Resourcing of the Garda and the Office of the Director of Corporate Enforcement: Motion

Tuesday, 2 November 2010

Dáil Éireann Debate
Vol. 720 No. 3

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Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  I move:

I propose to share time with Deputies Alan Shatter, Kieran O’Donnell, James Bannon, P.J. Sheehan and Leo Varadkar. The Government’s policy on banking has been an absolute fiasco. On every step of the road from the misguided guarantee, given under pressure in the last days of September 2008, to the recent decision to wind down Anglo Irish Bank, the policy of the Government has been seriously flawed and has led to ever-increasing estimates of the cost of the bank rescue to the taxpayer. We started at €1.5 billion on the night of the guarantee, it became €4.5 billion on the day of nationalisation. Subsequently it became €10 billion, then €18 billion, then €24 billion and has ended up at €32 billion. The guarantee was flawed and should not have covered Anglo Irish Bank.

Since the night of the guarantee in September 2008, Fine Gael has maintained that the bondholders in Anglo Irish Bank should have shared in the losses that completely wiped out the shareholders. The Minister has argued very forcefully that while some discounts could be made in respect of subordinate debt, no discounts could be made in respect of senior debtors, as in law they are the equivalent of depositors. The Minister claimed he had legal advice to this effect and I presume this is from the Attorney General. He was as good as his word three weeks ago when he agreed that €7.9 billion be paid to senior Anglo Irish Bank bondholders just three weeks ago without any discount.

The Minister may be interested in a recent editorial in the Financial Times in respect of the new policy of the Government of seeking discounts on Anglo’s subordinated debt. It states:

[552]In a deathbed conversion, the Minister has realised he can take discounts on subordinate debt held by Anglo Irish Bank. That is the faint praise in the editorial that damns. The editorial continues:

That is an astounding indictment of Government policy and of the Government’s legal advice. It shows this side of the House was correct all the time and that taxpayers have carried an unnecessary burden because the Government did not, would not, and thought it could not, get discounts on senior debt. That is the view of the Financial Times of the Minister’s actions, of his failure to protect the Irish taxpayer and of his legal advice. The Financial Times goes to every boardroom in Europe and beyond. It is a journal of incomparable influence in the financial world. Is it any wonder there are problems in the bond market and that Irish bonds were being traded up to 7.3% at close of business this afternoon? Is it any wonder the country is in trouble? When the question was raised, the Minister assured us he had legal advice to the effect that what the Financial Times is suggesting was impossible and that senior debtholders always had to be treated as equivalent to depositors under Irish law. According to today’s article, this is not true so I would like the Minister to publish the legal advice he received. Whatever about the Minister’s reputation, the country’s reputation cannot afford any more damage.

The failure to protect the taxpayer and to punish recklessness leads us on to another concept much ignored in this country, moral hazard. This concept is fundamental to capitalism — people and institutions who behave recklessly should not gain from their recklessness but should be punished and be seen to be punished as an example to others who might be tempted to take reckless measures in the future. This concept was much debated in the United States, which led to Lehman Brothers being allowed to collapse without any attempt to rescue it. There are different views of what moral hazard should be and some argue that Lehman Brothers should have been saved. As a concept, it seems to be unknown in Ireland, especially in Irish banking circles.

AIB has had a scandal in each decade. It had to be rescued by the State when ICI collapsed in the 1980s; it was exposed as being involved in widespread and systemic tax evasion in the 1990s; in this decade it has become insolvent and the State has been forced to bail it out and acquire 92% of the bank in doing so. Moral hazard does not stop at AIB. Anglo Irish Bank has wiped out its shareholders and Bank of Ireland shares were trading at 52 cent yesterday. That is some hit for those who hold Bank of Ireland shares in their elderly years as a safe place to put money — usually on the advice of bank managers who claimed people would get a better income stream from dividends than from the highest deposit interest available in the banks at the time. Irish pension funds also put money in bank shares and yet Anglo Irish Bank shares have been wiped out, AIB is practically wiped out and Bank of Ireland shares were trading at 52 cent yesterday. What do we have in terms of moral hazard? Despite these disasters, 32 of the directors on whose watch the decisions leading to the collapse of Irish banks and [553]building societies were made are still in position. The Minister’s amendment refers to the directors who have moved on. What about the 32 who were there for the past two years and held office while this was happening and served on audit and lending committees? Who are the 32 untouchables left there? I am not saying they are personally culpable but they presided over the policy that led to the disaster. The rules of capitalism are that if it happens on one’s watch, one is responsible and must take a hit. No one in Ireland takes a hit for anything. It is a case of “It will be all right”. If we had an honours system in the country, these people would have been knighted five or six years ago. When people argue about reform of this House and want Ministers to be parachuted into Cabinet without going through the electorate, these are the people who would have ended up in the Cabinet if that facility had been available to the former Taoiseach, Deputy Bertie Ahern. Until very recently the top management at AIB and Bank of Ireland were recruited from insiders. The culture of the bank has remained the same. Unreasonable targets are again being set. Staff are being pushed towards further charges on customers and salary packages are linked to achievement of those targets. The banks are not providing the stream of credit the economy needs. The Government is perplexed that the banks are not functioning as intended. Einstein said the definition of insanity is to do the same thing over and over again and to expect a different result. That is where the Government now finds itself and that is what it is doing.

I hope the inquiries of the Garda and the Director of Corporate Enforcement are speedily concluded and that the files to be forwarded to the Director of Public Prosecutions will have sufficient evidence to support prosecutions. Why does everything take so long? There is an old joke that a Mexican tourist in Ireland inquired what word was used here for mañana. The reply is that we do not have any word that would communicate that sense of urgency. Two years later the inquiries of the Garda and the Director of Corporate Enforcement continue.

How can the Government stand over an appointment to the new banking commission under the Central Bank Act of a person who wants to take Ireland out of the eurozone? Is that the kind of appointment that inspires confidence in the halls of Brussels, among the bankers in Frankfurt and in the International Monetary Fund? The Government has appointed someone well known by the media whose first statement as a commissioner is that Ireland should get out of the eurozone. God help us. It is time the Government went.

Deputy Alan Shatter: Information on Alan Shatter  Zoom on Alan Shatter  It is right that we consider why we need this motion. For too long there has been an attitude of “anything goes” in our politics and economy. We have seen a shocking disregard for the truth by bankers, developers and the Government. At the heart of our financial, economic, and sovereignty crisis has been a crisis of truthfulness. This deficit of truth has had a disastrous consequence for our country. Telling the truth is a critical requirement of a properly functioning economy and of properly functioning politics.

At the heart of Government there has been a moral void — a black hole lacking any moral compass. This was recently graphically depicted by the Minister for Justice and Law Reform, Deputy Dermot Ahern, first proposing a charge on cash withdrawals from ATM machines and then denying in this House that he had said anything of the sort. Unfortunately for him, it was all caught out on YouTube.

We must squarely face the ugly reality that under Fianna Fáil’s and the Green Party’s watch, there has been a succession of disastrous banking scandals and failures, scandals relating to State agencies such as FÁS and the Health Service Executive, reckless lending, a home mortgage crisis and a fiscal meltdown. These scandals have happened under the watch of Fianna Fáil-led Governments that have shown an almost sociopathic disregard for the truth.

