The Taoiseach indicated yesterday that he sympathised with the idea in Deputy Cosgrave's amendment, but that he would like to have an opportunity of consulting with the Minister for Finance, to see whether something could not be done in a definite way to meet it. In reply to a question by Deputy Childers, as to the value of the backing of that portion of our currency issue that was not backed by sterling, the Taoiseach indicated that such security as would be put at the backing of that part of the currency would be valued on the sterling rate. I do not know exactly what was implied.
Central Bank Bill, 1942—Committee (Resumed).
Debate resumed on amendment No. 45.
So long as they have parity.
That rather impresses me forcibly. If we were self-sufficient, and had no outside trade, I take it that we would have currency which would cover internal working, and that there would be no necessity to back it by securities of any outside country. We would have to carry on with our internal securities, and whatever backing was put to our currency would have to come from inside. There would be no point in having our currency backed by outside securities.
I cannot help relating in some way the necessity for backing our currency by outside securities with our trade with outside people, and when I look back to the kind of backing we had for our currency in 1930-31, to the volume of that backing and the volume of our trade, I am put a sort of puzzle. For the year ended December, 1930, our total trade was £101,000,000 of which £56,700,000 represented the value of our import trade. In 1931, our total trade was £86,800,000, the value of our import trade being £50,460,000. We come then to 1938. In that year, our total trade was £65,600,000, of which £41,400,000 represented imports and last year our total trade was £61,300,000, of which our imports represented £29,000,000. When our trade was £101,000,000, our legal tender note issue was about £7,000,000. We had to have £7,000,000 of our currency backed by British security. In 1931, the position was the same—£7,000,000 of our currency issue had to be backed by British securities. When our trade fell to £65,000,000 in 1938, our legal tender had swollen to £10,000,000 and that was backed by British securities; but our trade last year was £61,000,000 and we now have £18,000,000 of our currency backed by British securities, and we are embarking on a proposal which could involve the addition of another £5,000,000.
The cost of backing our currency by British securities is pretty heavy. In the case of the year 1931, when we had £7,000,000 of legal tender, if the securities were bearing 5 per cent., it cost the banks £350,000 to back that issue, and, if the figure was 3 per cent., it would cost only £210,000. At present, when the legal tender is £18,000,000, at 3 per cent. it would cost the banks £540,000 to back it. What I cannot understand is why, with a falling trade, it should cost an addition running into hundreds of thousands of pounds to back our currency, if, as I understand it, the necessity for backing our currency by outside securities arises out of our trading.
I do not know exactly what line of argument the Deputy is adopting, or what he is driving at. With regard to the cost to the banks, you may be quite sure that if currency goes out through the banks, it does not go out for nothing, from their point of view. They are giving it in advances on which they get very much more than they will have to pay for getting the currency. From the point of view of the community, the extension of the currency is due to the need for having the necessary currency for the convenience of trade. On the hypothesis that we were completely and absolutely self-sufficient and had no external trade whatever, the need for having our legal tender backed by external assets would not arise, but that, of course, is a completely unrealisable situation—that we should be cut off completely, have no trade and be completely and absolutely self-sufficient. That situation is, I think, almost entirely unrealisable. It would preclude people travelling into and out of the country, and so on.
The position we are in is one in which there is trade of a substantial amount, even though there has been a considerable falling off. If you grow for yourself the things you were importing, there must be a falling off. Suppose we were importing £5,000,000 worth of wheat and suppose we grow that ourselves. In the former case, you were importing £5,000,000 and probably exporting something to meet it, so that for each £5,000,000 you keep at home you may expect that, in the ordinary way, unless counteracting measures are taken, each £1,000,000 you produce for yourself means £2,000,000 in the double trade. There is, however, a considerable trade and therefore the premise on which the Deputy wants to argue does not arise. In respect of that trade, it is convenient, as we will find later when we are discussing the parity question, that we should have parity with sterling, and, having that parity, it is desirable that our currency should be backed with sterling; otherwise, the inter-convertibility might possibly be endangered. When I said that, if we were backed by Irish assets, it would be desirable that these should be estimated somehow in terms of their value in sterling, it was, of course, on the assumption that parity remained. If you were basing it on completely internal securities and internal issues, it would be necessary, I suppose, to have an outside exchange to correspond and you would probably have a variable rate of exchange.
I do not see the particular point the Deputy is driving at. You either have parity or you have not. There is no halfway house, so far as I can see, and though your trade may tend to make the importance of parity less, if the trade is less, it seems to me that, as the position is, you must either have parity or not have it. There is no intermediate position, and so long as we have it, we have to consider sterling as a necessary backing for our notes.
Are our external assets necessary for our carrying on here? Without them, could we carry on trade and commerce here?
We could, if we did not have trade and so on. We could have minus external assets by having external debts and be a debtor nation.
Everybody is in a quandary in regard to the Bill. Even in connection with the Bill, are the external assets we have in England necessary?
Some of the speakers seem to have missed the point which really underlies this question. If we go back to the time when there were a number of banks more or less making their reputations, we find that they issued bank notes and that the very proper provision was made that they had to pay out gold in exchange for these notes. We came along, and then that situation was improved upon, by which there were issues of notes other than by the private banks. These were again backed by, at any rate, a gold covering. That scheme then became highly inconvenient and, in some cases, impossible, and they were backed by securities which were readily realisable. Now, what a number of Deputies seem to forget is this: we have had such a period of financial stability, running back over a number of years, that we seem to have forgotten, or perhaps we never knew, that a situation might arise when a person could look upon a £1 note as an absolutely valueless piece of paper, and say: "What can that get for me?" Now, I think, some of the discussion on this matter, vis-a-vis sterling——
The question of parity will arise on a later amendment. The Deputy should relate his remarks to the amendment before the Committee, which is whether there should be a percentage of Irish backing for our legal tender notes.
I only intended to refer to parity, in passing, and perhaps I might have said that the idea of having sterling assets, which could be readily realisable, was that if a situation arose—God forbid that it should—whereby we should come to a financial crash in this country, people could be offered, at any rate, an alternative to the £1 note. We never can go back to the stage at which the banks could be expected to hand out gold, as against notes, to anybody who took the fancy that the notes were valueless, but at any rate an effort could be made to provide for an alternative currency and an alternative to the £1 note. To my mind, while I have the greatest sympathy with this amendment, I imagine that a case could arise in which the 25 per cent. of assets here of liquid sound advances might be absolutely unrealisable. By that, I do not want to be taken as running down our liquid sound advances which, in a time of ordinary trade, are perfectly good, perfectly sound, and perfectly realisable, and which ought to be accepted by anybody, but if and when—if it ever did occur—a financial squeeze were to come, there is no doubt about the fact that an alternative form of currency which could be offered to the people might allay a panic and might put off a run on the banks.
There appears to be some misunderstanding or incorrect impression abroad in connection with this question of liquid sound advances. The very first term of the expression—"liquid"—is, in itself, an explanation of the realisable character of the liability. If it were not liquid, a different description should fall to be applied to it, and it is rather strange, in the state of affairs which is envisaged by a bank having liquid sound advances, to say that they might not be easily realisable. There is as little doubt about their being realisable as there is about the realisability of a given quantity of War Loan in the precise moment. One might have difficulty, even on the London market, in getting rid of £10,000,000 worth of War Loan in a day—£2,000,000, you might, but with regard to £10,000,000, perhaps you might not. The description "liquid sound advances" simply means something that can be cashed on short notice. The mere accidental fact that the Currency Commission felt itself unable to find a method of accepting that as a backing for the Irish notes in a proper form is beside the question.
I have already stated that it was one of the objections of the banks, as such, to give any information to persons outside—those that they had not been authorised to give it to by the transactions that took place between customer and bank. If any person here in this House has a transaction with a bank in which there is an advance made to him by the bank in respect of collateral security, that person has present to his mind the fact that it is a transaction between two persons, himself and the bank, and he would have a natural objection to have the bank's confidence shared by the central bank, no matter how exalted or of how high integrity the officers or the directorate of that bank were at the time. Now, I am still holding with the backing of at least 25 per cent.—I am not confining myself to 25 per cent.—of our note issue by our domestic assets, and the description, in Section 3 of the Currency (Amendment) Act of 1930, does not satisfy me in that respect. In other words, I want the liquid sound advances as one of the means of backing our assets. There, the description is "securities, currency, balance, or other form of assets to the forms in which the legal tender note fund" and so on. Now, apart from the basis of the whole business—that is, that this is a side method and, one might almost say, a device to meet a crisis or an emergency—I consider that our currency should have a better character than that: that it should have and that it is entitled to have a national character. I by no means belittle or criticise the value of sterling assets. I realise in full their value, and I realise as well as anybody the contribution which the sterling asset unit or stability is to the world's economy, but I dispute absolutely any contention that our own assets are unworthy of being harnessed to the liability of our currency issues.
I think that, as an independent country, having an independent legislature, the issue of currency is one of the vital tests by which we would decide the question whether or not we have either the independence or the integrity of which we boast. Now, if there be a doubt as to the workability of this scheme on the basis of the enactment that is in force—that is that the Currency Commission must be satisfied—that must be waived. It is part of the acceptance of the recommendation I am making that it would be waived. Yesterday, I said when speaking in support of my contention that we are entitled to waive it. Irish banking has a tradition of over 100 years. The Currency Commission has had a tradition of 15 years. Whatever strength there is in the Currency Commission—and I think I have as much right to be proud of it as any person in this State—it has it by reason of the predominant character and stability of the banking institutions of this country, and not by reason of anything that it has done itself. It could only use whatever was there in the nature of assets to be employed for the purpose of balancing. In other words, in so far as its use as a constructive factor in the situation was concerned, it was on point duty, regulating the traffic but doing nothing to create it, and in no way responsible for the character of the traffic that was there.
In my view—I may be wrong—there are sufficient liquid sound advances in this country to warrant the backing of 25 per cent. of the currency issue. As I have said, when one takes into account the responsibility of the banking institutions of this country to the people of the country, one sees that in their deposits they have the confidence of the people to the extent of something like £200,000,000. Their balance sheets are published annually, and these show how they stand. They have been able to pay over a long period of years a certain dividend, and, in addition, have been able over a certain period—I am not confining myself to the last few years—to put sums annually to reserve. I say, taking the character of those institutions and comparing them with the Currency Commission or the central bank, they have at least seven or eight times the strength behind them that the central bank has, even if it be buttressed by the State. It does not fall to the directorate, however exalted they may be, or however high their integrity may be, to question that stability. That stability is there, not by reason of any description I have given it, but because of the facts of the situation—that the banks are the trustees and guarantors for sums in the neighbourhood of £200,000,000. It should be quite sufficient if proof is given that there are liquid sound advances there to a sum that would be stated on paper by the directorate and officers and certified by the auditors of those institutions. If there is any weakness in that, then it is a weakness from which even the Currency Commission or the central bank would not be more immune. That is the main contention and I think it is not unreasonable.
I think it is perfectly understandable that a difference of opinion would arise as regards the reluctance on the part of the banks to share with the Currency Commission information which had been given to them in confidence—if that were the reason—and an insistence on the other hand by an institution newly set up, with an ex-civil servant, of all persons, in the chair. We know from our own experience of the Civil Service what might be expected from a person of that kind. I am making no criticism of him, but I simply say that in respect to the characteristics of his class, the order from which he came and the procedure with which he had been acquainted— it is not a business procedure—that so far as he was concerned it was natural that the letter of the law was what would be expected. When we had that on the one hand and the objection, rather than the reluctance, on the part of the banks to sharing the confidence extended to them on the other, it was obvious that the particular form of the scheme that was devised would not work. Is it worthy of being worked? I believe it is not.
During the course of the discussions on this measure there have been many exaggerations. I present one for the consideration of the House. The sum of currency notes that could be issued under this Bill if Section 3 of the Currency (Amendment) Act of 1930 were not brought into play, and if we were dependent entirely on employing whatever sterling assets we have in the country, would be in the neighbourhood of £90,000,000. Let us take the round figure of £100,000,000. That is the maximum value of the sterling assets which this country possesses. If it be £100,000,000, what have we got? The banks have a liability to their depositors to the extent of £200,000,000. In that event we are going to pay 10/- in the £ if there be a run on, unless we are to employ Section 3. Now, to employ it, and to bring in all the other means that there are for providing currency, we still find ourselves short of a very considerable sum to put up sufficient to provide every person who has a pound note in the bank to his credit with a currency note. It is an exaggeration, but it is a sort of factual exaggeration. One of the ways of meeting it—it would be the principal way ultimately—would be by employing the value of those liquid sound advances in that case. In that event they come in at a certain discount. They come in under a certain cloud, being looked upon as a second best. In my opinion they are not a second best, but are as sound and as realisable and as good backing as sterling. I am not in any way belittling sterling when I say that. That is the sum and substance of the recommendation that I am making in this amendment.
Deputy Childers raised a question yesterday as to what would be the convertibility under this arrangement. Convertibility, if I may say so, has two aspects in this connection. If a person requires to pay a debt in England, or elsewhere outside this country, he usually does not pay with a currency note or with a consolidated bank note, but draws a cheque on his own bank, sends it away and it is honoured. How is it honoured? By an almost unbreakable rule it is honoured by his own bank which has a credit with a London bank, and the Currency Commission does not come into it at all. In the case of an individual who has not a banking account and desires to carry out a transaction of that kind, he may employ the Currency Commission or the central bank, as the case may be. But, in the normal course, the banks here have their sterling assets where they are in a position to deal with any transaction of that kind which may occur, and are able to do it quite rapidly and satisfactorily. However, what I am concerned with is the principle of having a proportion of not less than 25 per cent. of the currency note issue of this country backed by the liquid sound advances of our banks.
There is one aspect of this matter in which I am interested. I raised the point on the Second Reading and I rather think it could be dealt with in connection with this amendment. This Bill is not intended to be a fleeting or passing measure. I take it that it is intended to be enshrined for all time as part of our permanent legislation. It is a very important piece of legislation and we must, I think, consider all possible contingencies. So far as I can make out, the proposal is that legal tender notes are only to be issued as against certain things, but including sterling assets. I do not think we are taking into consideration the position of affairs which might arise in the unlikely contingency of sterling assets losing their value altogether.
Would not that come in on the parity discussion rather than now?
There is an alternative now of providing some backing besides——
Quite, but then there would be two discussions on parity with sterling. The references to parity have been incidental to this amendment and not on parity per se. Amendment No. 66 deals specifically with that issue.
Then I will have an opportunity of raising the matter?
Certainly. Is amendment No. 45 being withdrawn?
I understand it is to be considered.
I said last night that I would take up with the Minister for Finance this matter of liquid sound advances and have it considered in connection with the special powers that would be given to the Minister to make an order to add home securities in addition to sterling backing. The Leader of the Opposition seemed to think that the liquid sound advances which are mentioned would not come under the heading, of the securities mentioned in the other connection. I am not so sure of that, but it is a question that can be examined. With regard to the difficulty that arises with the Currency Commission, owing to the fact that the banks do not want to give to the Currency Commission the information which the Currency Commission require, we are talking of putting on the Currency Commission the obligation to make sure of the soundness of our currency, and I think it would be very difficult to impose upon them, on the one hand, that responsibility and, on the other hand, preclude them from making inquiries and getting the information which they think necessary in order that they may be sure. It is not a question of thinking: "This is a sound institution and it is all right." They are the people who are immediately responsible, and I do not think that will be the attitude of the civil servant or the attitude of any person on whom responsibility is placed. I think there is a genuine difficulty which it may not be so easy to resolve.
We are putting on the new bank the responsibility which was placed on the Currency Commission to see that our legal tender issue is backed in a certain manner and that the currency is absolutely sound, and they can only do that by making sure that it is backed by assets which would enable that to be done. Although I agree with the Deputy with regard to the character and reputation of our banks, still it is not fair to ask another body outside them to take upon themselves the responsibility of saying: "We will trust you." Even in business that is not done. As I say, the civil servant's mind will not approach it in that way or the mind of anybody who has a definite responsibility placed upon him. However, there may be some way. I imagine if there was a way out it would have been found. But, if a way cannot be found, I think we will have a very difficult situation indeed. However, the whole question and the points which have been raised can be examined.
Might I put this to the Taoiseach? He left the impression on my mind yesterday, by his speech, whether inadvertently or not, that so far as the backing of the currency in countries which were usually described as being on the gold block was concerned, such as some of the Scandinavian countries, for the purpose of parity they also backed their currency with British sterling.
I did not say anything of the kind. I did not say anything so absurd.
The Taoiseach suggested that it was for reasons of trade they kept the parity. He described it as a link and he said they had sterling assets for the backing.
When talking about the percentage of backing which countries have for their currency, I said that those which were backed by gold—formerly there was a class backed by gold, because gold was an international commodity and what I might call an international medium— did not have it backed to the full 100 per cent. necessarily, and those which had a backing partly of gold and partly assets external to their own currency did not have it necessarily backed to 100 per cent. and that we here need not necessarily have ours backed to the full 100 per cent. That is what I said. I may not have said it in precisely the same words, but I think the Deputy will find that the general sense was the same.
Amendment, by leave, withdrawn.
Amendment No. 46 not moved.
I presume the Deputy will take amendments Nos. 47 and 52 together, as they cover the same point.
I move amendment No. 47:—
In sub-section (2), page 19, line 57, after the word "bank" where it occurs secondly to insert the words "a co-operative banking society".
Sections 36 to 40, inclusive, are concerned with the making of a deposit by commercial banks. It will be noted that to carry on business a commercial bank will be required to make a deposit. I suppose the purpose of demanding a deposit is to preserve the monopoly of the existing banks. I remember reading some time ago that Senator Sir John Keane stated in the Seanad that anybody could start a bank. After the passing of this Bill that statement will be no longer true. To start a bank then one will be required to make a deposit of £20,000 in the High Court. There is nothing wrong in requiring that our banks should be solvent. But the purpose of this Bill is not only to secure the solvency of the banks, but that only a certain class of people can carry on banking. Section 36, however, provides that certain types of banks are to be exempted from the obligation of making a deposit in the High Court and these are: the central bank, the Post Office Savings Bank and the Trustee Savings Bank.
The purpose of this amendment is that a co-operative bank shall be in the same position as the Trustee Savings Banks and the Post Office Savings Bank and will not have to make a deposit in the High Court. I might mention cases where co-operative banks have been a great success. The Manchester Co-operative Bank is probably one of the most successful in the world. It has helped to finance the manufacturing and trading corporations in Manchester to a very subtantial extent. On the Continent co-operative agricultural banks have been of tremendous help in financing agricultural development in those countries. My reason for moving this amendment is that a good many people feel that there is a great desire to start a co-operative bank in this country. Such a bank would be of great help to the farming community in providing credit for agricultural development. This amendment would not interfere in any way with the principle of the Bill, or with the commercial banks. It simply asks that the door be left open for essential development. I hope the Minister will accept the amendment, because I think there is a desire for a co-operative bank in this country.
I am sorry that I cannot accept the Deputy's amendment, but I do not think that is going to do much harm to anyone who wants to start a co-operative society to help farmers or industrialists or anybody else. Many such societies have been started, to my own knowledge, in the last 35 years or so.
But not banks?
