Noel O'Flynn (Cork North Central, Fianna Fail)

I was making the point about ICI whose underwriting losses in 1982 went from £0.5 million to £7.3 million. At the time, ICI was selling insurance premiums in its London office, insuring satellites, bloodstock and fairgrounds. All of this collapsed and there were hundreds of millions worth of claims against the company. The Government of the day had two options; it could have stood back and let the liquidation take place when the company was about to go into liquidation or it could have responded appropriately to the consequences. The Government could either assume the liabilities of ICI from AIB or it could allow a run on AIB's cash which would have been a run on the bank and which would be contagious. Who saved that company and who made the decision? None other than Dr. Garret FitzGerald who was the Taoiseach of the country at the time and Mr. Alan Dukes who was the Minister for Finance. They decided that this company could not be allowed to go into liquidation and that AIB was to be allowed to walk away. They decided that the reputation of the country was so important that the claims against the company should be honoured and that existing insurance premiums should be fully covered. This was the decision taken during a very difficult period for the country. I understand it cost several hundred million to solve that problem and we all remember the 2% insurance levy and the PMPA.

It is interesting to note that the administrator of ICI at that time was Mr. Donal O'Connor who is now the chairman of Anglo Irish Bank. I was talking to Mr. Alan Dukes last week and he said that ICI as a company has still not been wound up because there are still claims being dealt with 25 years later. It is important for the Opposition to remember that this was a decision taken by the Government of the day and it was the correct decision so as not to allow Ireland's reputation to be tarnished by allowing a major company, which had insured a variety of assets all over the world, to fail and not honour the claims.

This is what the Government is trying to do with NAMA. The banking system provides vital working capital for Irish business as this is the lifeblood of business. Every sector from agriculture to manufacturing is suffering from a lack of access to overdrafts and working capital. They cannot buy stock or trade because they do not have confidence.

I have been in business since 1 April 1985 - April fool's day. I am no different to anybody else. Our company has suffered, our turnover is down. We deal in the motor trade, in the motor parts business and car sales are down 60% to 70%. The message from my employees is that customers and other businesses do not have confidence in themselves, in the country or in the economy. They are afraid to purchase out of fear they will be unable to pay for the goods when payment is due. They are not receiving support from the banks because the banks are looking at their business and reducing rather than increasing overdrafts. Businesses which have never had any difficulty with banks or with trading are the ones who are suffering because of this crisis. The result has been job losses in the economy. The live register figures in August were at 428,000 people whereas one year earlier the live register figure was 236,000. Lack of working capital is a particular problem for small businesses who do not have major reserves and who are dependent on overdrafts to keep their businesses on the go.

It is important to put in place a firm foundation for the Irish banking system. This is the first and most immediate issue facing the Government and this nation. Several Members have also made the point that this is not about rescuing the banks or developers but rather about saving the jobs of hundreds of thousands of people who are not greedy, who did not go mad in the boom but now are being thrown out of a job because of the collapse of the banking system and its inability to lend to productive enterprises.

I have looked at the options put forward by Fine Gael and the Labour Party and I genuinely believe that the Fianna Fáil-led Government and the NAMA option is probably the best one at this time. It is not without fault but it is the best option. It is neither perfect nor without risk but if we abandon plans to implement it we will destroy international and investment confidence in this economy and the ability of the Irish political system to provide leadership in a time of crisis. Failure to implement NAMA will turn Ireland into - I hate to use the term - a banana republic. That said, we have a duty to minimise the risks to the taxpayer by ensuring that valuations paid for bank assets are realistic and that an element of risk sharing is put in place, along the lines advocated by the new Governor of the Central Bank, Professor Patrick Honohan. The Minister has set out clearly how the risk will be shared. Realistic valuations should be based on international experience of property boom and bust. I read recently that Professor Morgan Kelly of University College Dublin estimated that between 2000 and 2007 while nominal GNP rose by 77%, mortgage lending rose from €24 billion to €115 billion, lending to builders rose from €2.4 billion to €25 billion and lending to developers from €5 billion to €80 billion. Should the usual post-bubble correction occur in Ireland, this suggests that real prices of residential and commercial property would return to the levels of the mid to late 1990s, two thirds below peak values. This seems to me to be a realistic and suitable valuation and one for which the Government should aim.

