Brendan Howlin (Wexford, Labour)

I thank the Acting Chair and I will need his protection. I propose to share time with Deputy Ciarán Lynch.

I am old-fashioned in my view of politics and economics. I understood the basic rule of capitalism was that the market determined the price and value of goods and services; at least that was the way it used to be. Professor Joseph Stiglitz has been much quoted in recent times. He is a Nobel laureate in economics, a former World Bank chief economist and was an economic adviser to former President Bill Clinton. He is not an unimportant observer in these matters and his firm advice to us - as a social democrat it is not something I would normally exhort to the House - is to play by the rules of capitalism. It is a view that was firmly enforced by those who cheered on the economic bubble that was the Celtic tiger.

For the boom years the Government took hold of an economy left to them by the rainbow Government which was creating 1,000 new jobs a week based on solid exports, industry, production and real goods and services and created a parallel false economy based on inflation and bubble economics whereby we could all have a notional ever-increasing value on our homes and one could invest forever more in pyramid selling of land and property and it would be all right forever more. On that basis we could reduce our tax base and increase public expenditure because this bubble was going to expand forever.

It is a profound irony that what is now proposed in the Bill before the House is that the rules of capitalism are no longer to apply to the capitalists. The rules of capitalism are not to apply to the speculators and bankers who created the problem in the first instance. Of course, the rules of capitalism are to apply in full measure to ordinary mortals, those who bought their homes at the height of the boom. They are left with inflated mortgages which they will spend their lives trying to pay back. There is no redress or support for them. The Bill proposes to place a generational burden on the taxpayer. We do not know the cost despite all the stabs at costing it from the Government side of the House. The true cost of this extraordinary measure will not be known until the fullness of time.

The core of the proposal is amazing. The basic principle is to overpay banks for assets. That basic core principle has been described by Professor Joseph Stiglitz as criminal. That is hardly an understatement of reality. He also said:

There is an alternative. Play by the rules of capitalism - if you cannot pay back your debt, shareholders and bondholders lose. If the Government puts in money, it needs to get control commensurate with the money put in. It also should get a return proportionate to the risk involved - in this case, it is a big risk.

That is the view of capitalism and those who have been recognised internationally as the main spokespeople for the capitalist economy.

What is proposed, however, in NAMA is that the State will overpay by design for so-called distressed assets on the basis of a new economic concept that I never heard before - the hope dividend. The new concept for economic planning – certainly not a sound one for State economic planning – is that we are to hope that some time in the future the value of the assets we take into public ownership now will be greater. We will not pay the market, the real or true value of these assets but instead put a price of hope on them, hoping it will be achieved some years hence.

Valuing these assets is like a gazing into a crystal ball or being an economic Mystic Meg. We are going to gamble the good name, treasure, fortune and resources of this State at taking a stab in our depressed economy on the potential price of assets that were deliberately overvalued in recent years.

Members opposite get agitated when it is fairly and honestly stated that this is a banker's solution, if a solution at all. I am sorry Deputy Wallace has left the Chamber but the Labour Party alternative is not blanket nationalisation. Instead, it is a temporary nationalisation of the strategic two banks to achieve, as Joseph Stiglitz said, the normal aims of capitalism – that he who buys the assets, controls the outcome. There is no easy solution in all of this, any solution is fraught with risks. To minimise risk and maximise safeguards for the taxpayers of today and the future, the agreed path of many economic commentators, including Professor Stiglitz, is the Labour Party's choice.

The Government's expectation of property price rises in the future is an essential ingredient if the NAMA plan is to succeed. Apparently, we all, collectively as a nation, must hope for another property boom as the way of getting back the State's investment. This is the property boom which has already proved ruinous to thousands of ordinary families across the country who cannot pay the exorbitant prices it created for housing.

The Greens have grafted in a community role for NAMA which leads to a contradiction. Is NAMA to be an agency to get back public moneys or a property investment agency which will give out land for social purposes? The two cannot be encompassed in the same objective.

Another suggestion is that NAMA money is not real money, meaning it could not be spent on the provision of public services. It is a State guaranteed bond, a State IOU, in exactly the same way as every other State borrowing is achieved for the normal day-to-day running of the State. It is real money and a real enormous crippling debt. Worryingly, it is to be funded on the basis of a six-monthly bond at plus 1% of the ECB interest rate. Every 1% interest rate change, with the €54 billion in question, will mean an extra €540 million per annum on payments.

The main need of our economy now is the release of capital, a fact I am only too aware of having spent last Monday night with Wexford businesspeople at a forum in the Ferrycarrig Hotel. Small businesses are going to the wall for want of money. When it is stated with conviction that banks will start lending again as soon as NAMA is enacted, I do not believe it unless the State insists on taking ownership and dictating lending policy to the banks in the short term.

It looks like we are stuck with the NAMA solution. It is now Government policy, endorsed recently by the Greens and Fianna Fáil. We are stuck with this enormous gamble for ourselves and our future. It falls to the rest of us to pray that the Government solution is not worse than the original problem that the failed politicians on the other side of the House caused in the first place.

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