Beverley Flynn (Mayo, Fianna Fail)

I welcome the opportunity to contribute to the debate on this Bill. As previous speakers have mentioned, the NAMA Bill is arguably the most important piece of legislation to come before Dáil Éireann in the lifetime of this State. It is the Dáil's considered response to solving the problems of the parlous state of our economy, restoring our finances, underscoring the importance of a functioning banking system and ensuring that we return to the growth we experienced over the past decade.

The NAMA Bill is a multifaceted instrument which attempts to find a middle path through sometimes conflicting interests and competing priorities. However, although we here as legislators may debate NAMA or how, in our wisdom, we finally agree on what direction it should take, there is a far larger audience which must be convinced not only of the need for what we are doing but that we are doing the right thing. I am referring to the people of Ireland, that is, the taxpaying public whose faith in the institutions of State has been badly shattered over the past 12 months.

Sometimes I wonder whether we in this House fully realise the depth of anger, bitterness and resentment of ordinary people at the litany of greed, incompetence and mismanagement which has brought us to where we are today. People have grown cynical and it is this cynicism which has bred a deep distrust of the banking system, and NAMA is all about the banking system. This public mistrust has in turn created a climate where a couple of glaring untruths about NAMA have been allowed to take hold and because they have been repeated without challenge often enough are now regarded as accepted fact.

The first is that we are mortgaging our future, our children's future and our grandchildren's future because of NAMA. This is the big lie which has gone uncorrected for so long as to be an article of truth in the minds of the public. If one talks to people on the street, listens to any talk show on local or national radio or reads the letter pages of any newspaper the message is the same. People believe we are saddling ourselves with a millstone of debt to meet the cost of NAMA and they will not be convinced otherwise. It is all very well for us here to realise that not one penny of taxpayers' money will go to pay for the day to day running of NAMA or that not one cent of the tax take to balance our finances is going to shore up the banks or their owners. That is not the perception among the public and if NAMA is to succeed we need to win the hearts and minds of the ordinary people who have taken such a buffeting from the establishment that they simply refuse to believe a word they are told any more. It is vital that we get across the message that the whole concept of NAMA is that it becomes a self-financing operation with any profit accruing to the taxpayer and any losses to be absorbed by way of levy on the banking institutions.

The second major lie which has equally come to be accepted as fact is that NAMA is somehow a ploy to bail out the builders and developers who have come unstuck as the bubble burst and are now sinking in the quicksand of debt. We need to emphasise that for big borrowers nothing has changed. The developer who owed €20 million before his loan was transferred to NAMA will still owe €20 million; not only that, he will be vigorously pursued until every last cent of the principal and interest has been recovered. We cannot allow this belief to go unchallenged, just as we must ensure NAMA is seen to be driven and robust enough to recover its debts without fear or favour to any business or developer.

I want to move to something to which the Taoiseach referred in his speech a number of weeks ago. It is something which is causing grave distress to thousands of mortgage holders who find themselves in hock to the banks and who find the same bank quite inflexible when they seek to deal with them. The Taoiseach referred to a statutory code of conduct under which banks will refrain from acting on repossession until there are arrears of six months. However, that is not the case on the ground. Mortgage holders are being hounded by banks under all sorts of threats. Those in mortgage arrears should be allowed a period of grace until such time as things pick up, which they will in time, and those in default now can start making full repayments again. There is a marked contrast between the leniency that has been shown to the banks and the attitude of the banks to those who find themselves in arrears and are unable to meet their repayments.

We are all familiar with the biblical parable of the servant who owed his master 10,000 talents but was unable to pay. The master ordered that the servant should be sold into slavery, along with his wife and children, and that all his possessions should be seized to pay the debt. When the servant threw himself at his master's feet and begged clemency, the master felt so sorry for him that he cancelled the debt and let him go. I hope this analogy is not lost on anybody in the House. At a later time, the servant met a fellow servant who owed him a hundred denarii. He seized him by the throat and demanded his money, at which point the other servant fell to the ground and asked for mercy. The servant would not agree to this and instead threw the other servant into prison. When the master heard this story, he became so angry that he sent for the servant, berated him for his lack of charity and turned him over to some torturers.

I am not sure whether the Minister's remit extends to turning this country's bankers over to torturers. Many people would prefer if it did. I suggest that he should exert the full powers of his ministerial office by calling on them to show leniency to those who are unable to meet their full repayments through no fault of their own. I refer to people who do not wish to default on their debts, but whom circumstances have left unable to pay their mortgage dues in full in the short term.