Yes: agricultural credit banks, agricultural credit societies and co-operative banks. I remember as far back as 1907, 1908 and 1909, when I was one of the honorary secretaries of the old Sinn Fein organisation, being out with the late George Russell, "Æ", who was an enthusiast on co-operative matters of all kinds, but who had a particular interest in co-operative banking societies. He interested Sinn Fein in banking societies of the Raffeisen type, which is the type of society that he induced his own co-operative society to take up, and he also got Sinn Fein to take them up. I do not know what has become of them, but they were started and did good work for many years.
You admit the opposition they had to face at that time?
That is true, but some of them continued to exist, and I think a few of them are still in existence. Perhaps they are not doing a great lot, but there are some of them there. This section is a necessary one to protect the public against so-called banking societies—there have been such in the country in days gone by— that might prey upon the public because of being permitted to use the name "bank". I would suggest to Deputy Hickey that, without the use of the word "bank" or "banking society", co-operative societies could still do banking work of the type they have been doing. They have called themselves "credit societies", but they cannot use the word "bank" in their title.
I know they cannot do so after the passing of this Bill.
They will not be allowed to use it. That is all we want to secure—that they will not mislead the public. That will not prevent a co-operative society from continuing to do the type of work they have been doing. The Deputy mentioned the Post Office Savings Bank and other kinds of savings banks. They do not lend money. Those savings banks do not lend money, and, therefore, they are not intended to come under this section, making it obligatory to pay that deposit. In the case of some semi-commercial banks which have made representations to us we propose to take certain powers, but, in the case of any society, co-operative or otherwise, calling itself a bank or bankers, if they use that word in their title I cannot permit them to carry on. My whole sympathy would be with the co-operative idea; I should like to see it go ahead and prosper——
It cannot be a success without having a co-operative bank to help it on.
It does not need the word "bank" to make the thing a success. They have had the use of the word "bank" for the last 35 years to my own knowledge. Speaking from my own personal knowledge over the last 35 years there has been no real effort made to get a co-operative bank either in Dublin or in any other urban areas where it might have been a success if it had been properly taken up and worked enthusiastically.
Is the Deputy pressing the amendment?
It is only waste of time to put it to a division, because I think the scales are weighted against me from what the Minister has said.
Amendment, by leave, withdrawn.
Section 36 put and agreed to.
SECTION 37.
I move amendment No. 48:—
To add at the end of sub-section (1), page 20, the words "or, in the case of a person to whom an Order under sub-section (3) of this section relates, the sum mentioned in such Order".
Amendments Nos. 48, 49 and 50 are three amendments of mine, and No. 51 is just a consequential amendment arising out of those three if they are accepted by the House. Representations have been made to us that the sum which we proposed to ask for as a deposit from bankers would be much too big a sum for certain smaller organisations that do banking business to a certain extent. They asked us, seeing that there had been one or two of them in existence for a long period —one that I know of here in the City of Dublin for just 50 years—that they had done successful business and that their credit was good, whether the Minister would meet them and allow them to put in a smaller deposit. Having considered the matter and gone over it with my advisers, I agreed to put in a limit of not less than £5,000 as the deposit to be paid by even those small banks. Those bankers who had made representations accepted that. They thought it was a pretty stiff figure, but they accepted it, and those amendments are intended to meet that position.
Is the Minister speaking on amendment No. 50 or 48?
Amendments Nos. 48, 49 and 50. Amendment No. 51 is consequential.
Amendment No. 48 put and agreed to.
The following amendments were agreed to:
49. To add at the end of sub-section (2), page 20, the words "or, in the case of a person to whom an Order under sub-section (3) of this section relates, the sum mentioned in such Order". (Minister for Finance.)
50. Before sub-section (3), page 20, to insert two new sub-sections as follows:—
(3) The Minister, where satisfied that special considerations so warrant, may by Order permit a person holding himself out as a banker to deposit and keep deposited in the High Court in accordance with this Part of this Act a sum less than that mentioned in sub-section (1) or sub-section (2) of this section (whichever is applicable) but not less than £5,000.
(4) The Minister may by Order revoke or amend any Order under this section. (Minister for Finance.)
Question proposed: "That Section 37, as amended, stand part of the Bill."
Is the Minister quite satisfied with the wording of sub-section (4) of Section 37? It is intended by that sub-section that a director or officer of a company or corporation convicted of an offence should also be liable, I take it, to punishment by fine similar to the punishment provided in sub-section (3). Is the Minister satisfied that that intention is carried out in sub-section (4)? Perhaps I might read the sub-section for the Minister:—
Where a company or other corporative body commits an offence under this section, every director and every officer of such company or body who wilfully authorises or permits the offence shall also be guilty of the offence and be punishable accordingly on conviction thereof.
I suggest that the word "accordingly" is not sufficiently specific. Such officer or director could raise the point that no specific punishment is provided. The matter is left very much in the air. It is, of course, intended that such director or officer shall be liable to the same fine for the offence as the corporation or body concerned. It would simplify matters if the punishment were specifically set out in that sub-section in the same manner as it is set out in the case of the corporation.
The Deputy does not think that it is set out sufficiently clearly in the preceding section?
I think a very good argument could be put up that the word "accordingly" is not sufficiently specific.
I shall have the point looked into.
Question put and agreed to.
Section 38 agreed to.
SECTION 39.
I move amendment No. 51, which is consequential on amendments Nos. 48 and 49.
Before paragraph (b), page 22, to insert a new paragraph as follows:—
(b) an Order under sub-section (3) of Section 37 of this Act in relation to the amount of such deposit shall be capable of being made notwithstanding that such company has not been incorporated.
Amendment agreed to.
Section 39, as amended, agreed to.
Section 40 agreed to.
Amendment No. 52 not moved.
Sections 41 and 42 agreed to.
SECTION 43.
On behalf of Deputy Davin, I move amendment No. 53 to delete sub-section (2).
We are not relieving the bodies of any obligation to publish. As a matter of fact, we are taking further and wider powers to make publication essential but this particular section will not be required when we take the extra powers which we propose to take.
Amendment, by leave, withdrawn.
Section 43 agreed to.
Amendment 54 not moved.
Section 44 agreed to.
SECTION 45.
I move amendment No. 55:—
Before Section 45 to insert a new section as follows:—
(1) If the board is of opinion—
(a) that any licensed banker is holding assets within the State which are insufficient in proportion to his liabilities within the State, and
(b) that sufficient additional assets within the State of a character appropriate to the liabilities and to the normal business of the licensed banker can be acquired by him at a reasonable cost and with reasonable security,
the board may notify the licensed banker of the additional assets within the State which can be so acquired and may recommend the licensed banker to acquire them.
(2) The licensed banker shall within one month notify the board whether he accepts the recommendation of the board.
(3) If the licensed banker fails to accept such recommendation or having accepted, fails to act thereon within a period of three months the board may report such failure to the Minister.
(4) The Minister may, on any such report and after consultation with the licensed banker, by order prescribe that the licensed banker shall deposit with the bank free of interest such sum as the Minister thinks fit not exceeding the amount by which, in the opinion of the board, the assets held within the State by the licensed banker are insufficient in proportion to his liabilities within the State.
(5) A licensed banker, the subject of an Order made by the Minister under sub-section (4) of this section, may from time to time apply to the board for a review of the last preceding recommendation of the board as to the acquisition by the licensed banker of additional assets within the State.
(6) The board shall report its conclusions on any such review to the Minister, and the Minister may, on any such report, and after consultation with the licensed banker, by Order terminate or vary the terms of any Order then in operation and made by him under the provisions of sub-section (4) of this section.
(7) The board shall account separately for any sum deposited with it under this section and shall not apply, either directly or indirectly, any sum so deposited to the acquisition of any assets other than such assets within the State as the bank is by this Act empowered to acquire.
(8) Repayment to a licensed banker of any portion of a deposit made with the bank under sub-section (4) shall be in the form of legal tender or a draft on the London Agency.
The amendment I am moving is in substitution for Section 45 of the Bill. I take it that we could all give a sort of pious blessing to Section 45 as drafted by the Minister but I question how far it will produce the desired effect. I submit to the Minister that it will not produce the effect he desires. My amendment was an effort to put forward a method by which this balance can be corrected in so far as it is possible to do so. The banker has not control of the whole proceedings. He is tied down by making or refusing advances to customers. He is always willing to take money from depositors when they appear but they have to appear. I should like to read to the Minister three instances which, more or less, cover all the circumstances which would arise for a banker in this connection and I submit that these do not make any difference under the Minister's draft of Section 45:—
"A. Bank buys £100,000 national loan:—1. From a customer, B/1. Éire assets rise; B/1. Éire liabilities rise. This operation fails at the outset to correct the proportion in the manner aimed at in Section 45. 2. From a customer of (M.) Bank, B/1. Éire assets rise; B/1. sterling assets fall. M., B/1. sterling assets rise; M. Éire liabilities rise. That produces the same effect.
B. Bank takes direct issue of:— 1. Éire Government stock, same as A.1. above. 2. Dublin Corporation stock, same as A. 2. above. The effect is the same.
C. Bank makes a loan in Éire. B/1. Éire assets rise; B/1. Éire liabilities or those of other banks rise."
In those cases, it seems as if it is beyond the powers of the banks to produce any effect which will alter the proportions. It seems beyond question that the intention of Section 45 cannot be realised unless external owners of assets within the State can be found willing to dispose of them to the banks in exchange for sterling. That is a state of affairs in which, for all practical purposes, it would be beyond the scope of the bank to do anything more than hold themselves out as perfectly willing to facilitate any of those transactions when they arose. This matter can correct itself over a period of years. The banks show an increase of liabilities within the State, as between the years 1932 and 1941, of £7,000,000, and an increase of assets within the State of £14,000,000, so that the assets within the State, as a percentage of total liabilities, amounted to 43 per cent. in 1932 and 55 per cent. in 1940. I submit that the amendment would go further along the lines the Minister would like than the original text in the Bill, and I have pleasure in proposing that amendment.
I cannot accept the Deputy's amendment. I do not think it would be an adequate substitute for what I propose in the Bill. I do not anticipate that action will be taken under the section as proposed unless any appropriate internal assets are or have been available for acquisition by the licensed banker concerned. A reasonable time limit will be allowed to the banker within which to acquire the assets: the time allowed will not be as liberal as Deputy Dockrell suggests, but it will be adequate. The members of the board will be sensible businessmen, and not out to do any harm to the associated banks. Their anxiety will be to give assistance to the banks and not to do them any injury.
The object in sub-sections (1), (2) and (3) of the Deputy's amendment are already covered in Section 45 of the Bill. Admittedly, Section 45 is something new, which banks have not had to deal with before, and something they may think will cause them some trouble. I anticipate, however, that the members of the board will be experienced men, with a desire to help the associated banks, while carrying out the duties and functions imposed upon them. They will not operate this section, which has a definite purpose in view, to cause real disadvantage to the associated banks. They will be prudent and probably they will consult with the bankers concerned and try to secure by other reasonable means that what is desired in Section 45 be accomplished, before the section would be called into operation.
The section desires definitely to encourage still further the repatriation of our Irish assets abroad. In the last ten or 12 years the banks have been repatriating foreign assets to a certain extent. That is not continuing at the same rate now as it was for a number of years before the war; but, please God, the war will not last always, and the process will be taken up again by the banks, and this time they will have the assistance and guidance, I hope, of the board of the central bank in that operation as well as in many others. If this section is accepted, though it may never require to be used, the central bank will have the power to encourage the banks still further to go in the direction some of them were willing enough to go during the last ten or 12 years. The rate might be accelerated—that remains to be seen— and it will be for this board, watching the situation from week to week and watching our financial position vis-a-vis our foreign trade, to see what steps it may be necessary or desirable to take in the direction indicated by this section. They will encourage the banks to take action accordingly.
Regarding the example read out by Deputy Dockrell, as to how the scheme might work under certain conditions, I suggest that the assumption in the example of the proportion is not correct. I would make another assumption. Let us assume that the total internal liabilities of the bank are £1,000,000, that its external liabilities are £500,000, while against these the bank holds £700,000 worth of Irish assets and £800,000 worth of external assets. On those figures, the actual proportion between internal assets and liabilities is 7 to 10, that is, 70 per cent. Let us assume the adoption of this section and of the regulations made under it. On the request, perhaps, of the central bank to a particular bank, that bank purchases an additional £200,000 worth of Irish Government securities. Its internal liabilities and assets would then increase by £200,000 and the new figure would be £1,200,000 in respect of liabilities in Ireland and £900,000 in respect of assets in Ireland. The new proportion between internal assets and internal liabilities is as 9 is to 12, that is, 75 per cent., which is an increase of 5 per cent. on the previous figure. The assumption, therefore, in the Deputy's figures is not, I suggest, correct, and I would like him to examine this assumption of mine and compare it with his own at his leisure. I think the suggestion in Section 45 is a reasonable one and one that is likely to be used prudently and, when used, will be used for the national good and the banks' good. I do not, therefore, accept the Deputy's amendment. I think the suggestion I make will be practicable and workable and will be advantageous.
The Minister says that before the bank would be forced to take action under this section, the board would see that there were appropriate assets available here for the bank to buy. Will he say what he considers appropriate assets in such a case —what assets has he in mind?
Any kind of suitable assets that the central bank would, to employ words that have been in common use here within the past 24 hours, consider sound and liquid— domestic assets.
I take it the idea of putting in Section 45 is to pursue a particular policy?
Yes.
Surely, if the Minister is clear as to the policy to be pursued by the operation of this section, he could be a little more specific and give us some idea what the appropriate assets would be? Must the assets be liquid? Could the Minister give us any idea as to a simple operation under the section?
That would be more appropriate to the section.
Very good.
The section, as it is drawn, is regarded generally as an onerous section. This is an alternative to it. If we dispose of this without examining the section in all its variations, it is possible that in a subsequent discussion we win be faced with this, that, having beaten the amendment, we will then have nothing left but the section and the section has this rather peculiar distinction about it, that in a later amendment, amendment No. 58, I seek to emphasise the fact that while there may be a transfer of certain securities, national securities, in the books of a bank as distinct from sterling assets, we do not interfere with the bulk sterling assets held by the State in any transaction that can take place. In fact, there is only one means of lessening the sum total of sterling assets that we possess, only one means left to us, and that is to purchase goods for which money will have to leave this country; in other words, to buy foreign goods.
It is held that in certain circumstances the purchase of capital goods would create productive assets in the State or give the means of increasing the productivity of the State. But there is no indication in this section, as it is drawn, to mark any distinction between the purchase of boots, clothing, beer, foreign spirits, wines or anything of that sort and the parting of money for capital goods. To that extent, as between the amendment and the section, the balance of our judgment ought to be for the amendment. Neither of them, to my mind, ought to be in the Central Bank Bill, for the reason that banking as such is a technical and very peculiar modern development, likely to be thrown out of gear by simple transactions.
We have in this country a very healthy banking system. It may be objected to on various grounds by certain people—that it does not fulfil all the obligations or considerations that people expect—but it has this about it, it has a character for stability, a character for having paid what is described as 20/- in the £, or 100 cents in the dollar, without interruption over a long period. If Deputies had an opportunity of meeting people from other countries who were informed that their life savings, or a certain proportion of the savings they have taken years to collect, were rendered valueless in an hour and that they were left penniless—from being in a position of comparative comfort, they were obliged to take their place in the bread line—that would give them some idea of the danger of interfering with one of those institutions, to the disadvantage of the institution.
We can, of course, take steps to make even more useful our banking institutions, but, so far as this section is a contribution to that, so far we have not heard the reason for it. The overbalancing—if I might so describe it—that has taken place in this country over a long period, in which we have rather a large proportion of the wealth of the State represented by foreign investments or foreign credits, is something which can scarcely be laid entirely at the door of the banks in the matter of responsibility. It has occurred through trade. It is emphasised in recent years by reason of the fact that we sell goods in an external market and we are paid for those goods in external credits. We can turn these credits, if we wish, into securities, or we can keep them as cash in an external country. There is no indication given to us in connection with this section, as it is drawn, of any other method except transfer taking place.
The transfers which have been referred to by the Minister have this weakness about them, that we have not a market here for any of our securities. It does not follow from that that they cannot be sold. They can be sold but they cannot be sold in large quantities and any huge purchase of securities here which would be involved by the figures that have been given by the Minister, that is, purchasing, let us say, £400,000 worth of our securities, unless it were to take place over a long period, would unquestionably increase the price which would have to be paid for those securities and when that market passes off, unless some other huge purchase takes place, there would be a slump. Is there anything more inadvisable in this country, having had only two decades as its period of existence, than to have a fluctuating quotation for national or other securities in the State? It is certainly most advisable from the point of view of future loans that there should be a steadiness about the market for those loans. If to-day the market increases by, let us say, even 1 per cent. and over a month increases by 2 per cent. and then by 3 per cent. and then purchasing stops and the market is left to its own devices and there is a drop in these securities, it gives rise to a public feeling of disquietude and a reluctance on the part of the people subsequently to take up national loan or any issue of a local authority.
In a very small respect I happen to have been a member of a body which required to make investments of a small amount, somewhere about £10,000 or £15,000. They were all Irish securities. Owing to the emergency and other things it was very difficult to sell any of these and we were faced then with the problem, in making any investments in future, whether your patriotism on the one hand would battle with your discretion on the other and, having a responsibility as a trustee, whether you could equate the difficulty of the situation on the one hand with having to pay a fairly high price, it being almost certain that if you had to sell on the morrow you might not be able to get your price.
The section interferes with the normal flow of the investments that have taken place by banks. If a bank had amongst its clientele, a number of persons engaged in the cattle export industry and they sell in the months of September, October and November, huge quantities of cattle and bring the proceeds to the bank, the bank then has a preponderance of what are called sterling assets. Are they to advise their customers to go to some other bank with those cash accounts? They cannot do that. Suppose the Minister himself was placed in that position, what would he do?
I have no cattle for sale.
Supposing the Minister was in the position of those who were cattle dealers, and he got the money, what is his alternative? I will tell him what his alternative would be in that case. If his bank had not got a branch across the Border, he would be well advised to deal with a bank that had a branch across the water and tell them to put that credit in one of those institutions over there, so that it would not disturb his balance. That, to my mind, would be a very inadvisable proceeding, but if you are faced with the question of not having a certain amount of sterling assets over a point, there is always a way out. The real question at issue here is that in the opinion of the Ministry our sterling assets are at a figure beyond that at which they ought to be. They may have in mind the desirability of facilitating people in purchasing capital goods. If a bank finds that its customers are not in that line of business, what is there to prevent the manager of a bank suggesting to his client who sells, let us say, drapery or goods of any kind, to buy these foreign goods and sell them to the detriment of the people engaged in the production of these goods here? That, surely, was not the intention when this section was drawn. Consequently, unless the Minister is prepared, to some extent, anyhow, to answer the questions that have been put to him in connection with this matter, I think we are forced to support the amendment as against the section.
I am disappointed in the Minister's reply. All the Minister's reply seems to amount to is: "Well, I have not had an opportunity of looking into the instances that have been given to me, but in any case, I am sticking to my own figures until I am proved wrong." I would like to suggest to the Minister that what his reply amounts to is: "Well, of course, although we are taking power to hit the bank hard, really, the board of the central bank will be very decent people and they will give him as much rope as they can." I am afraid what will occur is that, having had the instances brought to their mind, the bank will be told: "It is just too bad. We have given you a certain amount of latitude but the law must be carried into effect." Regulations such as these could quite easily have very detrimental effects on the business of a particular bank. The instances that Deputy Cosgrave has given could be, I think, multiplied almost indefinitely. Are the bank going to be in the position that, having got to a certain point, they will have to start juggling with the amount of sterling assets that they hold? That is a most undesirable feature to introduce into banking.
