Oireachtas Banking Inquiry Committee


[Speaking in the Seanad on a Motion re: Establishment of Joint Committee of Inquiry into the Banking Crisis]

I welcome the Minister of State. As the Leader said, this inquiry is overdue and I am delighted that it is happening, as there is a clear need for an inquiry into the circumstances surrounding the financial collapse, circumstances which, clearly, were heavily contributed to by the actions of the banks. It is telling that the Government and Opposition supported initiative is focusing so much on the banks because, clearly, there is a broader story.

I hope the terms of reference will allow the appropriate questions to be asked about the role of other players, who are not employees, board members, etc., of the banks, in the events. Let us be honest. The economy failed because of three constituencies: the banks and the financial services sector, the building and property development trades and the government, with a small “g”. Of those, the banks acted usually incompetently, sometimes possibly criminally, although that will be determined in other fora, but always in their self-interest. There was something rational about the way the banks behaved at the time. They found themselves in a situation whereby the country suddenly became flooded with cheap foreign credit and they did what bankers were doing throughout the world, namely, they incentivised their staff to sell loans to people which they could not afford. People in the banks at all levels were getting bonuses for giving this kind of advice.

I had a conversation with a gentleman recently who was involved on the fringe of the whole process. He maintained the problem in the country was that we all got greedy and offered the defence that everyone was to blame and therefore no one was to blame. I do not buy that. I do not believe we all got greedy. Ordinary people throughout the length and breadth of the country did the same thing that their parents and grandparents did, namely, they bought a house. The only difference was that they were told the rules had changed. People who had received prudent advice for generations and over the years to the effect that one should only borrow 70% or 80% of the value of the house and that one should only borrow two or two and a half times the annual household income, were suddenly told that all those rules had gone, that one could borrow 100% on an interest-only basis and that it did not much matter whether this was five or six times a person’s salary because in the past we had been too conservative.

People bought into this advice from a group that they had previously considered to be a priest class, that is, the bankers. If we were asked who in every town in Ireland did we trust, we would say we trusted the teacher and the bank manager. These were the pillars of the community and the people whose words meant something. Suddenly, the view was that the advice being given was incorrect, it was wrong and it was being given for the self-interest of the bankers. This is a question which, I imagine, will come out. This is why I believe the great majority of the mis-steps taken by the banks will be found not to be criminal. There were entirely legal, rational and foolish.

The case is similar with the building trade. If people want houses, if there is a growing population and if people have access to cheap money, a builder will build the houses. Furthermore, if generations of Governments have tried to put incentives in place to make people buy houses as opposed to renting properties, thus committing themselves in many cases to lengthy and unsustainable mortgages, then the builders will do it. All of these people acted entirely rationally, although not very socially responsibly.

Who were the guilty parties? The guilty parties were those in government. I do not simply mean the outgoing Fianna Fáil-Green Party-Progressive Democrats coalition. I mean the process of government in the country. I mean politicians from both sides of the aisles of both Houses and senior officials. These were the people who were not supposed to act in their self-interest. These were the people who were charged with the task of looking after the public interest. These were the people who were supposed to rein in the natural exuberant tendencies of self-interest manifested by those who could gain profit from flogging their wares. They were supposed to be our people in this equation and they failed.

I have no wish to be sectarian about it but it is obvious that those in the outgoing Government bore specific responsibility for this since they had been in power for much of the time. However, the bleats of financial rectitude that we hear from those in the current Government ring hollow when one considers the fact that they never yelled “Stop”. In fact, prominent persons in the current Government were pouring fuel on the fires of the mad house price bubble and inflation by making suggestions such as further reducing stamp duty and putting further incentives in place to enable people to take up mortgages which, ultimately, were unsustainable. We also had the entire group of permanent government officials, civil servants and regulators. It is now well known that there was not one person with a PhD in economics working in the front-line services of the Department of Finance on the night the bank guarantee was given. It is outrageous and unacceptable.

I hope that the inquiry casts some light on the tragic events that have had such awful consequences for so many people in the country, but it cannot be too narrowly focused. We cannot have another exercise whereby a whistleblower points out something which is found to be a problem and then everyone aims at the lowest level of accountability. Accountability goes to the top in this case. A little flame of light needs to be flickered onto some of these dark events and we cannot allow it to blow out.

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