority of the problems, were created internationally. However, this leaves us with the difficulty of regulation, of which we must be part. A society and world in which a flick of a switch can transfer billions abroad or to different companies or accounts is becoming increasingly difficult to regulate. This is the reason an international dimension, a European dimension and a national dimension are required. We have a strong interest in this regard to maintain strong regulation for the financial services centre, which comprises a major part of the economy.

When considering such regulation, one must specifically examine the misselling of sub-prime loans. There is a suggestion from Europe that 5% of the value of sub-prime lending would be held by the initiator, that is, the seller. The original proposal was for 15% and the Minister should consider the retention of this suggestion because the profit margins in selling such products are so great, that in time, the capacity for greed again may take hold and in ten or 20 years we would find ourselves with unstable banks that were creating instability.

What could the Government do in this climate? After 11 years of budget surpluses, the surpluses suddenly eroded and major deficits arose. I contend that it took the right course. Had it taken more money out of the economy this year, it would have made the situation worse. The Government has modulated the amount it can borrow while being committed to reducing the deficit over a number of years. However, Members also should be cognisant that there is light at the end of the tunnel. Oil costs $40 a barrel, the United States dollar is cheap and the price of money, at a rate of 2%, is low. Moreover, an additional half percent cut in interest rates is expected at the ECB's March meeting next week. We have low inflation but most of all, we have low expectations. This is a real opportunity for Opposition Members to pull together with the Government to do what is necessary to bring us as quickly as possible back to where we should be. I have mentioned that the bailout figures are quite astounding. More than €1.2 trillion has been spent in Europe bailing out banks and there has been recapitalisation of €200 billion to stimulate the economy. Such stimulation packages and bailouts, together with their American equivalent, will bring us back. While it may take a couple of years, if we take the correct steps and if we all pull together equally, we will get there.

Photo of Feargal QuinnFeargal Quinn (Independent)
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I propose to share time with Senator Ross.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Is that agreed? Agreed.

Photo of Feargal QuinnFeargal Quinn (Independent)
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I welcome the Minister of State, Deputy Mansergh. We are getting fond of him now that he is in the House so often. I do not propose to talk about the past. Instead, I prefer to query how we propose to resolve the current difficulties. The Government amendment does not provide the solution because it lacks urgency and fails to recognise the magnitude of the problem.

Our reputation has been greatly damaged internationally, especially from the perspective of financial investors. Despite this, insufficient action is being taken to address this issue. Members of the boards of all the banks, including the Central Bank, must be replaced. So too must there be an overhaul of the Financial Regulator which failed to guard adequately against these abuses. Such action is desperately needed to repair Ireland's reputation. How can we trust those who led us into this mess to lead us into recovery? Whistle-blowers are needed more than ever. Mr. Tony Spollen, who exposed the DIRT scandal at AIB ten years ago, was a good example of the type of white knight so urgently needed now. There are people within the banks who are aware of malpractice. They must come forward without delay.

I recently read an interesting OECD report on the causes of the current financial crisis and its effect on policy issues. It is not surprising the report is highly critical of many of the banking practices that were prevalent before the current global crisis. Its recommendations include a reform of the incentive system for employees in financial institutions through a focus on the slow vesting of shares in employees rather than rewards for quick returns. The report also recommends matching the cost of capital to the risk being taken in its use. In other words, risk-taking sections of banks should be separated from the rest and should pay more internally for their funds. These are the types of financial reforms that should be implemented as a matter of priority so that we can rebuild the banking system as a properly functioning entity which serves the consumer rather than the risk-taking, high-earning cowboys who play with other people's money.

Before people regain their confidence in the banking system, there must be some type of admission of guilt. In the United Kingdom, for instance, unreserved and public apologies were given by HBOS and Royal Bank of Scotland to their customers. A similar apology on the part of Irish banks would be a good start.

I have not focused on the past but have instead looked to the future. There are certain actions that can and must be taken. I urge the Government to grasp the opportunity immediately to resolve this crisis. It is a crisis that is solvable.

Photo of Shane RossShane Ross (Independent)
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I thank Senator Quinn for sharing time. We have debated this issue in various forms, on various occasions and at some length. The motion represents an opportunity to mark time. I agree with Senator Quinn that it is not helpful to harbour resentments about the past. The problem is that the Government does not recognise the nature of the crisis with which we are faced. There is a worrying pattern here. Given that the Irish banking system had only a minimal involvement in sub-prime lending, we cannot hide beneath the international umbrella and blame that for our current difficulties. The reality is that many of our problems are home grown.

The alarming and continuing pattern indicates that the Government is not taking control of events. The guarantee that was given at the end of September was a response to the banks putting a gun to the Government's head and warning it that fire and brimstone would erupt the following morning if action was not taken. The provision of the guarantee may or may not have been the correct action to take. Likewise, the decision to nationalise Anglo Irish Bank represented the forcing of the Government into an action to which it was initially opposed, as it made clear. The recapitalisation move was part of the same pattern in that it was not the first choice of the Government.

Now there is clearly a serious possibility that the two largest banks, Allied Irish Banks and Bank of Ireland, may also be nationalised. As the Minister for Finance has said, this will only be done as a last resort. It is clear from the Minister's remarks on "Drivetime" yesterday and those of the Tánaiste and Minister for Enterprise, Trade and Employment today on "Morning Ireland" that recapitalisation is close to failing and that the next step will be nationalisation of the two largest banks. If that happens, it will, once again, be a case of the Government, instead of proactively taking steps that are necessary, being forced to do what is necessary by events and international markets.

I was in the city of London on Monday and spoke to people who had investments in Ireland. What they said about the state of the economy and how it is being run and the state of the banks is unprintable and I do not intend to repeat it, even though I may do so under privilege in this Chamber. It might be damaging to do so because it is the view of these responsible investors that this economy is heading for the rocks and that the Government is in denial.

As I said, the pattern is that the Government waits until it is pursued before responding. We need something more proactive. The Government must recognise the problem and instead of taking the minimalist approach, being merely the target and victim of events, it must, to some extent — but not to a total extent; I acknowledge that is not possible in a global market — take charge of events. I dread to wake up tomorrow morning or the morning after to hear that the Government has decided — which will mean it has been forced — to nationalise the two major banks. However, I suggest this is very likely to happen. It will not be a voluntary or proactive move by the Government but, once again, an action of last resort. This type of pattern offers no confidence to international observers. It suggests the Government is not in control of the economy and not confident enough to take the necessary steps.

It is unfair to blame the Government entirely for the current difficulties. The Government is full of people who are without experience of this or any other such crisis. Bankers must take a large portion of the blame for living in denial for so long and hoodwinking the people, the Government and the regulator. Likewise, the Financial Regulator must take its share of responsibility. It is an absolute fiasco when the regulator is making inquiries into a situation in which it is directly involved and almost undoubtedly culpable. One cannot expect international investors or any objective analysts or observers to have faith in the financial behaviour and economy of a country where the regulator is culpable and intends to issue a report exonerating itself. Despite it all, that is what will happen. This is the desperately damaging situation in which we find ourselves. The buck stops with the Minister of State, Deputy Mansergh, the Minister, Deputy Lenihan, and the Taoiseach. It is high time they at least gave the impression that they are in control of events instead of vice versa.

Photo of Dan BoyleDan Boyle (Green Party)
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It is important to put the current economic situation in context. If I were to devise a ratio for where we stand and where culpability lies, I would say that 70% is accounted for by international factors and 30% by policies that primed an economy that was too heavily reliant on the construction industry, property prices and the merry-go-round of easily lent money that is now impossible to recover. These are the essential flaws in the Irish economy which are meeting with an already intolerable international situation. Yesterday the US Treasury Secretary spoke of the US having a severe contraction in its economy. As a country that has prided itself, probably unfortunately, on being one of the most open economies in the world one of our main trading partners will be in a severe recession before we can seek to achieve economic recovery.

