Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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I wish to share my time with Deputy Ulick Burke.

Brendan Howlin (Wexford, Labour)
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Is that agreed? Agreed.

Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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I cannot support the Government's NAMA approach to resolving the banking crisis. It is very unfair to taxpayers and the public, who should not have to take responsibility for the reckless behaviour of developers, banks and even the Government. Unfortunately, for many reasons NAMA is not the solution to the banking crisis. First, NAMA remains a secretive tax-funded politically directed work-out process for 1,500 of the most powerful, well-connected politically directed people in the country. Also, NAMA will provide an unnecessary bailout of banks by capping their losses. More importantly, it does not provide any mechanism to get credit flowing again.

NAMA has not received any domestic endorsement. The Small Firms Association says it does not believe the Government's NAMA plan will be enough to get credit flowing to small businesses around Ireland. It also feels that unless we get credit flowing to businesses, jobs will be at risk.

Dick Roche (Wicklow, Fianna Fail)
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Mr. Alan Dukes had a different view.

Ulick Burke (Galway East, Fine Gael)
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Ministers are citing him now.

Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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Where did this all start? It started in the Galway tent where builders and developers were cheered on to create a bubble in which most people got caught up. This bubble was encouraged and supported by the Government, property developers, bankers and speculators.

Many young couples are in negative equity because they bought their houses at the height of the boom, but they have now been badly caught. I come from a business background and a business that ten years ago employed up to 30 people. Businesses had to diversify, but we did not survive. I diversified into property and bought shares. I bought shares in the two major banks, AIB and Bank of Ireland at the height of the market. I also bought shares in Eircom and in many mining companies. Sometimes I made a profit, but I did not make a profit on my bank shares. I am like most people in this country who when they make a profit do not expect to hand it over to the Government, but just pay the capital gains tax. However, I find it repulsive to think that the people who speculated and gambled now depend on the Government and banks owned by taxpayers to bail them out. This is wrong. People should be able to pay their way and should do so. Those who have lost should not be able to cop out or be bailed out.

Billions of taxpayers' money will now be paid into NAMA to bail out the banks. One of NAMA's chief goals is to get money flowing to businesses again. However, I believe the terms of reference are being weighed in favour of the banks and the big builders, while neglecting the needs of the small and medium enterprises and the ordinary person on the street.

Given my background, I want to address one aspect of the legislation. Small businesses are the lifeblood of this economy and employ hundreds of thousands of people. However, hundreds of businesses are gone already with the loss of a great many jobs and hundreds more are on the verge of bankruptcy. I tried to raise the NAMA terms of reference for two consecutive days in the Dáil and in the end I was put out of the Chamber for trying to highlight a situation which I believe to be very serious. If we want the economy to get going again it starts with jobs and it ends with jobs. The Government and the banks are in denial as regards what is happening to businesses in this country. Clearly the Government is far more interested in bailing out the golden circle of bankers and big builders, instead of helping the thousands of hard working businesspeople and their employees who keep the economy going.

The Government is deluding itself that banks have started to lend to businesses again. It should wake up. The banks have probably the most professional PR companies in the country. The three banks have colluded to give the impression that they are open for business and lending again. They are not open for business. Just ask any of the businesses that are trying to employ people around this country, farmers, etc. The banks are closed for business and lying through their teeth. Any Administration that believes what the banks are saying should be put out of government, because I believe we have a crisis and this Government is in denial.

We are fed up with the small empty promises from the banks. People are also fed up with the Government because it is not listening to small businesses. Once again I would urge businesses and their hard-pressed families to remind the banks of the guidelines that have been set down as regards the next time they ask for a loan, overdraft or extended credit facility. The banks should be reminded that they are only open for business, courtesy of the support of the taxpayer.

I needed €20,000 to keep five jobs going, but I was told to close my business. Why should I close the business and put five people who were employed full time on the dole? This is happening around the country and I am not afraid to speak about it. However, some business employers are petrified and terrified lest they offend the banks. Because I went public, nationally, on this very situation, I was threatened by the banks. I was told by one bank that it was monitoring everything I said. I will not be cowed by a faceless institution that we have bailed out. I believe the Government, for once, instead of being led by the nose in accepting that the banks are open for business, should question whether this is the case. It will find they are not.

The current climate limits the number of customers who will be able to fulfil the terms of sensible lending criteria. In the past we had Foir Teoranta to lend to businesses, and that helped us out many years ago. We need a bank now to help out small businesses. Once again, there are no guarantees that money will be used to provide loans. Unfortunately, the money to be put into banks will just repair their balance sheets. In the boom period they became too dependent on wholesale funding, rather than relying on the deposits of Irish customers to fund lending. The money that will appear in those balance sheets may well be used by the banks to wean themselves off a reliance on overseas funding. Foreign liabilities could be repaid using the NAMA proceeds which would mean more stable and conservative balances at the banks, but no increase in lending.

The only significant lending by Anglo Irish Bank is to existing large developers and little change has been witnessed in the bank's management. Anglo will, of course, be participating in NAMA. It should be noted that among most of the staff in the major banks who caused these problems the champagne corks are being opened because they are delighted to have jobs for life. They will be in no hurry to ensure that the banking crisis ends. Finally, there should be an investigation into why cheques are being delayed. It takes five full working days for a cheque to be cleared. Back in the age of steam it took two working days. Something has to be done to ensure that credit is available for businesses. NAMA is not the way. An open new bank would be the way to address the crisis.

Ulick Burke (Galway East, Fine Gael)
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At the outset, I thank Deputy Feighan for sharing his time with me.

When the Minister for Finance introduced the NAMA legislation in the House, he said the establishment of the agency showed the Government was prepared to take bold action to deal with the banking system, which needed radical surgery. Deputy Brian Lenihan further claimed that brave and decisive steps had to be taken immediately. If ever there was a false declaration of intent by any Minister, surely that is, because we have no bold steps and no surgery whatever. In other countries, bankers with reckless lending records were immediately removed, but there is no indication whatsoever that the Minister for Finance or the Government have any bottle to remove some, any or all of the banks' directors that have caused so many of the problems in this country.

If the Minister is not able to convince the public that NAMA does not represent a bailout for the greedy developers and foolish bankers who have brought the country to its knees, then he will have failed dramatically. I have a few questions for the Minister to answer as regards this whole debate. The first concerns the question of transparency. In the supplementary budget document, paragraph 1.3, the question is asked as to whether there will be transparency in relation to loan transfers and NAMA. The answer given was, "Yes - NAMA will operate on a commercial and independent basis." That could, perhaps, be misinterpreted. In light of this information as regards its exposure and its size, according to the document, NAMA is commercially sensitive so it would not be appropriate to disclose details. How can the Minister for Finance convince the public that he is determined and that he will be transparent about what is happening if he has made this declaration?

For the sake of the public and for the success of NAMA - if it is to succeed - it is imperative that the Minister for Finance is transparent in his actions and that the details relating to the major offenders involved should be open to the public at large. A few months ago the Department of Agriculture, Fisheries and Food mandated that all details of farmers who had drawn down public resources from the EU support grants should be available to the public. If it can be done in the public interest in that instance, why can it not now be done in the case of NAMA? Deputy Feighan indicated that we were talking about a secretive organisation. So it will be if the Minister denies the public the opportunity to see the details as regards those who will be involved in NAMA, the people who have caused the crisis as regards banking services and otherwise.

In relation to transparency, will the Minister mandate all Oireachtas Members who support the legislation, in either House, to declare their interests as regards whatever involvement they might have with NAMA? If they are below the €5 million threshold, they might be dealt with in another way but, if they have an involvement with NAMA above that threshold, surely they cannot come to the House, join the lobbies and vote to support that without declaring their interest. It would be a conflict of interest, as mentioned earlier. If there is to be any credibility for NAMA, it is essential this happens as a matter of urgency.

The €5 million threshold is one issue. However, it is also important that the Minister would indicate the position with regard to all of the others who have difficulties with the banks. In the past few days, we have had a finalisation with regard to ACC and the major developer controlling the Zoe group of companies. However, many people, such as small developers, owe banks a lot of money although below the €5 million threshold. If the banks go to the courts to chase down the loans, as I am sure they will, there will be a downside.

The Minister's prognosis that 1% growth for each of the next ten years will give a 10% return at the end of the cycle for NAMA will never materialise if the loans relating to a series of residential and commercial premises are called in by the banks. People will be thrown out of their houses, and developers and investors in commercial premises will also lose their property. All of this property will come onto the market and will undoubtedly depress it further, despite the Minister believing there will be growth and an increase in prices of 1% per annum. While that seems moderate, there is no indication as to what will happen below the €5 million threshold. I want to know what plans the Minister has in that regard.

All of the NAMA plan was to restructure the banking system so that the banks would work again. Deputy Feighan referred to his own very credible experience. I want to give two examples of a simple situation where not a penny is being made available by the commercial banks, even to their best customers. One example concerns a small business person who had a viable and progressive business. He had achieved a contract from an Italian company to develop its products here in Ireland and he needed an increase in his overdraft. When he went to his traditional banking source, he was refused point-blank for a loan of €25,000 to develop his business, which would create employment in that industry. He has tried every other source that might support him but the answer was always "no". It seems that inter-bank conniving is taking place with regard to the details, and if a person gets a black spot from one bank, that person is doomed in regard to all the banks. That is unfair and it must stop. One of the major planks of this process, the Minister declared, was that the banks would work and provide loans to support small businesses.

My second example is as follows. At the start of the fine weather some four weeks ago, the autumn harvest began. A farmer who had 400 acres of cereals to harvest went to the bank for a loan to replace a machine which had been involved in an accident. Bank staff said openly to him that they would allow his harvest to rot in the fields rather than give him €25,000 with which to buy a new machine to harvest his crop. Not only did the banks refuse this man but all of the other leasing agents - every one of them - had the black spot ready and just ran him out of their offices. They told him he was wasting his time and that he should go elsewhere, but he did not get an answer elsewhere either.

When the Government introduced NAMA, it said there was no other show in town. If that is the case and if the Government cannot see there is an alternative, and if 40 economists made a statement that this would not work but the Minister accepted as the be all and end all the advice of his recently acquired economic adviser, who was new to the political stage, we are in for a further crisis in the banking system. The Government is paralysed in every sense of the word with regard to what it intends to do. There has been no surgery. Banks are sitting ducks for surgery but the Government did nothing. With regard to decisive action to get the money flowing, Government members have sat on their hands and done nothing, and they have allowed banks to railroad the people into further misery.

Séamus Kirk (Louth, Fianna Fail)
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I wish to share my time with Deputy Niall Collins.

The legislation to establish the National Asset Management Agency is one of the most important Bills that has ever been debated in the Dáil. The decision to set up NAMA was taken last April and the draft proposals were published in July last. Never in the history of the State has one subject been so extensively and passionately debated both in the House and outside. The Government is acting decisively because we simply cannot have economic recovery without a fully functioning banking system. We are determined to re-fashion the financial and banking system, and to address and correct all regulatory and governance shortcomings, which the problems we have experienced in the past year or so have graphically illustrated. NAMA will facilitate the speedy removal of high risk property-related assets from the banks books and enable banks to start lending to families and businesses again.

Much of the criticism of the legislation has concerned the price the Government will pay for the bad debts. The Minister, Deputy Brian Lenihan, said he expects NAMA will purchase loans with a book value of approximately €77 billion for a 30% discount at a price of approximately €54 billion. Each loan will be individually valued, meaning that in some cases NAMA will only pay the agricultural value of the land, while in other, more viable projects, it will pay the long-term economic value.

We must remember that we need to get the economy back on track as quickly as possible. We cannot do that by forcing a fire sale of assets at below what would be rational prices for them. Despite what the Opposition would have us believe, the success of NAMA is not dependent on property prices going back up to 2007 bubble prices. In fact, NAMA will have to achieve less than a 10% uplift over current market values on its assets over ten years to break even. Another allegation being made is that NAMA is a bailout or rescue for builders or developers. The Minister has confirmed that developers who are insolvent will be liquidated and NAMA will have the full range of remedies already available to the banking system, including repossession, enforcement of mortgages, the appointment of a receiver and the liquidation of companies.

Members of the Opposition have tried to argue that NAMA poses too big a threat to the taxpayer. The biggest risk of all would be to do nothing while the economy continues to stagnate.

Ulick Burke (Galway East, Fine Gael)
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That is what is happening.

Séamus Kirk (Louth, Fianna Fail)
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The legislation provides that the banks will share a portion of the risk associated with NAMA. This means that the banks will have an incentive to work with NAMA to achieve a profit for the taxpayer and they do not get to share in any profits. However, if there is a loss, they will be subject to a levy. The State may end up owning larger stakes in the banking system. That is another form of protection which reduces the risk of taxpayers overpaying bank shareholders for the assets since taxpayers themselves are significant shareholders.

The Fine Gael approach is to let the banks struggle on for another year before a National Asset Management Agency is set up in September 2010. Small businesses and families around the country cannot wait for another year. We desperately need to get credit flowing now.

The Labour Party has called for full nationalisation. That will not solve the problems in the banking system. It will not make any of the problems faced by the banks go away. The troubled loans will be still on the balance sheets of the banks, severely hindering their ability to support economic recovery through increased lending to businesses and households. The nationalisation of Anglo Irish Bank, while necessary to protect the banking system, has not solved that bank's problems. The reality is that full nationalisation would involve large up-front costs for the taxpayer. The State would have to compensate the current shareholders of banks. At current market prices, that could involve an immediate payment by the State of more than €5 billion in cash for the two major banks. The State would have to borrow this money on international markets at a time when we are already borrowing €400 million a week.

Pre-emptive nationalisation of the entire banking system would pose an intolerable risk to taxpayers and result in a huge loss of confidence. As mentioned earlier, bond market spreads for Government paper have improved considerably in recent months, which reflects a more positive view of our ability to deal with the economic crisis we face. The loss of confidence would exacerbate funding problems for the banks as uncertainty about the banks' future would almost certainly scare away international depositors and bondholders. Funding conditions are already difficult enough without risking full nationalisation. Governments around the world have avoided wholesale nationalisation during the global crisis for those very reasons.

Our NAMA proposal has received the backing of the IMF and the ECB as well as former Fine Gael Party leader, Alan Dukes, and former Taoiseach, Garrett FitzGerald.

Ulick Burke (Galway East, Fine Gael)
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Deputy Kirk has changed his tune.

