Report of Joint Committee of Inquiry into the Banking Crisis: Statements

I welcome the Minister of State, Deputy Simon Harris. Cuirim fáilte roimh an Aire Stáit.

I will be brief because I am eager to hear the views of Senators. I welcome this opportunity to come before the Seanad to discuss the report of the Joint Committee of Inquiry into the Banking Crisis which was published last week. It is important to acknowledge the tremendous effort on the part of the committee. The significance of this undertaking cannot be underestimated. The hard work and commitment of the Deputies and Senators involved must be properly recognised. I would like to recognise the contribution of all members of the committee in regard to the large amount of work they carried out.

The banking inquiry was the first of its kind under the Houses of the Oireachtas (Inquiry, Privileges and Procedures) Act 2013. It is fair to say, therefore, that it was a learning experience for all involved and proved to be a challenging road. It is, therefore, admirable on the part of the committee and its support team, through their collective endeavours, that we are here today discussing the report’s findings and recommendations. I am sure we will learn from this process in terms of how we can improve the operation of this type of inquiry. The second volume of the report deals with this specific issue and I am sure the Senators involved will share their experiences in this regard.

The main findings and recommendations of the inquiry are welcomed by the Government. Obviously it will be a matter for the next Government to consider and act on those recommendations. It is important at this stage to note the key findings made in the report. They include the fact that no single decision or event led to the failure of the banks. Rather, it was the result of a cumulative series of events and decisions over a number of years.

There were in fact two crises rather than one, namely, a fiscal crisis and a banking crisis. The lending practices of the banks made them vulnerable to a liquidity risk which was not recognised. Banks had, by 2008, moved away from prudent lending principles towards a riskier asset value based lending model in their dealings with the property development sector. The business model of some key developers during the boom years led to them being overwhelmingly reliant on Irish financial institutions. The Central Bank and Financial Regulator had sufficient powers with which to do their job effectively and could have required banks to hold additional capital to absorb losses that could have arisen in the event of a financial crisis.

An independent review and assessment of the effectiveness of the Central Bank and Financial Services Authority, created in 2003, should have been carried out by Government, but it was the execution by the Central Bank and Financial Services Authority of their mandate and the absence of interventions that directly contributed to the crisis. The systemic risk that was building up in the banking sector was not identified by the Financial Regulator. The financial stability reports of the Central Bank, while monitoring the key risks to the financial system and financial stability, did not identify those key risks.

The Department of Finance relied too heavily on reports of the Central Bank and external agencies such as the IMF, the OECD and the European Commission. The soft landing theory accepted by the Department and external agencies was not substantiated by robust analysis or research. The Government at the time did not always follow the advice put forward by the Department of Finance or the Central Bank. In 2010, the ECB threatened the then Minister, Brian Lenihan, that it would not continue to provide emergency liquidity assistance, ELA, for the Irish banks if Ireland did not enter into a bailout programme.

Ireland’s entry into a bailout by October 2010 was inevitable, but the timing of the entry was determined by factors outside the Government’s control. The ECB’s position on imposing losses on senior bondholders in November 2010 and March 2011 contributed to the inappropriate placing of significant banking debts on Irish citizens. As a citizen, I found the manner in which the Houses of the Oireachtas and Irish people were treated by the ECB, in terms of its lack of appropriate interaction with the inquiry, disappointing. I am sure it was a source of great frustration and contrasts very sharply with how other international agencies and organisations co-operated with the inquiry. I do not think that is acceptable. It is something we should regret on a collective basis and it must not happen again.

I pay tribute to Senators Michael D'Arcy, Susan O'Keeffe, Sean D. Barrett and Marc MacSharry, who were members of the inquiry, and thank them for their collective bipartisan work. While there has been much commentary on the report, some of which we will hear today, it is important to say that, as a citizen, to see people come before the committee and testify in public for the first time and give their perspective and knowledge of the events that created one of the most unprecedented crises in the history of the State was powerful. It was something no other inquiry ever did. While it is fair to say that the report may not be earth-shattering, the fact that people came before the inquiry and testified in public and citizens had an opportunity to see decision-makers from a wide range of society testify has done the State significant service.

The committee operated in a bipartisan fashion when so many critics were eager to talk it down. It is regrettable that some of those who were loudest in criticising and talking about the report of the banking inquiry were those who refused to serve on the committee. I look forward to the debate and thank the Leas-Chathaoirleach.

I support the Minister of State's comments. The members of the inquiry were exhausted by the sheer volume of work. There was a tremendous effort on the part of the committee and the significance of this undertaking cannot be underestimated. The hard work and commitment of the Deputies and Senators involved must be properly recognised.

Tom Lyons wrote in The Sunday Business Post about the people who participated and said the members of the inquiry were exhausted by the sheer volume of work, frustrated by legal roadblocks and that undoubtedly they showed real public service commitment. He asked whether the inquiry was established to prevent a crash happening again or to score political points.

On that point, I refer to Colm McCarthy's very brilliant article in the Sunday Independent. He said the Irish banking bubble had been a decade in the making when it began to deflate almost eight years ago.

I recall sitting here in the Seanad and hearing this soft landing referred to repeatedly, and I was perplexed. What did a soft landing mean? What was the back-up that indicated there would be a soft landing?

Colm McCarthy makes the point, which we all know, that we had a very cautious and conservative banking system. He says that every bank went wallop and all required guarantees and capital injections. He states that not a single detailed report is available into the failings of even one of these banks. He further states: "All the official reports have interesting things to say about the banking system in the round and its spectacular collapse, but there has been nothing exploring the failures on a bank-by-bank basis". That is a simple statement. If there is no investigation into individual banks, as businesses, one by one, how do we know this cannot happen again?

