Government wants to give banks 'undated blank cheque'

LABOUR LEADER Eamon Gilmore has claimed the Government wants to give the banking system an “undated blank cheque” in amending legislation to extend the bank guarantee scheme beyond 2010.

But Taoiseach Brian Cowen insisted the changes were being made “to ensure that Irish banks will have access to the issuance of eligible debt securities for the same length of time as other banks” and compete “on a level playing pitch for those debt securities”. Other jurisdictions had issued state guarantees for much longer than two years.

There were acrimonious exchanges in the Dáil and the Opposition sharply criticised the guillotining of the legislation. But the Financial Measures (Miscellaneous Provisions) Bill was pushed through the House last night after just over two hours of debate, with four votes taken on the issue before it even got to committee stage, amid claims the Government dealt with the legislation in an “underhand” fashion, “straight out of Sir Humphrey”.

Mr Gilmore questioned the rush to pass the Bill when there were 14 months until the guarantee expired, but Mr Cowen insisted that it was necessary to “facilitate long-term debt issuance by the banks of up to five years” and it had been signalled in April.

The Labour leader said “we have given one blank cheque to the banking system, now the Government is effectively asking the House to provide the system with an undated blank cheque”.

Fine Gael finance spokesman Richard Bruton said “there is no sunset clause on these provisions”. The Taoiseach would “bleat” that “every time he comes up with something he is opposed, yet this serious legislation which he has brought to the House will almost inevitably be opposed tonight because most of the amendments the House wants to debate and have included, if possible, will not have been reached.”

Labour finance spokeswoman Joan Burton described the move as “an extra cocoon of Lenihan insulation from the cold winds of the market for our wretched banks”. She accused the Minister of demanding “near dictatorial authority and even immunity from review and scrutiny”.

Sinn Féin finance spokesman Arthur Morgan said the Minister was “disenfranchising the House” and the crucial element of the Bill allowed Mr Lenihan to extend the bank guarantee scheme “on a whim”.

Mr Gilmore who first raised the issue during leaders’ questions said that “buried away in part 2 of schedule 2 of the Bill is an amendment to the legislation that introduced the bank guarantee scheme. That amendment lifts the two-year time limit on the scheme and gives power to the Minister for Finance to extend the guarantee by ministerial order for any period”. It was an open-ended provision with no mention of five years, or of particular categories of debt. “The Minister for Finance is asking the House effectively to open the bank guarantee scheme and leave the manner in which it will be exercised to his discretion in future,” Mr Gilmore said.

But introducing the legislation, Minister for Finance Brian Lenihan said “there is no power in this Bill to allow me to extend the guarantee on the stroke of a pen; a positive resolution of the Oireachtas will be required were such to happen.”

Insisting he had been “open and transparent”, he said “it is essential not to extend the entire guarantee but to modify it to ensure our institutions are not put at a competitive disadvantage by virtue of the more extended guarantees which other jurisdictions have made. This is the essential issue here.”