Wednesday, 18 February 2009
Dáil Eireann Debate
Deputy Enda Kenny: We are worse off than we were yesterday. What is at stake is the liquidity and independence of the Irish banking system and our country’s finances. Yesterday’s news did not do us any good; we are worse off politically and economically than when we asked questions in the House yesterday.
When the Taoiseach was elected, I respected and believed his call that he would work hard and make his decisions in the interests of the Irish public. The Irish public is not being served by what is happening now, nor is Ireland’s interest. The Government that the Taoiseach leads has been far too timid about the situation in our financial institutions. The finger can be pointed at the Government for a lack of oversight, real regulation and activity as our country edges ever nearer to further economic depression. The Green Party — whose Ministers are not in the Chamber again this morning — will bleat in the distance for resignations and action, but the posteriors of its Ministers are super glued to their seats at Cabinet.
Yesterday I asked the Taoiseach when he was informed of the transactions between Anglo Irish Bank and Irish Life & Permanent. I asked him if he was aware that any member of the Cabinet in any way encouraged, was associated with, or supported that activity. The Taoiseach did not answer that question. On 29 September, when the Taoiseach discussed the offloading of shares in respect of the Quinn position, was he not aware how this would be financed? Did he ask questions about this? The Taoiseach is aware that section 60 of the Companies Act 1963 makes it illegal to transfer shares in this manner, except in certain circumstances. Does the Taoiseach agree there was a fraud perpetrated on the Irish Stock Exchange?
When did the Taoiseach find out about these transactions? Was any member of his Government in any way associated with this? Why did the Taoiseach not ask questions about how the transaction in respect of Mr. Quinn was to be financed?
The Taoiseach: I reject the Deputy’s contention. I also reject the idea that he does not wish to impugn my integrity when he has been putting out statements that impugn my integrity. I would rather Deputy Kenny desisted from that sort of hypocrisy.
The Taoiseach: What is suggested in the briefing by Deputy Kenny and his people is that I am protecting someone. I am not protecting anyone but the Irish taxpayer and the Irish national interest. That is my sole concern.
The Taoiseach: One of the points raised by the Deputy was whether the Ministers in the Taoiseach’s Cabinet entourage supported a €300 million deal with select golden circle customers of Anglo Irish Bank. We were not involved with this, it was an internal bank matter. It had nothing to do with members of Government or any parties in the Government.
The Taoiseach: I am entitled to reply to the question, Deputy Durkan. Of course, the old tactic is that if one throws enough muck some of it might stick. That is one of the reasons Fine Gael is so often on that rather than this side of the House.
The Taoiseach: It is the old tactic. I want to make it clear to Deputy Kenny that every decision taken by this Government in respect of trying to handle a difficult financial crisis has been in the interest of the taxpayer and in the public interest, and in the interest of no one else. The Deputy asked about 29 September but there was no discussion on 29 September on those matters. What was being discussed at that time was the fact that we were facing the possible collapse of the Irish financial and banking system unless the Government was prepared to provide a guarantee to that system. That is what we did. In doing so we provided greater stability to the system.
The Taoiseach: I have made it abundantly clear that far from seeking to protect anybody, which is the nice juvenile conspiracy theory the Opposition has been going around with for the last three weeks——
The Taoiseach: I did not interrupt the Deputy. As a result of the due diligence undertaken on behalf of the Department of Finance, questions were referred to the Financial Regulator, which are now being investigated by the statutory authorities concerned. This suggestion of protection——
The Taoiseach: The only way in which that principle of accountability can be achieved is to respect due process. The one way to ensure that people with far more resources than the Deputy or I can avoid accountability is by not respecting due process.
The Taoiseach: It is fundamental to trying to get to the bottom of this problem. One of the ways we can ensure confidence in our system, externally as well as internally, is to confirm that those who have the independent statutory authority to investigate these matters are doing so. As far as I and the Government are concerned, recognising their independence, they cannot come to a conclusion soon enough. Whatever facts must be dealt with or whatever further processes must be instigated can then be initiated. Let us be clear that this is the motivation of Government in respect of that matter.
The Taoiseach: ——in terms of the leadership that must be displayed in the country and this House, it is true to say that our financial system, like others, is under continual stress. The credit crunch and the ability to access markets and credit remains a challenge facing this system now more than ever. I hold absolutely no brief for anyone who would besmirch the reputation or integrity of Irish banking domestically or internationally because of the difficulties it brings, exacerbating an already difficult position.
The Taoiseach: Those are the two principles upon which we are seeking to deal with these matters. There is no other motivation or reason. I reject with contempt any suggestion that I am in the business of seeking to protect anybody or do something in that respect. It is really about the Opposition seeking political advantage.
