Seán Sherlock (Cork East, Labour)

While I have great respect for Deputy Michael McGrath's views, as a layman I still find it difficult to understand how the State can justify the investment of €4 billion of taxpayers' money in Anglo Irish Bank. To date, no one has been able to give me an economic rationale for allowing this bank to stay afloat. I have not heard it from a market perspective, nor have I heard a cogent political perspective to convince me of the need to have invested so much taxpayers' money in that institution. There will have to be a further analysis of that decision. I can only surmise that some of the stakeholders in that bank were so strategic in terms of the Irish economy and the employment they provide that if there was a risk their investments were going to be compromised in any way, it could have had untold consequences for jobs in a number of other sectors. That has not been stated by anyone on the Government benches, however. I would prefer people to come clean about the motives for such an investment because taxpayers deserve no less.

As regards the Deputy's comments on the levy, those who will ultimately pay the price if such a levy is imposed on the banks will be the customers, not the institutions themselves and certainly not the shareholders. If a levy is imposed, the taxpayers will pay it, thus imposing another cost on the customer base.

As regards the NAMA legislation, four months ago, a representative from the Irish Banking Federation told an Oireachtas committee that approximately 14,000 people in this country have mortgages which are in arrears. Juxtapose this with a blanket guarantee, which Labour opposed, and one has a situation where the Government now stands as guarantor for the funds of speculative bondholders in some instances, as well as shareholders in a banking system in a state of paralysis and to which it is proposed to transfer resources in the name of all taxpayers, present and future.

One of the fundamental questions for my constituents in Cork East is whether legislation of this magnitude will protect home owners who are at risk of repossession. The answer to that question, quite plainly, is "No". We are losing jobs every day and liquidity plays a part in that analysis. More seriously, as my colleague Deputy Michael D. Higgins pointed out earlier, home owners are terrified of the day when interest rates increase as the European Central Bank responds to a slow European recovery. A wave of repossessions may ensue. That figure of 14,000 represents thousands of families who live with the fear of repossession hanging over their heads as they attempt to make ends meet. These are families living in unfinished estates or shoebox apartments. Young families are sending their children to prefab classrooms in schools too small to cope with the influx of new housing. They are families who made a choice. Much like the bankers who will be bailed out by this legislation, these families decided to take a risk in purchasing houses at historically high prices. Taking out a mortgage constitutes making an investment in property, with all the potential hazards that come with it. In the main, however, their behaviour could not be characterised as speculative. Their behaviour was predicated on the basic human need to set up home and put down roots. The difference, however, is that these families will not be afforded any bailout. The best that families in arrears will get is a moratorium, a stay of execution that will delay the inevitable proceedings that could see a percentage of them rendered homeless.

There is also another difference. While bankers and builders looked to a multitude of so-called financial experts hell bent on hitting financial targets, the people took their Government's assurances at face value when stepping onto the property ladder. The Fianna Fáil Party laughed off warnings of a recession with jokes about naysayers committing suicide and insisted that we were in for a soft landing when cautioned about the overheated economy. Weeks prior to the 2007 general election, the then Taoiseach, Deputy Bertie Ahern, criticised an RTE programme entitled "Future Shock: Property Crash". At the time the programme was frightening in its bleak appraisal of the property market, but it is now seen as remarkable in its prescience. At the time, Deputy Bertie Ahern described the programme as irresponsible and inaccurate.

Why should the public trust those who got us into this mess to get us out of it? The Fianna Fáil Party has not got the confidence of the people of this country on NAMA or any other issue. Once again, the people are being asked to trust Fianna Fáil, the party which gave assurances of soft landings and ignored the advice of those concerned with the property bubble. Once again, its members chose to ignore the warnings, this time disregarding the sound economic consensus that NAMA is a bad deal for the taxpayer. Any faith the public once had in Fianna Fáil is gone. We can see this legislation for what it is - an attempt by Fianna Fáil to maintain the status quo. It will continue to prop up those who benefited greatly from the economic policies of Deputies Bertie Ahern, Charlie McCreevy and Brian Cowen. Those policies enlarged the gulf between the wealthy elite and ordinary citizens. The people of Ireland do not want NAMA and they do not believe that this Government can repair the damage done to Ireland's economy, reputation and confidence.

The Labour Party policy on NAMA is predicated on a belief that the payment to a bank of a long-term economic value for loans amounts to a significant gift by taxpayers. This is a €7 billion gift to the banks. As CORI and other organisations have pointed out, this is likely to undermine the State's finances and public services for years to come while failing to secure credit for businesses.

The Government's approach to resolving the current fiscal crisis is inherently flawed. There is no talk of stimulus and the assets are over-valued. Banks do not have to change their behaviour. We believe the current market value is the price that must be paid for these assets. The Government should ensure nothing above the true current market value is paid for the assets in order that the risk to the citizen is lessened. If the €47 billion valuation is accurate, the decision to pay the banks €54 billion for the assets amounts to a gift of €7 billion to them. Where is the economic justification for such an action?

