The Taoiseach has a different personality from his predecessor. While sometimes I despair for our country, I admire the resilience and patience of our people. One of the most shameful acts in political life has been the decision of the Minister for Education and Science to remove teachers from 900 special needs pupils——
Leaders’ Questions
Deputies
Hear, hear.
——at a time when we speak of fairness, solidarity, the type of people we are , the need for us all to put our shoulders to the wheel and at a time of financial turmoil and uncertainty. The Taoiseach has an opportunity to break the golden circle of developers, banks, regulators and Government. Far too cosy cartels have existed to the consternation and deep anger of people on the streets.
We are in a mess where the Fraud Squad is investigating, the Committee of Public Accounts cannot call before it people to give evidence in terms of public accountability——
Hear, hear.
——we continue to deal with the entrails of a range of tribunals and nobody in Government accepts responsibility for any actions of Government. We are in this mess not because Fianna Fáil policies have failed but because they have succeeded. As the Minister for Finance has said, this is where the people wanted us to go and the position at which they wanted us to arrive. We have now come to a shuddering halt.
The transfer of €7 billion from Irish Life & Permanent to Anglo Irish Bank took place when there was a run on that bank during the final quarter of the financial year. Was the Government aware of the extent of the transfer involved? Did the Financial Regulator inform the Government of the transfer of €7 billion from Irish Life & Permanent to Anglo Irish Bank? More important, did the treatment of that transfer of money, either as a loan or as a deposit, not send out a misleading statement or perception to shareholders of both institutions and to international markets?
The Financial Regulator knew about this. The Minister for Finance told us in the House that Anglo Irish Bank was being nationalised owing to the unethical loan practises of the previous chairman. If that were the case and the Financial Regulator informed the Department of Finance of the transfer, how can the Taoiseach justify the Department of Finance signing off on a special bonus of the type awarded to the previous Financial Regulator? I accept he has statutory entitlements but this payment goes beyond normal terms and conditions. Given the Financial Regulator knew of the transfer of €7 billion, a massive deposit, by Irish Life & Permanent to Anglo Irish Bank, can the Taoiseach justify that payment and will he explain to the House why that happened?
They broke no law.
It is important to point out that these issues with Anglo Irish Bank are the subject of various investigations. This is based on information from the Financial Regulator and the due diligence exercised, which was undertaken as part of the planned recapitalisation of the bank. The information was also provided by the new board of the bank. I am confident the new board, appointed by the Minister for Finance, under the chairmanship of Donal O'Connor will follow up on all of these issues. The Director of Corporate Enforcement is also conducting an investigation independently in that respect.
Who wrote that?
The new board is also reviewing all the corporate governance practices of the bank and will put arrangements in place to guide the bank in the future.
It is important that Anglo Irish Bank customers and depositors can be sure their savings are being safeguarded. While I understand people's anger about these matters, it is action that will deal with this issue. There is a very serious situation with which we must deal. As the House knows, we brought forward a guarantee system in September in order to bring stability to the banking system in the interests of protecting businesses, protecting as many jobs as is absolutely possible and making sure people can conduct their business in the normal way with a functioning banking system. That guarantee will be paid for by those who avail of it to the tune of approximately €1 billion during the course of the term in which the guarantee is provided to those institutions.
A Deputy
To pay the directors.
As the House knows, we are also in the process of finalising arrangements regarding recapitalisation. The recapitalisation of banks is about ensuring once again that we provide much-needed stability in the banking system for the benefit of the real, wider economy. The portrayal of the recapitalisation policy as being in some way simply for the provision of bankers is incorrect. It is about maintaining stability in the banking system at this critical time.
It is about bonuses and pay-offs. The Taoiseach has no moral compass.
On executive remuneration, under the guarantee scheme that was enacted here in September there is a remuneration oversight committee which will report to the Minister for Finance in the coming weeks and which will deal with all of those issues, rightly so.
Another committee.
On severance payments for the Financial Regulator, in a reply yesterday the Minister for Finance outlined the factual situation whereby the regulatory authority informed the Minister for Finance that pension benefits are payable in accordance with the Central Bank and Financial Services Authority of Ireland superannuation scheme. I also understand that the former chief executive had two years remaining on that contract, but having regard to independent legal advice and his exclusive availability to the authority for a period of three months, the authority agreed to payments of an additional €151,500——
He should have been fired for gross incompetence.
