Michael Moynihan (Cork North West, Fianna Fail)

I thank the Acting Chairman for the opportunity to speak on the NAMA Bill. It is one of the most important pieces of legislation to go before the House for a generation and perhaps even since the foundation of the State. Over the years I have heard one particular man recount the experiences of his family and others around the world after the 1929 Wall Street crash. The economic and financial crisis we are facing is similar to that. The decisions we take as Members of the Oireachtas in the coming weeks and months will be crucial to the type of society we create and regulate in the future.

In the past 12 months since the bank guarantee scheme was put in place to stabilise the banking system and prevent a withdrawal in funding we have heard discussions in this House and on the airwaves about the decisions taken by the regulatory system that was in place for the financial institutions and how that system did not work. The amount of money that was pumped into the economy has left us with a huge crisis to face.

We can learn two lessons from what happened. The first is that the principles-based regulation system did not work and it will not work in the future. The regulatory framework we must put in place has to ensure that the credit bubble that developed will never occur again. Much economic activity was built on credit and many people are now experiencing a lack of credit availability. We went from having a large amount of credit to zero credit. Successful and profitable businesses are starved of financial resources due to the dysfunctional banking system. The National Asset Management Agency legislation we are dealing with is an attempt to address the issue. The Minister is working on further drafts to the legislation. It is crucially important that we get the bad loans out of the system and get credit flowing again to restart the economy. First, we must ensure that once NAMA is in place and the bank balances are cleaned up that the credit made available is reasonable.

We must also examine the type of society we were creating in recent years. Policy decisions that were taken in the Anglo-Saxon world, especially in the United States and Great Britain, in recent years have had disastrous results. It is time for us to reconsider the type of society we wish to create, not alone in terms of the Bill before us but in the context of all the other issues we must face. Following the Great Depression in the 1930s some commentators considered that American industry did not recover until the onset of the Second World War. That recession spread to the southern hemisphere also.

Decisions were taken at that time by those in power on protectionism in our case and other policies to be pursued. We must take a fundamental look at how we go forward. In recent years we devised a spatial strategy with hub towns in the regions. The policy was to drive the majority of the population into the major urban centres and to create a critical mass, whatever that means. It can stand for a vast amount of things. We have taken our eye off the ball.

Let us consider the issues that face NAMA. The loans that will be of predominant interest to it are in the main based in the major centres of population where greenfield and brownfield sites were sold for vast amounts of money. Nobody in this House would have even contemplated the ridiculous amounts of money that were paid for such sites. Some people in rural areas say the Celtic tiger never reached them in terms of the frenzy of land and property purchase.

We must examine every aspect of our policies for the future. Much policy has been driven by interest groups outside of this House, some of which are statutory groups or for one reason or another are funded by the Government or Government agencies. I do not just refer to the fabric of society we wish to create but to whether we want society to be predominantly based in urban or rural areas. We have many decisions to make on NAMA, the banking system and its flaws. The loans it will buy will predominantly relate to property in the major urban centres. There must be a more balanced regional approach to development and we must seriously examine the type of society we want and the type of country we wish to leave after us.

We must examine our planning policy. We have seen what happened in parts of the United States and the United Kingdom after the development of huge urban centres in the 1960s and 1970s. We did it in this country too in some of our cities by creating huge housing estates without any amenities. Forty years later our society is paying an enormous price through social breakdown, policing and the violence in west Dublin and other parts of the country. The policy was to continue building. We must examine that.

On the legislation, we must learn things from the last 12 months. People and particularly public representatives have often heard young people talking about seeking loans or credit from financial institutions. They might hear that a particular bank manager was very strict and would not give the loan unless the person had made proper calculations of the principal earner's salary, half the second earner's salary and so forth. However, other banks were giving money out much faster. There followed a race to the bottom. The critical issue was the way the banks loaned the money. Bonuses were paid by the banks on the amount of money being loaned. Every week it was totted up and the banks showed a profit on paper. There was never an issue about a person on a small salary who was being loaned ten or 20 times his salary and how he would pay it back, even if the mortgage or loan was over 25, 35 or 45 years.