The economy of Japan contracted by 3.3% in the past quarter alone. Every four weeks its GDP shrinks by 1%. The bank liabilities of the two biggest banks in Switzerland, the citadel of banking, Credit Suisse and UBS have combined current liabilities that are seven times the GDP of Switzerland. This is an international crisis. Our nearest neighbour has already invested in or guaranteed its financial system to a cost of £1.3 trillion. The responses we are dealing with are the same as those of every other major economy in the world. This will affect how we do things.

People have made criticisms, which may be justified, of the pace of change and the choices being made but these circumstances are unparalleled in world history. Many people are discovering policy approaches as we go along. In the UK, there were four separate approaches in respect of Government interventions in the financial institutions; in the US, there were six. One year after the collapse of Lehman Brothers, the banking situation in those countries has not improved. We are dealing with this on top of bad economic choices we made in the past and on top of a financial services sector that, in some elements and in terms of certain individuals, has shown itself to be corrupt. There are necessary obstacles that we must overcome. We must acknowledge that an international crisis exists, which we are suffering disproportionately because of policies followed here.

On the other hand, it is important that the political debate gets beyond the pantomime politics we have experienced since we entered this critical juncture in the country's economic history. The main Opposition party referred to having better options in terms of only the most recent €2 billion that had to be corrected in public expenditure because of the shortfall in tax receipts in November and December of last year, never mind any ideas about the €4 billion we must save at the end of this year, the €4 billion at the end of next year or the €3.5 billion for the year after that. Some of the proposals made by Fine Gael do not add up and some include measures that have already taken place.

Photo of Nicky McFaddenNicky McFadden (Fine Gael)
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Is this pantomime politics?

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Senator Boyle is letting himself down.

Photo of Dan BoyleDan Boyle (Green Party)
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Almost half of the €2 billion that Deputy Richard Bruton is claiming can be saved refers to €850 million being saved in wages. This includes a pay freeze, which will happen, and increments that are still in place and partly because of 5,000 people being taken out of the public sector.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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This is pathetic.

Photo of Dan BoyleDan Boyle (Green Party)
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These 5,000 people would save €250 million, according to Fine Gael, and this is where we are going wrong in our economics. The €250 million is based on the presumption that the 5,000 people are earning an average of €50,000 each. What about redundancy payments, pension payments and unemployment payments? That is no saving at all. How is it saved in the first year when we need to repair our public expenditure? This is a danger in some of the Opposition approaches. The Opposition believes there are easy fixes and populist measures that can be announced to give people the impression that the Opposition can solve this situation without difficulty, without pain and without any effect on people who live in this country. It will not be done like that, it will not happen.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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What is Senator Boyle's plan?

Photo of Dan BoyleDan Boyle (Green Party)
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We must control public expenditure and we must restore confidence in the banking sector. Much of it has been discussed already and with eight minutes I am sorry I cannot give Senator Twomey all the answers to the world economic crisis.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Senator Boyle could start.

Photo of Dan BoyleDan Boyle (Green Party)
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I will certainly not play the game that Fine Gael has played, suggesting this can be done easily and that people can be told what they want to hear. We must tell people what they do not want to hear. The situation is serious and critical and the decisions we make from here on will be vastly unpopular because they must be taken——

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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When?

Photo of Dan BoyleDan Boyle (Green Party)
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——mostly because of an international situation and partly to correct mistakes made in our political system. Until we understand this, the kind of pantomime, table tennis politics does nothing for the benefit of this country and does nothing in terms of the honesty of presenting motions of this type in Private Members' time. I ask the Opposition to consider this and to avoid the party political advantage it is seeking in this period of utmost crisis. The Opposition should ask the questions that need to be asked and tell people what they need to hear. Until we do so, this is a crisis that will worsen.

6:00 pm

Photo of Nicky McFaddenNicky McFadden (Fine Gael)
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I am sorry Senator Boyle is leaving the Chamber because I tuned into what he said about correcting mistakes. That was the only conciliatory remark he made before speaking about the Opposition and pantomime politics. Then he started into a big rant and I am disappointed in him. The Cathaoirleach does not like us referring to the Dáil but the Minister for Finance stated he would reject the Fine Gael motion. This motion includes the point that all members of the board of the Irish Financial Services Regulatory Authority be removed, that a cap of €250,000 be imposed on banking executives and that the ten members of the so-called golden circle be named. Senators Boyle and Hanafin were asking us to wear the green jersey. This is a fair motion yet the Government parties are playing party politics, over and back, tit-for-tat, pantomime politics.

President Obama delivered his state of the nation speech yesterday and spoke about the day of reckoning. Members on this side agreed that our country is in a serious state and we do not need to be lectured by the Government telling us we need to wake up and that it is not about scoring points. I ask Fianna Fáil to give the leadership this country deserves. While there is a serious global situation it is not all about the global situation. It is about the irresponsible, bad banking that has gone on in this country.

We would like decisive, prudent and responsible management of our capital investment and deposits and a reliable source of credit for Irish businesses. Last week a survey of small and medium enterprises found that 48% of such firms were refused credit by the banking institutions. It is almost impossible to get money to buy a car. These are the banks we have guaranteed and this is not good enough. The motion refers to the need for the regulatory authority to be replaced with a new, honest, vibrant group of people. The cronyism that existed between the Irish banking fraternity must stop. Some members of these institutions were also members of other banks' boards. There must have been much backslapping and this does not really represent reassurance or confidence. I ask the Minister of State to comment on this. The Minister rejected this, saying he would not do it.

A regulator must be able to investigate transparently transactions by banks, their investors and directors. The regulators should be independent. The Government knew about the transactions of the so-called golden circle for over a year and it was only yesterday the Garda Síochána went into the offices of Anglo Irish Bank. I find that extraordinary. If the names are known, the beans should be spilt. I do not accept the excuse of banker confidentiality. This golden circle must be named. The drip feeding of information must stop because every day there is a new revelation which further damages our reputation. Most importantly, we must recover the associated €300 million in debts taken by this so-called golden circle from the Irish taxpayer. The assets of these people should be confiscated.

I fully support my party's call in this motion for open advertisement for the appointment of the next Governor of the Central Bank, and that the position should be open to international competition and scrutiny by this Oireachtas. It is an outrage that the Government has now guaranteed and recapitalised three of our banks and that some of the chief executives of these banks are still earning in excess of €250,000, which includes bonuses and share options.

A person must earn a bonus. Investors and poor people have lost money because of these corrupt transactions. A bonus should be earned if people are helped to invest their money wisely rather than when all that money is lost. Why are these people still allowed to live freely as if nothing has happened? The Minister of State will argue this is due process but how long will due process continue? Our banking reputation has been destroyed and ordinary hard-working and honest people have lost thousands.

I thank the Minister of State for coming to the Seanad, as he does regularly, but on this side we are acutely aware of the need to get together and sort out this matter. I will do anything I can to support sound and wise suggestions from this Government.

Photo of Ivor CallelyIvor Callely (Fianna Fail)
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I wish to share time with my colleague, Senator Larry Butler. I will take five minutes and he will take three minutes.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Is that agreed? Agreed.

Photo of Ivor CallelyIvor Callely (Fianna Fail)
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I second the amendment to the motion, which was put forward by my good friend and colleague, Senator John Hanafin. I am happy to participate in this debate and I welcome and congratulate those who have tabled the motion. I am not sure whether there are other ways we can achieve the same results or whether there are better avenues we should travel to achieve those results.

All Members of this House would be united in their desire that this House and our Government would take the necessary steps to stabilise our financial institutions and secure the funding base. We all acknowledge that we must reboot our banking system and ensure the availability of credit and a fully operational banking sector.

There is no doubt it is very disquieting to look at the current state of our banking sector and financial institutions, and every day something new unfolds. People are inclined to jump on the bandwagon of a sensational media headline and are not prepared to allow due process. For a while, everybody in Ireland was blaming one man for the financial position of Ireland with no acknowledgement of the international and global difficulties.