Séamus Kirk (Louth, Fianna Fail)
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It is also clear that the proposal has credibility in the financial markets. On 30 August last the Financial Times reported, "Evidence that Ireland is addressing the crisis has been well received in financial markets. Irish bank shares have rallied and the risk premium on Ireland's sovereign debt has reduced." Since its announcement, the cost of borrowing by the State has already fallen. It is now time to implement our plan and to get banks up and running and lending to Irish businesses and households.

Niall Collins (Limerick West, Fianna Fail)
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I am grateful for the opportunity to partake in the debate. It was opportune that the draft legislation was published as early as possible during the summer to allow us to have a national debate in the House and around the country in the manner in which it is taking place. The longer the debate goes on the better and the more informed we will all become.

One of the issues of concern is the level of misunderstanding about the intent of the proposed legislation and the Fine Gael proposal. I was gripped with interest listening to the accounts of Deputy Ulick Burke's constituent, Deputy Feighan's own circumstances and the deplorable treatment they have suffered at the hands of the banks. We are all familiar with such cases from our clinics. Ultimately, the purpose of NAMA is to address such issues. The longer it takes to devise a method to sort out the situation, the worse it will get. It would be a dereliction of the Government's responsibility if we did not get NAMA or some other such vehicle up and running in order to address the situation.

We know all about the lack of credit that is available to small businesses but we must not forget about everybody else. We hold a brief for everybody. I refer to the farming community and to young married couples trying to access mortgages. Value is available currently in the property sector but young couples are not able to secure mortgages. Every sector of society is discommoded. The problem with the banks is that they have impaired loans on their books and that is restricting their ability to raise credit on the international markets. In its crudest sense, a bank is a shop. In this case the shop buys money at a cost and sells it to the market at a margin. Unfortunately, currently the bank does not have the ability to raise loans and, therefore, it does not have stock to sell. We must act to improve the availability of funds and to increase liquidity. The way forward is not to sit back and do nothing.

I wish to refer briefly to the bank guarantee scheme that has passed its first anniversary. That was an important first step in addressing the banking crisis. Many positive effects are evident as a result of that scheme, for example, the appointment of the public interest directors to the banks. The Minister for Finance made a cross-party spread of appointees, which was important. The fact that the individuals concerned were from various political backgrounds instilled a degree of confidence in the public.

I welcome the placing of a cap on salaries payable to chief executive officers and senior bank executives. Prior to the banking crisis there were front page newspaper reports of millions being spent by banking executives taking their trophy clients to the Ryder Cup in the United States at a cost of millions. That type of activity must stop. Every crisis presents an opportunity to address the anomalies that have built up in the system. The Minister deserves great credit for addressing such issues head on.

It was believed in some quarters that if we set the cap on those salaries too low we would not attract the right kind of people. We have a wealth of people both in the country and abroad who would be keen to fill those positions in spite of the cap. I do not know any of the bank directors who were in place at the time the bank guarantee scheme was introduced but it is time they moved on. I do not know who they are but I do not hold any brief for them. A cap should be also imposed on the term of appointment of any of the directors appointed in their place.

Legislation is due to be introduced to the House on the new FÁS board of directors. It is envisaged that a cap of two terms will be placed on the new directors. Those recommendations have been made for other State bodies in draft legislation due to come before this House. Accordingly, it would be opportune and correct to place time limits on the duration of service a director can sit on the board of a bank.

I sometimes wonder whether the public has a full understanding of the bank guarantee scheme. Fundamentally, it is an insurance policy for every member of the public who holds a bank account. If a bank fails, whatever money he or she has in a bank would be honoured. In other words, when a person puts an ATM card into an ATM the money one seeks would be available to him or her. That is the purpose of the scheme. It was not to bail out developers. It was to ensure that if a bank was threatened with collapse that the State would honour its liabilities. That is as it should be.

Fixing our banking system is imperative for our international credit rating. We must have a functioning banking system in this country. It was not an option to sit back, do nothing and allow our banks to collapse. The notion being proffered by some people was that we should let Anglo Irish Bank go to the wall. However, we must keep our international credit rating in mind. Why is that important? When our international credit rating was downgraded, the subject was brought up in this House. People are very concerned about it. We cannot let our banking system collapse and affect our international credit rating. Consider the cost of funds. With our current spending we are borrowing €400 million per week. The cost of international funds will increase if our credit rating is downgraded.

There are many upsides to the NAMA legislation, but there is a risk. It is not a risk free operation. We must address the issue and there is a downside. However, there are many upsides, one of which is the opportunity to secure a social dividend. All Members know areas in their constituencies and throughout the country where there is a deficit of infrastructure in terms of schools, hospitals or community health facilities and so forth. Much of that is due to bad zoning. Local authorities made wrong decisions by zoning areas for residential use when they should probably never have been zoned for such use. If one looks at a map of the country, one can see the surplus of zoned land. It could take up to 50 years to build on the zoned land in some parts of the country. However, there are opportunities for the State to provide for the deficit of infrastructure in those areas. NAMA can play an important role in that.

The Planning and Development (Amendment) Bill has been published. There is a proposal in that legislation to permit the extension of planning permission from five to ten years. It is imperative that this legislation comes before this House as soon as possible. It should be discussed in conjunction with the NAMA legislation because NAMA, in taking over these asset-backed loans, many of which will have planning permission attached to them which could be approaching the five year expiry date, will need that permission to be extended for a further five-year period. It is important that the legislation is brought through the House as soon as possible.

With regard to the Minister's role in dispute resolution with people who are in dispute with NAMA, my colleague, Deputy Seán Fleming, proposed an amendment when the legislation was published. It is a common sense approach. I agree with Deputy Fleming that the Minister should not have a function or role in dispute resolution. There is much merit in providing that any dispute that exists between NAMA and a loan-holder should go before the Commercial Court. The handling of the Zoe Group proceedings recently has shown the Commercial Court has the ability and personnel to deal with these complex commercial disputes. Removing the Minister of the day from that role is very important.

I turn now to the issue of phoenix directorships. This subject has been discussed at the Committee of Public Accounts in both private and public session. There has been a trend in this country of people winding down and liquidating businesses and leaving debts unpaid. In the case of NAMA, there must be provision for these phoenix-type creatures who think they can walk away from a commitment they have to NAMA and subsequently engage in a transaction with NAMA by buying, for example, a performing loan from the agency further down the road. There must be a clear statement that NAMA will not tolerate any phoenix-type transactions, where people who have defaulted on a loan or transaction can later engage in a different transaction with the agency and conclude it successfully. That is most important. That is the course we must take.

During this debate on the principle of NAMA there was a reference to the 40 economists who had put their names to a document which stated that NAMA was not the way forward. NAMA is one proposal and there were many other proposals, including a proposal from the Labour Party and one from Fine Gael. In the interests of balance, it should be pointed out that more than 250 economists were contacted and asked to put their names to the document. Certainly, that is the information circulating in the public domain. If 250 were contacted and 40 put their names to the document, 210 did not. People will have different opinions as to how we should proceed.

There is a risk with NAMA. It is not a bailout for developers. The Minister has stated categorically that NAMA will pursue each developer to comply with the requirements of their loan obligations. Each loan as it is being taken over requires 300 separate pieces of information. This is a thorough approach, which is important. NAMA is a bailout for the banks, as has been said by other speakers. We are helping the banking system by bailing it out, but we are not bailing out developers. They will be pursued rigorously. However, we must have a banking system. There has always been a functioning banking system in this country. We rely on it for every aspect of life. Whether one is a child or old age pensioner, one needs a functioning banking system, and to sit back and allow it to collapse would be a dereliction of responsibility. It is a necessity.

We must proceed by addressing the issues, such as the concerns and examples raised by Deputies Feighan and Burke. To sit back and do nothing would only make the situation worse.

Mary Upton (Dublin South Central, Labour)
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I wish to share time with Deputy Liz McManus.

Kathleen Lynch (Cork North Central, Labour)
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That is agreed.

Mary Upton (Dublin South Central, Labour)
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I welcome the opportunity to speak on the NAMA legislation. This legislation has been called the most important since independence, but I contend that the blanket guarantee extended to the banks on 30 September last year was equally seismic. The decision to offer a blanket guarantee to all the major financial institutions closed off many of the options open to the Government and has led us to this position and this momentous legislation. Then, as now, the Labour Party opposed the blanket guarantee. It is fair to point out that we were right then and I suspect we will be proved right again.

The Labour Party has consistently and calmly argued that the temporary nationalisation of the two major financial institutions in Ireland, AIB and Bank of Ireland, is the least worst option for the Irish people. Temporary nationalisation would allow the Government to control both ends of the deal, eliminating any potential for overvaluing or undervaluing assets which are to be transferred. Instead, the Minister has categorically stated that we are to pay well above market value to the banks for their delinquent assets, using an inflated long-term economic valuation method. This is purely to shore up the banks' balance sheets and prevent the otherwise inevitable nationalisation of the banks which can no longer survive in the capitalist market, from which they were happy to profit for decades. As the economist Karl Whelan recently noted: "The idea that the only possible way to deal with banks in difficulty is to overpay them for their assets is, frankly, ridiculous."

The major flaw in the Government's NAMA scheme is the deliberate, delusional decision to overpay for assets when the market has not yet bottomed out. This decision was described yesterday by the Nobel Prize winning economist Joseph Stiglitz as "criminal". Many assets have fallen by substantially more than 47%. Indeed, the "Prime Time" television programme recently showed a view of a field in the Taoiseach's bailiwick of Edenderry which was previously valued at over €12 million but is now valued at under €2 million. There is simply no credible, non-partisan information to support the Minister's contention that we have reached the bottom of the market. A number of commentators across the economic and political spectrum have written that the Minister's figures simply are not correct and that values have fallen further than this and have further yet to fall.

That the share prices of AIB and Bank of Ireland rose 25% on the day after the full details of NAMA were announced is proof that the markets believe the State is significantly overpaying for these assets. There are hundreds of other land banks dotted around towns and villages in the country with a similar story of grossly inflated prices and no prospect of development, particularly if planning laws of any substance are introduced. All these land banks will be transferred to the National Asset Management Agency and taxpayers will be left shouldering the burden for decades to come.

Dublin, which has the greatest potential for a property bounce, has a commercial vacancy rate that is projected to rise to 27% in 2010, the highest in 18 years. Nationally, almost 80,000 houses, apartments and sites are for sale on the Daft.ie website. On a drive from Dublin to Sligo or Kerry one will pass through towns which have a glut of unsold commercial developments or housing estates on which construction has ground to a halt. It is unlikely that there will be a need for these houses and commercial spaces for years to come and certain they will not be worth what NAMA paid for them. Instead, they will be owned by us, the taxpayers, a monument to incompetent regulation, avaricious bankers and greedy developers.

The Minister has stated that the principal concept behind NAMA is to get the real economy moving again by allowing banks to lend. However, €36 billion will go to Anglo Irish Bank and Irish Nationwide Building Society which loaned almost exclusively to big developers and whose reputations are beyond recoverable. Irish Nationwide will transfer 76% of its loan book, almost €8 billion, to NAMA, while Anglo Irish Bank will transfer almost €28 billion to the agency. There is no value in paying these sums to the two institutions in question as they will never again lend in the real economy. It is dead money. We have already paid €4 billion into Anglo Irish Bank, which has to be supported form direct Exchequer borrowing this year and on which we have no prospect of ever seeing a return.

The €36 billion from NAMA which will go into these two zombie institutions is more than the entire tax take for this year. This sum would pay for metro north six times, cervical cancer vaccine for 12 year old girls for 3,000 years and cover the school book grant for 4,000 years. It could provide for a substantial, sustained early child care intervention scheme tackling educational, health and social issues at the level where most can be achieved.

Why should taxpayers bail out Anglo Irish Bank and Irish Nationwide Building Society, the homes of golden circles, loans to inflate balance sheets, executive loans and million dollar bonuses for people who run their companies into the ground? Bernie Madoff was sentenced to 150 years in jail just six months after being arrested. Unlike the United States, the authorities here do not appear capable of forcing those guilty to be held to account, to do the "perp" walk. How can we jail 167 people between 2003 and 2007 for not paying their television licence fee, while allowing those guilty of impoverishing the future prospects of the country to continue to play golf?

We need real regulation that will completely clear out those responsible for the catastrophe the banking sector has caused the real economy. This must be done without any more golden handshakes, particularly as they are now being funded by taxpayers' money. It seems, however, that Fianna Fáil is not capable of introducing legislation that would end the cosy relationships they have enjoyed for more than a decade. The party has shown this in FÁS and other semi-State boards and it will be the same old story in NAMA, under which the plain people of Ireland will be forced to shoulder the pain of the elites who creamed it during the boom.

The Minister has stated the National Asset Management Agency will pursue developers for everything they owe. The banks have admitted they have rolled up more than €9 billion in unpaid interest on developers' loans. This hardly paints a picture of a determination to pursue developers. The only bank which went after Liam Carroll and the Zoe Group is not Irish and not involved in NAMA. The NAMA banks were happy to nurse Mr. Carroll's loans until they could be transferred to the National Asset Management Agency when they would become the problem of the State, that is, the taxpayer. It is individuals such as Mr. Carroll that NAMA will reward, not those struggling with negative equity on whose homes banks are waiting to foreclose or small and medium size enterprises which will have to close because they cannot obtain credit. Thanks to the Supreme Court, we may get a solitary scalp but the majority of the developers and bankers will continue to be treated with the hospitality their years of donations to the Fianna Fáil Party have built up.

I, like every speaker in this debate, am aware that a large number of people are in negative equity. Worse still, mortgage lenders, namely, the banks, are waiting to pounce and foreclose on such people. People in negative equity do not have a national asset management agency available to them. The other evening I was visited by a constituent whose son and daughter-in-law face the prospect of having their home repossessed because they cannot meet the repayments on a 100% mortgage. No one shouted "Stop" when these types of loans were being provided by the financial institutions.

Businesses are going to the wall because they are paying unrealistic rents. According to a survey supplied by Retail Excellence Ireland, 86% of businesses have requested a rent reduction. Of these, 52% need a rent reduction of between 16% and 40% to break even. Despite these figures, the Minister has put the kibosh on legislation to allow for downward rent reviews. As a result, small businesses will face even greater difficulties. It appears this has been done to protect the banks and speculators which own the shopping centres and prime retail streets. The result has been to keep rent yields artificially high. If the Minister was true to his pious assertion that the protection of the real economy was paramount, we would have had late night sittings to pass legislation to allow for downward rent reviews. Such reviews would take pressure off the real businesses providing employment and paying taxes, rather than the speculators who are probably tax fugitives and the bankers whose august organisations continue to exist only because of the intervention of the Government.

The Government should give practical consideration to alternatives to NAMA which would primarily look after the interests of taxpayers, small businesses and those who are about to lose their homes.

