George Lee (Dublin South, Fine Gael)

That is correct.

There has been some comment, in various radio interviews I have done and elsewhere, that the suggestion has been made on the Government benches that I, in my former capacity as economics editor of RTE, was somehow in favour of the Government's NAMA proposal, and I want to take this opportunity to put the record straight. In April last when there was an appendix to the budget with a summary of a Government plan on the banks and I was asked what was the story with the plan, I said a plan is better than no plan and that, ultimately, we would have great arguments on the valuations of this and it would not help lending in the short term and possibly in the medium term. That has been interpreted as some kind of an approval for the Government's approach.

I want to make clear that, in terms of what we knew in April last, a great deal of detail was left out. Up until April last the Government had been running around like a headless chicken with no plan whatsoever since the beginning of the credit crisis, which started in August 2007 and became a disaster and crisis from September 2008. Any plan sounded like a good idea to the people who were panicking over the chaos which had ensued and a brief outline of a plan was probably welcomed in financial circles, but what has unfolded as the details have been filled in makes clear that what we have in front of us is not a good plan. It is a nightmare for the taxpayer. It may be a dream plan for banks but it is something which will leave us, if we pursue it and if we carry on along this route, with untold long-term economic damage.

There was no suggestion in April last when this was produced that we would be paying over the odds for these assets. There was no such thing as this invention of "long-term economic value", whatever that is supposed to mean. There was no suggestion either that the taxpayer would be taking so much risk. There was an expectation, surely, that the banks would take many of these losses themselves - nothing like what we have in front of us - and there was no suggestion whatsoever that the plan would not include any commitment to ensure that the banks engage in new lending. As it contains none of those elements, it is clear that this is not a good plan. It is something that we should not proceed with at all.

If any evidence was required that this is a dream solution for the banks, one need only look at what happened with the Stock Market reaction where the share prices of banks went through the roof this morning. Last night the former chief executive of Bank of Ireland, on the television programme, "Tonight with Vincent Browne", stated that those who do not like NAMA should go out today and buy bank shares, and that way they would get part of the coming party. If anybody wants to know what this plan is about, that answer should suffice. This is a plan which may well fix up the banks, but it stitches up the taxpayer. That is for sure.

This Government plan is full of holes. It means that we will borrow €54 billion for an indefinite period and take a significant amount of risk. We have been told not to worry about the borrowing of that money, that we are borrowing it at a 1.5% interest rate, we should be delighted with the opportunity and that it will be a great assistance to the economy. I had been wondering for a period, as most people had, exactly how this would work until we heard the Minister for Finance this morning on the radio explaining it. He stated that NAMA will issue six-month bonds at 0.5% above the European Central Bank rate. The difficulty is that every six months these bonds must be reissued at 0.5% above whatever is the new relevant ECB rate. This is a variable rate mortgage, which the Minister is asking us to take out for an indefinite period, for €54 billion.

The worse aspect of this mortgage is that it is an interest-only variable rate mortgage. As these are Government bonds, there is no way we are paying back any of the principal. This is like a child asking his or her parents to go guarantor for a borrowing of €54 billion, with the child getting an interest-only mortgage at a low interest rate that would go up in time.

This is the lowest possible point in the interest rate cycle. This interest rate will go up. We have been given no indication of how long this commitment will be for. We can only assume it will be at least a decade. The economics of this plan will fall apart as a result. A 1% increase in the interest rate by the ECB will mean a €540 million additional bill for NAMA. As those interest rates go up one can be certain that the income from the loans which the Government states are providing some income will go down because the interest rate will go up in line with mainland European economic performance and our economy is bound to lag behind that given Ireland's present position. Therefore, there is no way that the supposedly performing loans are likely to be able to live up to the pressure, and I will come back to that. This is madhouse economics which will unravel as those interest rates rise and it is a big, big mistake.

We are being asked to catch a falling knife. We are told that for this €54 billion mortgage we will get all of these assets at a 30% discount. When one really looks at the figures, that means we are paying €54 billion for what we are told is a €77 billion banks' asset book of loans most of which are not delivering according to their deeds. Of the €77 billion, €9 billion is rolled-up interest. It is interest on loans which just cannot be met and it will be given over to this public organisation to take on board as some kind of an asset. These developers are already in trouble. These loans are already impaired. This interest is not being paid. It is not an asset. The Minister must take away that €9 billion and look at what he is buying. He is buying a €68 billion book for €54 billion. When one looks at that, it is not a 30% discount. That, for starters, at best, would be a 20% discount.