The tax-paying public are being asked to risk a considerable amount of public money to save the banking system when there are many demands from the old, the sick and disabled which we cannot meet. The public have a right to demand that bankers and developers, whose greed, arrogance and stupidity precipitated the crisis, pay and are seen to pay for their misdeeds.

I note that the Director of Corporate Enforcement and the fraud squad are in Anglo Irish Bank. I understand that as many as 400 witness statements will be taken along with the forensic investigation of all transactions and decisions of the bank. This bank has done major damage to Ireland's international credibility. We must show that we are serious and get to the bottom of decisions taken by that bank and other financial institutions.

We must also show that we are serious about regulation. The Financial Regulator was asleep at the wheel. Instead of monitoring the banks and other financial institutions, his staff spent their time hounding mortgage brokers regarding the content of their adverts. They hounded people who were trying to make a living instead of monitoring what was happening in the banks.

On 22 January last, I wrote to Deputy Michael Ahern, Chairman of the Joint Committee on Finance and the Public Service, asking for a full investigation into what went wrong with the bank. Dr. Colm McCarthy made the same call a couple of months ago but I made it in January. I wrote:

Dear Michael, I would be grateful if you and your Committee, Finance and Public Service Committee, would investigate the circumstances and failures of the banking and financial systems regarding Anglo Irish Bank.

The role of the Central Bank, the role of the Financial Regulator and the role of the Director of Corporate Enforcement, the role of the Department of Finance and any other State bodies and the banks auditors associated with the bank.

The confidence in the banking system has been seriously undermined by the revelations which have emerged from Anglo Irish Bank in recent months.

Confidence must be restored in our banking system and in us, as legislators who make the laws to regulate banks and financial services in Ireland.

I would urge your Committee to use its powers to compel witnesses and discovery of documents under compellability legislation which was used in the DIRT inquiry.

Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act.

I served on the mini-CTC inquiry, which was brought to a halt by Mr. Justice Kelly in the High Court in 2001. The Abbeylara inquiry was also brought to a halt. Of course, we had a very successful DIRT inquiry. We have solved these problems legally, as a result of these inquiries and we are now in a position to continue with them. When all this is dealt with and if prosecutions are taken against individuals, the Oireachtas should get to the bottom of what went wrong in our financial system so that if we introduce regulatory legislation we will do so having been informed by a proper inquiry.

I have seen people come before Oireachtas committees whom I do not believe have been truthful. Much of the information given by witnesses to committees in the past 12 months was evasive and not the truth. The only way to get at the truth is to use the powers of discovery and compellability which would ensure that witnesses appearing before committees would have to tell the truth and produce documents.

The National Asset Management Agency will purchase land and development loans from the banks, together with their largest related investment property loans, at a discount to book value. We are doing this in order to help banks to clean up their balance sheets, reduce uncertainty regarding their bad debts, boost the flow of credit to businesses and households and kick-start the economy. NAMA will purchase the loans through the issue of Government bonds. Many people think we will, physically, take money out of the taxpayers' purses and give it to the banks. We are giving a piece of paper which will allow a bank to go the European Central Bank and draw down funds based on the value of that bond. NAMA will pay 1.5% for the privilege of having that money available to the Irish banking system.

Of course, the decision to take not only the impaired or non-performing loans but also performing loans and property assets, was correct. Some 40% of the loans taken are performing loans. Those performing loans will help pay the running expenses as well as the interest rates on the money drawn down by the banking system.

This is not a bailout for borrowers who have purchased these properties. All borrowers, no matter who they are, will be required to pay back all the money they were lent, including rolled-over interest. If they fail to service their debts, NAMA will call in their loans and take possession of the assets on which the loans are secured. Until now, the banks were hiding these loans on their balance sheets. They were rolling over the interest because they could not get it from borrowers. They could not get blood from a turnip. They did not want to liquidate people who owed them €1 billion or more because that would reflect badly on the bank. One bank has done this because it is not an Irish bank and is, obviously, trying to exit Ireland.

It is important for the people to know that even though we are buying the book debt it will not simply sit there. NAMA will make firm decisions on what is to be done, whether something is viable, whether it can pay its way or must be liquidated, in full or in part, to repay developers' loans.

The banks have much to answer for. They competed for business and did not want others to get it. They took extreme risks. When the banks deal with smaller business people now, they roast them.

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