Simon Coveney (Cork South Central, Fine Gael)

The setting up of a national asset management agency to purchase loans from banks with a book value of €77 billion, secured on property and land currently worth a fraction of that sum, at the supposed discounted price of €54 billion based on an estimated future potential value, is the greatest financial gamble any government has taken on behalf of its people. The motivation of the Government in bringing forward this legislation is genuine, which is to create a functioning system from the current insolvent banking mess where liquidity cannot be provided for consumers, families or businesses due to the burden of toxic loans the banks have brought on themselves.

While this is, undoubtedly, a public sponsored bailout for Irish banks, I do not buy into the conspiracy theory that it is a bailout for the wealthy development friends of Fianna Fáil. Developers and speculators who have borrowed irresponsibly from careless and morally corrupt banks will continue to owe that debt, whether under NAMA or existing banks. I hope that, whatever shape NAMA takes if the legislation is passed, it will fearlessly pursue those responsible for property debt to minimise losses to the public. However, a growing number of others and I believe the NAMA approach is fundamentally misguided, irresponsible and blatantly unfair to the public which is to be burdened with the consequences of the enormous debt should NAMA fail to realise the value paid for its loan book.

The Government's gamble with taxpayers' money is based on such uncertainty that to support NAMA is like committing other people's money to a bet one cannot afford to lose. It is the uncertainty around NAMA that makes the proposal so unacceptable. Predictions as to whether NAMA will make a profit or loss in decades to come amount to guesstimates at best. The truth is nobody knows or can predict with any certainty how the Irish property market will perform in the next five to ten years. All we know is that we have no functioning property market and there is no reason to believe the position will change any time soon. The Government is committing tens of millions of public resources, albeit in the form of cheap bonds, on the basis of a future hope value for property, without any credible evidence in respect of future property values.

The financing of NAMA on top of the financing requirements of the Government between now and 2010 will massively increase Ireland's national debt levels. Predictions that our debt levels will reach 110% of GDP within a year are now accepted. The reduction of the national debt in the last ten years of prosperity has been wiped out in 18 months. As Dermot Desmond said today, public sector spending is already out of control. We do not need to bloat it further with a €54 billion spend on NAMA. However, the Government is right about one thing. We must find soon a solution to the banking crisis, as the economy is being strangled by lack of credit and cash.

I want to pose five key questions to assess whether NAMA is the best way to solve the banking crisis. Is it the lowest cost option and the most effective way to minimise losses? Does it minimise the risk to the taxpayer? Are investors and risk takers in banks taking their fair share of the losses? Will NAMA solve our credit and liquidity crisis? Is the NAMA plan the only show in town? The answer to each of these questions is an emphatic no and the basis for the need to oppose this expensive and flawed proposal.

To take the first question as regards whether NAMA is the lowest cost option, last November the IMF finalised a study of banking and property crises in seven countries where this type of approach had been adopted. It stated clearly that government owned asset management companies appeared largely ineffective in resolving the issue of distressed assets, mainly due to political and legal constraints. In other words, the IMF warns that NAMA-type solutions end up costing the taxpayer a fortune because politically directed state agencies are much less skilled and aggressive than private banks in recovering loans from wealthy powerful interests. The Fine Gael proposal is an alternative to NAMA and would force banks to confront their mistakes in order that they effectively would set up their own asset management and debt recovery agencies. Our view is being adopted by more and more countries because it makes sense and only turns to the taxpayer for bailout funds as a last resort after forcing banks and their investors to carry risk and responsibility first.

Does it minimise risk to the taxpayer? Absolutely not. At a time when we will be asking people to pay more taxes, take cuts in their pay and accept cuts in public services because our public finances are regarded as a basket case owing to Government incompetence, we are exposing the State to unnecessary and enormous financial risk. The Minister tells us that if NAMA does not make a loss, banks will need to pay a levy to meet that loss. What a joke. If banks are charged a levy how will they finance that levy if not by charging consumers for their banking services? Either way the public will pay for the losses incurred.

Are the investors and bondholders taking their fair share of risk? Absolutely not. Surely a principle should be set at the outset of this discussion that the first losers of crystallising losses in banks due to appalling decision making and lending should be the speculators and bondholders in the banks concerned. When professional investors make an investment involving risk and potential return that goes badly wrong, they expect losses - that is capitalism. What is happening here is a transfer of risk and ultimately a large amount of funds from the taxpayer to bondholders and investors, which is a scandal.

Will this plan put liquidity back into the economy? This is the key question. What are we trying to achieve here? Are we trying to save banks to keep the institutions alive or is it about ensuring a functioning responsible banking system to provide credit and cash to an economy in crisis? The Irish economy will continue to stay on its knees. Businesses will continue to suffer and unemployment will continue to rise if we cannot get liquidity into the veins of the Irish economy. Irish recovery is not about property values - that is a consequence. It is about liquidity and credit availability. If people cannot borrow they cannot spend and businesses cannot grow. I cannot see how NAMA will result in banks lending to businesses, families and consumers. The funding given to banks through bonds will not be funnelled into lending to consumers. It will be used to repay debts owed by banks to other lending institutions. NAMA will not reduce the banks' loan to deposit ratios. It will simply replace one form of non-deposit funding, interbank loans, with another, ECB funding. NAMA alone fails to solve the most crucial problems of liquidity and making funds and credit available to people and their businesses. Fine Gael wants to inject finance directly into the economy through a new State-owned recovery wholesale bank. This has been achieved in France as Deputy Bruton and other Fine Gael spokespeople pointed out.

Is NAMA the only show in town? No it is not. Fianna Fáil Ministers and, more recently, Green Party representatives have tried to create the myth that we have no option but to accept NAMA. They claim it has been accepted by the markets at this stage and we must proceed. They claim that if we do not proceed we will introduce uncertainty and that the most important issue now is certainty. I do not accept that. This is wrong. Other countries are debating how to resolve banking crises as we speak. We have the benefit of other solutions being implemented elsewhere. Most governments are now moving away from the NAMA approach. Fine Gael's approach of a good bank-bad bank solution has been outlined repeatedly. This is an approach, variants of which have been adopted to fix banks in other countries. The examples have already been given of Northern Rock, Washington Mutual, and Bradford and Bingley.

To those outside this House who are taking an interest in this debate, I say that NAMA is flawed and there are alternatives despite the spin people will hear from the Government. Ireland is in crisis and banking is at the centre of that crisis. We need big thinking from Government, but it has got it wrong here and should be sent back to think again.

See this speech in context