Dáil Éireann debate -
Tuesday, 30 Mar 2010

Vol. 705 No. 4

Leaders’ Questions.

Deputy Enda Kenny

Today, we are expecting what amounts to the fourth bailout of the Irish banking sector. We had the announcement of the bank guarantee, the recapitalisation announcement and the NAMA announcement. Each of those announcements was, in the words of the Government, designed to get a well of cash flowing, to sort out the banks and to make credit available for business and SMEs throughout the country, but this has not happened. The impact of the failure of the Government's banking strategy has been that more than 430,000 people are now out of work and we have an unemployment rate that is twice the European average.

Yesterday, the Minister for Finance said that today was the moment for the State to take decisive action to sort out the banking sector once and for all — those were his words yesterday. Will the Taoiseach confirm that the Government has backed off on its stated intention of recapitalisation of Allied Irish Banks and Bank of Ireland today and that, in doing so, it has again prolonged and deepened the uncertainty about the future of both banks?

Second, will the Taoiseach confirm that the Government has decided today to inject a further €8.3 billion of taxpayers' commitment into Anglo Irish Bank? Can he give the House and, as a consequence, the people of Ireland a guarantee that this will be the last such injection into what is a dead bank that is not in a position to lend any money? Will he give me those two guarantees?

The Taoiseach

First, the Deputy is incorrect in what he says in regard to the main banks. I understand a briefing has been provided to the parties and I would be surprised if that is his understanding of what is about to take place. Obviously, I do not wish to anticipate the statement that will be made. The markets do not close until 4.30 p.m. and I would have thought the importance of respecting that would have been obvious to everybody.

Deputy Paul Kehoe

Anglo has been closed for two years.

The Taoiseach

Second, what we are doing today is to provide, as a result of the independent Financial Regulator's requirement to have best practice in terms of the emerging capital ratios required for investor confidence in our banks, that they be fit for purpose and that the capitalisation that is required arising from that will in fact reflect the maintenance of capital ratios which will enable us to move forward in our banking system.

What is clearly the case is that the banking policy, if one could call it that, which the Deputy has continued to espouse in regard to one of those banks would have meant having to find €65 billion of funding immediately because of his refusal to deal with the situation in a rational way. It is because of this that the Government will be coming forward at 5 p.m., through the Minister for Finance, with a comprehensive statement about putting our banking system onto a proper footing because the NAMA operation has enabled us to deal with banks in a differentiated way. It has enabled us to bring forward the losses with which the banks have to deal. As a result, the recapitalisation programme can go ahead, based on the assessment of the independent Financial Regulator.

Deputy Enda Kenny

I asked the Taoiseach two questions and he did not answer either of them. The Minister for Finance said yesterday that today, Tuesday, is the moment for the State to take decisive action to sort out the banking sector once and for all. We have been led to believe, as has the nation, and as is reflected in the activity in Bank of Ireland and AIB shares, that the question of recapitalisation and the exposure of taxpayers' commitment, was to be answered today. I understand from the briefing that this is not now the case. This is another example of having bottled it again in front of the banks. I am aware that their plans are before Europe.

In respect of my second question, the Government proposes putting €8.3 billion of taxpayers' commitment into Anglo Irish Bank today. Will the Taoiseach confirm that this is the extent of what will happen this year? I am led to believe that the Taoiseach may have to come back with a further injection of €10 billion for Anglo Irish Bank. Is this the Government's information and intention? If that is the case, this dead bank on its own will cost the taxpayer €40 billion, as a result of recapitalisation, the €21 billion from NAMA, €8.3 billion today and a further €10 billion. The Taoiseach is strangling the next generation and tying the hands of future Governments. He is imposing a levy of €27,000 on every family. This is because of the debts run up by Mr. Seán FitzPatrick and his management group in Anglo Irish Bank. Is it true that the Government intends to put in €8.3 billion today, to be followed by a further €10 billion some time later during the year? The Taoiseach committed to writing whatever cheque was necessary and this is becoming only too true, except that he has transferred the debt from Anglo Irish Bank on to the backs of the taxpayers. What is the extent of the commitment to Anglo Irish Bank at the taxpayers' expense?

The Taoiseach

The Deputy is well aware that the Minister for Finance will come to the House at 5 p.m. to divulge those details to the House. The Deputy obtained a briefing for that purpose. The Deputy refuses to say that the Fine Gael policy on Anglo Irish Bank would cost——

Deputy Enda Kenny

I asked about the Taoiseach's policy.