Colm McCarthy goes on to state: "In other common law jurisdictions, the investigators, including parliamentary committees, have been free to explore the failings in financial institutions case-by-case. The report of the Banking Inquiry, as feared, has failed entirely on this score". There is no mystery about that gentleman making those succinct comments because he is an economist. It is his job to analyse the inquiry. He further states: "The report sheds no light on the manner in which each bank mismanaged liquidity and vaporised capital to the point where the State had to find €64 billion in rescue funds for the Irish-owned banks alone". Our generation of Irish citizens will never forget that. That €64 billion will be imprinted on our minds forever.

The report does not draw any distinction between the performance of the various banks. As Colm McCarthy states: "There are no rosettes to be awarded to any Irish bank but some were clearly the victims of worse management than others. This continuing failure to explore what went wrong, bank by bank, ensures that lessons go unlearnt and the bank management and boards have been held publicly to account only in the aggregate". I was here the night of the bank guarantee. I recall going to the restaurant at about 4 a.m. to get a cup of coffee and speaking to one of the Department of Finance officials. I am not blaming the Department of Finance official because we were all led to believe that the situation was critical, and that we had to do it. This is my second last day in the Seanad - I will not be here again - but my personal opinion is that if Charles Haughey, Albert Reynolds or Bertie Ahern had been here, we would not have signed up to it. They would have kicked it to touch, and dealt with it, which would have allowed more time. We were rushed into it. I will never forget it in terms of the coldness around it, the fear of it and how we had to do it.

The other serious point is that the legal system put a constraint on the members of the inquiry in that they could not pinpoint any person as being to blame. That must change in terms of any future inquiry. The barristers and solicitors - the m'lords, as Colm McCarthy calls them - protected the reputations of those other actors. That was wrong, and we have to deal with that in the future.

I wish the Minister the best of luck in the election. I am sure he will win.

I have to correct Senator Mary White. It was not the lawyers. It was the Supreme Court ruling in the Abbeylara case. There is no committee in this House allowed to make a finding of fact against any individual.

They made the decisions.

Those are the rules of the Supreme Court ruling and we are obliged to accept the law.

The point I am making is that we have to change the law and that people have to be answerable for their-----

Senator Michael D'Arcy to continue, without interruption.

The opportunity was given to the people in 2011 for that law to be changed, and the people chose not to change the law. They are the facts.

After two years I will try to go through the report in six minutes. The large exposures were the risk. The banks took all of the risk regarding the commercial real estate sector. It was the commercial real estate sector that brought down each institution, which in turn brought down the entire sector. We must put that into context, as I tried to do in the report, where it shows our level of exposure versus that of other countries. One other country went as far as 50% in terms of guaranteeing the assets of banks; we went to 100%, which was unheard of.

In terms of the numbers in the report and those large exposures, the National Asset Management Agency, NAMA, and others had 29 connections, with a debt of €34 billion, equivalent to almost our national debt at that stage. That was for 29 connections. The banks took those connections without a statement of affairs, with the bank taking practically all of the equity risk. The competition was intense. I heard Senator Sean D. Barrett say a thousand times that banks that had stood for centuries threw that conservative approach out the window and went chasing Anglo Irish Bank.

The Department of Finance was asleep at the wheel. The Central Bank Governor, the Central Bank committees and the Financial Regulator did not do their jobs. We made a finding that they had the powers to do what was required but what they lacked most, in terms of doing what was required, was courage. I am deeply disappointed with that from a Department of Finance that had the best civil servants, going back to Ken Whitaker. If Ken Whitaker had been in the Department of Finance, the Central Bank or the Financial Regulator's office, he would have intervened. Paddy Honohan and Philip Lane would have intervened.

Another finding was that we were over the cliff, so to speak, in 2005. At that stage it was only a question of how bad the position was; we just did not know. We found that the ECB threatened to remove emergency liquidity assistance, ELA. That was put into the report and it got a good deal of coverage. In terms of what I found from that, it was the cumulative interaction between the ECB and the Department of Finance. It was their correspondence dating back to October 2010. It was the language used with the Minister, Deputy Michael Noonan. We put it to Mr. Trichet in Kilmainham. It was also the obstinacy with which the ECB chose not to allow burden sharing with bondholders. However, I am glad that on two occasions the option to burden share with bondholders was put to the ECB because almost one year later, with the liquidation of IBRC, a deal was achieved in terms of the €31 billion annual payment and the €3.1 billion in promissory notes that was shoved out into the long term. The ECB does not like the term "write-off".

In terms of who was responsible within the banks, it was the bank executives. I will not name them. We have stood by our legal team's direction and we have been very responsible as members throughout the process. We left our political jerseys at the door.

We had one crisis in the process, namely, a 750 page draft report that was presented to us. I have the ability to read quickly and was disagreeing with it as I read through it, while asking other members about the stage they were at. At the end of the 750 page draft report none of the 11 members was prepared to sign it, which was a crisis. As members we put in place a report finalisation team. I express my appreciation to Senator Susan O'Keeffe and Deputy Eoghan Murphy who stepped in at that stage, which I believe was a Saturday. I am sure Senator Sean D. Barrett will agree that they put in a huge body of work.

It was only a partial inquiry.

In truth we were disallowed from going near Anglo Irish Bank or from going near permanent tsb. On a number of occasions the Director of Public Prosecutions effectively did not want us to discuss those banks at all. However, we did the best we could with the confines that were there. I thank all members, including those who chose not to participate - I apologise, "participate" is the wrong word - who chose not to sign the report. We worked hard together. I have nothing in common politically with Sinn Féin or the socialist parties but that does not mean I am not capable of working with people from those parties.

I want to mention one item. We expect the dissolution of the Dáil tomorrow and I extend my personal thanks to the Leader of the House and the Government Whip. Before the last general election my sister was unwell and the leadership on this side of the House gave me the opportunity to travel to bring my sister from her home to Dublin. I missed many Thursday sittings and I thank the leadership here, the leadership of the Fianna Fáil benches and the Fianna Fáil Whip, Senator Diarmuid Wilson, for facilitating that. I extend a special word of thanks to my Wexford colleague Senator Jim Walsh who facilitated me in that role, on every occasion.