For almost 14 years Fianna Fáil-led Governments have acted as the political wing of unprincipled self-serving bankers and avaricious developers. The former Taoiseach, Deputy [554]Bertie Ahern, led the troops in the charge and the former Minister for Finance, now Taoiseach, Deputy Cowen, was his financially illiterate sidekick for more than five years. Many remember the tawdry days of these dons of incompetence in their Galway tent, a tent that had all the dangerous allure for business people of a Don Vito Corleone wedding marquee. Their distinctive contribution to this Republic was to openly elevate greed in an emporium of reckless financial gambling to a plane where it was the only value in sight in our exploited, betrayed, Republic.

We have tabled this motion because this feckless Government, which has become a byword for unprincipled politics, incompetency, and financial illiteracy, cannot be trusted. Their noses were so deep into the trough that it was too late before they realised that they were leading the country in a nose-dive to economic meltdown and financial ruin. They have breached the principle of government as trust. Their incompetence has created a debt of up to €50 billion to bail out the banks and an additional debt of €100 billion to date from excessive public expenditure and left decent citizens abandoned and betrayed. We tabled this motion because this Government cannot be trusted to police the delinquent bankers and builders who were its gilt-edged clientele.

Our country needs a new attitude of responsibility and a Government it can trust. This has been explained repeatedly by Deputy Kenny, the leader of Fine Gael, with the principled consistency of a leader who puts personal integrity and responsibility first. We must do the hard work of entrenching a new attitude of responsibility, accountability and more than anything else, a new political morality. There are specific steps we must take. Those who criminally exploited Fianna Fáil’s era of light-touch regulation to do financial wrong as a highroad to wealth must be punished. Those who fabricated accounts or who carried out off-the-books or fictitious transactions to misrepresent the true financial position of financial institutions in order to lure others into detrimental deals, should realise that they have written their own tickets to a prison cell.

It is true that the Government has put a pious emphasis on making wrongdoers answerable before the criminal courts. Since 2008, when the corpse of the collapsed Anglo Irish Bank had barely cooled, the Minister for Finance, Deputy Brian Lenihan, solemnly pledged to make gangster bankers answerable. There have been no prosecutions to publicly vindicate the fundamental importance of truthfulness in the marketplace. Let us make no bones about it; public trust in the Government to make bankers answerable for their wrongs has collapsed. Any true commitment to the rule of law demands that we confirm that the powerful are not above the law and that where appropriate criminal prosecutions are initiated expeditiously. Few in this State believe that those truly responsible for our banking disaster will be brought to justice. This Parliament, this Dáil, must do all it can to prove them wrong and to ensure any obstacles to justice taking its course constructed by Government are dismantled.

The Garda Commissioner’s recent statement in Templemore Garda college indicates that he is aware that there is a growing public mood for the two-year investigation to yield results soon. He warned, however, that investigating fraud is a complex and time-consuming exercise. He is right. He reported that approximately 150,000 e-mails and other communications are being examined, that up to 400 witnesses have been interviewed, and that some witnesses have given statements of up to 150 pages long. While that is reassuring it is not the point nor is it enough. I have no doubt the Garda is doing Trojan work.

Speaking also in Templemore, the Minister for Justice and Law Reform, Deputy Dermot Ahern, dishonestly presented himself as some sort of detached commentator with no responsibility for bad decisions made by the Government of which he is a part. He said “nobody is more annoyed” than Cabinet Ministers over past banking practices. He stated: “Unfortunately, [555]outrage and anger is no good in a book of evidence. What you have to get is hard evidence.” On the issue of the investigation concluding, he said “the sooner the better”, but that it is entirely a matter for the appropriate prosecution authorities. One would think that the Minister was inhabiting the planet Zog at the time when Government supported light-touch regulation and not sitting in Cabinet and bound by collective Cabinet responsibility for the banking disaster, some of the unnecessary expenditure incurred in trying to prop up banks and excessive general public expenditure which is at the root and core of the destruction of the economy.

The same Minister should have, but failed to put in place a distinctive, adequately resourced, cohesive, inter-agency unit with a mission to complete the banking investigation expeditiously. Not only that, but he has failed to clarify the ambit of the investigation. Some 150,000 e-mails and witnesses’ statements of up to 150 pages is a long paper trail. Any vigilant observer must ask, as I do, whether the paper trail stretches from the head office of Anglo Irish Bank to desks in the Department of Finance or into any other Department? One must also ask whether the paper trail stretches from the head office of Anglo Irish Bank to any former Financial Regulator or Governor of the Central Bank. One must further ask whether the paper trail stretches from the desks of the various banks and banking regulators to the desks of the present or previous Taoiseach or any Minister in government.

Those questions are important. It is probable that key bankers will offer the defence that any questionable actions they performed were beforehand notified to a regulator, Department or member of Cabinet and were either expressly approved or given the sort of nod or wink for which Fianna Fáil is famous or rather infamous. The incompetence and deceitfulness of successive Fianna Fáil-led Governments was abetted by inept regulation. Regulators allowed banks and building societies to lend billions of euro in the face of inadequate collateral without uttering a whimper. Regulators failed to spot or ignored sharp practices. Both this and the previous Government, deliberately led regulators to believe that maladministration and looking the other way was the acceptable norm. The failures of regulation were not accidents. They were the outcome of the light touch regulation obsession that gripped the Government’s Galway tent mindset. Successive Fianna Fáil-led Governments actively fostered regulatory failure.

So we must ask these questions. Have investigators questioned Deputy Bertie Ahern as a former Taoiseach? Have they questioned the current Taoiseach, Deputy Cowen, regarding his role as Minister for Finance? Have they interviewed senior civil servants in the Department of Finance? Have they been able to ascertain the exact state of these people’s knowledge of some of the exotic banking and share transactions undertaken that are now subject to investigation?

The job of Government is to serve the public interest, but it is still failing to do so. Take a simple example of necessary reform. We urgently need new legislation to govern the mortgage market. I will mention three specific reforms. First, borrowers must be protected from bankers, developers and estate agents who conspire to inflate property prices and to provide excessive mortgage funding for which there is no adequate security. Second, all brokers or lenders must be required to verify a borrower’s reasonable ability to service and discharge a mortgage obtained within the timeframe stipulated. Third, the law must say that mortgage brokers have a fiduciary relationship with the borrower and an obligation to act in the borrower’s best interest and in good faith.

The Minister for Justice and Law Reform has made an art of entering the House happy to blame others for the Government’s incompetence and failings. Tonight, he should answer the questions asked. He should tell the House whether the Garda or representatives of the Office of the Director of Corporate Enforcement have interviewed members of the Government and senior civil servants during the course of their two years of investigation, whether all relevant [556]files and papers from the Taoiseach’s office and the Department of Finance have been furnished to the Garda, the extent to which the former Financial Regulator and the former Governor of the Central Bank have co-operated with the investigation and whether full co-operation has been received from current and former employees of Anglo Irish Bank and from former board members of that bank, as it is now a State institution. The Government should publish a draft constitutional amendment to give our Parliament inquisitorial committee powers that are effective and fair so that we can hold people who abuse the financial markets or misuse public funds accountable.

The elemental dishonesty of this financially illiterate Government in respect of the economy is yet again illustrated tonight in the amendment it is proposing to Fine Gael’s motion. Despite all we now know and all the reports published in the past 18 months, it is still so delusional as to claim that all of our economic and banking woes result from “the worst global financial crisis in more than 75 years”. The Taoiseach and his Ministers occupy a parallel fictitious world in which they cannot even acknowledge that their own appointee to Governor of the Central Bank, Professor Patrick Honohan, a well respected individual, has stated that this crisis is essentially home grown. The public rightly are no longer willing to tolerate the Government fabricating the facts and covering up its disastrous failures.