I accept there is real hardship and deprivation across society and the public is rightly angry. This is not owing to the difficulties in one sector or another and there are many facets to the public perception and its reaction. Our banking and regulatory systems have been found wanting and business closures and job losses are escalating at levels not experienced in recent times. Unemployment is creating uncertainty and destroying self-respect. Our spiralling and out-of-control public finances warrant exceptional measures. There are new levels of security threats, as well as social and industrial unrest, which threaten the very foundations of the State.

The depressing state of Irish society is due to the anxiety of the Irish people about the direction in which our economy is heading. The public witnesses more evidence of job losses and economic and financial failures every day. Its view is that the position is deteriorating with no light at the end of the tunnel. There is a genuine call for resolution to our banking problems, economic revival, more job opportunities and a relaxation of the anxiety by the vast majority of people for the future of the country.

Some of this is stimulated by people in the Houses and other leadership roles, including the media. We must not underestimate the challenge ahead, and it is essential not to overstate our difficulties. Most importantly, we should remain positive in our ability to address these issues and succeed. In the unprecedented set of international circumstances that has emerged, it is our duty in this House to address the public's concerns and anxieties, restore confidence and bring the public with us in our resolve and belief in our ability to get ourselves out of this crisis.

I will send out a clear message from this side of the House. There is a determination and an ambitious Government programme to resolve. In global terms, Ireland is vulnerable and we have no special protection from the global economic and financial difficulties. This is not an easy time to be in Government but this Fianna Fáil-led Administration is determined, with every beat of our heart, to resolve our acute difficulties in the national interest. Ireland has been very successful in growth and development recently and we all have an awareness of what we have achieved. With our can-do attitude, we will do it again. I earnestly ask that we all get down to the task of getting our economy and financial difficulties resolved to get back on the road we successfully travelled in the past.

Photo of Larry ButlerLarry Butler (Fianna Fail)
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I support the amendment to the motion. Although we are experiencing difficulties and we need a solid banking system, we still have a very good economy, with 1.8 million people still at work. We have to ensure we govern the economy and we are doing so. The Opposition has tabled motions and this is a reasonably good motion that I would not have too much difficulty with. It indicates a much more conciliatory approach from the other side of the House, which is very welcome. We should continue to act this way.

There is much silly talk about golden circles and people are trying to say that Fianna Fáil is more involved than others. The other day I heard the views of one member of a golden circle, Mr. McEvaddy, who would be a strong member of Fine Gael. I am sure most people would know him. He stated these people were heroes. Before there is any further dirt thrown at our party, the Opposition should look at what is on its own side. I say this with the best intentions and without wanting to change the tone of the debate because the issue is too important for that.

It is important when the Minister is recapitalising our banks the directors should ensure small businesses, which create work for approximately 800,000 people, are looked after. I support what the Minister is doing. Senator Ross indicated we may have to nationalise the banks and I would not rule that out. It may be one of the options we should consider. We should bring the social partners back into play because we must bring everybody on board. Everybody is feeling a certain amount pain and will continue to do so in the current economic circumstances. We need to have a solid banking system, as that will stand us all in good stead. There are no quick fixes and no easy answers. The Minister has been cautious in his approach to addressing the banking system and I congratulate him on that.

Photo of Joe O'ReillyJoe O'Reilly (Fine Gael)
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Ba maith liom fáilte a chuir roimh an tAire Stáit.

A recurring theme running through many of the contributions is an attempt to ascertain the degree of culpability of the Fianna Fáil section of the Administration for our current ills. I do not propose to devote too much time to that aspect given that we must look to policy positions and the future, other than to say it would be in the best interests of this House to clear that up. There is no avoiding the fact the Government in office during the last 11 years allowed an unquestionable culture of waste, recklessness and reckless spending to develop in this country. I will cite four instances where the Taoiseach, when Minister for Finance, contributed to our economic woes to date. In 2005 his decision to extend tax breaks for property developers and investors was done against the advice of the National Competitiveness Council and all current advice at the time. From 2005 to 2007, Government expenditure was extended by twice the sustainable rate of growth. There was a runaway increase in Government expenditure over that time. Because of mismanagement, over-spending and lack of controls it is not clear that we have an infrastructural bonus to match that sort of expenditure.

An assurance was given by the then Minister for Finance, Deputy Cowen, in 2006 to home owners that our economic fundamentals were strong. The failure of the Financial Regulator to interfere with the banking sector was ignored during all that time. That puts it on the line that culpability for the current position rests with the Administration in place during the past 11 years. There is no denying that. In terms of how we move forward, it is unhelpful not to accept that. The attempts, in so far as they have been some by Members on the other side of the House, to suggest the contrary is not assisting their cause. It is as well to take that as read and try to move forward. It is clear from many sources that the necessity for those on the Government side, as they perceived it, to win the last general election stopped reaction to what they knew was the developing ills of the economy.

We are in a situation where strict regulation of the banking sector is required at home and internationally. We should contribute to that. There is no doubt there was a huge international contribution as well as a domestic contribution to our economic ills. We need to be associated with the international efforts to regulate the financial world. The same laissez-faire, light touch regulation can never again be allowed again. We have all learned our lesson.

Good news emanated from the European Commission in that respect today, but we, as a State, must be at the vanguard in promoting international financial regulation, and we have to begin that at home. Clear regulation and control of the sector domestically is needed. There is a need to remove boards, directors and for a huge culling in the sector. There is also a need to eliminate the astronomical salaries and bonuses, which contributed to a hedonistic atmosphere, childish irresponsibility and a lack of connection to reality that permeated the banking sector and the top echelons of the developer sector here such that they lost all sense of reason, connectiveness and balance. That must be taken into consideration.

The banks are short of capital due to loan losses. Consequently, they have cut credit lines to small and medium sized enterprises, but that cannot be allowed. The banks cannot be allowed to solve their difficulties in that fashion, if they are to be supported by taxpayers. They are anxious not to use their capital in that way because they are afraid of bringing down share prices. They are only concerned with profit and with maintaining the value of shares. It is important we do not let the banks away with cutting off credit to the small and medium sized enterprises and to individual consumers. It is important to ensure such credit is maintained.

The banks lack of creditability internationally is damaging their capacity to borrow. They are also afraid to dilute share prices. The strategy Fine Gael recommended to Government and on which we look favourably is the idea of buying preference shares. Buying them has the advantage in that a preference share takes precedence over ordinary equities and preference shares are a safer bet for the taxpayer. This does not mean we would become hands-on bankers, which is not necessarily a role for the Oireachtas, although we should have tight control of the sector.

There is no point in giving the banks extra capital that they can use for lending overseas and on other speculative ventures. The extra capital they get must be to power the domestic economy and strict controls should apply. AIB recently bemoaned the fact it would only have a profit of €500 million this year, that its profit would be down to that level. The onus in this respect should be on generating our economy and on there being only modest profits for our banks. If there is to be taxpayers' investment in the sector, that should be the case.

Recent statistics suggest that 43% of small and medium sized enterprises are waiting for money and in need of financing. It is shocking that Mr. Wallace recently — I know the Cathaoirleach is anxious we do not name individuals——

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Yes.

Photo of Joe O'ReillyJoe O'Reilly (Fine Gael)
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It was shocking that people — I will put it that way — appearing on a "Prime Time" programme recently openly boasted they were not paying the interest on their loans. That is a horrendous state of affairs, while huge pressure is being put on individual consumers and on small and medium sized enterprises. That must be a source of concern. We should buy preference shares, remove many executives and boards, introduce rigorous control, insist the banking sector responds to the needs of our economy and those of ordinary people and that it plays its role. If there is a crisis, and all conventional and accepted wisdom suggests there is one, the banking sector cannot be exempt from its role in solving it, particularly in light of the fact it played an enormous and pivotal role in bringing us into it in the first instance.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I begin by declaring an interest in that I have a daughter who is a middle ranking official in AIB, although she is on maternity leave at the moment.

