I welcome the opportunity to contribute on this legislation, which is one of the most important aspects of the financial resolution infrastructure to come before the House in recent months. While we may say this about almost every item of legislation aimed at the resolution of the economic crisis, this Bill is particularly apposite since it deals, to a large extent, with regulation. There is little doubt that regulation is at the heart of the problems we have experienced.
Since summer 2008 there has scarcely been a day that Irish banks and the banking system have not made the front pages of the newspapers. I heard one commentator remark in recent days that it has now been some time since the banks were relegated to the business pages, their natural home. The banking system was for many years considered to be a subject that was rather dull and boring, and was discussed neither in the vernacular nor in general discourse. We hanker back to those days and wish they would return soon. However, I doubt they will, because of the damage that has been done by the failure of so many people to recognise the malpractice that was allowed to develop, which has caused a massive cancer in Irish society and, to a broader extent, in the world.
For many, the early morning announcement that an overnight Cabinet meeting had taken place was the first indication, back in September 2008, that a problem existed within the banking sector. Since then it has been one bad-news story after another, day in day out. The continual drip feed came in many cases from the Government and other parties to force the banking sector into an admission of its guilt and complicity in the malpractice that has had such a devastating impact on our economy.
The arrogance of some of the players has been breathtaking. Some have sought to deny from the very start that there was a problem and that they were involved in creating it through their failures and lack of respect for the trusted positions they held. Many of these people pursued a greedy approach, enriching their own positions through the various schemes that were in place, and the focus for far too many in the banking sector switched to feathering their own nests. They spent time managing their own pension funds and investments rather than accepting their responsibility to protect other people's investments. That is the most shocking revelation of all — the prevalence of the quick buck, or the capacity for people to earn large bonuses based on short-term benchmarks or the assumption that they had in some way developed their investments to the point at which they were making a return.
The implications of rolling up interest should have been fundamentally obvious to everyone. Yet such deals were taken to indicate, somehow, that the bank had received a return, and people received bonuses on the basis that investments had come good. However, in many cases the investment had not taken off at all, although the money had been spent. There is little doubt that these continued investment practices created the building boom and the lack of prudence in lending fed into a property sector that was already doing quite well. The endless supply of funds made it possible for small players within the sector to believe they were large players. This had a devastating impact on the economy because it further fuelled the boom.
The problem was not restricted to loans for the building sector. We have seen in the analysis of NAMA the amount of money expended — which was funded through crazy lending practices — on the purchase of agricultural land in small villages with little or no infrastructure because of a belief that rezoning had taken or would take place. There was a belief that the zoning of land for residential purposes somehow conferred an expectation that there would be 300 or 500 houses, even in villages that had never had a population of more than 75 or 80 people. That the banks did not have even the basic cop-on to investigate this with due diligence is breathtaking. That is proof, if proof were needed, that there was a complete disconnect between the lending of the money and the expected return. Any half-wit that set about considering the future potential of the bank's investment would conclude that there was little or no chance of a return on the loan. It seems that bankers were more concerned about short-term gain by virtue of a bonus based on money having been lent rather than having been earned by the bank.
Some have sought to distance themselves or say they were involved in driving on the economy; I do not buy it, and nor do many others. Some were professionals who had risen through the ranks and developed the culture. That the so-called economists who worked for the financial institutions continued to give projections for property growth that were unconnected to the growth in population or the expected population dispersal is breathtaking. They continued to contribute to the hype and to give positive appraisals without ever rooting them in the fundamentals. That is a clear indication that an entire culture that was quite a distance from reality had developed.
Some of these bankers sought to blame others. One person, after the crisis erupted, seemed to indicate that the problem in our economy was the minimum wage. This was a person with a massive salary, bonus and pension entitlement; yet the cleaner earning €8.65 an hour was the problem. It just sums it up. Another person seemed to suggest that the banking problem, from his point of view, would not be resolved through the investment of cash by the State, indicating on one occasion that the only way one particular institution would require funding from the State was over his dead body. This is an example of the arrogance of some in suggesting that they were invincible. As we have seen, nothing could be further from the truth.
We saw the tip of the iceberg of a culture of delusion and deception that existed within our banking system. There is little doubt that the regulator was asleep at best, and at worst somehow colluded in the ongoing deception. I do not say that lightly, but there can be no other excuse. If professional people who are well paid and well qualified and have all the information available to them continue to propagate a lie, as they did before various committees of this House and in various reports, we must question their motives. As I said, either they were asleep or they were in collusion in some way, which is disturbing.
Given that every aspect of Irish society has been affected by what has happened, most people recognise the necessity for a strong and effective suite of measures to deal with the problem. For this reason, the legislation under discussion, which seeks to bring together the best aspects of the Central Bank and the Financial Regulator under one board, where a much more co-ordinated approach can be taken to the overall management of the banking system, while retaining the capacity within the same framework to manage the prudential requirement of each institution, is the way forward.
Whatever architecture or regulatory framework we put in place, unless there are people who are prepared to do their jobs in line with the legislation and with what is expected of them by society and by those who make the laws, we are going nowhere. It would be wrong to suggest that the framework that existed in the past was overly deficient, because it was not. There were issues with it, which this Bill seeks to resolve. However, it comes down to people having the wherewithal to stand up and say "Stop". We have all learned a difficult lesson in recent weeks as the Financial Regulator has done exactly this with regard to Quinn Insurance.
We all recognise what a wonderful company Quinn was and what fantastic work Seán Quinn and his family, who were motivated in such a selfless way, have done. However, when insurance policies and the financial system are placed in jeopardy because of risky decisions and mistakes, someone has to shout "Stop". Mr. Elderfield has done the State an exceptional service. Along with Professor Honohan in the Central Bank and Mr. McDonagh in NAMA, he has given confidence to the international markets and helped to restore Ireland's battered image. Over the past several weeks, these three individuals have done a good job in getting us back on the long and difficult path to recovery. In ensuring the mistakes of the past never happen again, the Bill before us will restore further our credibility.