I thank the Leader for proposing extra time for this debate. I also thank Senators Michael D'Arcy, Marc MacSharry and Susan O'Keeffe. The Seanad was very well served in the inquiry. All members across the political spectrum in the Dáil performed splendidly. They all thanked their assistants when they spoke in the Dáil last week. I add the names of Dr. Charles Larkin and Ms Ursula Ní Choill.

We had to do this. As the Minister of State has said, we cannot have €64 billion walking out of an Exchequer and nobody asking questions. If lobbying legislation comes up again for consideration, successful lobbying should be looked at and the right to ask questions should be reserved. The world which the lawyers invited us to inhabit in this regard, as referred to by Senator Michael D'Arcy, is impossible and undermines our democracy. We cannot have a situation where €64 billion is spent by the Exchequer and we are not allowed to ask questions. The lawyers are wrong on that. I will cite later some of the lawyers who have different views on the matter. Our democracy was undermined in the way they drew up rules regarding the conduct of the inquiry.

I will now turn to the matter of costs. There are huge numbers in negative equity with their mortgages and 230,000 children now live in poverty. The taxpayer was stung for €64 billion, although the net figure will be about half that. Davy Stockbrokers has estimated that €55 billion of shareholder value was wiped off the banks. UK banks lost €20 billion here. Two shadowy German banks, DEPFA and Saxony Land Bank probably lost another €50 billion. Patrick Honohan estimated that we have sustained €150 billion in terms of cumulative tax increases and public expenditure cuts. Some 300,000 people lost their jobs and hundreds of thousands emigrated. Of course we had to investigate that. It is why the people sent us here.

Mr Justice Nicholas Kearns, on the occasion of his retirement from the High Court in January, said a parliament had to have the right of inquiry into legitimate matters of public interest. We have to distinguish between an inquiry into policy and one into culpability. He said the courts had "virtually paralysed" the investigatory process where "accountability for matters of serious public concern is required". Former Chief Justice, Mr. Justice Keane, was quoted by Deputy Pat Rabbitte in his valedictory speech last week:

The power of the Oireachtas to conduct investigations is inherent in the legislative process. That power is broad. It encompasses inquiries concerning the administration of existing laws ... defects in our social, economic or political system for the purpose of enabling the Oireachtas to remedy them.

We cannot have €64 billion being spent in the manner in which it was with a guarantee that no questions will be asked.

On an earlier occasion I quoted Edmund Burke who said, "It is not what a lawyer tells me I may do; but what humanity, reason and justice tell me I ought to do." Oliver Goldsmith, whose statue is beside Burke's outside Trinity College Dublin said, “Laws grind the poor and rich men rule the law." They certainly ruled the law in preventing Oireachtas inquiries. Matters which are well known in economics such as regulatory capture, drawing up tables and the contrast between the pay of chief executives in Irish banks and the average industrial workers were taken out of our report by the lawyers. That has to be confronted.

I will now turn to the banks. There is, as Senator Michael D'Arcy said, much information in the report on reckless lending on property, reckless reliance on wholesale borrowing and reckless reliance on foreign borrowing. The report also found that NAMA discovered that there were no proper records kept regarding loans. The rules were quite simple and they centred on issues such as loan to value, loan to income, sectoral concentration and borrower concentration. Banks lent to people and did not know how much they had already borrowed from other banks. Banking was reckless.

I welcome the appointment of Professor Philip Lane as the Governor of the Central Bank. He has the highest academic standards from Harvard and Trinity College Dublin. Banks had better get used to the fact that if they have a Government guarantee they will not be allowed to behave recklessly in future, whether they like it or not. The banks exceeded limits on sectoral concentration to 390% of own funds when the Central Bank's limit was 250%. The banks then told us they were comfortable with breaching those limits. I asked if the banks would approve a similar defence if one was found driving at 60 mph in a 30 mph zone. The comfort of banks cannot be assured.

The regulators did not do their jobs. They missed out on many things going on around them, and the European regulators are included in that. They gave us a currency which was not prepared to deal with a tsunami of funds flowing into Irish banks. There was no exit mechanism and no bank regulation in this area until November 2014. In addition, we had lost the interest rate and the exchange rate as instruments of economic policy.

With regard to the refusal of Mr. Trichet to appear at the inquiry, one can see in the report that the liaison with the German, French and Italian Parliaments was far superior to what we were offered. In addition to not addressing the design faults in the euro currency - we should not have sleepwalked into that currency, Gordon Brown made a different decision - Mr. Trichet took the approach of the colonial governor of old. We celebrated William Butler Yeats recently. In "Under Ben Bulben" he says:

That were beaten into the clay

Through seven heroic centuries;

Cast your mind on other days

That we in coming days may be

Still the indomitable Irishry.

We will not allow colonial governors like Mr. Trichet to treat this Parliament as he did.

Reform of banks is necessary and we have that in play. Reform of the Department of Finance is necessary and we need to reform auditors. Auditors acting in the public interest are required to be audited with new audit legislation effective from June 2016. Bank auditors must be included in that. How the auditors missed so much has to be one of the mysteries of this crisis. The Irish Auditing and Accounting Supervisory Authority, IAASA, will be given responsibility for inspecting the quality of audit work performed by auditors of public interest entities from next June. I believe that banks are in that category.

The incoming Parliament has to be reformed to ensure we have the mechanisms to deal with this. There is so much information in thousands of documents and half a million pages. Some students from the next generation are in the Visitors Gallery today. We now have the means to ensure this never happens again. Deputy Ciarán Lynch and the inquiry investigation team deserve the applause and credit of everybody in the State for what they put together.

