Joan Burton (Dublin West, Labour)

I regret that the Minister has constrained the debate. On Committee Stage, the debate by agreement was moved to section 70, where the concept of value is explained at some length to allow a comprehensive debate on the issue. It is unfortunate that the Minister made the decision he made when the rest of the House was willing to debate it. It is an attempt to move the debate on and to get to the core sections of this terribly important Bill, because we are not going to reach those sections by 8 p.m.

The format of this Bill is rooted in one proposition, which is a decision by the Government to overpay by at least €7 billion for the distressed assets and loans, as well as for the good loans of the banks. In all probability, it will overpay by €11billion to 12 billion. Independent commentators such as Professors Whelan, Gurdgiev and Lucey, have all done detailed analyses of the problem with the long-term economic value and the overpayment of the assets. Mr. Peter Matthews, an accountant, has also done some detailed analysis which he has made available to every Member of the House. He has experience in compiling valuations and schedules of valuations, which is the system that NAMA proposes to use.

The decision to overpay for the assets is fundamentally flawed for a number of reasons. From a democratic point of view, it is really unacceptable to people, whether they are on Anne Street in Dundalk or Clonsilla Road in Dublin 15. When something goes completely against the grain of everybody's common sense, whether they have had the benefit of becoming a doctor or the benefit of doing their leaving certificate, the Government should pause and think.

I will remind the House of what judge after judge said about the valuations and the schedule of recoveries that were laid out in the appeals in the Zoe case. Mr. Justice Clarke, who has a background in mathematics, basically said at one stage that the expected work-out values were nonsensical. He said that as the assets did not have the necessary capacities, the business survival plan was not meaningful and did not meet the required tests. We are asking the State to do what the judges, in their wisdom, did in the Zoe case. We are asking it to operate from the perspective of judges who informed themselves of the specific elements of the cases before them and decided they made little sense.

This legislation proposes a move from "current market value", which is the value that is arrived at between a willing buyer and a willing seller, whose knowledge of the market is as perfect as possible. Any expert will say that "current market value" implies a recognition of the increase in value that is expected over the period of time in question. If one believes that the book value of a premises is €500,000, one might decide to pay €1 million for it if one expects it to yield far more than would otherwise be the case for a similar piece of land, property or building. According to the Minister, this crude device has been introduced into the Bill with the blessing of the European Central Bank and other agencies to allow for the overpayment and overvaluation of assets. At a time when the Government is looking for €4 billion in cuts from the poorest people in this country, the public is enraged that the Government is proposing to pay an extra €7 billion in value to the banks. The banks will not have to fully acknowledge and recognise, in equity terms, the amount of money the State is putting into the banking system. It is an artificial device.

Almost all international reporters and observers, including the European Central Bank, the IMF and various other organisations have said that if one departs very far from market value, one does so at one's peril. They have emphasised that it is wrong not to depart significantly from market value. The ECB is changing its approach now that the Lisbon treaty has been passed, the German elections are over and a number of European countries are poised, we hope, to enter a slow but sustained recovery period. I do not doubt that the European Central Bank will slowly but surely exert more influence as it seeks payback for the overpayment. Deputies are familiar with a decision made by the EU Commissioner for Competition, Dr. Neelie Kroes, to whom the Minister referred extensively on Committee Stage. She told the ING bank to take action to recognise the various arrangements, such as the state investment, that were put in place to rescue it and bring it back to an appropriate market level. She dealt with the issue of what was, in effect, the provision of state assistance to the bank.

We are in very dangerous territory. The Minister has spoken about the consequences of the overpayment and the issuing of the bonds. When the banks go to the ECB window, they use the bonds as collateral for their capital requirements and for other borrowings. The interest rate on the bonds is likely to be 1% for the first six months. When he spoke at a conference on international financial services in Ireland, which I attended this morning, the Minister was at pains to point out that the 1% interest rate will last six months only. Thereafter, it will be renewable on the same terms. The 1% interest rate is unlikely to remain in place for very long. We need to consider what will happen as the ECB toughens its stance. It is clear that sometime next year, the banks will be forced to sell the bonds for cash into the markets. As a consequence, the debt will be put out there at the same time as the Irish State, with its current deficit, tries to raise €20 billion in monthly or other instalments to try to bridge the gap between revenue and expenditure in its budget.

The consequences of the proposed overpayment have not been thought through by the Department of Finance or by the Minister. The Minister keeps saying that Mr. John Hurley and Mr. Patrick Honohan have given a sort of benediction to the process. I suggest that their form of wording will be found to have been pretty circumscribed, when it comes to be examined in an historical context. The Minister accepted it, as he is wont to do. He tends to think that if someone smiles at him, that person is agreeing with everything he has to say. He has suggested that the comments of the ECB and the IMF about Ireland have entirely endorsed the Government's line. He did not read the small print of all of these opinions, which contained a severe warning to Ireland that paying over the market price and departing significantly from market value is not the right thing to do. These statements are the subject of much discussion between the Department of Finance, the Central Bank and various other institutions. They came about partly through a process of negotiation. Many people do not understand the process, in which various opinions are put forward, examinations are made, drafts are given to the Government and a statement is finally agreed.

The decision to overpay is wrong. It will not necessarily rescue the banks, in the context of what is happening to bank shares. When bank shares went up after the decision was announced, it was seen as some kind of validation of the Government's position. The increase in bank shares resulted partly from the actions of groups of people who were betting €10,000 or €100,000. Hedge funds may have placed larger bets on increases in share values. There was nothing organic, relating to banking performance, in the increase in share prices. Three weeks later, when things did not look so good for bank shares any more, they came down. That was to be expected. We are fooling and codding ourselves if we think overpayment and the use of long-term economic value will make the banks return to profitability and lending, etc., more rapidly than would be the case if there was an honest use of market value and an honest recognition of the State's investment in the bank.

The Minister seems ideologically fixated on not taking the alternative path, which involves taking the banks into temporary public ownership and reprivatising them when they have been cleaned up. He would not do it in the case of the two most notorious banks, Anglo Irish Bank and Irish Nationwide, when it should have been done 15 or 18 months ago. He put the two institutions at the centre of the bank guarantee scheme, even though their business model was bust, instead of dealing separately with them. We are spending all our time catching up. At some future stage, the Minister will have to take a majority stake in one of the institutions, or nationalise it, in the worst possible circumstances. We nationalised Anglo Irish Bank in the worst way possible. In this case, it is a question of temporary public ownership-----

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