Deputy Enda Kenny: It is not the first time the Taoiseach has descended into casting aspersions on other people’s judgment capacity. I am glad the Taoiseach has accepted that I did not impugn his personal integrity. I will follow up with some of the questions he did not answer.
Deputy Enda Kenny: Is it not a fact that the Government was in possession of information two months before it was prepared to put €1.5 billion into Anglo Irish Bank, when one could certainly say there was fraudulent activity going on? The Government was quite prepared to put €1.5 billion of taxpayers’ money into it.
Deputy Enda Kenny: The Government knew about this when discussions were taking place. The Taoiseach might confirm the report that the transaction of the €300 million — not to a golden circle but a toxic circle — was overseen by a British finance house. Is that true? If that was the case, was the Financial Regulator and Central Bank in possession of all the information in determining whether the transaction was legal?
Deputy Enda Kenny: There is a chasm of anger out there. The Taoiseach is in a position to do something and send out a message both nationally and internationally that a change of direction is taking place in Irish banking and financial institutions, in which we now have no trust or confidence.
Who made the decision not to pursue the ten members of the so-called golden circle? Is the Government not going to go after these people? I listened to the chairperson of the Green Party this morning on the radio. When the Minister for Finance, Deputy Brian Lenihan, came in to speak about nationalisation of the bank, he referred to the concealment of loans to directors, the scale of those loans and the damage done to the reputation of Anglo Irish Bank and Irish banking in general. We were told the Government would go after those loans to balance those books.
Deputy Enda Kenny: If a decision has been taken not to pursue these ten persons, that will not happen either. The Government states one thing with regard to nationalisation, while in possession of those facts, yet it does not act.
Was this transaction overseen by a British finance house? Was the Financial Regulator, the Central Bank and, therefore, the Government fully informed as to what was going on? Who made the decision and why has a decision been made not to pursue the ten persons in respect of the €300 million overhang from Quinn? What action will the Government take to send out a message internationally that this country is a good place to do business and banking?
The Government cannot do this unless it shifts persons in the boards and management structure. There are good people in all our banks. It is nothing personal but the message is all wrong. The Taoiseach is in office but not in charge.
The Taoiseach: I thank the Ceann Comhairle. There were a number of issues to which I wanted to respond. Deputy Kenny spoke about the need to be responsible and is worried about our international reputation. I heard him saying in this House only two weeks ago that our banks were bust. That was a nice statement from the Leader of the Opposition.
The Taoiseach: On the specific matters he asked about, I heard in comments this morning that the Cabinet had made some decision to ensure people were not pursued in respect of any liabilities they may have. Nothing could be further from the truth; the Cabinet made no such decision and it is not our business to make such a decision. We have nationalised a bank, which is now in the ownership of the people, so it can pursue, to the greatest extent it possibly can, all liability and debts due to it. That was the purpose of nationalising it.
If it were the case that we had not nationalised the bank and if the loss of market confidence was such that it could not maintain its deposits and it went into default, the taxpayer would have had to pick up the tab.
The Taoiseach: The reason we have nationalised the bank is to ensure the bank functions and we retrieve whatever debts are due to it to the greatest possible extent in respect of any transaction in the bank. We made it clear that the management and board of the bank will do so according to normal banking practice. They will not be interfered with on a day to day basis by this or any other Government that would have enough sense to know how that should proceed. That is another canard that has been thrown out as part of the rumour machine we must contend with.
I have made the point clearly that in respect of the proposed recapitalisation at the time, in the statement we made on 23 December, on Anglo Irish Bank we were talking about taking a 75% stake in the bank to provide capital of up to €1.5 billion to it. Upon deciding that, with the loss of market confidence being such and the governance issues that were arising, we said we would have to nationalise the bank because there was no market confidence in its ability to continue under those structures. We nationalised the bank; we have not put money into it yet but we stand ready to support it.
That is the decision we made and it is at great variance with the suggestion we made about the recapitalisation of the other two banks at that time, a €2 billion capital injection plus €1 billion underwriting that would be supported by the Government in return for a 25% share if the private capital was not raised. It is a totally different transaction, taking into account the very different situation for Anglo Irish Bank compared to the other two main banks.
The Minister for Finance has indicated that we regard regulatory reform as a priority and that we must proceed with it to change the structure, how we provide regulation and its type. That is a challenge not only for this jurisdiction, but for every jurisdiction that must face this financial crisis. This is not unique to Ireland, although I am not suggesting in any way that is a factor. We must ensure, on the basis of the facts before us, that we have a new regulatory regime.
