Dáil debates

Tuesday, 13 October 2009

National Asset Management Agency Bill 2009: Second Stage (Resumed)

 

12:00 pm

Photo of Seán ConnickSeán Connick (Wexford, Fianna Fail)

I am delighted to have the opportunity to make my contribution to what is, as many speakers have said, probably the most important legislation ever to pass through this House, certainly in the lifetime of this Dáil and probably in our lifetime in this Parliament.

I thank the Minister for Finance, Deputy Brian Lenihan, his staff and his advisers for all the work they put into the Bill. The old phrase, "a lot done - more to do", is very apt in respect of this Bill. We all know NAMA is, and will be, work in progress for many years ahead. It is the best and only option for us to try to manage our way out of the very difficult financial situation in which we find ourselves and our banking system. While not trivialising our own domestic problems, we must also deal with the worst global downturn and economic collapse since the Great Depression. Last year, this Government had to readjust and manage the collapse of our tax receipts, the construction industry and the global downturn. Our exports have held up extremely well but our competitiveness has been weakened - of that there is no doubt. We lost thousands of jobs as a result of that. We have also had to deal with a massive devaluation of sterling against the euro, which continues to be of significant concern to all of us. This is also impacting seriously on our exports to what, traditionally, was our biggest market. We also took €10 billion out of people's pockets in the adjustments in the budget which has had a real impact on people's lives. This decision was not taken easily and resulted in real pain for people. We understand that.

The Opposition would have us believe it is all Fianna Fáil's fault, of course. In its regular efforts to bay for blood from this Government it has been assisted by a hostile media. Politics in this country has become soundbite central, with "blew the boom", "bailing out the banks" or "bailing out the developers" being the cries, or that boring old taunt, "the Galway tent", which is constantly trotted out. The tent is gone, by the way, although it may be difficult for some people to accept this. Funnily enough, it has been replaced by a Fine Gael tent at Punchestown. People should be careful and watch out for that and where it might take them.

The Opposition's behaviour throughout this crisis has been appalling. Its Deputies are so anxious to get their hands on power they are prepared to say anything and are backed up by a largely hostile media commentary. We have a few friends in the media, for example, Gerry Ryan, Senator Eoghan Harris and Brendan O'Connor, who have occasionally shown the courage to go against the tide and I acknowledge that. I have sat in this Chamber and been shocked at the recklessness of some of what has been said. Have the Opposition leaders, Deputies Enda Kenny and Eamon Gilmore, stopped for a second to think of the message they are sending out? Have they and their spokespersons on finance, Deputies Richard Bruton and Joan Burton, done so? They all seem to have forgotten the banking system works on confidence. They constantly refer to appearances by the banks before an Oireachtas committee over a year ago during which the banks said everything was okay. One shudders to think what would have happened if they had said there was a problem. That might have caused a run on the banks resulting in a bank collapse. The consequences of that would be a calamity too great for me and many of us present to contemplate. The so-called alternative government cannot agree on a solution for the banks in addressing the correction of the public finances. Its parties have many policy differences in every sector yet want us to believe they could do a better job. The parties with all the answers and none of the solutions will have to wait a bit longer, I am afraid.

Regarding blowing the boom, what about the record levels of expenditure invested across every programme of Government over recent years? People seem to forget that. Every village, town and county in this country has benefited. People have seen the benefits of investment in schools, health services, roads, sports halls and across all sectors. There was the small matter of the pension reserve fund, a mere €20 billion we managed to save through all that time against the backdrop of an Opposition calling for more expenditure. In those times there was no mention of fiscal rectitude. The Opposition was as visionary as all the economists who suddenly arrived on the scene in the past 12 months to say, "I told you so". Where were they two years ago? In fairness, I set apart Deputy George Lee who was eventually going to get it right, having predicted a downturn for almost ten years in a row.