I thank Senators for their contributions and for what has been a good debate. I assure them that I listen carefully to what the Opposition and everyone has to say.

I will give a short response to the last contribution. Senator Paul Bradford was correct in the last debate I attended when he said nearly all of us were, to a degree, to blame and nearly all of us had to help find a solution. That was a very accurate statement.

There was a reference to infrastructure bonus. The national motorway network, which was started in the late 1990s, will be completed next year and is a quite a large infrastructure bonus. As far as preference shares are concerned, that is the route the Government has gone down. I agree with Senator O'Reilly on that point.

While commentators here are naturally very much focused on our own internal problems, it is important to put the banking crisis in an international context and Senator Boyle, in particular, did so. Governments all across the world are grappling with collapsing confidence in the global financial system, and all are making a variety of interventions to try to achieve the best possible outcomes for their country. It is important, therefore, to understand what the Minister for Finance, Deputy Brian Lenihan, sees as the Irish strategy.

The Minister is keen to ensure there is an independent banking sector in Ireland. This requires us to protect systemically important banks and avoid nationalisation of these institutions, if at all possible. His aim is to ensure there continues to be competition in the Irish market for consumers. To that end, we are seeking to ensure that Bank of Ireland and Allied Irish Banks plc continue as a strong and competitive banking presence in the marketplace.

Given the uncertain position of the UK and foreign owned banks, we would ideally like to see a third significant Irish player in the banking sector. This situation reminds me of debates in the early 1990s on a third banking force which was part of the Fianna Fáil and Labour Party programme for Government, but it did not come to fruition at that time.

The prerequisites for the success of this strategy are sufficient liquidity in the system and adequate capitalisation of our banks. The introduction of the Government guarantee scheme in 2008 was designed to ensure the banks would have sufficient liquidity to operate on a day-to-day basis. This move has since been followed by many other countries.

Market expectations regarding the capital banks hold have altered significantly. As a result, banks have had to compete vigorously for deposits and other forms of funding in a weakening economic environment. They have also been forced to seek capital in an unwilling and unfriendly market, resulting in an array of State recapitalisation programmes across the developed world. It is in this context we have announced our plans to capitalise the two main banks. In due course, we will look at the remaining institutions.

In this extremely challenging period for the banking sector, and where investors dealing with banks are even more risk-conscious, the good standing of a bank, its reputation and a strong ethos of corporate governance through its board and senior management become even more important. There have been important issues for the Government to address in taking on this role, at a time when we have also to redress a large fiscal imbalance and take difficult decisions to restore our competitiveness internationally.

The Government is providing €3.5 billion in core tier 1 capital for each of the two main banks. The capital to be provided to each was determined following detailed engagement with the banks themselves and with the benefit of survey information of the bank's loan books, which was conducted for the Financial Regulator by PricewaterhouseCoopers. A careful assessment was made of the potential losses that the banks face on their loan books in the coming years, taking into account the impact of likely trends in property values and various stress scenarios for the economy.

The Minister was criticised in some quarters for being slow to proceed with a recapitalisation of our major financial institutions, but he strongly believes the time spent on assessing as accurately as possible the capital requirements of each bank was worthwhile in terms of the assurance that can now be offered to the markets on the levels of capital in the two largest banks.

The level of capital being provided by the State will boost the core tier 1 capital ratio of AIB to 8.5% and of Bank of Ireland to 9%. It is important to note that these are high capital ratios by international standards. The banks will therefore be in a strong position, able to raise the funding they require on international markets and withstand loan losses arising.

The continued flow of credit is vital to our economy. To establish the exact position regarding the availability of credit, the recapitalised banks have agreed to fund and co-operate with an independent review of credit availability which will be managed jointly by the banks, Government and business representatives. The recapitalised banks have also agreed to work closely with the IDA, Enterprise Ireland and State agencies to ensure the supply of appropriate finance to contractors engaged on major projects sponsored by them. They have also agreed to engage in a clearing group to identify specific patterns of events or cases where the flow of credit to viable projects appears to be blocked and to seek to identify credit supply solutions. The two banks have also agreed to provide €15 million each to a new seed capital fund.

The international credit crunch is severely limiting the availability of credit to sound businesses and thereby doing severe damage to our economy. The bank customer package announced as part of the recapitalisation program addresses this problem in a number of ways. The banks have agreed to make additional funds available for lending. A statutory code of conduct for SME lending has been devised to help create a better climate for SME lending and to give potential borrowers greater confidence. This covers all banks and not just those which have been recapitalised. An independent review of credit availability will give a definite picture of the current supply, demand and conditions for business lending.

In addition, statutory codes of practice on business lending and mortgage arrears were published by the Financial Regulator on 13 February 2009 and apply to all banks. The business lending code includes a requirement for banks to offer their business customers annual review meetings, to inform them of the basis for decisions regarding their accounts and to have written procedures for the proper handling of complaints.

Decisions to grant, refuse or alter credit must be taken on a case by case basis. Where a customer gets into difficulty, the banks will allow reasonable time to seek to agree an approach to resolve problems and to provide appropriate advice. The Minister wants to stress this is a statutory code and banks will be required to demonstrate compliance with it.

The code of practice on mortgage arrears applies to all mortgage lending on a customer's principal private residence. A lender may not seek repossession until every reasonable effort has been made to agree an alternative repayment schedule with the borrower. The code will ensure that mortgage lenders can only commence legal action for repossession six months from the time arrears first arise. A number of days ago the Financial Times quoted a figure of, I understand, 70,000 repossessions in the UK. Proportionately what is happening here is, properly, far below that figure.

In January, against a background of concerns about governance issues and market confidence in Anglo Irish Bank, the Government, following consultation with the Central Bank, the National Treasury Management Agency and the Financial Regulator, decided to take it into public ownership. This decisive step was taken to safeguard the interest of its depositors and the stability of the economy.

The Government, along with the entire country, has been shocked by the revelations of the practices in Anglo Irish Bank, and as the Minister for Finance has said time and again, we are fully committed to getting to the bottom of the situation and ensuring the full rigours of the law are applied to anyone found to have abused the system. The Government will fully investigate the loans to Mr. Sean FitzPatrick, the loans to purchase shares transaction and the Irish Life & Permanent deposit arrangement. Any further issues that may emerge will also be dealt with by appropriate action, but the Government must remain fully cognisant of, and committed to, upholding the principle of natural justice.

It is vitally important that the country now regains confidence in its banking system. There are many thousands of loyal and hard-working banking staff out there who are shocked at recent revelations. It is important they and the public can be reassured about the long-term future of the financial sector in Ireland. It is also important that we collectively give confidence to the international markets about Ireland's financial sector and its long-term future. Continued revelations of alleged malfeasance damage all of us individually and collectively. However, it is incumbent upon all of us, the media included, to ensure there is a balance struck between the exposition of past alleged wrongdoings and the solidity and proper functioning of a significant and vitally important part of the country's infrastructure.

There is no doubt that there are inherited problems in the banking sector and there has been much comment about how these might be resolved. As the Minister for Finance indicated in his recapitalisation statement, the Government is prepared to look at and examine proposals such as an insurance scheme, the creation of a bad bank, or other, more innovative Irish solutions to deal with this problem. The Minister has appointed Dr. Peter Bacon to work in conjunction with NTMA to report and advise me on suitable options in this area.

At the recent ECOFIN meeting, there was considerable debate and discussion on this topic and desire was expressed for an EU-wide response.

The British Government has examined many possible options in this area and may well announce a scheme in the coming weeks. The Minister is firmly of the belief that there is no huge benefit to being first with a solution on this issue and that the best approach is to learn from other experiences and to move as quickly as possible when we have devised a scheme that uniquely suits the Irish circumstances.

