Dáil votes to extend guarantee for banks

THE DÁIL last night backed the extension of the bank guarantee for a further three months, by 83 votes to 74, ahead of the lapse at midnight of the previous guarantee.

In a two-hour debate there was trenchant Opposition criticism of banking policy and a claim by Government backbencher Ned O’Keeffe (FF, Cork East) that “we were sold a pig in a poke”.

He expressed concern about how “we’re directing our banking system”, condemned the National Asset Management Agency and said it was “about time that the Minister for Finance put all this to bed”.

The Minister, Brian Lenihan, said the guarantee differed from the original one, which had provided for a blanket guarantee of the deposits and liabilities of Irish institutions by the Government in the face of clear and present danger to the financial stability of the State.

The latest, he said, was more focused and targeted than the original scheme and in line with the European model of bank guarantees developed in its wake.

The scheme no longer covered subordinated debt and imposed significantly higher fees on participating institutions for the benefit of a State guarantee of their liabilities.

The Government had acted to reform the system of regulation, he said, adding that the appointment of Prof Patrick Honohan as Central Bank governor and Matthew Elderfield as head of regulation had been welcomed by all.

He said he was appointing five members to the Central Bank commission, which was the unitary board with responsibility for the bank’s activities and functions.

These five are Max Watson, Prof John FitzGerald, Des Geraghty, Michael Soden and Prof Blanaid Clarke.

Fine Gael spokesman Michael Noonan said his party would only support the Government if it accepted an amendment to the motion introduced by Mr Lenihan.

This, he said, provided for the introduction of legislation before November to set up a bank resolution system giving the Central Bank powers to wind down or break up failing banks and to equitably share the costs with professional providers of capital and long-term funding.

The amendment also called on the Government to require Anglo Irish Bank to immediately commence negotiations with the holders of subordinated bonds to alleviate the costs of the wind-down to the taxpayer. But the amendment was disallowed because the Dáil could only approve or reject the motion.

Mr Noonan said his party believed it was misled by the Minister two years ago.

Labour finance spokeswoman Joan Burton said the reputations of the Taoiseach and the Minister had been shredded “as umpteen billions are carted into the Anglo incinerator despite their vulgar promises to the Irish people that their policy would be the ‘cheapest bank bailout’ in history’’.

Mr Lenihan, she said, had to look back on that fateful night of two years ago and see “the complete bonfire of the vanity he displayed that week”. Sinn Féin finance spokesman Arthur Morgan warned that an exit strategy from the debt crisis had to be established along with a new system of public banking.

“The Government should not be allowed to extend this guarantee scheme for another three days never mind another three months,” he said. His party believed that “a State bank should be created” by nationalising Allied Irish Banks and Bank of Ireland.