——which is equivalent to six months remuneration plus an additional two months salary to the former chief executive. That is the decision of the regulatory authority in regard to that particular matter.
Does the Taoiseach believe it is right?
Does the Taoiseach stand over it?
I make the point that we are in a very serious situation that must be handled calmly. Anger alone, while understandable and justifiable in many respects in terms of the history behind all of this, will not be the solution to the problem. Action is needed.
There is no action, certainly no commensurate action.
The Government is determined to take that action during the course of today as part of an ongoing response to ensuring we maintain stability in our banking system at a very difficult time internationally and domestically.
I asked two questions. Did the treatment of the transfer of €7 billion from Irish Life & Permanent to Anglo Irish Bank send out a misleading perception of the strength of the bank and therefore have an impact on shareholders and on the international markets in the way they considered this? That is the question.
Did the Government know about it?
The Taoiseach has not justified in any way the special bonus for the former regulator. The Minister for Finance could have sacked the regulator if he felt he was not up to his job, in which case all of these matters would have fallen. There is clearly a need for the Taoiseach to smash this circle once and for all, and to be seen to do that in such a way that if people who accept positions of responsibility abuse those positions or fail to live up to their remit, these special golden handshakes should not be paid.
Deputies
Hear, hear.
I understand the Government is due to announce its recapitalisation programme today or tomorrow, certainly this week. First, within that recapitalisation programme, is the Taoiseach looking for guarantees that pools of money will be made available for mortgages for first-time buyers, for small and medium-sized enterprises and for sufficient funds to enable existing businesses that might be in distress to trade their way out of that?
Second, will he insist that remuneration levels for top executives will not be dealt with by percentage but will be capped? There are many people in this country who have expertise in the financial area and who would willingly work in the nation's interest for a capped level of remuneration, not a reduction of expenses, where salaries are still extraordinarily high by Irish standards.
Finally, I have continuing doubts about the consequences of putting €7 billion of taxpayers' money into a recapitalisation programme. While I called for such a programme last November as a forerunner of an operational banking system, this may not be the most prudent use of taxpayers' money and the Government could well find itself in a situation where it is coming back for more at some time in the future. Can the Taoiseach justify the Government's proposal to take €7 billion of taxpayers' money to bridge a gap that is clearly of unknown depth and unknown consequence?
Does the Taoiseach know about the €7 billion?
May I answer the question? The new board of Anglo Irish Bank obviously took a view in regard to this question. Investigations are being conducted of foot of this and that process must be given the opportunity to go through its various stages, which is being done. The investigations are ongoing in regard to that matter.
When did the Taoiseach become aware of it?
On the other question regarding the capitalisation of the bank, we are seeking to ensure there is additional credit over and above what was provided last year for business. We made that point in the policy statement we issued in December, calling for a greater amount of money to be made available for first-time buyers and people who wish to take out mortgage commitments. This has been part of the ongoing discussions.
On the question of the recapitalisation itself, the Deputy makes the point that he felt a recapitalisation should have taken place sooner. It is because of the prudent approach and the advice we are taking, and the work that has been undertaken based on various stress tests and scenarios which are prudent and proper in assessing the capital needs of the banks going forward, that we will find in what way we can contribute to stability and what sort of figure would be regarded as sufficient in those circumstances, as matters stand.
We have been conducting this with the best of advice to the Department of Finance. The figures that would be coming forward if the Government makes a decision later this afternoon are not plucked from the air. They are based on an assessment as to what is required in the interests of the stabilisation of the banking system and its ability to work through its provisions.
I spoke yesterday, and the suggestion is made in comment today in various newspapers, about predictions on the performance of various assets. Once assets are diagnosed as bad debts, they are provided for in the accounts. The stress testing and the various scenarios that are worked out by those who advise on this matter to Government and to the Department are such that we are devising the amount of money that would be required in the interests of the wider economy, of jobs, of ordinary people conducting their business on a daily basis and of having a functioning banking system with which to do that. That is the whole purpose, and no other, behind why we are conducting this policy and why we are bringing ourselves to the position where a decision can now be taken by the Government on these matters.
