Motion on the Credit Institutions (Financial Support) Act 2008 - 17th October 2008

Motion on the Credit Institutions (Financial Support) Act 2008 - 17th October 2008
Senator David Norris: Like Senator Donohoe, I listened with great interest to what my
colleagues said and in particular I was entertained when Senator Ross, who is a noted gadfly
in this House, suggested that the recommendations from the Government side, that somebody
should be placed on the board as a Government nominee, referred to me. It would be far more
appropriate if it were Senator Ross, who has served on a large number of financial institutions
and funds of various kinds. He has the experience and one hopes that he has guarded their
moneys extremely well. Since he is the father of the House and has been here about three
times as long as anybody else, I was a little surprised that he did not know that we do not refer
to the fact that people are not physically in the Chamber in his pointed remark about my
absence. I was doing my work in my office and I heard every word he said, much of which
made sense.
There is no doubt that this is an international problem. In an article about America by Lee
Iacocca, the man who saved half the American motor car manufacturing business, he stated:
We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got
corporate gangsters stealing us blind and we can’t even clean up after a hurricane ... The
most famous business leaders are not the innovators but the guys in handcuffs. While we’re
fiddling in Iraq, the Middle East is burning and nobody seems to know what to do.
That is the problem. There is no leadership, certainly no moral leadership. There was not any
leadership here either because we did not take on the Americans. We were afraid of the impact.
Nobody in the financial world and nobody with a foot in both camps was prepared to stand
out against the appalling moral collapse in values in the United States when it embarked on
kidnap, torture, the blitzkrieg of Iraq and all the rest of it. The bill for that is precisely the size
of the hole in the banks, and that is a point well worth making.
There is no question of business ethics. All this talk about patriotism is nonsense. Banks and
stock exchanges do not operate on the basis of ethics, rather on the grounds of profit. They do
not even observe their own rules. I was a director of several companies. I did not get paid but
the institutions were established as companies. On two occasions I stopped the operations of
those companies for fear of reckless trading. Did the directors of these banks ever hear of the
phrase “reckless trading”? Why are they not prosecuted? They obviously traded recklessly with
their depositors’ and investors’ money and the future of this country. It is shameful that they
are being allowed to continue in their positions. Sea´n O´ Faola´ in, writing in the aftermath of
the Civil War, said that when the dust had settled, nothing had changed and the old arses were
back in the saddles. Nothing had changed, and that is exactly what has happened here. They
are still there even though they traded recklessly which is, in fact, a criminal offence.
This affects not just Ireland, of course, but the whole financial world. We hear people such
as the head of the IMF talking about a global financial meltdown. This is apocalyptic language
and the situation is very serious. Bank shares are tumbling all the time. How many more
mornings we can listen to announcements about 9% off one bank and 9% off another? They
are going to be left with virtually nothing. These were the people who made obscene profits
and now they are repossessing people’s homes. I hope the Minister of State will bear in mind
what I said the other day, namely, that people who are being squeezed for their mortgages
should be looked after. If we are rescuing the banks, the small people also should be rescued.
With regard to the objectives of the Bill, there has been some talk about liquidity, capitalisation
and all this type of stuff. This is supposed to create confidence. It is supposed to be a
guarantee. I am not a financial wizard and I know it depends on confidence but sometimes
confidence can turn into a confidence trick. The exposure of the banks is rumoured to be \485
billion. The real gross national product of this country in the last figures issued by the Department
of Finance was \158.86 billion. In other words we have issued a cheque for three times
our GNP, and it could well bounce if called into play. That is the type of guarantee that cannot
be sustained.
The Minister of State is laughing and I am glad he has something to laugh about. Perhaps it
is delusional. One never quite knows because it is certain Ministers and the heads of financial
institutions have been delusional before and we do not know the precise exposure of the banks.
When I read the Bill last night, I thought that as I do not have the financial expertise of some
of my colleagues, perhaps I was missing something. I could find very little in the way of specific
detail. We were told, when we were looking at this situation earlier at the time of the crisis a
week ago when Members were in the House overnight, that this was a facilitating Bill and the
detail would come in this motion, but it has not. The explanatory memorandum is full of those
exhortatory phrases such as “to the extent possible” and so on, but it does not give any specifics
as far as I can see. One senior banker is quoted today in the newspapers as saying it is like
going into a restaurant without knowing the prices.
With regard to the mechanism for rescuing the banks, the seven criteria listed in the Bill are
very interesting. The Minister of State knows them, so I do not have to read them out. They
include long-term credit rating, ability to reduce risk and to self-finance charges, etc. However,
the weaker the banks, the higher the charges will be. That is rather strange. Joining this scheme
is optional. If any of our big banks were properly capitalised and not in any danger, why would
they join this scheme to bail out institutions that had been stupider and more profligate than
they were? It will be interesting to see whether banks join the scheme because I can see
disincentives in it.
One way or another, there is no doubt capitalism is in trouble. The Minister of State smiled
there a while ago. I smile somewhat at the situation I mentioned and believe it should be
questioned. However, I do not smile for the unfortunate citizens of this country who have been
caught in this situation and for the weakest and most vulnerable who are the target of this
Government. That may be seen very clearly not just in the removal of the medical card for the
over 70s but in a most sinister fashion in the attempt to collapse into one controllable unit the
five principal agencies that look after the weakest. Just today the Departments of Finance and
Justice, Equality and Law reform have refused freedom of information requests about the
exchanges between their two Departments on this issue.