I would like to submit that over a long series of years the banks have had as their foremost idea their stability and security and, after that, I think they have had the well-being of their depositors and their customers in view. In my opinion, it is quite easy to imagine a position in which a bank will find that they have come under the observation of the Minister and will be in a very difficult position if they cannot alter their assets very materially. It seems to me that they will have to put their brains to work as to how that can be done. I would like to suggest to the Minister that over a long series of years he may quite easily find that something that has been started to get rid of the difficulty under Section 45 may have created a position which will be quite different from what the Minister would like. I should like to suggest to him that he should try to meet this section and the other amendments by considering them before Report Stage.
The Minister has not told us yet how this section can be implemented. If we take the circumstances of the present time, if there was any specified proportion fixed, as between sterling and home assets, how could the banks control that specified proportion? Our present trade operates in such a manner that the banks have to keep credits for a considerable period on the other side, as our exports are greater than our imports. No matter what efforts are made on the part of the banks, their extern assets are appreciating and that is a situation over which the central bank would have no control. If they are forced to convert some of these extern assets into Irish assets, an artificial competition will ensue on the Irish market because of their efforts to purchase Irish assets, with the inevitable result that the price of Irish assets is bound to appreciate. The consequence will be that there will be a fluctuating market for Irish assets, a thing that is very undesirable, as Deputy Cosgrave has pointed out. It must be admitted that there is no possibility of repatriation of assets except by purchasing commodities that are outside our normal requirements. Particularly at a time like this, or at any future time when a situation may arise in which our exports will be greater than our imports, there is bound to be an appreciation of our extern assets and in that situation the specific proportion suggested would immediately be upset. That is a situation that cannot be controlled because it is the trend of our trade that will govern all that. I think the Minister would have to make it clear to the House how that could be controlled before the House could agree to what is proposed in this section.
Listening to some of the remarks that have been made in connection with this section and amendment, one would think that it was provided in the Bill that here and now it shall be ordered that the banks shall convert a certain proportion of the sterling assets immediately into home assets. There is nothing of the kind in the Bill. What the Bill provides is that if at any time the board of the central bank, which will be an expert board and which will know at least as well as anybody in this House what is practicable and what is good, believes that the banks can and ought to hold a greater proportion of home assets against their liabilities than they do hold, it can then say to the banks: "You are holding an unnecessarily large proportion of assets against home liabilities, abroad. You should take steps to try to keep a greater proportion at home." As I visualise the operation of this section, it would be worked somewhat in this manner. The central bank board would keep under review the whole situation from this point of view. If, for instance, it became obvious that these sterling assets abroad were not being made available for the purchase of capital goods abroad, or if the banks instead of making these facilities reasonably available to our people, were employing these funds abroad in a way which might be, from the purely narrow banking point of view, more profitable, the board of the central bank should be in a position to say to the banks: "It is desirable that you should get a larger proportion of home assets than you have. Here we have people who are anxious to import machinery, capital goods, etc., and you should make it possible to bring home some of these balances; you should get home assets against the extern assets you have."
I am sure that nobody on this side of the House would suggest for a moment that you can, at a particular time, without considerable loss, attempt to change rapidly, overnight so to speak, the present situation with regard to the proportion of assets held outside the country and the assets held at home against home liabilities. Everybody realises that that cannot be done. There might be some point in the remarks that were made if you were putting a number of people, who had no realisation of what the facts of the case are, in charge of this matter, but here you have an expert board. It is only if in their opinion a higher proportion should be maintained at home that they will take action, and they can only take action with the concurrence of the Minister for Finance. In other words, you have a two-fold arrangement. The initiative must be taken by the expert board. These bankers would know the difficulties involved in suddenly making a change. You will have them in the first instance, and the assumption is that they will not act without very good reason. In the second place, you will have, on behalf of the community as a whole, the concurrence of the Minister for Finance. That is a reasonable safeguard against anything being attempted so absurd as has been suggested here.
On the other hand it is desirable that sterling assets, if they go beyond a certain proportion, would have to be substituted by home assets, particularly if that is done by way of making facilities available for enterprising firms here to get better equipment, to extend their plant or to set up new factories. It is desirable that there should be some inducement, a certain amount of pressure, or an indication that that was from a national point of view in general more desirable than the existing situation. Again, there is not contained in this any reflection on the actions of the banks heretofore. The sterling assets have been accumulated by the banks in the course of trade, as has been pointed out here several times, and it is more desirable that the banks would be given, so to speak, a certain direction in regard to these sterling assets, the direction being that it is desirable, to such extent as is possible, to get them converted with reasonable speed into home assets. During the war, owing to the difficulty of getting in our requirements from abroad, our imports are building up external assets in excess of those which would be built up in normal times.
Everything is going well. These are valuable to the extent that they have proved valuable in the past, with the income derived from them. They enable you to get goods to that amount. For some years the income has been about £13,000,000, and that £13,000,000 if brought home is definitely brought home by way of giving us the goods we require. From the point of view of making goods available, the income or dividends on these assets or securities will be added, and in addition to the excess of our visible trade, will help to swell our foreign assets. It seems obvious that we ought to try to turn the direction of the banks, not so much to the utilisation of these assets outside the country, as towards making them available particularly for the import of capital goods.
Deputy Cosgrave pointed out that that might not be confined to capital goods. It might be argued that the getting of consumable goods of various kinds might compete with goods at home. There is another way of handling that. The Minister for Finance and the Minister for Industry and Commerce can make that an unprofitable method of procedure, from the point of view of those who would try it. Consequently, what is intended here is to give the central bank an opportunity constantly to remind the banks that they should, to the utmost extent, facilitate the bringing home of these assets when it can be done by way of capital goods and, by constant attention to the matter, get our banks set in that way rather than in the utilisation of these assets abroad. Everything depends on whether or not this is operated by sensible people who know their business. The argument made here would apply, I agree, if they were six or seven absolute novices, who did not know what was available, who simply presented a pistol at the head of the banks and said to them: "You have to change. You have 80 per cent. and you should change that to 50 or 50-50."
There is scarcely any fear of that.
I agree. If that were so, the results that the Deputy pointed to could follow. We have a double check. We have, first of all, a board of experts who will know the banking business. I do not think there will be any likelihood of any absurdity arising. There is also the check of the Minister for Finance, notwithstanding the fact that the central bank would indicate the direction in which it ought to be done, that it was not desirable there should be such a disproportion, and that they ought to do so-and-so, if the banks unreasonably continued to use the external assets, not to enable development to take place here, but to be used for development elsewhere, then it is desirable that the bank should be in a position in which it could definitely say: "If you do not heed what we say about this, and if you continue this particular practice, then we will have to make regulations, or we will have to go to the Minister to ask him to make regulations by which we will have such a percentage." I think that is reasonable power to give the bank. Otherwise the attention which it is desirable should be paid to these representations might not be given. It is desirable to have this power to make representations based, I hope, on reason. I am assuming all the time that this will be worked reasonably. If they do not pay attention to representations of that kind it is desirable that the bank should have power to say that a penalty would be imposed or that they would make representations to the Minister for Finance to compel them to have a proportion which they believed it was quite possible to have.
Supposing that at the end of September a bank fulfils the specified ratio of 7 per cent., and that cattle dealers do a large business there, and that then a big volume of cheques come along for cattle exports, and that there are not sufficient cheques for other commodities to maintain the balance, there is then a rapid depreciation of sterling credit as far as the bank is concerned. What is going to happen in that case? Is that bank to change the ratio by buying home assets?
The central bank understands seasonal changes of that kind and makes due allowance.
Are we to take it that the specified ratio remains?
There is no specified ratio.
It is mentioned.
Representations will be made. As I understand it, the bank makes regulations.
A percentage.
A proportion.
Will the Taoiseach tell us what will happen in that case?
The regulations will deal with that. It is not the first time that there was a saving clause or provision of that kind. I have not the task of working out the regulations absolutely. Everybody who is conversant with the course of trade and with banking operations knows of seasonal variations. It is a simple matter, and the amount can be easily calculated from time to time. Over a period of years they know fairly well what variations to allow for.
I wish the Taoiseach would clarify something that puzzles me arising out of what he has said. It is common ground that, except by purchasing goods, we cannot repatriate our external assets. Therefore we must purchase goods. The Taoiseach considers equipment and capital goods as the type it is desirable to purchase. He spoke of expert knowledge of members of the Banking Commission. Will not a great deal more be required from members of the Banking Commission if they are to work in this direction? They will be economic experts as well, and have great knowledge of economic matters concerning this country.
Not of every country.
And the class of goods.
They will have to know what industries it is desirable that capital should be available for, and those for which capital should not be refused. That will not be an easy matter for men who are essentially bankers.
I think they would have an easy opportunity of knowing whether there was need for credit for purposes of that kind.
They would have to make up their minds about particular cases and from that arrive at what was the general need. I had an uneasy feeling when the Taoiseach was speaking, that he was putting altogether too much weight on the economic capacity of men who are essentially bankers. I am not so sure that they will be in a position to know what capital goods the country at any particular moment—and, by that, I mean over a certain period—will need. I doubt if they will be in a position to get that knowledge quite easily, if they are essentially bankers, many of them being only part-time men. That, to my mind, is a difficulty in the working out of the Taoiseach's plan, and I should like him to explain how he would meet that difficulty and where he expects to get these super-economic men, who, in addition to being expert bankers, have also this knowledge of national policy and are in agreement with national policy, whatever it is for the moment, and who also know more than Ministers would be in a position very often to know, what are the precise needs of the country, so far as the purchase of capital goods from outside is concerned.
It is very easy to answer the Deputy. Firstly, there will be, I hope, this close co-operation between the Government and the bank and the commercial banks. I regard this general power as a reserve power rather than anything else. I regard it as a reserve power which, if there was an abuse—some people think there is and others think there is not—in that the banks insisted on using their foreign assets for foreign development and for whatever profit came from it rather than making them available for development here, could be used. I think every member will agree that, other things being equal, it is desirable that Irish savings should be available for Irish development. That, I think, is common ground, and it is a question of seeing how that can be carried out most effectively.
The Government, in the first instance, would probably become acutely aware of the fact that credits which were needed for home development were being unreasonably denied, or were being furnished only at such a rate as practically to cripple the possibilities of that development. I can imagine the Government, through the Minister for Finance, conveying to the board of the central bank their view and saying: "Here are projects which we understand are desirable, but the credits which are necessary do not appear to be made available and we think they ought to be made available in the ordinary way. Will you look into the question?" The bank would then ask Government Departments for any material, statistical and otherwise, which was available and would examine the matter from that side. The central bank, then, acting on its own responsibilities, would look over this material and see whether, in fact, the fundamental assertion, namely, that these credits were being unreasonably denied, was true or not.
The men on the board would be men who would know the commercial banking business and could check, to a certain extent, because they will have other means of information, whether that assertion was true or not—in other words, whether this suggestion from the Government that these credits were being held up through lack of co-operation on the part of the commercial banks was true or not. If they believed it to be true, and if they had specific instances, they would say to the banks: "A high proportion of your assets against liabilities is held externally. It is desirable that you should, as quickly as possible, change that proportion. We think the proportion is too high and you ought to try to change it. Here is an opportunity for doing so," and would then hear what they had to say on it.
I am taking it that the men on the central bank will be reasonable people who will know the situation, and if the banks said, "This is really an unsafe project from our point of view. We have certain responsibilities and we cannot carry these out efficiently effectively and properly if we do what the Government seems to suggest it would be wise to do, or what the governor of the bank suggests should be done. Our case is such and such", they would have to examine that. We are putting upon the central bank the responsibility of judging in such a case whether, in fact, the banks were right, or whether the Government, so to speak, was right in its suggestion. If they feel that the banks were not moving in the direction in which, other things being equal, we would like to see them move, that is, in the direction of development here and in the direction in which Irish savings would be used for Irish development; if they find that that development was being hampered by the banks, I think it right that they should have the power of penalising the banks which refuse to co-operate in a reasonable way. This suggests that that power would be to say, when an impasse of that sort did occur, to the banks: "Here is a reasonable proposition. We are asking you to do something which is reasonable. If you do not do it, the only course left to us is to propose to the Minister that we make regulations insisting that a certain proportion of these assets which you have outside shall be transferred home, and we shall have to fix that proportion. We think your proportion at present is unnecessarily high and that it is feasible to have it otherwise."
The only arguments I can see against that in general are, firstly, that you might possibly get a bank acting unreasonably and, secondly, that it might be said—and I can see the force of the remark—"After all, the commercial banks have primary responsibilities. They have to consider their responsibilities for their liabilities and assets have to be properly balanced, and so on. They need to have a certain amount of profit, to meet their expenses and to have reserves, and they can only do this properly by having full, complete and absolute freedom as to the manner in which they provide for their liabilities by disposing of or placing their assets." I can see that, and it is a question of whether you are prepared to agree that the board of the central bank will know enough of banking business and be reasonable enough to appreciate all these points. I take it that the Minister for Finance, in dealing with regulations of this sort, would have to convince himself, too, before he agreed with them, that the attitude of the central bank was reasonable and that all these aspects had been taken into account.
By this section, we are putting upon the central bank the determination as to whether, in fact, the banks are proceeding unreasonably by keeping this high proportion of external assets, or whether they could, in reason, be expected to make a larger proportion available for home purposes. That is how I look at the section, in any case, and looking at it from that point of view I think it is desirable, but I am quite prepared to listen to any other method that may be proposed that would be effective so far as the purpose is concerned, and that is to turn the minds of the banks towards making Irish savings available for Irish purposes to the greatest extent possible.
I gather from the Taoiseach's speech that his attitude is that if the commercial banks desire to avoid penalties—I think that is the phrase the Taoiseach used—in the last resort, the decision, whether an application for credit to a bank is one which the bank should grant or refuse, rests with the central bank. Am I correct in that?
Not in a particular case.
Well, in a couple of cases?
In general, but not in a particular case.
Supposing a bank takes up the line: "We have been unable to give credit in a number of cases that have come before us because we believe they are not safe", and supposing, on the other hand, the Government are anxious to promote industries, even ones that are rather shaky—and I believe the thing has happened, even with the credit corporation—the bank, then, is almost compelled, if the central bank agrees with the view of the Minister, to give the credit, even against its own better judgment, and the last decision will be, not with the commercial bank, but with the central bank. I take it that that is the position as it stands now.
Not quite. It could be the case in particular instances, but I do not think it would be general.
Well, take the number of applications that have been made before the credit corporation: would a commercial bank have been compelled, under the new system, to take up a number of these?
There is not a particular or individual policy; there is a tendency.
Yes, to shift its proportion. To get inside the specified proportion, might not the bank do what Deputy O'Sullivan has suggested?
I do not think it would. Again, I am assuming that the board of the central bank, being acquainted with banking business generally, will know whether there is an undue tendency in one direction or not, and if the commercial banks are able to put up a good case against the proposal—give examples and so on —I do not think the members of the central bank are likely to coerce them unless there is a good case for it. As I have said, I regard this as a reserve power which would enable the board of the central bank, from day to day, to exert whatever influence it has to try to direct the bank towards making available for Irish purposes, to the extent that may be reasonable and proper, Irish savings. Every one of us can imagine laws and penalties being unfairly imposed. We have to make general laws and we have to put up judges to operate them. What we are doing here is that we are putting up the board of the central bank as judges to operate what one might call a general intention.
Supposing these rules or regulations come into operation and that the commercial bank then is compelled to sell its assets or to give credit, it will even give credit in what seem to be very doubtful cases in order to get the proper proportion laid down by the regulations. Is not that so?
I am sorry. I did not quite follow the Deputy.
Supposing that the central bank makes up its mind that these regulations are to be issued and come into force, is there not the danger that a commercial bank, in order to get its proper proportion—the proportion demanded by the central bank—will be tempted and, possibly, compelled to give credit in cases where it is convinced and fully convinced, that credit should not be given?
I do not think it would.
How will it escape?
There would be other ways in cases like that, such as were indicated by Deputy Cosgrave, to which they might revert in the last resort.
This whole section appears to me to be a dangerous one. I am not enamoured either of the amendment or the section, but, of the two, the amendment appears to me to be the lesser of two evils. This is an attempt to coerce the banks; it is an attempt at what one might call coercive repatriation. There are two dangers here. One is, as Deputy O'Sullivan has just remarked, that it might force the banks to engage in what one might call, in a loose phrase, doubtful operations—I shall not go farther than that—in the line of financing institutions or bodies that, perhaps, ought not to be so financed. That, however, is not the point I want to argue, and I was only making a passing remark in reference to what Deputy O'Sullivan said.
The point I wish to make is that the bank has two functions, and this section, to my mind, might interfere with both. One function is concerned with the liquidity of its assets as a security for its depositors, and the second is to build up reserves, or profits, to which the Taoiseach himself referred, to carry on a profitable business. In regard to the first, any action of a coercive nature with regard to its assets may interfere with the liquidity of the assets. As Deputy Cosgrave remarked earlier to-day, not all domestic assets are readily realisable, and, as a matter of fact, at times it would be difficult to obtain realisable domestic assets readily, and any enforcement in that direction might have serious consequences on the liquid assets of the bankers. The other danger that I see is that if, as the section stands, they do not fulfil these dangerous provisions, they are penalised one way or the other: either they have got to make an entrance fee deposit with the central bank or suffer a penalty of a fine of, I think, £100 per day. Now, either one of these is a rather severe penalty. To be put in the position that it did not know what its deposits would amount to eventually might be a serious handicap on any bank, running, as the banks have been recently, on a margin of profit which scarcely permits of the maintenance of the dividends, previously paid, and which, I think, does not permit of the addition being made to reserve that was made at one time.
Whatever way you take it, the whole section appears to me to be an attempt at interference with institutions which have run in this country, without danger, for 60 odd years. We had, I think, only one instance of failure, and the danger there was of the kind that I have been trying to point out on this section—that the assets of that particular concern were not sufficiently liquid. I will not say definitely that was the cause of its failure, but, at any rate, we had only the one instance of a bank failure in this country over a period of nearly a century. To pass a section of this kind would, I think, be going a little bit too far in an attempt to coerce the repatriation of external assets. The question of their repatriation is a big one, and should, I think, be faced by another kind of policy. It is not a matter to be forced on banking concerns which hold those assets as security for their depositors. Any attempt to interfere with the liquidity of those assets may, possibly, have more far-reaching effects than any of us contemplate. The Irish depositor is not, normally, a very timid person, but at the moment his fears may be more easily aroused than those of most other people. It would be a dangerous thing to attempt to lessen the security that he feels he has in his deposits. I am heart and soul against the section. I am not very enamoured of the amendment, but of the two it seems to me to be the lesser evil.
The Taoiseach gave the House an example of what might be required if certain capital were needed for Irish industry. May I suggest to him that the banks might have to provide that capital out of Irish assets without any reduction whatever in sterling assets? He has not told us how those sterling assets are to be converted. Supposing there is not a sufficient importation of capital goods and that the sterling credits have to remain outside, what happens? I think it is generally admitted that you cannot repatriate those assets except through the importation of capital goods. If the trade is not there, the repatriation cannot take place. What can the banks do in that case except provide Irish assets which may possibly result in a certain element of competition that ought not to be there, in the artificial inflation of prices in the Irish market, and further fluctuations in the Irish market? That would be an unhealthy thing for any country. The Taoiseach has not told us how the repatriation is to take place, or if any specified ratio is to be maintained. I would like to have more detailed information from him on that aspect of the question.
