[Labour Party Finance Spokesperson Joan Burton's speech to the Dail after Finance Minister Brian Lenihan announced the details of the recapitalisation of Irish banks after loans had been taken into NAMA]
The Irish taxpayer is today seeing the costs and consequences of crony Irish capitalism.
Today’s recapitalisation and transfer of assets to NAMA is socialism for bankers and developers while each taxpayer was being saddled with €22,000 of debt for the Anglo Irish arrangement alone.
This is the sixth time the ‘donkeys’ of Fianna Fáil will be asking the taxpaying ‘lions’ to take on the chin the mess that was made of their economy.
This is not a formal Budget Statement but let us be in no doubt that Brian Lenihan has today set the parameters for every Budget for years to come, perhaps as much as a whole decade.
Every Autumn from now on whoever is Minister for Finance will have to frame a Budget that will incorporate the true year by year cost of today’s announcements.
In all probability there will be an Inspector from the European Central Bank sitting there in the Minister’s office with a grim smile saying what can and cannot be done.
That will be an historical loss of national financial sovereignty that will infuriate all who value with pride the independence of our nation.
Sadly that loss of sovereignty will be the price of financial survival because of the bill for the banking collapse that today is being transferred to the taxpayer.
So the first item of many future budgets in this House is the cost of the bank bailout and that cost will be massive and it will dominate the economic landscape of this country for many years.
Remember the pain that a mere € 4 billion caused last December.
Today is just the preliminary announcement of adjustments to come and any Minister for Finance of whatever party will have to grit his or her teeth and grasp some very stinging nettles.
The State is now the hapless and reluctant owner of dominant shareholding of all the main financial institutions in the economy.
‘I own the banks’ is really a hollow boast.
Every single extra percent ownership is an admission of policy failure and in his heart he knows that is the truth and will be acknowledged internationally as the bitter truth.
You don’t own the banks. In truth is that the banks own you.
They dictate every element of policy, their interests take precedence over everything else and financial resources that ought to be channelled into economic recovery are directed instead to protecting 2 rogue institutions the INBS and Anglo.
Since late 2008 you have thrown literally billions of precious public savings to bail out these institutions from the consequences of their reckless casino operations.
You never spent such money to rescue indebted homeowners or indebted manufacturers or to offer a lifeline of credit to small businesses.
You devoted the entire stock of family silver, even the curtains and carpets, to these banks because they told you they were too big to fail and you were panicked into believing them by their sinister threat to unleash Armageddon should you refuse to give in to them.
Today’s massive bailout announcement is the natural consequence of decisions made that fateful night of September 29th 2008.
That night, you were surrounded by bankers, you took advice only from bankers.
You meekly promised to jump through whatever hoops they put in front of you and your Taoiseach even went on radio to say no cheque could be big enough for him to sign if it was necessary to meet their insatiable demands.
The ‘Too big to fail’ doctrine, applied with no economic justification even to Nationwide and Anglo, has taken a savage toll on the economy and the raw evidence of that was highlighted in the CSO document last week.
This was supposed to be the cheapest bank rescue in the world.
The Taoiseach said that no cheque was too big to write to save our banks
Today, we get the first glimpse of the likely size of this cheque.
A €36bn bank bailout package on top of NAMA – €20,000 for every taxpayer in the country.
Today is really Endgame Day.
The endgame in chess is when there are only a few pieces left on the board and the remaining pawns take on a special importance.
Well we are certainly close to Endgame in this protracted chess game that has gone on for 2 full years now, since that fateful St Patricks Day massacre of the Anglo Irish share value in March 2008, the event that triggered the unwinding of that banks business model with all the consequences we now experience to our cost.
Since then there have been 6 Government interventions:
1. The guarantee on September 29th 2008
2. The nationalisation of Anglo Irish
3. The € 7 billion recapitalisation for AIB and BoI
4. € 4billion injection of capital last summer into Anglo
6. The transfer of the preference shares in BoI into ordinary shares.
None of these interventions lived up to the expectations claimed for them by Ministers.
Today, we have Fianna Fáil’s final solution.
In the light of those experiences one question stands out:
Is there even the slightest shred of credibility left in this Government’s banking policy after the Minister’s speech today?
The failures in our financial system demonstrate the more general failures in our entire economic system.
It is inevitable that changes will come from the events of recent years and the decisions of the new Regulator are the first examples of a tighter regime.
Nevertheless there remains one fundamental issue that is only partially treated today.
The Government has worked on the assumption that the banks are favoured institutions that must be secured at any cost even when they become insolvent by their own decisions.
This House is going to have to set out new rules in law for future bank collapses. These laws will need to be the toughest ever to be brought in this country.
God knows we have endured enough from bad banking behaviour in the 1980s and 90s.
I could not now take anything they promise on trust.
Jim Kemmy once joked that while politics might seem easy to some, others had come by the scenic route.
Fianna Fáil are certainly taking the scenic route to nationalisation, via a mega-NAMA bailout, as taxpayers now look set to be full or majority shareholders in four banks and minority shareholders in another.
All nationalisations were not created equal, of course.
We had the panic nationalisation of Anglo, and now we have the belated nationalisation or part nationalisation of the rest.
Labour proposed a different approach.
Following the model of the successful Swedish bank rescue, and as articulated by Bo Lundrgen when he spoke in Dublin, the Labour Party proposed taking our key banks into temporary public ownership before cleansing their balance sheets for return to the private sector.
The key attraction of this approach was that it would have eliminated the valuation risk and the bailout element of NAMA.
There would not have been any need for the fantasy of ‘long-term economic value’.
Having taken the scenic route, we will now be left with the worst of both worlds – a nationalised banking sector alongside the risky NAMA bailout.
Not only was the scenic route the longest route, wasting 18 valuable months, it was also the most costly.
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