On this question of the transaction undertaken by these individuals to help to unwind the CFDs that had been built up in the Quinn stake in the bank, the issues that are arising now on that arose because of a due diligence undertaken, I again emphasise, by people acting on behalf of Government. If the contention now is being made that in some way we nationalised a bank to protect people——
The Taoiseach: ——of the country. If it is being contended by those who would not even support the guarantee, let alone the recapitalisation of the banks, that we should allow that bank to default, clearly the situation would have been a greater liability for the taxpayer. We need to make sure Anglo Irish Bank gets on with its business, including the repayment of debts due to it.
Deputy Eamon Gilmore: The Taoiseach stated yesterday that he did not know the identity of the ten wealthy investors who constituted the golden circle in Anglo Irish Bank. Has he found out who the ten are since? When will he find out and when will he tell us? We must be told because the people own this bank and we are stuck with the €300 million they gambled recklessly. The golden circle must be named.
The Taoiseach made an interesting statement yesterday. He told us that he, the Department of Finance, when he was Minister, and the regulator became of aware of what he called the “overhang” of the Quinn interest in Anglo Irish Bank in March 2008 and that they concluded it was a source of instability in the bank. That overhang was assembled by the Quinn group using a method known as contracts for difference, an arrangement whereby the person does not buy the shares, he or she effectively gambles on them, buying an interest in whether they go up or down. Why would someone use contracts for difference to acquire an interest in a bank or other body rather than buying the shares? One reason is that contracts for difference have a different tax treatment from the purchase of shares. Stamp duty is payable on shares whereas contracts for difference are not liable for stamp duty.
The Revenue Commissioners rumbled this back in 2006. On St. Patrick’s Day 2006, the Revenue Commissioners issued a compliance notice to the effect that contracts for difference would have to be subject to stamp duty. Within days, the Taoiseach, as Minister for Finance, caused the Revenue Commissioners to reverse that decision and to withdraw the compliance notice. He did so after being lobbied. We know he was lobbied because in reply to questions from Deputy Burton and Deputy Rabbitte shortly after that, he acknowledged that he was lobbied. The day after the compliance notice was withdrawn, the shares in Anglo Irish Bank increased by €0.30 and 3.7 million shares in Anglo Irish Bank were traded.
Will the Taoiseach tell the House who lobbied him in March 2006, causing him to direct the Revenue Commissioners to withdraw the compliance notice days after it had issued? This caused a situation to continue whereby trading in contracts for difference without tax liability continued, resulting in the overhang of Quinn shares in Anglo Irish Bank, among other things, which has now led to what the Taoiseach referred to yesterday as the instability in Anglo Irish Bank and all of the consequences that have flown with it, with the disastrous results for our banking system and economy.
The Taoiseach: It is unfortunate that in asking a question about 2006, Deputy Gilmore did not give me some prior notice. I cannot give him the accurate information immediately, but I will get it for him as soon as I can now that he has mentioned it here. If he had wanted an accurate answer to that, he could have put me on notice to it and I would certainly have provided it.
The Taoiseach: I will get the full explanation from the Department of Finance and will supply it to the Deputy in public in case there is any suggestion that I did something untoward or at someone’s behest. I did nothing at anyone’s behest; I did it on the basis of official advice on a matter which was having an effect on the trading of shares. That is my general recollection of 2006 but I will get the details and supply them. There is no mystery to this.
On the question of obtaining names, I have made the point — others can say differently if they wish — that the matter is currently being investigated by the Office of Corporate Enforcement and the regulator. It relates to a commercial deal done internally in a bank between the bank and its customers or investors. I do not have the details of that transaction. The independent statutory authority, acting independently, is dealing with that. If I went down to Fitzgibbon Street in the morning——
The Taoiseach: ——and asked the sergeant in charge to give me the names of the suspects in crimes A, B or C which he or she was investigating, I would not be entitled to that either. It is in the interests of due process and of ensuring the objective everyone has is achieved, which is to see if there was any wrongdoing in regard to these matters and that if there was wrongdoing, those who did wrong will have to answer for it under the law without fear or favour. That is my only motivation in regard to this matter. I have no other motivation. While I will perhaps have to put up with the smear obviously going around as a result of it, I want to make it very clear that this Government holds no brief for any individual, that it expects everyone to be treated equally before the law——
The Taoiseach: ——and that we have confidence in those investigating the matter, in particular in regard to the Office of the Director of Corporate Enforcement, who has the statutory authority on the basis of that examination to appoint a High Court inspector and to proceed. If that is his requirement and he includes two members of the Garda from the fraud squad in his staff, he will proceed with that with the full support of Government. That is the situation.
I am not prepared to do what has been suggested to me because it may, in some way, put that at risk and not because I hold any brief for anybody or for who they are, what they are or who they eventually emerge to be. That is not my motivation. I have no interest in any of that.
I am simply trying to ensure the process of investigation is concluded as quickly as possible. I ask that it is concluded as quickly as possible and that the decisions which flow from it are proceeded with. We hold no brief for anyone. The law should affect everyone without fear or favour whatever way that turns.
