Local News
- Upton Welcomes Tourism App for Dublin (01/09/10)
- A great advocate and actor (31/08/10)
- Urban Horses Must Be Protected (16/08/10)
- SERIOUS PROBLEMS IN THE HOTEL INDUSTRY STILL NOT ADDRESSED BY GOVERNMENT (21/07/10)
- DROP IN VISITOR NUMBERS ALARMING - UPTON (01/07/10)
Latest Speeches
- A Level Playing Field (02/09/10)
- Management Company Legislation Too Little Too Late (09/07/10)
- Government Continues To Break Promises On Cystic Fibrosis (08/07/10)
- TOURISM JOBS DESERVE GOVERNMENT PROTECTION FROM EXTERNAL FACTORS (23/06/10)
- Central Bank Reform Bill – “Plus Ca Change, Plus C’est La Meme Chose” (05/05/10)
| Central Bank Reform Bill – “Plus Ca Change, Plus C’est La Meme Chose” |
| Wednesday, 05 May 2010 | |||
|
Ceann Comharile, it is indicative of this Government’s opinion of both this house and the Irish people that we are only debating a bill to reform our derided financial regulatory institutions in May 2010. This is 20 months after the banks effectively collapsed; over 2 years since the St. Patrick’s Day “massacre” of the Anglo share price and several years since people became aware of the erratic lending polices of Irish nationwide. To address the Bill in front of us, any sort of reform of the Central Bank and Regulatory systems that have failed so badly over the past number of years is urgently required and should be addressed clinically in the best interest of the Irish Taxpayer. What kind of regulatory system allows banks to loan developers more than 100% of a purchase price; allows banks to become developers; authorises 100% 40 year mortgages; and does not recognise a property bubble despite the weight of economic history? Our system failed. It failed badly and it is the plain people of Ireland who will pay. It is the people whose only experience of the Celtic Tiger was being able to pay all their bills on social welfare or who were panicked by the media and auctioneers into buying overvalued, poorly built and badly located housing that will pay for the recklessness of the few and the failings of those charged by the state with overseeing these BMD’s, or “Banks of Mass Destruction”. Those culpable and the guilty get away with it. Instead of real reform and pursuing those at fault for everything they have, all we get is a media circus of some top former bankers being questioned in front of cameras. Nothing but window dressing. They have had over 12 months of investigating Anglo, yet it is only in the week before it is announced that every citizen in the state will forfeit over €20 billion in tax revenue to pay for delinquent lending practices, not including NAMA money, that Mr. Fitzpatrick is questioned. The group myopia and sheer brass neck of those within the golden circles is frankly breathtaking. From Sean Fitzpatrick stating that he couldn’t “say sorry with any degree of sincerity' for running his bank into the ground to the then leader of Fianna Fáil stating his surprise that people who had the temerity to question the Governments economic and financial policies “didn’t commit suicide”, the collective group think at work suggested that we didn’t need regulation. While I believe the previous regulator had no choice but to resign, it is my strong suspicion that the regulator was merely implementing the financial regulation to the levels that the Government was happy with, ie extremely light touch. If the banks were forced to reduce lending it would have dampened the property bubble thus reducing the amount of tax the Government received from stamp duty. The regulator and the Central Bank are certainly at fault and need to be reformed; reform which goes beyond that set out in this document, but the simple fact is that the architects of this crisis are still in situ in the Government and the upper echelons of the Civil Service. The Taoiseach was Minister for Finance between 2004 and 2007 the years which effectively destroyed this economy. The new head of the Department of Finance was in a senior position for the entirety of the Celtic Tiger. Accountability and responsibility begin at the top, with those blessed with the privilege of serving the people. When they choose to spurn opportunities to accept the consequences of their actions, they demean their very office. The Bill before the house today does not go far enough in addressing the problems in our system. Despite the abject failure of the bankers in almost every institution in the state, there is no effective mechanism for regulator to object to unsuitable senior appointments. Will it be the same case of the golfing buddies and those who sit on multiple boards who will once again fill the senior positions in the banks, thus condemning the system to fail again due to a lack of appropriate and qualified oversight? Even worse the Minister for Finance will have control over the appointment to the new Central Bank so we can be sure that good solid Fianna Fail supporters will be appointed to these boards to do their masters bidding. What we need instead are independent experts beholden to no one and fully qualified to ask the bankers the