Batt O'Keeffe (Cork North West, Fianna Fail)

The scale of the economic challenge facing Ireland is unprecedented. Our banking system is in crisis and businesses and households across the country are struggling. In response, the Government has devised a carefully considered solution to our financial sector difficulties - the National Assets Management Agency. In simple terms, NAMA will help banks to access cash to lend to businesses which, in turn, will stimulate our severely damaged economy.

The NAMA Bill contains a number of important changes that will allow the agency to achieve its goal of stabilising the banking sector and restoring the flow of credit to businesses. At the same time, NAMA minimises risk to the taxpayer. Without a functioning banking sector, viable businesses and households across the country cannot access credit. This would mean more businesses would close and more jobs would be lost. As a result, our ability to deliver public services and invest in public infrastructure would be undermined.

The bottom line is that banks are struggling to access funding because of concerns at home and abroad about risky property and development loans on their balance sheets. Because of the size of the Irish economy, Irish banks are heavily reliant on accessing funding from foreign financial institutions. Getting this funding is proving difficult and costs are high. As a result, Irish banks are restricting credit.

NAMA will clean up the balance sheets of Irish banks and allow them to focus on their core business. It will strengthen and improve their funding position so they can lend to viable businesses and households. Some commentators have asserted that NAMA is about bailing out bankers and property developers, but that is not correct.

Contrary to what some have claimed, NAMA will not buy the loans with money that could have been spent on public services. NAMA will issue bonds to the banks, essentially lOUs. The interest on these bonds will be paid out of the income NAMA receives from the good loans it takes over. Proceeds on loan repayments and property sales are expected to pay off in full the bonds that NAMA issues. These bonds can be exchanged for cash on world markets and at the European Central Bank. In other words, tens of billions of cash from outside the country will be pumped into our economy through the banking system. That will stimulate our economy.

Above all, the Government's primary concern is the welfare of the Irish people. The Government is determined to put in place provisions to protect the Irish taxpayer. There will be no easy terms available to borrowers from NAMA. They will be expected to pay the full amount owed by them in exactly the same way as they are obliged to pay their banks now. For borrowers who will not or cannot repay their loans according to the terms of their contracts, NAMA will pursue these using all the commercial and legal means at its disposal to get the maximum return. In addition, this Bill contains a specific provision to outlaw lobbying of NAMA in relation to any of its decisions. Any involvement by borrowers in the development or completion of properties acquired by NAMA will be strictly controlled.

Our common cause must now be the future of Ireland and all her people. One would expect that this should not be a time for political parties taking populist positions. The stakes are far too high for that. Yet, the Opposition parties continue to treat the economy as the plaything of political expedience. Fine Gael is at odds with two of its own former leaders on an approach to the banking crisis. Perhaps that is no surprise when one considers the party's proposal for a wholesale bank which, oddly enough, would not come into play until next October when the bank guarantee scheme runs out.

I have news for Fine Gael. Ireland cannot wait 13 months before trying to clean up the banks and kick-start the economy. Fine Gael's magic wholesale bank would supposedly get €2 billion in capital from the State and be able to borrow €40 billion from European Central Bank. This is not practical because the European Central Bank demands collateral. The wholesale bank would have to raise deposits and these almost certainly would be funds withdrawn from the current banks. Alternatively, the State would have to provide the wholesale bank with between €50 billion and €60 billion in bonds. There would be no benefit to the economy since the banks have access to the European Central Bank.

Fine Gael wants to default on the bondholders of Irish banks, but the so-called professional investors to whom the party refers are pension funds, insurance companies and other long-term savings institutions that provide funds to banks here so that they can in turn lend to businesses and households. Defaulting on the providers of money to Irish banks would dry up funding. Those are the same providers of funds that are lending to us to finance our budget deficit and to keep State services running.

I wish to deal with the Labour Party's plan also. Labour wants to impose a 50% discount on the loans being transferred to NAMA. It has picked that number-----

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