In regard to the other matter, I am also very cognisant — this is something the Deputy and the Fine Gael Party will know from detailed briefings with the Minister for Finance — that we are in a situation where we want to maintain stability in our financial system and ensure our financial system remains stable. That is a very great challenge in the present circumstances.
I say to people who quite rightly, as I do, wish to see emphasis placed on proper oversight, proper supervision and proper outcomes to any wrongdoing that has taken place, let us please keep our eye on the big picture too, which is to ensure at the same time, and not at its expense, that our financial system continues to operate in a way that helps to serve the economy.
Deputy Eamon Gilmore: The Taoiseach said he will provide the information to me in regard to what happened in 2006. I remind him that the information I seek is the identity of those who lobbied him in 2006 to cause him within days to reverse the decision by the Revenue Commissioners to issue notices of compliance for contracts for difference.
Deputy Eamon Gilmore: I am not so sure that it is of such insignificance that it has entirely escaped the Taoiseach’s mind because of what a commentator, whom I wish to quote, said at the time. John McManus, writing in the business opinion section in The Irish Times on 3 April 2006 days after the decision was made, stated:
That was very prescient because now we know what has happened to all those investors and to the banks now that the downturn has come. The overhang of Quinn shares in Anglo Irish Bank, which the Minister described yesterday as causing instability in the bank, brought about a situation where that bank ended up having to be nationalised, where our entire banking system has been put at risk, where repeated efforts have had to be made to restore confidence in it and where tens of thousands of people in our economy are losing their jobs as a result of a lack of credit being extended to them and as a result of what is happening in banking and the economy. That is the consequence of it.
That is what the Taoiseach was being warned about by this commentator in 2006. It was also what he was being warned about by Deputy Burton in 2006 when she raised this very issue with him. The Taoiseach this morning and Ministers put on media over the past few days are trying to spin the line that something untoward was going on in the banks, that they discovered it only lately, that they are trying to sort it out and that this is the Government acting tough with the banks. The fact of the matter is that the Taoiseach’s stewardship, as Minister for Finance, has contributed to the hole we are now in economically. The Taoiseach was at the heart of it.
The Revenue Commissioners decided these things should be taxed. Up to 40% or 50% of transactions were being done in this way. It was a form of gambling. These people were taking risks and gambling with the economy and shares. Why would they not do so? They did not have to pay tax on it. No stamp duty was being imposed. If they had to buy the shares, they would have had to pay the stamp duty. The Revenue Commissioners said they should have done so but the Taoiseach responded to lobbying from somewhere about which he has yet to tell us which reversed the Revenue Commissioners’ decision and they carried on partying, as Charlie McCreevy would say. Now we know the result. The banks and the economy are in trouble and the Taoiseach was the Minister for Finance charged with the stewardship of this. At the very least, he was unwise in the decisions he made and, at worst, he was not doing his job.
The Taoiseach: In regard to what happened in Anglo Irish Bank, the problem was that the international credit crunch brought about a situation where its business model came under immediate pressure and the market made a decision on that. Its perceived exposure on the construction side was regarded as another negative but the idea that it was just in regard to the CFD issue is stretching things considerably.
I said that the acquiring of a shareholding by Mr. Quinn through the CFD mechanism was causing concern and was referred to me by the Governor in his normal meetings with me as Minister for Finance, which are conducted on a regular basis, and was unwound through 15% of shares being converted to shares for Mr. Quinn and his family. The other 10% then arose in regard to this other arrangement which is now under investigation by the regulator.
That source of instability was dealt with in July but, unfortunately, what we are now finding out is that the nature of the transaction in regard to the shareholding made up of the investors which was referred to the regulator has now been referred to the Office of the Director of Corporate Enforcement. It has to be dealt with to see whether it was a commercial loan conducted in the ordinary course of business. There are indications that perhaps that may not be the case. That issue has to be resolved by the Office of the Director of Corporate Enforcement.
The Taoiseach: The source of instability which that created was being resolved. Deputy Kenny has suggested that the ultimate amount involved could be of the order of €300 million, but the problems in Anglo Irish Bank were far greater than that. While it is a very large figure, in the context of overall banking stability it will not have the impact suggested by the Deputy. It would be better for us to keep things in perspective. The issue here was——
The Taoiseach: Of course it did not help the situation, but that source of instability was dealt with in July and August through the mechanism we have just been discussing. However, the problem now is that an aspect of the nature of that transaction is under investigation. Those are the facts with regard to the CFD position and the unwinding of the shareholding by Quinn in that bank with regard to that matter. It is an exaggeration to associate with us and CFDs the rest of the problems of the economy, including the international recession and the depreciation in sterling.
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