Séamus Kirk (Louth, Fianna Fail)

The legislation provides that the banks will share a portion of the risk associated with NAMA. This means that the banks will have an incentive to work with NAMA to achieve a profit for the taxpayer and they do not get to share in any profits. However, if there is a loss, they will be subject to a levy. The State may end up owning larger stakes in the banking system. That is another form of protection which reduces the risk of taxpayers overpaying bank shareholders for the assets since taxpayers themselves are significant shareholders.

The Fine Gael approach is to let the banks struggle on for another year before a National Asset Management Agency is set up in September 2010. Small businesses and families around the country cannot wait for another year. We desperately need to get credit flowing now.

The Labour Party has called for full nationalisation. That will not solve the problems in the banking system. It will not make any of the problems faced by the banks go away. The troubled loans will be still on the balance sheets of the banks, severely hindering their ability to support economic recovery through increased lending to businesses and households. The nationalisation of Anglo Irish Bank, while necessary to protect the banking system, has not solved that bank's problems. The reality is that full nationalisation would involve large up-front costs for the taxpayer. The State would have to compensate the current shareholders of banks. At current market prices, that could involve an immediate payment by the State of more than €5 billion in cash for the two major banks. The State would have to borrow this money on international markets at a time when we are already borrowing €400 million a week.

Pre-emptive nationalisation of the entire banking system would pose an intolerable risk to taxpayers and result in a huge loss of confidence. As mentioned earlier, bond market spreads for Government paper have improved considerably in recent months, which reflects a more positive view of our ability to deal with the economic crisis we face. The loss of confidence would exacerbate funding problems for the banks as uncertainty about the banks' future would almost certainly scare away international depositors and bondholders. Funding conditions are already difficult enough without risking full nationalisation. Governments around the world have avoided wholesale nationalisation during the global crisis for those very reasons.

Our NAMA proposal has received the backing of the IMF and the ECB as well as former Fine Gael Party leader, Alan Dukes, and former Taoiseach, Garrett FitzGerald.

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