John Perry (Sligo-North Leitrim, Fine Gael)

This is an important debate given that the legislation provides a basis for making a wrong decision and failing to kick-start the economy. The backdrop to the legislation is the decision made one year ago to provide a State guarantee to the banks. The guarantee provides protection for all three types of bank creditor, namely, normal depositors, interbank lending and high-risk bond holders. It was provided initially as a stop-gap measure to ensure the banking system did not collapse and based on an expectation that money would begin to flow into the economy again. Regrettably, the banks have failed to honour their commitments over the past 12 months. Recovery has been slow, the level of credit provided in the economy has been minimal and company closures, job losses and trading difficulties have increased. Cashflow, the life blood of any business, has completely dried up.

The establishment of the National Asset Management Agency is intended to ensure an orderly economic recovery. Under the NAMA process, the books of five banks and the State-owned Anglo Irish Bank have been opened to reveal a frightening picture of development loans. The loans of 2,000 customers, 25,000 loans in total, will potentially be transferred to the new agency. The loan book to be transferred is valued at €77 billion, including €9 billion of unpaid interest. Unpaid interest of this scale suggests there was a problem even when property values were high and loans could have been sold at high prices. The problem has clearly been around for a long time, although the Taoiseach, a former Minister for Finance, insists he was not aware of a crisis until one year ago.

Only 40% of the property loans to be transferred to NAMA are performing. While it is not clear to what level they are performing, they are described as "toxic" loans for a reason. This also means that 60% of the loans are not performing. The asset valuation of these loans is €88 billion. While developers are required to put up some of their own money when taking out loans, I doubt this was the case. A 47% reduction in values has been assumed, giving the loans a valuation of €47 billion. The Government has decided to pay €54 billion for these loans or approximately €13,500 for every man, woman and child in the country. If a problem arises, it will be extremely costly.

The valuation process is problematic. If, for example, the companies owned by Liam Carroll are even remotely representative, the reduction in values is more likely to be 80%, rather than the Government's estimate of less than 50%. In addition, land values are subject to variation and are not based solely on supply and demand but also on zoning. A further problem arises if the developers did not put up cash as collateral. I doubt very much this was the case. Another concern regarding NAMA is that it is premised on future values. The Minister failed to take into account the likelihood of future interest rate and inflation rate increases. Those who lend money expect more than to break even after ten years.

While I accept the necessity to save the banking system, must we save the five Irish institutions as private banks? Should we have provided guarantees to all bank creditors? The Fine Gael Party policy is to establish a State bank which would provide seed capital, which would ensure many businesses with the potential to develop succeed. Anglo Irish Bank, which will receive State support of €28 billion, will not lend one euro to any business. Having received €3.5 billion from the State, the bank is seeking further moneys to underpin its accounts and wants to have its toxic debts removed. We should instead make billions available to a stand-alone bank.

A State-owned bank sold to the Bank of Scotland in the 1990s was highly effective in previous recessions when it invested in stand-alone projects in every town and village. It is regrettable that the Government has not decided to establish a new bank with a clear mandate to invest in job creation. Small companies across the country are finding it impossible to secure working capital. Today, my party leader, Deputy Kenny, asked what assurances the banks had given that they will re-invest in small companies. Banks will give one ten reasons not to give money and not a single reason to provide it.

The Bill is specific on the establishment and operation of the National Asset Management Agency and about the arrangements for transferring vast amounts of money into the accounts of participating banks. However, it is weak on issues such as transparency and it is silent on the issue of restructuring. The word "ethics" makes a brief walk-on, walk-off appearance in the legislation. A significant element of the NAMA project reminds me of a phrase used in a Hans Christian Andersen fairytale - "Meanwhile, in another part of the forest...."

To find out about Government intentions under many other related headings, we are referred to ministerial statements. This is not good enough. Let us take the issue of ethics as a case in point. Section 30 refers to disclosure of interests by members of the board of the National Asset Management Agency and provides that the board shall issue guidelines as to what constitutes an interest for the purpose of the section, having regard to the definitions of the Ethics in Public Office Act 1995. This is the only reference to ethics in the entire Bill. Let us contrast the ethical arrangements and standards built into the legislation with those built into the Local Government Act 2001. Part 15 of the 2001 Act provides for a comprehensive ethical framework for local government services.

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