Brendan Kenneally (Waterford, Fianna Fail)

While he is not in the Chamber at the moment, I wish to record my congratulations to Deputy Kirk on his elevation to the post of Ceann Comhairle. I am sure he will do an excellent job. I was sorry to see Deputy O'Donoghue step down from the post. He did an excellent job and was seen as very fair by everyone. I will not go into anything else around that issue.

I welcome the opportunity to speak on NAMA, which I agree is the preferred method of resolving the banking crisis. It is not a bailout of bankers, the mantra that has been trotted out time and time again. Nor is it a bailout of developers, it is a bailout for the country. We must put the country first and get on a sound financial footing. We must be seen to be do something credible internationally. Otherwise, we would not be able to borrow on the international market to sustain us.

It is incorrect to say that bankers are being soft on developers or those who owe money. Today I read newspaper reports on Anglo Irish Bank taking proceedings against some of the developers who owe money to the bank. This is what NAMA will do when it takes over the loans. Let nobody be under any illusions: developers will be chased for the money they owe and must pay the money or face being liquidated. At one stage banks thought they would get a soft ride due to NAMA but they realise that this is not the case and that they must repay. They will pay for any NAMA losses, as the Minister has made clear. The banks did not want this but it is included in the legislation.

From speaking to business people in my constituency, I know there was much uncertainty last week about how long the Government would last because of the Green Party conference. While the Green Party members agreed with NAMA by and large, they did not want to see the Government falling because they see that something must be done. We are attempting to do this through NAMA and, if the Government fell, we would be back to stage one. This would involve putting this recovery on hold for a number of months which would be to the detriment of the country. We must be ready to get in on the upturn that is starting to happen elsewhere. I saw reports about Singapore on television last night. Growth in the third quarter was 15%, while it was 1% for the same period one year ago. We do not know how long this will take but we must be ready when it comes. I commend the Minister for Finance on the way he has addressed this issue. He has made it clear that he is willing to make changes to legislation if they are warranted.

Deputy McGinley referred to Deputy Lee and his comments on the building bubble. Before he was a Deputy, when he was a reporter for RTE, he thought NAMA was a good idea when it was first suggested. He was supportive of it at the outset. Now he must sing a different tune because he is in the House and is a member of Fine Gael. Since he left RTE, economic reporting on the station has become far more balanced. Some on the Opposition benches are opposed to NAMA as a concept but they can have an important part to play by suggesting amendments to this legislation. That will ensure it is as workable and comprehensible as possible.

I refer to the comments of Alan Dukes and Garret FitzGerald. There are critics of NAMA but there has been much support and we should not forget this. IBEC referred to the Irish situation as tough but manageable and stated that "NAMA, more action on the public finances in the budget, a "Yes" vote in the Lisbon referendum [this statement was issued prior to the referendum] would all help to improve the country's image abroad".

I was abroad in the past few days as Chairman of the Joint Committee on Justice, Equality, Defence and Women's Rights. Some 22 of the 27 EU countries attended the meeting. They had been following Ireland's Lisbon treaty referendum very closely. They were all very relieved at what we had done. Their attitude would have been that if Ireland did not want to come along, they would have moved on without us. We did the right thing on the Lisbon treaty and this is part of restoring our credibility internationally. We must also do so in respect of NAMA.

IBEC stated that it gave conditional welcome to the publication of revised legislation establishing NAMA. The IBEC director general, Danny McCoy, stated, "It is in everyone's interests that we move quickly to repair our banking system and restore the flow of credit throughout the economy". Speaking on RTE's "This Week", Alan Dukes described the Fine Gael proposal to set up a national recovery bank as "very cumbersome, very doubtful of success and much less clear" than the NAMA proposal. Mr. Dukes said the establishment of NAMA was the Government's best option. The former Fine Gael Taoiseach, Garrett FitzGerald, made a stunning intervention in the NAMA debate, warning that a Dáil rejection of the Government's banking or budgetary proposals could throw our State into the hands of the International Monetary Fund. That is something we do not want to see happening.