Liz McManus (Wicklow, Labour)
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While this debate is being overshadowed by other events, the division on the National Asset Management Agency Bill will be the biggest decision most of us in this House will make. This is all the more reason for Committee Stage to be taken in this Chamber and not condemned to the basement.

The stakes are enormous. In particular, there has been much criticism of the price to be paid by the State for impaired loans. As Deputy Upton noted, last night, the Nobel prize winner, Joseph Stiglitz, went so far as to describe as criminal overpaying the banks for loans. Professor Stiglitz argues that temporary nationalisation of the banks, if required, is a better way to go, a view shared by the Labour Party.

When the Minister for Finance published this Bill it was described as the "only show in town" and alternative propositions were rejected out of hand. No basis was provided for this extraordinary claim. Where is the empirical evidence? If a panel of objective experts from outside this country had given an assessment of the various options, we may have had a very different Bill to debate. Instead, we have spurious claims from the Government and the repeated "only show in town" mantra.

The Minister for Finance referred to reform of the banks. While there must be no return to the recklessness and greed of the past, it is not clear how the Government will ensure restructuring of the banks will lead to better banking. Many of the same people who were part of the problem are still in situ. More important, will credit flow to where it is needed? The Minister for Finance stated, "The Government has made SME lending a major priority." It is clear, however, that while NAMA is designed to protect the banks from collapse, it does nothing to create the conditions for facilitating credit for business. When it comes to securing credit from the banks at present, while it may be technically available, it is available only in the way that the Ritz Hotel is open to anyone.

Business overdrafts are being slashed and incredibly onerous conditions are being attached to securing mortgages. The legislation makes no mention of lending by the banks, let alone requiring banks to lend for viable business purposes in return for the bailout. The Labour Party does not advocate reckless lending to the business sector by the banks. We have seen enough of this practice for a lifetime. The banks have been lending hand over fist to the wrong people. It is this that has us in such trouble. We must now ensure they lend to the right people, namely, small and medium enterprises which form the backbone of our economy. We cannot depend on empty words of reassurance from the Minister.

International experience over the past year has shown that where a bank bailout has occurred, the focus has been on shoring up the capital base of the bank to satisfy shareholders and to pay bonuses rather than lending to businesses. The banks' purpose is to get back into profitability. That means achieving a balanced ratio between credit and deposits. In the current climate it means that businesses lose out. Dermot Desmond wrote a newspaper article recently which warned that NAMA would result in economic paralysis for decades to come.

What are the Government plans to deal with the issue of credit? How will the Minister use his influence on the banks to resolve it? It is a central issue, regrettably not just for the business sector. Already houses are being repossessed and families are losing their homes. When interest rates rise - as they invariably will - the trickle could become a flood and the Government has no strategy to prevent the consequences. That is insupportable at a time when so many people are at risk of losing their homes. An ESRI study predicts that 35,000 people may be unable to pay their mortgages next year. I urge the Minister to accept the Labour Party proposal for a home protection commission to address that issue.

Many speakers have raised their concern about the lack of credit being made available to SMEs and I have no doubt the Minister will refer to this matter in his closing speech, but there is a further aspect to this issue which may prove to be even more damaging in the longer term. We all look to signs of the future recovery whenever it happens. We need to be prepared to exploit its potential, whether by upskilling our workforce or improving our broadband infrastructure now, but when that time comes the priority for the banks will still be profitability not the provision of credit to businesses which want to expand in the upturn and take on staff. The prospect of ongoing stagnation referred to by Dermot Desmond could prove crippling for our economic growth and development and is why Mr. Stiglitz worries about what will happen not in 2010 but beyond it.

NAMA is a big gamble and the Government is intent on taking it, whatever we on this side of the House think, but I ask that the Bill at least be amended to provide safeguards for the public. For example, provision should be made for a whistleblowers' charter to cover staff in NAMA, covered institutions, debtors, advisers and service providers to ensure the highest ethical standards. Accountability needs to be stitched into the Bill so that robust checks and balances ensure Ministers cannot use NAMA for their own purposes. Under the Bill its chairman and chief executive are precluded from discussing policy matters with any committee of the Oireachtas; that restriction should be lifted in the interests of public accountability.

Concerns have also been expressed about the capacity of NAMA to address its brief. Managing a highly complex portfolio worth €77 billion, covering some 20,500 loans linked to almost 2,000 developers' business plans is an absolutely staggering challenge. NAMA could be managing one of the largest property portfolios in the world and it is hard to believe that the expertise and resources will be equal to the task. It is important that the Minister consider that point and address it in his speech.

I want to make some simple points. One concerns the situation which local authorities, mine in particular, have found themselves. As a result of the compulsory purchase legislation land was to be acquired and the local authority now finds itself, at the end of a fairly lengthy process, having to pay an enormously inflated price for land which is worth only a fraction of what it was because of the economic collapse. We should be carefully examining ways of ensuring that local authorises are not left in such a position, particularly at a time when they are being starved of funds, and that there is also a social dividend.

I noted on Monday the Labour Party Senator Dominic Hannigan published research he carried out into the recreation and social needs of young people in the commuter belt around Dublin. He made the point that there should be a social dividend. When one considers the amount of empty space that exists now and will become the responsibility of NAMA at some point, there needs to be a social dividend in terms of how NAMA operates, if it is, regrettably, passed by the House. At this point we still have the opportunity to find a better route and the alternative route which has been recommended by so many eminent economists. Unfortunately the Government is deaf to a clear analysis of what can and should be done, particularly taking into account the international experience and the needs of our country.

Beverley Flynn (Mayo, Fianna Fail)
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I welcome the opportunity to contribute to the debate on this Bill. As previous speakers have mentioned, the NAMA Bill is arguably the most important piece of legislation to come before Dáil Éireann in the lifetime of this State. It is the Dáil's considered response to solving the problems of the parlous state of our economy, restoring our finances, underscoring the importance of a functioning banking system and ensuring that we return to the growth we experienced over the past decade.

The NAMA Bill is a multifaceted instrument which attempts to find a middle path through sometimes conflicting interests and competing priorities. However, although we here as legislators may debate NAMA or how, in our wisdom, we finally agree on what direction it should take, there is a far larger audience which must be convinced not only of the need for what we are doing but that we are doing the right thing. I am referring to the people of Ireland, that is, the taxpaying public whose faith in the institutions of State has been badly shattered over the past 12 months.

Sometimes I wonder whether we in this House fully realise the depth of anger, bitterness and resentment of ordinary people at the litany of greed, incompetence and mismanagement which has brought us to where we are today. People have grown cynical and it is this cynicism which has bred a deep distrust of the banking system, and NAMA is all about the banking system. This public mistrust has in turn created a climate where a couple of glaring untruths about NAMA have been allowed to take hold and because they have been repeated without challenge often enough are now regarded as accepted fact.

The first is that we are mortgaging our future, our children's future and our grandchildren's future because of NAMA. This is the big lie which has gone uncorrected for so long as to be an article of truth in the minds of the public. If one talks to people on the street, listens to any talk show on local or national radio or reads the letter pages of any newspaper the message is the same. People believe we are saddling ourselves with a millstone of debt to meet the cost of NAMA and they will not be convinced otherwise. It is all very well for us here to realise that not one penny of taxpayers' money will go to pay for the day to day running of NAMA or that not one cent of the tax take to balance our finances is going to shore up the banks or their owners. That is not the perception among the public and if NAMA is to succeed we need to win the hearts and minds of the ordinary people who have taken such a buffeting from the establishment that they simply refuse to believe a word they are told any more. It is vital that we get across the message that the whole concept of NAMA is that it becomes a self-financing operation with any profit accruing to the taxpayer and any losses to be absorbed by way of levy on the banking institutions.

The second major lie which has equally come to be accepted as fact is that NAMA is somehow a ploy to bail out the builders and developers who have come unstuck as the bubble burst and are now sinking in the quicksand of debt. We need to emphasise that for big borrowers nothing has changed. The developer who owed €20 million before his loan was transferred to NAMA will still owe €20 million; not only that, he will be vigorously pursued until every last cent of the principal and interest has been recovered. We cannot allow this belief to go unchallenged, just as we must ensure NAMA is seen to be driven and robust enough to recover its debts without fear or favour to any business or developer.

I want to move to something to which the Taoiseach referred in his speech a number of weeks ago. It is something which is causing grave distress to thousands of mortgage holders who find themselves in hock to the banks and who find the same bank quite inflexible when they seek to deal with them. The Taoiseach referred to a statutory code of conduct under which banks will refrain from acting on repossession until there are arrears of six months. However, that is not the case on the ground. Mortgage holders are being hounded by banks under all sorts of threats. Those in mortgage arrears should be allowed a period of grace until such time as things pick up, which they will in time, and those in default now can start making full repayments again. There is a marked contrast between the leniency that has been shown to the banks and the attitude of the banks to those who find themselves in arrears and are unable to meet their repayments.

We are all familiar with the biblical parable of the servant who owed his master 10,000 talents but was unable to pay. The master ordered that the servant should be sold into slavery, along with his wife and children, and that all his possessions should be seized to pay the debt. When the servant threw himself at his master's feet and begged clemency, the master felt so sorry for him that he cancelled the debt and let him go. I hope this analogy is not lost on anybody in the House. At a later time, the servant met a fellow servant who owed him a hundred denarii. He seized him by the throat and demanded his money, at which point the other servant fell to the ground and asked for mercy. The servant would not agree to this and instead threw the other servant into prison. When the master heard this story, he became so angry that he sent for the servant, berated him for his lack of charity and turned him over to some torturers.

I am not sure whether the Minister's remit extends to turning this country's bankers over to torturers. Many people would prefer if it did. I suggest that he should exert the full powers of his ministerial office by calling on them to show leniency to those who are unable to meet their full repayments through no fault of their own. I refer to people who do not wish to default on their debts, but whom circumstances have left unable to pay their mortgage dues in full in the short term.

A few days ago, I received an e-mail from a constituent that made the exact same point as the parable I have outlined. The man who sent me the e-mail will not be covered by NAMA because he owes a bank less than €5 million. The treatment that will be given to those covered by NAMA involves working through their problems in a way that will secure the best possible return for the State. By contrast, people like the man who sent me the e-mail are not getting the same treatment because they owe less than €5 million. He owes €1.5 million to a bank because he was unable to sell some houses he had built due to the nature of the housing market when they were completed in 2008. For a while, he negotiated rolled-up interest with his bank. He has decided to rent the houses because there is no sales market. The rent is enabling him to pay the interest on his loan. His loan is performing at present, as he is paying the interest on it. In recent weeks, his bank contacted him to say he must sell the houses even though the market for them is in a depressed state. The man has given his family's home and all his family's assets as security to the bank, in addition to this investment. The total value of his family's home and assets is €1.6 million. The debt he owes to the bank is €1.5 million. The bank is showing the man no leniency, even though he is paying the interest on his loan at present. It wants to get the capital back.

It is interesting to compare that approach with the lenient manner in which the State is dealing with the banks. We are giving them an opportunity to work out their problems over a period of time, which contrasts with how the large bank in this case is treating one of its customers. It knows it will not get a pay day in this instance because the man owes less than €5 million and therefore will not be covered by NAMA. I intend to highlight the manner in which this man is being thrown to the wolves at another forum. It illustrates the point I am making, which applies to business people just as it does to mortgage holders.

When people contact me to speak about their mortgages, they tell me it is possible to negotiate a six-month interest-only period on one's mortgage if one's back is completely to the wall, one has absolutely nothing and there is nowhere for the bank to go. That period might even be extended to 12 months if one's circumstances are particularly difficult. If one has any liquidity whatsoever - if one has 1 cent in one's savings account - the bank will show one no flexibility. They will bleed one for every small bit of cash one has. As far as I am concerned, it is an irresponsible approach for the banks to be taking at this time. The public interest directors that will be on the boards of the banks to act on behalf of the Minister for Finance will have to do something about the way the banks conduct their business.

The manner in which the banks calculate their interest payments has been a bone of contention with me for some time. I welcome the commitment by AIB and Bank of Ireland to increase their lending capacity to small and medium enterprises by 10%, compared with 2008, as part of the overall NAMA package. While this is welcome, with the best will in the world it brings us back to the innate conflict between what the Minister would like to happen and what the real practicalities of business will dictate. Bankers will gladly lend to any borrower whose credentials are good, whose business plan looks secure and who seems to have a safe prospect of repaying his or her loans.

We cannot ask the banks to extend credit to those who are unlikely to pay, as that is why we are in our present mess. One cannot legislate for commercial decisions, even if one might wish to. That is one of the reasons I disagree with the idea of nationalising the banks on a temporary basis. There is a conflict between the commercial realities banks have to face every day and the political realities we have to face in this House. That is why I do not think temporary nationalisation is a good idea. The manner in which the Minister is proceeding at this time represents the right approach. While it might not be perfect, it is the best option available to us. One of the strongest arguments against temporary nationalisation is that political decisions and commercial decisions are oil and water. They simply do not mix. We would be pulled between urging the banks to free up their lending and provide more credit to small enterprise and having equal regard for the realities of commerce. What powers can we exercise to ensure the base rates of interest being charged by the banks are fair and reasonable? How can we be sure that customers will not be fleeced once again as rates are pushed upwards, little by little, by opportunist lenders? We must find a way of policing interest rates. I suggest that one of the main duties of the public interest bank directors should be to insist that banks do not start to crucify the borrower with unjustified rates of interest.

I have already mentioned one of my constituents, who owes €1.5 million to a bank. I should have mentioned that in the middle of his crisis, while he was renting his houses and making his interest repayments, the bank increased his loan rate by a further 1%, at a time when the European Central Bank rate was the lowest it has been for many decades. The bank added a further 1% to the repayments of a man who was making his interest repayments.

I would like to speak about the related issues of funding and how the banks calculate their base rates at present. The banks' base rates were based on the one-month Euribor rate until 2007, but they were changed to the three-month Euribor rate when it was decided it was safer to base lending rates on longer deposit terms, which seemed reasonable. However, rather than looking at the three-month Euribor rate as it currently stands, some of the banks have decided to look at the average three-month rate over a three-month period. The rate stands at 0.73% today, but the average over three months is 0.876%. It is immediately evident that the banks are getting the benefit of a premium by averaging it over three months. In addition, the banks are charging a significant funding premium at present. When one goes into the bank to negotiate one's rate, one is told it will be the base rate plus a margin. There is now a significant funding premium within the margin. It is 0.75% for amounts up to €1 million and it is even more for amounts above €1 million and for extended terms. If one includes the minimum 0.75% rate and considers the averaging that is done over three months, one is almost looking at an additional 1% on top of one's rate of interest. Given that the present European Central Bank rate is 1%, the addition of three months' money at 0.73% and the additional 1% means that there is a 100% loading on the premium.