I think I have said everything that I had to say on that, and on the part that the board would have to play in the whole thing.
I think this amendment is "cod," but it is a dangerous kind of "cod." The Government know, just as everybody else knows, that all this codology about the repatriation of assets is "hooey." I believe this section was put in to give the Fianna Fáil back benchers something to talk about. There is plenty of credit in this country. I am sick listening to Ministers saying that, so far as they are aware, no worth-while scheme is held up for the want of money. I entirely agree with that. There is plenty of money here for anything that we want to do, and all that is necessary in order to use that money is to find suitable purposes on which it may be prudently spent. The trouble, so far as I can find out, is that the Government are prepared to spend money on nothing but "cod," and that they will not spend money on schemes that would produce useful results. As far as I can see, the only purpose that Section 45 serves is to force the Irish banks against their better judgment to sell British securities and buy Irish securities. Now, here I find myself in sympathy with the Opposition, because there is not the slightest doubt that one of the essential things for the success of the banking system that obtains here and in Great Britain is that its liquidity should be preserved. The continental banking system is quite different. There they go in for long term loans and a capital financing of industry. Our banking system has never done that and is not adapted to that purpose.
What does the purchase of Irish securities under compulsion mean but an effort to make the banks in Ireland provide long-term capital for certain Irish industries. Is it not common knowledge among us that, if you buy ordinary shares in the majority of the recently formed Irish companies, they are quite unsaleable, except by negotiation? There is no market for them. I could not sell a single share that I hold at the present moment in Irish companies except by negotiation. There is no market here for them, and everybody knows that. There may be a market for the shares of a few Irish enterprises such as the Transport Company, the Great Southern Railways and a select few others, but in the case of the majority of recent industrial enterprises whose share capital is held by the public in this country, the shares are quite unsaleable. The shares are quite unsuitable for the portfolio of our banks which desire to maintain the degree of liquidity necessary for the system we are operating here.
If we examine the experience of the Industrial Credit Corporation in providing long term capital for a number of recent flotations in this country, it provides rather alarming prospects for such of the joint stock banks as may be constrained to take some of the shares which that corporation is carrying, because I conclude that the purpose of this section is to constrain the joint stock banks to do that. The Taoiseach may say that there are lots of things that can be done under the Bill which reasonable men realise never will be done. What Deputies have got to realise is that we have made up our minds that the best way to administer credit in this country is through the agency of the joint stock banks, and, therefore, I say we ought to let the joint stock banks function. There is no use in handing over a matter for management to the joint stock banks, and then proceed to manage the joint stock banks, because in that case we are going to get the worst of both worlds.
Naturally, if this section stands in terrorem over the joint stock banks for a period of years, inevitably the investment policy of these banks must be profoundly affected, because regularly, when the investment of the banks' surplus funds comes to be considered, not only will the ordinary questions of safety and maximum profit come up for consideration, but, when these two questions have been weighed and determined, somebody will say: “Now we must review our investment policy in the light of Section 45 of the Central Bank Act.” Repeated reference to that Act may impose on the merchant banks of this country an inclination so to handle their funds as to leave their financial stability much less safe than it is at present.
Is any useful purpose to be served by this operation? I think it was the Taoiseach himself who said that, on reflection, it became manifest to him that it is quite impossible to repatriate our foreign investments except by the transfer of goods from the country of investment to this country. There is no other way of getting the balances back. At the present time you simply cannot get the goods. But, suppose we could get the goods, would it be a desirable thing to do if there was a surplus of available money here? It has become fashionable in this country during the last 20 years to talk of foreign investments and emigration as two terrible evils that have been imposed upon us by the wicked capitalist, on the one hand, and by the base, bloody and brutal Saxon, on the other. Where do all the navy blue Sunday clothes on parade on the country roads of this country come from if not from external investments? Why is it that the small farmers' sons in Ireland go to Mass on Sunday in boots and navy blue suits, and that the small farmers' sons in Czecho-Slovakia go to Mass in pampooties and woolly coats? Did anyone ever ask himself that? The reason is that the external investments of the people of Ireland have provided our people with a higher standard of living than the middle European peasant. Therefore, when we want to buy a coat, we go to the draper's shop and buy our choice of a coat. The middle-European, when he wants a coat, goes to the sheep and skins whatever sheep happens to be fit for killing, and he is damn glad to make a coat out of it, and he wears it until the wool falls off, and then makes pampooties out of it.
That is the plain fact, and no one knows it better than the Taoiseach. Bring home your foreign investments and create a situation in which that source of invisible export disappears and see what will happen to the standard of living of our people. There is nobody in this country, daft as many of them are, who will ever do that when it comes down to tin tacks.
It is astonishing to me why the Taoiseach in his chastened frame of mind, burdened with his recently acquired wisdom, has stooped to insert Section 45 in the Bill, because I believe that he knows as well as we know it is all "cod". But it is dangerous "cod". It loses sight of that most fundamental fact, that we have in the country all the money we want to do whatever we think it prudent and right to do without this operation at all. But, even if it were advantageous, which it is not, to bring home our external assets, it would be virtually impossible to do so; and even if it were possible to do so, it would be suicidal to attempt it. In face of all these facts, why have the section in the Bill at all or, indeed, Deputy Dockrell's amendment? Does the Taoiseach himself consider it desirable to bring home the external assets of our banks? It is important to remember that a lot of people are saying at the present time that the favourable balances of our trade relations with Great Britain are simply providing us with paper credit the value of which is not easy to determine.
The Parliamentary Secretary was the last man to say that.
While it is perfectly true that it would have been a wiser thing to purchase on credit all the supplies we could have possibly laid our hands upon at the beginning of this international crisis and paid off the debts thus contracted with our favourable balances that are not accruing due to us, it is a great delusion to imagine that our favourable trade balance investments in Great Britain will be worth no more than the paper they are written on at the end of the war, because these balances are going to be invested. There is many a Deputy in this House who is saving a little out of his £480. Where do they put it? Let them ask themselves that question. Do they ever slip down and buy a couple of shares in the Imperial Tobacco Company? Is there anybody who bought a couple of shares in Arthur Guinness, Son and Co., in the last 12 months? Even on the sanctified seats of the Fianna Fáil Party, where the plain men sit, I venture to say there is. These are the external assets of the Irish people, and if the shrewd financiers of the Fianna Fáil Party are buying an odd share in these industrial enterprises in Great Britain, can we not assume that the even shrewder and more wicked merchant bankers are as well up in the finesse of high finance as the simple, plain men on the Fianna Fáil benches? Suppose we had to determine where was the safest place to put our money —in gold bonds, in Irish notes, or in good British industrial equities— where do you think we ought to put them, and which do you think will have the best chance of having some value post-war? The good equities of British industry. And that is the form in which a very large part of our external assets are held at present. It is the interest on these external assets that is putting blue Sunday suits on our farmers' sons.
Will the Taoiseach tell us what advantage he expects to accrue to this community if the merchant banks of Ireland are constrained against their better judgment to liquidate these assets and to purchase securities in Irish industrial enterprises which it might be against their better judgment to do? It will not, in fact, repatriate any of the community's wealth from abroad; but it may very seriously jeopardise the solvency of the banks. If the Taoiseach does not believe it is desirable to do these things, if the Taoiseach realises, as most people must now realise, the value to our community of our external assets, why does he put Section 45 in the Bill? If he knows, as it seems to me from what he said he shrewdly suspected, that the powers contained in this section are very likely never to be used, why put them there? Why create a menace? Why create a danger which, as at present advised, he thinks should never be invoked. If he says that he cannot foresee the future, and that a situation may arise in the dim and distant future wherein this ought to be done, why not wait for that eventuality and then provide legislative authority to have the thing done? Why not reserve to ourselves here in Oireachtas Eireann the discretion to determine when and whether this thing ought to be done?
We are told repeatedly that the central bank is to function not only as a banker's bank, but as a body of economic advisers to the Government of the day. Is it not perfectly appropriate that, if a situation arises in which it is desirable to do the things made possible by Section 45 to do, Oireachtas Eireann should wait for the Government of the day to come here and say: "We are advised that it is now expedient to take those powers. We are advised by the best economic advisers in the country, and with that advice before us we propose enabling legislation to permit of this being done?" Then we could debate it on the merits, and in the light of the circumstances in which the Government allege that such a departure is desirable. But at the present time we are making provision to do something (1) which we all know cannot now be done, (2) which a great many of us believe should never be done, and (3) which may seriously jeopardise the liquidity and solvency of the joint stock banks of the country. I suppose Deputy Dockrell moved his amendment in order to offer the lesser of two evils. I do not agree with that line, because I think the whole principle of this proposal in Section 45 is wrong. It is an attempt seriously to interfere with the investment policy of the joint stock banks. That is all wrong.
Of course a drowning man will clutch at a straw.
He will, but he would be a very foolish man if, in the belief and hope that the straw would hold him up, he did not buy a lifebelt, because commonsense would tell him that straws do not support heavy men in stormy seas, and that, therefore, he should purchase a lifebelt. I advocate the purchase of a lifebelt in the elimination of Section 45, but Deputy Dockrell says: "If you cannot get a lifebelt, trust to the straw." My answer is: "No; if it is a straw you are depending on, you will sink just the same as if no straw were there at all."
I think there is very little fear of either of them happening.
Either of what?
Either the amendment being accepted or the section being eliminated.
Well, I do not despair. Those men over there have learned a great deal in the last five years. I think the Taoiseach has learned a great deal since this debate began. Section 45 should go out, and he knows now that he ought to take it out. Whether he will have the moral courage to do that is another question. I would rather see that happening than see Deputy Dockrell's amendment accepted instead of it.
Having listened to this discussion, I think the cat is slowly emerging from the bag. I do not suggest for a moment that it has got out of the bag yet, but at least I think that, during the speech of the Taoiseach, we just got a glimpse of its head sticking out. To my mind, of course, it is not the sterling assets holding by the banks that the Taoiseach is after—he has said that there is power to deal with the bank that has a wrong proportion—but he is looking for an increase in loans to Irish people who are seeking for accommodation. Of course, being a mathematician and seeking how he can increase the accommodation or increase the holding of the banks in Irish assets, he says: "Well, I will nibble a bit off their sterling assets, and that will come to the same thing; it will have the same effect." I suggest that that is the real cat which is enshrined in Section 45. If the Taoiseach thinks that the banks are not sufficiently accommodating, he ought to say so, and go for them directly; he should take the direct approach.
To my mind, this whole Section 45 is a left-handed way of getting around, as I say, by a mathematician, to the other side of the equation, namely, that if you decrease the sterling assets held by the banks here the only way they can bring that about is either by throwing them on the market or increasing their loans. When Deputy Hughes spoke of a cattle trader coming back from the British market laden with English cheques, the Taoiseach mentioned that, of course, some accommodation would be found for seasonal trade; that the banks would not be so foolish as to refuse to take cheques such as that. I should like to suggest to the Minister that some such calculation is going to be made by every bank manager once this becomes law. I do not know how much reliance is to be placed on the fact that there have been appeals from the Government Benches that the banker should not be treated too harshly, that he ought to be given another chance, that he ought to be told that he is not going the right way and that he had better mend his evil ways. Mind you, the Taoiseach was reluctant to admit that a figure would have to be fixed by some body, somewhere, some time, on behalf of the central bank as to what is a desirable proportion, say of Irish assets vis-a-vis sterling assets. I think it would not be very long until possibly the wickedest of the banks would get a warning from the central bank as to what the proportion was. That would go around like wildfire, and every other one of the associated banks would proceed to examine their last balance sheet and their latest returns as to where that left them. I can imagine Deputy Hughes arriving at a particular bank that had got a warning and, on his offering to lodge English cheques, he would be about as welcome as a mad dog. In fact, if the bank manager had a shotgun and could get one of the cartridges that are so difficult to obtain, it might be too bad for the person making the lodgment.
Does the Minister seriously think that this will not have a profound effect on the business of the banks? Every one of them will, probably, consider how they might increase their Irish assets and they might review a certain number of loans but prudence will dictate that there is a certain margin over which they ought not to go. Then, they are driven back on the other side of the equation—how are they to reduce their sterling assets? I suggest to the Minister that that will produce a most unfortunate condition of affairs. There are many ways by which sterling assets could be reduced. The simplest and easiest way would be not to take them in. There may be competition for people who have Irish assets to go into a bank or a bank may importune a customer to take his sterling assets away from the bank. Whichever of these methods was adopted would be undesirable. I urge the Minister to abandon this system of holding a pistol to the heads of the banks and inviting them to depart from their ordinary system of doing business and get on to juggling with an equation. I suggest to the Minister that that would not be good for the Irish banks or the Irish people.
I object to the principle of this section, but I object also to the manner in which it is proposed to carry out what is intended by the section. It is all very vague and the manner in which the board are to be limited in their activities in this section is not sufficiently specified. The board are, for example, given power, with the concurrence of the Minister, to make certain regulations. Under those regulations, they can require the banker to make too alternative types of deposit—a deposit of a specified amount or an amount calculated in the manner specified. We give the board full power to decide which of these courses should be adopted. There is no specific direction from the Legislature as to how they are to be limited in that respect. They are given power, in these regulations, to fix the proportion in relation to liabilities and assets. That is a very dangerous thing. If it is intended that this section should go through, I think we should lay down specified directions to go into these regulations. This is a very loose way of dealing with a very serious matter. It introduces a revolution into our banking system and commercial dealings and we just leave it to the board to make, with the consent of the Minister, certain regulations to deal in a broad way with the question as to whether there is a proper balancing of this question of liabilities and assets. I think the matter is left too much in the air and that this section would be considerably improved and the justice of the case met if a proper direction were given in the section to the board and to the Minister, setting out certain well-defined limitations to be embodied in the regulations. Then, perhaps, the uneasiness which this section is bound to arouse in the minds of those who know anything about the banking system might be allayed to a certain extent.
Perhaps the Minister would tell us whether or not this is an absolute innovation in the case of a body which has not Ministerial responsibility and is not really answerable to anybody with Ministerial responsibility. This body is being given power to make regulations which may involve a liability amounting, approximately, to £30,000 a year. I am assuming that there are about 300 banking days in the year. A bank would be liable for that imposition in a given set of circumstances. The principal objection I have to this section is that, once passed, it is likely to mobilise the banking institutions of this country against any export trade, because export trade in the future would mean moving on towards the danger point with regard to the liabilities they have here. It is obvious that, if our industries are to prosper and expand, they must seek and be able to secure an external market. With this section in the banking law, what inducement is there to any, or all, of the banks to promote an export trade?
The explanation we have got from the Prime Minister is not completely to be inferred from the section as it stands. Let us pursue it with a little less generality, while still being general on the subject. A complaint is made by a citizen to one of the directors or to the governor of the central bank that he has applied to a particular bank for accommodation to buy capital goods either to establish an industry here or to expand an existing industry and that he has been refused that accommodation. We shall assume that he has persuaded this bank director that he ought to have got the accommodation. The central bank then says: "The only way we can deal with this recalcitrant bank is to examine how it stands with regard to the amount of its liabilities and assets in this country, compared with the amount of its assets and liabilities outside the country." Some standard must be taken at some time or other which would apply to all the banks. Otherwise, it would be an abuse of authority, if you are going to impose a particular restriction upon one bank and you do not impose the same kind of restriction on another.
We have got to the point where the assets on the one hand are compared with the liabilities, and the assets on the other hand are compared with the liabilities. These are to be the subject of examination and the decision has to be taken as to the proportion they might bear one to the other. It is open, to the bank to do what the Minister explained in an earlier discussion, that is, to get from some source or other an exchange of its sterling assets for Irish assets. If it manages to get that exchange and then reaches the point where it fulfils the conditions laid down by the bank, in the first instance, it has regulated its procedure and everything is in order. The main purpose of the section has not been achieved, however, as, if it were interpreted in the Taoiseach's way, the banks would be compelled on given occasions to provide certain industrially-minded people with money to buy capital goods. If, on the other hand, the bank is unable to equate the proportions of its domestic assets to its sterling assets, and if it proposes to pay the fine or to lodge money on deposit as the case may be, we are still without the industry, which is the main purpose. The person concerned can go from bank A and open an account in bank B and wind up, if he likes, by mulcting the eight banks in £30,000 a year. But he may not get his industry.
There are some ingeniously-minded people in this country. One of them, 40 years ago, looking over the activities of a certain company promoter, went across to London, interviewed him at 2 o'clock in the morning and left at 5 o'clock with a cheque for £15,000. There is no provision in the Bill restricting a particular member of the board of directors from holding shares in any other activity in this country, except in a bank, and he can hold them in banks in America, Great Britain, France, and so on. Would it not be well, at any rate, if we are going to persist in having this peculiar legislation in our banking code, to make that point right, and see that there cannot be anything in it likely to prove unjust in a matter of that kind? So far as the amendment is concerned, it is more or less regulatory. It is not a very advisable addition to our legislation, but, certainly, it is preferable to the section as it stands. It is a most unusual step to take in a case of this sort. It is giving to a set of persons, not exercising a judicial function and not occupying a position in which a Minister has the responsibility to answer for them, the power to compel one of the banks— having gone through all the forms prescribed here—to lodge £1,000,000 free of interest with the central bank.
How would a joint stock bank lodge the £1,000,000 with the central bank?
It would have to get a credit from London, of course, and we would still have the same amount of sterling assets as before. That was a very able interjection by Deputy Dillon. What is the situation with which we are really faced at the moment? We have nine judges and they will have in their own coffers all the sterling assets. The consolidated bank note issue will have disappeared and the only backing for the note issue of this country will be sterling assets. They will have 100 per cent. sterling assets there. No matter how bad the situation is with regard to the joint stock banks, their proportion of it would not be more than about 50 per cent. The people who are functioning under the 100 per cent. external assets sit in judgment upon those who not only have provided them with all they have but who have themselves 50 per cent. of the assets, and they decide to penalise them in the form presented here. No matter from what angle this is examined, it will be found that the non-capital goods imported into this country during those years of progressive extension of industry—and I suppose those were during the period when the hydro-electric works on the Shannon were set up—at no time bore any sensible proportion to the other goods that came in here.
If this is passed as it stands, it will unquestionably be an added reason for banks to find accommodation for those who wish to import any sort of goods into this country, as it will lessen the liability they will have to meet—more money goes out and more goods come in. That is an undesirable state of affairs. Not only would we buy huge quantities of consumable goods and give employment to other countries in producing them, but we would provide £250,000 or £500,000 for the purchase of capital goods. That would not be a good bargain.
Is it the Government's contention that from their experience of the last ten years, from the reports of the commissions— one of which they themselves set up— that the banks of this country have unduly indulged in buying foreign sterling credit? Do they think that the banks have erred in that particular way? Is there any evidence that they have? Has their policy in that respect been to the detriment of the country? Is it the Government's contention that it has been? Has the tendency in recent years been such as to strengthen the view, which apparently the Government has, that the banks have erred in this particular way? Is there any evidence whatsoever of it? If so, is there any excuse whatsoever for this clause? What is the explanation of the clause as it stands, if it is the view of the Government's experts that the banks have not badly conducted themselves in this country? Is it mere window-dressing, as Deputy Dillon suggested? Is it the Government's intention to enforce it? If not, surely it is a most harmful thing to put it in, because there is a threat there. If they do intend to enforce it, to what extent can they enforce it? To the extent of the capital goods required, the machinery required?