The elemental incompetence of this Government and that of its predecessor is evidenced by their monumental waste of taxpayers’ hard-earned money, the extent to which the former has mortgaged the future of this and future generations and its complete failure to stimulate growth. My political colleagues, including Deputies Noonan, Bruton and Varadkar, have needed to remind the Government repeatedly that taxation and cutbacks will not resuscitate the economy and create or save jobs. No Government has done as much in the history of this benighted Republic to undermine the institutions of this State in the minds of an understandably aggrieved public.

No one should be fooled by the Government’s ducking and weaving and its pathetic attempts to deny responsibility yet again this evening for the catastrophic economic failures with which we are all confronted. A succession of Fianna Fáil-led Governments have ruled over not the free market, but the greed market. People outside the House should demand an election and no longer tolerate the sad spectacle of a Government desperately holding onto office by its fingertips, holding onto its cherished Mercs and perks and long past its sell-by date. To the Independents in the House who continue to support the Government, I say have the courage and the sense of public duty to vote it out. It no longer has the people’s support. If Independents had any sense of public duty, they would no longer maintain this Government in office. Indeed, if the Green Party retained any vestige of pride or moral compass and was not so fearful of being held to account by the people, it would also in the public interest end the life of this discredited Government. It is time that the electorate was afforded an opportunity to elect to Government Fine Gael politicians who can be trusted and who will restore international and domestic confidence in the institutions of this State.

Deputy Kieran O’Donnell: Information on Kieran O'Donnell  Zoom on Kieran O'Donnell  When I have one minute remaining, the Leas-Cheann Comhairle might let me know.

I am delighted to support this motion and I will touch on a number of points. The public are angry. The national debt has doubled to nearly €100 billion and the banking situation could cost more than €50 billion, €35 billion of which will go into dead banks, namely, Irish Nationwide Building Society, INBS, and Anglo Irish Bank, neither of which will ever lend or function again. People are asking how we have reached this point. The Government and the regulatory system failed the public.

[557]Going back to when this crisis began, Northern Rock failed roughly around September 2007. In April 2008, Anglo Irish Bank’s share price collapsed. For a long time prior to the bank guarantee scheme being put in place, the former CEO of the National Treasury Management Agency, NTMA, stated that he had an issue with providing deposits to Anglo Irish Bank. The Government should have been actively considering putting a bank resolution in place, specifically in respect of Anglo Irish Bank, which will now cost the taxpayer up to €35 billion.

The situation requires that the truth come out. We are two years down the road since putting the guarantee in place, investigations are ongoing and the Garda Commissioner wants something to happen before the end of the year. A number of issues, including the resources required by the Garda, must be addressed. Regarding the back-to-back loans between Anglo Irish Bank and Irish Life & Permanent, it is incredible that an institution like the latter would give €7 billion to another institution that clearly had problems. There was no logical financial reason for it. Was Irish Life & Permanent told to put on the green jersey, as reported by its former CEO? It was a manipulation of Anglo Irish Bank’s money. The money was routed through Irish Life & Permanent and returned as consumer deposits rather than interbank deposits.

The golden share transaction with Anglo Irish Bank was done by way of contracts for difference. Effectively, the taxpayer could end up bailing out the cost of the transaction.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  The Deputy has one minute remaining.

Deputy Kieran O’Donnell: Information on Kieran O'Donnell  Zoom on Kieran O'Donnell  We need to know the reason for the golden share situation.

The public’s perception that certain people are above the law must be changed. A bank resolution scheme needs to be introduced. We have debated it for long enough and it should be in place before Anglo Irish Bank is split into the asset recovery bank and the funding bank. Measures to tackle reckless trading in financial institutions and banks should be put on a statutory footing so that people who trade recklessly will know that they will be held to account by the law.

People are entitled to justice. Some people cannot repay their mortgages, are worried about the banks foreclosing and are losing their jobs, yet a burden of up to €54 billion is being placed on their backs and the backs of their children and grandchildren. We need results. We need to see the Government bringing this situation to finality and providing whatever resources the Garda requires to allow that to happen.

Deputy James Bannon: Information on James Bannon  Zoom on James Bannon  Reckless lending by banks and reckless spending by the Fianna Fáil-Green Party Government have made for a sorry state of affairs. Unfortunately, it is not the Cabinet which is sorry, rather it is the unemployed, the poor, the elderly, the disabled and the young.

Last week the Minister for Finance, Deputy Brian Lenihan, stated that reckless lending was the core problem of the banks. However, he failed to mention who had slept on the job of regulating the banks and thereby did not provide the country with advance warning of the crisis that has brought us to our knees. Essentially, he failed to mention the total mismanagement of our finances by his predecessor, the present Taoiseach.

The only efficiency that has come to light in the last two years is that of this Government which has shamefully manipulated the country’s finances and resources to shore up the shameful dealings of its cronies. The Government is a model of efficiency in this regard. A whole country has been held to ransom for the good of a number of bankers, developers and speculators, members of the gold circle of cronies, the men of the Galway tent.

[558]There is huge anger in the country that not one banker or politician has been brought to trial for reckless abandonment of the trust put in them. Despite a bill, to date, of €2 million there is no expected timescale for convictions and criminal investigations are set to last for years. It is a nightmare to consider that one third of the staff of the Office of the Director of Corporate Enforcement is working on the investigation into Anglo Irish Bank because the matter will drag on and more and more personnel will be needed.

Along with the investigations into reckless banking, it appears it may take more than 60 years to correct the chronic over-development and re-zoning of lands in some parts of the country, including the midlands, a direct consequence of the failure of Government to regulate the planning sector. On the one hand banks were recklessly lending, while on the other planning permissions were also recklessly handed out because lending and building were tied together. I refer to the figures for my constituency of Longford-Westmeath, where, combined with figures for counties Cavan, Leitrim, Roscommon and Sligo, housing stock increased by 49.8% between 2002 and 2009, from 90,491 to 135,544 units. By April 2006, 19% of houses in these counties were vacant but nevertheless 20,500 extra units were built up to 2009.

The amendments tabled to this motion by the Government are at best laughable and at worse a deliberate attempt to deceive. Like a parrot mindlessly repeating what it has learnt by rote, the Government once again blames the situation on the global financial crisis and follows this with a litany of meaningless justifications for the so-called remedial measures it has taken. No mention is made of what should have been done prior to the crash but was not. There is no mention of the collusion with the banks, or of the bank bail-outs which come at the expense of the jobs, health and well-being of our citizens.

Deputy P. J. Sheehan: Information on P. J. Sheehan  Zoom on P. J. Sheehan  The Deputies on the opposite side will vote down this motion and in doing so will claim this Government provided adequate supervision of the banks. We all know it did not. The country knows it did not. The Deputies believe the regulator, the Central Bank and the Department of Finance monitored the banks so well that adequate advance warning was provided of this crisis and we are now having the soft landing the Government promised us. The facts of today’s crisis, however, prove that is not true. The Deputies believe this Government acted in a timely fashion when the banks abroad collapsed. I cannot remember it doing anything until the heads of the banks sneaked into Government buildings after dark in their Mercedes to put a gun to the heads of Ministers and the Irish tax payer.

The Deputies want us to believe that this Government has replaced those responsible for leading us into this crisis by making new appointments of directors and other senior staff to run our now nationalised banks, and that the public has faith in them. The majority of bank directors who were there three years ago are still in place today. Is that radical change?

