OPINION:The stark choice was whether to let one bank go down or implement the guarantee scheme, writes Stephen Collins
AS THE drama and excitement involved in the Government's late night decision to underwrite the Irish banking sector subsided yesterday concerns were expressed by all sides of the Dáil that, while the emergency legislation had stabilised the banks in the short term, there were still a lot of questions about how it would actually work and what the liability to the taxpayer might ultimately be.
For the Government, the sobering reality is that no matter how necessary the legislation was in the national interest, it will take some explaining to the public. The fact that unpopular bankers have been let off the hook is easy to grasp, while the unknown impact of an averted banking failure is an abstract concept.
If the legislation works then people will never know the scale of the potential calamity that has been avoided by Brian Lenihan's decisive intervention.
On Monday night he faced the stark choice of letting one Irish bank go down, with incalculable consequences for the entire banking industry, or implementing his guarantee scheme.
A banking collapse was avoided, at least for now, but what appears to rankle with many people is that irresponsible bankers and fat cat developers appear to have been saved by the exchequer guarantee but the ultimate liability of the taxpayer for that insurance policy is not clear.
Green Party TD Paul Gogarty summed up the feeling when he said in the Dáil debate: "Unfortunately, I must support it with gritted teeth because there are a lot of scum, and I state this deferentially in one sense, who do not deserve to be bailed out in this way.
"These people made a great deal of money out of many innocent people. Unfortunately, this is the only way we can protect our society. Passing this legislation is very much in the national interest."
The legislation took far longer than expected yesterday as the committee stage debate dragged on and on.
The major issues of concern to the Opposition were that the Bill did not spell out any detail of how the guarantee would operate, what the banks would be charged and what supervision would be applied to them by the Government.
The other big issue was the plight of Ulster Bank and National Irish Bank who were not covered by the legislation and as a result were haemorrhaging funds yesterday. Intensive behind the scenes negotiations took place in the Department of Finance on this issue and the matter was raised by Fine Gael leader Enda Kenny.
The furious reaction of the British authorities to the competitive implications of the measure cut little ice, although the mood in the Dáil certainly favoured the extension of the scheme to the two foreign-owned banks with a long history of involvement in the Irish market.
The committee stage of the Bill took far longer than expected with a range of Opposition TDs determined to speak on the principle of the legislation and not just on the specific amendments tabled.
By 8.30pm last night the House was still debating the first amendment out of 28 tabled by Joan Burton of the Labour Party seeking publication of the specific terms and conditions of any scheme before it could come into operation.
Burton said the Irish scheme was being toasted by bankers and financiers, not just throughout Ireland but in Europe, but the cost would be enormous.
"If the State steps in as the final guarantor of banking probity, underwriting banking deposits and borrowings to that extent, we need to know the terms and conditions of the scheme. In particular, we need to know that the reckless behaviour of the banks that led to this situation will be reined in."
Labour threatened not to back the Bill unless the Minister provided details of how it would work. Fine Gael TDs back the Bill in principle but were highly critical of aspects of the scheme. Party finance spokesman Richard Bruton pointed out that the Minister for Finance was taking sizeable powers but the Dáil had not been told what that regime involved.
"The problem is the Minister is asking us to make an act of faith and trust that he, in consultation with the regulatory authorities, will come up with a scheme that is robust. Prudence would suggest that we should not make that act of faith quite so easily."
Arthur Morgan of Sinn Féin summed up much of the Opposition ire saying: "We are giving the banks a blank cheque, but we are also giving the Minister a complete blank cheque. We have heard about blank cheques at the tribunals and we know that is not good practice."
Dinny McGinley of Fine Gael insisted that the crisis had been caused by a combination of the banks, the builders and the Government, and while he would support the principle of the legislation, he wanted those who had caused the problem to accept responsibility.
On the Fianna Fáil side there was backing for the Minister's action but also criticism of the way the situation had been allowed to develop. Cork East TD Ned O'Keeffe was highly critical of the Central Bank for not stepping in to prevent the out of control lending practices of the banks and he also said that Ulster Bank would have to be included in the scheme.
TDs on all sides were clearly responding to public hostility to the notion of propping up the banks, but whatever their criticisms, the consensus was still strongly in favour of Brian Lenihan's action, given the situation he faced on Monday night.
The mood in the Dáil favoured more information about the precise nature of the deal, allied to tough new controls on the banks but there was no appetite to do what the US House of Representatives did and reject the package altogether.
• Stephen Collins is Political Editor of The Irish Times