On bailing out the banks, the subject does not sit easy on the shoulders of any of my colleagues in Government. If we had our way, we would not give them a penny. However, without a functioning banking system we will not have an economy and the risks to the economy are now so great we must fix our banking system first. NAMA is the best method of doing this. It allows us to manage our way out of debt and allows our banks to get back to the business of ensuring funding is available to business. It restores confidence in our banking system and gives us the opportunity to deal with the many unfinished sites and projects that will have value and, in time, will give a positive return to the Exchequer.

I welcome the recent news that a levy will be applied to banks if a loss is made at the end of this scheme. I would also like to see banks working closer with small businesses, showing the flexibility required to ensure that such businesses will survive these turbulent times. Decisions must be made again at bank manager level rather than in the boardroom in Dublin or anywhere else that is removed from what is happening on the ground. People in business are under serious pressure. I recently met a publican, a good friend, who had a direct debit returned because he was €1.93 over his limit. It cost him €18.50 to deal with that issue. Surely this is not playing fair. Discretion must be applied. When my friend went to the bank he was told decisions were made in Dublin. One can see the difficulties this causes. Banks need to be told to behave in a way that is helpful in getting us out of the current mess. Hiding behind best banking practice in this situation will not work. The banks had a significant role in getting us into this mess and must now play their part in helping us to get out of it. There are no free lunches. As we take measures to save the banking system, the banks must take measures to save us and our economy.

I turn to a matter of considerable concern to which Deputies on all sides of the House have referred, namely, mortgages and the difficulty people are finding in coping. My colleague in the Seanad, Senator Marc MacSharry, recently produced a document of merit which warrants further consideration. He and other contributors offered a number of solutions, including interest-only payments. Obviously, that is not a permanent solution but it might consolidate people's affairs and give them the opportunity to get themselves out of the situation in which they find themselves. Perhaps time limits might be set with the interest period being without penalty. This would have implications for some aspects of the mortgage but is worth considering and I ask banks to look at such options. Permanent extensions of a mortgage period or extending a 25 or 30-year mortgage are such options and might be examined. There is the possibility of renting back a property from the lender. In this situation the default on the mortgage is taken back by the bank which re-rents the property to the original mortgagee. A moratorium, or breathing space, could be looked at because fixed rates are causing great difficulty for people who bought at a time when they thought it prudent to fix rates but now, with the lowering of interest rates, they are paying hundreds of euro more than they should. Surely addressing that debt problem by means of a lower current rate is better than getting no payment at all or having a default at a much higher rate. I call on the banks to look at this.

Regarding the redrafting of the terms of a mortgage, there are some new mortgage holders who probably should never have been approved, many of whom went to mortgage brokers. I deal with people in my constituency office every day who face enormous mortgage repayments and, unfortunately, are now on social welfare. In many cases, there is no way out for some of these people because the scale of the mortgage is such it should not have been given. We need to address this issue and I call on the banks to consider it again and see if they can do anything about it.

Most builders I know have gone bust. Those who are trying to struggle on are doing their best to keep a man or two in work. For some builders everything has gone and they may lose their homes. Previous speakers asked where the money has gone. It went into further sites and developments and was eaten up. However, it is time to stop demonising them. The majority of the jobs lost, more than 100,000, have been in the construction sector. It is possible that up to €10 billion of our current Exchequer shortfall comes from that sector alone. If we are to get out of this situation, there is no doubt but that we will need a fully functional construction sector.

We must stop the myth that borrowers and developers will walk away scot free because it is not true. At local level, the builders who present at our constituency offices are in serious difficulties and their banks are pursuing them rigorously. When NAMA takes over, the loans transferred to it will not be written down and borrowers will continue to owe the entire amount borrowed from the bank. Many well established construction firms need a break. They have viable projects in the pipeline and NAMA must work with them to try to maximise returns. If NAMA is a success, which I believe it will be, what will be the Opposition's stance? The winners at that stage will be the taxpayers, which is proper order.

It is only fair to say that everyone is angry and frustrated with what has occurred during the past 18 months. Hindsight is a wonderful tool, but no one could have foreseen the collapse of the global financial system. We did the right thing with the bank guarantee on 30 September 2008 and we are doing the right thing now with NAMA's establishment. I understand the concern, hurt and difficulty being experienced by people and many are in what I refer to as "walk away trouble" and may never recover. Many people have seen their hopes and dreams dashed, but we must find a way out. NAMA is an important component in getting the economy functioning again.