It is widely accepted that bank regulation on a global scale has been too lax, and Ireland is no exception in this regard. A new structure is clearly required and the Minister is committed to its implementation. The Minister has already indicated in the Dáil that this may involve the merger of the Financial Regulator and the Central Bank and he is close to securing international expertise, which will help advise him on this matter. Several Senators pointed out, properly, during the debate the extreme importance of this, given the size of the financial services sector in Ireland and, in particular, the International Financial Services Centre.

The oversight of the banks concerned has been greatly intensified since the introduction of the credit institutions — financial support — scheme. This new regime provides for a heightened direct engagement with each of the covered institutions and new reporting arrangements, including the provision of scheme compliance certificates by the covered institutions themselves and by their external auditors. The bank guarantee scheme requirements and conditions are the first step in a new system of financial regulation and supervision. The joint boards of the Central Bank and Irish Financial Services Regulatory Authority are considering further reform measures and the Minister has received a report in that regard which he will examine closely.

In addition, other regulatory considerations, both domestically and at international level, are under way, including the following: the regulatory authority is reviewing its overall strategic regulatory approach with a view to ensuring that the authority meets its statutory mandate and responds to EU developments in financial regulation; the Financial Regulator business process review, designed to improve its effectiveness and value for money, is now close to finalisation; the Financial Regulator is also processing a strategic plan for 2009, which will address the particular EU and guarantee scheme requirements for 2009; at EU level, new regulatory proposals, including improvements to the capital requirements directive, are due for adoption in early 2009 and more generally; and at ECOFIN, which will incorporate the work being carried out at a wider international level, the role and mandates of national regulators are now the subject of in-depth consideration and, arising from this, it can be expected that proposals will be forthcoming on matters such as prudential soundness, the orderly functioning of markets and stronger European co-operation on financial stability oversight. The Minister proposes to progress those issues and to bring proposals to Government as a matter of urgency.

There is absolutely no doubt that there needs to be accountability in the financial sector for what has happened. We have seen a number of senior people stand down for various reasons and the Minister is clear that more will follow when that is appropriate. What we have witnessed is a massive failure on a global scale of a banking culture that went beyond all bounds in pursuit of high short-term rewards, with appalling global economic and financial consequences on a scale that few countries, including our own, ever expected to be faced with.

At all stages, the EU has been consulted regarding any involvement in the banking sector. In the coming days an EU high level group is due to unveil its blueprint for reforming the financial system. This is one of several topics the Minister intends to discuss with the President of the European Central Bank, Jean Claude Trichet, when he visits Ireland tomorrow. It is essential that we work with our EU counterparts to ensure a consistent and decisive approach is adopted that will see us emerge from this very difficult time with a strong and well regulated banking system.

The Minister has already put on the record that there will be a new pay regime in the banking sector in Ireland. It is imperative that this regime is organised in such a way that any rewards in the sector are structured to meet the long-term objectives of both the banking institutions themselves and the overall health of the Irish financial system. The banks have accepted this in principle and we await CIROC findings to help us ultimately flesh out and implement these principles. The Minister has been advised that this committee, headed up by Mr. Eddie Sullivan, will report on 5 March 2009 and that the report may well include a recommendation regarding a cap on the salaries of senior executives.

I agree with Senator Twomey that we are perhaps involved in a redefinition of the scope and role of social partnership which has served this country well over the past 22 years but which must be reshaped to respond to present circumstances.

The Government recognises that the future prosperity of the country hinges on the actions we take now. It has a strategy to deal with the complex problems in the banking sector and actions have been undertaken firmly and fairly in accordance with the national interest. The Government's approach to the banking system has been structured and measured. All Government intervention in the banking sector has as its ultimate goal the benefit to the citizens and the taxpayer of ensuring stability and securing the position of the customers of the banks, account-holders, mortgage-holders, businesses and entrepreneurs, not ignoring the thousands of rank and file employees who work conscientiously in the banks for reasonable but essentially modest reward.

I call on the Seanad to support the amended motion and to contribute to the leadership needed to see us through this crisis.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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I very much welcome the Minister of State. He has been very attentive to the House and, if I might be so bold as to say, perhaps this House stood him in good stead. I also thank him for what he said. He always manages to impart a message and he has done so with undoubted enthusiasm. I hope and sincerely trust that what he outlined will be followed through as a matter of urgency. He placed great stress on that. I support everything he said and sincerely hope there can be follow through because, in a sense, we are all in this together. The banking system is essential to the proper functioning of our economy. Without the stability of the banks, we would be lost and in a deep mire.

I was glad to note the Minister of State's remarks on Allied Irish Banks and the Bank of Ireland, in particular, and the strong competitive banking presence they provided heretofore in the marketplace. Sadly, faltering steps have been taken, as we know from recent history. The Minister of State also referred to the uncertain position of UK and foreign-owned banks.

The Minister of State said the Government would like a significant third player. The only issue I have about that is that some months ago, the Minister, Deputy Brian Lenihan, spoke about restructuring and, as I understood it at the time, from the point of view of the country's strength, he lead us to believe that he wanted to see the six covered institutions reduced to two or, at most, three. Perhaps the Minister of State will address what is envisaged by way of further restructuring.

On recapitalisation and sufficient liquidity, that is the key, with time, to the healing process which we require to restore confidence. This is all about instilling in the people confidence in the banking system because without that, we are lost.

The guarantee scheme was the most fundamental requirement. Without that scheme, we would have been totally lost. It has helped to bring a minimum level of stability. The only difficulty I see with the guarantee scheme, with which nearly all of us agreed, is that it is set to finish in 2010. It is vital that timeframe is extended. The Minister should indicate as early as possible that an extension will be provided as the guarantee is essential to maintain liquidity. In the context of interbank lending and bonds to the value of hundreds of millions of euro in Irish institutions, many of these are due to mature in the coming months. Normal practice would be that these would be issued for three years at a time. How, therefore, can they be reissued if there is no guarantee available beyond 2010?

I agree with what was intended to be provided by way of core tier 1 capital for both Allied Irish Banks and Bank of Ireland. However, I would like the banks to apologise to the public, as did their British counterparts before the Select Treasury Committee. There are many formulas for doing that here. That said, I compliment Allied Irish Banks on the public notice it issued in the newspapers some weeks ago. While it was not quite an apology, it acknowledged the commitment of taxpayers to the bank and set out the bank's commitment to work harder on behalf of the public. Hopefully, that will happen. Sufficient capital for our two major banks is vital.

The Minister of State spoke about the European Union. I agree we should stay in line with international best practice. I am delighted the president of the European Central Bank will visit Ireland tomorrow and that the Government is staying in close touch in that regard. We are fortunate to be part of the European Union and of the euro. This is a great strength to us in this difficult time. Hopefully, our membership will help make it easier for us to maintain ratios and raise the required level of funding on interbank markets. The Minister of State indicated that some new developments are expected and, hopefully, these will happen as quickly as possible.

I was glad to note what the Minister of State said with regard to the statutory code and that the banks will be required to demonstrate compliance, because lack of compliance is part of the reason for what has happened within our system. There was a lack of compliance, too cosy a relationship among bankers and a total breakdown of the Financial Services Regulatory Authority's ability to deal with the banks. Clearly, it was not fit for the purpose. I agree there should be an amalgamation of the Central Bank and the Financial Regulator.

The availability of working capital to small and medium-sized businesses is a matter of concern to all. We are just as concerned with regard to first-time purchasers seeking mortgages, which are not being provided in large numbers currently. However, I understand the Government is working with the banks to follow through on this and commit funds for people seeking mortgages. Long-term big business customers of the banks are pretty well all right, because the banks continue to deal with them and in the two major banks senior lenders are designated for that purpose. I would like to see more of this approach available to other customers. The Minister of State suggested this should be the approach in his speech and I welcome that. The bigger clients of the banks are having their loans rescheduled or rolled over and interest is being deferred. I do not say this should not happen, especially where these clients have a good record. Hopefully, the current difficulty for small enterprises is only temporary and we will get through it, even if it lasts for longer than first expected.