The Deputies do not recognise there is any public anger or that those chiefly responsible for the crisis have been held to account, including members of the present Government. That is a joke. Not even the 19% who claimed they would vote for this incompetent Government at the next election would believe even one of those arguments, let alone all five.

I have a request to ask those Deputies across the House — of whom, God knows, there are not many present to listen to us. It seems they have completely reneged on their responsibility. I ask them to consider their position, as did their former colleague last night. In order to save this country and prevent further disaster being inflicted on the good people of this country by the worst and most incompetent and corrupt Government in the history of the State I ask them to do the honourable thing, resign their seats and go to the country.

[559]I paraphrase a famous statement. Never in the history of mankind have so many owed so much because of the actions of so few. Included among the few is every member of the Cabinet during the past 13 years who was responsible for bringing this country to its knees. I hold my greatest contempt for those people across the House who still blindly support the most disastrous Government in Irish history. I appeal to those Members who will vote down this motion tomorrow to consider their position, resign now and cause an immediate general election.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  Perhaps the Minister of State might tell the House whether the Minister for Finance, Deputy Lenihan, or the Minister for Justice and Law Reform, Deputy Ahern, intend to address the debate tonight.

Deputy Dara Calleary: Information on Dara Calleary  Zoom on Dara Calleary  Perhaps tomorrow night.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  Their presence would be most welcome. I have three points to make in the time I have. First, I wish to congratulate Deputies Michael Noonan and Alan Shatter for tabling this motion which I fully endorse. The motion condemns the failure of the Government to ensure adequate supervision of the banks, the failure of the regulator, the Central Bank and the Department of Finance to do their job, the failure of the Government to act in a timely manner when it was clear that a banking crisis was unfolding in Britain and the United States, and the failure of the Government to get rid of the untouchable directors who remain in positions on bank boards despite having being in situ during the banking crisis. The motion also calls for the Garda, the Office of Corporate Enforcement and the Director of Public Prosecutions to be given the resources they need to bring about prosecutions as quickly as possible.

My second point relates to the Anglo Irish Bank bondholders. In particular, I wish to ask the Minister and his colleagues if they are prepared to name those bond holders, or, at very least, to confirm names that have been released. Some Members will be aware of leaks and a British website that was involved in releasing information on the scandals involving MPs’ expenses. Lists have been produced on that website of the Anglo Irish Bank bond holders. Will the Minister either name them or confirm that the list is accurate? The Anglo Irish Bank bond holders are the only winners from the bail out of Anglo Irish Bank by the Minister, Deputy Lenihan. The shareholders lost their money and the customers must pay back the money they owe unless they become bankrupt. The taxpayers, of course, will be hit with the bill of €25 billion. Clearly, the bondholders are the major beneficiaries of the Minister’s bailout and it is my party’s view they should be asked to bear some of the cost of the bank’s failure. That is what would happen if the rules of capitalism were applied. At very least, the people of Ireland have a right to know who the bondholders are, especially when an alternative to this policy existed. The bank should have been put into administration and wound down with the cost being shared by the investors and creditors. There should have been a resolution regime, as Deputy O’Donnell stated. It is amazing that two years into the banking crisis, or three years later, there still is no resolution legislation in the State. Perhaps somebody can explain to me why there is no such legislation. If the Anglo Irish Bank situation were to happen again tomorrow we would have to take the same action, or the Government might end up doing the same thing, simply because there is no resolution regime.

My final point relates to the Attorney General and the Director of Public Prosecutions. Nobody doubts the independence of the DPP but to suggest it is entirely up to the DPP to decide whether to prosecute is incorrect. Article 30.3 of the Constitution provides for the Attorney General to take prosecutions. The Attorney General sits at the Cabinet table. I am aware that power was transferred to the DPP under the 1976 Act but that does not mean the Attorney General’s constitutional right to take a prosecution has been extinguished. This view [560]was supported by Mr. Justice Walsh in the Supreme Court decision of the State, Collins v. Ruane in 1984, Irish Reports 105, 118-219, which states that the prosecutorial function of the State can be shared between the Attorney General and the Director of Public Prosecutions as long as the Oireachtas deems it fit. If the DPP decides not to prosecute — I would be appalled if that were the case — the Government should at least give consideration to the possibility of initiating a prosecution by the Attorney General. If the DPP decides not to prosecute — and I would be appalled, in the event — the Government should at least give consideration to the possibility of the Attorney General initiating prosecution.

Minister of State at the Department of the Taoiseach (Deputy Dara Calleary): Information on Dara Calleary  Zoom on Dara Calleary  I move amendment No. 1:

[561]

The Irish banking system has endured an unprecedented crisis. The Government has responded forcibly and decisively to this challenging position. How we continue to manage our collective response to the crisis will affect every Irish citizen now and into the future. The banking system is fundamental to a strong economy. The core purpose of a banking and financial system in a modern economy is to contribute to the economic welfare of all citizens by helping borrowers — both households and businesses — to obtain and utilise funding to meet their investment and consumption needs. A healthy banking system facilitates the most efficient allocation and pricing of risk by paying interest rates on the deposits of savers and by charging rates of interest to borrowers related to the purpose, duration and risk weighting of the loan required.

The Government has commissioned two reports on the banking crisis, The Irish Banking Crisis — Regulatory and Financial Stability Policy 2003-08 by Professor Patrick Honohan, Governor of the Central Bank and A Preliminary Report on the Sources of lreland’s Banking Crisis by Messrs Regling and Watson. The findings of both reports were published in June this year.

Internal safeguards and proper risk management procedures in the banks did not function effectively in the institutions as they should have done. Some of these matters are under investigation. All investigations into Anglo Irish Bank are at an advanced stage and are being progressed as a matter of priority. The matters under investigation are detailed and complex. The appropriate authorities must be allowed to take the time needed to finalise these investigations. My understanding is that a large number of personnel from the Garda and the Office of Director of Corporate Enforcement are involved in these investigations. I also understand that the relevant interviews have taken place, or are to take place, as part of this wide-ranging inquiry and that the relevant files are being prepared for submission to the Director of Public Prosecutions. The Garda Commissioner had indicated that a file will be sent to the DPP before the end of the year. That is how criminal investigations are conducted in this and in neighbouring jurisdictions. I accept that inquiries on the other side of the Atlantic tend to be much sharper and quicker than they are here. The nature of our criminal justice system is such that investigations in this jurisdiction — like those in the UK and France — take a substantial period of time.

The Garda has adequate resources to carry out its investigation. The Minister for Justice and Law Reform has been assured by the Garda Commissioner that the Garda has no higher priority than completing this investigation. For his part, the Commissioner regularly meets his officers involved, ensuring that, at all times, they have every resource they require.

I will not comment further on the investigations at this stage. The House is aware of the independence of An Garda Síochána and the Office of the Director of Corporate Enforcement in carrying out their investigations. Let us look at the facts. In response to the weaknesses [562]exposed by the crisis in the structure, systems and staff responsible for financial regulation and supervision, the Government has acted vigorously and effectively. Professor Honohan was appointed Governor of the Central Bank in September 2009 and Mr. Matthew Elderfield was recruited as head of financial regulation at the bank at the beginning of this year. The appointment of these two gentlemen has done much to restore public confidence in the Central Bank and in our capacity to regulate and supervise the financial sector. The Central Bank Reform Act was commenced by the Minister for Finance on 1 October 2010, and the House will be aware of its key provisions. In addition, new and enhanced accountability and oversight mechanisms have been put in place, including a specific focus of the Central Bank Commission on regulatory performance, including development of performance benchmarks. Annual performance statements on regulatory performance must now be prepared by the bank, presented to the Minister for Finance and laid before the Houses of the Oireachtas. There is now a statutory requirement for regular international peer reviews of regulatory performance and a committee of the Oireachtas may call the Governor or the heads of functions to be examined on the performance statement.