It was an honour and a responsibility to be a member of the banking inquiry committee. I use the word "responsibility" advisedly because it was a difficult and at times a frustrating task. My wise colleague, Senator Michael D'Arcy, described it as a partial report. That is a very good short version of what happened because it was partial for many reasons. I will refer to some of them.

Before I continue, I acknowledge that while a book has been produced as part of the report on improvements that might be made, there is one thing that we ought to never repeat and that is we should never again have any committee that has ten men and one woman sitting on it. Setting that aside as the one women on the inquiry, I believe the report we produced - I thank the Minister of State for his gracious remarks - does bring a new coherence to the story of the banking crisis that affected so many of us in so many ways.

It also reveals many of the small details on many fronts that were otherwise consigned to files marked "Secret" or, possibly, to the shredder.

As I wrote in The Irish Times last week, I believe this banking inquiry is part of the growing up of this nation. We are so used to deference, patronage and secrecy, which I believe is a very damaging cocktail whose legacy is ours to destroy. For me, the inquiry is another piece of that work. We were not experts but we were there on behalf of the people. That is the important part and that is what parliamentary accountability is about. The people, not through experts or judges but through their public representatives, did not permit those who made poor or selfish decisions to hide, even though, of course, not all the questions were answered. They definitely were not.

I have some examples of how those questions were not answered. We still do not know what happened on the night of the guarantee. We do not know what the banks said in that meeting because there are no records. There are not even records of the documents they brought to those meetings. We know they brought them but we do not know what they were. We do not know how far they went in asking for a guarantee or what kind of guarantee they asked for precisely. We do not know precisely what Alan Gray said to the then Taoiseach in that conversation because there are no records.

Before the former taoisigh came before the inquiry, I noted in an e-mail that no letters that passed between the Minister for Finance and the Taoiseach's office were given to us for that entire period of time. There were no letters between the Minister for Finance and the Taoiseach. There were no records of any private meetings. There were no minutes, diaries, speeches, replies to parliamentary questions or records of phone calls. There was nothing at all. It strikes me as a very large gap if both the Taoiseach's office and the Minister for Finance's office have no documentation. It is clear there is a problem. When we come to talking about accountability, we also have to face up to the fact that while we have done a job and have taken steps, we have more steps to take.

Last Sunday, the Sunday Business Post produced some documents it has apparently received from someone in the Department of Finance, which are documents we did not see during our inquiry. Many of these were memos to the Government. They were from the period 2009 to 2010. I do not know what other documents are there but I know we did not see these ones. What does that mean? It means there are other documents we have not seen. That is a problem. Therefore, we have to work very hard to ensure that when we talk about accountability we really mean it.

The question we then have to ask is whether we should have gone ahead. Should we have persisted despite the problems we actually knew about, including the lack of time, the fact that the legislation was quite limiting, the lack of answers and documents, the fact that Anglo Irish Bank could not be discussed because it was tied up in legal matters and, of course, the passing of the former Minister, the late Brian Lenihan? I believe we had to go ahead and that we had to keep going. We had to persevere.

I thank my fellow members. In the main, as Senator Michael D'Arcy said, we did leave our so-called political jerseys at the door. We did work hard to try to work together as a team of people interested in accountability and not our own political leanings.

We have to learn from the weaknesses of what went before. As I said, in the second part of our report we discussed those weaknesses. Why would we walk away now from that kind of process, as some commentators, who were not in the room for much of what happened, suggested? Why would we walk away from the process now? Are we afraid of something else? Are we afraid that we might not have had all the questions answered? When are we ever going to get all the questions answered? That is not a good enough reason to give up this kind of parliamentary inquiry.

Before I finish, I thank my assistant, Geoff McEvoy, who is in the Visitors Gallery. It might be said he is here to the bitter end. We were blessed with such hard-working assistants. Without them, the inquiry would have been much the poorer.

Parliamentary inquiries are not perfect. If someone can show me the perfect inquiry, I will be the first to say it is the model we should use. In the meantime, we make the best of what we have. We improve and build on it and commit to the notion of accountability and transparency. The ideal of having parliamentary accountability is necessary. If we need to go back and ask the people in a referendum for the powers that we failed to get in the first referendum, that is what we ought to do. The next Government, Dáil and Seanad must have that debate. We must not throw away the opportunity for us, as parliamentarians, on behalf of the people and as public representatives, to try to bring people to account. It was a first attempt. It was not perfect. It is up to all of us, whoever we are in the next session, to build on and make that better.

I welcome the Minister of State and refer to one item in his contribution. He said, "The lending practices of the banks made them vulnerable to a liquidity risk which was not recognised." I raised in this House in the run-up to the financial collapse the matter of a major continental bank that was routinely flouting liquidity regulations. There was no response whatever. It was ventilated in this House but ignored by the Government. I would like to refer to another speech that I saw in The Irish Times today. It is the speech of His Excellency, President Michael D. Higgins, launching his report on the President of Ireland's Ethics Initiative. He said, "How could anybody listen to the debate that has gone on about Mr. Trichet's role in the Irish case without being concerned?" Thank God for a President who makes such brilliant, searching and analytical speeches and tells it as it is. This is in extraordinary contrast to the response of the Minister for Finance, Deputy Michael Noonan, in the Dáil. I understand the political motivation, but he denied there was any threat. Then we hear that Mr. Trichet said a bomb would go off in Dublin. I would call that a threat. If a person mentions the word "bomb" in an airport, he or she is whisked off straight away. That is the kind of threat involved. It is a real threat.

This inquiry was held in the shadow of the Abbeylara judgment. The referendum was rejected by the people because of the arrogance of the Government at the time. However, we have to examine this issue again and should have another referendum. It is ludicrous to have an inquiry that cannot make findings of fact. For God's sake, how pathetic is that? I congratulate the members of the committee on doing what they did in the circumstances. The banks are continuing in the same practices as we speak. What got us into this mess? They ignored the ordinary account holders, treated them with contempt and ran off on a gambling spree to the casino that was the property bubble.