Is that serious on the part of the Government, or is there, perhaps, another explanation? Is it possible that at one time the Government, and the Minister for Finance in particular, did believe that you could forcibly, so to speak, without the purchase of foreign goods, repatriate Irish capital invested abroad? Was there not a passage-at-arms between the Minister for Finance and the Leader of the Opposition on that point at a previous stage of this discussion, and is it not the explanation that this section found its way into the Bill as the result of a misunderstanding of the whole position on the part of the Government, and now, belatedly, the Taoiseach comes forward with a very lame justification for the paragraph, namely, that it may be necessary, in order to loosen up credit for buying capital goods, for buying machinery to start industry?
Surely, the explanation is that at one time the Minister for Finance was under the impression that you could repatriate Irish investments abroad by some forcible means without the disadvantages of purchasing goods, that that initial mistake still remains in this paragraph, that now the Government have to justify it and, up to the present, they have not given any solid justification for it, and they are obliged to keep it there in order to satisfy a cry of mere window-dressing and flag-waving, and nothing else. That is the position as I understand it. Surely the Government must put forward some case for a section that can do very little good, but, by its very presence in the Bill, may do a considerable amount of harm.
If the only defence that the Taoiseach can put up for this proposal is that it is designed to loosen up capital in this country in order that the joint stock banks may be constrained to provide capital for the purchase of capital goods, nothing could be less desirable. Was it not in order to relieve the joint stock banks of the obligation to undertake that kind of lending that the Industrial Credit Corporation was established? It is the very kind of lending that the joint stock banks should not engage in. Has anything gone wrong with the machinery of the Industrial Credit Corporation which makes it desirable in the eyes of the Government to transfer this business to the joint stock banks? If we put an obligation on the joint stock banks, which are the custodians of the people's savings, to undertake business of a certain character, we must be scrupulous to ensure that we do not impose upon them an obligation to undertake business on which they may lose their depositors' money.
The Industrial Credit Corporation is there and the Government have repeatedly said that it is prepared to provide all the long-term money for which good propositions can be put up. That is a function none of us need hesitate to endorse. If the long-term money that is wanted for good propositions is ultimately going to be repaid, and the interest is regularly paid, the State need have no hesitation in lending the money, because it involves the Exchequer in no loss. But does this proposition mean that the Industrial Credit Corporation is going to empty its portfolio of banking securities into the joint stock banks? There is that danger.
Why has it become desirable to transfer the functions of the Industrial Credit Corporation to the joint stock banks? What has changed the mind of the Government in regard to that matter? What answer do they make to this proposition? On the merits, it is not a good activity for the joint stock banks to engage in, to lend capital for the purchase of capital goods. Industry desiring capital for the purchase of capital goods, such as machinery, ought either to borrow the money by the issue of shares, by the issue of debentures, or by recourse to the Industrial Credit Corporation. Why do the Government think that henceforth it will be better for them to do it by way of overdraft?
If they cannot answer that question —and I gather it is along those lines the Taoiseach has made the only justification so far—what grounds can they advance to justify this section at all? They know, we know, everybody knows, that the section involves considerable dangers. If some purpose sufficiently valuable were to be served, it might be right to face these dangers, but if no purpose is going to be served, surely it is just reckless folly to create dangers which heretofore were nonexistent? I challenge anybody in this House to tell me that industry is at this moment short of money for capital requirements. I am prepared to say to any group of capitalists, who come to me with a proposition, that I can raise any sum within reason for the financing of an industry here through the Industrial Credit Corporation or by recourse to a public issue, if the proposition is a good one. Is there any scarcity of long-term money for a proposition of that kind? Not that I know of. In fact, if there has been any complaint that might legitimately have been made, it is that there was too much long-term money made available for certain crackpot ventures that have gone bust.
I think this is one of the most dangerous sections in the Bill, and, unless the Government have a much more substantial case to make than I can conceive it possible they should have, I warn Deputies that the very stability of the joint stock banking system in this country may be seriously jeopardised. I believe the Minister knows that. If he does know it, let him take courage and say: "We will drop this section for the present, albeit we reserve the right at a future date, if it should seem a useful purpose would be served by reviving it, to introduce amending legislation to that end."
The section may work out dangerously, but it is not, in my opinion, intended by the Government to be anything dangerous at all. It is intended and recognised by them as complete humbug. You have only to read the Minister's Second Reading speech to realise that. If this section were found in a Bill where there was any real modern view with regard to credit at all, then I think it could be judged in a different way, but, embedded as the section is in a Bill which is quite out of date as far as modern views in banking matters are concerned, I do not think it would be regarded as anything more than humbug. This is the only time, all through the whole Bill, when the Minister has allowed a green rash to break out. The Minister was one who in olden days got the walls of the country plastered with slogans about the Republic. This is the only section in which that idea is allowed to come through.
That occurred to me, but it might be dangerous all the same.
It might work out dangerously. This is the only time the Government are not swayed by the Banking Commission Report. It is rather interesting to compare what under this the Minister, with the concurrence of the board of the bank, may do to the joint stock banks. On the discussion on Section 7, an attempt was made to get into Section 7 that the bank might take cognisance of the securities issued by or guaranteed by the Government of this State. Deputy Dillon was antagonistic to that and the House defeated it. In any event, the argument used by the Taoiseach in that matter was, think of the pressure the Government might exert on the central bank in regard to a loan or something that it has either issued or guaranteed and it had to remove that temptation from the bank but, through the bank, we can throw that temptation before the joint stock banks, under this particular Section, 45. Similarly—it has been so often referred to I think it is not necessary to go into it again—as far as the central bank is concerned we know what its legal tender fund is to be based on—British money, and 100 per cent. of it—until we get the unanimous report of the directors and the approval of the two Houses to some change but, when it comes to the joint stock banks, there again the central bank may make them do something that the central bank will not be coerced by this House or the Government to do.
These are considerations that fall from an examination of the Bill itself. Think of what the Minister said in introducing this Bill to the House. He had an historical review inquiring how the Irish banks came to possess these large holdings of sterling assets. He said:
"The banks' sterling assets came into being mainly in times when exports were in excess of imports, thus producing what are called favourable trade balances. This happened particularly during the Great War, 1914-18. These excess balances accumulated in the shape of credits in the books of English banks in the names of the Irish banks who held them for their Irish exporter-customers. At one time the Irish banks could have demanded gold from the English banks to settle such balances, but even then it was more profitable to buy some English Government or other securities yielding interest."
This is the conclusion of that paragraph:
"The banks are not, therefore, primarily responsible for their external position. Initially, they are merely agents of the trading and other financial activities of their clients."
Then there is this pungent sentence:
"The amount of foreign assets held by our banks is, therefore, to an extent outside their control."
That is a bit realistic. Then he went on to Section 45:—
"Whenever the value of our imports, visible and invisible, exceeds the value of our visible and invisible exports, there occurs a fall in our external assets in order to make up the difference. Owing to the operation of various factors in the years preceding the outbreak of the present war, the general trend in Irish banking was in the direction of replacing external by internal assets."
Then we had this pat on the back to the Government—I do not think the Banking Commission would agree with this little commendation—
"A policy of industrialisation, involving large scale purchases of plant and machinery abroad, accelerates such a trend."
Again, here is realism:—
"The banks contend, however, that it is not their function to make such purchases and that the determination of such a policy is for industrialists and investors generally."
That is the Minister introducing this section.
"They hold that the matter is thus not one which is concerned exclusively with deliberate banking policy."
The Minister's speech shows that the section is not meant seriously. In fact, having more or less indicated that the whole thing is almost outside the control of the banks, then the Minister slid easily into saying, "Nevertheless, it is felt we might assist the banks," and with this object in view they have included in the Bill the powers set out in Section 45. Comparing this Bill with the position in regard to central banks in other countries, and seeing the forward movement there and how retrograde this is and, finally, thinking of the Minister's own words leading up to this very section on Second Reading, you can realise that the section is not intended seriously. It is only included so that the groundlings will have something to talk about. Our difficulty is, how is it going to work? Certainly, the Minister for Finance had not a very clear view of the operation of the section when speaking on the Second Reading.
Apparently, he has now learned that in fact the re-investment here will be achieved through the purchase of commodities from outside, whether these are to be capital goods or consumers' goods is a point of difference, and will not be entirely within the control of the banks or of the central bank or the Minister. They are going to achieve some sort of scheme in time. I, personally, would welcome a section framed in a different way if, first, the circumstances demand it—clearly, they do not at the moment but we have to look beyond the immediate time—and secondly, if it were framed in some better way. The terminology of the section mentions two things—expediency is one, and that expediency is to be judged by the board with the concurrence of the Minister. At any time that it should appear to the board, with the concurrence of the Minister, that it is expedent—whatever that word "expedient" may cover—then what happens is that a bank is to be penalised in a particular way if the assets held by that bank within the State fall below a specified proportion in relation to its liabilities within the State. As I read the Banking Commission Report, if the Minister had followed the Banking Commission on this matter, he would have made that section run in the opposite direction; he would have penalised the bank if it held too much inside the State.
That is certainly the trend of the Banking Commission Report—that there has been a tendency in a particular direction and they do not regard it as sound for the reasons stated. I mentioned a few of them. Supposing the section were framed so that if a case were made and proved to the satisfaction of the board and the Minister that there were good Irish investments—not where the products were going to cost the consumer extravagant prices through the operation of some tariff—but that there were good investments in this country and they were being held up because there was not sufficient credit available for them, I think the Minister might make some such move as this. But this is based on a vague thing such as expediency and, apparently, the whole thing is going to be based on the proportion of their assets in relation to their liabilities.
Deputy Professor O'Sullivan here asked the Taoiseach whether a particular solution of this might not commend itself to the banks. The regulations that are to achieve this end may be different as between banks. It is possible, of course, that a bank about to be penalised in this way might get transferred to it certain of the liabilities of another bank in the country or it might enter into competition with another bank in the country by, say, lending against cover that it did not ordinarily think was secure or by offering rates that it did not think were good. A particular joint stock bank might be driven along those lines.
It would have to balance at a particular point, on the one side, the fine likely to be imposed or the loss on the interest of the deposit. Rather than have that, they would go in for something that they would not consider good from a practical banker's point of view. The Minister may find them developing along those lines rather than achieving the end he desires.
It is rather amusing to see that, on this point, the Minister gets so far away from the report which, up to date, has been his bible in this House. The Banking Commission reported on this whole question of external assets, how they have been built up on the savings of the people over a number of years. They say, at paragraph 132:—
"The proceeds of the sale of external investments may clearly be used to meet a variety of requirements. A part of it certainly reflects encroachment on past savings to meet the needs of current consumption, not only by the direct action of individuals who have realised their own holdings but also indirectly, for example, by withdrawals of bank deposits which have in turn obliged banks to liquidate external assets."
They simply glance at the thing. Everybody who paid attention to the general meetings of the banks held at the time the economic war was raging, and even after it stopped, knows what was happening. Over and over again the bankers said they knew people had had to realise some of these deposits in order to keep life going in themselves. That was the condition to which the Minister and his colleagues had reduced the country; some of the external savings were cashed in order to provide people here with the means of sustenance. Part of them was not used in that way; part of them was used to be put into some of the industries started here.
The Banking Commission examined that development over a series of pages and they point out that most of the industries established in these years were backed by a high tariff protection. They point out that almost inevitably the outcome of that was very high prices for the consumer. They point out also another result— that we were losing assets abroad which were producing revenue without any cost to ourselves, that we were having these assets transferred to certain industries which were not giving the same revenue return to the holders while the goods produced were costing consumers here immeasurably more. Having gone through all that in a series of pages, they come to the conclusion in paragraph 137 that there is
"a need for conserving that part of the national wealth which is invested abroad".
That is their solemn conclusion after running through all these pages.
The Minister has accepted the report of the Banking Commission right along the line. I think he accepted their conclusion in that matter. In the statement he made to this House on Second Reading, he gave us the historical reasons as to why these assets were built up abroad, and he said that they were to a certain extent outside the control of the banks. He said it was not the function of the banks to make purchases abroad necessary to bring these assets home. Now, in the teeth of what the Banking Commission says, and in the teeth of what he himself, in the main, said on Second Reading, running counter to his own judgment he brings forward this humbuggish section. I do not think he is going to get any great results from it.
I would have welcomed this section in a Bill which showed some sort of advance in the Government attitude towards credit, but, stuck into a Bill of this sort, it is an excrescence, and I do not think we should take it seriously. I should like the Minister to say, when replying, whether he has any rate of repatriation in his mind, and whether he thinks that the present time, when these paper pounds, as they have been described by the Parliamentary Secretary to his Ministry, are piling up abroad, is a time when it is advisable to embark on this particular course. As his concurrence has to be obtained to this scheme, has he any view at the moment as to the circumstances which would render it expedient to have these regulations made?
In reply to Deputy McGilligan's last question I say that the present time would be most unsuitable to attempt to repatriate assets held abroad. We could not do it for very obvious reasons. The Deputy knows them as well as I do. This Bill is not introduced to meet an emergency situation and, in introducing it, the Government had not the present time and the present difficulties in mind. It is brought in to be operative in normal times and under normal conditions. It is meant seriously. It is not as the Deputy said play-acting, nor is it introduced, as Deputy Dillon said, to try to "cod" the public or to fool Fianna Fáil followers. We do not need to do that. I happen to know that the Fianna Fáil Party has taken a great interest in this matter. I have listened for the last 12 years, long before we came into office, to countless discussions and arguments on credit, credit reform and the various types of central banks that had been set up and to discussions on the type of central bank that might be set up here. The idea of bringing in a Central Bank Bill here did not occur to us this year or last year. It has been in our minds over a long period. Various schemes were suggested in an endeavour to improve our credit position here. Various conclusions were put up and discussed by individuals and individual members of the Government at various times. The subject, therefore, is not a new one for us. As far as the Party is concerned, the members of it have known over a long period that we were discussing this matter. They had the Bill put in front of them. They know what is in it and know the intention behind it. There is no fear that there is anything in the section that will mislead or fool them or, to use Deputy Dillon's classic word, that will "cod" them in any way and they represent the big majority of the voters of this country. There is no attempt to "cod" anybody by this section in the Bill.
The Deputy may be right in his prophecy that much will not be got from Section 45. There are certain sections in the Currency Act of 1927 that were seriously intended, I am sure, to be useful and helpful and to be operated for the benefit of the community as a whole, but they were never operated or used. Some of them were never used because they were not found to be practicable. I do not think that that will happen in the case of this section. I was at pains in my Second Reading speech to try to put the whole facts, as I saw them, before the House and the country. I do not think the Deputy can contend that, in giving the history as I saw it of how these external assets were built up, frankly, candidly and fully, I attempted to fool anybody. The Deputy quoted phrases I used and tried to prove from my own words that I was insincere in introducing a section of this kind into the Bill. I think even what the Deputy quoted bears on its face evidence of the sincerity of the attempt to make this Section 45 useful, good and helpful.
I agree with the description given the Banking Commission's report by the Taoiseach last evening, that it is an excellent work. I think he described it as a monumental work. These words are justified. It is a work that will be of lasting value, but the Taoiseach did not say, and I do not say, that we took that monumental work as our bible. There is evidence throughout this Bill that we have not always taken the Banking Commission's report as our bible. We are glad of the advice contained in it, and of the experience that many of the men on that commission brought to bear on the problem they were asked to consider. We were glad to have their advice, and glad to have the information that that volume contains, but we have not always accepted the recommendations contained in it. Certainly this is one instance in which we have not to do so. Deputy McGilligan would probably be more pleased if we had not accepted when drawing up the Bill many of the recommendations of the Banking Commission's report which we have accepted. It is within the knowledge of anybody who is interested in the development of Irish industries over any lengthy period of years, that it was frequently very difficult to get credit made available for industrial enterprises at home. Deputy Dillon called attention to that fact when he referred to the Industrial Credit Corporation. That was one of the means adopted to help us over a difficult situation. What was true for a good many years with regard to getting money for industrial enterprise and development here, might be true again, and it is wise to have the reserve of power that this section will give. It is wise that the central bank board and the Minister should have that reserve of power. It is not intended, as Deputy Dillon said, to be held in terrorem. I do not think bankers are going to be terrified by it or that they will even find anything in it that will upset the even tenor of their ways in their own business but, it is a power that is intended to be used, if necessary. It is a power that I think the Government ought to take, and it is certainly sincerely adopted by the Government for the purpose of being used if the occasion arises. I do not think I ever suggested at any time in the course of any of the numerous discussions on this Bill, in this House or otherwise, that I believed that our external assets could be forcibly repatriated.
I do not know where Deputy O'Sullivan got these words of mine, or the idea that I ever expressed the view that our external assets could be forcibly repatriated. I need not go into the history of the building of these assets again. I dealt with that matter very fully on the Second Reading Stage. It is true that Deputy Cosgrave said earlier to-day that the banks were not entirely responsible for the building up of this relatively big balance of external assets. The history of our trade, and the course of our economic dealings, with our neighbouring country has led to that situation, and is leading to further development of it under present conditions. As things stand at present there is no power to alter that situation, even if it were desirable to do so. I do not agree with Deputy Cosgrave when he suggests that we are giving power to a board, without responsibility, to penalise the banks. In the first place the board will be a responsible body, and if this power is put into the Central Bank Bill to be used by the central bank board, with the consent of the Minister for Finance, I am satisfied, no matter what the personnel of that board may be, that it will be used only when it is absolutely necessary, when the board and the Minister are satisfied that conditions require it, and that there is no other remedy for a situation which it is desired to alter. As I stated earlier this evening, whoever the individuals on the board may be, it will be their interest and the interest of the Minister for Finance and the Government of the day not to injure the joint stock banks or the credit of the country, but to be helpful. They will not set out to hurt any one bank by imposing on it conditions that it cannot operate. Their desire will be to act in the national interest, and certainly the national interest would not be served by doing injury to the financial standing of any of the banks in this country. I have not any hesitation in thinking that it would be wise to put that power in the hands of the central bank board. I think it will be useful and helpful, and I can foresee some time, as happened in the past, when it might be helpful to all concerned, even to the bankers, that they should take advice with a body, such as the central bank board, as to the balance of their assets held inside and outside the country.
May I ask the Minister to indicate what he had in mind when he expounded upon the physical phrase in this section. Deputy Dockrell has a phrase in his amendment which reads:—
"If the board is of opinion—
(a) that any licensed banker is holding assets within the State which are insufficient in proportion to his liabilities within the State, and
(b) that sufficient additional assets within the State of a character appropriate to the liabilities and to the normal business of the licensed banker can be acquired by him at a reasonable cost and with reasonable security...."
Am I right in assuming that that would be the normal basis upon which the board would make any such determination? Would it not depend upon the existence of sufficient additional assets?
I cannot imagine them putting this section, with its penal clause, into operation, if they had not satisfied themselves that it could be properly operated and that there were assets available.
And the other point in Deputy Dockrell's amendment—"...appropriate to the liabilities and normal business of a licensed banker can be acquired by him at a reasonable cost and with reasonable security"— presumably all these matters would enter into their consideration?
I imagine they should.
That is not in the section.
There are regulations to be made.
The regulations will not come before this House.
No; they have to be sanctioned by the Minister.
We will not know of them.
Not until they are operated.