The Act provides for a new statutory arrangement to ensure the fitness and probity of persons appointed to high level positions in the management of banks and on their boards. These are designated as “controlled functions”. Under the new arrangements the Central Bank may prescribe the functions which are controlled functions within certain parameters set out in the Act. The Act permits a flexible and incremental approach to the prescription of controlled functions so that, for example, it is possible to introduce the fitness and probity provisions in respect of the most urgent functions first, and expand them subsequently to a broader range of functions. A controlled function relates to the provision of a financial service where the person appointed exercises significant influence on the conduct of the financial service provider’s affairs. People who perform controlled functions are liable to be removed from the performance of those functions in the event that the Central Bank determines that they are not fit and proper persons to perform those functions.

Last month, the Minister for Finance appointed five members to the Central Bank Commission, namely Mr. Max Watson, Professor John FitzGerald, Mr. Des Geraghty, Mr. Michael Soden and Professor Blanaid Clarke. The new members serve alongside the Central Bank Commission’s ex officio members, who include Governor Honohan, Mr. Elderfield, Mr. Tony Grimes, head of central banking, and Mr. Kevin Cardiff, Secretary General of the Department of Finance. The new commission members have brought a diversity of knowledge and experience to the Central Bank, drawing from sectors including economics, financial services, social policy, corporate governance and law.

The Central Bank Reform Act is an important element in a comprehensive legislative programme. The new structure of the Central Bank establishes a domestic regulatory framework for financial services that meets Government objectives for the maintenance of the stability of the financial system. It provides for effective and efficient supervision of financial institutions and markets, and in the future, it will safeguard the interests of consumers and investors. The new structures will also encourage more responsible and transparent management and lending policies in financial institutions. The Government will bring forward a second Bill shortly which will provide for the enhancement and adjustment of the regulatory powers and functions of the restructured bank.

This Bill will deal with the prudential supervision of individual financial institutions. It will help strengthen supervision and enforcement and also protect consumer interests and overall stability of the financial system. This second Bill is of critical importance to the future of the financial services industry in Ireland. The enhancement of the Central Bank’s powers of finan[563]cial regulation and supervision will be grounded in best practice within the European Union and internationally. I would like to assure the House that the Central Bank remains fully independent in the discharge of its operational responsibilities. Taken together, these two items of legislation will ensure that there is appropriate accountability to the Minister for Finance and the Houses of the Oireachtas and greater transparency and co-operation in the exercise of regulatory and supervisory powers.

A third Bill will consolidate the existing statutory arrangements for the Central Bank and financial regulation in the State. Building on the provisions of the Central Bank Reform Act 2010 — and in response to the regulatory failures identified by the two banking reports — the Central Bank has published its new more assertive approach to banking supervision. In future, banking supervision will be more intrusive and challenging. Banks will be required to change their behaviour and improve governance, risk management and lending practices. Under the new regime, the Central Bank will demand decisive follow through by both supervisory staff and supervised institutions.

Specifically, the Central Bank will bring forward initiatives on internal governance requirements; remuneration standards; risk exposures; and standards on credit risk management and valuation.

The Central Bank has also recently opened consultation on a revised code to strengthen consumer protection. The revised code requires regulated entities to act in consumers’ best interests by ensuring that they know and understand the consumer’s needs, sell them products and services that are suitable and provide them with appropriate information to enable them to make an informed choice. The code also requires firms to have in place an effective complaints handling procedure and sets out a timeframe within which regulated entities must deal with complaints from consumers.

In addition to the programme of legislation, the Government has progressed a broad range of effective policies to resolve the banking crisis. The Government’s approach has been based on three broad principles; not to let any systemically relevant financial institution fail, this involves protecting depositors and creditors; any State involvement in the financial institutions will protect taxpayers’ interests; and to ensure the flow of credit to the real economy.

In formulating the strategic approach to the crisis and developing the detail of individual policies for the banking sector, the Government has taken advice from and consulted with the Central Bank, the National Treasury Management Agency and legal and financial advisers. Moreover, it has sought to reflect agreed principles at EU level and to comply with state aid guidance.

The Government has ensured that there is no return to business as usual.

Contrary to the Opposition’s motion, significant changes have been made at director and senior executive levels in the covered institutions. Since September 2008, the chairpersons and chief executives of all of the covered institutions, with the exception of chairman of Irish Life & Permanent and the chief executive of the EBS, have changed. There has also been a substantial turnover of non-executive directors since 2008. In total, based on information supplied by the covered institutions, 47 directors have vacated their positions since September 2008 for a variety of reasons and 33 new appointments have been made. In addition, some 31 senior executives have departed.

Without firm and immediate action to stabilise the banks at an early stage in the crisis, the detail of departures at senior level in the institutions would have been irrelevant. An early example of the Government’s effective response to the crisis was the Credit Institutions [564](Financial Support) Scheme introduced in October 2008. This scheme provided for a blanket guarantee by Government of the deposits and liabilities of Irish institutions. It was introduced in the face of clear and present danger to the financial stability of the State at that time. Had that guarantee not been introduced, it is doubtful whether the economy, let alone the banking system, would have survived. When the Government made the decision on the guarantee scheme, funding had all but dried up and the banks faced closure within days. Anyone who doubts the seriousness of the situation should read the recent report of the Governor of the Central Bank, in particular his remarks in the first chapter referring to the discussions that took place on the night of 29 September.

I accept that Professor Honohan raised in his report the inclusion of dated subordinated debt in the guarantee scheme. However, as the Minister for Finance has explained to this House, there was on that night simply too much at stake to discriminate between different types of bondholders and in the end those whom the Governor felt should not have been included accounted for just 3% of the covered liabilities. The Credit Institutions (Eligible Liabilities Guarantee) (Amendment) Scheme 2010 introduced in September last amended the bank guarantee scheme, known as the eligible liabilities guarantee scheme, ELG, which had been in effect since December 2009. The scheme is now more focused and targeted than was the original guarantee scheme and it is in line with the European model of bank guarantees developed in its wake. The scheme no longer covers subordinated debt and imposes significantly higher fees on participating institutions for the benefit of a State guarantee of their liabilities. At the end of June 2010, bank liabilities covered under the ELG scheme stood at €153 billion.

The original guarantee scheme provided a necessary and critical support to banks as other measures to repair and renew the banking system were introduced. The Government’s guiding principle in all its interventions since September 2008 has been to provide a financial system that will serve our industry, businesses and households.

Deputy Beverley Flynn: Information on Beverley Cooper-Flynn  Zoom on Beverley Cooper-Flynn  I, too, welcome the opportunity to speak on this motion. It is fair to say that the public is extremely angry at what has happened, the roles played by bankers in bringing the country to its knees and the economic crisis we are now going through.

It is important to say that we on this side of the House are angry too. The Opposition does not have a monopoly in terms of anger in this respect. Everyone in the country is outraged at what has happened. We all want to see anyone who has broken the law brought to justice. I welcome the recent statement by the Garda Commissioner that the investigation in this regard is receiving the highest priority possible and that he hopes to be able to bring it to a conclusion at the earliest possible opportunity. It must be recognised that the Garda Bureau of Fraud Investigation has informed us that this is the most complex investigation ever undertaken by the State, having dealt with approximately 100,000 documents. It is hoped that this investigation when complete will result in an outcome which satisfies Members of this House and the public.

