Pat Rabbitte (Dublin South West, Labour)

I appeal to the Government to rethink its latest decision on the banking crisis. I repeat my conviction that the NAMA, in the context announced, is wrong for the economy and the taxpayer. Surely the Minister for Finance must wonder why not a single independent commentator of any stature has come out in support of his position. Yet, as Deputy Gilmore said, a substantial body of independent commentary advocates temporary nationalisation of the two big banks rather than going down the NAMA route as proposed by the Government.

The Government's failure to rebut the case for temporary nationalisation is very worrying. The ministerial arguments for the NAMA are merely assertions and do not engage with the case set out by different academics and banking experts. Most worrying of all was the piece in The Irish Times a couple of weeks ago by Dr. Alan Ahearne, who is now advising the Minister. Dr. Ahearne's only substantial argument is the assertion that, if nationalised, the two big banks may not be able to source money on the international inter-bank markets. He produced no evidence for this somewhat extraordinary contention that banks backed by the State would be less likely to source funds than private banks of doubtful solvency. We know that State owned banks already successfully access funding on the international markets. Is it seriously being suggested that a nationalised bank would be refused funding by international banks but a bank that is owned 70% by the State would be successful?

Neither has the Minister told us how, in the present environment, it is proposed under his model to price the assets being stripped out of the banks. The prospect of the usual suspects being let loose on €90 billion worth of taxpayers' money will eventually, when understood, bring people onto the streets. The Government is playing with almost three times the annual tax take. The men in sharp suits will do what they always do, and this time with knobs on, because the trading will be underwritten by the taxpayer. Already some of the shakers and movers are removing the "good" bad assets from the covered institutions and placing them with banks not headquartered in this jurisdiction. There is nothing to prevent them doing this and further disadvantaging the taxpayer. They are also engaged in restructuring the ownership of some built and half built developments to enable the NAMA to be stymied and obstructed when it comes to take over these assets.

The Bacon proposals are a nightmare for the taxpayer, the economy, employment and, eventually, for the Government. Mr. Peter Bacon has made a very poor fist of defending his proposals. It appears as if he had been given instructions that whatever he came up with, he was not to suggest nationalising AIB and Bank of Ireland. That appears to have become an article of faith with the Government although it is not clear why. Is it because Bank of Ireland has about 80,000 share holders and AIB 90,000, approximately 76,000 of them in the Republic? The Labour Party is not arguing for the confiscation of the shareholders' stake and clearly, as Deputy Gilmore said, some acceptable provision would have to be made for their interest. However, fear of the electoral wrath of shareholders is not an especially strong argument for persisting with a formula that will squeeze the Irish taxpayer for the next generation.

The Minister for Finance must know that the challenge of pricing the bad assets where frequently there is no market while the banks remain partially in private ownership is fraught with pitfalls. If the bad assets are overpriced the taxpayer pays the price. On the other hand, if the bad assets are properly diluted, the banks will require further recapitalisation and the taxpayer will again have to pay up. In contrast, temporary nationalisation offers the prospect of the taxpayer benefiting from the upside when normality returns. The challenge of acquiring the bad assets and tangling with the banks and developers to do so is the most difficult task yet undertaken by the State. It is a task, according to one writer in The Sunday Business Post that would require 700 specialist staff. The whole thing is unthinkable.

The Labour Party leader has already today drawn the Taoiseach's attention to the truth that temporary nationalisation is not a proposal from the Labour Party alone. The IMF, for example, has said:

Insolvent institutions (with insufficient cash flows) should be closed, merged, or temporarily placed in public ownership until private sector solutions can be developed. While permanent public ownership of core banking institutions would be undesirable from a number of perspectives, there have been numerous instances (for example, Japan, Sweden and the United States), where a period of public ownership has been used to cleanse balance sheets and pave the way to sales back to the private sector.

That is the view not of the Irish Labour Party only, but of the IMF. Other agencies at home and internationally have expressed similar views. Some 20 academics from the Dublin universities with no vested interests have vehemently contested the NAMA approach as structured and argued for temporary nationalisation. Neither the Taoiseach nor the Minister for Finance can reach for any independent approval of the Government's approach.

Today the Taoiseach made the odd statement that he did not believe in assuming any more responsibility than is necessary at the time. But this is not a pay-by-instalments scheme. If we give legislative underpinning for the road embarked on by the Government, much of the damage will be done and much of the cost will have been borne by the time nationalisation becomes inevitable. It is always interesting that the Government has not ruled out temporary nationalisation. It is just that, like our former colleague, Dinny Foley, the Government is "hoping against hope" that it will not happen. The problem is that if nationalisation is forced on us, and most experts think it will be, we will already have borne a huge part of the cost.

Nor can I see the merit in the Fine Gael amendment which similarly seeks to avoid what it calls "early nationalisation" on the basis that it would essentially extend the guarantee beyond 2010. Surely we have to admit that, whether we like it or not, the guarantee will inevitably be extended beyond 2010. The back-up notes to the budget effectively signalled as much when it was recorded that,"The Government also intends in line with its previous indication to put a State guarantee in place for the future issuance of debt securities with a maturity of up to five years." This may or may not add to the overall stock of guaranteed liabilities but it must inevitably extend the guarantee for at least part of that stock. I fail to see how the fear of extending the guarantee beyond 2010 is a reason for not facing up to the big question now.

If I have only one minute, will the Ceann Comhairle permit me to put on the record a quote from the Taoiseach, which fits in with his incremental approach today about not accepting responsibility for something until one has to? On 30 September 2008 he told the House:

The point I am making and the commitment I am giving is that in the event of having worked out whatever had to happen in relation to those banks, and if a deficit emerged, the sector would pay, not the Irish taxpayer. That is my commitment to the House.

I repeat the Minister's word, "That is my commitment to the House, that the sector would pay, not the taxpayer".

We know the truth now. The sector is not able to pay and the taxpayer is being squeezed to death. The road the Government has embarked on with the NAMA approach will squeeze the taxpayer further.

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