There are certain things laid down in the Act of 1927 with regard to the commission presenting a report each year and the Minister having certain things to say on it. As I understand it, that is now carried forward to this board, but it is not anywhere stated that these regulations will have to be even commented upon by the Minister in connection with the annual report, and it might be well if that were made part of it.
I shall look into the point.
The Minister has told us that he thinks there possibly is a necessity for this section. I remind him of what he said on Second Reading.
I remember well what I said.
"No worth-while project has been held up in this country for lack of money to start it, whether the initiators were private citizens or the State." How can the Minister reconcile that with what he has just said?
I can.
I had not the opportunity of hearing the whole of the Minister's speech, but there can be little doubt that this section gives the impression that credit has not been made available, or is not available, for investment in Irish issues or Irish undertakings. Taking that aspect by itself, is it a part of banking to make an investment in Irish issues or undertakings? Obviously it is not. That is a long-term undertaking, and while there might possibly be an excuse for considering, at the moment, an Irish equity as a basis for collateral, it surely is not intended that the joint stock banks should take shares or otherwise be interested in either Irish issues or Irish undertakings? As I understood the banking problem, it was governed, very largely, by liquidity. There is no liquidity in a case of that sort. There would be a perfect case for banks affording accommodation to an Irish firm to buy goods or raw materials which would be cashed within a period of 12 months at the outside, and sometimes three or six months. On that basis, there is no case for the section.
If it be conceded that money has been available for worth-while undertakings, the insertion of this section would seem to negative that contention. We must start from some basis, and we can accept no other than that if they had not done it up to this, we are satisfied they are not going to do it in future. Coming to the conclusion that they will not do it in future, we are faced with the consideration of why they should not do it in future. There is no more profitable business for a bank than the advancing of money to a business undertaking for the purchase of goods, or such other short-term accommodation as would be required. That is an accommodation which repays them at the highest price. It is obviously to their interest to do it, because it stimulates their business and promotes the expansion of commerce and so on. It is obvious that if they are going to earn money in future, it would be to their interest to continue that part of their business. On the basis that this might be the means whereby more money might be made available for Irish issues, there is no case for it.
Let us take the second case, that is, that they have been unable to keep up with their domestic assets in comparison with their external assets. The whole trend of the majority report of the Banking Commission, which had to deal with a very peculiar period, a period in which there was a great deal of political advantage out of the economic war, with a terrible economic disadvantage, was a fear that our external assets were in danger at that period. We were going through an unusual period, a period of emergency, and in that period, with a difficulty in the way of the purchase of foreign goods, it was inevitable that the sterling assets should increase.
Let us take another aspect of the matter: how banking institutions, as such, have treated either National Loans or advances to local authorities. We find that the increase in the investments, over a few years, amounts to about £8,000,000. They were about £3,000,000 some eight or ten years ago, and they are now £11,000,000. Surely nobody will contend that that is a perfectly safe transaction. There is an element of illiquidity there. There is no question whatever as to the stability of the assets, but the chance of selling the assets is quite a different proposition. While they have increased their holdings from £3,000,000 to £11,000,000, they have saddled themselves with a certain disadvantage in having something like £11,000,000 worth of Irish securities, which it is problematical whether they could get rid of in 12 months, and possibly in two years. Even if they were to do that, there is scarcely anybody who will deny that it would reduce the market price of those securities. It would be highly undesirable that anything of that sort should happen.
The next question which arises is one with which I have dealt before. The more I think of it, the more I am satisfied that it is a real danger. The Prime Minister said here this evening that there were methods and opportunities to the Minister for Industry and Commerce and the Minister for Finance to deal with any attempt which might be made to import consumable goods here.
Nobody can deny that those consumable goods form the greater proportion of our import industry. Let us take one of the items alone, coal. Since the hydro-electric works at Ardnacrusha were established it was generally assumed—and I think it has happened— that our coal consumption would be reduced. Now, no effort that can be made either by the Minister for Industry and Commerce or the Minister for Finance will lessen the import of coal unless there be an expansion of the electricity undertakings so that it will be unnecessary to import it. You cannot put a tax on coal. Even prior to the Trade Agreement of 1938 it was thought that such items as coal should be allowed in free of duty and were not to be included in the list of dutiable goods. We have reached the stage now when the vital interests of any country, as affected by a trade agreement, will be maintained by that agreement, and it is obvious that if a very large proportion of our imports are of the consumable class of goods, as distinct from capital goods, there is a danger in this section of expanding the imports of such goods to the detriment of our own people and of employment here. If it is contended that the advantages that are to be derived from a stimulation of the purchase of capital goods outweigh the others, we are then faced with the other problem: are those capital goods that are to be employed here to be merely employed for the purpose of supplying the home market? Is it not clear that, so far as this section is concerned, it would be to the interest—I put it no higher than that, and, notwithstanding this section. I have the gravest doubts that the banks would do it—of somebody, somewhere or another, to see that it should be dealt with by the home market? So far as this section is concerned, would it not be a dangerous thing, if it meant that you were going to get sterling or foreign assets, or whatever they might be, in respect of whatever imports you have?
As far as I know, there are eight or, on some calculations, nine joint stock banks in this country—it does not matter whether the number is eight or nine. Three representatives only of these banks will be on this board. So far as these three banks are concerned, it would be unreasonable to assume that their directors would not be specially interested in their own banks and that, so far as the interests of their own banks were concerned, they would be paramount in their own minds, as distinct from the interests of any of the banks that would not be represented. Assuming that they work in the best way possible, does not everybody know that when those regulations come out and are circulated to the various banks, they will be viewed by the banks that are unrepresented as, perhaps, being weighted against them? It certainly would not be a desirable thing that legislation that we are going to pass here would present us with a situation of that kind.
I come now to the last point, which I put before and which I do not know whether the Minister has answered or not, and that is that in so far as the penalty is concerned, there is scarcely any limit to it. To use a modern, wartime expression, there is no ceiling to it, or if there is any ceiling at all, it is that of a fine of £30,000 a year. That is a fairly big fine—a very big one— and does anybody think that it is desirable that a Minister should be part of the machinery involved, without responsibility, to impose that fine— a fine which our courts, during the last five or six years as far as I can remember, have not been given the power to impose. That is what may happen in connection with the working out of this. When it is all done, the purpose which is meant to be carried into effect—and that is that there are to be facilities for the purchase of capital goods—is not carried out. In other words, we have the penalties, we have the machinery, we have the regulations, we have no responsibility whatever on the Minister, even though he is part and parcel of the scheme in which this fine is imposed, and we do not get delivery of the goods. And all that is done at a time when, if you look up the returns of the dividends that have been paid by the banks, you will find that there is a marked reduction in the dividends paid, and that the allocations to reserve are lower than they were since this State was established.
Those, to my mind, are compelling reasons for reconsidering, and, in fact, eliminating, this section from this Central Bank Bill. Now, if the intention is to stimulate industry, let us examine what has been done during the last 20 years in that connection. Within the last 20 years there was set up what was called a Trades Loan Guarantee Fund, and that functioned during the first ten years and during the last ten years. Now, there have been fairly considerable losses entailed in connection with the working of that Act. Was the working of that Act well done? There was, in the initial stages at any rate, an advisory board that went into an application, considered the application and took a very considerable time before an ultimate decision was given, and yet very large sums of money have been lost. The Government had to come to the Dáil and get Votes passed here during the last 20 years, to make up those losses. We are told that this will be a board of experts. Well, that was a board of experts. Its members had had long and successful business careers to their credit, and they viewed all those matters with almost judicial rectitude. It was a great idea. It was initiated for the purpose of stimulating employment, and it was thought so desirable that that should be done that the State was prepared to guarantee these loans. Now, in this particular case, a whole series of banks have certain proposals put before them. They have three responsibilities. They have responsibility, in the first place, direct to their depositors; in the second place, to their shareholders; and, in the third place, to the people of the country, because it is unlikely that the bank is going to be prosperous if the commercial and economic conditions of the country are not prosperous.
Is the Deputy's third point that they are responsible to the people?
Yes.
Should not responsibility to the people be the first category?
Well, I would say that the first responsibility would be to the depositors. I would put that first —to their depositors.
That is why we are where we are.
Mind you, I have yet to learn that you can set up an institution in any part of the world, give it authority to accept money from people, and, having taken that money, say that the responsibility is more to people who have no money in the bank than to those who have put it in.
Nobody said that.
Well, I think I could take that from what the Deputy said.
That is the kind of thing that frightens the people from putting in their money.
Now, the Deputy can make his case at great length at any time. I am certainly entitled to say, if a man entrusts a sum of money to me, that my major responsibility is to him in respect of that money: that it is greater to him than to any other person in the community.
The Government are equally responsible to him if he puts his money in the savings bank.
The Deputy will not share his assets in the same way that he is asking bank depositors to share their assets with the bank.
I will.
I do not think so. Supposing the Deputy bought a house, I imagine he would dispute the right of the Minister for Finance to share possession of that house with him.
That is a nice way of putting it.
Or, again, supposing the Deputy bought a bottle of whiskey —I do not believe he would—I feel that he would dispute the right of the Minister to get a portion of it. The point is that the banks have a responsibility to their depositors. The responsibility is a very peculiar one because, under certain conditions, a deposit can be withdrawn on the day after it has been lodged. As I said before on another section of the Bill, there is scarcely anything so tragic as those cases in which banks have closed down. The regrettable and tragic feature of their closing was this, that it was due not so much to any weakness in those institutions as to certain circumstances which occurred at the time. When people speak of banking in this country, and compare our system with that in operation in other countries, they ought to bear in mind that the peculiarities and tendencies of our people are altogether different from those of peoples in other countries. There is an inherent conservatism in our people in so far as their bank deposits are concerned. It is said of the British that they make money, and of the French that they save it. In the case of our people we might, taking the French example, drive the comparison farther and say that they almost scrape up the sums of money which they deposit in the banks. In the vast majority of cases the sums they have on deposit are very small. As I said on the Second Reading, my main concern is with those people because of the hard work and of the many things they have denied themselves in order to be able to make those deposits.
Is not the money that our people have on deposit in the Post Office Savings Bank as safe as any money that is on deposit in the banks?
If the Deputy went to those people and asked them for a loan, what would they say to him? There is a still safer bank than the Post Office Savings Bank, and that is the Currency Commission or the central bank, because all that it has it has got for nothing. However, we are getting away from this particular section. The experience of most countries is that anything that has been done by the Legislature to weaken the confidence of depositors has struck a deadly blow against thrift. I wonder if the Deputy heard from anybody who had experience of it, what was the experience of those countries which inflated during the earlier years of the 1920's. I will admit this, that the stimulation of thrift is an almost indispensable preliminary to prosperity. What were the statements made by most young people in those countries where inflation took place? Did they not say: "What is the use of saving? Our fathers saved for the best part of their lives and it all went in a night." What are we doing here? Are we not going to shake public confidence in the banking institutions of this country by a penalising clause such as this, a clause which I have demonstrated cannot effect the purpose it was designed to secure? Since that is so, surely it is time that we reconsidered our attitude on this. If the idea be that you require stimulation for industry for the purchase of capital goods and so on, why not ask the banks to subscribe a certain amount out of their capital moneys for the formation of a special company? We have been told that we will have experts on this central bank. Very well. Present them with £250,000, if you like, and say to them that you want them to stimulate trade and industry in this country by giving opportunities to progressively-minded citizens who have an industrial push in them. In that case you will know the obligations that you are placing upon somebody.
What is being done in this section is, to my mind, an outrage on our judiciary. It is a negation of the principle of democracy which postulates that where a Minister of State has to take responsibility this House should have an opportunity of reviewing his action and of pronouncing a judgment upon it, if that were felt to be necessary. We are not being given that opportunity here. We are not giving to a Minister of State the power to make regulations. The regulations, in this case, are to be made by a body of experts who are to be nominated by the Minister. We are being asked to endow people, who are described as financial experts, with judicial authority, and the right to impose a penalty in excess of anything that has been done in our courts since this State was set up. I do not think that is just.
During the course of this debate I have heard many things said by the Taoiseach, by the Minister for Finance, by Deputy Cosgrave and Deputy Dillon about money, but if one thing is certain it is that many of the fallacies about money have been pretty well shown up by this war. We have heard a good deal on this Bill about the experts. Can any of us say that in this or in any other country the bankers and the experts have rendered any great service to the people? Deputy Cosgrave talked about banks closing down overnight. Men who were at school with me and went to America where they saved some money that they had earned hard, woke up one fine morning to find that all their money had vanished with the closing of a bank. Surely that could not happen if there was any sort of social control over the banks. My complaint is that it is the banking experts who are largely to blame for the situation that we have not only in this country but all over the world. I listened to Deputy Dillon here the other day uttering his cheap sneers about the "dafties" who were trying to change people's minds through a Catholic newspaper. I want to tell Deputy Dillon that any views or convictions I hold on the question of money or the power of money were got from Catholic writers. I am prepared to base my convictions on these writers on the money question rather than on Deputy Dillon and some of the financial experts we hear so much about.
The Deputy might come back to the amendment under discussion.
We are told that the danger is that the Government will interfere with the banks and ask them to do certain things about deposits. I have no such fear about the board of the central bank. I am not satisfied that the mentality of the members of the board will be of a revolutionary character. I am surprised that Deputy Cosgrave expected anything of a revolutionary character from the members of the board. For a number of years I tried to reconcile myself to poverty, to barefooted and hungry children and to broken-hearted women, and that was due to the fact that I was afraid to think or talk about this question of money. It was supposed to be a matter only for experts and bankers to deal with. I want to tell the Minister and Deputy Cosgrave that, so far as I am concerned, those days are gone. I heard the Taoiseach and the Minister for Finance some time ago saying that there was no shortage of money, that money was available for everything. I want to protest against that pretence and that falsehood. There is not a house, amongst the thousands of houses between Bantry Bay and Donegal Bay, in which there is not a need for necessaries simply because money is not available.
I can understand some of the points made by Deputy Cosgrave in connection with the bringing over of goods which might interfere with industrial development here. What is wrong is that we have not control over the distribution of the things we want. The purchasing power of £3 for a week's work, as compared with 23/- if a person is compelled to be idle, makes all the difference in this country or any other country. I say that there is no fear of anything irresponsible being done by the board or the responsible Minister. I do not care who the Minister is. I am satisfied with the commonsense of the people of the country and I rely on them. Deputy Cosgrave, when he was in power, was conservative and if he took control of the things which I wish to see control taken of, I would be satisfied in leaving things in his hands, as I would be satisfied in leaving them in the hands of the present conservative Minister for Finance. My complaint is that both Deputy Cosgrave and the Minister are too conservative about this power of money and the policy in regard to it.
Deputy Cosgrave talked about depositors. I have as much regard as Deputy Cosgrave for the security of the few pounds which a poor man may have. It would be tragic if a man who has worked hard and saved a few pounds for the rainy day had not security for that money. But, if I had a few pounds to deposit in a bank, I would much prefer to put it in a State bank than in any other bank. That is the reason I said the other day that the central bank should be empowered to take deposits from the people as well as any other bank. If I had the command of words like Deputy Dillon I could express myself much more forcibly on this matter.
You are not doing badly.
I could express myself sufficiently strongly about the fallacy and fiction of money. This money should have been retained, and should never have gone out of this country, where there is so much work waiting to be done. I am blaming the Government for allowing so much money to go out of the country while there is room for development here. I know a concern which got a loan of £4,000 from a bank. Deputy Cosgrave has told us from time to time that the money which is being lent by the banks is the money of depositors. That is not necessarily so. When the loan was issued to that concern they had to lodge in the bank the deeds of their property. That was the security for the loan and not the security of the deposits. I should like to see this Bill going through much more quickly, because there has been a lot of time wasted unnecessarily. We should bear in mind that there are men, women and children starving because of the present money system. People cannot get the necessaries of life, and those who control money and credit are the people responsible for that state of affairs. Why could not the Minister say the other day that he was prepared to increase the old age pension from 10/- to 15/-? Why is it the Minister cannot increase the widow's pension from the present rate of 7/6? Why is it Deputy Cosgrave, when he was in power, had to reduce the old age pension by 1/-? I submit that if Deputy Cosgrave, when he was in power, had control of money and credit, he would not have agreed to that.
I must ask the Deputy to come to the amendment.
It is for these reasons that I am opposing this amendment.
Is there any comparable section to this that the Minister knows of in any other country?
In some cases there are powers vested in the central bank to demand deposits.
That is the regular practice; that is the penalty for doing certain things. But does the Minister know of any case anywhere where a central bank could ask people to give interest-free deposits because of the disproportion between assets and liabilities?
I cannot quote any.
Amendment put.
The Committee divided: Tá, 26; Níl, 52.
Tá
- Bennett, George C.
- Benson, Ernest E.
- Brennan, Michael.
- Browne, Patrick.
- Cole, John J.
- Cosgrave, William T.
- Costello, John A.
- Dockrell, Henry M.
- Doyle, Peadar S.
- Esmonde, John L.
- Fagan, Charles.
- Giles, Patrick.
- Hughes, James.
- Keating, John.
- Lynch, Finian.
- McFadden, Michael Og.
- McGilligan, Patrick.
- McGovern, Patrick.
- McMenamin, Daniel.
- Mulcahy, Richard.
- Nally, Martin.
- O'Sullivan, John M.
- Redmond, Bridget M.
- Reynolds, Mary.
- Rogers, Patrick J.
- Ryan, Jeremiah.
Níl
- Aiken, Frank.
- Allen, Denis.
- Bartley, Gerald.
- Beegan, Patrick.
- Boland, Gerald.
- Bourke, Dan.
- Brady, Seán.
- Breen, Daniel.
- Brennan, Martin.
- Breslin, Cormac.
- Briscoe, Robert.
- Carty, Frank.
- Cooney, Eamonn.
- Corry, Martin J.
- Crowley, Tadhg.
- Davin, William.
- Derrig, Thomas.
- De Valera, Eamon.
- Flynn, Stephen.
- Fogarty, Andrew.
- Gorry, Patrick J.
- Harris, Thomas.
- Hickey, James.
- Hogan, Daniel.
- Keane, John J.
- Kelly, James P.
- Kennedy, Michael J.
- Keyes, Michael.
- Lemass, Seán F.
- Loughman, Francis.
- McCann, John.
- McDevitt, Henry A.
- Maguire, Ben.
- Meaney, Cornelius.
- Moylan, Seán.
- Mullen, Thomas.
- Norton, William.
- O Briain, Donnchadh.
- O Ceallaigh, Seán T.
- O'Grady, Seán.
- O'Loghlen, Peter J.
- O'Reilly, Matthew.
- O'Rourke, Daniel.
- Rice, Brigid M.
- Ruttledge, Patrick J.
- Ryan, James.
- Ryan, Martin.
- Ryan, Robert.
- Smith, Patrick.
- Traynor, Oscar.
- Walsh, Richard.
- Ward, Conn.
Tellers:—Tá: Deputies Doyle and Bennett; Níl: Deputies Smith and S. Brady.
Amendment declared lost.
I move amendment No. 56:—
In sub-section (1), line 19, after the word "board" to insert the words "by unanimous resolution".
This amendment is likely to gain the Minister's adherence by reason of what we heard about the board. The board is to be composed of a number of experts, experts in banking, in business, and in all that concerns those weighty matters which are to come before them and to which they will have to bend their minds and their energies. There is a very severe penalty attached to non-compliance with their regulations or with their decisions. As I have said in dealing with the amendment which has just been negatived, the penalty is a heavy one—a fine not exceeding £100 for every day during which such failure is continued. I calculated that if that were to continue for 12 months it would mean a penalty of £30,000 in the year, on the basis that there would be 300 banking days; there would probably be 310 or 312.