Just last week, there was the case of a woman in Cork with two children and a husband out of work.

That is not in the report.

It is not, but I am talking generally. I am talking about the consequences, which is one of the things the report should have examined. It should have examined the impact on the people. People would like to know about it. They would like to know about the hundreds of thousands of people put out of their jobs, the many people who took their own lives, the young people forced to emigrate, the special needs assistants who were taken away, and hospital trolleys. They would like to know about all this kind of stuff. There was a devastating impact.

What about the burning of the bondholders? I was always in favour of burning the bondholders. We should have looked the European Union in the eye and said, "Okay, bring us down, but we sure as hell will bring you down with us." People bought those bonds at 25% of their face value and redeemed them at full cost. That is an absolute scandal. I asked some questions in this House in the run-up. I asked, when we were giving the €400 billion guarantee, what our gross national product was. I was told they had to set out to find €200 billion. We were giving a guarantee for twice our gross national income.

We should look at the impact on the people of Ireland. The regulators were asleep on the job - all of them - yet they walked away with enormous pensions. That is an insult to the people of Ireland, who were bankrupted by it. Then there are the accounting firms. How on earth did the people involved who are still employed by the Government sign off on the accounts of these banks? They were there to scrutinise, authorise and put their signature to accounts that said they were all right when they plainly were not. They were borrowing from Peter to pay Paul and shifting huge sums of money around to conceal the deficiencies in their own banks.

I compliment those who were involved in the banking inquiry. They did a good job within the limitations applied.

On the appointment of Senator Marc MacSharry, I got out of my sick bed just after having a major operation to come and vote on this issue. I voted Senator Marc MacSharry in because I wanted to see an independent inquiry. The media got hold of it and stated it was a Fianna Fáil plot. As I have stated previously in the House, they should have seen the look on the faces of Fianna Fáil Members at that meeting because the jaw-drop was colossal. They had not realised I was going to do it, but I did it in the interests of independence and transparency. Like all other members, Senator Marc MacSharry played a valuable role in assessing the issues involved.

I welcome the Minister of State, Deputy Simon Harris, and thank him for his remarks. He is always interesting on this and other subjects.

I agree with what everybody else has said. I compliment the four Members who were involved, Senators Michael D'Arcy, Susan O'Keeffe, Sean D. Barrett and Marc MacSharry. I accept that they put enormous time and energy into the inquiry and that very few others would have been prepared to do so. We all accept how hamstrung and restricted they were. I agree, therefore, with what has been said on the need for another referendum to allow proper Oireachtas inquiries to take place. As Senator David Norris said, there is no point in having an inquiry if it cannot make findings of fact. I accept the 28 recommendations made by the committee of inquiry and, please God, they will prove useful, despite all of the restrictions.

As the report indicates, the regulator, the Central Bank and the Department of Finance were asleep at the wheel and, essentially, agreed with the banks. The Governor of the Central Bank was very strong in agreeing with the banks on the need for a guarantee covering all of the banks which were, of course, reckless in the way they had lent to the property sector, about which there is no doubt.

The matter about the pressure exerted by the ECB is contentious. Whether it was persuasion, of course, there was pressure to accept a bailout. We all now accept that the troika programme, involving the ECB, the IMF and the European Union, could not have been agreed to if the Government had targeted senior bondholders. Can any of us imagine, if we had borrowed €1,000 from somebody and refused to pay him or her back, the credit rating we would have had and who else would have lent to us? We must be sensible and grown up about this. In fairness, that was accepted by the Minister for Finance, Deputy Michael Noonan, and a practical view was taken. Because of the way the programmes were extended and rolled over, etc., we got the best deal for the taxpayer arising from what had happened. It will be interesting to see what the net cost will be. I accept what Senator Sean D. Barrett has said, but it might be less. The Senator might accept this, but that is a little down the road.

The banks were allowed to breach lending limits on property without fear of the consequences and no action whatsoever was taken by the regulator. We acknowledge the failure of the banks. Senior managers and boards of directors had direct responsibility. They were responsible for the collapse. Over-reliance on market funding and the continued introduction of new mortgage products also had the effect of masking the underlying problems in the construction and housing sectors. We have to learn from this and that is where the recommendations will come into play. However, we must look at the question of inquiries. We cannot go on having inquiries along these lines.

I join others in commending the outstanding work done by our colleagues, Senators Michael D'Arcy, Susan O'Keeffe, Sean D. Barrett and Marc MacSharry, on which I congratulate them. I also welcome the Minister of State, Deputy Simon Harris.

I agree fully with the view expressed that any future inquiry of this nature must be strengthened. It would be a waste of taxpayers' money if we were to go down the same road again. On whatever legal experts can come up with, I am sure it will be a formula that will address the concerns of former Attorneys General that changed the public mood in the days leading up to the referendum. It is not beyond their capacity to do something along these lines as it happens in all other parliaments. The American model is an example. It should be able to guarantee the legal rights of those appearing before such an inquiry and conclude with facts in order that persons, where there is wrongdoing, will face sanctions. A parliamentary inquiry should not be a cosmetic exercise. I do not suggest this one was because the inquiry members operated within strict parameters and did an excellent job.

From a purely partisan party position, there is no question whatsoever - I am not suggesting it came from the Government but it was certainly being aired around the country - that it was an attempt by the Government to taint Fianna Fáil even further, but that has not happened. In fact, if anything, for the general public, what has come from the conclusions made in the report is that what happened in the relevant period was much more complex, that it involved a variety of stakeholders that had contributed to what happened and, not least, that it had coincided with an international crash of almost biblical proportions.