I ask the public interest directors who will sit on the boards of the banks whether such additions are acceptable at a time when customers, particularly mortgage holders, are finding it difficult to survive and small businesses are being crucified. Most of the banks will tell one that the funding premium will remain in place in the medium term. How long will it last? I accept that it has been difficult for the banks to access moneys on the inter-bank markets over the last six months, as the credit rating of the banks has disimproved, but that situation is improving all the time. At what stage will we be informed that the funding premium is to be removed from people's margins? I understand that it is itemised separately in their loan agreements. At a time when the banks are being shown leniency by the Government, it is important that the customer is seen, at least, to get a fair deal.

What happens to those with loans of less than €5 million? Where is NAMA for them? Perhaps we should be examining bankruptcy legislation, which is particularly onerous in this country and which debars a person from business for a period of 12 years. Could a mechanism be found whereby a long previous history of exemplary credit compliance can be taken into account when a person hits the wall of short-term insolvency? I refer to the short term because this type of person is industrious and motivated enough to get back on his or her feet at the first opportunity. As someone who knows a fair amount about bankruptcy legislation, I suggest that 12 years is a life sentence for bankruptcy. In the current economic climate, a lot of people who have built up good credit ratings now find themselves in a difficult position. It is important that they are given an opportunity because at the end of the day we have to kick-start the economy. In some countries people can get out of bankruptcy in as short a period as 12 months.

It is important to emphasise that NAMA will have a significant income stream from the outset. Many of the loans being taken over are good enough to ensure that what comes in will exceed what goes out. In addition, one third of NAMA's holdings will be linked to overseas property in places where the slump has not been so severe and where assets can be liquidated more quickly and advantageously. In any event, NAMA must look to the long term so as to ensure an orderly disposal of its assets over time rather than do anything which smacks of a sell quickly approach to its holdings. It must ensure that the disposal of its massive portfolio of lands and buildings is conducted in a balanced way and that supply must not exceed demand, sluggish though demand might be in the near future. A situation cannot be allowed arise whereby the sequence of property disposal is flagged to the extent that developers will hold back for what is in the pipeline. Our demands of NAMA in terms of asset enhancement are not particularly high and a 1% growth rate per year should not be too much to ask. This, of course, assumes that the starting point has been correctly set by the Minister for Finance and those who advise him.

There is, however, one caveat in regard to what we expect of NAMA and how it deals with the disposal of its assets. There is in some quarters a view that NAMA should look to its social obligations and that a social dividend should come from the sudden acquisition of lands and buildings across the state. While we might agree with the notion of NAMA becoming the benefactor of houses, schools sites, hospitals, community buildings and other desirable social needs, we must prioritise its commercial remit. The role of NAMA is to maximise to the utmost its revenue on behalf of the State to ensure that the taxpayer is the ultimate beneficiary. If assets lend themselves to be used for school buildings, social housing or community projects, they should be acquired from NAMA at market prices by the agencies charged with catering for the various social needs. NAMA must operate as a commercial agency. If it is to have credibility, it must be just as hard nosed and implacable in dealing with its debtors as the banks should have been. It must also be allowed to work out its brief even if it takes up to ten or 15 years.

In supporting NAMA we are embarking on a strategy which will bring order to our finances and restore us to the path of national growth. I totally reject the falsehoods that we are condemning future generations to a millstone of debt or that we are colluding in a plot to save the financial skins of bankers and developers. The Minister is to be commended on the detailed planning and thorough research which has gone into bringing NAMA to this stage. He has minimised the risk to the public purse while at the same time providing a vehicle which will enable the economy to start working again. The decision on NAMA has now been taken and the framework is in place. That is the easy part but we will only know if the correct decision was made if NAMA is made to work. NAMA will speed our recovery and restore our finances to the stability we enjoyed for so long and I am pleased to voice my support for the Bill.

Charlie O'Connor (Dublin South West, Fianna Fail)
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The next speaker is Deputy P. J. Sheehan, who I understand is sharing time with his colleague, Deputy Tom Hayes.

P J Sheehan (Cork South West, Fine Gael)
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I propose that we will each speak for ten minutes.

Charlie O'Connor (Dublin South West, Fianna Fail)
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Is that agreed? Agreed.

P J Sheehan (Cork South West, Fine Gael)
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It is difficult to follow Deputy Flynn given her vast experience of banking systems and finances. I will preface my remarks by noting that NAMA is manna from heaven for the banks. This is the most expensive Bill that the taxpayer may ever have to face. There is a crisis and we are being forced to bail out the banking institutions once again but what about the people who are sunk up to their necks in debt by borrowing from these very same banks? Such people were offered loans of up to 110% from banks to purchase their homes at exorbitant prices. The banks have been the architects of their own misfortune and we should not be bailing them out unless they give a guarantee that they will bail out the common people of Ireland who are up to their necks in debt by promising not to acquire their homes or put them out on the roadside.

We are here today because the proper controls and safeguards were not in place. I blame the Governments that have been in power since 1997 for following the market like sheep instead of providing leadership and good governance. At times they even added fuel to the fire of greed. In 1997, the economy was sound and strong. The volume of exports, which in 1997 was growing at 17% has collapsed to nearly zero. Under the Fine Gael-Labour Government productivity was growing at 8% per annum but it has now collapsed to negative figures. Our market share increased by 25% in four years but this Government has cut it back by over 20% in a similar period.

It is said that money is the root of all evil. All the recent scandals involved other people's moneys. It is well known that finance has been the cause of trouble since Adam was a boy. Did our Lord not put the money lenders out of the temple because they were extracting money from the poor people of that age? In nearly all the recent controversies it has been the handling of other people's money that has caused problems whether they be among taxpayers, bankers, developers, Ministers, officeholders, stockbrokers, shareholders, bondholders, savers or solicitors. Should I not state that the mishandling of this money put us where we are today?

The Minister for Finance may claim to have the misfortune to take up office at the wrong time but he also has the misfortune that the person partly responsible for this mess is now his boss. The nub of the problem is that the Minister can never be too hard on the banks. They remind me of smokers. Regardless of how much they are taxed or curtailed, they continue their habits. I understand the number of smokers has increased.

We do not have the Mafia in Ireland but the banks are one of the largest of the groups involved in criminal behaviour. They have run rings around every measure the Government has introduced since it came to power in 1997. Do I have to remind Deputies of the DIRT inquiry involving every strand of banking in Ireland, the Faldor scandal involving tax evasion by senior executives in AIB, the ever recurring overcharging by all the banks on every type of transaction, the Cayman Islands accounts, the bank directors loans, the resignations of numerous senior executives and the scandal in National Irish Bank? While researching this subject, I was not surprised to come across an example not from the last century but from the one before that. In 1885 the Munster Bank failed due to mismanagement and fraud and was liquidated. Out of the ashes, however, the Munster and Leinster Bank commenced operations. Eventually, it became the largest of the three banks. I have never understood the difference between the person in a suit who robs one's money and the person who robs one's money in the street or from one's home or business. The public does not understand either, but they are asking why there is no one in jail for all of these offences. With this in mind, I note that at a meeting of the Dublin Bar solicitors last week a question was raised as to whether solicitors should continue to hold client moneys, and it was stated that accountants do not and there have been very few irregularities in the accountancy sector. We need to introduce legislation in this area as soon as possible. We then need to introduce new comprehensive legislation governing the use of other people's money, whether by bankers, stockbrokers, Ministers or whoever.

This legislation must provide stiff penalties for those who break the rules. They must be tried like ordinary criminals and there should not be a delay because of other inquires, commissions or regulatory authorities. The bank robber does not get these get-out-of-jail cards and the person on the other side of the counter should not either. The main deterrent to committing crime is the prospect of getting caught and if we increase the chances of, and penalties for, getting caught, we will reduce the possibility of crime.

I also note the complete absence of involvement in these scandals by one segment of Irish society, amounting to more than half the population, namely, women. In noting that women must pay the price being extracted from the taxpayers for these crimes, I encourage the Minister to ensure that there are many more women involved at the very top of all of our financial institutions.

This Government has a long way to go to make amends for its bad government over the past 12 years and the taxpayer still must take his or her piece of flesh for its incompetence. The sooner the Government is gone the better it will be for all the citizens of this country who must pay a massive penalty for its bad government.

I want to put on record that the IFA is concerned that the proposed 80% rate of capital gains tax on the disposal of rezoned land will have major negative consequences for farmers and for the rural economy for the following reasons. It is an attack on the right to free sale of private property and may drive sales of farm land into the black economy. It is an inequitable imposition on farmers who intend to stay farming but have land rezoned by State or local authorities. It will strongly discourage disposal of land and thus will stifle development in rural Ireland. It is viewed by farmers as a political over-reaction to national economic and financial problems not caused by farmers, but farmers will be the main victims of this decision. Because windfall gains are much more a feature of the recent past than the immediate future, and because a tax rate of 80% is likely to discourage disposals, such a tax will yield very little to the Exchequer.

While recognising that there is a precedent from the 1980s for a somewhat higher rate of capital gains tax on disposal of development land, the differential in the rate was 20%. The Minister's proposal involves a differential of 55% over the normal rate of capital gains tax. Tax rates as high as 80% are generally viewed as extremely regressive and distortionary.

Before we give carte blanche to the banks on NAMA we must get a guarantee from them that they will not impose the repossession of homes on ordinary men and women who have excessive loans. Give the ordinary people of this country a chance and do not bolster up the vast empires of banking institutions.

Tom Hayes (Tipperary South, Fine Gael)
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Like everybody else, I am delighted to have an opportunity to say a few words on this matter, the most important legislation to come through the House in my time. No doubt, as many more experienced than I would say, it is the most important legislation since the foundation of the State.

One should consider why this happened; our banking institutions collapsed. People say the bankers should be fired, and they ask why this happened and why those in charge of the banks were given golden handshakes. I would question first those who were looking after the banks. It was a crying shame to allow the banking institutions do what they did in this country giving, not millions, but billions of euro of loans to different companies controlled by the same people, and nobody knew what was happening. Three or four years ago, the banking institutions were reluctant to give mortgages or personal loans to small account holders with overdrafts or to give loans to people who wanted to set up in small businesses while at the same time another section of the banking institutions were throwing billions after billions of euro to the very same people to build new houses and to push up prices. It ended up that the same people abused the system and now the entire banking institution has collapsed.

The one institution we all - householders, Members of the Houses of the Oireachtas and companies - need is a bank. One cannot operate without banks. It is banks which lend money, no matter who the employer or how successful the person. That is the job of banks and that is the reason they are in place. They are a vital part of any economy - whether it be the household, small business, big business, builders or whoever.

We need banking and I am all in favour of helping banks. That is why my party supported the Government on the night, some months ago, when we were asked to secure the deposits in the banks. I was proud that night that my party in opposition could stand up and state this is good for the country. However, I was extremely concerned when NAMA and the rescue of the banks was proposed. I was disappointed that the Government did not talk or listen to those on this side of the House who had much to say on the setting up of NAMA. I have had dealings with banks for many years and have had my own differences with them from time to time, but I understand we all must deal with them from time to time.

When the Minister spoke of €54 billion in loans, based on valuations of which nobody could state the origin, I was extremely concerned. I received inquiries from auctioneers and valuers from outside Dublin who do not understand how they will get on the list of valuers. I am perturbed that some of the bigger firms in Dublin might be appointed as valuers. They do not know the price of land in Goleen in County Cork or in Golden in County Tipperary.

P J Sheehan (Cork South West, Fine Gael)
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Or on the slopes of Hungry Hill.

John Curran (Dublin Mid West, Fianna Fail)
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It is good land.

Tom Hayes (Tipperary South, Fine Gael)
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It is important that the Minister opens up this to people who know the current valuation of property and land in a given area because such valuations can vary from parish to parish. The valuers will have a difficult job. I have nothing against Dublin valuers but it is the local valuers who should value the land. Land that was valued some months or years ago as development land is now returning to agricultural land, and what is the price of agricultural land? There is a major difference between the price of agricultural land in County Meath and in County Cork. This issue is vital in determining the success or failure of the project. I hope NAMA is successful because if not, it will be disastrous not just for our generation but for generations to come. Ordinary people are worried. There are people who are trying to set up small businesses and are under desperate pressure; speaker after speaker has mentioned them.

I have an important query about the legislation. Will the money given to the banks when the loans are taken over - which represents substantial funding for them - be lent to borrowers? Will Bank of Ireland and AIB look after the people who are suffering? Will they look after those who are on the live register today and the 400,000-odd who have ideas for small businesses? Will something like this be written into the legislation? That is imperative if the country is to improve its position. There are people on those dole queues who do not want to be there and who have brilliant ideas. I have met them in my constituency. I see Deputy Mattie McGrath is up there ready to talk. He can vouch for what I am saying because he has spoken against NAMA. He has said locally that NAMA is not good for us and that he will vote against it. I will hold him to that. It is important that those people in our constituency who have ideas be helped out by the banking institutions. We cannot turn our backs on them. This should be written into the legislation. There are so many more issues to talk about. That is the problem with NAMA - it is so vast.

There is one more issue I would like to discuss in my final few minutes - that is, the threat of an 80% windfall tax which will apply to the sale of land. It is absolute madness.

P J Sheehan (Cork South West, Fine Gael)
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Madness.

Tom Hayes (Tipperary South, Fine Gael)
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I will say it again: absolute madness. It is something the Green Party would come up with - a proposal to take €80 out of every €100 earned when a person sells a site in rural Ireland for €50,000 or €100,000, even though most of these people are selling land because they want to prop up their businesses or farms. If we want to keep rural Ireland alive, and if we have any interest in making Ireland greener, as the Green Party is supposed to, the first thing we need to ensure is that people have finance. We must not crucify people with an 80% tax. Most of them are trying to educate their children or care for their elderly relatives. Deputy Curran has rural roots. I ask him not to allow the Government to implement this. He is closer to the Cabinet because he is a junior Minister. He must not allow this to happen, for everyone's sake.

P J Sheehan (Cork South West, Fine Gael)
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He should back up Deputy McGrath.

Tom Hayes (Tipperary South, Fine Gael)
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It would be crazy and wrong. Whatever genius in the Green Party came up with this, he or she needs to go back to the drawing board and do some more thinking.

P J Sheehan (Cork South West, Fine Gael)
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Well done.

