Taoiseach rejects Labour call to nationalise banks

TAOISEACH BRIAN Cowen rejected a Labour demand to temporarily nationalise the banks during heated exchanges in the Dáil

Mr Cowen said that he was not seeking to assume any more risk for the State, adding that the Labour proposal did not deal with the funding and bad debts’ issues.

“It deals with the ownership issue, which is your position. . .” he added.

Mr Cowen said there was a continuous effort to portray that investments made by the Government were to bail out people.

He added: “We are in the business of trying to help those who depend on banks. We need a workable banking system. . .and I know the traction and the revs that you are able to get at the doorsteps. . . by suggesting that this is about bailing out banks.

“This is about trying to bail out the Irish economy. . .trying to save the Irish economy by having a proper banking system.

“And you have to make certain decisions in order to do that in terms of the scale and magnitude of the challenge that faces us.’’

Labour leader Eamon Gilmore challenged Mr Cowen to accept his party’s private members’ motion, moved last night, proposing temporary nationalisation. The banks could be cleaned up and put back into order, he said.

A national investment bank would be established, with a banking commission to oversee it.

He said there was a crisis and what the Government was doing was not working. “It is costing more and more,’’ he said.

“The money that we should be committing to building our schools, hospitals, building up our infrastructure, providing broadband, doing the things that a growing economy will need in the future, is now going to be committed to sorting out the banks.’’ There had to be €8.5 billion upfront for recapitalisation, and, “God knows how many billions you are going to have to spend in order to buy up the bad debts. . .’’

Mr Cowen said that introducing the bank deposit guarantee stopped banks collapsing because people could safely leave their deposits in place. “Other countries followed that move. . .You opposed that move in this House,’’ he added.

“Money is being invested in bank recapitalisation, and I would remind you that that there was an eight per cent return on that investment. So the suggestion that we are handing over money, without getting a return in that investment, is not correct.”

He added that it was something Labour continued to portray day in and day out, “because it thinks it gains votes, even if it is misinformed’’.

Mr Cowen said the National Asset Management Agency (Nama) was established to remove uncertainty and introduce a new approach to bad or non-performing loans for development land and investment property.

Later, Labour’s Pat Rabbitte said that developers were already shifting the best of the bad assets to foreign banks to avoid Nama taking the good with the bad.

“There is nothing to prevent them doing this and further disadvantaging the taxpayer.’’ He said there was a a body of substantial independent commentary advocating temporary nationalisation of the two big banks rather than going the Nama route. as currently proposed by the Government.

Minister for Finance Brian Lenihan said the Government was acting on the best advice, not just the Central Bank and professional advisers, but also on the advice of what was the best international practice. The House will vote on the Labour motion tonight.