serious question about unsustainable practices and irresponsible lending. Any board member should have no problem appearing before an Oireachtas committee, similar to Senate appointments committees in the United States where the qualifications and thinking of the proposed appointees are challenged. Another glaring flaw in the Bill is that there is no bank resolution mechanism in the event that a bank becomes insolvent at a later date. If history has taught us anything it is that everything goes in cycles and at some stage in the future again it is likely that another bank will overshoot its reserves in a quest for higher share values and greater bonuses. If this occurs there should be an ability for the regulator to intervene in a potentially toxic bank before it is too late. While every Irish bank acted irresponsibly it was the trail blazed by Anglo which led to other banks following their lead. Much like the BP oil well in the Gulf of Mexico, once the pipe burst the contagion spread across the entire sector and no amount of disaster relief could do anything more than contain the problem and leave a huge mess to be cleaned up. The economic commentator David McWilliams is correct when he states we have effectively abandoned capitalism when it comes to the banks to embrace instead a form of socialism for our banking sector. The Government is so petrified by the all powerful Bond Market, that they move in lockstep with what the compromised, tainted former masters of the universe tell them to do. It is of course the plain people of Ireland who will pay for all of these bailouts with reduced services- less roadwork repairs inevitably means more accidents; Less funding for hospitals meaning longer waiting times for patients not lucky enough to have private health insurance; cutting language supports means that we run the risk of creating our very own version of Paris’s “banlieue” in places such West Dublin or Galway. To use a poker analogy, the banking elite have been caught bluffing outrageously, yet they walk away from the table confident in the fact that the Government will force the citizens of the state to pay for their bad behaviour and cavalier risk taking. Where is the Justice in our system? The United States of America, the home of capitalism, is a useful comparison: · In the United States Bernie Madoff will spend the rest of his life behind bars; our ex bankers play golf. · In the United States they have announced sweeping reforms and new regulations for their banking sector; our banks throw their toys out of the pram until they get their way with the Government on issues like appointing insiders or pay levels which exceed Government regulations. · In America Goldman Sachs get hauled before a Senate hearing with a massive fine expected; in Ireland bankers with outstanding loans to their own companies which they are not maintaining continue to receive pensions from these same organisations. The 20 months it has taken the Government to produce some level of reform of the baking regulatory sector is indicative of the inertia which courses through the veins of this tired Government. The pace of legislation emanating from this Government runs at a glacial pace, unless it seems that someone from the Golden Circle might be imperilled. The Bank Guarantee is one such example, when a panicked Taoiseach was sold snake oil by the chief executives of Bank of Ireland and A.I.B. and persuaded to guarantee the entire banking industry even though it was known at that stage that Anglo and Nationwide were in serious trouble and were not systemically important. The legislative programme for the Dáil in 2010 shows only 14 Bills due for publication for the entire summer session. There are 39 private member’s bills on the order paper of the house, including two of my own, which the Government show absolutely no inclination in taking. There is no question but our regulatory institutions are in need of serious reform. Light touch or principles based regulation has been shown to be an abject failure. The simple truth is that unfettered capitalism does not find a natural equilibrium and can and has gone badly wrong. 2008 was not an isolated incident. In 1637 the Tulip bubble burst in Holland as market irrationality drove prices up to ludicrous levels. Despite the best hopes of many who spend their spare time watching the film “Wall Street”, unfettered capitalism does not work and must be kept in check by regulation. It is the Government’s responsibility, as the servants of the people of Ireland, to develop a regulatory system which ensures that markets and financial institutions cannot damage the real economy. While any reform of our obsolete financial regulatory system is to be welcomed, this legislation does not go far enough. It is a conjurers trick which does not give regulators enough power and oversight to prevent such bad practice from occurring again. As a representative of the people of Dublin South Central, and of Ireland, this is disappointing, but not surprising from this Government. Plus Ca Change, Plus C’est La Meme Chose.
|