Our decisions last year, which saw €10 billion taken out of public expenditure, have hit people hard and we have further tough decisions to make in the coming months, but they must be made in the country's interests. We must restore our competitiveness. While there are signs that we are addressing this matter through falling prices, we have some way to go and the nation must buy into what we are trying to do. For this to happen, we need everyone on board, including a hostile media. Social partnership must be re-established with a new realism and a determination to refocus our efforts on putting Ireland Inc. back in business and preparing it for the global upturn when it comes.

The Lisbon treaty has been passed and a new and refocused programme for Government has been agreed. I compliment the Minister for the Environment, Heritage and local Government, Deputy John Gormley, and his party on their work at the weekend. Let us ensure that any of NAMA's current shortcomings are addressed by amendments proposed during the coming weeks. Its swift passage through the House is critical because businesses cannot hold out much longer. Then, we must focus our attention on the upcoming budget.

Recently, I have received many e-mails, telephone calls and clinic visits from people from every background who are concerned about NAMA and its consequences for their futures and the futures of their children. The public want to see people who have contributed to the difficulties in our banking system brought to justice. They want to see them led away in handcuffs and jailed. It is only proper that justice be served on those who behaved reprehensibly. The public's confidence also needs to be restored. They must have faith in the senior managers and directors of our financial institutions, and they need to know that their deposits are safe. This will take time and effort on everyone's behalf. The Government is committed to a complete reformation of the banking system, which I am confident it will achieve.

Social benefits from NAMA are possible. With so many people on housing lists, there will be an opportunity to purchase or take long-term leases on unsold apartment blocks or housing units for social and affordable housing. This initiative should be pursued with vigour in the months and years ahead. Other uses could include the acquisition of land for schools, public parks and social housing. This is something that I would like to see occur and I encourage the Minister to ensure that these options are fully explored and delivered.

Regarding the banks, it is vital that a commitment by the two main banks be secured and put into practice to boost lending by increasing lending capacity to small and medium-sized enterprises and to help first-time buyers. We must adopt a new approach that sets new standards in banking regulation and corporate governance and creates a new and enhanced role for the Central Bank.

Much has been written about NAMA and many concerns have been raised, particularly regarding risk-sharing. I share these concerns and hope that the new levy under discussion will be supported and included in the amendments to the Bill.

In Wexford last night, we met landowners along the Enniscorthy and Newross bypasses who were concerned about the new windfall tax of 80%. The Minister for Finance has assured us that the tax will not apply to lands acquired via CPOs, but I call on him to make a public statement in that regard. People have enough concerns without believing that such taxes will be imposed upon them at this time, so clearing this matter up would be helpful. Concern about the sale of sites by farmers was also expressed. There was a call for the roll-over tax of 25% of capital gains tax to be abolished. As in most CPO cases, the land is replaced by the farmer. I call on the Minister to reconsider this issue.

The State will provide bonds to the value of €54 billion to the banks. In return, the State will acquire assets which, if managed properly, will and should return a profit to the taxpayer. While I accept that there is a risk, the risk posed by doing nothing is not an option and could have far greater consequences for the country.

Losses will be incurred by the banks and their shareholders and NAMA will move against any borrower who will not or cannot repay his or her loans. Further reductions in risks to the taxpayer will come in the form of prudent and realistic assumptions about future property prices and equity stakes in the banks, which I welcome. NAMA is expected to pay its way through interest received from the performing loans.

I do not underestimate the task lying ahead, but we are following a plan of action that should help us to stabilise the situation and get our public finances back in order. We have delivered on the Lisbon treaty and our new programme for Government has been agreed. NAMA is on the way and we will succeed in fixing the banking system. Next up is budget 2010 and we must continue our efforts to restore confidence in the economy, which will lead to job creation, restore our competitiveness and get this great country back on its feet. With the help of the people and all sides of the House, I am confident that we will achieve our goals and make a success of this important legislation.

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