In coming here I cannot help but reflect on how we should address what will happen next. There is an old cliché that those who ignore history are condemned to repeat it. Three or four years ago a book was published in which the economic progress made in countries across the world from the 12th century was tracked. Rather interestingly, was called This Time Is Different. In each economic cycle governments or rulers, in taking economic decisions, stated, "We will do this because, even though we know what happened the last time, this time it will be different." If this is a political point, I make it unashamedly. The Government is already indicating, in the way it is fighting the general election, that it will narrow the tax base. This will result in reduced services and another crash because all of economic indicators show that we are in for troubled times in the next 12 to 18 months. The Government's economic projections are based on good times returning and continuing without any consideration being given to the developing international crisis, particularly as a result of the slowdown in China and the American economy not powering ahead in the way it should. The United Kingdom economy is already suffering to a degree. I am unashamedly making the political point which I know deserves a political answer. That is my view based on all that I have read.

I am sorry to say the Government of the Labour Party and Fine Gael does not seem to have learned from what is contained in the report, that between 2003 and 2007 the Fianna Fáil-led Government narrowed the tax base to such an extent that, despite the surpluses in 2006 and 2007 when the former Taoiseach Mr. Brian Cowen, as Minister for Finance, was being lauded as the man of Europe for the manner in which he was looking after the economy, two years later everything had gone belly-up. Despite what is contained in the report about all of the gathering clouds in 2003 and 2004, it made me ask myself, "My God, is hindsight not a wonderful thing?" With 20/20 vision, suddenly everybody now says he or she knew this was going to happen when, in fact, very few predicted that it would. In 2007, in their election manifestos, both Fine Gael and the Labour Party were looking for greater spending. The Labour Party, in particular, wanted to see an easing of the tax on housing. It wanted it to be reduced. These are the political realities emerging from the report produced and I am not taking little bits to suit myself. For goodness sake, will the Government get real? We are in a totally different economic position than we were ten or 15 years ago.

It has already been indicated that auction politics are being engaged in by both Fine Gael and the Labour Party, as can be seen in the promises the Minister of State is making. The Government is making promises of tax cuts based on a hope the economy will continue to drive ahead without taking account of international considerations, in much the same way as the previous Administration did.

As we are due to complete at 6.15 p.m., there will not be enough time for those still in the Chamber to speak and the Minister of State has to respond. Therefore, I ask Members to try to stay within the time allocated.

The committee, especially the Senators on it, Senators Michael D'Arcy, Marc MacSharry, Sean D. Barrett and Susan O'Keeffe, and its Chairman, Deputy Ciarán Lynch, deserves our thanks for carrying out a very difficult task, within well publicised constraints in terms of from whom they could and could not take evidence. They amassed a wealth of evidence and pulled together a coherent set of analysis and recommendations that need to be addressed urgently. We are all agreed on that point.

I would like to address my remarks, in the time available to me, to one of the principal underlying drivers of the banking crisis as it developed, namely, the bubble in the property market and some of the messages that should be taken from that particular aspect of the debacle. The report identifies that the weak role played by the Financial Regulator and the Central Bank was central to the crisis. If anything, this is a point that needs even more attention than it has so far received, because it is quite clear that the force of competition in the market drove the banks to focus on building market share and increasing the volume of lending, driven principally by the property market, at the expense of medium-term to long-term sustainable lending.

One of the lessons we must learn from this is that markets must be regulated to put limits on that dynamic of irresponsible competition. At the height of the last boom, the prevailing orthodoxy across most of the western world was that of market fundamentalism, namely, the belief that market forces, left to themselves, will always generate the best possible outcome. We need to learn from the experience of this crisis that markets are not mysterious forces of nature; they are social institutions that have to be managed for the collective good. It was the failure to manage the Irish property market that was, perhaps, the single most important reason for the banking collapse in this country. After the turn of the century, as is well known, our economic strategy as a country went off-course. Senator Paschal Mooney has made an important point; we moved from economic growth that was essentially export-led to a phase of economic growth that was property-led. That was during the governorship of the Fianna Fáil Party. This was not something that just happened; there was a very conscious consensus behind it at senior policy levels. I am aware, for example, that one Minister remarked in a speech that the level of house-building that had taken place in that particular year had probably gone beyond a level that was sustainable into the future and he was admonished by a senior official from the Department of Finance for being off-message. I know that to be true because he told me.

The inquiry report looks, for example, at how the vested interests in a strong property market extended into the media. Whether one accepts the assurances of editors that this did not affect editorial policy substantially, the fact is that all parts of the public sector, including local authorities, for example, became increasingly dependent on the revenues generated through property development. The weight of vested interests in the property bubble prevented due attention being paid to the downside of excessive property prices. The injustices being done to a whole generation, as has been pointed out, in forcing them to incur massive debts to get onto the property ladder, if they were able to do so at all, still has not received enough attention. The impact of the property bubble on Ireland's economic competitiveness, feeding through into the cost of living and required salary levels and leading to Ireland moving from export surplus to deficit in the years before the crisis, has also never been fully considered.

One of the important recommendations of this report is to put together an official list of indicators to be kept under regular review to warn us of another impending property bubble. Some of those indicators are addressed individually in the report, such as the proportion of State revenues derived from property-based transactions and earnings, but there are others that are also relevant and should be considered, such as the proportion of the total economy accounted for by construction. Another is the price of houses in Ireland compared to other countries. For example, how could one rationally justify that a house in the leafy suburbs of Dublin is more expensive than a similar house in Belgravia in London? Another indicator to watch for is when a significant number of properties are being bought as investments and not to be lived in. When assets are bought in anticipation of future price rises without reference to any revenue they can bring in, that is normally an indicator of a bubble. We need to keep a watch on such indicators and keep them highly visible, so that our regulators will feel the due pressure to take action before it is too late the next time around.

There was consideration of the role of NAMA. It is very important to consider that NAMA has an important part to play. We cannot allow the booms and busts of the property cycle to dictate the future of the economy. In that fashion, it is very important that we look to the housing sector and the construction sector to even out the flows, the rises and falls, the supply and demand. NAMA could have an important role in that regard.

