Question of trust at heart of calls for banking inquiry

The Seanad discussed the plans for a banking inquiry. Labour is very much against the idea of a private inquiry and I had an opportunity to put my views to the Minister of State, Martin Mansergh TD.

I welcome the Minister of State to the House to talk about the promised inquiry that is to be instigated into the banking system and related issues that have brought us to this position. I have had the opportunity to read his speech but I do not know if he spoke also perhaps impromptu about whether the investigation of the commission – most people accept that the preliminary stages ought properly to be held quickly and therefore in private – should hold public hearings. That would be a matter for the terms of reference but these should be set by the Oireachtas. There is some suggestion that will be the case. I invite the Minister of State to agree that it would be appropriate for the default position to be that the commission of inquiry would hold its hearings in public. There could be circumstances in the course of its investigation that it might decide a particular hearing should be held in private but the default position should be that proceedings would be in public.

The question of trust is at the heart of this whole controversy and debate. One cannot restore trust by simply asking people to trust. It does not work that way, certainly not in view of what happened in this country in the past two years. Far too much of what has gone on has occurred behind closed doors. People do not trust a whole range of actors, from politicians and the Government in particular to the banks and the construction industry. People cannot be expected to trust an inquiry held predominantly in private. People argue against this by suggesting we want a public execution in St. Stephen’s Green and that we will bring on the guillotine, as if this is the only basis for calling for it to be heard in public. I disagree with some members of the Opposition who give the impression, perhaps unwittingly, of wanting an inquiry that would be a public execution, whether of the Taoiseach or anyone else. If the Taoiseach is to be executed politically it will be done at the time of the next general election. I very much hope it is done but that is a matter for the general election. That does not undermine the proposition that a commission of inquiry ought to be held in public to examine the grave issues the Minister of State touched on in his speech. Why should there not be a presumption of hearings in public, with perhaps some allowance for the inquiry to make an ad hoc decision on a particular part of the inquiry to be held in private? I will not re-engage with the differentiation between private and secret drawn on some radio programme, where the Minister for the Environment, Heritage and Local Government, Deputy Gormley, got himself into trouble.

What is the problem for the Government? The Minister for Finance made some reference to it costing €150 million for lawyers. I do not accept this. If people seek to have lawyers representing them, this will be true whether the inquiry is in public or private. If it is contemplated that there should be a cost, there is no way around the argument that if this is not held in the public eye it will not deliver the restoration of trust we all wanted to see. This is an argument the Green Party made, unsuccessfully as it turns out. If this is not held in public, it will not deliver the restoration of trust we all want to see.

There is much talk of the Supreme Court decision on the Abbeylara case when discussing whether this should be considered by a committee of the Oireachtas. It is well worth reading the decision to see what it says. Much as I would like to see committees of the Oireachtas made more robust and holding public inquiries, I do not think a committee of the Oireachtas should be in a position to make findings of guilt of a criminal nature in respect of any citizen in this country. I do not think that is our role. I have no difficulty with that.

Last week Mr. Michael Casey posed 16 questions on this topic in The Irish Times. Senator MacSharry mentioned Elaine Byrne’s article in The Irish Times this morning. She included questions she saw as appropriate and we all have our list of questions. I read Mr. Casey’s 16 questions but I will not detain the House unduly in this regard. I could not find a single question that could not be dealt with by an inquiry staying away from the notion of individual culpability. For example, Mr. Casey asked:
Why did boards and senior management not worry about excessive growth of credit, especially for commercial and residential property? What kinds of discussions took place between boards and management on portfolio diversification and “value at risk”? What, if any, warnings were given by internal auditors, risk managers and credit committees? To what extent were the bonuses and incentives geared to growing the balance-sheet at the expense of quality? What discussions took place on the question of banks depending more on borrowed funds than on deposits? How did banks’ internal stress tests compare with those submitted to the Financial Regulator?

