Pat Rabbitte (Dublin South West, Labour)

I would like to raise a number of questions with the Minister for Finance on behalf of business people trying to plan their survival in the real economy. I would be obliged if the Minister when he replies to the Second Stage debate would address these acute concerns of people who are trying to stay in business and retain their workers in employment. The debate for the past number of weeks has been dominated by property and, not surprisingly, the valuation of the properties, in whatever stage of development, that underpin the loans being transferred to NAMA but what about the real economy?

The banks have frozen credit. They may be advertising "business as usual" but all they are doing is advertising. Small business owners have been hanging on waiting for the Government. They have been borrowing from relatives; they have not been paying or are delaying paying their creditors; they have been using up their savings; and their overdrafts have been cut back or eliminated. The banks do not tell the truth. Whatever the Government was to come up with almost a year after governments in the UK and the US took decisive action, it was hoped it would inject liquidity into the system and normal business could resume.

NAMA is the Government's response and, although speaking the language of compromise, the Government has set its face against any other response. No mechanism in this Bill offers any confidence to SMEs and business generally that the taxpayer-guaranteed ECB funding will ever get to small business. There is no mechanism and there are no guarantees. The chronic, if not technically insolvent, condition of our banks together with the impact of the 30% discount makes it probable that the banks will cash in the taxpayer's IOUs to correct their loans to deposits ratios. At all stages since July 2008, the banks have been economical with the truth and, on occasion, downright misleading. If the 30% discount is applied to the truthful balance sheet realities of the banks, they are most likely to use the ECB funding themselves rather than start lending again in the normal way.

The banks will revert to doing what they do. They will act in the best interests of their shareholders first. Twelve months ago we were all agreed, that was "the end of the new banking model and the end of enormous salaries and obscene bonuses". Let us have a look at what is happening on Wall Street and in the City of London. President Obama, of whom the Minister for Finance is so enamoured, and Prime Minister Brown have both publicly expressed their bitter frustration and disappointment that the old practices are creeping back. It was cringe making to hear the Minister plead with the banks yesterday after the biggest bailout in history. He stated:

The banks should be extremely grateful for the continued support and forbearance extended by the citizens. In return, the Government expects the banks to play more than their part in the economic recovery of the State by providing appropriately risk adjusted credit to businesses to protect and create jobs. Our citizens deserve nothing less.

The Minister is too clever a man to believe that the banks will pay the slightest attention to his pleading. As far as being grateful to the citizens goes, what a load of nonsense. Sean FitzPatrick told RTE he was grateful for the guarantee of 29 September 2008 but he said Anglo Irish Bank was a thriving bank in an over-regulated environment.

The two Brians become incandescent if reminded of the organic links between Fianna Fail, developers and the banks. They can relax because I will not go down that road. Their only motivation, they say, is to fix the banks and get them lending again but will NAMA do that? If that is the main purpose – I agree it should be - why are we imposing a mortgage of, according to Deputy Bruton, €34,000 on every family in Ireland unless we are certain that normal lending will resume?

The evidence is that the Irish banking model has failed. The model developed in recent years involving the lending of money based on security. The traditional banking role of lending money to businesses where a view must be taken on the strength of the business and the acumen of the business people involved essentially no longer exists. Current bank management and senior staff are not equipped in today's market to lend to businesses on this basis. The banking system needs a fundamental overhaul and the introduction of experienced businessmen and the reintroduction of traditional banking skills to equip the banks to lend into the real economy in the current Irish economic situation.

It is not only SMEs who are sceptical about normal lending being freed up by this Bill. I refer to the verdict of the financier, Mr. Dermot Desmond.

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