Terence Flanagan (Dublin North East, Fine Gael)

The collapse of our banking system can partly be attributed to a regulator who was asleep on the job and poor regulation in the banking sector. Both the Governor of the Central Bank and the Financial Regulator failed to monitor the actions of the banks over many years because of the cosy and close relationship that developed between them. From the country's point of view it is important that a full investigation takes place to find out how and why this happened. We must ensure our banks are adequately regulated in future to prevent something like this happening again. In that regard I am a little surprised that in the Government's legislative programme under section C, the heads of a Bill relating to changing the regulation of banks have not even been agreed. That Bill must be fast-tracked immediately to ensure the current situation does not happen again.

Fianna Fáil and the Green Party are seeking to establish NAMA to solve the banking crisis and to get credit flowing again in the economy. However, there is no guarantee. Our party leader, Deputy Enda Kenny, asked the Taoiseach today if he could give a guarantee that credit would flow again under the NAMA proposal but the Taoiseach, yet again, did not answer the question. NAMA is a costly exercise and that is the main reason Fine Gael totally opposes proceeding with it. It is a €54 billion gamble. It is taking out a mortgage that is guaranteed by taxpayers' money to buy toxic developers' loans from banks. A premium of €7 billion is being paid over the market value.

The total values that have been given are very dubious. It is hard to see how the figures being bandied about are credible, particularly when the property market is continuing to fall. We know from the Daft.ie website, for example, that property values nationwide have fallen by 4.6% over the last quarter of July, August and September. This has definitely not been factored into the figures that have been presented to us. The figures are not credible.

NAMA is a massive gamble for numerous reasons. In a falling market it is not possible to put a realistic value on development land and property. It is ludicrous to purchase development loans in a falling market. It is a gamble too far, and involves the taxpayer taking 95% of the risk while the banks only take 5% of the risk through the subordinated bonds. That is clearly inequitable and must be changed immediately. The public is not in favour of NAMA. This arose on the doorsteps when we canvassed on the Lisbon treaty. One got it in the neck that people are totally opposed to it. The Irish Times/MRBI poll of 5 September showed that only one in four people supported the Government's NAMA proposal. We have also been bombarded with correspondence from ordinary members of the public who are really concerned about the major risk being taken.

Under the legislation, if NAMA makes a loss there is no provision for a levy to be applied to the banking sector. The banks will again get off the hook if this is not included in the legislation. No cash flow analysis was provided by the Minister for Finance in his presentation on NAMA. That creates little confidence that the Government has done its homework on this issue. We must see what the cash flows will be over NAMA's proposed life span of ten years, although I expect it will last a good deal longer. The rate of interest quoted by the Minister was 1.5%. He did not clarify that it is a variable rate of interest. Interest rates will increase in the long term so it will clearly cost taxpayers a great deal more. This is a major oversight. We must have the facts and see the projected cash flows and how the Government envisages NAMA working. Taxpayers need that. There must be some form of accountability to taxpayers. They need to know what will happen in the future. Falling rents are also not factored into the dubious figures we have been given.

As Deputy Clune pointed out, Fine Gael has an alternative proposal, which is to set up a national recovery bank. This would guarantee that money would get to businesses immediately and get them functioning properly again. It would only take between four and six weeks to get the recovery bank up and running. This would leave the banks responsible for undertaking the reckless lending to take the risk. They would have to fix up their balance sheets rather than have the taxpayer bail them out. We would give the banks until the end of the guarantee period in September 2010 to repair their balance sheets. If they failed to do that, we would separate the banks into a good bank and bad banks. The private investors who took the risk and invested in the banks would take the hit rather than the taxpayer. In fact, the taxpayer would have very little exposure. The State would have to put €2 billion up front and would seek between €30 billion and €40 billion from the European Central Bank. This makes it a very credible proposal if it were pursued.

Many businesses have gone to the wall as a result of being cash starved. Fine Gael's proposal would create a small number of jobs, which are badly needed in the current climate. There is a huge information deficit in the public domain about how NAMA will operate for the next ten years. It will distort property prices. The taxpayer will buy property not just here but in other countries. Many people have major concerns about that. That situation must be clarified.

Regarding the secrecy, there is no transparency with this proposal. We are concerned that the Freedom of Information Act will not apply fully to NAMA. It should apply so there is full transparency. There can be no cover-up with NAMA, and no sweetheart deals with property developers. In the fullness of time, the information about the deals that will be struck by NAMA must be publicly known so people can have a certain level of confidence that this proposal works correctly. The proposal to remove 25 directors from the banks does not go far enough, particularly if the new regulation of the banking system is not put in place immediately.

An agency similar to NAMA was adopted in France in the 1990s. It failed spectacularly, with the loss of €15 billion of French taxpayers' money. The French Government decided to do a U-turn and set up a recovery bank. We can learn from other countries' failings. It is not too late for this Government to do a U-turn and adopt the proposal to set up a national recovery bank. In advance of the Oireachtas committee meeting on 31 August, Deputy Richard Bruton set out Fine Gael's position and what core corrections and principles must be adopted for NAMA to be successful. Unfortunately, the Government did not listen to him. The risk sharing element should be split 50:50 between the banks and the taxpayers, rather than the taxpayers taking 95% of the risk. That is wrong. There must also be guidelines from NAMA as to how it will deal with developers who are in default on their loans.

The legislation does not mention homeowners or the protection of homeowners at risk of repossession. A total of 100,000 homeowners are in negative equity and the ESRI stated yesterday that 35% of these are at risk of being unable to meet their mortgage repayments next year. Conveniently, this is not being discussed. We must look at how other countries deal with the repossession crisis. There must be a social dividend.

We on this side of the House totally oppose the NAMA proposal. On 31 August, Deputy Bruton set out the core principles the National Asset Management Agency must adopt to help improve the situation. I have no doubt the Fine Gael Party will table many amendments to the legislation.

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