I welcome the action of the Office of the Director of Corporate Enforcement and have great faith in that office. In the past the Government left the office short of staff, but I hope it now has sufficient staff to deal with the business in hand. The office is constrained by law to deal only with company law and matters and will do that efficiently, no doubt, in Anglo Irish Bank. However, with regard to inter-transactions between Anglo Irish Bank and Irish Nationwide and Irish Life & Permanent, the law may not meet the requirements and may not allow it to go into the affairs of Irish Nationwide, which is a building society, or the other institution. Will the Minister of State address that issue in his response?

Photo of Alex WhiteAlex White (Labour)
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I am glad to have the opportunity to support the Fine Gael motion. I have noticed repeatedly on Private Members' business and across the board that Senators on the Government side of the House frequently complain about the Opposition's refusal to be positive and co-operative. Senator Boyle got particularly exercised in this regard this evening in his contribution. Senator Hanafin mentioned this too, but was somewhat less exercised on the issue.

I find it difficult to take the frustration of the Government side seriously because the Fine Gael motion is very reasonable. I cannot see how any reasonable person, including Members on the Government side, can argue with the motion. However, the Government side proposes to delete the Fine Gael motion and substitute its own for it. This goes to the heart of the issue of co-operation and Opposition politics. If Senators Boyle, Hanafin and others are serious about wanting co-operation, why do they wish to delete the Fine Gael motion and replace it with their own?

I can understand that some aspects of the Fine Gael motion might give some pause to the Government side of the House. It might find it difficult to agree to phraseology that calls on the Government to take more decisive action to restore the reputation of the Irish banking system. I understand too it might find it difficult to accept one or two other aspects of the motion, and if I was on that side of the House, I might want to amend or vary those aspects. However, I see no reason for the Government side to strike down the basic thrust of the Fine Gael motion.

The motion recognises that the reckless and incompetent management, regulation and oversight of the domestic Irish banking system has damaged domestic and international confidence, that the Irish economy cannot recover from the deepening economic depression without a functioning banking system that enjoys the trust of depositors and everybody else and the public perception that the resolution of the banking crisis is being manipulated in the interests of powerful and wealthy elites. Perhaps the Government spotted itself in that phrase, but it does not necessarily refer to the Government. Perhaps there is some paranoia in that regard. The phrase "powerful and wealthy elites" does not necessarily mean the Fianna Fáil Party and could be a reference to other people.

I see no reason therefore for scrapping the Opposition motion and introducing a totally new amendment. I have made the point before that I am relatively new to this forum, but——

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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No barrister is new to the procedure of the House.

Photo of Alex WhiteAlex White (Labour)
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Leaving aside anything to do with the legal profession, I have been dealing with motions and amendments to motions since I became involved in student politics. Then, the view was always taken that if one was to amend a motion and suit it to one's own argument and point of view, it would not be done with a blunderbuss or hatchet. One would go through it and select the parts one agreed with and the part one wished to delete and where one wished to substitute one's own point. That is the spirit and kind of co-operation Government Senators claim they want from the Opposition. However, when they have the opportunity to make common cause with the Opposition on an issue such as this, they take a different approach. We cannot take them seriously with regard to co-operation given that approach.

I welcome the Minister of State. He raised a number of issues in his reasonably comprehensive speech in terms of what the Government is doing or attempting to do in this matter.

I do not know whether the Minister of State will have an opportunity today but perhaps the following issues can be addressed on another occasion. The Minister of State referred to the code of practice on mortgage arrears. He stated the code will ensure mortgage lenders can only commence legal action for repossession six months from the time arrears first arise. I have a serious concern as to whether the length of time that will be allowed for this moratorium is sufficiently generous or lengthy.

I am aware, as I am sure are others, that already in the courts there is, appropriately and reasonably, a measure of indulgence — if this is the right word — given to people who have difficulty making repayments in respect of mortgages and bank loans. It is very rare, particularly on the first or second and often on the third and fourth occasion for a judge to make an order for repossession. Already there is an element of flexibility in the system. I would not like to see this being zeroed and replaced by the new code and period.

The new period being allowed should be added on to the existing flexibility in the system and not be a replacement for it. I do not want to see the banks simply adopting a position of pocketing the flexibility that is there already rather than affording to people an additional element of flexibility and a longer period of time and moratorium than is already there in practice if not by reason of law or any code.

Colleagues dealt with the question of regulation in the course of the debate. I welcome, however belated it is, recognition on the part of the Government and its spokespersons of the importance of regulation. Until recently, regulation was almost a dirty word in debate about economic matters and business. Now it is back in vogue and everybody is in favour of it and this is good. I was always in favour of a fairly high level of regulation. I am not a convert to this as are some people. I do not mean the needless officious regulation we sometimes see. There was always a very compelling argument, in good times and in bad, for a very high level of regulation of the banking and financial industries. We lost sight of that and now we have almost to reinvent a regulatory system given the crisis we face.

I note the various bullet points set out by the Minister of State and I am a little frustrated. I would prefer to see the Government making one solid clear statement of principle and intent in terms of legislation to be introduced urgently in these Houses in respect of regulation. I get a little concerned when I see not one clear bullet point but four or five. When there are four or five different answers to a question one does not have any answer to a question. The regulatory authority is reviewing its overall strategic regulatory approach, the Financial Regulator business process review is now close to finalisation, the Financial Regulator is processing a strategic plan for 2009 which will address the EU and guarantee scheme, new regulatory proposals are being made at EU level and ECOFIN is also getting involved. I do not state that any of these initiatives are unimportant. However, I would prefer to see a single clear commitment from the Government as to its intentions in respect of introducing a vigorous regulatory regime.

In respect of accountability, the Minister of State stated, "We have already seen a number of senior people stand down for various reasons and the Minister is quite clear that more will follow when that is appropriate". If the Minister is clear that more will follow, he must be clear that there is wrongdoing or potential wrongdoing on the part of those persons. If he is clear there will be further resignations why must we wait? How long will we wait? What exactly does the Minister mean?

I wanted to make some points on the Labour Party's proposals in respect of bank regulation and how to deal with the crisis but I will not have an opportunity to do so. I will flag the fact that they exist so the Minister of State is aware of them.

With regard to pay, the committee will report next week on 5 March, but why was a committee required to deal with the issue of pay? I cannot understand this and I want an explanation for it.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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Cover.

Photo of Alex WhiteAlex White (Labour)
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Of course, one subcontracts many of these matters so one does not have to make a decision. President Obama can make an executive decision that there will be a maximum pay of $500,000. He just made a decision.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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He did have to revise it since.

Photo of Alex WhiteAlex White (Labour)
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Then he made two decisions. Let us have a decision from the Government.

Photo of Marc MacSharryMarc MacSharry (Fianna Fail)
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I welcome the Minister of State and I am glad to have the opportunity to make a couple of points on this most important issue. I thank the Opposition for using its Private Members' time to debate this issue because it is the single most important matter facing the country. We cannot overstate the unprecedented nature of the position we are in.

In recent days, I made a point in the House quoting Dan O'Brien who is with the Economist Intelligence Unit of The Economist. He is an Irishman based in Geneva and one sees him from time to time on various programmes. Recently, he made an analogy on where we are at present when the entire international banking system has seized and collapsed. We are all at point A, which is an earthquake zone where one must keep one eye on the sky or roof for fear something might fall on us and one eye on the floor to ensure we do not lose our footing as the ground is moving. We are trying to get to point B but nobody in the entire planet has managed to identify where is point B and nobody has been able to identify what vehicle or path should be used to get there when one identifies where it is. Dan O'Brien also stated that the most prudent moves, therefore, are to take baby steps in approximately every direction.

I like this analogy because it appears to be what is happening internationally. Recapitalisation has been tried as have guarantees. The idea of an aggregated bank or insurance scheme has been mooted. However, it would appear that the market adjudicating on all of these issues has given mixed signals and we continue to try to evolve a solution to the international crisis in which we are.