A few days ago, I received an e-mail from a constituent that made the exact same point as the parable I have outlined. The man who sent me the e-mail will not be covered by NAMA because he owes a bank less than €5 million. The treatment that will be given to those covered by NAMA involves working through their problems in a way that will secure the best possible return for the State. By contrast, people like the man who sent me the e-mail are not getting the same treatment because they owe less than €5 million. He owes €1.5 million to a bank because he was unable to sell some houses he had built due to the nature of the housing market when they were completed in 2008. For a while, he negotiated rolled-up interest with his bank. He has decided to rent the houses because there is no sales market. The rent is enabling him to pay the interest on his loan. His loan is performing at present, as he is paying the interest on it. In recent weeks, his bank contacted him to say he must sell the houses even though the market for them is in a depressed state. The man has given his family's home and all his family's assets as security to the bank, in addition to this investment. The total value of his family's home and assets is €1.6 million. The debt he owes to the bank is €1.5 million. The bank is showing the man no leniency, even though he is paying the interest on his loan at present. It wants to get the capital back.

It is interesting to compare that approach with the lenient manner in which the State is dealing with the banks. We are giving them an opportunity to work out their problems over a period of time, which contrasts with how the large bank in this case is treating one of its customers. It knows it will not get a pay day in this instance because the man owes less than €5 million and therefore will not be covered by NAMA. I intend to highlight the manner in which this man is being thrown to the wolves at another forum. It illustrates the point I am making, which applies to business people just as it does to mortgage holders.

When people contact me to speak about their mortgages, they tell me it is possible to negotiate a six-month interest-only period on one's mortgage if one's back is completely to the wall, one has absolutely nothing and there is nowhere for the bank to go. That period might even be extended to 12 months if one's circumstances are particularly difficult. If one has any liquidity whatsoever - if one has 1 cent in one's savings account - the bank will show one no flexibility. They will bleed one for every small bit of cash one has. As far as I am concerned, it is an irresponsible approach for the banks to be taking at this time. The public interest directors that will be on the boards of the banks to act on behalf of the Minister for Finance will have to do something about the way the banks conduct their business.

The manner in which the banks calculate their interest payments has been a bone of contention with me for some time. I welcome the commitment by AIB and Bank of Ireland to increase their lending capacity to small and medium enterprises by 10%, compared with 2008, as part of the overall NAMA package. While this is welcome, with the best will in the world it brings us back to the innate conflict between what the Minister would like to happen and what the real practicalities of business will dictate. Bankers will gladly lend to any borrower whose credentials are good, whose business plan looks secure and who seems to have a safe prospect of repaying his or her loans.

We cannot ask the banks to extend credit to those who are unlikely to pay, as that is why we are in our present mess. One cannot legislate for commercial decisions, even if one might wish to. That is one of the reasons I disagree with the idea of nationalising the banks on a temporary basis. There is a conflict between the commercial realities banks have to face every day and the political realities we have to face in this House. That is why I do not think temporary nationalisation is a good idea. The manner in which the Minister is proceeding at this time represents the right approach. While it might not be perfect, it is the best option available to us. One of the strongest arguments against temporary nationalisation is that political decisions and commercial decisions are oil and water. They simply do not mix. We would be pulled between urging the banks to free up their lending and provide more credit to small enterprise and having equal regard for the realities of commerce. What powers can we exercise to ensure the base rates of interest being charged by the banks are fair and reasonable? How can we be sure that customers will not be fleeced once again as rates are pushed upwards, little by little, by opportunist lenders? We must find a way of policing interest rates. I suggest that one of the main duties of the public interest bank directors should be to insist that banks do not start to crucify the borrower with unjustified rates of interest.

I have already mentioned one of my constituents, who owes €1.5 million to a bank. I should have mentioned that in the middle of his crisis, while he was renting his houses and making his interest repayments, the bank increased his loan rate by a further 1%, at a time when the European Central Bank rate was the lowest it has been for many decades. The bank added a further 1% to the repayments of a man who was making his interest repayments.

