"BAD BANKS" and "delinquent developers" should not be allowed to guide the Government's bank recapitalisation plans, Fine Gael leader Enda Kenny said last night.
Opening his party's national conference in Wexford, Mr Kenny said he and Richard Bruton, the Fine Gael finance spokesman, had been pointing out the need for bank recapitalisation for the past three weeks.
"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," he said. Mr Kenny said the bank guarantee only addressed the symptoms of the financial crisis, not 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."
Mr Kenny said restoring trust and repairing Ireland's reputation for responsible economic management would be tough. A start must be made by providing assurance that Irish banks had enough capital to absorb the likely losses from reckless property lending, he said.
"You know and I know how transfixed the Government has been by the economic meltdown. Transfixed. Rabbits caught in headlights. Postponing action at all costs. That's what they've been doing," Mr Kenny said.
"Now, they're finally moving towards some announcement on recapitalisation. What concerns me now is that the process lacks any transparency, that it will 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.
Commenting on reports that the bulk of the equity to be invested will be from private venture capitalists, Mr Kenny said the State had a role where the market failed but it needed to set down terms and conditions for involvement. "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 conditions are: a, the taxpayer gets a dividend; b, that credit is guaranteed for solid small and medium sized businesses; c, that there is upside for the taxpayer in the event of a sale; d, that the advice that the Government has received is published.
"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 warned against the danger of asset stripping and job losses .
"That option is dangerously appealing to the Government in the short run. It avoids the need for significant State investment. But is it the right solution for Ireland in the long-run? No, it is not."
Mr Kenny said the State should provide and attract long-term capital for the banks that would allow them to keep credit flowing.
"Indeed, consideration could be given to allowing individual Irish people to buy preference shares in the banks, and keeping a strong Irish link alive.
"Much better to make sure we emerge from this crisis with a competitive banking system dominated by at least three strong, Irish-owned institutions. Just two banks is simply not enough. We also must take steps to ensure that those organisations outside the restructuring are encouraged to stay and actively compete in the marketplace. I consider it appropriate and am calling on the banks to provide for a six-month moratorium on foreclosures for homeowners to enable people to consider all options for recovery in view of the recapitalisation programme to be announced," said Mr Kenny.
