Jim O'Keeffe (Cork South West, Fine Gael)

Put simply, the NAMA figures do not stack up. The first question to be addressed is whether this is a good deal for the taxpayer. The best independent advice that I tend to rely on is from The Economist, already quoted by Deputy Aylward, which has a record of serious warnings over many years about the dangers of the Irish property bubble. On the NAMA plan it recently stated, "the Government seems to have erred on the side of favouring shareholders, largely to minimise the amount of capital it would have to inject into the banks" and "NAMA will still pay about €7 billion more than the assets are actually worth." It seems clear the taxpayer is expected to carry far too much of a burden for this bank rescue operation.

I question the estimated current market value of the assets being acquired by NAMA at €47 billion. The Minister for Finance, Deputy Brian Lenihan, referred to the accompanying documentation, the Green Book, to see how this figure was calculated. I do not have much faith in the valuation methodology. What is clear, however, is that the proposed valuations are largely based on commercial property yields whereas a significant amount of the property is development land that may never yield anything other than if it reverts to agricultural use. In the end it will be a matter of judgment for the valuers which will decide the figure for each asset.

I well recall the controversy several years ago when I seriously questioned and strongly objected to what was presented by the then Government as the market value of the property being acquired at Thornton Hall. A figure of €200,000 an acre was paid for a property which I, and many people whose opinion I respect, valued at €25,000 to €30,000 an acre. This involved the taxpayer funding a purchase by the Government at a figure of €30 million of a property which was probably worth no more than €5 million. Taking into account this record on valuation, there will have to be a hard cold appraisal with total transparency on the valuation process.

The concept of long-term economic value is something I never encountered in many years of practical experience of dealing with property. Market value has always been the price agreed between a willing seller and a willing buyer. In that equation, likely future trends are factored in by both seller and buyer. Beyond that the Government is talking of over-the-rainbow values. It suggests the annual average increase provided for is modest enough but who knows whether current values are at their lowest and what will happen in the years ahead. Neither has any account been taken of the cost of financing in the meantime, inevitable substantial interest rate increases or of the cost of maintaining property.

If there were gold at the end of this over-the-rainbow approach, the taxpayer should now be making an advance payment against that possibility. The Minister for Finance claims he is providing for the banks to take part of the payment by way of €2.75 billion of subordinated debt. Is there any reason, in fairness to the taxpayer, the banks should not carry the entire €7 billion uplift from market to long-term economic value by way of subordinated debt?

The Minister has argued such an approach could result in a greater capital requirement for the banks. In an unscripted comment when he spoke on the Bill he said,"The capital would require to be provided and have to be borrowed on world markets at current rates of 4%, far in excess of the 1.5% with which this paper can be traded in world markets". However, he seems to have been comparing financial apples and oranges since the 1.5% money is short term for three to six months money whereas the 4% relates to three to five year money.

An alternative approach might be for the State to underwrite a substantial rights issues by the banks but only at approximately 50 cent per share. Bank shareholders would not be too pleased with such an approach but, at the same time, such a rights issue would have a substantial uptake. The banks' share prices would subsequently appreciate substantially in time giving rise to major gains for the taxpayer in respect of any portion of the share issue taken up by the State.

I very much question the dependency created by NAMA being a continuing subsidiary of the National Treasury Management Agency. These are clear grounds for conflict. If NAMA is to proceed it may need to make unattractive decisions affecting lenders to the banks. The National Treasury Management Agency may be conflicted by virtue of its continuing relationships with lenders to the State and agents of lenders to the State.

If NAMA is to proceed, the language under section 2(b)(i), "to facilitate the availability of credit in the financial markets in the State", should be amended to "facilitate and direct in NAMA, or through participating institutions, new credit to high-quality persons and SME borrowers through the establishment of a department of NAMA devoted to such cause." This would go some way towards achieving the objectives behind such proposals in the absence of the national recovery bank as proposed by Fine Gael.

Many issues will arise on the legislation itself but one in particular stands out on its constitutionality, or lack thereof. According to the Bill as drafted, if NAMA wants an acquired property sold on and wants to add in or create rights over adjoining land, it has the power to do so even though the owner of the adjoining land has no borrowing on it and is not involved with any bank or NAMA. I foresee such an owner who objects to such a takeover going all the way to the Supreme Court on the issue and the protection of his rights which should not be affected.

The Minister for Finance has provided for an extraordinary range of powers for himself under this Bill. Under 50 of the sections, nearly a quarter of the total, the Bill provides for different powers to be exercised by the Minister. Many of these powers are appropriate for the Minister while many are not. This situation reinforces the case for an independent oversight body. I have long held the view that there should be a separate Oireachtas committee with powers at least equivalent to those of the Committee of Public Accounts, preferably even stronger, and similarly chaired by the Opposition to oversee banking matters. If the Government proceeds with NAMA it reinforces the case for such an approach.

NAMA is like the emperor without clothes or at least with clothes that are not made to measure. The NAMA figures do not stack up. The prospective cost is too high for the taxpayer. There should be a rational, balanced debate on this Bill. Our aim should be to ensure that the exposure of the taxpayer is the minimum amount to get the banking system working again. That will require a balanced approach with bank investors taking the main losses. That is fundamental to the Fine Gael approach in this Bill. If that approach is followed the exposure of the taxpayer will be minimised. There must be some exposure but we want to ensure that it is minimised. This Bill does not achieve that objective or the balanced approach I have outlined. That is why I cannot support the Bill.

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