The Taoiseach

——more than €65 billion in funding which will have to be repaid immediately to depositors and other providers of funding at the ECB. The policies we are proceeding with are the policies necessary to make the banking system fit for purpose. That is what we have set out to do and that is what we will do.

Deputy Olivia Mitchell

It is twice the bail-out of Anglo alone.

Deputy Enda Kenny

It is €40 billion.

The Taoiseach

What Deputy Kenny seeks to put forward would expose the taxpayer to a far greater degree of indebtedness than what he suggests.

Deputy Eamon Gilmore

Today is a day that will be remembered for a very long time. It is the day that crystallises more than a decade of mismanagement of our economy and bad government by Fianna Fáil. It is very easy for the Taoiseach to stand here and point across the floor of the House and ask about the Opposition's policies. We are here today because of the Taoiseach's policies. Today is the day that the taxpayer gets the invoice for the bail-out of the banks. There will be a press conference at 4.30 p.m.. The Financial Regulator and the Governor of the Central Bank will make a statement and the Minister for Finance will make a statement in the House at 5 p.m. There has been considerable speculation in the press about what is likely to be in those statements. I reckon it will come somewhere, all told, close to €40,000 million. This will be the price that the taxpayer will have to pay for the bail-out of the banks. This is more than three times the income tax take for a full year. It will be €26,000 for every taxpayer. It would finance the primary education system for 13 years and pay non-contributory pensions for 40 years.

Fianna Fáil rode to power on the back of a promise that it would be payback time. It is payback time now. The problem is, it is the banks who are getting paid and working families who are doing the paying. For example, a family living somewhere in County Kildare, which bought a home at a high price at the height of the property boom is now being asked to pay four times and in four different ways. Today they are being asked to pay a higher mortgage for a home that is now worth less than the mortgage. They are being asked to pay more in taxation over the next, probably, several decades, to finance the transfer of the bad debts from property developers to NAMA. Their pension fund is being raided to pay for the recapitalisation of the banks because the banks had it both ways; they were lending simultaneously over the odds to the property speculators on the one hand who were driving up the house prices and lending the money to the people who had to pay the high house prices in the first place. That same family is probably paying already through pay cuts, through job loss or through loss of business.

Approximately €40,000 million is a great deal of money, not counting the negative equity on homes and not counting the collateral damage caused to the economy. Instead, the Taoiseach comes in here today, has a whack again at the Opposition parties and brings in a motion later this evening about clapping the Government on the back.

It is time the Taoiseach accepted responsibility for what has happened to the banking system and as a consequence to our economy. Will the Taoiseach, today, finally take responsibility for what he has done?

The Taoiseach

The Deputy will be aware that we have had a global banking crisis for the past two years. He will be aware there are 18 EU states who have recapitalised their banks to the tune of €300 billion. He will be aware there are bank guarantees to the tune of trillions of euro in European banking. It is time we recognised that Ireland could not be immune from what happened such as the fall of Lehman Brothers and the complete meltdown in the international financial system. What this Government has been seeking to achieve since this crisis emerged has been to avoid a meltdown of the Irish financial system which would have devastated this economy completely. This Government took decisions such as the guarantee which was fundamental to making sure we did not have a disorderly failure of our banking system two weeks after the disorderly failure in Lehman Brothers in the United States and with the impact this caused. Those are the facts.

The motivation of this Government at all times is to see how we can ensure that the Irish banking system is fit for purpose. Many complaints are made here, week in, week out, about the need to put our banking system back into order. The NAMA solution, an asset management agency solution, brought forward by the Government has been referred to in the international press as a way forward for this country and an example to other countries to extricate themselves from the problems continually bedevilling the financial markets and financial institutions of other countries. It makes the banks face up to the losses. It ensures that the capitalisation of the banks can take place in a way that provides investor confidence to get banks functioning for the economy and to try to maintain jobs. This is what we are seeking to do.

Deputy Denis Naughten

Pull the other one.

The Taoiseach

The country will be not be immune from the €300 million in recapitalisations in other European Union countries. Trillions of euros are being placed under guarantee simply because the international financial system practically collapsed. Capital had been wiped out and we need to put the banking system back into place. At 5 p.m., the Minister for Finance will come into the House to outline in a comprehensive way how we can achieve that objective and rebuild a banking system that is fit for purpose.