To suggest that nothing has been done in terms of dealing with this situation is completely outrageous, in particular as far as boards of directors of the various banks are concerned. There has been a huge amount of change in the boards of directors of the covered institutions of which we are speaking tonight. Some 47 board members who were in situ pre-September 2008 have departed, with 27 remaining. That is a 64% change in board members, representing a significant change in the past number of years. In addition, there have been 33 new appointments, including 12 Government nominees. There has been a huge amount of change across all the boards. The appointment by Government of two public interest directors to all major covered institutions is an important mechanism in terms of accountability to this House and the public.

[565]I welcome that there is a mix of board members from the domestic and overseas markets. The Opposition’s motion states that there has not been a change of personnel, but it is wrong. What is more important than a change of personnel across the boards is a change of culture. It is important there is a change of culture in all of the banking institutions and that the new board members challenge the management structures in terms of the decisions they are making. That is the only way we will get the type of robust boards across our banking system that we deserve.

My colleague, the Minister of State, Deputy Calleary, referred to the introduction of the guarantee scheme in 2008. That guarantee was absolutely essential to ensure the stability of the banking system. One, if not more, of our banks was close to collapse. In terms of the protection of deposit holders, it was critically important for confidence in our banking system that the guarantee scheme be introduced. This has been reflected in the banking reports subsequently published. The Government introduced NAMA, a work-out vehicle to remove all the development loans from the banks’ balance sheets. That process is working efficiently. It is hoped that process will be completed by February of next year. It is through NAMA and the recapitalisation of the banks that we are bringing about stability in our banking system. We are dealing with a financial crisis that is changing week by week. Much of what happens is based on confidence. In this regard, I might add that the role of the Opposition throughout all of this has done more damage to confidence in this country. It has played no small part in the rising rates we must pay to borrow. It was suggested by the Opposition that we should default on senior bondholders. From whom do they think we will secure additional funds when we return to the markets in the new year?

The reality is that our credibility as a country is at stake. I support the position taken by the Government.

Deputy Mary O’Rourke: Information on Mary O'Rourke  Zoom on Mary O'Rourke  I am glad to have an opportunity to contribute to this debate. I thank the Minister of State, Deputy Calleary, for his clear statement to the House this evening. It will be a useful speech.

  8 o’clock

When I read the Opposition’s motion, I was unable to determine whether it was referring to the past or the present. It is not timeframed. The Minister of State, Deputy Calleary, has adequately set out the actions taken by Government since 2008. I want to echo what Deputy Flynn said, namely, that there is no premium on anger. It is not that Members on that side of the House are angry and we, on the other side, are cold and callous. We are as incensed as anyone else in the country at the manner in which the various people at the top of the financial institutions behaved. They have squandered the trust people put in them. I saw on television last night a clip showing all of the people who attended the Allied Irish Banks special meeting. I felt sorry for them and do not know what stopped them pelting apples or oranges at the people concerned, even though it was not the man currently in charge who was in place at the time. Those people lost all of their savings. The banks took their money and even though they have lost all their savings, they were politely sitting in their seats listening to what Mr. David Hodgkinson was saying. It was parroted from sections of this and the opposite side of the House that the Government was “in bed” with the bankers and speculators and that it was encouraging this heinous behaviour, which is incorrect.

I, too, wish to see some of them in handcuffs being brought in and out of prison but it will not happen because we have embraced a different justice system here. Whether one believes the American system is good and ours is not, that is our system of justice and it has served us well.

I heard Garda Commissioner Fachtna Murphy, say clearly on television last night that they were getting ahead with their business and that there was no word of any shortage of funding [566]to him or to his men to enable them to continue their investigations. He said he hoped to carry them through to a fruitful end.

I listen to some of the talk shows at the weekend that interviewed some people who have been very much involved in speculation of the wildest nature and they get a great hearing, although not when the e-mails come in. They want to tell their story but I wonder what is the point of that because it only enrages people further.

I commend the Minister’s speech earlier and support the work the Government has undertaken in the past two years.

Deputy Frank Fahey: Information on Frank Fahey  Zoom on Frank Fahey  This is a populist motion by the Fine Gael Party, the key to it being that it “recognises the widespread public anger that those chiefly responsible for the crisis have not been held to account” and “calls on the Government to adequately resource the Garda”. There is public anger. Everybody is angry about the way in which the banking system failed miserably.

Regling and Watson, and Governor Honohan, put the blame squarely on the banks. Messrs Regling and Watson stated that the primary cause of the banking crisis lies with the banks and their boards. While mistakes were made in regard to macro-economic policy, the Government has taken the blame for that, principally that counter-cyclical policies were not put in place by the Government during the period from 2000 onwards after we joined the euro up to 2005 to 2006.

The reality is that between January 2003 and January 2007 the total outstanding credit from the banks here increased from €160 billion in 2003 to €380 billion in 2007. That was an increase of €220 billion of outstanding credit from the banks. That is the cause of the crisis. We can put whatever connotation we want on it but that is what led to the difficulty we have today.

One of the interesting points made by Regling and Watson was that there was not the kind of expertise available to deal with the situation that was occurring. I did not see anybody——

Deputy Alan Shatter: Information on Alan Shatter  Zoom on Alan Shatter  That was the Government’s fault.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Allow Deputy Fahey to speak.

Deputy Alan Shatter: Information on Alan Shatter  Zoom on Alan Shatter  It was the Government that was entirely responsible for the lack of expertise within the regulatory bodies.

Deputy Frank Fahey: Information on Frank Fahey  Zoom on Frank Fahey  It is interesting that Deputy Shatter says that because the reality, and Regling and Watson pointed this out, was that going back to the time of T K Whitaker, who tried to put in place the proper economic and fiscal expertise within the Department of Finance, it was not put in place, not when the Deputy’s party was in Government or when our party was in Government.

Deputy Alan Shatter: Information on Alan Shatter  Zoom on Alan Shatter  The Deputy’s party has been in Government for 14 years.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Allow Deputy Fahey to conclude.

Deputy Alan Shatter: Information on Alan Shatter  Zoom on Alan Shatter  This has happened on Fianna Fail’s watch.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Deputy Shatter, nobody interrupted you when you were speaking. Please allow Deputy Fahey speak.

[567]Deputy Frank Fahey: Information on Frank Fahey  Zoom on Frank Fahey  During that four year period, I did not hear anybody from the Fine Gael benches calling for any reduction in the amount of credit that was being given out by the banks. It is fair to say that all parties in the House wanted to see that credit regime continue.

Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  Not so, Deputy.

Deputy Frank Fahey: Information on Frank Fahey  Zoom on Frank Fahey  In fact, some of the Opposition parties were calling for more money to be spent and for money to be taken out of the National Pensions Reserve Fund to fund further infrastructural development.

This motion will not fool anybody. There is great anger about the situation. We all want to see people who have broken the law brought to justice but Deputy Shatter knows more than anybody else that there is due process. There is a Garda investigation and it must take its course. The Garda assured the Minister and this Dáil that it has adequate resources to carry out its inquiries, and this Fine Gael motion will do nothing other than try to be populist in that respect.

Deputy Alan Shatter: Information on Alan Shatter  Zoom on Alan Shatter  It should not take two years.

