Tuesday, 22 September 2009
Today, the Central Statistics Officer released figures which show emigration is a feature again in Ireland for the first time since 1996 and that we have also lost 174,000 jobs in the year to March. The House should really focus on the priority of a stimulus package to protect and create jobs and get the country back to work.
Among the population the general understanding is that the Government's proposal for NAMA will allocate €30 billion to Anglo Irish Bank and Irish Nationwide Building Society. This will not result in a single person being taken off any dole queue anywhere. The Government has defended NAMA on the basis that the €51 billion plus in taxpayers' guaranteed bonds used to acquire toxic assets will leverage money from the European Central Bank, which, in the words of the Minister for Finance, will be allowed to flow back as credit to help struggling businesses and families. Given that this is the main justification for the bailout of the banks and the protection of developers, there are several questions I wish to ask the Tánaiste and Minister for Enterprise, Trade and Employment.
First, when will lending conditions be eased as a consequence of NAMA? Last week, when asked this question, the Tánaiste said she was not in a position to answer. I am anxious to know if she has made inquiries since then and what answer she has been given.
Second, 40% of the total NAMA bonds will be used to buy toxic loans from Anglo Irish Bank and Irish Nationwide Building Society. Both are institutions which will never make another loan in the normal sense. In fact, in the case of Anglo Irish the only loan it is interested in is that from a zombie bank to an insolvent developer for a headquarters that is not required. The remaining bonds, some €30 billion, will go to solvent institutions. In turn, this could leverage 80% from the European Central Bank, amounting to €25 billion. Given that 40% of the bonds will be used to acquire toxic loans from Anglo Irish Bank and Irish Nationwide Building Society, how much extra lending does the Government estimate will be generated by NAMA?
The four clearing banks - mainly Bank of Ireland and Allied Irish Banks - are servicing loans from other foreign and Irish banks of approximately €140 billion. They are very eager to pay down these debts. For them, the overriding strategic position is to improve their capital positions and lower their overstretched loan-to-deposit ratios. NAMA will not achieve this. For this reason both the new Governor of the Central Bank, Professor Honohan and the economist, Colm McCarthy, said that there are serious doubts about whether these banks will lend on the extra moneys they get for credit and business here. It is not contained in the legislation. What guarantees have these banks given the Government that the extra money they receive will be lent to small businesses and struggling families across the country?
My three questions are, when will lending conditions be eased as a result of NAMA? How much extra lending does the Government estimate will be generated here? What specific commitments have the banks given the Government that they will lend the extra money to business, as credit is badly needed now because people are losing jobs by the minute?
The Deputy's initial comment arose from the quarterly national survey. While it was not a surprise it is a reminder of the major challenge we face to sustain employment and create new opportunities here. The Government is taking several initiatives to address many of those issues, for example, concern about access to credit for business has been raised in this House over a considerable period. Some have severely criticised NAMA but it is the most appropriate way for us to ensure that there will be a credit supply to business, and stability in the banking system.
As a consequence of NAMA, banks will receive funds cheaper at 1.5% from the European Central Bank, ECB, which will entice them to lend. We have set up a credit clearing group in which we have worked on the Mazars report-----
I brought together the banks, all the representatives of the small and medium sized enterprise sector, the foreign direct investment sector, and we have worked progressively on many of the issues raised by many sectors. Most particularly, we have been addressing people on both sides of the argument and familiarising them with the challenges within the banking and business sectors. For example, I have appointed, through Enterprise Ireland, a senior person to the banks and vice versa and we are working with a second bank in order to ensure that the business acumen which is necessary to this economy will be made available to people who wish to make applications to the banks.
When I was asked could I give a definite day or date when this would happen I said we have been progressively working with the banks to make sure that those viable businesses in need of support are supported to the best of our ability. I have provided a framework within which that will happen through the clearing group. People can bring their difficulties to the website that has been set up where we can deal with them on an almost one-to-one basis.
