Timmy Dooley (Clare, Fianna Fail)

I welcome the opportunity to speak on this important issue. As the previous speaker said, we are here tonight to normalise and make a new beginning in a situation which has spiralled out of control and needs to be addressed. Fortunately or unfortunately, this Government is the only group putting forward a proposal that has the capacity to deal with the issues to which Deputy Lynch has referred, normalising a way of life for so many, whether homeowners, small businesses, employers or larger enterprises that have not been able to avail of the necessary credit to allow them to continue in business.

We are here because of the poor lending practices of the past. Competition from external banks forced others into a position such that in order to maintain market share they had to give up many of the prudent practices that existed prior to the entry to the market of the external banks and follow their poor and imprudent lending practices. Many of these pressures came from international sources.

We often fail to recognise that this is part of an international problem. While we have a problem that is peculiar to Ireland it must be viewed in the context of what was initiated in the United States. It happened some time prior to the collapse of Lehman Brothers. It started with the Clinton policy and the development of the notion of the subprime mortgage and the bundling, processing, re-processing and re-sale of what are, and clearly were from the start, toxic assets. People borrowed money who had no capacity to repay it. It was a policy of the Clinton Administration. President Clinton stands over a policy that had been good in very many ways but which failed, initially, with the failure of Freddie Mac and Fannie Mae. We know where matters went from there. The comment in this House and abroad in the country would lead a person to believe the problem we have is in total isolation.

The banking practice that emerged in this country over the past ten years is very different from that which existed heretofore. During that period people on all sides of the House took pride in the fact that interest rates were much lower and not at punitive levels. We all knew people who were cursed in the past with rates of 20% or 21%. We prided ourselves out of that and perhaps did not realise what was opening up with the availability of money from money markets rather than from the deposits which were a factor in a bank's capacity prior to this. The regulation regime allowed that to happen and policy makers on all sides of this House espoused it as the way forward. It recognised, or reflected, a population and an economy that were maturing and that was something we embraced. To try, as some have done on both sides, particularly among the Opposition, to lay this at the door of Fianna Fáil and in this cynical way suggest it was something cooked up at a race meeting in Galway is disingenuous. It belies those persons' record in this House on policy development and in the approaches they took and the campaigns they led, whether from a trade union point of view or in commentary in this House. It does not do them any particular honours to take this approach.

Notwithstanding that, the Government has had to deal with what was clearly a very difficult situation. The suite of policy measures it has brought forward is appropriate and commensurate with the challenge and risk that existed at every opportunity, initially through the bank guarantee, through the €7 million recapitalisation of AIB and Bank of Ireland and the ultimate nationalisation of Anglo Irish Bank. It has been suggested there might have been some other way and that Anglo Irish Bank, because of the toxicity of its assets and the practices that existed there, could have been eliminated. This was suggested in despite of the people who had deposits or the bondholders, many of which were smaller institutions that provided credit in this State and pension funds. That suggestion shows, at a minimum, an ignorance of the facts and, at best, an underestimate of the importance, from a systemic point of view, of where Anglo Irish Bank stood within our financial structure. NAMA is a requirement at this stage. It is about freeing up credit and that is clearly what the Government has set out, in response to the needs of Irish people.

There is an issue about wrongdoing and I will not go into it. It must be addressed. Collectively, we must find a system to bring people to justice more quickly. I do not suggest it should be administered in this House. We have all commented on this - some with regard to the way justice was denied in this House most recently. It would be wrong to try in this House to bring justice to those who have perpetrated wrong. However, there are issues with regard to Anglo Irish Bank. They concern the hiding of personal loans, the bed and breakfast approach to deposits in other institutions, and institutions making deposits in Anglo to boost or misrepresent results. There was the distortion of the market by contriving to sustain a stock price that clearly should not have been sustained. That points towards corruption. As a society we must be much quicker in addressing this and bringing people to book if we wish to restore the credibility our financial system must have if it is to serve the citizens of this State in future years. There was no choice about nationalisation. Clearly, the approach NAMA takes in dealing with toxic assets will provide a cheaper suite of finance to Anglo Irish Bank than would have existed heretofore.

There has been reference to the long-term pricing issue. That shows an ignorance of the facts regarding how one might deal with so many assets, so much value and so much volume. If we were to do a mark to market in an environment where there is no market effectively we would be saying it was a fire sale. Who would end up with the assets? If one were to take that approach, there would be no need for NAMA in the first place. One would effectively throw away our entire property and development book, and the entire existing asset base required for the development of this country over the next 30 to 50 years, into the hands of sovereign wealth funds, Middle Eastern wealth funds established on the back of the oil industry or some of the Chinese wealth funds. I do not believe anybody would suggest that the way to dispose of these assets is by way of a fire sale into an environment where no market exists in this country. It is about an orderly disposal of the assets and this can only be done through NAMA.

One must set some price in the event of not having a market. Clearly, the approach being taken also acts as a stimulus because the funding coming from the European Central Bank is at the extremely low rate of 1.5% when moneys on international markets are currently costing much more. When one considers that €4 billion of that money will go into Anglo Irish Bank, this should reduce, to a very real extent, Deputy Howlin's concerns. Perhaps these were the concerns of the Nobel Prize-winning economist. If we were to have a discussion about that economist-professor, he has made some rather strange utterances in the past that I do not believe would find favour in the democratic system we operate in this country. Perhaps that is for another day.

There have been statements, most recently by Deputy George Lee, that the taxpayer was funding NAMA. There is another canard if ever there was one. The taxpayer is not funding NAMA - the ECB is doing so. With the inclusion of a levy regime, as proposed by the Minister, it is clear that the taxpayer will not fund NAMA. Banks will ultimately have to do that in the event of there being a loss which is not envisaged at this stage.

The biggest issue from now is to ensure that banks will lend into the economy when they come into funds as a result of the passage of the NAMA Bill. It is important that they do not hoard that cash. They are getting the money at a cheap rate. Clearly, if they were to put it in the markets they would get a better return on it than what they will pay for it and we must ensure they do not do that. I am concerned about that area and that there is not effective competition between the banks at present. We need at least three banks in this State to create the kind of competition that is necessary.

To an extent, I am concerned that there is a capacity for the gouging by banks of some of their customers. It is happening already. They are doing this because they can, because there is no competition. I have seen a number of examples, particularly where banks are imposing punitive margins on viable businesses. I am aware of customers with viable business who have attempted to rearrange contracts in order to reduce to some extent their overhead and allow themselves a bit of breathing space as they go through a difficult trading period where they are repaying interest and capital. In an effort to reorganise their affairs, the banks are attempting to put a multiplier on the margin that exists, of 2%, for example. In some cases they are attempting to multiply that four times to a margin of 8%. We must find a mechanism to prevent that because it is wrong. The banks are taking an approach on viable sectors other than the property and development sector in which they have maxed out. They got that wrong and are now attempting to recapitalise and reposition themselves by targeting people who are trying to survive through a difficult period.

I hope the Minister may be able to find some mechanism within the NAMA structure that will ensure standards other than the code of practice which is laudable and, if properly policed, beneficial. There still is an obligation on all of us to find a way to ensure that the banks, which will be in funds shortly with the passage of this Bill, do not try to use their dominant position in a negative way that will force many of these viable businesses into a position where they can no longer trade.

I commend all the people involved in the development of this Bill for their job of work. It obviously involves risks but the greatest risk would have been to sit on our hands and ignore the problem.

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