People are coming to our clinics about their homes being repossessed and mortgages they took out for 40 or 45 years from some of the sub-prime lenders and the operators who were giving cheaper and more easily available credit than the main banks and institutions. We must learn the deep and expensive lesson from this financial crisis. A generation of people learned from the financial crisis of 1929 and the 1930s. Regulation was put in place to ensure it could never happen again but, 70 years later, the greed of the human being and the eye for accumulating more and more profit was everywhere. We must be true to ourselves and in ordering society for the future we must ensure the financial regulatory system we put in place will be draconian.

The difficulty was that when we joined the eurozone we experienced a low interest rate economy for the first time. Our interest rates were no longer tied to sterling. We were tied to the European Central Bank and would have a low interest rate economy. If there had not been the mindless borrowing and lending that was permitted by the banks and financial institutions, we would have been better off. We must ensure the draconian legislation that is necessary is put in place.

All Members who have contributed to this debate on NAMA have spoken about the need to get more credit into the economy and to small and medium sized businesses. Small and medium sized businesses are suffering due to the lack of credit, as are farmers. Cattle prices are suffering because credit is not available for the stocking loans that are usually available in the autumn over a six or nine month period. There is a crisis in that sector and throughout the economy due to the lack of available credit. However, we must ensure when we are dealing with this issue and the amount of credit we can put into the system that it is credible credit and that the fundamental rules of allowing credit into any economy or society are followed. They may seem draconian towards what they were formerly but they will have to be steady and solid.

One feels that many of the contributions made in this House over the years are being ignored because powers outside the House do not give due recognition to us as legislators and people. The Members of this Parliament are probably closer to their constituents than the Members of most other European parliaments because of the proportional representation system and the ethos of serving the people through the system we have. It is a great system because we bring into it the knowledge and experience we encounter in our clinics and constituency offices, as well as the huge difficulties people are experiencing on a daily basis. In return, we must ensure good legislation is put in place.

Many people have worries about NAMA but the fundamental basis of any economy is a sound banking system. In September 2008 the bank guarantee scheme was put in place by the Government because there was unease throughout the western and particularly the Anglo-Saxon world about the banking system, after the collapse of the major American bank Lehman Brothers. Banks were affected throughout the world. We had to put that scheme in place. People might ask why we did not allow the banks to go to the wall. If they went to the wall, they would bring far more with them, such as the insurance industry and other, smaller financial institutions that depend on it. It is important to convey that it is for the underlying benefit of the Irish economy that we get this legislation working, the banking system back in order and force through solid and genuine regulation that is checked on an ongoing basis by the Members of the Oireachtas, who are answerable to the people. As has been seen with other agencies and bodies throughout the public sector, there must be accountability to this House and therefore to the public and the people who elect us.

There have been comments about the European Central Bank. The European Central Bank resulted from the various treaties and the common currency negotiations many years ago. Without the European Central Bank and the facilities it has made available to us over the last year, we would be in a far more difficult position.

There is one issue regarding NAMA of which the Minister and Government are very conscious, the correct price to pay for these loans. Some of the loans will not have deteriorated too much in value, while some of them are worthless. There are loans based on land prices in areas where the land will never be anything but agricultural land. In some places the land is beyond being agricultural land. We must be very conscious that the price being paid for these loans is recognition of what they will be worth into the future.

The legislation is complex and detailed. It has been given huge consideration by the Government, and the Minister for Finance and the Government are working very hard on other aspects of the legislation. I believe it is the right thing to do at this time. It is an important step in trying to get our economy back on track and to ensure that there is a credible credit system in this country. However, in tandem with this and other legislation we must decide on the type of society we will have. We must examine the fundamental elements of society. Over the past 30 to 40 years, the focus of society has gravitated towards large urban centres, sometimes with disastrous consequences. For example, many towns and cities have experienced a problem with ghettoisation, an issue that must be examined.

The national spatial strategy, with its focus on hub towns, has not been properly implemented to ensure the benefits are spread across the country, including the most rural of areas. Some rural schools are under pressure for numbers owing to building. We should work to ensure facilities are provided in smaller towns and villages, around which society must be built. Rural areas do not experience the difficulties associated with larger towns because their populations are spread more widely.

This complex and detailed legislation has been examined by the European Central Bank and International Monetary Fund, both of which regard it as the way forward, as have other experts. We must ensure amendments to the Bill reflect the ideas of Members of the Houses. We are ultimately responsible to the people who send us here and must do our best to represent their views. I commend the legislation to the House.

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