Mattie McGrath (Tipperary South, Fianna Fail)
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I thank Deputy Hayes for prompting me on what he would like me to say.

I welcome the publication of the National Asset Management Agency Bill and I take the opportunity to congratulate our Minister, Deputy Brian Lenihan, on his excellent work on the matter. He has shown great leadership in recent months and, while the job he has been given is extremely difficult, he is doing a good job of getting the country back on track.

There is fear that we are not moving quickly enough to tackle our problems and begin recovery, but I appreciate that the legislation took time to put together. It is possibly one of the most important decisions we will take in our lifetimes so, while the delay is regrettable, it is vital that we get the Bill right so we can be sure it is the best option.

I will correct Deputy Hayes in case he got carried away and thought I said I might vote against the Bill. I expressed the concerns I have, like many other citizens, about NAMA. I have received reassurances and I assure the Deputy there is no danger of my making a mistake in the lobbies when we come to vote on this.

Tom Hayes (Tipperary South, Fine Gael)
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A big change there.

Mattie McGrath (Tipperary South, Fianna Fail)
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I was concerned about the major risk that we as a Government are taking on, and shared the concerns of every citizen in Ireland. Many of us did not and still do not understand how NAMA will work and are worried about whether it will work out. I was obliged to raise these concerns on behalf of my constituents recently. I am pleased the Minister took steps to make his proposed legislation available to all concerned so it could be considered during the summer period. This gave everyone the opportunity to suggest amendments. I am even more pleased he has taken into consideration many of the amendments and ideas that have been put to him. I remind my colleagues across the House that two of Fine Gael's former leaders who have major respect in economic circles - former Taoiseach Dr. Garret FitzGerald and former party leader Mr. Alan Dukes - have been honest about the situation, and I compliment them on that.

One thing is certain: we must all pull together for the sake of future generations. We must ensure we are taking the best possible steps to help our economic recovery and that we do not burden our children with high levels of debt that could have been avoided. There has been much talk about NAMA over the past nine or ten months and, regrettably, when people hear the name they think of a bailout of bankers and developers. Unfortunately, they are asking where the bailouts were when they got into difficulties. They are asking where the Government was to help them keep their businesses open or repay their mortgages so they could stay in their homes. We cannot blame families and businesses for asking these questions.

I am not an economist but I welcome the fact that NAMA has been endorsed by the ECB and the IMF. If NAMA is the best option, there are a few more steps we must take. I welcome many of the new provisions in the Bill, of which many are vital. I welcome the fact that the banks will share a large portion of the risk associated with NAMA. One of the major fears expressed by many of my constituents is that the banks will be given the bonds but money will not be passed on to individuals or businesses. Many people fear the banks will use these bonds to increase their profits again and that there will be no credit flow for small businesses or young couples who want to set up their own homes. Such young couples are in many instances unable to get mortgages to build their houses even though they have secure employment. We must ensure that no family home is repossessed. As I said on other legislation recently, one's home is one's castle. The family home must be protected and no family should be put out of their primary place of residence. It is a different story if they own two, ten or 20 houses.

People cannot be blamed for having such opinions of the banks given the disgraceful behaviour of our banking institutions in recent years. Saying they were disgraceful is a mild way of putting it. The banks must work with NAMA but they must also ensure credit flows to the economy, especially to small businesses, as credit is not currently flowing to businesses and there are no mortgages for young couples. Many small businesses have already shut their doors and others are struggling to hold on. I mentioned the delay in getting our economy moving again. If NAMA is to work, cash must start to flow as a matter of urgency. There is no point in codding ourselves. We know on all sides of the House that the money is not being released by the banks.

When I speak of getting money flowing I do not mean reigniting the credit bubble and re-entering the madness. I am talking about legitimate lending to the business people who have worked so hard over the years to ensure good credit ratings and who are now being starved of cash. I know many such businesses as I am a small businessman. They have built up modest overdrafts over many years of good working relations with the banks, and it is shameful that many banking institutions have now removed those overdrafts, which were never defaulted on or seldom used. I know of business people who when they received large cheques for which they had waited a long time had those cheques used by the banks to pay off their overdraft when they lodged them to the bank to meet commitments they had made, which is outrageous. I also know of small businesses that have had their overdrafts withdrawn even though they have never failed to pay a debt.

Are we guaranteed that the banks will start to lend to small businesses again? While I welcome the risk equalisation which gives banks the incentive to work with NAMA, does it address this issue? We must earmark a particular percentage of funding for small and medium sized businesses. We must guarantee that possibly 20% of the funding made available to the banks will be returned to small businesses. We must set the banks a limit otherwise this will not happen.

Many small businesses supplied materials, products or services to developers to complete their developments. Many of these developments are now unfinished and are not saleable and the developers concerned are experiencing difficulties. If they are taken under the control of NAMA what will happen to the sub-contractors, many of whom had to pay for materials and to pay their employees? They are now left holding bad debts and cannot obtain funding from anywhere, resulting in their going into liquidation. If these developments are taken under the control of NAMA, who will be responsible for the payment of these debts? Will it be NAMA or the developer? If they remain with the developer, how will the debt be met if NAMA owns the development? There is a great deal of clarification required in this regard.

We must explore the option of having NAMA pay the small businesses the money they are owed in respect of the developments it is taking over? Rather than NAMA paying the bank the full sum it should pay the small businesses a portion of what they are owed? This would ensure that the cash starved businesses can continue to get by and will act as their source of sustenance going forward.

Confidence must be restored in our economy and small businesses must be supported. They need to be allowed to continue trading. Many of these small businesses which are the backbone of Irish society have not asked for bailouts or hand-outs and have never received any. All they want is to be able to carry on trading and to be paid for their services so they in turn can pay their employees, support their families and pay their rates and taxes as before. This would help to keep the economy moving in every county.

I was pleased to hear the Minister for Finance, Deputy Lenihan, stress during the summer that we will not bail out the developers, those who profited in the good times and those who could afford to take risks and that many of the developments concerned will end up as social housing. I am a risk-taker. It is said that to be in politics one must be a risk-taker. Nevertheless, I am also a businessman and I understand what is involved when one takes risks. I am not suggesting we should stifle everybody who took risks. However, we should go after the greedy people who went too far and stretched themselves beyond what any reasonable person could justify. I would like to see some social capital being invested in communities.

While I acknowledge that many of the developers are now struggling like the rest of us, it is important to stress that with risk comes responsibilities and consequences. Many developers and many of the bankers lost the run of themselves. They wanted to make as much as they could and must have left their consciences at home when they made many of their decisions. Many of them were, unfortunately, driven by greed.

What went on in the banking system in recent years is nothing short of deplorable. People are angry because they are being made to pay for the mistakes of others and, more important, for the "greed" of others. They are angry that their vital services are being cut on a daily basis, that their future is uncertain and at the way we as a Government allowed this to happen and are tackling this problem.

The bankers and developers involved in actions that were less than fully and morally right must pay for them and must repay their loans. I am pleased to hear that all borrowers will be pursued by NAMA for their debts. I am pleased, too, that the offices of the Garda Síochána and the Fraud Squad have been beefed up to investigate where wrongdoing took place. While I acknowledge that one is innocent until proven guilty and is entitled to due process, the heavy hand of the law must come down on those people who flagrantly violated the rules and regulations, that they must be brought before the courts, given due process and must pay the price if they are proved guilty. It is imperative that this point be stressed. Also, we need to set the public straight about NAMA and what it will do. It is not a bailout for developers and banks will not profit from it. Steps need to be taken to ensure that remaining businesses are kept alive.

We need to remove the thinking that NAMA is a bailout and must fully inform the public about what NAMA will do and how it will work. The media has a moral responsibility to state the facts about NAMA and to help instil some confidence in our economy again. As we all know - I am delighted to note Deputy P. J. Sheehan is nodding in agreement - confidence is at an all time low. There is still money in the country; we did not become paupers overnight. However, nobody has the confidence to invest in business here, businesses which would help to create much needed jobs.

Another issue of importance is NAMA's use of the development land which it will take under its control. NAMA will cost us a great deal of money and thus our services will suffer due to financial constraints. The Government may never again get access to land at low prices. Many communities have suffered from over-zoning and over development and any social capital gained should be invested in these communities. I compliment those planners, including those in my own county, who resisted the temptation to allow crazy rezoning of land. I, as a board member of the Irish Council of Social Housing, want that agency to be involved in taking over many of these unfinished or partly finished developments which could be used as social capital for the construction of community halls, resource centres or badly needed schools. Given so many builders and developers are now idle we could get value for money in respect of the work required. These lands and partly finished properties must be taken in charge and used for the greater good of our communities and all people who will be paying a price for NAMA but will never get anything from it.

We should earmark some of this development land for future infrastructural developments, which are badly needed. If NAMA is taking on some partially finished houses, will consideration be given to these houses being used for social housing? We must use this opportunity to obtain the best return for the taxpayer and our future. It is shocking that despite the Celtic tiger years more people are awaiting access to social housing and many more people are homeless. This is a sad indictment of all of us. We must put two and two together. We cannot forget about the little person who, even when NAMA succeeds, will not benefit. In taking this risk, we must ensure a valuable return for our society.

With regard to job creation, we need to do much more. Even with NAMA, new jobs are not guaranteed. Banks may start lending again but that does not guarantee new investment or job creation as businesses need time to recover. Earlier I congratulated the Minister, Deputy Lenihan. I now plead with him and the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Coughlan and their respective Departments to take every step they can to create new jobs and to support existing jobs. While I do not wish to revisit old stories, there are in this country, organisations like NAMA which are penalising businesses. While I accept that people must pay their taxes and rates, business people are crying out for some breathing space. They have never before failed to pay their taxes or rates and will not do so now. They need moratoriums and support. It is vital that we reshape our Departments to meet people's needs. We need more dynamic visionary Departments of State led by Ministers and top officials. We also need to obtain fresh thinking from outside the Departments to reinvigorate and drive our economic recovery. Irish business people will do this but they need some support. They must be allowed to do it in an environment where they are not shackled by the constraints laid down by bureaucratic quangos that are literally driving them out of business. While this economic downturn is difficult and uncomfortable, it is important for us as a nation to take a good look at ourselves and at how we do our business. We must restore confidence in ourselves, in our banking system and in how we appear to the outside world.

I pay tribute to the ordinary decent bank officials and public servants in these organisations who are on the receiving end of much of the public's agitation. They had no hand, act or part in the way things went sour. They were doing their jobs professionally. They were not at the higher echelons and should not be blamed for this. Sadly, greed was rife throughout the country in recent years and has made us suffer hugely. As individuals, as business people and as a Government we must bring some integrity back into how we carry out our transactions. We must ensure that our banking system is better regulated to ensure that actions like those of the golden circle will not happen again. We cannot allow such a situation to develop.

There must always be due process but there must be tougher action against crime. We see people who for small amounts of money are brought before the courts and imprisoned. They should be asked to make recompense in some other way, instead of sending them to jail where there is no room for those who should be there. The fraud squad and the Criminal Assets Bureau must be reinvigorated to deal with what has happened. John Citizen knows that if he cannot feed his family or pay college fees and he takes something out of necessity, he will pay the price and be prosecuted. The law of the land must be observed but it is unfair that only ordinary people are punished. The perception that only ordinary people are punished must be fully explored and dealt with otherwise it will continue. That perception is bad; it is unnerving and disquieting and must be eliminated. We should have a fair playing field where every family will be dealt with equally.

I will speak about other aspects of the golden circle later this evening in the debate on FÁS but this has been damaging to the body politic and to ordinary people who want to reinvest and get his country moving again. The people are willing to put their shoulder to the wheel but they must see fair play and leadership.

If there is one lesson to come from this recession, it must be that we return some honesty, integrity and trust into two of our most important institutions: our Government and our banks. Unless we instil some integrity, we will find ourselves in the same position in a few years' time.

Dan Neville (Limerick West, Fine Gael)
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I oppose the Bill before the House and support the Fine Gael position on NAMA. The proposals are wasteful and represent a reckless use of taxpayers' money, with €7 billion being paid to banks over and above the value of the assets. That is not a proper use of taxpayers' money at a time when people are bled dry due to economic circumstances and services are being cut in areas that are sensitive. It is inappropriate when there are alternatives to these proposals.

The Minister is buying unfinished developments and development land that has now reverted to its agricultural value. Huge prices were paid in Dublin for development land. Those of us in rural areas could not believe the prices that were paid for development land in the city. I was a member of the constitutional committee that looked at this some years ago and we proposed that development land would be bought at agricultural values plus 25%. The Government never entertained that idea even though it was strongly supported by the committee. It would have controlled the situation and limited the growth of toxic assets that happened over a period of intense greed.

The situation was manipulated by the people who are now being bought out by the Government. Lands were withheld from the system creating a market that ensured massive profits from development land for developers because of the limited amount of land that would be released to the market. If an alternative approach based on our recommendations, including a consideration of a progressive tax on development land if it was not released for development, had been taken, we would not be in the position we are in now.

The Minister is giving the banks €12,273 for each person in the country. That is what every man, woman and child will allocate from their resources over their lives. A family of four will pay more than €50,000 in future taxation even though taxpayers are not responsible for the actions of some bankers.

There is generalisation that the bankers are at fault but only some bankers are at fault. The bank officials on the desks doing their daily work are not responsible for what has happened. They do a good job and many of them have been destroyed by the actions of a few powerful people in the bank. Their morale and job satisfaction has been destroyed by a powerful elite who became very greedy.

The Government nationalised Anglo Irish Bank, the bank that did most damage. It led the other banks, where the traditional approach had been to avoid these high risk ventures. AIB Bank and Bank of Ireland had a conservative, reasonable approach but because Anglo Irish Bank was seen to be successful they followed suit. That was one of the major problems.

The Minister must now recover massive loans from these developers. They are the friends of the Government, of Fianna Fáil, they are the people who were entertained in the Fianna Fáil tent at the Galway races. The Minister should go after them but he has given them a lifeline in this proposal and that is wrong.

Deputy Mattie McGrath mentioned small businesses. What guarantees have the banks given that if they participate in NAMA they will then lend to small and medium enterprises? This is crucial. This Bill will be passed if the Green Party decides to remain in Government this weekend. This Bill will go through if the Green Party stays in Government over the next weekend. The Government should ensure that money will be allocated to small and medium sized businesses to ensure the retention of employment and the future creation of employment. We would see the green shoots of economic recovery if that were to happen. In bailing out the banks, an agreement must be made that they begin the bail out of the economy and of the people of Ireland.

I question the approach, the actions and the monitoring of the Governor of the Central Bank and the Financial Regulator in this whole saga. They stand accountable to the people and to the Oireachtas to explain why they did not monitor properly the actions of our banks, and why we see ourselves in this position today.