Some 16 questions were submitted by this one commentator who was a former senior employee at the Central Bank. We can assume he has some knowledge of this. The public is entitled hear the answers to a range of crucial questions, as it is entitled to view and absorb the process of engaging with those questions and receiving the answers. People are also entitled to see witnesses asked supplementary questions and cross-examined on their answers. The Abbeylara decision does not preclude that kind of inquiry. Of course it can and should stay away from any findings of individual culpability to the extent at issue in the Abbeylara case. At least two of the Supreme Court judges, whose judgment I read earlier, made it clear the decision was to be confined specifically to that inquiry which concerned a tragic incident at Abbeylara and which clearly involved the possibility of findings of individual guilt or criminal guilt. It was not appropriate for the Houses to be engaged in such an inquiry but this seems entirely different.

We do not know how some elements referred to in the speech of the Minister of State will play out. We must take some of this on trust in terms of what the Government will do when the time comes to set the terms of reference for the commission. I was happy to hear the Minister of State saying the initial report would consider international and social issues and the macroeconomic policy environment that provided the context of the recent crisis. The Minister of State referred to the unsustainable increase in property development lending as one of the factors that drove and facilitated an unprecedented property boom. The property boom did not sprout like a beanstalk. It had to be fostered, fanned and sustained by political decisions made by the Government on tax incentives or the rural renewal schemes that were valuable when set up but overextended.

A self-serving attempt is being made in some quarters to reduce everything to wrongdoing by, for example, individual bankers and individual decision makers. We have all made speeches about how horrific were some of the decisions made by some of the banks under investigation by the Director of Corporate Enforcement and the Garda authorities, but much more is involved than individual acts of fault or wrongdoing. I am as critical of those individuals as the next person but the story is much greater and wider than that. It includes political decision making and the kind of culture that fostered links between different sectors of society, including a particular political party. The question arises also in respect of regulation and its quality. It also applies to property incentives and tax incentives for the hotel industry or the refurbishment of a luxury ship on the back of the taxpayers. This was one of the more extraordinary episodes referred to in one of the trio of books published over Christmas. All of these matters turn on how the political system conducted itself and, in particular, how the Government conducted itself. This does not point to individual wrongdoing in the criminal sense but it involves people making bad calls, bad decisions and wrong decisions. The people are entitled to have those who made bad or incorrect decisions scrutinised in public.

I welcome the Minister of State’s comments on lax practices in the banking industry, the performance of the regulatory system and the Central Bank and the response of the relevant Departments and agencies, although he was slightly more anodyne than I would prefer. I am pleased that it is not proposed to overly restrict the inquiry’s remit but I will have to wait to see precisely how much is achieved by the two initial reports.

I acknowledge the existence of an underlying political tension which will continue to play out in public until the next general election, whenever that may be. However, while this will undoubtedly remain a live political issue, the Government is responsible for more than simply protecting its own position. I do not seek to wage a direct attack on particular individuals when I advise the Government to resist the temptation to use this process to protect itself. The people need a comprehensive, warts and all, inquiry. I may be accused of being naive in even allowing for such a possibility but, the suggestion of an Oireachtas inquiry having been rejected, I would prefer the proposed commission of inquiry to achieve something. We all have an interest in encouraging people to look to the future rather than back at what has happened. The single biggest decision the Government could make would be to deal with these matters in public. I concur with Senator Boyle and his colleagues in this regard. A commission of inquiry in the United Kingdom is at present publicly scrutinising former senior Ministers about their decision to go to war and thereby sacrifice people’s lives. If that commission can openly inquire into such a subject, there is an unanswerable case for holding our inquiry predominantly in public, with the proviso that certain matters can be heard in private for given reasons.

Public confidence will not be restored simply by asking people to trust us to produce a report in a year’s time. At that stage, any report deliberated on by an Oireachtas committee would be a fait accompli. Let us be straight with each other rather than claim something is in public when in fact it is in private. The Joint Committee on Finance and the Public Service will never be able to scrutinise these matters properly because the inquiry will have concluded. I ask that the public not be told that black is white, that public is private or that secret is open.