Dáil debates

Wednesday, 16 September 2009

National Asset Management Agency Bill 2009: Second Stage

 

4:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)

I move amendment No. 2:

To delete all words after "That" and substitute the following:

"Dáil Éireann declines to give the National Asset Management Agency Bill 2009 a Second Reading because:

1. The Government has published neither the Bacon report that underpins the NAMA proposal nor any proper analysis of this enormous initiative in terms of:

a. The enormous risks for taxpayers of using a dubious and politically influenced valuation methodology to pay €90 billion for assets of highly uncertain long-term value;

b. The growing doubts regarding its impact on bank lending;

c. The growing concerns from creating a secretive, politically directed, state-managed, tax funded work-out process for 1,500 property developers.

2. The Government has not facilitated a review by the Oireachtas of independent analysis of alternative banking solutions which international evidence suggests are likely to be more effective at getting credit flowing, less costly and fairer for the taxpayer and less vulnerable to political manipulation and business lobbying.".

This is a decision of truly enormous proportions. The Minister is asking us to make a commitment on behalf of the taxpayer today of €54 billion. That is the highest commitment ever made by any Minister in any Act before a Parliament. It represents for every family in the country €34,000 of mortgage that they are being asked to pay in order to purchase these impaired loans from the banking system. The crisis we are now facing has not happened because some tsunami has swept onto our shores from international waters and engulfed us. This has happened because of catastrophic policy failures. It was the Government's regulatory system that failed to call a halt. It was its public finance policy that led to reckless overspending and exposure of the taxpayer. With its system of cosy relationships, it refused to confront problems and instead sought to buy them out and cosy its way around them. It is those problems that have left us in the hole we are now in. Those problems led to the easy money and the runaway property bubble that have brought our people to their knees.

The taxpayer is being asked today not only to buy these impaired loans, but as the Minister has said also to pay €7 billion extra for them over their market value. That is an extraordinary amount of money. Remarkably, this extraordinary decision is being taken without any forensic analysis of the costs and benefits of this approach or of the risks and threats that are clearly involved. It is happening at a time when funding is being slashed for many important needs in our community, including investment in vital infrastructure, care for extremely sick people and support for disabled children. It behoves us to treat this as real money because real money is what it is. This €5.4 billion is not, as the Minister for Defence, Deputy Willie O'Dea, seems to think some sort of fairy money on which we do not need to pay the interest or ultimately pay it back. This is real money. We pay the interest on it and we need to pay it back. It ultimately falls on the taxpayer and our children who need to service that debt.

Let us be under no illusions about the decisions we are about to take. If we get this wrong - I believe we are getting it wrong - we will undoubtedly prolong the recession that our people will face. We will increase the number of job losses in businesses around the country if we get this banking solution wrong. Let me try to assess what we have heard today. We have heard that the write-down is to be 30%, which is strikingly low. On behalf of the Green Party, Ministers and spokesmen were saying it needed to be at least a 50% write-down on the loans. We have now moved away from that. As recently as 31 August the Minister advised the Oireachtas Joint Committee on Finance and the Public Service that we were protected by an equity buffer of 25% in these loans. Today, the Minister was forced to reveal that that is not 25%, but half of that and he has only taken one element into account to determine that half of it has disappeared and that is rolled up interest. I wonder how much more will disappear before we find the truth of the matter.

We were told that the €7 billion step-up would be allocated 50-50 between senior and subordinated bonds. However, it is not being shared 50-50. Only one third of the extra will be shared through subordinated debt. Already, what seemed to be pillars of the new approach are being hacked away at.

Remarkably, we are told the taxpayer must pay a 15% mark-up on the value of the loans. Where is the underpinning for that? What evidence has the Minister offered to support his contention that we must pay that? He suggests there will be a bounce-back in prices of at least 10%. Where is his evidence? A reputable commentator - one of the few who forecast the crash - has told us a further 20% fall in property prices is likely.

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