Banking Crisis

October 01 2008

I will begin by referring to the end of Deputy Durkan’s contribution on this amendment when he used the phrase “more confidence”. The quickest way to instill confidence is to pass this legislation. This is why while I agree with the sentiments of the amendment wholeheartedly, it would be flawed to place this type of constraint on the Minister. I agree that the worldwide financial system is shattered. As far as I am concerned, it is a global pyramid scheme. The financial markets have long since left marking their speculation against value. If one could return to the gold standard at least one would have something to measure it against. Today, most of the world market is based on speculation. It is based on
human emotion, greed and fear. It is not based on any reality.

A couple of years ago, our deputy leader, Deputy Trevor Sargent, referring to peak oil roduction rather than economic collapse, though they are related, stated that very soon Ireland would have to enter a wartime economic footing. This emergency legislation is that wartime footing. In a wartime situation we fight to defend ordinary people and this legislation

92 Credit Institutions (Financial 1 October 2008. Support) Bill 2008): Committee Stage is about defending ordinary business people, PAYE workers and people on social welfare. Unfortunately, I must support it with gritted teeth because there are a lot of scum, and I state this deferentially in one sense, who do not deserve to be bailed out in this way. These people made a great deal of money out of many innocent people. Unfortunately, this is the only way we can protect our society. Passing this legislation is very much in the national interest, a phrase which is often used.

The banks have lent money improperly and this was supported by successive Governments. We had a good Celtic tiger spurred on by Fianna Fa´ il and the PDs and by Fine Gael, the Labour Party and Democratic Left. However, bad decisions were also made, including with regard to developer-led greed and speculation. This was not only in terms of macro-economic policy, but also with regard to decisions made in council chambers throughout the country where corrupt or incompetent local representatives increased the value of land tenfold overnight by rezoning, thus encouraging baby developers to get onto the ladder, encouraging people to speculate and banks to lend more and more money until the bubble expanded to the point
where it is just about to burst. This is the problem with which we are dealing now.

An Ceann Comhairle: I must discourage Members from making Second Stage speeches. This amendment deals with the role of the Oireachtas prior to the commencement of the legislation.

Deputy Paul Gogarty: Absolutely. Questions were asked of the Minister about which banks were more fragile than others. To mention the name of a particular bank which the Financial Regulator might have secretly told the Minister was a little more dodgy than another would start a run on banks and increase the lack of confidence in the financial sector. A bank may be in such a situation. I do not know and to be quite honest I do not want to know.
Right now, I am happy enough with the statements of the Minister and the Financial Regulator that the fundamentals of the banking system are sound, at least when compared with other banks, such as those in the United States. I am happy right now to accept that it is a liquidity issue. That is what we are debating — the issue of ensuring that ordinary people and businesses are able to borrow money at critical times to keep normal economic activity going. I am referring to bread and butter economic activity, not speculative economic activity. Deputies Higgins and Burton have suggested that by offering this guarantee the State is encouraging banks to embark on another orgy of speculation. That risk is obviously there but I would argue that banks now have a triple-A rating and will have to pay the State the difference between what they get as a triple-A and a secondary bank. They will be a lot tighter in how they lend money from now

on. If the Minister had to outline exactly the terms, conditions and schemes that would applyit would take longer than one day. It would serve to increase the lack of confidence in the market, so that is why we need to have this done and dusted today. It is not without precedent that primary legislation is passed and details of the statutory instruments or regulations are xamined at a later stage. In deference to Opposition spokespersons, I ask the Minister to give as much information possible. However, I also argue that because we are in a wartime economic situation vis-a`-is the factors that might influence the stability of the Irish banking system over the next two five years, the terms and conditions the Minister may apply are fluid. We do not know exactly what is needed until we know what situation we will face. Asking the Minister to lay
down a list of criteria now would, first, be false because the situation may change and, second, it would delay the passage of this legislation. It would also have a negative impact on economic stability. While I agree with Deputy Burton’s sentiments, I ask her to withdraw the amendment on the basis of its negative impact on confidence. We need to increase confidence and let the public know the Government and Opposition are standing foursquare behind them. People 293 Credit Institutions (Financial 1 October 2008. Support) Bill 2008): Committee Stage should be able to do their business as much as possible in this constrained market without fear of the whole edifice tumbling down on top of us.

Posted in Dáil Speeches

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