Deputy Michael Ahern: Information on Michael Ahern  Zoom on Michael Ahern  This motion and the contributions from the other side of the House go back to the accusations made in the past two years, specifically with regard to the bank guarantee scheme. The credit institutions support scheme introduced in 2008 provided for a blanket guarantee of the deposits and liabilities of Irish institutions. Without that guarantee, the banking system would have collapsed. As the Governor of the Central Bank said in his report on the banking crisis, “An extensive guarantee needed to be put in place”. Otherwise, our banks would have run out of money within a matter of days and “would have had to close their doors”. The Governor went on to state: “Closure of all, or a large part, of the banking system would have entailed a catastrophic immediate and sustained economy-wide disruption...”

The bank guarantee provided breathing space to allow necessary measures to fix the banking system be introduced. That included NAMA, the bank recapitalisation, reform of the Central Bank and a new Financial Regulator put in place, and the ongoing restructuring of the individual institutions. As all Members are aware, attracting funding remains difficult for the banks, not least in light of the stress in sovereign debt markets. It is also important to point out that about a dozen other European Union countries also recently extended their bank guarantee schemes to 31 December. They include countries such as Austria, Denmark, Germany, Poland, Spain and Sweden. It is also important to note also that the State has already earned more than €1 billion from guarantee fees in less than two years.

Messrs Klaus Regling and Max Watson, in their report, questioned the fiscal and macro-economic policy of the Government but they went on to state:

It has been stated also that the Government has done nothing in recent years to face up to the problem but that is untrue. The creation of a fully integrated Central Bank has been announced. That was recommended in the FRS report of the then finance committee in the 1997-2002 [568]period. We recommended that to the House. It was an outside report which recommended breaking up that body. The wisdom of the House was correct on that occasion. Deputy Noonan was the spokesperson on finance at the time and I was chairman of the committee at that time.

There has also been the replacement of the board of the Central Bank and the Financial Regulator with a new Central Bank Commission chaired by the Governor, Professor Patrick Honohan. Mr. Matthew Elderfíeld was appointed as Head of Financial Regulation, and has been doing tremendous work since he took up office. There has also been provision on a statutory basis for a new regime of fitness and probity for senior management and board members in banks and other financial service providers.

A total of 60% of the members of the boards of the banks have vacated their positions. It is often put forward that there have been no changes in that area but it is clear from the facts that there has been change. Regarding what has been done to make the people answer for what they have been doing in the banks, the Garda Síochána and the Director of Corporate Enforcement have been doing extensive work in that area and from the statement of the Garda Commissioner in recent days it is hoped that work will come to an end in the near future and will go to assuage the anger that exists, and rightly so, among the public.

Deputy Joan Burton: Information on Joan Burton  Zoom on Joan Burton  I would like to share my time with Deputy Arthur Morgan.

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  And Deputy Seán Sherlock?

Deputy Joan Burton: Information on Joan Burton  Zoom on Joan Burton  Yes, tomorrow evening.

Recent revelations have added massively to the cost and uncertainty surrounding Fianna Fáil’s bailout of its pals, the bankers and developers. So badly has Fianna Fáil’s blanket guarantee turned out that the interest rate on Irish bonds, as we have seen today, is now well over 7%. If we stay at this rate, our national debt will double in ten years. We are on an upward escalator the size of Mount Everest. Although ordinary Irish people are taking tremendous hits in terms of cuts in services, extra taxation, pension levies and so on, the amount involved does not come near the actual increase in interest costs that Fianna Fáil and its disastrous mismanagement of the bank bailout and guarantee have brought down on the heads of the unfortunate citizens of this country.

There are two major contributors to the cost of the bailout, as mentioned in the recent announcement by the Minister for Finance, Deputy Brian Lenihan. The bailout IOUs, or promissory notes, give rise to super-sized interest payments, adding at least €1.7 billion to the deficit in 2011, which means that higher taxes and harsher cuts will be needed to meet deficit targets. Many people have been surprised by the rise in the deficit from €7.5 billion to €15 billion. The answer is simple. Most of it — almost all of it — relates to higher interest costs, particularly with regard to promissory notes to Anglo Irish Bank and Irish Nationwide. When he announced this last Easter, the Minister seemed to think there would be no interest charge at all, or else he did not tell us about it. Thus, either he was stupid — which I do not think he is — or he exercised his discretion and did not share his knowledge with the plain people of Ireland.

In addition, the Government has agreed to buy all shares in the AIB rights issue at a price of 50 cent — as announced on black Thursday — even though the shares are trading on the open market at about 35 cent. This reminds me of the purchase of Farmleigh by the former Taoiseach, Deputy Bertie Ahern, in his salad days. It was on offer on the open market at €15 million, but by the time he managed to acquire it the cost, believe it or not, had risen to well over €20 million. AIB shares cost 33 cent, yet the poor unfortunate taxpayer will pay 50 cent per share for them. Of the total €5.4 billion rights issue, upwards of €1.6 billion will be a [569]straight gift to existing AIB shareholders, including the many who took a punt on those shares — hedge funds and private equity funds — when they were floating at the bottom.

Bankers have treated taxpayers as doormats. It is a case of all take and no give. It is time this balance was redressed and the banking sector made to contribute to the cost of cleaning up its own mess and preventing a similar mess in the future. There are two options I will recommend to the Government in this regard. The first is to provide that 100%, rather than 50%, of the cost of financial regulation be covered by the industry, which will result in savings of about €30 million per year, or €150 million over five years. At the moment, the banks, financial institutions and insurance companies pay half the cost of regulation, with the State paying the other half, which runs to about €30 million per year at present. Why should the industry not pay for all of this? Why should the banks and financial institutions not also pay the cost of the Office of the Director of Corporate Enforcement? It is the least they could do, given the billions of euro we have poured into them.

The second recommendation, which would require a little courage and engagement by the Taoiseach and the Minister for Finance, is to campaign for an EU-level financial transaction tax on speculative transactions in derivatives and other types of financial product. Believe it or not, this would raise €1 billion to €2 billion per annum for the Irish Exchequer. However, it could only be done on an EU-wide basis, and therefore our Government should lobby for the introduction of such a tax in the EU. It would help to curb speculation and to document transactions, which is important.

The Taoiseach shed some light on how Ireland is to pay down the IOUs incurred in bailing out Anglo Irish Bank, Irish Nationwide Building Society and EBS when he described the promissory notes — a cool €31 billion — as being akin to paying a mortgage. This is a €31 billion mortgage on Irish households for the sake of Anglo Irish Bank, Irish Nationwide and, in a small way, the EBS. To date, the Minister for Finance has issued €18.88 billion in promissory notes to Anglo Irish Bank, with the issue of a further €6.4 billion to take place before the end of the year. A promissory note for €2.6 billion has been issued to Irish Nationwide Building Society, but the Minister has indicated that this will very soon increase by a further €2.7 billion. A smaller promissory note, amounting to a mere €0.25 billion, has been issued to EBS.

These IOUs will total €31 billion by the end of 2010, but that is not the end of the story. The interest rate on the promissory notes will average around 5%, because the interest rate on the day the note is issued is applied. With repayments totalling €3 billion per annum, the total interest charge will add a further €10 billion to €14 billion to the final bill for bailing out the banks. The Minister for Finance must come clean on the interest rate, the term, the annual cost and the total overall cost of paying off these IOUs. We need to see the small print of the “mortgage agreement” which the Minister has signed the country up to.

The use of the word “mortgage” by the Taoiseach in the Dáil confirms the Labour Party’s view that these IOUs will generate large annual interest payments in the budget every year for the next ten to 15 years. This makes the target of a 3% deficit by 2014 more challenging and will result in more tax hikes and spending cuts in the Government’s four-year plan.