A great job of work has been done by the banking inquiry and we will, particularly given the background documentation, have a great deal to consider in the next few years.

I remind Members that we must finish at 6.15 p.m. Everybody is eating everybody else's time.

In deference to my colleagues, I will not take very long, in order that somebody else can get in.

I thank the Minister of State for coming. I thank, in particular, the members of the banking inquiry committee, including four of my colleagues, Senators Michael D'Arcy, Sean D. Barrett, Marc MacSharry and Susan O'Keeffe, who may have sacrificed part of their political career in order to devote their time to the inquiry, forsaking their constituencies while they worked. That has to be acknowledged. This was a triumph of what politics can do. It is very sad that when we brought the referendum to the people, seeking that inquiries like this could have findings of fault, the people did not see what we were trying to do. Perhaps at some point in the future that might happen. Senator Michael D'Arcy is shaking his head.

The banks have not been humbled. They are as bad as they ever were, if not worse. They are utterly dismissive of the people who saved their hides after what was an extraordinary time in our history. I am not so sure that we are not heading into another bubble. I look over my back wall and there are terraced houses, built on a postage stamp, making €650,000. I just do not understand where we are coming from. Builders in my part of Dublin are now not selling houses until they have completed the entire estate, because they know prices are rising so fast that they do not have to sell the houses. The Minister of State may very well be back here in government in a couple of weeks time and I am sure that if he is, he will be in the same portfolio. I hope somebody takes time out to stop these guys. It was a total gambler's paradise. One could walk into any stockbroker in here, open a contract for difference, CFD, account, and make thousands in weeks. That was wrong in every sense of the word.

I have serious concerns about the fiscal space about which we hear, which is supposed to be either €3.5 billion or €12 billion. I am not sure where it all fits in. I fear the auction politics we are heading into. The Government has done a great job in restoring the economy over a period. This is a small, open economy and can only account for so much, but I would be terribly worried that we would now squander any part of it. I could go on, but I will not. I see there are colleagues who want to speak. I thank the inquiry and particularly my colleagues in this House, who gave a great deal of their time to it.

I call Senator Cáit Keane. Unfortunately, we have to cut it at that because the Minister of State is due to reply to the debate.

I will be as quick as I can.

I congratulate those who have done the work for us. Their names have been mentioned, but as Senator Gerard P. Craughwell said, they gave up a great deal of time when others were out in their constituencies. Senators Michael D'Arcy, Susan O'Keeffe and Marc MacSharry are all seeking re-election, while Senator Sean D. Barrett is heading into a different type of election. I wish them all the best of luck and perhaps people will recognise the good work they have done on their report.

I know that it is not perfect and everybody is looking for people to blame, but one looks at the Central Bank, Department of Finance and the regulators, in particular. I read one quote in The Sunday Independent, which was that the regulators were worse than "a neutered bullock in a field of heifers". That is one lesson that has been learned from this. We set up a planning regulator today and one of the things I said was that regulators have to take their powers seriously, as seriously as the members of this committee took their powers. They had their hands tied behind their backs. The banking inquiry was established to try to give people insight into how this sorry mess came about and to try to stop it from happening again. I hope it has done some of this.

As Senator Susan O'Keeffe said, it is not a full report as they had their hands tied behind their backs by the decision of the Supreme Court. They were not given full access and could not ask the questions that they wanted to ask due to legal constraints and everything else. They had to fight sometimes for relevant information and were stopped from asking the relevant questions. The Taoiseach has said this might have to be revisited by way of a referendum and I would say that if it has to be, so be it.

Following the banking inquiry in Britain, the committee met a year after the publication of the report to highlight the progress of the recommendations. There are some good recommendations in the Irish report and I recommend that the banking inquiry committee be recalled to do just that in a year's time.

I think Senator Mary White spoke about the individual banks' culpability. The inquiry committee did not have in front of it a report on individual banks and where they failed or why they failed. They said there was a systems failure in the banking system, which was not good enough. Individual banks should have been hauled over the coals to find out the individual failings.

The ECB, as has been found in the report, behaved improperly, demanding payments when it should not have. There are differences between what happened when the ECB came in in 2008 and 2010. It was in 2010 that Brian Lenihan was hauled over the coals and we saw what happened there. Before that, in 2008, at the outbreak of the crisis, there was no evidence that the decision at that time was forced on the Irish authorities. It changed in 2010 when burden sharing was looked at. I think it is a question of the amount of the burden sharing that is outstanding for the ECB. I know people have said the Government should take the ECB to court but if we were going down that road, we would have to look at what we might gain from it.

The report was published in the same week as the Law Reform Commission sought submissions on "whether the supervisory and enforcement powers of the State's main financial and economic regulators are adequate" and "whether there are gaps in the criminal law that do not deal sufficiently with serious wrongdoing by corporate bodies, in particular regarding current fraud legislation and the general rules for attributing criminal liability to corporate bodies." All the members of the committee will be well versed in that, and I think the answer is a big "No".

I do not have time to say more of what I would like to say. Again, I compliment those who are here and those from the Opposition who facilitated the Senators' absence from this Chamber during the inquiry. Senator Jim Walsh, as Senator Michael D'Arcy said, was one of them.

I thank the Leas-Chathaoirleach for a very interesting debate. I do not intend to respond to all of the political charges made. Many of them are so outlandish----

Go on, force yourself.

I would not have time. I will make one or two very brief points just to please the Senator.

When one reads the report, as I am sure the Senator has, one sees that it finds there was a nexus between a banking crisis and a fiscal crisis. While we can blame international factors for a banking crisis, neither Lehman's nor the ECB caused the fiscal crisis. Some in the Senator's own party have been good enough to apologise for the role it played. While Senator Gerard P. Craughwell points out that the banks do not seem to have been humbled, clearly not every member of Fianna Fáil appears to have been humbled. Senator Mary White said she did not know where this talk about the soft landing came from. She could not believe it at the time. At the time of the general election, Fianna Fáil members were going around telling Opposition parties and the public that there was to be a soft landing, everything would be grand, we could trust Bertie and Brian with the gig, we should not worry and they would sort it all out.