There will be ongoing monitoring and evaluation of the situation to see in what way risk is managed into the future. There is no means by which we would put this behind us and suggest that is the end of the matter. We are approaching in a prudent, cautious and comprehensive way the maintenance of stability in the banking system, first, through the guarantee system, which is being paid for, and, second, by a capitalisation programme, which is being paid for by a coupon and in which greater interest will be available to the Government than what is available at present for the money that is being provided. This will ensure the Government also gets the upside in the event of shares returning to more normal trends in the years ahead.
When did the Taoiseach know about the €7 billion?
He knew about it on 30 October, or was it 30 September?
The Taoiseach is refusing to answer the question.
On 30 September the Labour Party stood alone and opposed the blanket guarantee the Government proposed for the banks. We did so because we believed we were not being told the full story and that the taxpayer was not being told what was involved with that guarantee. It turns out we did not know the half of it. It turns out on that very day, Irish Life & Permanent was shuffling €4 billion by way of a loan——
It was €7 billion.
The bank moved €7 billion by way of a loan into Anglo Irish Bank to make the latter's accounts look good.
They were false accounts.
It was effectively a financial three card trick, the dig out to beat all dig outs. Why would it not do so? There was no risk involved for the bank, because the taxpayer was taking the risk. It could lend Anglo Irish Bank billions of euro. It was our money and if it went wrong, we would pick it up. The Government could impose some more levies on working people to get it back.
It appears the banks can lend thousands of millions of euro to each other, but at the same time they cannot extend several thousand euro to viable businesses to keep going.
Hear, hear.
The former chief executive of the Financial Regulator, which was supposed to be keeping an eye on all of this for us, now walks off with an enormous golden handshake. The Government, which presided over all of this, imposes levy after levy on hard working people to pay for this largesse. Does the Taoiseach have any idea of the degree of anger which exists among people, especially working people? This includes workers in the private sector who are losing their jobs because of the credit squeeze, and workers in the public sector who are being asked to pay this so-called pensions levy?
I seek some straight answers today. When did the Taoiseach become aware this money was lent by Irish Life & Permanent to Anglo Irish Bank?
He did not have a clue.
It is unbelievable that at the very time it was introducing a blanket guarantee, the Government was not aware such inter-bank lending arrangements were taking place before our very eyes. The Taoiseach made a very interesting comment on the day of the bank guarantee, to which I refer. The Taoiseach stated he would expect that the banks would help each other out. I remember that comment, because I remember putting the question as to whether the taxpayer would end up having to pay. The Taosieach stated that the banks would help each other out.
They did so.
Did the Government encourage the payment of these loans, or what was the extent of its knowledge of the position? When did it first come to the attention of the Taoiseach and the Minister for Finance?
I absolutely refute the suggestion put by Deputy Gilmore — it is without foundation — that he finds it unbelievable the Government was not aware of these loans. I was not aware of these arrangements.
When did the Taoiseach become aware?
Why was he not aware?
The Taoiseach ought to have been aware.
In fact, the board of directors of the bank was not aware of these arrangements. It seems to me that not all members of the board of the bank were aware of those arrangements.
They ought to have been aware.
The point is——
To which board and which bank is the Taoiseach referring?
The Anglo Irish Bank, which is the bank to which the Deputy referred.
What about Irish Life & Permanent?
It is similar with Irish Life & Permanent. I wish to make the position very clear, in case the Deputy seeks to start throwing innuendo to me.
I am not. I am simply trying to get information.
The Deputy sought information and then decided it would be unbelievable if I gave a certain answer. The answer is very straightforward.
He is entitled to ask.
Of course I had no knowledge of any untoward goings on between Irish Life & Permanent and the Anglo Irish Bank. The decisions made on 30 September were in the interests of maintaining stability in the banking system and the economy, based on advice from the Governor of the Central Bank, the regulatory authorities and the Department of Finance, and from no other source. I wish to make that very clear. This innuendo has been going around for long enough. Everything the Government is doing regarding this matter to bring stability to the banking system is on the basis of our assessment of the national interest and the seriousness of the situation confronting the country. I refute any suggestion to the contrary; it is without foundation.
The Taoiseach does not know what is going on.
When did the Taoiseach become aware?
I simply made the point that when we became aware on the basis of the due diligence that was being conducted as a result of the recapitalisation programme policy statement announced, it obviously had to be taken on board by the regulatory authorities——
When?
——and by the Office of the Director of Corporate Enforcement. I can provide a time and date for the Deputy.