Deputy Bruton drew attention to the former chief economist of the World Bank and a veteran of banking crises all over the world, Professor Stiglitz, who described as "criminal" the Government's proposed NAMA policy to deliberately overpay the banks by €7 billion for their toxic loans. Professor Stiglitz said that to overpay for these loans is criminal, and he warned that the process will rob the taxpayer. Together with George Soros, the professor is one of the prominent advocates of the Fine Gael good bank solution to fixing banks. He joins financier Dermot Desmond, commentator David McWilliams and Mr. Michael O'Sullivan of Credit Suisse, among others.

Thomas Byrne (Meath East, Fianna Fail)
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That is rubbish. None of them has supported Fine Gael's policy.

Dan Neville (Limerick West, Fine Gael)
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As Deputy Bruton stated, the approach outlined by the professor leaves the risk and responsibility for working out toxic developer loans with the bankers who made them, and with the investors who funded them, while also ensuring that a clear and healthy banking system is ready to restart lending. The professor has rubbished the scaremongering by the Government and its banking friends that Fine Gael's tough policy on the banks will scare off private investors in Ireland and make it difficult for the Government to borrow money. On the contrary, the professor has confirmed the Fine Gael view that protecting the taxpayer from banking losses is the best route to restoring Ireland's economic reputation and creditworthiness. Nobody wants to lend or to invest in a country that caves in so easily to powerful financial interests.

Bernard Allen (Cork North Central, Fine Gael)
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It is with great regret that I come here today to speak on this buyout Bill. Our once mighty export economy has been brought to its knees by the current and immediate past administrations. No two men have contributed more to the destruction of wealth in this State than the construction industry's chief cheerleader, former Taoiseach, Deputy Bertie Ahern, and the "asleep at the wheel" former Minister for Finance, the current Taoiseach, Deputy Brian Cowen. Builders and developers deserve blame for this catastrophe as well as the bankers who threw prudence out the window in pursuit of a quick buck. However, they were facilitated at every turn by the organs of the State controlled by Fianna Fáil. Where was the regulation? It was dumbed down so that questions would not be asked and bankers could do what they liked.

For the past five years, the economy has been run primarily for the benefit of the construction industry. We knew the colour of the former Taoiseach's money when he asked why people urging caution on the economy had not committed suicide. The current Taoiseach took up that cause to attack people for warning of what was ahead. He said that the fundamentals were fine. The country then slammed into the middle of an international credit crisis as badly prepared as any other, with the possible exception of Iceland. Our property bubble was bursting and Brian Cowen was ignoring it until it was too late.

It took the worst kind of Minister for Finance to allow what was a culture of complacency to creep into the Financial Regulator's office and into the Central Bank. Even as the tide was going out there was no sense that either the then Minister for Finance or his successor were taking regulation seriously, until the directors of the banks themselves showed up one evening asking for their liquidity to be shored up on the back of the taxpayer. Banks were giving each other dig-outs to fool any observers on directors' loans or the strength of their balance sheets. It shamed this nation.

The current Minister for Finance told us six months ago that this legislation was urgent. He then realised he should be a lot more thorough in his thinking about the legislation, when Dr. Michael Somers came before the Committee of Public Accounts and warned us all about the legal pitfalls that were coming. The Minister had to be shaken out of his complacency. He then changed tack and the imperative to be urgent became the imperative to be thorough, even though the economic need was still urgent. It has taken a long time for the Minister to do what has been urgently required and yet he will not do what is transparent and let the country see that the individual valuations are fair for all, including the taxpayer. Having minimal scope for immediate scrutiny of a massive transfer of assets is a dangerous road for the Minister to take. If the Green Party is serious about transparency, I trust it will do right by the State.

I have a series of questions for the Minister, and I will ask them now as time is short. Is there any reason not to believe that every cent the banks receive on the strength of the money from the Government will go straight to pay off their debts? In other words, has the Government anything at all in its plan to get credit back to small businesses? So far, the answer has been a resounding "No". Is the Government considering setting up a wholesale bank to get credit flowing again, as proposed by Fine Gael? How much extra capital will Anglo Irish Bank need? Will Irish Nationwide Building Society be wound up? If so, at what cost? How much extra capital will AIB and Bank of Ireland need?

When will the third banking force come into being? What is the book value of the property on loans under €5 million in the five banks? What is the total book value of the five banks' non-performing loans outside of the NAMA-bound loans? What is the total rolled up interest on these banks' books? If credit is to flow, we must know if what is left with the banks is sustainable.

Will all board members and top executives that drove the banks aground in 2008 and up to then be asked to leave within six months? If the Carroll companies are spending tens of thousands of euro in the courts to get to NAMA, how insolvent will a company have to be to be wound up by NAMA? Will NAMA be accepting the fanciful projections that were provided to the High Court by Carroll's companies and others? Why is the Minister for Finance relying on rents as an indicator of the market bottoming out, when he knows about businesses being stuck with upward-only rent agreements and when we have had some of the highest rents in the world? Will developers know the discount given for their loans? What feedback on NAMA did the Government receive at the Irish diaspora economic forum? Will NAMA be able to give developers discounts on their loans? Will there be a change in the Government bank guarantee scheme introduced in September 2008?

What will NAMA do with the hotels that may come into its control? Will NAMA be able to liquidate a delinquent developer and transfer all the assets to another NAMA developer? Has the Green Party accepted the principle of overpaying for these development loans? Has the Green Party abandoned the whole principle of transparency?

We are living in momentous times and the decisions we are confronted with in the next few months will reverberate in Irish life for decades. Therefore, we must be brave and smart or we will lose much of what we still have after the Celtic tiger. We must cut our cloth to fit our measure and move to shelter the vulnerable from the worst of the changes taking place. We cannot ask the people of Ireland to pay billions more for assets than they are worth and also remain ignorant of the price they are paying for each one. Our Government, which is the least trusted in the history of the State, is dealing with the industry that dominated its economic thinking over the last decade. We cannot afford to let this pass and the questions must be answered before the vote is taken.

We cannot have business as usual for Fianna Fáil, because accountability and transparency are not high on its agenda. These should be the central ingredients of NAMA. If NAMA is handled badly, developers will celebrate it - there is anecdotal evidence they are already celebrating the birth of NAMA - and could be nursed along -----

Thomas Byrne (Meath East, Fianna Fail)
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Anecdotes, that is what Fine Gael policy is based on.

Bernard Allen (Cork North Central, Fine Gael)
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Fianna Fáil still retains its arrogance, despite everything. Fianna Fáil Members should be ashamed of themselves. They should hang their heads in shame.

Charlie O'Connor (Dublin South West, Fianna Fail)
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Deputy Allen should address his remarks through the Chair. Deputy Byrne will get his opportunity to contribute and I will be happy to protect him.

Bernard Allen (Cork North Central, Fine Gael)
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They could be nursed along in their insolvent state living the rock star lifestyle to which they became accustomed at first-time buyers' expense, while thousands of workers lose their jobs and our infrastructural deficits remain untouched.

It strikes me that the Minister, Deputy Brian Lenihan, will do anything to avoid publicising what price an individual property is transferred at, because he knows that once transparency becomes an element of NAMA, his over valuation of loans will be made plain to the people. It is a politics of secrecy at its most dangerous in order to pull the wool over people's eyes. Now, the Minister wants to pay a phantom price for these assets and we will never know who or which individual benefited and how much from being in NAMA.

Let this be a warning. We have had the tribunals, seen the human frailties and the catastrophic banking failures and now the Minister wants us to roll the dice again without transparency. Let the people know and be reassured that this is no sweetheart deal where cronies get a handout and builders continue to live their rock star lifestyle on borrowed money. The common good must override the privacy of big developers and builders. If the market eventually begins to function again, it will not matter significantly what valuation is published today. It should not be a hard sell for the Green Party to stand firm on transparency in its traditional role of scrutinising development in this country.

Thomas Byrne (Meath East, Fianna Fail)
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Deputy Allen's contribution was helpful and he asked useful questions. However, it is interesting that his and other Opposition Members' contributions demonstrate that Fine Gael seems to have completely moved away from its original policy. It also seems to have moved away from the allegation made at the start by the Fine Gael spokesperson on finance about the selection of 1,500 developers. It was irresponsible, wrong and reckless to allege that 1,500 developers were being hand-picked to go into NAMA. That is not the case.

When we examine legislation we are bringing through the House we must ask ourselves what the problem is that needs to be fixed. In the case of NAMA, the problem that must be fixed relates to the number of development loans sitting on banks' books where in many cases no interest is being charged. The Government had to do something about this. My only criticism is that we should probably have introduced NAMA earlier. However, other things were happening with the banking system. What is at the heart of the Government's proposal is to ensure borrowers are repaying their loans where they can and if not to repossess the properties. It is as simple as that. The banks were not able or willing to do that. Therefore, in the interest of the wider economy the Government must step in to make sure that is done.

That is the reason I am astounded by the proposals made by Mr. Desmond and by Fine Gael. The main advantage Fine Gael suggests its proposal has over NAMA is that the banks that made the loans may have better incentives, skills, information and estate agency experience to recover loans made to developers. This is what Fine Gael has said in its policy paper. It suggests the banks can do this and go after the developers. However, the banks have not being doing this. Where did Fine Gael make up this proposal? The problem is the banks have not being doing it and Fine Gael cannot see the problem. The banks have failed in that regard. Mr. Desmond also has great faith in the banks.

Faith in the banks is at the heart of the Fine Gael proposal. What banks has Fine Gael given as examples of where its policy works? It has given as examples Northern Rock and Bradford & Bingley. Is Fine Gael serious? We are trying to get people back to work. Hundreds of people in my constituency are about to lose their jobs in Aer Lingus, but Fine Gael tells us that if we do it like Bradford & Bingley and Northern Rock, the economy will be back on track. That is wrong.

A letter sent to me from a Fine Gael Deputy, which looked like it was written in the Fine Gael press office, asked me why I have decided to support the bailing out of the 1,500 people NAMA intends to bail out. I cannot understand how any Minister for Finance could hand pick 1,500 people. NAMA is not about 1,500 people. It is about 4 million people on this island to whom we need to return hope and confidence, not about the nonsense the Opposition has been raising about it.

NAMA is the worst nightmare of builders and developers who have not being paying their loans. We must get that fact across and that is the basis of my support for NAMA. Fianna Fáil is very clear that people who borrowed money must pay it back. Why should people who have not been repaying their loans be treated differently by the banks than the ordinary people we represent, who are not being treated in the same fashion? The banks have not been doing their job and Fine Gael's and Dermot Desmond's faith in them is astounding.

I support NAMA. There have been many rumours about it. Last night on television we heard one such rumour, namely that builders have not been selling apartments for the past nine months because they are waiting for NAMA. The NAMA proposal was only made in April, so how can such rumours be true? However, rumours are constantly being propagated by the Opposition against the interest of the people. We can have reasonable discussion and questions like those of Deputy Allen, but they are few and far between. We have had some sensible proposals from the Labour Party, but they just do not work or might be more expensive. At least they went some way to help. However, even the Labour Party was prone, on occasion, to accuse us of bailing out builders and developers.

Let us bail out the economy. Let us look after the ordinary people and get off that record. Let us have more developers, like Zoe Developments, in court. If they cannot pay their bills, that is where they should end up. That is a good template for NAMA, rather than what was suggested by The Irish Times and other political entities. The suggestion was that somehow this court case was designed to help NAMA and that the refusal of examinership was a disaster for NAMA. Refusal of examinership in a case like that is exactly what NAMA should be about. If there is no hope for the company, the Government must step in where the banks have failed.

Let us look at the money that will come from NAMA. We can have all the guarantees or rules we like about banks lending out money, but if they have not got the cash there is not much we can do about it. NAMA will give banks the cash and the Minister can put in stricter requirements with regard to lending the money to the wider economy - to people who can repay their loans. We must not forget when talking about lending money that the problem we have is as a result of lending too much money. Therefore, we want to lend money in the proper circumstances. I heard Deputy Kenny remark one day that needy families required credit. Needy families do not require credit. They require jobs and hope, but not credit. There is too much credit in the economy for families. Businesses require credit. I have full faith and support in NAMA.

I am also astounded by the latest Fine Gael press release on NAMA, which criticises the 80% rezoning tax. While the IFA must represent its members' interests, it has more to be doing than criticising this 80% tax. This 80% tax is designed to get around the problem we have had whereby the small number of landowners gained at the expense of the many. Fine Gael issued a press release on this today saying it supports people who have had land rezoned against having to pay an 80% tax. Why, asks Fine Gael, should they have to pay an 80% tax. They are the people Fine Gael has been complaining about who over the past ten years have gained the millions that were borrowed and are now the cause of our problems. However, Fine Gael is now again supporting every interest group.

How many farmers will be able to benefit from rezoned land? In its latest statement on its website, Fine Gael shows this is what it is concerned about. Very few farmers will be in a position to be worried about paying capital gains tax on the sale of rezoned land. Let us worry about the real issues in the economy. The 80% tax is not an issue. I fully support it as do most of my colleagues. It should not affect any one-off housing because such houses are rarely built on zoned land. They are usually built on agricultural land.

Let us have a proper debate and let us talk about the approach to take. Let us worry about the valuations. We are all worried about the valuations. It is a massive amount of money for anyone to spend on these loans. We must get that message across. It makes me angry every time I hear we are buying property or that NAMA will become the biggest property company in the world. We are buying loans and many of them are good and will help pay for the running of NAMA. Those good developers who are paying back their loans should be encouraged to promote further development, and employment.

We are constantly saying we do not have enough construction employment and that is true. There are too many people unemployed. Any good developers who are paying back, contributing to society and looking at investment need to be encouraged, and that message has to go out, too. However, the speculators or the "flippers" as they are often referred to, who unfortunately are hopeless cases, must be moved out of the system because they are blocking the construction industry and the wider economy. That is the simple reality of the NAMA approach.

I fully support it, but we are worried. However, I should be more worried if we did nothing, because the situation at the moment is so dire. While the international economy is moving on - and we are benefiting from that - the domestic economy is not. NAMA needs to get the money into the economy. Whatever mechanisms the Minister needs to put into the legislation to get that money into the economy, let him do that. Get the money into the economy and the banks off our necks. Close down Anglo Irish Bank as soon as possible, but let us not tell the wider world that we are going to default on our obligations. That is the layman's banking solution and it is not one that can be recommended to a small country totally dependent on international trade.

