Extending the Guarantee

Last night, the Seanad was invited to extend the guarantee covering Irish banks that was first put in place in September 2008.  This was before we were told the final bill for Anglo Irish Bank, which was announced only this morning.  The extension was carried by a margin of 6 in the Seanad.  The following is an edited transcript of my speech…

It is not irresponsible to oppose, to test government policy or to seek to amend it. The opposition at any period of a country’s history performs a major task for the body politic precisely by being in a position to test, criticise, query and, if it judges it to be appropriate or necessary, oppose. It is for a government to ensure its policies are sufficiently well argued in public and in parliament and that it has sufficient support among the members of a parliament to get those policies through. Opposition parties must exercise a sense of responsibility and, especially at moments such as this, restraint in how they present their arguments, marshal their arguments and participate in the debate. I do not disagree with that for one minute.

I do not believe we have time at this point to rehearse all the arguments that were gone through in the days and weeks after 29 September 2008. I assure the House that at all times the position taken by my party, then and since, has been motivated by no other objective than the interest and common good of the country. The fact we took a different view and opposed a proposal brought forward by the Government does not and should not in anyone’s eyes lessen in any way or suggest to anyone, either in this House or outside, that a political party that takes an opposite view is somehow offside, cannot be relied upon or is in some way undermining the common good. The opposite is the case.

We do not have time to deal with or go back through all the arguments we had then. Some of them have been touched on because they are still live and relevant. That is the basis upon which the guarantee was presented at the time and the basis of the claims that were made for the guarantee. Senator Boyle says it has been very successful. I do not know how it is possible for anyone to say it has been successful. While it would be difficult for me to say definitively that it will historically be proven to be unsuccessful, I do not know how Senator Boyle can say it has been successful because it will not be possible to pass that judgment for many a long year from today. I can understand him defending it but to suggest it has been a success seems contingent on many different things that lie in the future such that it is not possible to make the point.

At the time of the original guarantee legislation in regard to which this proposal is an amendment, the Minister, Deputy Brian Lenihan, stated:

There is understandable concern that the Exchequer is potentially significantly exposed by this measure. This is not the case. The risk of any potential financial exposure from this decision is significantly mitigated by a very substantial buffer made up of the equity and other risk capital in the relevant institutions. It is estimated [he does not say by whom] that the total assets of the six financial institutions concerned exceed their guaranteed liabilities by approximately €80 billion, which is half of Ireland’s total GNP. By any measure there is, therefore, a very significant buffer before there is any question of the guarantee being called upon.

I note the narrative has moved in recent days and weeks in the view of Ministers and certainly former Ministers, such as Deputy O’Dea, and I saw the Minister of State, Deputy Curran, nod his head when someone made the point that the banks had lied to the Government. It may well suit the Government that the narrative now becomes “the lies the banks told the Government”. It may be that lies were told and that the Government can somehow seek to portray itself as being blameless in that regard and being the hopeless victim which has been misled.

However, this cannot be the end of the story for any responsible government that has the experience of managing government for as many years as this Government does. As to the level of supervision of banks and financial institutions in which it was engaged, what information flow did it insist on having? To turn around and claim the banks told it lies is ludicrous. What level of monitoring was there?

There must be some level of judgment that a government can exercise or is required to exercise when it is told something by a financial institution rather than simply accepting it.

Senator Ross made another point. Even if we were to go along with the notion that the Government and we were lied to, how could it ever speak to those people again, if I could maintain the schoolyard approach to it? If people lied to it on such a spectacular basis and it was misled, how could it have any business dealing with any of them at any stage ever again, given that the implications of the lies are significant? It is beyond belief that a Government would consider maintaining a relationship with any of those individuals. What precise lies were told and have those people been asked about where they got the information about their institutions and why they believed imparting such spectacularly false information regarding their capital situation could be so easy?

The proposal before the House is a net one. It does not re-open the scheme for debate, although it gives us an opportunity to touch on all of the issues relating to the guarantee and, when they have the time, Senators will grasp the opportunity to have that debate. It is about the extension of the time period. There are some other changes, but the only one of substance relates to the time period. I am right in that. If so, and I ask the Minister of State to address this issue if he has a chance, it is remarkable that nowhere in his speech from what I can see, with the possible exception of one reference, or in the speech of the Minister for Finance in the Lower House was a rationale given for the net issue of the three-month extension. Why is it three months and not two or four months? What is the necessity for the extension? I am not asking about the necessity for the guarantee, since I know the answer and we have had that debate. We are doing it because the others have done it. That answers it.

If that is the rationale, it is quite limited. It would have been nice had it been explained to the Irish people. We are simply doing it because 12 other countries have done it. When did we know they would do it? Did we know before the Houses took the break and, if so, why were we not told?

Why has the Minister of State not expressly stated that the reason we are extending the guarantee is because those other countries have done so? He did not state it.

According to the Minister of State, “the Minister sought a similar extension to 31 December”. It is the same point. The Minister is telling the Houses that he is doing it because others are doing it. A debate in which we stepped outside the notion that we should do something because other countries do it would be nice. Had we debated the precise reason these decisions were being put to us, it would have made matters clearer and been of more help to the House. I am reading the Minister of State’s speech as I speak. I do not see the sort of clarity he claims it contains. It is not headlined.