It is in the interest of all of us that we get this right and I know that will be supported on all sides of the House. We may have various proposals for tackling the matter but we are all in this together and we must get it right for the sake of our country. NAMA management has already admitted it does not have the expertise to value the €77 billion of developer loans and how could it? The suggestion is that a panel of auctioneers will be engaged to do so. Indications are that discounts of 30%, which would mean a valuation of €54 billion, will be applied. It is difficult to quantify whether this is the correct figure as there is little or no market at present. The banks are not lending to accommodate such purchases, and if they were to whom would they lend in the current climate? As most of the developers have assets which will be transferred to NAMA it will limit the scope to deal with traditional clients for the disposal of these assets.

The Government, in going the NAMA route, is in a difficult situation. If the assets have too low a discount, while it may in the short term help the banks' balance sheets, it will result in the asset value being too high to sell on and will only stagnate the entire economy. If the impaired asset values are too highly discounted it will result in serious consequences for the banks' balance sheets and involve the Government in substantial capital injections to recapitalise the banks and eventual nationalisation of the banks thereby leaving the taxpayer further exposed.

I am opposed to the nationalisation of the banks as I feel the cost of borrowing to this country would increase as a result. We must engender confidence and consider international perceptions. By nationalising the banks we would send out the wrong signals internationally. It would also cost us much more as interest rates on what we are borrowing internationally would increase, which would be to the detriment of what we are trying to achieve.

What is most important is to ensure that these toxic assets are sold on to outlets that will develop them and get the construction industry moving again. If the assets are too highly valued they will stay dormant for years and no benefit will accrue to the Government, taxpayer or future employment prospects. This second alternative is probably the best option as it would give the Government and the taxpayer the best end result and would remove some of the risks that NAMA holds.

International asset management companies such as New York-based Blackrock and the Western Asset Management Group in San Francisco are long established in this field of activity and a public private arrangement with the Government would ensure that somebody with expertise would correctly value the assets. This has happened elsewhere and international expertise exists to managing this. With their track records they will be certain to make a profit, in which the Government and the taxpayer would participate, and they have international contacts to enable them to sell the assets to somebody who can develop them and create employment.

It is most likely that in going the NAMA route some of these agencies will become involved to a lesser extent with no benefit to either the Government or the taxpayer. It would allow these agencies to cherry-pick the best value for money assets and leave the vast majority of impaired assets much harder to dispose of, with very serious consequences for the Government and taxpayers. This would result in a very prolonged recession and much slower economic recovery. I am unsure what interest these groups would have in such a situation and perhaps there might not be any such interest but it is something that could be explored. The Minister is open to exploring all of these possibilities.

Another very important reason international asset management agencies should be involved in this process is that we must take into account that almost €34 billion of the €77 billion is related to assets in the UK, Europe and the US. Surely their overseas expertise would be extremely important in valuing and disposing of these assets. Much criticism has been made of the way we suggest that these assets will have a certain value. The likelihood is that the fall in the book value of assets held internationally will probably be less than the fall in the book value of those in this country; overall we will probably hit the figure the Government suggests we will.

The very significant knock-on effect to the Government in engaging with international asset management agencies would leave the Government in a stronger position - once the toxic debt of €77 billion is removed - to concentrate on a solid plan to sort out the banks. The banks would need more recapitalisation and the Government could consider the possibility of merging the two main banks. We tend to consider the two main banks in this country, Allied Irish Bank and Bank of Ireland, as large banks. However, they are not. Internationally, they are very small players and we should take this into account in the future. I do not suggest that we should merge them but it will have to be considered at some stage. While that is a debate for another day, it should be noted that such a step should encourage the vast amount of deposits which has left the country to be repatriated. It would also encourage deposits from abroad, which is another side of the matter which we should consider. It would help to restore Ireland's credit rating and attract foreign investment.

The confidence of which I spoke earlier is the theme running through my contribution. We must disseminate it internationally and this Bill is the best way of doing so. We could then move on to leave the Government to the very urgent task of tackling job creation. At present, the number unemployed stands at approximately 450,000. Many thought it would rise substantially from this but thankfully the indications seem to be that it has begun to level off.

I have spoken to the Minister, and the Minister is more aware of the issue than I am, about introducing a mechanism or formula to ensure the banks lend to small businesses to allow them continue. This is not happening at present. I do not know how we can force it but it must be done. The Taoiseach and the Minister for Finance have repeatedly told us over the past 12 months that we are in uncharted waters. This is true, and anybody who was born in the 1940s or 1950s-----

See this speech in context