Why was the House not told? It amounts to a criminal conspiracy to defraud shareholders.
However, it was not on 30 September as suggested by this Deputy. This Deputy is trying to suggest——
As Deputy Shatter is aware we are on Leaders' Questions and he has no right——
The Deputy is trying to suggest something which is simply untrue.
The Taoiseach knew it on 20 January when he asked them to buy a pig in a poke. He knew it by 20 January when he proposed to nationalise Anglo Irish Bank. That is the critical point on which we must have clarity.
The Deputy is out of order. I call the Taoiseach without interruption.
A Deputy
The Deputy should not come in here and talk about banks.
I wish to make clear that the decisions made on these matters were totally on the basis of what was in the public interest at all times, and for no other reason.
That does not address the question asked.
The suggestion was made to the contrary that on 30 September there was some knowledge available to the Government. The Deputy suggested it would be unbelievable if I were to suggest that knowledge was not available to the Government. It certainly was not.
Did PricewaterhouseCoopers know of this?
(Interruptions).
I call Deputy Gilmore without interruption.
Okay, the Taoiseach did not know about this on 30 September. The Government was in discussion with the banks. We were told on 30 September that the Government was in discussions with the banks. Arising from those discussions, the Taoiseach came before the House and effectively asked the Dáil to hand over the deeds of the country to bail out the banks in a guarantee scheme.
Hear, hear.
If the banks did not tell the Taoiseach what was really going on at the time he came before the House, they were making a monkey of him. They were also making a monkey of the public, which was asked to put up the money and the guarantee. The Taoiseach says he did not know of this on 30 September. When did he find out?
We now have a serious problem in the banking system and a serious loss of confidence, domestically and internationally. Everyone knows it is critical for the country that confidence is restored.
The Taoiseach's proposed bank recapitalisation scheme, the details and conditions of which we have yet to examine, is aimed at restoring confidence internationally to the Irish banking system. However, he will not restore confidence to the Irish banking system, recapitalisation scheme or no, while we have this drip, drip emergence of one thing after another occurring in these banks. First, we found out about directors receiving loans and shoving money around between one bank and another. Then there was the matter of contracts for difference. Now, we hear the banks were moving money around between one another. When did the Taoiseach become aware of these loans? When did the Minister for Finance and the Department become aware? We are entitled to know. There has been far too much drip, drip information. The Government must level with the public. There is public money involved, which apparently will be put into the banks, and more public money will have to be used if everything goes seriously wrong. The people, whose money the Government is now playing with and who are being asked to raise this money, are entitled to know when the Government knew these arrangements were in place between the banks and when this loan was made. Will the Taoiseach explain this to the House?
I have made it clear——
Was this a once off?
He has not even started to answer the question.
Give the Taoiseach a chance to answer the question. Deputy Gilmore was listened to in silence and the Taoiseach is entitled to be listened to in silence also.
Tell us the date.
The position is there was no knowledge available to the Government concerning the guarantee scheme we made. That was an important decision. These were banks of systemic importance. We were advised at official level that the scheme should be brought into play and that was done. It brought stability to the banking system and improved the situation considerably. In fact other Governments have followed on from that. In December, we brought forward a recapitalisation policy statement. Subsequently, as I made clear, in the due diligence that was conducted it became clear that it was in the interest of the country that the bank be nationalised.
That does not answer the question.
The issues being brought to our attention in respect of the new chairman and the board, and the various practices and governance issues being brought to the attention of the board and the Department, had to be dealt with. They are being dealt with and are being investigated.
That is the padding. The Taoiseach should answer the question.
The Taoiseach should answer the question.
All of those issues will be dealt with on completion of the investigation.
The answer to the question is that the nationalisation of the bank became an imperative on the basis that market confidence had——
When did the Taoiseach know?
Deputies
When did the Taoiseach know?
Will the Deputies wait till I answer the question? Market confidence was leaving because of the practices that were emerging. It was before we nationalised the bank obviously, because that became necessary in the public interest of the country.
Deputies
Why did the Taoiseach not tell us?
It was taxpayers' money.
Deputies
When did the Taoiseach know?
It was an institution of systemic importance. That investigation is being conducted at the moment and will be finalised and brought to everyone's attention when it is completed. That is the answer to the question.
On a point of order——
Deputy Shatter has no involvement in Leaders' Questions.