The penalty there is severe—more severe than has been decreed in our courts since they were set up. It is obvious that, if these regulations are to be the subject of mature deliberation on the part of the directors, they will be perfect in themselves and will command the adherence of every member, so that it is not unreasonable to ask that a decision upon them should be unanimous. As the section is drawn, there are nine members on the board and five of them could come to this decision. It appears to me that they would come to a more sensible decision if they had to carry every member of the board. From all we have heard about the expert character of the persons who will be appointed and how knowledgeable they will be, there should not be any chance of a crank securing a place on the board. Considering that the Minister will be responsible for the appointment of all the nine members, he may have no apprehension that any nominee will be reluctant to give his support to a decision so important not only to banking interests but to depositors in the banks, to shareholders and to the general commercial community.
I cannot accept the amendment. I do not think that it is quite accurate to say that, even if selected with the greatest care and with the greatest desire to secure that those appointed be reasonable and commonsense people, one of them might not develop into a crank after his appointment. There are to be three banking representatives on the board and, even if there were not a crank amongst all the members, one of these banking representatives might say if this section were to be operated against any bank: "It is this bank's turn now; it may be my bank's turn next year and I shall vote against the operation of the section." That might happen. I hope that those appointed to the board will act impartially, but we all know cases of people who, we thought, were 100 per cent. commonsense being put upon a board or committee and failing to act in the best or wisest way or in the way we thought they would act. Once people are appointed to this type of board, they cannot be removed for a certain period. There is no way by which anything they do during that period can be undone. Under the amendment, even if one member of the board made up his mind that these rules would not be operated, the section could not be enforced. I do not know if that is exactly what is in the mind of Deputy Cosgrave—the making of the whole thing inoperative. I know he dislikes the section. He has told us so. It would be one way of securing that end and, there being a risk of that kind, I cannot accept the amendment.
The Minister said that there might be on the board a banker who would be concerned lest his bank should be involved or, if it were not involved this year, that it might be involved next year. He has, apparently, in mind that this section may operate against the whole of the banks —each one of them in turn. That is a very serious contemplation. Leaving that aside for the moment, there is no provision in the Bill to ensure that no member of the directorate of the central bank will be an interested party in connection with any application that may come before the bank for accommodation. As the Bill stands, there might be a member of that directorate who would have a personal interest in having an application made to a bank for accommodation, which application might be rejected. He would then be in a position to make a proposal that this whole machinery be put in motion. He could vote on that, and his vote could not be challenged. The following week another member of the board, interested in another company, could set the machinery going. When the Minister says that he could not have this unanimous decision because a banker might have an interest in the matter, I remind him that there is no corresponding safeguard regarding the interest which a director might have in operating the machinery so that either a penalty would be imposed or the accommodation which had been sought would be forthcoming. If his board is to have the character which has been mentioned here and which it should have, there is no earthly reason why we should contemplate the presence of a crank upon it. There should be unanimity on every question concerning the best interests of the country, the banking institutions, the central bank itself and the industry of the country, in addition.
I cannot understand why Deputy Cosgrave wants to have so much rigidity regarding the application of Section 45. I can see that it may be difficult to operate the section. In fact it may be impossible to operate it in times of emergency. On the whole, there is, however, much to be said for the development of a banking and economic policy which will enable us, so far as the power resides within us, to repatriate our foreign investments, even if that can only be done— as it can only be done—by the transfer of goods from the country in which these assets are invested. That is a commendable line of policy, notwithstanding all the difficulties that might have to be encountered in implementing it. Deputy Cosgrave says that somebody might have an interest in securing accommodation from a bank and, if that accommodation were not forthcoming, a member of the board conceivably might suggest that Section 45 be operated.
He suggests that, in order to endow the board with certain dignity and majesty, its decisions should be unanimous so far as the implementation of this section is concerned. I do not think it is possible, on a matter of banking wisdom or financial policy, to get unanimity in all matters. If one turns to financial literature, one can pick up half a dozen or, let us say, nine, books and find there is scarcely unanimity amongst the nine different authors. There is probably no subject on which there are so many diverse views and so many points of disagreement as on the best method of controlling and creating currency and credit. We will have nine people on this board, all financially-minded folk, coming from different financial schools, perhaps. Some may have one scheme in mind and others may have other schemes in mind, and there will not be unanimity amongst them. Probably they will not be of the type of people whom you can steamroll into a unified conception as to what it is best to do. Apparently, Deputy Cosgrave would say that, unless you can get them all to think together, there should be no action.
Presumably they will be able people, educated people, tenacious in putting their points of view and tenacious when it comes to surrendering their points of view. A board of this kind would have points of disagreement on many occasions, and in that circumstance Deputy Cosgrave's suggested amendment would make it impossible to implement Section 45 which, as I have said, may have some merits in it ultimately. In any case, it is not necessary as a condition for regulating life and activity that there should be unanimity in all things. We have not got unanimity in this House on this Bill, and when it is passed it will reflect the disagreement of the representatives of the nation. Probably there is disagreement in the Government on this Bill and on other matters that come before them. Even in the judiciary, when cases come up affecting the nation and its constitutional status, they have to be decided by the courts without unanimity. I think it is pushing unanimity too far to request that an amendment of this kind be passed, as it is calculated to render Section 45 completely inoperative.
I wonder if the Deputy has read the section, part of which reads: "If at any time it should appear to the board, with the concurrence of the Minister, that it is expedient so to do, it shall be lawful for the board to make, with the consent of the Minister, regulations..."
And what is the Deputy's amendment?
That there should be unanimity with respect to that. What are the regulations? They would be of a far-reaching character. In essence, we are endowing an expert body with powers to pass laws, as these, in fact, are laws. Any person who infringes any of the regulations is liable to a fine of £100 a day. Have we any previous experience of a body, outside this House, not being responsible to elected authority, passing regulations which have a penalty of that sort? Taking it the other way, and making regulations requiring a licensed banker to lodge a specified sum of money, which is not specified here and which they may specify, is it not departing a little from normal procedure if we give nine persons authority of that sort, and if they are not made amenable to a higher authority?
Would there be much difference if eight took one view and one took another?
I say that we must turn to the experts. They know their business and they, at any rate, should be agreed on these regulations. There may be disagreement in other matters, but in the case of regulations of this kind there would be much more respect for them if they are accepted by the nine persons on the board. If this board were elected in some other manner than the form of selection that is to take place, there might be something to be said for a division of opinion. In the normal courts, where a person is put on trial, I think there are certain cases where nine persons can go one way and three the other, and the majority decision would do. Here it may be merely a majority of five to four.
But it could be eight to one as well.
Yes, it could be eight to one, with this difference, that the eight would have a greater case for having the regulations carried into effect than the five. The Deputy ignored altogether the fact that all this machinery can be put into motion by an interested person. There is no provision for securing against that. Surely there is a case for something more than a passing majority of five to four in a matter of this kind. I suggest that it should be unanimous if you want to get real respect for the law. The more general acceptance one can get the better. Assuming that there are three bankers opposed to you concerning these regulations, what would the position be with regard to the working of them? What is the intention with regard to this? Is it to work it or to impose penalties? If you want to work it, surely the greater strength there is behind the regulations as drafted the greater likelihood there is of their being carried into effect.
I am supporting Deputy Cosgrave's amendment. As we have argued, this is possibly the most drastic section in the Bill. It embodies principles which I do not suppose are enshrined in any similar Bill in any other country in the world. If we are giving the board such powers, at least we should take the precaution that they would be unanimous on this point. It would strike one that the Minister is more desirous of making this section effective than he is in regard to other sections of the Bill. Apparently he wants this to function. He did not take such a stern stand in other matters. In another section, concerning Section 3 of the Currency Act, he accepted the principle of unanimity. I have no doubt that was his original intention. No doubt he watered it down somewhat afterwards to construe unanimity as meaning six out of nine, but in this particular section he has left a bare majority of the board to put the provisions into effect. The odd man apparently will be the ruling individual in this decision. I do not think it is fair to allow a bare majority of a board to exercise such drastic powers as are contained in the section and I think Deputy Cosgrave's amendment should be accepted.
I think I am entitled to hear what the objections are to this amendment, other than what we have heard already. I have not mentioned sub-section (2). I do not know whether Deputy Norton's attention has been directed to that sub-section:—
"Regulations made under this section may prescribe different requirements in respect of different licensed bankers."
What is the meaning of that sentence? Obviously it means that what would apply to one banker may not apply to another. Let us examine it from the point of view of a bank not represented on the board. Is it likely that a non-represented bank is going to get more favourable terms than a represented bank? I know objection will be taken to the term "represented bank", but the fact is that bank directors get on the board by reason of their being directors of banks. Although they may not represent their own bank, it would be ridiculous to imagine they will not have the interests of their banks in their minds.
The sub-section indicates that regulations may prescribe different requirements in respect of different licensed bankers. Let us examine what might happen in regard to this matter. A man applies to a bank for accommodation and he does not get it. The machinery is put in motion and they find that the bank in question has 50-50 domestic assets and sterling assets against liabilities. The bank decides it must have 45-55. It either agrees or disagrees. Let us assume it disagrees and it entails the penalty. Another individual applies to another bank. They have 55-45. The application is considered and regulations are made to ensure that in that case it should be 60-40 and the penalty can be imposed again. Is that desirable?
Presumably all these regulations and requirements will be made in the first instance. There is no indication that regulations once made are not to be departed from, there is no indication that they are irrevocable or may be subject to alteration. Why should there be different regulations in respect of different banks? Why should not the law apply to people generally in the same way?
How does the Deputy relate that to unanimity?
It is very desirable that there should be unanimity on the regulations that are made. If there are to be different ones, we are at least entitled to get unanimity on the part of the directors when they would be framing them so as to give it a character and so that it could not be said that you would have 5-4 in respect of bank A, 6-3 in respect of bank B, and 7-2 in respect of bank C. That would be most undesirable. Some of the banks operate across the Border. What is the position to be in regard to them? Does it mean that we are to have different regulations in respect of banks of that character, that we are going to discriminate between (a) a bank that has its headquarters here and branches in Northern Ireland, (b) a bank that has headquarters in Northern Ireland and branches here and (c) a bank that has headquarters in London and a branch here? I feel it would be most undesirable to have that situation and, therefore, it is all the more necessary that whatever regulations are made they should be made with the unanimous decision of the directors.
It is quite obvious that if you have the unanimous rule it may not operate at all. The Deputy seems to suggest that if we want it to operate we should make it unanimous. We have had many examples of unanimity which are blocked to such an extent that you could not have that at all. Unanimity is an extremely difficult thing to get in any group of people who approach a problem along different lines. To insist on unanimity might mean that the section would become inoperative. Somebody spoke about Section 3 of the Currency Act. It was never operated, and that is the answer to unanimity there.
We believe there may be an occasion upon which this particular section would be operated and the problem will be a difficult problem for the board. A very careful examination will have to be made before a definite conclusion can be arrived at, and you do not want to make the things completely and absolutely impossible. The Minister is there as a second check to see that the action proposed is in accordance with the general interests. Deputy Cosgrave spoke about one representative of a bank stopping it. One might set the machinery going, but one is not a majority of the board. Four or five would have to be got at if an advance was refused to some individual, so that the two things are absolutely different. One can block, but one cannot make the regulations.
There is another aspect of this to which the Deputy referred when he was speaking about the desirability of unanimity. He said we may have different representatives for different banks. If you want to be just you may have, because banks do not operate in quite the same way, and the composition of the portfolios of banks' assets might be quite different. The portfolio of assets of one bank may not be the same as the portfolio of assets of another. If you want to operate this in fairness to the banks you have to operate it having fully considered the banks' portfolios of assets. It is not purely a numerical question or a mere fixing of the proportion. It is not so easy as that. It will have to be decided in regard to each particular bank after a careful examination by the board of the central bank into all the circumstances.
The point has been made more than once about the repatriation of assets. There is another aspect, too. You can change the proportion, leaving the outside portion unchanged; you can increase the proportion by increasing the home portion—in other words, by giving more loans—by acquiring more home assets. The provision that a certain cash reserve, not bearing interest, should be lodged with the central bank is not an unusual provision at all in the case of central banks, though in our case its purpose would be rather the opposite to its purpose in the case of other banks. In the case of other banks it is a means adopted to compel them to decrease their loans and the amount of purchasing power that is available to the community, whereas in this case it could be operated so as to induce them to increase it. However, if we had unanimity—and if that is the only point at issue—it is quite obvious that unanimity would mean that the thing could not operate at all.
We learn now, for the first time, that so far as the banks are concerned there is to be a line drawn at the present moment in respect of whatever their domestic assets are and whatever their external assets are. A bank that has been accommodating people, if there be such a bank, to an unusual extent as compared with the other banks is now going to be judged in the future, not by what it has done but by what it is going to do in the future. It is an innovation into the discussion. We have not had it up to this. It is forgotten that while unanimity is asked for, there is a difference between having a thing unanimous and having it that although people may oppose it they will not vote against it. It might happen that one of the directors would consider that it was not an advisable regulation or set of regulations, as the case might be, but he would not go so far as to stop the regulations being made. We ignore the fact altogether that one of these directors may put all this machinery in motion by himself. He may be an interested party. There is nothing to prevent it. The only condition in respect of a director of the central bank is that if he is a non-banking director he should sell the shares, if he has any, of any of the joint stock banks of this country.
He can hold them if he has them of the Bank of England or the Bank of France or of an American bank, but he cannot hold them if they are shares of a joint stock bank here. There is no provision whatever in connection with his activities in another direction. On its face, it does appear as if it was an unusual procedure. He may be interested in something that he brings before the bank. We are asked to believe that he is an expert. I hope that in addition to being an expert, he will be a disinterested expert. But you have different regulations in respect of different banks. If there be a bank at present that has twice the amount of domestic assets as its external assets, is it going to be placed in the position of a bank that has preponderating external assets to domestic assets?
I have not been able to make head or tail of portion of what the Deputy has been talking about. He said that one man can put the thing in motion. The thing can only be put in motion if there is a majority of the board, not if there is one. It can definitely be stopped by one. Surely, there is a big difference. If we are talking about interested parties—again I do not want to bring that in—surely it is much more likely that there would be an interested party in blocking it rather than an interested party who could only make a suggestion and who would have to convert the majority of his colleagues on the board before it could be put into operation. I cannot see any parallel whatever between one putting it in motion who might be an interested party and one blocking it who might equally be an interested party. One can block it but one cannot put it in motion. He can only make suggestions to the majority of his colleagues that a certain thing should be done and he would have to give his reasons for it.
The whole position with regard to the banks' external assets and the position generally in the country that requires a higher proportion of assets would have to come into consideration. It is said that it is unusual. I do not see anything unusual in it. I think if you are making regulations and they apply to different states of affairs these regulations should be made having due regard to the position. With regard to what banks have done in their present existing position, those that may have had a high proportion in existing conditions, I presume, would be adjudged to have done their part. A certain degree of latitude is allowed, but the prescribing of different proportions to different banks is because the circumstances of the banks may be so different that the same arithmetical proportion applied to one would bear harshly on the other. We are really setting the central bank up as a board of judges to judge whether the banks are, under the circumstances, having regard to the whole monetary position of the country, doing reasonably their national duty. If it is desired, as being in the national interest, that a higher degree of the banks' assets as against their liabilities should be held at home, surely that is a question that has a national bearing and interests the whole community, and concerns also the whole position with regard to credit in the country and the public welfare. That being so, we are saying to the central bank that they will have, under certain conditions, a right to make regulations in that regard, and it is one of the powers that could be given to them to implement to a certain degree their general instruction in regard to expansion and the credit position, in which they would have regard to the general interest. It is one of the means by which they could implement that.
I do not see that there is much use in repeating these things over and over again. I say that unanimity would be resisted because it would be unreasonable. The right to have the different proportions is necessary unless you want to have some arithmetical rule applied which might bear very harshly in certain circumstances. It might under certain circumstances fit the case and in that case it would be satisfactory if you did have it, but we are not going to tell them in advance of the examination which will have to be made when the regulations are about to be drawn up. At any time that they were going to be put into operation, there must be an examination ad hoc of the position in regard to internal and external assets by each particular bank and all that will have to be considered by the judges who are directors of the board before they make their decision. We cannot make a decision here. We cannot say that it will be unanimous. We cannot make it a rule that there must be the same proportion in every bank. With regard to respect for the law, I agree the more unanimity you have when a law is made the better, but there would be very few laws made for the community in this country if we had to have a unanimity rule here or anywhere else. Even in the case of Governments which have collective responsibility they try as hard as possible to get unanimity, but what generally happens is, when the views are discussed with regard to a particular matter and when the arguments are heard, there is no definite voting upon it, but it becomes quite obvious from the remarks that members have made what their views are, and when the decision is taken it is the decision of everybody. That is the way in which Governments that have collective responsibility work as a rule. If any particular member feels that he dissents so strongly from the decision arrived at that he cannot stand over or become a party to it, he has only one way out of it and that is to resign. You cannot have a rule of that sort applying here, so you must have some rule by which decisions are arrived at. Unanimity means practically making the thing inoperative.
We have not got to the point where there may be an interested person. There may be three interested persons. Regulations have to be made regarding the proportion of the assets. In the making of those regulations, any member or two or three members of the board may have a personal interest. They may be interested in getting accommodation in respect of a certain industrial or commercial enterprise. They will be in a position to know what are the respective proportions of the domestic and external assets held by those banks. They can make regulations so that the banks will be penalised unless they give the information that is asked for. If they are to be the judges, they should not have any personal interest in the decision that would be arrived at, but there is no provision for that in this measure as it stands. The only restriction as regards shares held by members of the board, other than the banking directors, is that they should not hold shares in banks in this country. They are to make the regulations. What are the regulations to be made? Are they to be made on a fair basis? If they are, why should they not command the unanimous support of the members? It is not a question of the making of a law; it is an arithmetical matter. As far as one can judge now, each bank is to be judged in its turn. Its assets are to be examined, not with regard to any other bank but simply on its own. In a matter of that sort, should not the question be decided unanimously by the members? Should there not be a guiding principle of some sort governing the decision regarding the regulations? Those regulations will have all the force of law. The members of the board are to be law-makers and judges at the same time, and it is not unreasonable in these circumstances to ask that there should be unanimity. I do not know of any other instance except in a case of what is called "judge-made law", where a person is a law-maker and a judge at the same time.
Amendment put.
The Committee divided: Tá, 23; Níl, 51.
Tá
- Bennett, George C.
- Benson, Ernest E.
- Browne, Patrick.
- Cosgrave, William T.
- Costello, John A.
- Dockrell, Henry M.
- Doyle, Peadar S.
- Esmonde, John L.
- Fagan, Charles.
- Giles, Patrick.
- Hughes, James.
- Keating, John.
- Lynch, Finian.
- McFadden, Michael Og.
- McGovern, Patrick.
- McMenamin, Daniel.
- Mulcahy, Richard.
- Nally, Martin.
- O'Sullivan, John M.
- Redmond, Bridget M.
- Reynolds, Mary.
- Rogers, Patrick J.
- Ryan, Jeremiah.
Níl
- Allen, Denis.