I understand it was a Fine Gael economist who actually coined that phrase. I will not name him, but the Minister of State knows who I am talking about.

On the narrowing of the tax base, it might be old fashioned of me as the youngest Member of the Dáil to suggest that people should really wait and read plans before deciding what is in them. When people see my party's plans and I am sure those of the Labour Party in terms of our long-term economic vision for the country, they will feel that they are very prudent.

We, in Fine Gael, are not proposing to narrow the tax base. We make no apology for taking some of the lowest paid workers out of the hated temporary USC that Fianna Fáil brought in after it crashed the economy, but we are certainly not proposing to narrow the tax base. Senators will see that in our own plans.

Time will tell. This time it will be different.

The USC was introduced by the late Brian Lenihan as an emergency and temporary measure. I believe Fianna Fáil is also proposing abolishing it to some degree, but I am waiting to see the full proposal.

We need to be very careful heading into the election and I mean this sincerely. Regarding tax versus spend and the idea that it is a choice between taxing or spending, that is not the case if it is done right. There is a way we can use tax to achieve economic growth that gives us more money to invest in public services. A simple example was the VAT reduction at 9% in the tourism sector. We saw more jobs created and more revenue coming to the Exchequer which can be used in hospitals or to provide social housing. I do not think we should have that either-or debate. I look forward to debating this in the coming weeks.

On the report at hand, I fully agree with Senator Susan O'Keeffe when she talks about parliamentary accountability. This is something all of us should defend to the death. It cannot be outsourced.

Senator Sean D. Barrett referenced the retired High Court President, Mr. Justice Nicholas Kearns's comments. There is a difference between the job a judge has to do in a court and the job we have to do here. We should not apologise for doing our job or suggest we are inadequate in doing it. If we believe we are inadequate in terms of doing the job, we should not run for election to these Houses.

We are policy makers, legislators and public representatives and have a duty of care in respect of all three of these strands.

I want to comment on a few of the changes that have taken place in response to this report. I make these points while also saying that one can never be complacent or say that enough is done. In respect of the Department of Finance, significant work has been undertaken in recent years to address the issues highlighted by the crisis. A comprehensive overhaul of our regulatory framework for the financial sector has been pursued at both domestic and EU levels since the financial crisis. Through the introduction of various initiatives, the stability and resilience of the financial sector have been strengthened and restored to a position where it better serves the economies and the people of Europe. I will not have time to go through all of the various changes but people will certainly be very familiar with them.

There have been some comments on the Minister for Finance, Deputy Michael Noonan, and the issue of the ECB. I want to express my views. The Minister for Finance set out to the banking inquiry that the ECB President, Jean-Claude Trichet, was quite clear and that Mr. Trichet used graphic terms about what he saw as the consequences of Ireland burden sharing with senior bank bondholders. During the banking inquiry, the Minister made it clear to Deputy Joe Higgins that he was never threatened. In fact, he said:

I was never threatened that they'd withdraw ELA or assistance to the Irish sovereign but, and you'd well know from your experience here, in saying that Ireland would be treated as a country in default and a bank would be treated as a bank in default, the implications of that to me were clear. ELA could be suspended. ELA was always temporary.

I am quoting the evidence the Minister gave to the banking inquiry. We can tally that with the quote he gave in the Dáil and will see that the evidence was very much consistent.

On burden-sharing, the Minister for Finance has set out on numerous occasions that the Government considered it in the wind-down of the banks, including the Irish Bank Resolution Corporation, IBRC, encompassing Anglo Irish Bank and Irish Nationwide Building Society, but was prevented from taking action due to the ECB's unwillingness to provide the necessary support to allow such action, in other words, the provision of emergency liquidity insurance. However, it must also be remembered that as a Government, we were aware of the risks of burden sharing with senior bondholders. The Minister stated prior to the 2011 election that no action could be taken without ECB support. In fairness to the late Brian Lenihan and the former Government, they too came up against this issue. It is important to note the renegotiation that has been carried out since, which has improved the cash flow to this country by €50 billion.

Senator Sean D. Barrett has made a valid point on a number of occasions about the number of economists in the Department of Finance. It is quite an important point. It should be noted that the Department has significantly increased the number of economists since the Wright report. The figures contained in that report were based on the Department of Finance as it stood in 2010, including functions and staff which have since transferred to the Department of Public Expenditure and Reform. At the time, Wright completed his report in 2010, the overall Department had 542 staff. Of this, there were 39 economists who had a qualification at master's level, as cited by Wright. The Department of Finance has since focused on increasing the number of economists to meet the recommendations of the Wright report. The information provided to the joint committee last February detailed that there were 70 staff with qualifications in economics, more than 40 of which were at master's level or above in the Department. As of today that figure has increased to 89 staff with qualifications in economics, more than of 40 of which are at master's degree level or above. That is equivalent to about 11% of the Department's 350 staff.

I compliment the four Senators who played such a key role in this inquiry along with their colleagues in the Dáil. It was a proud and good day for parliamentary democracy and the Parliament. Clearly, they were constrained by the law. I share the view that this is an issue at which the next Oireachtas should look, whether by way of a constitutional referendum or further legislation to strengthen the hand of any of us or our successors who may be called on in any future inquiry.

I also thank Senators Michael D'Arcy, Susan O'Keeffe, Marc MacSharry and Sean D. Barrett, who served on the committee, for a job well done. I thank the Minister of State for this debate and apologise to Senators Colm Burke and Terry Brennan who were unable to get in. The time indicated on the Order of Business had already been extended.

When is it proposed to sit again?

At 10.30 a.m. tomorrow.

The Seanad adjourned at 6.20 p.m. until 10.30 a.m. on Wednesday, 3 February 2016.