Noonan scorns coalition bank plan

Finance Minister Michael Noonan has launched a shuddering attack on the previous government, claiming its banking policy was as dark an era as the Civil War.

The minister opened his plans for a reformed financial sector with a withering assessment of his predecessor Brian Lenihan’s attempts to bailout banks.

Mr Noonan, flanked by Taoiseach Enda Kenny, claimed the Fianna Fáil/Green coalition’s decision to guarantee all Irish banks after late night talks in September 2008 had shackled the State to mounting debt, unemployment and emigration.

“Tuesday September 30 2008 will go down in history as the blackest day in Ireland since the Civil War broke out,” he said.

“September 30 2008 was the date on which the then government extended the infamous guarantee to the Irish banks and decided that Anglo Irish Bank should be supported and maintained.

“It quickly became apparent that Anglo was insolvent in the absence of State support, that the other banks were illiquid and that the banking system was not fit for purpose.”

Fine Gael voted for the bank guarantee but has claimed it was not given the full information on the state of the banks.

Mr Kenny accused the previous administration of dithering in the face of crisis, but claimed the Government’s plans would put the country on the road to recovery and draw a line under the “failed policies of the past”.

“This Government has a clear plan to fix the banking sector and in doing so to help lay the foundations of broader economic recovery,” he said.

And the Taoiseach said the results of the stress tests would now bring clarity and purpose to the Government’s negotiations to ease the terms of the IMF/EU bailout.

Mr Kenny promised a “diplomatic onslaught” across Europe to renew connections.

Mr Noonan focused his anger on the perceived links between builders, developers and Fianna Fáil, claiming they allowed the banks to become too big.

“The JCB and the swinging crane had become the logos of the banks, and Irish bankers were as likely to be funding apartment blocks on the Black Sea or dabbling in property schemes in Singapore as they were to be investing in the Irish economy,” Mr Noonan said.

“We are now in the third year of the banking crisis. The previous government failed to act.

“They ducked and dived and procrastinated as they lurched from one crisis to the next. They went through periods of denial and periods of self justification. They paved the road to disaster with good intentions.

“They never fixed the broken banks however.”

Mr Noonan pledged bonuses to bank chiefs would no longer take place amid controversies under the previous administration that senior bankers were taking home payouts while getting bailed out by the taxpayer.

``I cannot understand how bonuses were paid in the past and it's very hard to believe how such big amounts of money were paid without senior people being aware of the payments,'' he said.

“But certainly, it would be my view that bonuses are no part of Irish banking going forward in the way that it’s now being structured.”

During an assured, near 20 minute address in the Dáil, Mr Noonan set out the future direction of the State’s banking sector.

The minister, who took office less than a month ago, stressed the Fine Gael/Labour coalition had a strong mandate to act.

He detailed how Allied Irish Bank would be merged with the EBS building society to form one of two new universal pillar banks, with Bank of Ireland the other.

Mr Noonan said Bank of Ireland would have until June to raise private investment and avoid majority state control.

Irish Life & Permanent will sell off its lucrative pensions division Irish Life.

And in a nod to international investors keeping a close eye on the Government’s plans, Mr Noonan said the banks would be fully funded to ensure confidence in the country’s economy.

The plans, he said, would finally break the “vicious cycle of the massive dependence of the banks on the state”.

In a bid to bring clarity to taxpayers of the scale of the financial losses, Mr Noonan said €46.3bn euro of public money already put into the banks will never be recovered.

A staggering €60bn of private equity, most of it owned by Irish citizens, has been lost since 2007, while subordinated bondholders have taken a €10bn hit.

Mr Noonan said there were strong arguments for Bank of Ireland and Allied Irish banks keeping a good relationship with senior bondholders, but claimed Anglo Irish Bank was different, branding it a warehouse for impaired assets.

But he said it did not need extra capital as it was not part of the stress tests.