I support the Government amendment to the motion. As this situation has evolved the Minister of Finance and the Government have taken the appropriate actions. We had the guarantee scheme, the nationalisation of Anglo Irish Bank and recapitalisation to try to restore a level of confidence to the financial system. Other problems emerged along the way.

With regard to Anglo Irish Bank, the palpable anger and frustration among the public is fully understandable. I share it. I am angry and I want a pound of flesh. I want people to be punished for any wrongdoing which was carried out. In this country, as all the criminal lawyers in the House well know, we have what is called "due process". As I stated on other occasions, it is not possible to return to medieval times and set up a guillotine on Leinster Lawn or in St. Stephen's Green and begin beheadings based on our opinions, which may be justified ultimately, of an individual's guilt or wrongdoing.

Due process takes time. Today or yesterday on the Order of Business Senator O'Toole pointed out that if a murder is carried out often it may be two years before somebody is convicted albeit that he or she may have been arrested on the day the murder was committed. Due process will take time. I am as anxious as any self-respecting Member of the Oireachtas of all parties and none who want to see justice done. We are going through the appropriate measures in terms of the Office of the Director of Corporate Enforcement, the Financial Regulator and the various agencies within the Garda Síochána. We saw a quite public display of that yesterday as part of that due process. However, I am afraid it will not be possible to increase the speed or have lynchings at dawn to satisfy the desires of those who are effectively expressing personal opinions. Although the evidence is very compelling, we must have due process. Due process will occur.

I would like to see us maintaining some agility and an ability to improvise and adapt to the ever-changing environment. The rate and type of change over recent months have been simply inconceivable and nobody could possibly have predicted the magnitude of what has gone wrong in international financial markets and in terms of asset values, nationally and internationally. There is no question that substantial mistakes have been made. Ireland is no different from anywhere else in this regard. If we knew some time ago what we know now, different steps would have been taken.

I agree with Senator Alex White that it would be wonderful to have a single regulatory measure or recommendation to solve all problems but I regret this is not possible. The numerous points being made in the amendment are vital. It is clear we will need some kind of pan-European, if not global, set of basic rules to which we must adhere from now on. Until we have this and follow the rules globally, recovery will be a step further away than we desire. I share Senator Alex White's sense of urgency in wishing for us to identify a regulatory measure but unfortunately we can only play our part in a European and global context. I would like to see this addressed as a matter of urgency but I welcome the measures that have been adopted thus far.

While we are all angry over how business was conducted over recent years, we must acknowledge there are many good people working in our banking system. Their morale is particularly low at present. We should spare a thought for the vast majority of personnel who work within the industry in Ireland because they have done their jobs to the best of their ability.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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The Senator's time has concluded.

Photo of Marc MacSharryMarc MacSharry (Fianna Fail)
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A change at the top of all the institutions would not harm confidence at this time. That is not to say everybody should be disposed of but we need to see very significant personnel changes to restore confidence.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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The Senator's point is made.

Photo of Marc MacSharryMarc MacSharry (Fianna Fail)
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I hope the Government will do what it can to ensure we have the right staff in charge of the banks.

I would like to see young people in their 30s and 40s in the banking sector. One does not have to be in one's 50s, 60s or 70s or have a long list of associations with a particular sector to do a good job. I would like the Government to be——

Photo of Alex WhiteAlex White (Labour)
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Some of the younger guys were the worst.

Photo of Marc MacSharryMarc MacSharry (Fianna Fail)
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I am sure they were. I am not being ageist but saying we should employ some.

Photo of David NorrisDavid Norris (Independent)
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I understand the Acting Leader is prepared to allow an extension. I had intended to share time with Senator Doherty but, if time is very limited, it will not be possible to do so.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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We have until 7.10 p.m. What can we do?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I am prepared to stay to listen to the two Senators.

Photo of David NorrisDavid Norris (Independent)
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That is very gracious of the Minister of State.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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I am advised the Minister of State cannot move an amendment to the Order of Business.

Photo of David NorrisDavid Norris (Independent)
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Senator Hanafin can do so.

Photo of John Gerard HanafinJohn Gerard Hanafin (Fianna Fail)
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I wish to move an amendment to allow the two speakers to contribute in light of the fact we had a late start because of the vote in the Dáil. The Senators may speak until 7.20 p.m.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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The proposer will be called at 7.15 p.m. to reply. Is that agreed? Agreed.

Photo of David NorrisDavid Norris (Independent)
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I wish to share time with Senator Doherty.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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Is that agreed? Agreed. The Senators have five minutes each.

Photo of David NorrisDavid Norris (Independent)
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I am very pleased to be able to contribute. I thank the Minister of State and Senator Hanafin for graciously being flexible to allow it to happen. I will not fire all my shots on this occasion because I am seeking, and will continue determinedly to seek, a rolling debate on finance, to take place every week. One reason I want to speak is because I know the way in which the Leader of the House tends to pick people off. If I did not speak tonight, I would be asked why I did not bother doing so when I had the opportunity.

With regard to what Senator MacSharry said on the leadership of the banks, the banks have betrayed us. Every single one of the four principal pillars of this country — priests, politicians, lawyers and bankers — has let us down. There is an analogy with the church because there are decent priests in the church who are afraid to go out. They, in the aftermath of the scandals over sexual abuse, have been spat upon. They are decent people and the same is the case for front-of-house staff in the banks. I know this and never attacked the ordinary, decent front-of-house staff. By God, for years I have had disagreements with the banks. They never wanted to know the ordinary, decent customer. They were established to look after and manage savings and keep safe the earnings of ordinary, decent people. They then pushed us out and did not want to be dirtied by ordinary people. They chased speculative profits and that is why the current circumstances have arisen and why the unfortunate front-of-house staff get attacked.

I have a couple of remarks on the general area of finance. We are always talking about Seanad reform and there is supposed to be a committee sitting to discuss it. I do not know what the committee is doing and the only thing it seems to be doing is targeting university seats, in the name of democracy, although those seats comprise the only democratic element in the whole bloody place. Let the committee take on board the question as to why Senators are treated as some kind of intellectual and moral halfwits such that they are not allowed to have anything to do with money. We can prate here for as long as we like but, under the Constitution, we are not allowed to spend or supervise the spending of one single brass farthing. Let us address this.

Let us consider the question of the nationalisation of the banks. Everybody is saying it is a great idea and that we must recapitalise etc. I made a few suggestions in this regard, one of which is that we should sequester all the rotten, speculative property. It will increase in value at some stage. Let us take it from the speculators, take it out of the books of the banks and put it under the aegis of a particular body. I am not suggesting a toxic bank but a national property management agency similar to the National Treasury Management Agency. It should be staffed by proper professionals who can mange the properties and eventually make a profit. Let the property owners have 10% of the proceeds as a gratuity at the end of the process.

Nobody can wave the Constitution in front of my nose and say property is protected because it is dependent on the governing clause, which refers to the public good. I doubt any person on this island would say to me the public good is better served in the interest of a tiny number of people who have ripped off every decent citizen in the land rather than in the interest of the ordinary people. My argument could clearly be sustained.

Let us have a bit of leadership. Reference was made to President Obama, who did at least talk clearly, intelligibly and forthrightly. I have always listened to Senator MacSharry, who is usually very good, but tonight I had no idea what he was talking about. He referred to what seemed to be some kind of financial octopus moving in many different directions at the same time in baby steps. What in the name of God does that mean? Can the Tánaiste be kept off the airwaves as she does not inspire confidence? I will restrain myself to making that point. Can we please get somebody who knows what he or she is talking about?

Will the Minister of State please ask the banks to learn a little? Why are they handing out below-cost mortgages? Yesterday morning people were receiving offers of unsecured loans to the value of €9,000. What happened to the notion of collateral? The senior management of banks should be cleared out. Who should they be replaced with? Not hedge fund managers. I laughed hollowly when at the weekend I noticed our two former taoisigh, Garret FitzGerald, retired from a hedge fund, and Deputy Bertie Ahern, who was off in Tegucigalpa collecting large sums of money for talking to the misfortunate, misguided inhabitants over there about the Celtic tiger. He apparently has not realised that particular animal picked up a thorn on its back foot fairly recently.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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Senator Norris is eating into Senator Doherty's time.

