Extension of guarantee 'most expensive U-turn in Dáil history'

Speaking during a Dáil debate on extending the banking guarantee by twelve months today Sinn Féin Finance spokesperson Pearse Doherty accused Fine Gael and Labour of "the single biggest and most expensive political U-turn in Dáil history" and of writing "another blank cheque for the banks, including Anglo Irish Bank."

Said Doherty:

“We are being asked to saddle the Irish state and the taxpayer with a unknown liability on top of the existing guarantee of  €100bn. We are being asked to write a blank cheque for the banks, including Anglo Irish Bank. Given the volatility in the Eurozone it is highly likely that the scale of this liability will increase.

“Given the risk to the taxpayer involved in the bank guarantee this must be the single biggest and most expensive political U-turn in Dáil history.

“Of course today does not mark the U-turn itself. This sad event took place, behind closed doors in Government buildings in June of this year when the Cabinet agreed to extend the bank guarantee until the end of 2011.

“But today unlike in June, every member of the Government, including backbenchers, will have to vote on whether to breath a further 12 months of life into what is universally regarded as the most costly and the most damaging decision ever taken by an Irish government.

“The scale of this U-turn is truly breath-taking, given the depth of opposition to the bank guarantee, particularly from the Labour party.

“If there is to be one single decision which represents the Labour party’s capitulation to the failed policies of Fianna Fáil it will surely be this. So much for not writing blank cheques for failed banks.

“Today Fine Gael and Labour asked the Dáil to write another blank cheque for the banks, including Anglo Irish Bank, to seek additional government guarantees on private banking debt. They asked us to do this as uncertainty and volatility in the banking system increases and with it the level of risk to the taxpayer.”

Read an edited extract from Doherty’s speech below. 

The amendment before us this morning is “the recommencement of the bank guarantee of billions in the name of Irish taxpayers”. It “provides for the roll-over of the bank guarantee”.

“The Minister is asking the taxpayer to provide yet another line of defence for the banking system.”

Next week when the Government will announce €3.8bn of “cuts in welfare and elsewhere, it will be to meet the higher interest charges Ireland has to pay on an increased national debt because of the incompetent way the bank guarantee was cooked up and then handled.”

“The critical issue that must be addressed is whether the banks have changed sufficiently…that would warrant the taxpayers dipping into their collective pocket once again…”

Minister these are not my words. They are the words of Deputies Joan Burton and Richard Bruton taken from their speeches to this house on December 3rd 2009.

The Dáil was debating the Credit Institutions (Eligible Liabilities Guarantee) Scheme. The very same scheme that Fine Gael and Labour are seeking to extend here today.

Both parties, then in opposition, spoke strongly against the new banking guarantee. And both voted against the scheme.

Nine months later, on September 29 2010, when Fianna Fáil sought to extend the ELG for a further six months Fine Gael and Labours opposition to the scheme remained steadfast.

Joan Burton described the extension as ‘a vote of confidence in the government’s banking strategy’ firmly saying ‘Labour doesn’t do blank cheques’.

Micheal Noonan, while supporting the principle of the extension itself voted against it on the grounds that it would continue to provide cover for Anglo Irish Bank.

Minister, how times have changed. Fine Gael and Labour voted against the ELG guarantee in 2009. They voted against its extension in 2010. And yet here we are today, being asked by Fine Gael and Labour to extend the bank guarantee, not for another six months, but for 12 months.

We are being asked to saddle the Irish state and the taxpayer with an unknown liability on top of the existing guarantee of €100bn.

We are being asked to write a blank cheque for the banks, including Anglo Irish Bank. Given the volatility in the Eurozone it is highly likely that the scale of this liability will increase.

Given the risk to the state and the taxpayer involved in the bank guarantee this must be the single biggest and most expensive political U-turn in Dáil history.

Of course today does not mark the U-turn itself. This sad event took place, behind closed doors in Government buildings in June of this year when the Cabinet, including Joan Burton, Richard Bruton and Michael Noonan agreed to extend the bank guarantee until the end of 2011.

But today Minister, unlike in June, every member of the Government, including backbenchers, will have to vote on whether to breath a further 12 months of life into what is universally regarded as the most costly and the most damaging decision ever taken by an Irish government.

The scale of this U-turn is truly breath-taking, given the depth of opposition to the bank guarantee, particularly from the Labour party.

