Deputy Pat Rabbitte delivers his final speech to Dail Eireann
28 January 2016
“The Banking Inquiry has done the State some service for which future economic historians will be grateful”
Dáil Eireann gave the members of the Banking Inquiry an almost impossible mission given the restrictions, constitutional and legal, in which they had to operate. We owe the Chairman Deputy Ciaran Lynch and each member of the too large Inquiry team a considerable debt for the remarkable effort, patience and diligence with which they discharged a very difficult responsibility.
They have done the State some service for which future economic historians will be grateful. The DIRT Inquiry remains the model for Inquiry by Parliamentary Committee. Only Deputy Durkan and myself are left standing from that experience and we would be the first to say that the Inquiry into the Banking Crisis was more complex, more extensive, more contentious and more problematic for several reasons. For the Chairman Ciaran Lynch TD to have navigated a completed Report to dry land is a very considerable achievement.
Those who dodged the hard work involved in the Inquiry were first out to criticise the Report. Bankers considered ideal a few years ago for the post of Central Bank Governor are now considered pariahs that the Inquiry let off too lightly. It is my own impression that the legal advice available to the Inquiry erred consistently on the side of caution but if the Inquiry members had spurned that advice the Report would never have been published. Indeed it is very probable that the immensely valuable public hearings would have collapsed if some of the more simplistic criticisms had prevailed. I will to return to this critical issue of Inquiry by Parliamentary Committee.
Let us take as read the failure of the Central Bank, the incompetence of the Regulator and the dereliction of duty and negligence of the Fianna Fail-Green Party Government. The rot started in the banks. The wild recklessness of Anglo-Irish Bank was breath-taking. But how did two conservative banks that, in one guise or another, preceeded the founding of the State go bust losing money mainly in their core business of making loans in Ireland? Every single bank, Irish or foreign owned, got into serious trouble and had to be rescued by the Irish State or by foreign parent banks. Anglo and Nationwide lost a mind-boggling eight to ten times their capital. There is a wide variation in the scale of the losses. In terms of loan losses AIB seems to have been three or four times worse than the similar sized Bank of Ireland. The business model of the two banks was and is similar. One building society, Irish Nationwide, was much worse than another, EBS.
I don’t know if the voluminous back-up papers explain these discrepancies or if there is a bank by bank scrutiny into the sources of these wide variations. Whereas all of the banks were mismanaged, some were recklessly mismanaged to a degree that almost defies understanding. It must be the case that individual banks did their own investigations of the sources of the disaster. Were these analyses furnished to the Inquiry? If not it is a failure of accountability and I presume that the modern Central Bank has the authority to demand production of these reports.
Dáil Eireann cannot signal approval for the cavalier treatment of the Inquiry by the ECB. Given the flaws exposed in the ECB’s own architecture, is it acceptable that an occasional appearance in the European parliament is the only gesture to accountability?
The Government of which I was a member was resolved that there should be burden sharing and we had quantified the value of that. The NTMA estimated – and the memo of 28 March 2011 is disclosed in the appendices to the Report – the financial benefit to the Irish Exchequer at €14.9 billion. The savings made in respect of subordinated bondholders means that the cost of the ECB veto to the Irish Exchequer was in excess of €9 billion.
This was the second occasion in which the ECB stopped a sovereign Irish Government from imposing haircuts on holders of unsecured and unguaranteed bonds issued by banks which necessitated re-capitalisation at public expense.
The Inquiry is clear that the ECB threatened on both occasions to withdraw approval for Emergency Liquidity Assistance to the Irish banks unless the bondholders were paid in full which would have shut down our banking system. A J Chopra of the IMF rejected in his testimony the proposition advanced by the ECB president, that haircuts to senior bondholders in Ireland would cause contagion to Eurozone markets in senior bank bonds. Subsequent experience in Cyprus, Italy and Portugal would seem to bear out Chopra’s view. And, of course, in the Bank Resolution and Recovery Directive burden sharing is now expressly contemplated.
M. Trichet’s dictat was punitive of Ireland. But the question remains concerning whether the ECB had the legal authority to impose arbitrary costs on the Irish Exchequer in pursuit of broader Eurozone objectives. The Irish Times reported in December that the Inquiry team wished to recommend that the government should sue the ECB for damages over its actions in 2010 and 2011 but were prevented from so recommending by the Inquiry’s own lawyers. If that is so, it seems to be an unnecessary intrusion into the domain of politics. Whether an Irish Government should use its statutory entitlement to seek judicial review at the European Court of the actions of an EU institution is a political matter and a matter that I hope the next government will consider.
This may be the last working day of the 31st Dáil. It is the last time that I will address Dáil Eireann. It has been a unique privilege to have been elected to this House by the people of Dublin South-West in six successive General Elections. I did not envisage that my final remarks would concerned a banking and fiscal collapse that posed an existential crisis for the State itself. Thanks to the work of Deputy Ciaran Lynch and his colleagues, economic historians and others will be able to study the lessons to be learned.
I remain convinced that any Parliament that does not have the right of Inquiry by Parliamentary Committee into legitimate matters of public interest is a diminished parliament. Properly organised and conducted, it is a natural extension of parliamentary oversight and would improve the performance of government. Following failure of the Referendum, repeated experience of the costly and slow public inquiry system under the 1921 Act and the latter day difficulties encountered under the Commission of Investigations Act, we now have an impasse. What is so unique about our jurisprudence that makes impossible here a form of hearing that is routine in so many other settled parliamentary democracies? Unless we frame another amendment and return to the people, we can never have an Inquiry in which there is an “adjudicatory” finding upon the conduct of a person who was not a government minister or holder of other constitutional office or a member of the Oireachtas. The difficulty therefore as shown by today’s Report is that there is in fact no clear demarcation between an Inquiry into policy and an Inquiry into culpability. By adjudication I mean a simple finding of fact, without any legal effect, whose impact is solely on the reputation of an individual. I draw to the attention of the House the remarks of the retiring President of the High Court, Mr Justice Nicky Kearns when he said in December that “Judges and Courts should not be excessively overactive or interventionist in areas where the boundaries of the judicial and executive function intersect.” Mr Justice Kearns acknowledged that many commentators now seemed to feel successive Court interventions had “virtually paralysed” the investigatory process “where accountability for matters of serious public concern is required.” The Courts he said “should never put themselves in the position of realising, all too late, that a particular decision has opened a Pandora’s Box of unintended consequences.”
In his dissenting judgement in the Abbeylara case, then Chief Justice Keane delivered his understanding of Irish law.
“The power of the Oireachtas to conduct investigations is inherent in the legislative process. That power is broad. It encompasses inquiries concerning the administration of existing laws . . . . . defects in our social, economic or political system for the purpose of enabling the Oireachtas to remedy them.”