- Bartley, Gerald.
- Beegan, Patrick.
- Boland, Gerald.
- Bourke, Dan.
- Brady, Brian.
- Brady, Seán.
- Breen, Daniel.
- Brennan, Martin.
- Breslin, Cormac.
- Briscoe, Robert.
- Carty, Frank.
- Cooney, Eamonn.
- Corry, Martin J.
- Crowley, Tadhg.
- Davin, William.
- Derrig, Thomas.
- De Valera, Eamon.
- Flynn, Stephen.
- Fogarty, Andrew.
- Gorry, Patrick J.
- Harris, Thomas.
- Hickey, James.
- Hogan, Daniel.
- Keane, John J.
- Kelly, James P.
- Kennedy, Michael J.
- Keyes, Michael.
- Lemass, Seán F.
- Loughman, Francis.
- McCann, John.
- McDevitt, Henry A.
- Maguire, Ben.
- Mcaney, Cornelius.
- Mullen, Thomas.
- Norton, William.
- O Briain, Donnchadh.
- O Ceallaigh, Seán T.
- O'Grady, Seán.
- O'Loghlen, Peter J.
- O'Reilly, Matthew.
- O'Rourke, Daniel.
- Rice, Brigid M.
- Ruttledge, Patrick J.
- Ryan, James.
- Ryan, Martin.
- Ryan, Robert.
- Smith, Patrick.
- Traynor, Oscar.
- Walsh, Richard.
- Ward, Conn.
Tellers: Tá, Deputies Doyle and Bennett; Níl, Deputies Smith and S. Brady.
Amendment declared lost.
I move amendment No. 57:—
"To add at the end of sub-section (1), line 26, the following words: "subject always to the provision that more onerous conditions shall not be imposed on bankers having their head offices within the State than bankers having head offices outside the State."
This amendment seeks to ensure that banks having their head offices within the State should not be saddled with more onerous conditions than banks having their head offices outside the State. It appears to me to be desirable that that should be a guiding principle with regard to the regulations. The House is to have no responsibility for and no co-operation with the regulations that are going to be made. The Minister has not even responsibility to the House in respect of these regulations, and I think we are entitled to lay it down as a condition that more onerous conditions should not be placed on banks having headquarters in this country than on those having headquarters outside. I am not disposed to be in any way inimical to banks having headquarters outside the State, because I can see that their major interests are probably within this State, but it would be undesirable to have any hostility raised as between one and the other. It would be desirable that the directorate should have before them as a guiding principle the primary regulations that more onerous conditions should not be imposed on domestic banks than those with headquarters outside the State.
This section concerns itself with the parity proportion of banking assets held inside and outside the State. The character of those assets held by the different banks, eight of them, will probably be very different. Quite likely there will be no two banks with anything like the same proportion and, therefore, it would be very difficult, if at all possible, to have the same treatment administered to one bank as to another. The case of each bank will have to be taken on its merits. The major assets held inside and outside the State and possibly the character of the assets will come into question, but certainly the proportion is a matter that will be a subject of investigation under this section. As the matter stands at present these banks differ very considerably in the amount and proportion of their holdings. I agree that there should not be any suggestion of hostility to Irish banks that have their headquarters outside because of that fact. They should be treated fairly and justly. There should be no discrimination against them, but I do not think it will be possible to lay down a rule that there should be discrimination in their favour, or in favour of one set of banks more than another; banks with their headquarters here any more than banks with headquarters outside the country. It is probably true that even banks that have headquarters outside the country have their major interest here, and therefore it would be very much their concern to see to it that the major interest would not be hurt in any way. It ought to be the interest of the board of the central bank to see to it that nothing should be done unnecessarily to hurt or to injure any of these banks, wherever their headquarters may be. Speaking earlier on the previous amendment I said that the aim of this banking board should be to be helpful, and, in my opinion, it would not be acting in the best interests of the country if it unnecessarily did anything to hurt or penalise any of them. I stand for this section, as I believe it is going to be useful. It is a good useful reserve power to have, and the mere fact of having it there may render its operation unnecessary, but if it is operated, I am certain there will be no hostility to any banks with headquarters outside or inside the country, that, in the judgment of the board, comply with the regulations that will be laid down.
The main purpose of this amendment is to ensure that the banks having their headquarters within the State shall not have more onerous conditions placed upon them, through the operation of this section, than those outside the State. Banks with their headquarters outside the State and having a fiduciary issue outside the State have an advantage already over the internal banks, because they have to pay much lesser poundage per annum on fiduciary issue and I am not at all sure that they are called on to pay for their till money. Till money has to be paid for over here. All I am concerned with is that the conditions to be imposed on the banks here—I have no feeling towards those with their headquarters outside the country other than that they should be progressive, prosperous and so on—shall not be more onerous than those imposed on banks outside the State. My primary consideration is in connection with our own banks.
The Minister talked about the section. Under the section as it stands and as we heard it explained, it is possible that there will be eight sets of regulations—a set of regulations dealing with each bank. These regulations amount to laws and this is the first time I have heard of laws being brought in affecting individual persons, assuming for the moment that the banks are individual persons. As a rule, a law is brought in to affect a whole series of persons—perhaps the whole country in certain cases—but here we are going to legislate in respect of each individual person—a very unusual procedure—and the person who legislates in that respect is the judge the next day. I am asking for a very simple concession on behalf of the banks having their headquarters here —that not more onerous conditions will be imposed on them than on the banks outside. It is not an unreasonable request; it is a request which is entitled to consideration in view of the history and tradition of the banks here which have the vital interests of the people at heart and who have preserved for them anything that was entrusted to them.
My main consideration, as I say, is in respect of the depositors in these banks. I have no interest in the banks as such, being neither a shareholder nor a depositor. We are making a law here and giving to nine persons power to make regulations, to make laws, each regulation applying to an individual person. As I say, it is the first time I have heard of laws being brought in specially to deal with single individuals.
It is very interesting to hear the Deputy talk in that strain. He knows perfectly well—if he does not, his colleague beside him will tell him very quickly—that if we were to put in "onerous", the question will arise as to who is to be the judge. How is it to be judged? He knows perfectly well that it would be quite impracticable to carry it into effect, because there is no rule by which you can decide what is onerous or not. The position is different in regard to the different banks, and if you wanted to test whether certain conditions were onerous or not, you would need to have all the circumstances completely and absolutely before your mind. The expert who would be the judge would naturally be the person knowing all the circumstances. If the ordinary courts were to decide it, you would have practically the whole of the transactions and the character of the transactions of each of the individual banks revealed. In the other case, you have a body which is able to get confidential information. There is no inducement to that body to discriminate one way or another. And if there is any discrimination, in which direction is it likely to go? If there is bias of any kind, is it not likely to be exercised in favour of the banks having their headquarters here? Here is a body of Irishmen chosen at home to judge this matter. What is the likelihood that these will discriminate against banks having their headquarters here and in favour of banks with headquarters outside? I think it is all nonsense.
We were told that we had nine judges on this board and we are now asked who are to decide it. What about the nine judges? They are experts in banking and judges as well. It is a new distinction. Every time they come up here for discussion, we give them a new baptism and call them by some other name. Suppose it has to go before the court. Why should it not? Are law and equity and everything else to be immobilised as soon as we set up a body of nine experts? Are they above the law? Should they be made to administer the law? If we pass a law here, is it not their business to administer it?
I do not know whether it is worth while replying to that speech as to whether these are judges or not. We have said they are judges. They are people who will know all the circumstance; they are a jury—if you like, a judge and jury— in regard to the matter. They know the circumstances. With regard to bringing it before one of the ordinary public courts, it is not the first time in this House that we have had to be very careful about terms. Deputy Esmonde drew attention to-day to the use of the word "accordingly" because of the indefinite nature of it. There is no criterion outside the judgment of these people by which it could be determined. No outside body can do it. It could listen for days and hear experts from both sides, and would finally have to make up its mind as to whether there was unjust discrimination. They might be able to get some little distance towards it, but there is only one way of judging what is fair or not, that is, by a body of experts with the power to do it. I am not sure if you could put it in as some sort of general directive, but I think it would be quite unnecessary, inasmuch as it is obvious that if there is to be any bias whatever, it will—the judges being Irish citizens—be in favour of the banks with headquarters here. I see no danger of discrimination.
If there is no danger of it, there is no reason why it should not be accepted.
Because it is impracticable.
Very well; put down terms that will be practicable.
We could not.
I see. We have come to the point that whenever we want something done, we cannot find the means of doing it because we do not want to do it. That is the sum and substance of the whole thing.
Amendment put.
The Committee divided: Tá, 22; Níl, 49.
Tá
- Bennett, George C.
- Benson, Ernest E.
- Browne, Patrick.
- Cosgrave, William T.
- Costello, John A.
- Dockrell, Henry M.
- Doyle, Peadar S.
- Fagan, Charles.
- Giles, Patrick.
- Hughes, James.
- Keating, John.
- Lynch, Finian.
- McFadden, Michael Og.
- McGovern, Patrick.
- McMenamin, Daniel.
- Mulcahy, Richard.
- Nally, Martin.
- O'Sullivan, John M.
- Redmond, Bridget M.
- Reynolds, Mary.
- Rogers, Patrick J.
- Ryan, Jeremiah.
Níl
- Allen, Denis.
- Bartley, Gerald.
- Beegan, Patrick.
- Boland, Gerald.
- Bourke, Dan.
- Brady, Brian.
- Brady, Seán.
- Breen, Daniel.
- Brennan, Martin.
- Breslin, Cormac.
- Briscoe, Robert.
- Carty, Frank.
- Cooney, Eamonn.
- Corry, Martin J.
- Crowley, Tadhg.
- Derrig, Thomas.
- De Valera, Eamon.
- Flynn, Stephen.
- Fogarty, Andrew.
- Gorry, Patrick J.
- Harris, Thomas.
- Hickey, James.
- Hogan, Daniel.
- Keane, John J.
- Kelly, James P.
- Kennedy, Michael J.
- Keyes, Michael.
- Lemass, Seán F.
- Loughman, Francis.
- McCann, John.
- McDevitt, Henry A.
- Maguire, Ben.
- Meaney, Cornelius.
- Mullen, Thomas.
- O Briain, Donnchadh.
- O Ceallaigh, Seán T.
- O'Grady, Seán.
- O'Loghlen, Peter J.
- O'Reilly, Matthew.
- O'Rourke, Daniel.
- Rice, Brigid M.
- Ruttledge, Patrick J.
- Ryan, James.
- Ryan, Martin.
- Ryan, Robert.
- Smith, Patrick.
- Traynor, Oscar.
- Walsh, Richard.
- Ward, Conn.
Tellers:—Tá: Deputies Doyle and Bennett; Níl: Deputies Smith and Seán Brady.
Amendment declared lost.
With regard to amendment No. 58, which I had down, I suppose that it would be generally accepted—and I should say that it did not appear to me that it was at all accepted in the beginning—that the only way in which external assets can be described, perhaps incorrectly or loosely, as being repatriated, is by purchasing foreign goods, and so there is no great necessity to go on with this particular amendment.
This section is designed to facilitate and to increase the import of foreign goods into this country. That, in essence, is what the section means. This is the first time that legislation has been enacted in this State to endeavour to increase imports. As far as the section is concerned, it does not matter whether the imports are boots, wearing apparel, sugar, wheat, or any other commodities, as long as the import list swells and the import of goods increases, that is the only way that you can decrease your sterling assets. Gold, of course, would be included in that. Now that is not the situation that has been accepted up to this. You can transfer, if you like, from one bank to another and from one individual to another, and you can share out and distribute sterling assets for home securities according as you please, but the surest and most effective method of ensuring that the regulations under Section 45 will not be put into operation is to increase imports, whether these be sugar, chocolates, motor cars, and what some might call other vulgar luxuries of that kind. The more that is done, the less likelihood there is of this particular section being operated. It was to emphasise that that I put down my amendment in the beginning. As that position has been accepted, I do not see that there is very much use in moving the amendment. The object of the section is to increase imports to this country for the future.
Amendment not moved.
Question proposed: "That Section 45 stand part of the Bill."
I have not anything more to say on the section. The real intention of it is, as I have said, to increase the import of every sort of commodity into this country. We are told it is capital goods that are intended. That may be the aim, but this section opens up very much wider prospects.
Suppose that at the present time we could increase the import of a variety of things into the country, would it not be desirable to do so? If you are not able to get home production to meet certain requirements, would it not be more desirable to do that than to have assets outside that might not be realisable at the time they were needed? There are times when that might happen, but that will have to be determined generally by the policy of the Government at the time. If, however, the Government felt that pressure was being used to bring home assets, with capital or other goods, to be used for different purposes, then there are ways of dealing with that, and of prohibiting it. Suppose there was a question of bringing home any class of capital goods under pressure—Deputy Cosgrave referred to chocolates and some other things—then it will be very easy to bring in a law forbidding the importation of chocolates or other goods. It will be quite easy to put up restrictions against the import of the classes of goods that we do not want, so that you are not, as the Deputy suggests, opening the door for all classes of goods. The State can very well regulate the classes of goods it wants brought in. In addition to that, there is the fact that, without touching the external assets; you can alter the proportion by increasing the home assets. That would be got by giving advances at home. By doing that, you would be able to increase the purchasing power of the community. There is no point whatever in the Deputy's suggestion—it does not hold—that the result of this would be to open the gates and have chocolates and the other things brought in which public policy might desire not to be brought in in competition with home industry. If that were attempted you could put up tariff barriers, have absolute exclusion or quotas if you wanted to, so that what Deputy Cosgrave suggests need not follow at all. It could be prevented.
We take this Bill in two parts. If the argument suits, we use the present time, and if it does not suit we use some future time. Everybody knows that, at the present time, you want to buy goods. What is to prevent you from buying them? The banks? There is no shortage of money in respect of any purchases to be made. Everybody knows the reason why you are not buying them. It is because they are not to be had. This section is not for to-day or to-morrow. It is when the emergency stops that you are going to operate this measure, and there is no doubt whatever that, as soon as the section is passed, there will be an inducement there to bring in all sorts of goods. Think of all the talk we had about developing a wheat policy. Under this there will be almost an inducement to bankers to give accommodation for the importation of wheat. When this is passed there will be an inducement to them to give accommodation to a person to buy French brandy. We are told the aim is capital goods, but the door is being opened much wider and the Ministers know that. Not since this State was established have the importers of this country been given a greater opportunity than they will have when this Bill becomes law. The banks are almost invited to give accommodation. They were practically told not to do it before. Now there is an invitation to bring in anything. Take coal. Can you put a quota on that? Will you stop wheat coming in, supposing it is not being grown here, and so on with all the rest? What about all the undertakings that you gave under the 1938 Agreement? Will you alter those with a stroke of the pen at your own sweet will? Not likely. There is an open door for the importer, and the threat is being held over the banks of the country that if they do not help the importers they will be made lodge money free of interest with the central bank, or, alternatively, will have to do that if they disobey the regulations to be made by those who are to be lawmakers and judges—eight or nine of them—at the one time. But the door is being opened for importers, much wider than it ever has been opened since this State was established. Every invitation and inducement that could be offered to the banking interests of this country is being made to afford accommodation for the importation of goods from outside.
Deputy Cosgrave has been talking as a politican for the last quarter of an hour. He has not tried to apply himself to this, as we have been trying, from the point of view of logic and common sense. He knows perfectly well that there is no open door, but that there are occasions on which it might be desirable, in the public interest, to import goods. If the present situation lasts for a longer period there may be occasions on which it might be desirable to import consumable goods, and if so then I take it the Minister would allow them through. If it were not desirable to do that, if it were against public policy to do that, the door would be closed. I am delighted to find how much Deputy Cosgrave has changed his opinions, and how very anxious he is now to make sure that the policy which we have been operating or trying to operate would be made successful— that is if we are to believe his argument.
There is not the slightest foundation for the assertions that the Deputy made. Even if these regulations may not be necessary, from the time the Bill passes, when there is an examination made by the board, if certain things are found to be desirable in the national and the public interest, which it is the duty of the board to take cognisance of, then they will say to the banks: "There are opportunities of various kinds that we see; can you not go out and help to get development along these lines?" There may be other attractive propositions put up to the banks for the use of the money which is outside the country at present and the board of the central bank will say to them: "Instead of these propositions which are attractive from your point of view, the purely narrow financial point of view, take the national point of view and say that these moneys will be applied for domestic development." But to say that we have no means of meeting what has been suggested here, that we open too wide a door to imports of all kinds, is absurd, because at any particular time, by complete prohibition of classes of goods, by quotas or by tariffs, you can limit the amount of consumable goods of any kind coming into the country to any extent you please. It has been done in the past and it can be done in the future. There is no question in this of taking that power away from the Legislature. It still remains there. It is foolish to talk in the way the Deputy has been talking.
There is no man in this country can compete with the Prime Minister in political talk. We are told now that this is a two-faced amendment. To the bankers he says: "This may never be operated." To the vigorous industrialists he said: "This is a means of squeezing the last penny out of the banks that is required for industrial expansion in this country", and to the importers: "Who has ever opened a door as wide for you as we have here?" It was a magnificent performance and I congratulate the Prime Minister upon it.
Question put.
The Committee divided: Tá, 46; Níl, 21.
Tá
- Allen, Denis.
- Bartley, Gerald.
- Beegan, Patrick.
- Boland, Gerald.
- Bourke, Dan.
- Brady, Brian.
- Brady, Seán.
- Breen, Daniel.
- Brennan, Martin.
- Breslin, Cormac.
- Briscoe, Robert.
- Carty, Frank.
- Cooney, Eamonn.
- Corry, Martin J.
- Crowley, Tadhg.
- Derrig, Thomas.
- De Valera, Eamon.
- Flynn, Stephen.
- Fogarty, Andrew.
- Gorry, Patrick J.
- Hickey, James.
- Hogan, Daniel.
- Keane, John J.
- Kelly, James P.
- Kennedy, Michael J.
- Keyes, Michael.
- Lemass, Seán F.
- Loughman, Francis.
- McCann, John.
- McDevitt, Henry A.
- Meaney, Cornelius.
- Mullen, Thomas.
- O Briain, Donnchadh.
- O Ceallaigh, Seán T.
- O'Grady, Seán.
- O'Loghlen, Peter J.
- O'Reilly, Matthew.
- O'Rourke, Daniel.
- Rice, Brigid M.
- Ryan, James.
- Ryan, Martin.
- Ryan, Robert.
- Smith, Patrick.
- Traynor, Oscar.
- Walsh, Richard.
- Ward, Conn.
Níl
- Bennett, George C.
- Benson, Ernest E.
- Browne, Patrick.
- Byrne, Alfred.
- Cosgrave, William T.
- Costello, John A.
- Dockrell, Henry M.
- Doyle, Peadar S.
- Fagan, Charles.
- Giles, Patrick.
- Hughes, James.
- Keating, John.
- McFadden, Michael Og.
- McGovern, Patrick.
- McMenamin, Daniel.
- Mulcahy, Richard.
- Nally, Martin.
- O'Sullivan, John M.
- Reynolds, Mary.
- Rogers, Patrick J.
- Ryan, Jeremiah.
Tellers:—Tá: Deputies Smith and S. Brady; Níl: Deputies Doyle and Bennett.
Question declared carried.
Progress reported; Committee to sit again to-morrow.
The Dáil adjourned at 9.35 p.m. until 10.30 a.m. on Saturday, 30th May.