The Bill is one of the most significant the Dáil will ever debate. The risks to the Exchequer are enormous and irreversible. Overpayment by NAMA for the loans will impose a major financial burden on the State, yet it is clear this is the inevitable consequence of the Government's approach. Throughout the banking crisis, the Labour Party's analysis has been consistent in its determination to protect the interests of the taxpayer, while advancing proposals to restore a functioning banking system, supplying much needed credit in the economy at the lowest cost and risk to the taxpayer. Our analysis is there will always be a risk to the taxpayer but we can mitigate it more expeditiously than Fianna Fáil. Our approach, based on temporary nationalisation of the two largest banks, would minimise the risk to the taxpayer and provide a potential upside when the banks were reintegrated into the private sector.

We have published our position in this regard and been consistent in our opposition to the underlying culture of greed and recklessness that gave rise to the banking crisis in the first place. We have always called for tougher regulation at EU level and countered the role of our own Commissioner, Mr. Charlie McCreevy, in completely rolling back the regulatory framework, a process started by his predecessor, Commissioner Bolkestein. In addition, we have always said the financial services sector would have to be regulated because the invisible hand of capitalism would render the type of crisis we are now experiencing. During the bubble years we pointed to the dangers and unfairness of soaring house prices, brought forward legislation to control the price of building land and challenged the tax breaks fuelling property prices. Instead of acting to control prices, Fianna Fáil stoked the property boom at the same time as the party flaunted its relationships with property developers.

There are serious weaknesses in the proposed governance structures of NAMA. As well as the risks and costs of bad loans being borne by the taxpayer, no provision in the Bill gives assurance that a tough, commercial approach will be taken to developers. The legislation has inherent flaws. The Bill states the agency is to obtain the best achievable financial return for the State having regard to a number of factors but it vests extraordinary powers and discretion in the Minister for Finance. I am not convinced these powers will achieve the best financial return for the State.

The legislation states, "except where otherwise provided by this Act, NAMA is independent in its performance of its functions". In an overall assessment of the Bill's provisions, the agency, in all major respects, is not independent but it must act at the direction of the Minister. Its function is "to acquire certain assets from certain persons to be designated" by the Minister and "to perform such other functions related to the management or realisation of bank assets that it has acquired as are directed by the Minister". The power of designation of "eligible bank assets" to be purchased by NAMA is vested in the Minister. He or she must consult NAMA, the Governor of the Central Bank and the Financial Regulator but the power to designate resides with him or her exclusively.

This is a flawed process in the context of democracy. I hope the Labour Party will have an opportunity to address this issue on Committee Stage because there must be proper financial and regulatory oversight of the legislation to ensure it will not be abused if the Minister is seeking to achieve the aim of gaining the maximum value for the amount invested by the State. The legislation requires NAMA, in the performance of its functions, to have regard to any guidelines issued by the Minister and sets out his or her powers of direction, which are extensive. The agency is required to comply with any ministerial direction. The legislation gives the Minister too much power. These powers need to be devolved to the financial regulatory regime. I hope this issue will also be addressed on Committee Stage.

The NTMA must provide NAMA with such business and support services and systems as the NAMA board determines acting on the recommendation of the chief executive officer of NAMA and following consultation with the chief executive officer of the NTMA. It is also obliged to supply staff and provide NAMA with treasury services and advice. Other than these functions, NAMA appears to be a cuckoo in the NTMA nest. While the formula of having consultation with the Governor of the Central Bank is included in the Bill, clearly the Minister is not bound by and does not need to have particular regard to his or her views.

With regard to the role of the Oireachtas, the Minister is required to furnish an annual statement to the Houses of the Oireachtas but the Bill entitles him or her to omit "any matter that would disclose confidential information". "Confidential information" is widely defined and could be construed to justify withholding any information the Minister sees fit. The chairperson and chief executive officer of NAMA must appear before the Committee of Public Accounts and deal with general matters that are specified, for example, the economy and the efficiency of NAMA systems and procedures. However, the Bill includes a section that gags and prevents them from expressing an opinion on the merits of the policy of the Government or a Minister or on the merits of the objectives of such a policy.

The legislation appears to leave it in the hands of the Minister to evaluate after five years whether NAMA "had made progress towards achieving its overall objectives" and whether a continuation of the agency is necessary. That should be a decision for the Oireachtas, rather than the Minister.

The Minister also has critical overriding functions in the determination of acquisition values. The Bill empowers the Minister to make regulations to require NAMA to take into account the report of an expert concerning factors or matters relevant to the determination of the value of any property in question. Under the legislation, he or she will appoint the expert reviewer and the valuation panel. The panel will review the total portfolio acquisition value and then proceed to communicate its position to the Minister, not NAMA. However, the Minister can reject the valuation of a portfolio by the panel. In other words, if he or she does not secure the valuation he or she wants from the panel, it will have to reconsider the valuation. That is a Labour Party analysis and is something I hope the Minister will respond to in the debate because it is pertinent.

There is much in the Bill that will require further discussion. The valuation process is inherently flawed. The taxpayer will have paid a surplus of their own money to the banks for this process. The legacy of this legislation will be negative. The Labour Party had a constructive alternative analysis through the construction of an asset recovery which we felt would be a much more expeditious way of dealing with the crisis in the banking sector. We felt that temporary nationalisation, with a view to selling stock back into the market once there was an upturn in the economy, was the way to go. We hope to deal with all of the issues we have outlined on Committee Stage.

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