I would like to speak about the related issues of funding and how the banks calculate their base rates at present. The banks' base rates were based on the one-month Euribor rate until 2007, but they were changed to the three-month Euribor rate when it was decided it was safer to base lending rates on longer deposit terms, which seemed reasonable. However, rather than looking at the three-month Euribor rate as it currently stands, some of the banks have decided to look at the average three-month rate over a three-month period. The rate stands at 0.73% today, but the average over three months is 0.876%. It is immediately evident that the banks are getting the benefit of a premium by averaging it over three months. In addition, the banks are charging a significant funding premium at present. When one goes into the bank to negotiate one's rate, one is told it will be the base rate plus a margin. There is now a significant funding premium within the margin. It is 0.75% for amounts up to €1 million and it is even more for amounts above €1 million and for extended terms. If one includes the minimum 0.75% rate and considers the averaging that is done over three months, one is almost looking at an additional 1% on top of one's rate of interest. Given that the present European Central Bank rate is 1%, the addition of three months' money at 0.73% and the additional 1% means that there is a 100% loading on the premium.

I ask the public interest directors who will sit on the boards of the banks whether such additions are acceptable at a time when customers, particularly mortgage holders, are finding it difficult to survive and small businesses are being crucified. Most of the banks will tell one that the funding premium will remain in place in the medium term. How long will it last? I accept that it has been difficult for the banks to access moneys on the inter-bank markets over the last six months, as the credit rating of the banks has disimproved, but that situation is improving all the time. At what stage will we be informed that the funding premium is to be removed from people's margins? I understand that it is itemised separately in their loan agreements. At a time when the banks are being shown leniency by the Government, it is important that the customer is seen, at least, to get a fair deal.

What happens to those with loans of less than €5 million? Where is NAMA for them? Perhaps we should be examining bankruptcy legislation, which is particularly onerous in this country and which debars a person from business for a period of 12 years. Could a mechanism be found whereby a long previous history of exemplary credit compliance can be taken into account when a person hits the wall of short-term insolvency? I refer to the short term because this type of person is industrious and motivated enough to get back on his or her feet at the first opportunity. As someone who knows a fair amount about bankruptcy legislation, I suggest that 12 years is a life sentence for bankruptcy. In the current economic climate, a lot of people who have built up good credit ratings now find themselves in a difficult position. It is important that they are given an opportunity because at the end of the day we have to kick-start the economy. In some countries people can get out of bankruptcy in as short a period as 12 months.

It is important to emphasise that NAMA will have a significant income stream from the outset. Many of the loans being taken over are good enough to ensure that what comes in will exceed what goes out. In addition, one third of NAMA's holdings will be linked to overseas property in places where the slump has not been so severe and where assets can be liquidated more quickly and advantageously. In any event, NAMA must look to the long term so as to ensure an orderly disposal of its assets over time rather than do anything which smacks of a sell quickly approach to its holdings. It must ensure that the disposal of its massive portfolio of lands and buildings is conducted in a balanced way and that supply must not exceed demand, sluggish though demand might be in the near future. A situation cannot be allowed arise whereby the sequence of property disposal is flagged to the extent that developers will hold back for what is in the pipeline. Our demands of NAMA in terms of asset enhancement are not particularly high and a 1% growth rate per year should not be too much to ask. This, of course, assumes that the starting point has been correctly set by the Minister for Finance and those who advise him.

There is, however, one caveat in regard to what we expect of NAMA and how it deals with the disposal of its assets. There is in some quarters a view that NAMA should look to its social obligations and that a social dividend should come from the sudden acquisition of lands and buildings across the state. While we might agree with the notion of NAMA becoming the benefactor of houses, schools sites, hospitals, community buildings and other desirable social needs, we must prioritise its commercial remit. The role of NAMA is to maximise to the utmost its revenue on behalf of the State to ensure that the taxpayer is the ultimate beneficiary. If assets lend themselves to be used for school buildings, social housing or community projects, they should be acquired from NAMA at market prices by the agencies charged with catering for the various social needs. NAMA must operate as a commercial agency. If it is to have credibility, it must be just as hard nosed and implacable in dealing with its debtors as the banks should have been. It must also be allowed to work out its brief even if it takes up to ten or 15 years.

In supporting NAMA we are embarking on a strategy which will bring order to our finances and restore us to the path of national growth. I totally reject the falsehoods that we are condemning future generations to a millstone of debt or that we are colluding in a plot to save the financial skins of bankers and developers. The Minister is to be commended on the detailed planning and thorough research which has gone into bringing NAMA to this stage. He has minimised the risk to the public purse while at the same time providing a vehicle which will enable the economy to start working again. The decision on NAMA has now been taken and the framework is in place. That is the easy part but we will only know if the correct decision was made if NAMA is made to work. NAMA will speed our recovery and restore our finances to the stability we enjoyed for so long and I am pleased to voice my support for the Bill.

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