Photo of David NorrisDavid Norris (Independent)
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I will not eat into but I just serve warning that I have a lot to say and I hope the Minister, Deputy Mansergh, will be there because I wish to examine the philosophical basis of the whole thing, including definitions of money and what is behind the market.

I am sorry to see this stuff about competition is still here. I voted against the abolition of the groceries order. Was I right? Everyone said that would result in lower prices but I knew it would not, that it would serve the interests of supermarkets. That is one thing. The Competition Authority was so stupid it did not even provide in the Bill for advertising an open competition for the chief executive's post — until I put it in — and then it missed the date when one of the major international corporations was supposed to be examined. It forgot about it until it was too late. Do not give me the Competition Authority.

Let us look at the ESB. We were told the ESB could not reduce its prices, as the regulator would not allow it because of competition. The idea behind that was to keep the prices high so that we could suck in people from outside to undermine our own State utilities. Let us preserve the public service.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Chomh maith leis an Seanadóir Norris, ba mhaith liom mo bhuíochas a ghabháil leis an ceannaire sa suíochán anocht fá choinne síneadh ama a thabhairt dúinn ar an díospóireacht seo. Is ceann de na hábhair is tábhachtaí é a tháinig os ár gcomhair sa tír seo. Is ábhar é atá i mbéal an phobail ar fad, an dóigh atá na bancanna ag láimhseáil iad féin le blianta anuas.

I thank the Acting Leader for extending tonight's debate because it is a hugely important one. I will support the motion tabled by the Fine Gael Party.

Senator MacSharry is right. The Government is taking baby steps in every direction. He is correct; the Government is all over the place on this issue. It does not know if it is coming or going. What is going on is laughable but, unfortunately, it is far too serious to be laughing about it. The Government does not know what to do. We know the ground is changing all the time but the Government needs to take decisive action and it needs to show leadership. This type of hokey pokey dance the Government is doing around the future of the banking and financial system, and of this country, is not good enough. We are losing credibility internationally and people are suffering as a result.

It has been five months since the Government, the Central Bank and the Financial Regulator had in their possession the PricewaterhouseCoopers report and it was only yesterday that the Garda raids took place on the headquarters of Anglo Irish Bank. That begs a serious question. Does the Minister really believe that the incriminating evidence will still be there five months after the report was in the Government's hands and many months after the dirty deeds were done? Everybody on this side of the House knew Anglo Irish Bank was rotten to the core. At the time of its nationalisation we said the bank was poison but nobody could believe the extent of the corruption that was endemic in that institution. What the Minister and his colleagues asked us to do in January was to nationalise a bank that had given €800 million to six customers, was involved in a €6 billion transfer with Irish Life & Permanent and had given out €180 million in loans to its directors. The report said the bank had large exposures. There was a duty on the Government to tell the public about the toxic debts before asking the taxpayer to take on the burden.

Last Saturday 120,000 people marched on the streets of the capital because of what they perceive as a gross injustice in the Government making lower paid workers pay for the mistakes of the Minister's party and of bankers. It has been said time and again and everybody knows it, that we are all willing to accept our share of the pain, but the fact is the Government is letting the banks and their executives away with embezzlement and fraud.

The time has come for action. That means taking bold steps. We called yesterday for the freezing of the accounts of senior executives such as Mr. FitzPatrick and others who have been involved in the fraud that has been exposed over many months. We must start to ensure banks lend to people. The Government must take control of banks such as Bank of Ireland and AIB and do something that is positive and stop allowing the drip feed of negativity regarding what is happening in the banking sector to come out as it is damaging our credibility internationally.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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I welcome the opportunity to say a few words on the motion. Like other Senators, I cannot believe the Government Members will not accept it, as it is a good motion and I do not think they can disagree with any aspect of it. We call on the Government to replace the current board and senior management of the Financial Regulator, to give the Office of the Director of Corporate Enforcement the lead role, to reveal the names of the golden circle, to set a cap of €250,000 on bank salaries, and to open up the appointment of the next Governor of the Central Bank to international competition.

The motion is simple and if accepted by the Government it would give confidence to the markets and the country. The Government amendment will give no confidence to the markets. When he was proposing the recapitalisation of the banks the Minister for Finance said it was all about confidence in the markets. He said that again when he was nationalising Anglo Irish Bank and he repeated the mantra recently. Every time the Minister said it, the markets went in the exact opposite direction.

The Government amendment would certainly not give any confidence to the markets. The Minister, Deputy Mansergh, stated the ongoing investigation has a criminal dimension to it. Who decided the matter had a criminal dimension? At what stage was the Garda called in and why? Most of the information was available since last September or October and I do not understand why it took so long for action to be taken.

The Minister, Deputy Mansergh, paid tribute to the taxpayer who is ensuring stability and referred to the need to secure the position of account holders, mortgage holders, businesses and entrepreneurs. He did not mention shareholders at any point nor investment in the banks. That is what gives confidence. There is no confidence in the banking system at present. Why would anyone invest in one of the Irish banks? Why would anyone invest money in banks that are going down the tubes? The Minister is at variance with the Government amendment. He is saying he wants to instil confidence in the markets but no reference was made to the shareholders. We can rightly see why the share price of all the Irish banks has gone to the floor. I urge Government Members not to press the amendment and to accept and take on board the motion tabled by Senator Twomey. We could see confidence restored to the markets.

Photo of Nicky McFaddenNicky McFadden (Fine Gael)
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Hear, hear.

Amendment put.

The Dail Divided:

For the motion: 25 (Dan Boyle, Martin Brady, Larry Butler, Ivor Callely, Ciarán Cannon, Donie Cassidy, Maria Corrigan, Déirdre de Búrca, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Lisa McDonald, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Denis O'Donovan, Fiona O'Malley, Ned O'Sullivan, Ann Ormonde, Kieran Phelan, Jim Walsh, Mary White)

Against the motion: 18 (Ivana Bacik, Paddy Burke, Jerry Buttimer, Paudie Coffey, Paul Coghlan, Maurice Cummins, Pearse Doherty, Paschal Donohoe, Frances Fitzgerald, Nicky McFadden, David Norris, Joe O'Reilly, Joe O'Toole, John Paul Phelan, Eugene Regan, Brendan Ryan, Liam Twomey, Alex White)

Tellers: Tá, Senators Camillus Glynn and Fiona O'Malley; Níl, Senators Paul Coghlan and Maurice Cummins.

Amendment declared carried.

Question put: "That the motion, as amended, be agreed to."

The Dail Divided:

For the motion: 26 (Dan Boyle, Martin Brady, Larry Butler, Ivor Callely, Ciarán Cannon, Donie Cassidy, Maria Corrigan, Mark Daly, Déirdre de Búrca, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Lisa McDonald, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Denis O'Donovan, Fiona O'Malley, Ned O'Sullivan, Ann Ormonde, Kieran Phelan, Jim Walsh, Mary White)

Against the motion: 18 (Ivana Bacik, Paddy Burke, Jerry Buttimer, Paudie Coffey, Paul Coghlan, Maurice Cummins, Pearse Doherty, Paschal Donohoe, Frances Fitzgerald, Nicky McFadden, David Norris, Joe O'Reilly, Joe O'Toole, John Paul Phelan, Eugene Regan, Brendan Ryan, Liam Twomey, Alex White)

Tellers: Tá, Senators Déirdre de Búrca and Camillus Glynn; Níl, Senators Paul Coghlan and Maurice Cummins.

Question declared carried.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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When is it proposed to sit again?

Photo of Donie CassidyDonie Cassidy (Fianna Fail)
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Ag 10.30 a.m. amárach.