Despite what Deputy Blaney just stated about the positives he is putting forward, unfortunately the taxpayers do not see it in quite the same way. They are still losing their houses, seeing no light at the end of this very long tunnel, and will bear the brunt of the mismanagement of the economy for many years. It is indicative of the Government's opinion of the House and Irish people that we are debating a Bill to reform our derided financial regulatory institutions in May 2010, 20 months after the banks effectively collapsed, more than two years since the St. Patrick's Day massacre of the Anglo Irish Bank share price and several years since people became aware of the erratic lending polices of Irish Nationwide.
Reform of the Central Bank and regulatory system that failed so badly in recent years is urgently required and should be addressed clinically in the best interest of the Irish taxpayer. What kind of regulatory system allows banks to loan developers more than 100% of a purchase price? This was, unfortunately, a common practice and many slightly bewildered borrowers availed of the opportunity because they believed in the system. What system allows banks to become developers, authorises 100%, 40 year mortgages and does not recognise a property bubble despite the weight of economic history?
The system failed badly and the plain people of Ireland are paying the price. These are the people whose only experience of the Celtic tiger was being able to pay all their bills on social welfare or those who were panicked by the media and auctioneers into buying overvalued, poorly built and badly located housing. They will pay for the recklessness of the few and the failings of those charged by the State with overseeing the BMDs — the banks of mass destruction. The culpable and guilty get away with it. Instead of real reform and the pursuit of those at fault, for everything they have, we have a media circus in which some former top bankers are questioned in front of cameras and a little early morning drama as bankers are brought off and questioned. This is nothing more than window dressing. Following 12 months of investigations into Anglo Irish Bank, Mr. FitzPatrick is not questioned until the week before it is announced that the citizens of the State will collectively forfeit more than €20 billion in tax revenue to pay for delinquent lending practices.
The group myopia and sheer brass neck of those within the golden circles is breathtaking. From Sean FitzPatrick stating that he could not "say sorry with any degree of sincerity" for running his bank into the ground to the then leader of the Fianna Fáil Party expressing surprise that people who had the temerity to question the Government's economic and financial policies "didn't commit suicide", the collective group think at work suggested we did not need regulation.
While the previous Financial Regulator had no choice but to resign, it is my strong suspicion that he was implementing financial regulation to the levels with which the Government was happy, that is, with an extremely light touch. If the banks had been forced to reduce lending, it would have dampened the property bubble, thus reducing the amount of tax the Government received from stamp duty. The Financial Regulator and the Central Bank were certainly at fault and need to be reformed. This reform must extend beyond that set out in the legislation before us. The simple fact remains, however, that the architects of the crisis are still in place in the Government and upper echelons of the Civil Service. The Taoiseach was Minister for Finance between 2004 and 2007, the years in which the economy was effectively destroyed. Accountability and responsibility begin at the top with those privileged to serve people. When they choose to spurn opportunities to accept the consequences of their actions, they demean their office.
The Bill before the House does not go far enough in addressing the problems in our system. Despite the abject failure of the bankers in almost every institution in the State, there is no effective mechanism for the regulator to object to unsuitable senior appointments. Will it be another case of golfing buddies and those who sit on multiple boards once again filling the senior positions in the banks, thus condemning the system to fail again owing to a lack of appropriate and qualified oversight? Even worse, the Minister for Finance will have control over appointments to the new Central Bank. We can, therefore, be certain that solid Fianna Fáil supporters will be appointed to these boards. What we need instead are independent experts beholden to no one and fully qualified to ask the bankers serious questions about unsustainable practices and irresponsible lending. A board member should have no problem appearing before an Oireachtas committee similar to Senate appointments committees in the United States where the qualifications and thinking of the proposed appointees are challenged.
Another glaring flaw in the Bill is the absence of a bank resolution mechanism in the event that a bank becomes insolvent at a later date. If history has taught us anything, it is that everything moves in cycles and at some stage it is likely that another bank will overshoot its reserves in a quest for higher share values and greater bonuses. If this occurs there should be a facility for the Financial Regulator to intervene in a potentially toxic bank before it is too late.
While every Irish bank acted irresponsibly, the trail blazed by Anglo Irish Bank led to other banks following its lead. Much like the BP oil well in the Gulf of Mexico, once the pipe burst the contagion spread across the entire sector and no amount of disaster relief could do anything more than contain the problem and leave a huge mess to be cleaned up.
The economic commentator, David McWilliams, is correct when he states we have effectively abandoned capitalism when it comes to the banks to embrace instead a form of socialism for our banking sector. The Government is so petrified by the all powerful bond market that it moves in lock step with what the compromised, tainted former masters of the universe tell it to do.
It is the plain people of Ireland who will pay for all these bailouts with reduced services. Fewer road repairs inevitably means more accidents. Less funding for hospitals meaning longer waiting times for patients not lucky enough to have private health insurance. Cutting language supports means we run the risk of creating our very own version of Paris's banlieues in places such as west Dublin or Galway.
To use a poker analogy, the banking elite have been caught bluffing outrageously, yet they walk away from the table confident that the Government will force the citizens of the State to pay for their bad behaviour and cavalier risk taking. Where is the justice in our system? The United States of America, the home of capitalism, is a useful comparison. In the United States, Bernie Madoff will spend the rest of his life behind bars, whereas our former bankers play golf while holidaying in sunny climes. The United States has announced sweeping reforms and new regulations for its banking sector, whereas our bankers throw their toys out of the pram until they get their way with the Government on issues such as appointing insiders or pay levels which exceed Government regulations. In the US, Goldman Sachs is hauled before a Senate hearing with a massive fine expected, whereas in Ireland, bankers with outstanding loans to their own companies which they are not maintaining continue to receive pensions from the same organisations.
The 20 months it has taken the Government to produce some level of reform of the banking regulatory sector is indicative of the inertia which courses through the veins of this tired Administration. The legislation emanating from the Government proceeds at a glacial pace, unless someone from the golden circle appears to be in peril. The bank guarantee is one such example. The Taoiseach was sold snake oil by the chief executives of Bank of Ireland and Allied Irish Banks and persuaded to guarantee the entire banking industry, even though it was known at that stage that Anglo Irish Bank and Irish Nationwide were in serious trouble and not systemically important.
The legislative programme shows only 14 Bills due for publication for the entire summer session. The Order Paper includes 39 Private Members Bills, including two of mine, which the Government shows no inclination to take.
There is no question that our regulatory institutions are in need of serious reform. Light touch or principles based regulation has been shown to be an abject failure. The simple truth is that unfettered capitalism does not find a natural equilibrium and can and has gone badly wrong. Developments in 2008 were not isolated incidents.
Despite the best hopes of many who spend their spare time watching the film "Wall Street", unfettered capitalism does not work and must be kept in check by regulation. It is the Government's responsibility, as the servants of the people, to develop a regulatory system which ensures that markets and financial institutions cannot damage the real economy. While any reform of our obsolete financial regulatory system is to be welcomed, this legislation does not go far enough. It is a conjurer's trick which does not give regulators enough power and oversight to prevent recent bad practice from occurring again.
I speak as a representative of the people of Dublin South Central, many of whom have contacted me with real, everyday problems. Some are at risk of losing their homes because they cannot pay their mortgages or put food on the table. They are in a state of panic. While it is disappointing that the legislation does not go far enough, it is not surprising from this Government. Plus ça change, plus c’est la même chose.