It is, however, worse than that because we are told that the value of these loans is €47 billion, as they are in mid-fall. We are being told to stick out our hand and catch that value - €47 billion. That value will go down. We have very good evidence historically and otherwise that suggests the value of those loans could be down by as much as two thirds by the time they hit the bottom. If they were to decrease by two thirds, we would end up with a loan book we should have paid €25 billion for and for which we are paying €54 billion. We are paying more than twice what we should and we are being told it is a great deal.

It is not a good deal, whatsoever. We are being told there is some type of 15% level above the market value we are going to pay for these loans. It is nowhere near 15% above market value, but rather 100% or more. That is what the Government is asking ordinary people to pay, and there are enormous risks as regards the risk sharing we are speaking about. When one considers the risks associated with these loan books, they would make one's toenails curl. Some 2,000 customers are involved in all the loans being taken over, but there are 21,500 loans. This means that for every one customer there are more than ten loans. If one of those loans goes down, ten of them will go down. That makes it extraordinarily risky, much riskier than any normal loan book and nowhere in the communications or legislation is that risk discussed or acknowledged. This is a far riskier proposal than it seems at first sight.

As regards the estimate of €54 billion it is asking us to accept, every single estimate the Government has produced in recent years has been so far wrong. It has had four budgets in ten months because the estimates are wrong. Every estimate on the way up in the economy is wrong. All the advisers who helped it get those estimates are the same people working on these estimates. It is an enormously risky process, on which we are taking a €54 billion interest only variable mortgage. There is nowhere near a 5% risk sharing appropriate in this. I heard the Green Party suggest it should be 50:50. It should be more, in my view - the banks should take on all of this risk and the taxpayer should take on none. There is a 5% risk element in this and for all of those risks I believe that is an enormous gamble.

Take AIB, for example, as per the data given to us in the documentation yesterday when the legislation was introduced in the House. AIB, for every one impaired loan has two others which are vulnerable or on watch, an enormously risky banking situation. Bank of Ireland, for every one impaired loan, has another one that has passed its due date, but has not yet been classed as impaired. Anglo Irish Bank has 10,000 impaired loans and another 13,000 that are passed due. Irish Life & Permanent has six passed due for every loan that is impaired. Therefore there are enormous problems in relation to this.

The ECB said that it had reservations about NAMA. It said the reservations were that the banks have a self-interest in not lending this money. It said there was a problem in relation to the risk sharing and that it preferred market value as opposed to this long-term economic value. None of those complaints has been properly addressed. There is no way, when €54 billion is given to our banks that they will lend that money out into the economy. They have borrowed the money from international banks in the first place to lend and as a result that €54 billion has to go back to pay the loans they got in order to give the money to our developers.

There is one final issue as regards the choice being made by the Government. The Government has an enormous obligation because it encouraged people to buy houses at the top of the market with 30-year and 40-year mortgages. It must deliver economic growth. It is faced with an economic problem which it divided into three. It has given one part of it, Government cutbacks, to one consultancy group, a second part to the Commission on Taxation and the third part, fixing the banks, to a third consultancy group, Peter Bacon. Each group has produced a solution to its particular part of the problem, but nowhere is the solution joined up. Nowhere is there any suggestion that we should be looking at promoting economic growth rather than solving individual elements. The thinking should be joined up and the economy needs a stimulus. There is, however, no hope of stimulus in this bank plan for at least two years, and the Government is ignoring the idea of Fine Gael's "good bank", which would provide that stimulus immediately. It has rubbished Fine Gael's proposal because it said we spoke about subordinated bondholders taking on the chin their responsibility and their losses. When it comes to risk sharing, however, it says that subordinated bonds are the way forward, so that these will not have to be paid. The inconsistency and hypocrisy speaks for itself.

This is a really bad plan and the Government is wriggling and squirming and trying to sell it and shove it down people's throats. It is a big mistake that will come back to haunt us. It will not be this Government that has to fix up the mess, but other Administrations after it. God love the people when this particular chicken comes home to roost. It is a €54 billion variable interest rate interest-only mortgage for which in the end we are going to have to pick up an enormous tab. It is a disgrace.

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