There is a stabilisation fund through which a considerable number of viable yet vulnerable businesses have received support. The employment subsidy scheme which sustains people in employment is as important as the creation of new employment. Although we continue to have many challenges to employment we are redoubling our efforts on the national employment action plan with my colleague the Minister for Social and Family Affairs, targeting training opportunities and convergence courses through which we take on people with skills and move them into new skills. We have a graduate placement programme to prevent our losing the skills that we already have.
We will continue to be vociferous in working with the banks to ensure that credit is made available as quickly as possible to the viable businesses that need to move forward.
When the Minister for Finance spoke on the legislation dealing with the guarantees on deposits he said we are deeply "embedded" in the banking sector. Now the Tánaiste tells me that the Government will continue to be "vociferous". I asked her three questions. I did not ask for a specific day or date. When does the Government calculate that lending restrictions will be eased for small businesses throughout the country? How much does the Government calculate will be made available in extra lending capacity as a result of NAMA, given what I said earlier? Can the Tánaiste tell the House, as she continues to be "vociferous" with the banks and as the committee is doing its work, or at least monitoring if not solving problems, what specific commitments have the Bank of Ireland and Allied Irish Bank given the Government that they will use the extra moneys they receive through NAMA to lend on to small business and struggling families across the country?
The Tánaiste has not answered any of those questions and I have a further question. The Government says, through the Minister for Finance, that the NAMA bonds will pay a premium of 0.5% above the main ECB rate and it claims that NAMA can cover its own costs at the introductory rate of 1.5% on the bonds issued to the banks and the big fees to be paid to bankers, lawyers and valuers. On this basis it says that NAMA can break even if the value of the assets purchased rises by 10% over ten years. Has the Government considered what will happen if interest rates rise? The financial markets are pencilling in not just a rise in rates but a quadrupling of the ECB base rate over the next ten years to an average of 3.8%. That would add €1.5 billion extra per year to NAMA's operating costs which over ten years amounts to €15 billion.
That does not take into account the very likely escalation in non-performing loans and the decline in rents expected on the NAMA portfolio. That is a €15 billion black hole in the Government's figures. I have asked four questions, on a day when the Central Statistics Office announced that emigration is back as part of the fabric of this society, and when we know that in the year to March 174,000 people lost their jobs. It is fine to be "vociferous" about the banks and to talk about "convergence" and all these wonderful schemes but can the Tánaiste explain how €30 billion going into Anglo Irish Bank and Irish Nationwide will take one person off any of the dole queues around the country which have been created by the incompetence of this Government?
Will the Tánaiste answer the four questions I have asked? They are constructive and pertinent to what we did last week while the Minister intends to shift €58 billion onto the backs of the Irish taxpayers.
It is true that emigration has returned. If one looks at the figures one will see that a considerable number are those returning home. That is a fact. There are still over 26,000 people coming into this country.
As part of the recapitalisation of the banks there was a tie-in on a code of conduct of business. The banks set down a special fund for green energy and a seed capital fund. The ECB also provided finance to the banks on the basis of new businesses being set up and a considerable sum of money has been drawn down from those schemes. The issue pertinent to many people is not necessarily the creation of new jobs and employment but rather the fate of those in very vulnerable sectors in this country, namely, the tourism, construction and the retail sectors.
These are vulnerable because of the collapse of the market. In working with those groups, the Minister for Arts, Sport and Tourism, Deputy Martin Cullen, and I are looking at specific initiatives regarding the sustainability of that sector of which some 35% is greatly vulnerable.
There is over-supply. We have had to introduce new incentives in order to support that sector and equally so within the retail sector.
I say to the Ceann Comhairle and the Leader of the Opposition that on the basis of the availability of credit-----
-----there has been a greater understanding. When this started it was very difficult to get people into the one room but that situation has moved on and there are much better working relationships. As a consequence, a considerable number of difficulties have been addressed. Some credit has been made available.
