Kenny warns against defending 'bad banks and delinquent developers'

 

Fine Gael leader Enda Kenny has warned against the danger of bad banks and delinquent developers guiding the Government’s bank recapitalisation plans.

Opening his party’s national conference in Wexford tonight he also questioned what long term interest any international venture capitalist firms would have in the ongoing viability of Irish banks and Irish business.

Speaking about the crisis in banking and finance he said. “Let me be crystal clear as to where we stand. Others can defend bad banks and delinquent developers. We are here to defend the interest of the people. The customers. The innocent victims.

“[Finance spokesman and deputy leader] Richard Bruton and I have been talking about the need for recapitalisation of the banking sector for the last three weeks in order to help get credit flowing again and save jobs in Irish businesses.”

Mr Kenny said he had warned all along that the that the bank guarantee by itself only addressed the symptoms of the financial crisis and did nothing to address the cause.

“That cause is the complete loss of trust in Ireland and Irish banks because of the reckless economic and financial management of the country over the last five years. Restoring trust will be tough.

“Repairing our national reputation for responsible economic management will be tougher. But we must start by assuring depositors and investors that our banks have enough capital to absorb the likely losses from reckless property lending in recent years,” he said.

Mr Kenny expressed concern that the Government’s actions would be dictated, not by the long term interests of the country, but by the narrow self-interests of bad banks, private venture capitalists and delinquent developers.

“All of the vultures circling around to see if they can make a quick buck out of Ireland's difficulties,” he said.

“Reports today appear to state that the bulk of the equity to be invested will be from private venture capitalists. We support the recapitalisation of the banks in the interests of business rather than in the interest of banks and developers. The State has a role where the market fails. We need to be absolutely clear in relation to the terms and conditions by which the State gets involved.

“There are pre-conditions – and the State cannot afford to repeat the eircom fiasco. There may need to be public and private equity injected into the banks. The public equity is designed to support the national interest – employment, businesses.

“The nightmare scenario is that - as with the Eircom fiasco - this Government hands one or more of our major banks over to some US private venture capitalist, whose only interest will be in making a quick buck,” said Mr Kenny.

He said that option was dangerously appealing to the Government in the short-run as it avoided the need for significant State investment. But it was not the right solution for Ireland in the long-run.

Mr Kenny said it would be much better for the state to provide, and to attract from other sources, long term patient capital for the banks that allowed them to keep credit flowing in the economy, with very strong conditions on credit availability for small businesses in particular.

“Indeed consideration could be given to allowing individual Irish people to buy preference shares in the banks, and keeping a strong Irish link alive,” he said.