Opposition condemns Lenihan over banking plan

The Opposition has today called on the Minster for Finance to show leadership over his plan for recapitalisation of the banking sector.

During a statement to the Dáil on the recapitalisation of credit institutions, Brian Lenihan said financial institutes had been asked to submit proposals that conformed to strict terms and conditions as set out by the Government.

The Minster today told the Dáil that State investment in banks would not be given without such conditions that secure the interests of taxpayers. He added that any role for private investors would reduce the need for such State investment.

Mr Lenihan said after the Government received a PricewaterhouseCoopers report in November into quality of assets at financial institutions, he had raised issues with those companies in an “ongoing and intensive” dialogue.

The Minister said he had encouraged financial institutions covered under the guarantee to make funding available to small and medium-sized enterprises, and a number of banks had announced their intention to do this.

However, Fine Gael finance spokesman Richard Bruton said no strategy was yet evident on the bank recapitalisation after two-and-a-half months. He said there was need for “careful scrutiny” of any recapitalisation scheme, yet the Dáil was now being dismissed for six weeks over the Christmas period.

"The Government seems to be continually looking for someone else to come up with the answers . . . the prevarication has become part of the confidence problem . . . you're not setting an agenda that the banks must respond do, you're waiting for them."

“Banks in the present situation will stick with bad loans and ration good businesses . . . because they are looking after their own skins,” Mr Bruton said.

“We now need to see you [Mr Lenihan] answer some of the hard questions. There is the real fear there is not the skills . . . to manage this effectively, and I think people are dubious that the Government can sit down with wolves and come out with a credible package to protect the taxpayer.”

“We need to see your vision.”

Labour TD Joan Burton said the Minister’s statement was “evading” the purpose of the debate, which she said “was to give some sense of how you are approaching this problem”.

“The face that you are unwilling to take questions . . . indicates that you are not very much further in deciding what to do,” she said.

Ms Burton said Mr Lenihan's “first-mover advantage” in guaranteeing the State’s bank deposits had long been eroded by his “dithering”.

She added the unknown level of bad debts in the bank’s balance system was poisoning the bank sector, yet “there is no evidence yet that they have addressed that issue”.

"I'm baffled by the Financial Regulator who is saying all is well in the banking sector. It's like saying the state rooms in the Titanicare in perfect order while the ship itself is going down."

Former Labour leader Pat Rabbitte said the Minster had taken the “worst hospital pass in modern politics” from his predecessor but had proved to be a “slow learner” in economics.

“We still don’t know the shape of the fund is . . . [or] what the terms of conditions are.”

Sinn Féin economic spokesman Arthur Morgan TD accused the Government of ignoring the warning signs of the impending financial crisis. "With the amount of time that has elapse, one would think the Government could produce details [of a recapitalisation plan]."

He warned against allowing venture capitalists into the banking system, saying this would put the system in a "perilous position" and threaten the interests of the State.

Responding, the Minister for Finance said if the political charges from the Opposition were stripped away, what everyone wanted was a reputable banking system.

He rejected the charge there had been any delay from the Government on injecting funds into the banking system. "I have spent night and day since budget time working on this particular issue."

Mr Lenihan also dismissed the claim vested interests had a role. " I act in the public interest, in the national interest, and nothing else."