Willie Penrose (Longford-Westmeath, Labour)
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I am glad to have the opportunity to contribute to what is probably the most important debate ever to be heard in this House since the establishment of the State. We in the Labour Party have proposed an alternative solution. We then made the difficult decision to propose the temporary nationalisation of the banks. However, the Government has chosen to nationalise the losses but privatise profits. That is the clearest and most enduring difference between the proposals.

The banking crisis which had led to the proposals for NAMA that we are now considering has produced several debased phrases to disguise or excuse those who are to blame for the crisis. We are told that "we are where we are", which implies that we should not ask how we got here. Every statement by the Minister for Finance ends with the phrase "going forward" which suggests that we should not look backward.

We are where we are because of the irresponsibility of bankers and developers, the incompetence of the Financial Regulator and the unwillingness of the Government to heed the warnings of distinguished economists in time to avert the disaster we must now deal with. In 2005 Professor Morgan Kelly wrote an article in The Irish Times pointing out that the total lending of the Irish banks to property developers was greater than the value of the deposits in the banks, and that a collapse of the property bubble and possibly of the banks was almost inevitable. He was immediately shouted down by Government spokesmen and by the Financial Regulator who assured us that the banks were well capitalised. In view of the hopeless inadequacy of the "light touch regulation" implemented by the Regulator it is possible that he actually believed what he was saying.

The Taoiseach, when he was Minister for Finance only very reluctantly and belatedly removed the plethora of tax incentives which fuelled the property bubble, although it had been clear from the mid 1990s that they were no longer needed. The Minister seemed to believe that when the construction sector reached 13% of GDP, while the average for the rest of the EU was about 5%, that this was a cause for celebration rather than alarm. When the global financial crisis broke in 2008 the irresponsibility of the Irish banks was brutally exposed. As Warren Buffet has said we only discover when the tide goes out who is not wearing swimming togs and the global banking crisis of 2008 combined with the collapse of the property bubble has led to taxpayers having to bear the cost of rescuing the banks.

NAMA is the brainchild of Dr. Peter Bacon, former economic adviser to Mr. Bertie Ahern, former stockbroker and property developer and favourite economist of Fianna Fáil. He was the author of the famous report on house prices ten years ago. When implementing the recommendations of his first report displeased the property developers Dr. Bacon readily came up with alternative recommendations that were more to their liking. He proposed that the State, or more accurately the taxpayer, take on the euphemistically entitled "impaired" loans and that with the cash provided by the State - or rather the bonds issued which the ECB will discount for cash - the banks will be able to get on with the business of lending money to business and so help to revive the economy.

There are several potential pitfalls in this plan which the proponents of NAMA seem to be ignoring. Even at the height of the boom the banks were, as they always have been, reluctant to lend to start up businesses or even the expansion of existing businesses and there is no reason to assume that this will change post NAMA. Less than 60% of the lending by Irish banks was financed by deposits from the Irish public. The rest was borrowed from overseas banks and investors and when this source dried up after the collapse of Lehmann Brothers, the Government was forced to guarantee the banks' liabilities and they had to turn to the ECB for funding. Despite the Government guarantee, the banks are finding it difficult to raise money on international markets and are very likely to use the funds supplied by NAMA to reduce their foreign liabilities. When loans are transferred to NAMA, the banks' assets will shrink and they are very likely to use the agency's funds to pay off some of their foreign liabilities. This will result in healthier banks which will be good for bank shareholders, but may not lead to much expansion of credit for small business which is the backbone of the economy, as we very well know.

I assume that the Minister for Finance is aware that the massive quantitative easing in the UK and the USA, which will have the same effect as NAMA will have on banks funding, and has not led to an expansion of credit. I see no proposals in the Bill before us that will ensure that when NAMA is set up the banks will be induced or compelled to increase their lending to the productive sectors of the economy.

In the past, Labour Party proposals for a third banking force were strongly resisted and even sneered at, by the main banks in particular, and even the State development banks, ACC and ICC were privatised - a very bad decision in my view. The Government therefore has very little capacity to ensure that any bank lends to the productive sector of the economy. I should like to see concrete measures incorporated in this legislation to ensure an adequate supply of credit to small and medium businesses. There are 250,000 small and medium-sized businesses across the country employing some 750,000. That is an important statistic, one that is real and impacts on the lives or real people.

The valuation of the NAMA loans has been the subject of much scepticism by economic commentators and has been referred to on numerous occasions in this Chamber today. The Government considers the discount which it has secured is sufficient to recover the full value of the loans on the basis of only a 10% increase in property prices. This may seem a very cautious provision, but there is a possibility that some of the development land acquired by NAMA may in fact be worth only its agricultural value, which itself has fallen significantly in the past year. In some counties there is land zoned for housing to meet housing needs for the next 50 years. NAMA will also acquire half-built housing estates in many areas where there is no demand for housing .and some of these houses may eventually have to be demolished. If zoned land and unfinished housing constitute a substantial part of the assets that NAMA will acquire, the valuations may be wildly optimistic.

NAMA also proposes to acquire performing loans which are meeting interest payments. I cannot see how NAMA can pay less than the value of performing loans to the banks without facing legal challenges. The management of the banks may be willing to accede to the acquisition of performing loans because of the scale of the Government's shareholding, but the bondholders are likely to resist as they stand to lose if NAMA buys bank assets at too low a price.

As I understand it, the Government is prepared to accept a proposal which emanated from the new Governor of the Central Bank that NAMA pay a reduced value for the loans, but give the banks a share in any increase in their value which the agency can achieve. The Government should give serious consideration to that proposal, in my view. It is suggested that part of the payment to NAMA will be in the form of a bond whose value will depend on the rate of recovery achieved by the agency. This provision would provide some return to the taxpayer, but the question arises as to how much the bonds will be worth. If the market considers that significant amounts of NAMA assets are worthless, the bonds may be worth very little and the banks will not be able to regard them as assets which will not improve their funding position.

The Minister argues that NAMA will make a profit because when the loans are repaid or the security underlying them is realised, the proceeds will be greater than the original cost. This prediction assumes that the long term economic value of the assets acquired by NAMA will be realised. However, NAMA can only make a profit by paying less than the long term economic value - and so any profit it makes will be at the expense of the banks.

The setting up of NAMA involves the largest expenditure of public money on one project since the establishment of the State. It also involves an enormous increase in Government debt at a time when people are being forced to accept higher taxes, lower public spending and cuts here, there and everywhere. Let us not forget that the borrowing to fund NAMA will ultimately be repaid by the taxpayer.

I was astonished to hear some Fianna Fáil Deputes state recently that NAMA will be funded by the European Central Bank. The ECB will discount the bonds given to the banks by NAMA, but bonds are a form of borrowing that will ultimately have to be repaid - like all Government borrowing - from tax revenue. Ministers have not actually misrepresented the reality of the bond issue, but are trying to give an impression that somehow we are getting a great deal from the ECB; or that the ECB has set the interest rate for the NAMA bonds; or that NAMA is somehow backed or approved by the ECB. These assertions are wishful thinking. The ECB will discount the bonds at the appropriate market rate and that rate is likely to rise, as many other countries are increasing their borrowing.

Let us break down the figures for the cost of NAMA into numbers that are intelligible to everybody outside in the street, but do not seem to make sense to the Minister for Finance and his advisers. NAMA will impose a tax of €1,500 for every person in the State for the next 20 years. Borrowing the money to fund NAMA will bring our national debt to €1.75 trillion which represents €1 million for every two workers in the country. A small fraction of this borrowing would fund all of the capital needs of the country.

Let us be clear that rescuing the banks will mean that many children will continue to be taught in freezing prefabs with leaking roofs, we will continue to have a public transport system that is less effective than that of some third world countries, we will continue to have the highest pupil-teacher ratios in the world and every day people will languish on trolleys in our hospitals. This is the impact it will have.

NAMA represents an enormous transfer of public money into private hands, the hands of bank shareholders. It is a grim example of what the Nobel prize-winning economist Joseph Stiglitz has called "socialism for the rich, markets for the poor". We used to be constantly told that markets were all about risk-taking and that in a dynamic market economy, losses and business failures are inevitable. I recall the chief economist of the Bank of Ireland, Dr. Dan McLaughlin, expressing a view in regard to the workers who were made redundant by Irish Continental Lines to be replaced by cheaper labour from poor countries. Dr. McLaughlin's view was that free markets inevitably lead to such results but that markets are always right. I am surprised that Dr. McLaughlin has not applied the same logic to Bank of Ireland shareholders, who, in his view, are clearly more worthy of State support than the ferry workers or many other workers throughout the country who are fighting their corner to try to secure a decent standard of living.

We are repeatedly told that NAMA is the only game in town. However, we have put forward an alternative and articulated the reasoning behind it, and it has received the support of some very eminent people. Nonetheless, it is a game in which the dice are heavily loaded against the taxpayer. In the USA, the troubled assets relief programme was originally based on the idea of overpaying for assets but Congress refused to sanction this approach and the programme is now based on equity investment in the banks, which will yield a return for the taxpayer. While asset management agencies have been used in other countries to enable banks to offload bad loans and get on with lending for productive purposes, these agencies have paid realistic market values for the impaired loans, which minimises possible exposure and losses for the taxpayer. The ECB, which will ultimately provide cash for the NAMA bonds, has recently stated that where assets are purchased, the price paid should be "mostly risk-based and determined by market conditions", in contrast to the Government's approach of deliberately paying more than market values.

The experience of previous asset management agencies shows that when the assets transferred to the agencies have been a large fraction of total bank assets, the agencies have struggled to succeed. While the assets likely to be transferred from Bank of Ireland are not large in total, those transferred from AIB represent a significant sum. In the case of Anglo Irish Bank and Irish Nationwide, they would have collapsed a year ago had the Government not introduced the guarantee. It was argued at the time that Anglo Irish Bank and Irish Nationwide were of "systemic importance" and that winding them up would have had negative effects on the whole banking system. I am not convinced this was the case. While the depositors in Anglo Irish Bank and Irish Nationwide were protected, the bondholders who lent to these very risky institutions should have been made bear at least some of the consequences of their irresponsible lending.

As the Minister for Finance would reply, however, we are where we are. What must now be done is to ensure that NAMA operates at the least cost to the taxpayer and, if possible, provides some return to the taxpayer for the enormous sums of public money that must be provided. I understand the Green Party is seeking a social dividend from NAMA and I note that the Construction Industry Federation appear to be opposed to this. The opposition was expressed most vehemently by the head of the CIF, Mr. Tom Parlon, former Minister of State for the Progressive Democrats, who were such cheerleaders for the unregulated free market that has greatly contributed to the crisis.

If any good is to come out of this crisis, one element must be that the provision of vital social amenities should not result in huge profits for speculators, as it has done over the past decade. We have seen the Minister for Education and Science having to pay huge sums of money for primary school sites to developers when the planning permission made no provision for social amenities. We have seen housing estates built without even adequate footpaths, much less any amenities that would make them tolerable places to live. All of this is the result of Fianna Fáil policy which has always put the interests of property speculators over the interests of the community.

The provisions of the Kenny report on building land prices of nearly 30 years ago are being dusted down and reconsidered. Every time the Labour Party sought the implementation of the Kenny report, we were told that it would violate the Constitution, although leading experts on the Constitution were convinced it would not. Had the report been implemented, not only would we not have had the current crisis but we might not have had the problems revealed by the Flood and Mahon tribunals.

NAMA must end definitively the notion that housing is a speculative asset rather than a basic social need. The debased approach to housing has left us with 50,000 people on local authority waiting lists while in every town and many villages we have thousands of unsold houses, the weeds growing through their windows, whose builders await rescue by NAMA. If NAMA is to have the support of the taxpayers who fund it, it must ensure a social dividend for the wider community commensurate with the enormous sum of taxpayers' money necessary to fund it.

What has been of great concern to me and many people we encounter on the streets or at our clinics revolves around the significant and increasing cohort of people, especially young people, who paid exorbitant and unsustainable prices for their houses, and who now find themselves unable to meet their huge loan commitments and, increasingly, find themselves in the zone of negative equity. People retort that no form of NAMA has been put in place to deal with the dilemma that these people now find themselves in. It would be a significant dereliction of the duty of this House if the banks were not required as part of the conditions for them receiving this unprecedented injection of taxpayers' cash to recognise the difficulties these young people are now in, and to devise appropriate measures and schemes of arrangement tailored so as to ensure that these people's homes will not be subject to repossession orders, and that the banks have a recognisable, defined obligation in this regard. It would be some kick in the teeth to the taxpayers and the public to find that as soon as the President signs this Bill into law, we are treated to an orgy or frenzy of court applications for possessions because unfortunate people have defaulted upon their loans.

The proposal of my colleague, Deputy Michael D. Higgins, for the establishment of a homes protection commission is an excellent one, which should be taken on board by the Minister. During the course of my recent attendance at the national ploughing championships, I took the opportunity of speaking to many farmers and their representative organisations, which left me in no doubt as to their bewilderment and anger at the proposed 80% rate of capital gains tax on the gains arising from the disposal of rezoned land which the Government has indicated it intends to introduce on Committee Stage of this Bill. Notwithstanding the draconian nature and rate of this tax, surely it is a case of closing the stable door after the horse had bolted. It should have been introduced much earlier because the level or frequency of windfall gains are unlikely to figure much on the landscape in the future, and the level of any such contemplated disposals are likely to be postponed or discouraged completely. Therefore, the level of income the Government will derive from such a source will be negligible.

Section 155 of the Bill is also causing considerable angst among the farming public. One can appreciate that their concerns are well-founded in so far as it empowers NAMA to acquire land by CPO in order to maximise the value of properties which it would already have on its books. Such lands must be acquired by agreement and, of course, the acquisition must be deemed necessary, but the key question is what acquisitions will be defined as "necessary". The Minister should consider these aspects of the legislation carefully before proceeding to embed these concepts in statute law as they constitute gross unfairness and are based upon the anvil of discrimination.

Jack Wall (Kildare South, Labour)
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Both inside and outside the House, this is viewed as complex legislation. The major representation being made to me in this regard is that nothing in the Bill provides for the tsunami that is coming down the track in regard to the repossession of people's homes - their kingdoms. It is this concern I wish to highlight. After reviewing the views of Deputies from across the House, the Minister must include in the legislation a mechanism to protect the family home.