If there is to be one single decision which represents the Labour party’s capitulation to the failed policies of Fianna Fáil it will surely be this. So much for not writing blank cheques for failed banks.

Of course the Labour party, stung by the exposure of this massive U-turn will attempt to deflect attention away from their own bad decisions. They will allege that they alone stood against the blanket guarantee in 2008. That only they had the courage to stand up to Fianna Fáil.

Of course this is not true. But they have repeated it so many times that it is quite possible that they now genuinely believe it to be true. The Dáil record tells a very different story.

So let me set the record straight.

At the end of September 2008 there was widespread fear that a run on Irish banks was imminent and that our banking system was at risk of collapse.

Many credible economic commentators argued for a time limited guarantee of deposits and liabilities of banks of systemic importance. They argued this as an emergency measure.

Fianna Fáil, acting under pressure from the European Central Bank not to let any bank fail, introduced the Credit Institutions (Financial Support) Bill on September 30th 2008.

The Bill empowered the Minister to produce a Financial Support Scheme to provide a guarantee for Irish banks.

Sinn Féin gave conditional support to the Bill. We criticised its lack of detail. We called for specific protections to be provided for the taxpayer. We argued for tougher regulation of the banks. We stated that any bank in receipt of state support should assist struggling mortgage holders in distress. We called for a specific levy to be applied to covered institutions.

And we made it clear that we would only support the scheme if our substantive concerns were met in the secondary legislation.

Many of these concerns were echoed in the contributions to the debate made by Labour deputies including Finance spokesperson Joan Burton.

Two weeks later the Government brought the Credit Institutions (Financial Support) Scheme to the Dáil. It met none of the tests set by Sinn Féin during the debate on the enabling legislation. Rather it provided for a guarantee so expansive and so comprehensive that anyone with even an ounce of sense could see that the level of risk to the state and the taxpayer was unacceptable.

Sinn Féin voted against the Scheme on this basis.

The decision on 17 October 2008 by Fianna Fáil, the Green Party and Fine Gael to saddle the state and the taxpayer with a liability running into hundreds of billions of euros had consequences more profound and long lasting than any politician or economist could have then predicted.

Throughout 2009 Sinn Féin and the Labour Party continued to oppose the banking guarantee.

When the Government brought the Credit Institutions (Eligible Liabilities Guarantee) Scheme before the Dáil in December 2009 both our parties rightly saw it as a mechanism to further extend the disastrous decisions of 2008.

Joan Burton was right to say that supporting the ELG was akin to voting confidence in Fianna Fáil’s failed banking strategy. She was right to describe the ELG a blank cheque which would be used by the Government to increase the risk to the state and the taxpayer.

Richard Bruton was right to withhold support from the ELG on the grounds that the banks were not doing enough to help get lending back into the economy and to change their greed driven culture.

And when Fianna Fáil came back yet again in June 2010 seeking to extend the ELG for a further six months Joan Burton rightly criticised the Government for ‘having no exit-strategy’ from the banking guarantee while Michael Noonan rightly questioned the inclusion of Anglo Irish Bank into any support scheme.

With such a strong and vocal record of opposition to the ELG by both Fine Gael and Labour you would think that on taking office they would have set about developing an exit strategy from this toxic debt.

Yet at a Cabinet meeting in June of this year Fine Gael and Labour abandoned two years of principle and adopted wholesale the failed banking policy of their predecessors.

Worse than that, today they are seeking a 12 month extension of this failed guarantee.

Their arguments are no different to those presented by the late Brian Lenihan in 2008 and Eamon Ó Cuiv in 2009. There are no new justifications for saddling the state and the taxpayer with the additional risks that will arise from today’s decision.

This is yet another blank cheque written by a Government in hoc to the Irish banking system and the European Central Bank, with little regard for the consequences on ordinary people.

Clearly the Labour party does write blank cheques, when asked by Fine Gael that is. It seems an apt if depressing description of everything that is wrong with this coalition and Labours participation in it.

Sinn Féin will be opposing the proposed amendment to the bank guarantee scheme that you are proposing today. We will oppose it as we have consistently done since October 2008. We will do so because it is the right thing to do and because it is the honest thing to do.

In conclusion Minister I want to be very clear. Today you are asking us to write another blank cheque for the banks, including Anglo Irish Bank, to seek additional government guarantees on private banking debt. You are asking us to do this as uncertainty and volatility in the banking system increases and with it the level of risk to the taxpayer.