On 8 October, I tabled a parliamentary question on the proposed rights issue to recapitalise AIB. I was concerned that this €5.4 billion transaction, which is to be underwritten by the National Pensions Reserve Fund, could involve an immediate and significant write-down on taxpayers’ investment. In his reply to me on 14 October, the Minister confirmed to me that he intends for the rights issue to go ahead at a price of 50 cent, even though the market price has ranged between 30 cent and 40 cent in recent weeks. In the topsy-turvy world of Alice in Wonderland, when, in a market-driven transaction such as this, would one pay 50 cent for a share that is currently trading at 33 cent, with an average of between 30 cent and 40 cent? It [570]is customary for shares to be offered at a discount; instead, the State is taking them on at a premium, which will result in a further loss of €1.6 billion in the State’s investment in the NPRF, because the share values will be diluted. The net beneficiaries of Fianna Fáil’s largesse will be existing AIB shareholders, particularly bottom-feeders who bought when the shares were very low — including hedge funds and private equity funds — whose investments will not now be diluted as much as they would have been. A further €1.6 billion gift to punters on bank shares may not sound like a large amount to those in the Department of Finance in the context of an overall bailout cost of well over €50 billion, but to put this in context, €1.6 billion is approximately one third of the total budget cuts and tax rises Fianna Fáil has in store in the December budget. The cause is the blanket guarantee that Fianna Fáil, Fine Gael and even Sinn Féin passed in these Houses in September 2008. Had we avoided the blanket guarantee, we could have probably avoided tens of billions of euro in losses that now lie on the backs of the taxpayers.

We must make the bankers pay for the crisis. Even if it takes 100 years as far as I am concerned and as far as the Labour Party is concerned, we will get every cent these bankers have swallowed and that Fianna Fáil has given its cronies in the banks. When these people move away from being in government, we will produce a serious programme for reform and corporate governance that will end the cosy old boys’ club that exists between Fianna Fáil, the developers and the bankers.

Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  I thank Deputy Burton for sharing her time with me. I support the Fine Gael motion, which Deputy Fahey described as populist. I wonder why it is popular for people to want to hold these bankers to account. I must be leading a sad life because recently I started to listen carefully to Fianna Fáil speeches, which I regard as dangerous. This evening I thought the Minister of State, Deputy Calleary, was doing particularly well. It was a very technical statement almost devoid of saying anything except what some Garda Commissioner or some other person might have said in the past with very little reference to the Fianna Fáil backroom team. However, he eventually made a bit of a slip when he said: “On the night of 29 September 2008, there simply was too much at stake to discriminate between different types of bondholders and in the end, those whom the Governor felt should not have been included accounted for just 3% of the covered liabilities.” So the Minister of State believes it is not a big deal at all even though that 3% amounts to €5 billion. However, on 7 December the Government will rip off the people of this State to the tune of €5 billion in what will probably be the worst budget ever. While it apparently has to be done for the greater good, the Government regards the 3% as pocket change and we should not be excited about such a meaningless amount. However, if it had done its homework properly on 29 September 2008 and shared honestly with this House what the situation really was, then the State would be €5 billion richer, but that is not the case because of gross incompetence on the part of the Government.

Deputy Conor Lenihan: Information on Conor Lenihan  Zoom on Conor Lenihan  The guarantee did not cost anything.

Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  Well the Government covered it. Whoever crafted the Minister of State’s statement — I suspect he had a hand in it himself——

Deputy Conor Lenihan: Information on Conor Lenihan  Zoom on Conor Lenihan  If the Deputy——

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Allow Deputy Morgan to speak.

Deputy Conor Lenihan: Information on Conor Lenihan  Zoom on Conor Lenihan  Does the Deputy think——

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  Please.

[571]Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  It is a pity I cannot hear that character when he talks because I would like to respond to him. It is a pity that whoever was given the job of crafting the statement was not given the job of crafting the amendment. The person or people who crafted the amendment to the Fine Gael motion obviously were in old mode and less competent than those who crafted the Minister of State’s speech because the amendment commends the Government on “the rapid and effective response it has made to reform the structures of financial regulation, support the banks, restore confidence...” Whoever might be replying to the debate should tell us in whom the confidence has been restored because the report on the front of today’s Financial Times and the interest rate of 7.24% on international bond markets today hardly suggest confidence. The confidence is certainly not restored in anyone in whom it should be restored and certainly not to the people. It has not even been restored to Government backbenchers; one has stepped away and more may follow, which does not suggest confidence in the Government.

The amendment also refers to “ensuring that banks fulfil their commitments given to the Government in relation to lending to Irish households and businesses and, in particular, small and medium sized enterprises”. However, that is simply not happening. Through their work in their constituencies, all Deputies know that small businesses are screaming out for support from the banks, but are not getting it. Overdrafts and term loans are simply not being extended to small businesses which means that the very backbone of the economy on which we will depend to find our way out of this economic mess is being wiped out. Really someone should have a chat with whoever crafted this amendment.

While we know a number of inquiries are going on, who is inquiring into the activities of the auditors of these banks? Ernst & Young were the auditors for Anglo Irish Bank. I am sure the Minister of State is familiar with the figures from the 2008 accounts audited by Ernst & Young, which indicated a profit of €784 million, but a few months later we were told it was a €12.7 billion loss. I must correct the record; of course there is an investigation going on into the auditors, but the auditors are investigating themselves. I am sure that will be a very fruitful investigation and I can tell the House now what the results will be, and it certainly will not be very heartening for the taxpayers who will need to carry the can for these characters.

I will return to the bank shortly, but before I do I want to address the other side of the Fine Gael motion, which deals——

An Leas-Cheann Comhairle: Information on Brendan Howlin  Zoom on Brendan Howlin  The Deputy has 2.5 minutes left.

Deputy Arthur Morgan: Information on Arthur Morgan  Zoom on Arthur Morgan  That is what I meant; I do not have much time to deal with the matters I would have like to have covered. There needs to be greater efficiency in the Garda. There are gardaí hanging around courthouses waiting for cases to be called when the DPP knows that those cases are not likely to be taken that day and in some cases knows definitely that they will not be taken that day, leading to substantial time being wasted. We need to get gardaí out from behind the desk doing silly things like answering phones, which is a telephonist’s job. Highly trained police officers should be doing the job for which they are trained rather than wasting time answering the phone.

I am somewhat concerned about the work of CAB, which appears to be used increasingly as a revenue raising agency. While I do not disagree with the work it is doing and welcome it, I wonder whether there are bigger fish to fry.

Let me finish with bank regulation. The Government claims it has done great things, but for the past three sessions the list of promised legislation has contained the Bills for the financial regulatory reform. On the publication of the Central Bank Reform Bill in March, I met Department of Finance officials and was told that the second and third parts of this three-stage legislat[572]ive programme would be almost finished by the end of 2010. The briefing document provided by the officials stated that the text of the second Bill would be available early in autumn, but now we are told that publication of the final two Bills is not expected until 2011. Why is financial regulation being dragged out? Why is it not all wrapped up and done and dealt with? The code has not even been published yet and we are supposed to have a consultation on it, which means it will not be introduced until sometime in the second half of next year. According to the Government’s amendment and to the contributions from Members on the Government side all of the legislation on bank regulation is supposed to be urgent, but there is no sign of it. I wonder why it is being delayed and dragged out, and I am concerned about the message that sends to the banking sector.

It is a pity I could not deal with the issue of directors and the cliques who remain in place. We need more time to deal with those characters and I hope we get an opportunity in the future.

Debate adjourned.


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