Jimmy Deenihan (Kerry North, Fine Gael)

The book sets out the time line from March 2007 when house prices began to decline nationally through to 29 September 2008 when bank shares fell sharply and on to the introduction of the NAMA initiative on 7 April 2009. It references a statement by Groucho Marx which sums up rather well what the Government is doing with this legislation: "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." I hope NAMA does not prove to be the wrong remedy.

The book to which I referred sets out how the property market was allowed to become dangerously overinflated. Bankers fuelled this bubble by throwing out the rule book on lending. As Deputy Hogan said, decisions by the former Minister for Finance, Mr. Charlie McCreevy, and other cavalier politicians led to the near invisible financial regulation and reckless tax breaks that made it all possible. This is summed up clearly in the book and I recommend it to the Tánaiste.

There have been consequences to the delay in introducing this legislation. It has afforded some of those most exposed by this legislation ample time to cover their tracks. Rather than pursuing some of these so-called zombie developers, the banks merely rolled up the interest. This will allow them to seek a greater payment from NAMA to reflect the apparent higher value of their assets. This lack of urgency indicates how the process thus far has been handled poorly by the Government.

We are told that the primary objective of NAMA is to ensure that the banks resume lending to businesses and individuals. I urge a note of caution in this regard. The banks will try to reduce their loan-to-deposit ratio, which is currently at some €1.65 for the Bank of Ireland, to a prudent €1 lent for every €1 deposited. In other words, there is no expectation the banks will be in a mood to lend very generously in the times ahead. The commercial managers who made the decisions in the past to lend money are the same people who are making the lending decisions now. Having been burned once and subjected to fierce criticism, they will be inclined towards caution. Although the banks will receive €54 billion through NAMA, this does not guarantee there will be lending on the same scale as heretofore and that every small business will be saved. It is important to recognise that.

The banks will not in future be willing to participate in the types of competitive practices that featured in the past. Some of the more responsible banks were essentially forced into a position of reckless lending by the reality that a potential customer who was refused credit in their institutions could simply go directly to Anglo Irish Bank to secure it. Any such loss of custom would be seen as a failure. As a result, all banks were effectively in competition with Anglo Irish Bank. It is important to bear in mind that the issue of liquidity, as described by Dermot Desmond in an excellent article in one of yesterday's newspapers, may not be resolved by this provision.

Looking to a recent international example, the Resolution Trust Corporation in the United States was established in the aftermath of the savings and loans crash in the late 1980s. This body proved to be a loss-maker in the long run.

Will NAMA be subject to the Freedom of Information Act? Will a regulator or ombudsman be established to deal directly with NAMA and allow arbitration to take place outside the courts system?

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