At present, the HSE through the community welfare system is paying mortgage interest relief to 16,000 families, the number having risen from 4,000 or by four times in the past 12 to 14 months. This is only an interim payment so it is plain that the family home is under threat in all of these cases. The ESRI in a recent working paper by David Duffy stated that the price of houses was continuing to drop and that almost 150,000 homeowners would be in negative equity by the end of 2010. With the continued rise in unemployment and related problems, it is clear that many families are using HSE payments and the generosity of parents and friends as well as borrowing beyond their needs from moneylenders and the like to try to ensure their homes are protected. Yet, there is nothing in the Bill to ensure, nor have I heard it from the institutions, that the banks will provide a mechanism which will ensure the family home is protected.

Many believe that when this legislation is completed, the banks will be waiting like wolves on the hill for the scent to move in the right direction and when that happens we will see countless repossessions. Last Friday was probably the worst ever day I experienced as a public representative since I came to these Houses in 1992. Five people who came to my clinic had received eviction orders. I had to face them, try to console them and give them some hope as to how we could help them. Not one line in the legislation offers any hope or solace for such families.

My colleague, Deputy Michael D. Higgins, has continuously stated that a mortgage management agency structure must be either incorporated into the legislation or introduced as separate legislation. Reference has been made to approximately 150,000 people who will be in negative equity. According to David Duffy the most likely people to default among them are those who are ill, unemployed or in poor financial circumstances and they will risk losing their homes.

I am sure the Minister of State, Deputy Moloney, has similar constituents in his area. Rural Deputies are aware of many people who have come from cities to rural areas to purchase properties at a cheaper price but due to the rise in unemployment their financial circumstances have deteriorated. I urge the Minister of State, Deputy Moloney, to bring the need for such a provision to the attention of the Minister for Finance. The Bill must be modified to incorporate such a change or alternative legislation must be drawn up in tandem with the NAMA Bill to ensure there is protection for the family and society. If not, the future of this country will be dark, as most of the houses in communities will be repossessed because the unfortunate families do not have the money to pay their mortgage. I hope that change will be introduced.

I look to the good side of the Government, such as the Minister of State, Deputy Moloney, and others I know who are honourable and who know in their heart and soul what are the problems. I hope that provision will be introduced by the Minister for Finance before the conclusion of Second Stage to ensure that families can rest in their beds at night and not fear a knock on the door the following morning from someone saying the keys to their house will be taken from them.

Michael Moynihan (Cork North West, Fianna Fail)
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I thank the Acting Chairman for the opportunity to speak on the NAMA Bill. It is one of the most important pieces of legislation to go before the House for a generation and perhaps even since the foundation of the State. Over the years I have heard one particular man recount the experiences of his family and others around the world after the 1929 Wall Street crash. The economic and financial crisis we are facing is similar to that. The decisions we take as Members of the Oireachtas in the coming weeks and months will be crucial to the type of society we create and regulate in the future.

In the past 12 months since the bank guarantee scheme was put in place to stabilise the banking system and prevent a withdrawal in funding we have heard discussions in this House and on the airwaves about the decisions taken by the regulatory system that was in place for the financial institutions and how that system did not work. The amount of money that was pumped into the economy has left us with a huge crisis to face.

We can learn two lessons from what happened. The first is that the principles-based regulation system did not work and it will not work in the future. The regulatory framework we must put in place has to ensure that the credit bubble that developed will never occur again. Much economic activity was built on credit and many people are now experiencing a lack of credit availability. We went from having a large amount of credit to zero credit. Successful and profitable businesses are starved of financial resources due to the dysfunctional banking system. The National Asset Management Agency legislation we are dealing with is an attempt to address the issue. The Minister is working on further drafts to the legislation. It is crucially important that we get the bad loans out of the system and get credit flowing again to restart the economy. First, we must ensure that once NAMA is in place and the bank balances are cleaned up that the credit made available is reasonable.

We must also examine the type of society we were creating in recent years. Policy decisions that were taken in the Anglo-Saxon world, especially in the United States and Great Britain, in recent years have had disastrous results. It is time for us to reconsider the type of society we wish to create, not alone in terms of the Bill before us but in the context of all the other issues we must face. Following the Great Depression in the 1930s some commentators considered that American industry did not recover until the onset of the Second World War. That recession spread to the southern hemisphere also.

Decisions were taken at that time by those in power on protectionism in our case and other policies to be pursued. We must take a fundamental look at how we go forward. In recent years we devised a spatial strategy with hub towns in the regions. The policy was to drive the majority of the population into the major urban centres and to create a critical mass, whatever that means. It can stand for a vast amount of things. We have taken our eye off the ball.

Let us consider the issues that face NAMA. The loans that will be of predominant interest to it are in the main based in the major centres of population where greenfield and brownfield sites were sold for vast amounts of money. Nobody in this House would have even contemplated the ridiculous amounts of money that were paid for such sites. Some people in rural areas say the Celtic tiger never reached them in terms of the frenzy of land and property purchase.

We must examine every aspect of our policies for the future. Much policy has been driven by interest groups outside of this House, some of which are statutory groups or for one reason or another are funded by the Government or Government agencies. I do not just refer to the fabric of society we wish to create but to whether we want society to be predominantly based in urban or rural areas. We have many decisions to make on NAMA, the banking system and its flaws. The loans it will buy will predominantly relate to property in the major urban centres. There must be a more balanced regional approach to development and we must seriously examine the type of society we want and the type of country we wish to leave after us.

We must examine our planning policy. We have seen what happened in parts of the United States and the United Kingdom after the development of huge urban centres in the 1960s and 1970s. We did it in this country too in some of our cities by creating huge housing estates without any amenities. Forty years later our society is paying an enormous price through social breakdown, policing and the violence in west Dublin and other parts of the country. The policy was to continue building. We must examine that.

On the legislation, we must learn things from the last 12 months. People and particularly public representatives have often heard young people talking about seeking loans or credit from financial institutions. They might hear that a particular bank manager was very strict and would not give the loan unless the person had made proper calculations of the principal earner's salary, half the second earner's salary and so forth. However, other banks were giving money out much faster. There followed a race to the bottom. The critical issue was the way the banks loaned the money. Bonuses were paid by the banks on the amount of money being loaned. Every week it was totted up and the banks showed a profit on paper. There was never an issue about a person on a small salary who was being loaned ten or 20 times his salary and how he would pay it back, even if the mortgage or loan was over 25, 35 or 45 years.

People are coming to our clinics about their homes being repossessed and mortgages they took out for 40 or 45 years from some of the sub-prime lenders and the operators who were giving cheaper and more easily available credit than the main banks and institutions. We must learn the deep and expensive lesson from this financial crisis. A generation of people learned from the financial crisis of 1929 and the 1930s. Regulation was put in place to ensure it could never happen again but, 70 years later, the greed of the human being and the eye for accumulating more and more profit was everywhere. We must be true to ourselves and in ordering society for the future we must ensure the financial regulatory system we put in place will be draconian.

The difficulty was that when we joined the eurozone we experienced a low interest rate economy for the first time. Our interest rates were no longer tied to sterling. We were tied to the European Central Bank and would have a low interest rate economy. If there had not been the mindless borrowing and lending that was permitted by the banks and financial institutions, we would have been better off. We must ensure the draconian legislation that is necessary is put in place.

All Members who have contributed to this debate on NAMA have spoken about the need to get more credit into the economy and to small and medium sized businesses. Small and medium sized businesses are suffering due to the lack of credit, as are farmers. Cattle prices are suffering because credit is not available for the stocking loans that are usually available in the autumn over a six or nine month period. There is a crisis in that sector and throughout the economy due to the lack of available credit. However, we must ensure when we are dealing with this issue and the amount of credit we can put into the system that it is credible credit and that the fundamental rules of allowing credit into any economy or society are followed. They may seem draconian towards what they were formerly but they will have to be steady and solid.

One feels that many of the contributions made in this House over the years are being ignored because powers outside the House do not give due recognition to us as legislators and people. The Members of this Parliament are probably closer to their constituents than the Members of most other European parliaments because of the proportional representation system and the ethos of serving the people through the system we have. It is a great system because we bring into it the knowledge and experience we encounter in our clinics and constituency offices, as well as the huge difficulties people are experiencing on a daily basis. In return, we must ensure good legislation is put in place.

Many people have worries about NAMA but the fundamental basis of any economy is a sound banking system. In September 2008 the bank guarantee scheme was put in place by the Government because there was unease throughout the western and particularly the Anglo-Saxon world about the banking system, after the collapse of the major American bank Lehman Brothers. Banks were affected throughout the world. We had to put that scheme in place. People might ask why we did not allow the banks to go to the wall. If they went to the wall, they would bring far more with them, such as the insurance industry and other, smaller financial institutions that depend on it. It is important to convey that it is for the underlying benefit of the Irish economy that we get this legislation working, the banking system back in order and force through solid and genuine regulation that is checked on an ongoing basis by the Members of the Oireachtas, who are answerable to the people. As has been seen with other agencies and bodies throughout the public sector, there must be accountability to this House and therefore to the public and the people who elect us.

There have been comments about the European Central Bank. The European Central Bank resulted from the various treaties and the common currency negotiations many years ago. Without the European Central Bank and the facilities it has made available to us over the last year, we would be in a far more difficult position.

There is one issue regarding NAMA of which the Minister and Government are very conscious, the correct price to pay for these loans. Some of the loans will not have deteriorated too much in value, while some of them are worthless. There are loans based on land prices in areas where the land will never be anything but agricultural land. In some places the land is beyond being agricultural land. We must be very conscious that the price being paid for these loans is recognition of what they will be worth into the future.

The legislation is complex and detailed. It has been given huge consideration by the Government, and the Minister for Finance and the Government are working very hard on other aspects of the legislation. I believe it is the right thing to do at this time. It is an important step in trying to get our economy back on track and to ensure that there is a credible credit system in this country. However, in tandem with this and other legislation we must decide on the type of society we will have. We must examine the fundamental elements of society. Over the past 30 to 40 years, the focus of society has gravitated towards large urban centres, sometimes with disastrous consequences. For example, many towns and cities have experienced a problem with ghettoisation, an issue that must be examined.

The national spatial strategy, with its focus on hub towns, has not been properly implemented to ensure the benefits are spread across the country, including the most rural of areas. Some rural schools are under pressure for numbers owing to building. We should work to ensure facilities are provided in smaller towns and villages, around which society must be built. Rural areas do not experience the difficulties associated with larger towns because their populations are spread more widely.

This complex and detailed legislation has been examined by the European Central Bank and International Monetary Fund, both of which regard it as the way forward, as have other experts. We must ensure amendments to the Bill reflect the ideas of Members of the Houses. We are ultimately responsible to the people who send us here and must do our best to represent their views. I commend the legislation to the House.

John Perry (Sligo-North Leitrim, Fine Gael)
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This is an important debate given that the legislation provides a basis for making a wrong decision and failing to kick-start the economy. The backdrop to the legislation is the decision made one year ago to provide a State guarantee to the banks. The guarantee provides protection for all three types of bank creditor, namely, normal depositors, interbank lending and high-risk bond holders. It was provided initially as a stop-gap measure to ensure the banking system did not collapse and based on an expectation that money would begin to flow into the economy again. Regrettably, the banks have failed to honour their commitments over the past 12 months. Recovery has been slow, the level of credit provided in the economy has been minimal and company closures, job losses and trading difficulties have increased. Cashflow, the life blood of any business, has completely dried up.

The establishment of the National Asset Management Agency is intended to ensure an orderly economic recovery. Under the NAMA process, the books of five banks and the State-owned Anglo Irish Bank have been opened to reveal a frightening picture of development loans. The loans of 2,000 customers, 25,000 loans in total, will potentially be transferred to the new agency. The loan book to be transferred is valued at €77 billion, including €9 billion of unpaid interest. Unpaid interest of this scale suggests there was a problem even when property values were high and loans could have been sold at high prices. The problem has clearly been around for a long time, although the Taoiseach, a former Minister for Finance, insists he was not aware of a crisis until one year ago.

Only 40% of the property loans to be transferred to NAMA are performing. While it is not clear to what level they are performing, they are described as "toxic" loans for a reason. This also means that 60% of the loans are not performing. The asset valuation of these loans is €88 billion. While developers are required to put up some of their own money when taking out loans, I doubt this was the case. A 47% reduction in values has been assumed, giving the loans a valuation of €47 billion. The Government has decided to pay €54 billion for these loans or approximately €13,500 for every man, woman and child in the country. If a problem arises, it will be extremely costly.

The valuation process is problematic. If, for example, the companies owned by Liam Carroll are even remotely representative, the reduction in values is more likely to be 80%, rather than the Government's estimate of less than 50%. In addition, land values are subject to variation and are not based solely on supply and demand but also on zoning. A further problem arises if the developers did not put up cash as collateral. I doubt very much this was the case. Another concern regarding NAMA is that it is premised on future values. The Minister failed to take into account the likelihood of future interest rate and inflation rate increases. Those who lend money expect more than to break even after ten years.

While I accept the necessity to save the banking system, must we save the five Irish institutions as private banks? Should we have provided guarantees to all bank creditors? The Fine Gael Party policy is to establish a State bank which would provide seed capital, which would ensure many businesses with the potential to develop succeed. Anglo Irish Bank, which will receive State support of €28 billion, will not lend one euro to any business. Having received €3.5 billion from the State, the bank is seeking further moneys to underpin its accounts and wants to have its toxic debts removed. We should instead make billions available to a stand-alone bank.

A State-owned bank sold to the Bank of Scotland in the 1990s was highly effective in previous recessions when it invested in stand-alone projects in every town and village. It is regrettable that the Government has not decided to establish a new bank with a clear mandate to invest in job creation. Small companies across the country are finding it impossible to secure working capital. Today, my party leader, Deputy Kenny, asked what assurances the banks had given that they will re-invest in small companies. Banks will give one ten reasons not to give money and not a single reason to provide it.

The Bill is specific on the establishment and operation of the National Asset Management Agency and about the arrangements for transferring vast amounts of money into the accounts of participating banks. However, it is weak on issues such as transparency and it is silent on the issue of restructuring. The word "ethics" makes a brief walk-on, walk-off appearance in the legislation. A significant element of the NAMA project reminds me of a phrase used in a Hans Christian Andersen fairytale - "Meanwhile, in another part of the forest...."

To find out about Government intentions under many other related headings, we are referred to ministerial statements. This is not good enough. Let us take the issue of ethics as a case in point. Section 30 refers to disclosure of interests by members of the board of the National Asset Management Agency and provides that the board shall issue guidelines as to what constitutes an interest for the purpose of the section, having regard to the definitions of the Ethics in Public Office Act 1995. This is the only reference to ethics in the entire Bill. Let us contrast the ethical arrangements and standards built into the legislation with those built into the Local Government Act 2001. Part 15 of the 2001 Act provides for a comprehensive ethical framework for local government services.