Deputy Eamon Gilmore

This is the fifth time we have heard this speech from the Taoiseach. When I first raised problems related to banking with him, he told the House that the Irish banking system was fine. There was no problem and it was well capitalised and fit for purpose. One of the most viewed videos on YouTube is of the Taoiseach making the same argument while standing in the New York Stock Exchange. He made the same speech in September 2008 when he told us we should pass the bank guarantee scheme and that it would not cost the taxpayer any money. Now we know, however.

The Taoiseach made the same speech when he proposed the nationalisation of Anglo Irish Bank after the Government had provided a guarantee in respect of it and again reassured us that if there was going to be a cost, it would not be significant. By my estimate, Anglo Irish Bank alone is now going to cost somewhere in the region of €22 billion.

We heard the same speech again when the Taoiseach announced the establishment of NAMA and told us the haircut would be 30%. As it is now after 4.30 p.m., I am not breaking embargo when I say the Financial Regulator and the Governor of the Central Bank advised Deputy Burton and I earlier today that the average haircut would be 47%. That is a long way in a few months from the 30% figure provided by the Taoiseach.

An Ceann Comhairle

Has the Deputy a question?

Deputy Eamon Gilmore

Today, the Taoiseach tells us it was all because of an international banking crisis. Yes, there was such a crisis but the problem with the Irish banking system and economy is that it has suffered a double whammy, of which the Taoiseach is the second. The Irish economy and banking system is not only affected by an international crisis which has to be addressed but it is also in a unique crisis because of the policies pursued by his Government working hand-in-glove with property developers and bankers which created the property bubble and over-priced houses. The result is that working families in this country are struggling with properties that are valued at less than their mortgages, which in turn have increased significantly. The Taoiseach is now presenting them with a massive bill of €40 billion which they will have to pay through their taxes. It is time that he acknowledged responsibility and said "sorry" to the people of Ireland.

Deputies

Hear, hear.

The Taoiseach

I have outlined the facts of the matter to Deputy Gilmore on a number of occasions even as he continued to put forward his view of the world. I have no intention today of looking back because I dealt with the issue many times in response to his repeated mantra. Had we pursued policies other than the ones we introduced when the crisis started in August 2008, when we had a total——

Deputy Joan Burton

On St. Patrick's Day 2008, when the Taoiseach was in Vietnam and Malaysia, Anglo Irish Bank's share price collapsed.

An Ceann Comhairle

Allow the Taoiseach to continue without interruption.

The Taoiseach

When Lehman Brothers collapsed——

Deputy Joan Burton

Bear Stearns.

An Ceann Comhairle

Deputy Burton, please.

The Taoiseach

I will try one more time. When the situation arose in 2008, this Government took the decisions that were necessary to deal with it. Had we pursued the policies proposed by the Labour Party, we would have seen the collapse of the Irish economy. That is a fact because Labour Party Deputies did not support the State guarantee which was necessary to avoid such an implosion of the financial system.

Deputy Michael D. Higgins

Anglo Irish Bank, the systemic bank.

The Taoiseach

It is a bit rich to hear a lecture from Deputy Gilmore on the matter. We put forward an estimate at that time because, as we pointed out——

Deputy Michael D. Higgins

Oh, yes.

The Taoiseach

I ask Deputy Higgins to let me answer the question. We made the point that every loan would be examined on a case-by-case basis. The contention from the opposite side of the House was that it would be a sweetheart deal and the NAMA operation would not have rigour or due diligence. According to Labour Party Deputies, it was all part of a scam. We ensured that NAMA's valuations took account of subsequent reductions in property prices.

Deputy Joan Burton

The ECB demanded that.

The Taoiseach

This has also ensured that the quality of security will be reflected in any valuation undertaken. We made clear at the time that it could only be done on the basis of a loan-by-loan valuation process, which differentiated between the various institutions and the loans they held. This is very different from the Labour Party's proposal for peremptory nationalisation without State guarantee, which I am clearly stating would have brought about an implosion of the system because——

Deputy Joan Burton

They are being nationalised now.

The Taoiseach

——without a State guarantee, we would have been unable to offer confidence that the Government was standing behind the system when it was in imminent peril. That was the situation then but, as the Minister will make clear at 5 p.m., we have made the response that is now necessary to ensure we have a banking system that provides the prospect of economic recovery and serves the economy. Despite all the revisions in which Deputy Gilmore wants to engage, the policy decisions he proposed at a critical time for this country were the wrong ones and would have been catastrophic for the economy in the context of the decisions we had to take.