I appreciate that Opposition Deputies do not accept NAMA and that is fair enough. People are entitled to their opinions in this House. However, there is an enormous risk if we do nothing. Our view on this side of the House is that the introduction of NAMA is the best way to get liquidity into the banks and get them back to function, to do what they should be doing, namely, lending to businesses and mortgage-holders.
Concerning the view expressed that the risk is so adverse that it will cost the taxpayer, on this side of the House we are very cognisant of the need to protect the taxpayer. That is why due diligence has been done by the professionals on our behalf to assure people that the best decisions-----
-----are made. As a consequence, the view expressed by the Minister for Finance during the debate was on the basis of an uplift of 10% over ten years. It is not our intention to lose money in NAMA.
There are checks and balances to ensure that if there is any loss - which we do not expect - it will then be a matter for the banks to pay it through the levy.
The Tánaiste describes today's CSO figures, which show jobs are disappearing and emigration has started again, as a "challenge". The people who are challenged are those who have lost their job, for whom the challenge is how they will pay their bills. The people who are challenged are those whose businesses are in trouble and for whom the challenge is how to get credit to keep going and stay in business. The people who are challenged are those who are still at work who are worried now about how much more bad news the Tánaiste and the Government have for them in increased taxation or even pay cuts. At the heart of the challenge, and its cause, was what happened in the banking system, particularly what happened in Anglo Irish Bank. That was the rotten bank at the heart of the whole toxic problem that caused the collapse in our economy.
I have some questions to ask the Tánaiste about Anglo Irish Bank. Last December, we first heard of the practices and scandalous goings on in that bank. Directors paid themselves huge bonuses and organised back-to-back loans that shifted money from one institution to another. Around the same time, Bernie Madoff was arrested in New York. Since then he has been tried, convicted and jailed for 150 years. Unfortunately, since then we have heard very little about anybody being called to book regarding what happened in Anglo Irish Bank. The only thing we heard was that there was a high profile Garda raid last February about which we have heard nothing since. Yesterday we were told about eight directors who have €22 million in loans between them. Over the weekend we also heard speculation that additional money is to be put directly into the bank. I am not talking about NAMA but about recapitalisation money being put into Anglo Irish Bank. This bank has been in State ownership since January.
I wish to know two facts. First, when will we see somebody brought to book for what happened in Anglo? What is happening to the investigations we were told were taking place? When the Labour Party proposed that an inspector be appointed to examine what went on in Anglo Irish Bank the Government rejected this and stated that the matter would be investigated by the Director of Corporate Enforcement and the Garda. What has happened? Where is the report?
Second, how much additional money will the Government put into Anglo Irish Bank? It was mentioned in the Sunday Business Post over the weekend that the figure of €3.8 billion already put in was to be increased to approximately €10 billion. Can the Tánaiste tell the House how much more of the taxpayers' money, which is needed for our schools and hospitals and the services which the public consumes, will be put into Anglo Irish Bank?
There are ongoing investigations by the Garda and the Director of Corporate Enforcement. The Minister for Justice, Equality and Law Reform, Deputy Ahern, has provided additional resources for that investigation as have I to the Director of Corporate Enforcement. This House facilitated additional legislative measures in order for that matter to proceed.
I appreciate, and I believe we all share, the frustrations concerning these investigations but unfortunately, unlike some others, the Government cannot be populist about this matter. In no way can we infringe on the current investigation which is very wide ranging. A considerable number of reports and interviews are taking place. The option is available to the Director of Corporate Enforcement, if he sees fit, to have an inspector appointed. We do not direct him. He is independent and has access to the courts if it is his considered view that an inspector should be appointed.
Our system of justice is not similar to that of the United States of America. We must deal with the legislative measures which we have at present. It would be imprudent of me or the Minister for Justice, Equality and Law Reform to direct anybody whose function is independent of Government with respect to this investigation. What we can ensure, and assure people of, is an ongoing investigation and that the requisite resources required by the Garda and the Director of Corporate Enforcement are being made available. We hope this matter will be brought to finality as quickly as possible.
Regarding Anglo Irish Bank, I have heard comments by many people that the bank is not systemic. I do not feel it is appropriate that we should have a situation whereby we would allow this bank to collapse. That is why the decision was made to nationalise the bank. There are still business transactions there, though not as many as heretofore. There are still depositors in the bank.
Those depositors are very important and are guaranteed by the State. I believe it is appropriate that we continue to support those people. I appreciate very much the Deputy's view with regard to Anglo Irish Bank but it is the considered view of the Government thus far that in NAMA it will deal with many issues appertaining to Anglo Irish Bank. The Minister for Finance alluded to this in his speech last week. Moreover, the Government will consider whatever capital injection is necessary to the banks in order that they can continue and revert back to their most important function, which, as I said to the Leader of the Opposition, is to get credit back to business.
The Tánaiste is right in one thing she said. Our system of justice, certainly as it pertains to corporate crime, is not the same as that of the United States. In that country they treat corporate wrongdoing somewhat more seriously than we do apparently. Our system of justice in Ireland, as it pertains to corporate crime, is not the same as it is in the US. Corporate wrongdoing in the US is treated somewhat more seriously than it is here. The public is not reassured that the investigation is ongoing. That is what worries the public and we have not seen any results from it yet. The Tánaiste has not been able to tell the House as to when it will be concluded and when we will see some accountability for it. This is an investigation into matters which took place in what is now a State owned bank. Meanwhile, all we are getting is the lámh amach from the banks, and in particular from Anglo Irish Bank.
The Tánaiste told us that the Government will consider whatever capital is necessary for Anglo Irish Bank. People who make up the statistics in today's CSO report, people who have lost their jobs, people whose businesses are in trouble, and people who are facing possible pay cuts and tax increases, are in this position due to the carry on of Anglo Irish Bank in particular. It was not the only bank, but it was the worst offender by far that was reflected in the figures provided by the Minister for Finance last week, when he stated that €28 billion of the toxic loans associated with that bank. We have to fork out for it and on top of that, the bank is now looking for more money to recapitalise. Can the Tánaiste tell us if the figure that Anglo Irish Bank will require is as high as the €10 billion that was reported in one of the newspapers last Sunday?
She has stated that the Government will consider whatever capital is necessary, but we do not get the same approach from the Government at all. She is not telling the hospitals, the schools or any area of public life in this country that they will get whatever money is necessary. She is not telling people who need to get back into employment that the Government is going to provide whatever money is necessary in order to get them back to work, yet she is telling us that the Government will provide whatever capital is necessary to keep Anglo Irish Bank alive. How much is that? It has got €3.8 billion of our money already. How much more will the bank get?
Every Member of the House wants to have these investigations completed as quickly as possible. Some of us are here a number of years and we know that these things take time. We also know that comment in this House can have an adverse effect on these investigations. I do not want to see that and neither does anyone else.
The Deputy would rightly criticise us if we interfered in due process, and I do not think he is asking us to do so. It is a matter for this House to determine the laws of the land under our Constitution. We are proceeding as quickly as possible with regard to the investigation on the basis that it is independent of the political process. If we do not want it to be independent of the political process, then we will have to change it. However, I am sure that if there was political interference, the Deputy would be the first man in the House to give out about it and say that it was not the right thing to do. People should take on board the fact that within the realms of possibility, this matter will be dealt with as quickly as possible.
On the issue of Anglo Irish Bank, the Deputy put forward his party's view on nationalisation. How much money would that cost the State?
We have made a decision to nationalise Anglo Irish Bank. I said that I am not prepared to speculate on the amount of money needed. As the Minister indicated in the context of NAMA and in the context of the other two main banks, due diligence is being done and considered on the capital requirements that may be necessary when the NAMA legislation is passed by the House.