Dáil debates

Tuesday, 13 October 2009

National Asset Management Agency Bill 2009: Second Stage (Resumed)

 

The following motion was moved by the Minister for Finance, Deputy Brian Lenihan, on Wednesday, 16 September 2009:

That the Bill be now read a Second Time.

Debate resumed on amendment No. 2:

To delete all words after "That" and substitute the following:

Dáil Éireann declines to give the National Asset Management Agency Bill 2009 a Second Reading because:

1. The Government has published neither the Bacon report that underpins the NAMA proposal nor any proper analysis of this enormous initiative in terms of:

a. The enormous risks for taxpayers of using a dubious and politically influenced valuation methodology to pay €90 billion for assets of highly uncertain long-term value;

b. The growing doubts regarding its impact on bank lending;

c. The growing concerns from creating a secretive, politically directed, state-managed, tax funded work-out process for 1,500 property developers.

2. The Government has not facilitated a review by the Oireachtas of independent analysis of alternative banking solutions which international evidence suggests are likely to be more effective at getting credit flowing, less costly and fairer for the taxpayer and less vulnerable to political manipulation and business lobbying.

-(Deputy Richard Bruton).

12:00 pm

Photo of Dick RocheDick Roche (Minister of State with special responsibility for European Affairs, Department of Foreign Affairs; Minister of State, Department of An Taoiseach; Wicklow, Fianna Fail)
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Rather than reading out, as Ministers do, a speech praising our side and criticising the Opposition side, it struck me that we might, for a change, consider what people are saying. Like most Members of this House I have received hundreds of e-mails recently and I have tried to engage in a dialogue, through the e-mail system, with my constituents and with people from far and wide who have concerns about this issue. Many people have deep concerns about the National Asset Management Agency, as they have about the banking system.

The questions that arises time and again are: Why do we need NAMA, and why not let the market visit its vengeance upon those in the banking system and in the development world who behaved in a profligate manner? The answer to those questions is simple. To protect jobs we need an economy that is growing and an economy cannot grow without a functioning banking system. Whatever views we might individually have about the people who have been at the top of the banking system, and, like many people, I am very angry about the manner in which they operated, everybody is agreed that we must address the health and stability of the banking system before we can start making progress. Risky loans in our banking system are restricting the flow of credit, as we all know, and there is no credit for ordinary business people in every part of the country. I was in the Leas-Cheann Comhairle's constituency and people were talking in the streets about this very issue, to the effect that the banking system is not functioning, credit is not flowing and people are suffering as a consequence.

Irish banks rely heavily on financial institutions abroad for funding but the scale of the losses in banking would make this liquidity more difficult and therefore make the entire process of recovery more difficult. It would also make borrowing and interest rates much more costly. In addition, if banks remain unsure about the losses that will eventually result from these loans, the nervousness about the adequacy of the capital that will provide future credit will not be dispelled and future credit will not be available.

The asset management approach is not an entirely new approach, which many people appear to believe. It is an approach that has a track record. By establishing the National Asset Management Agency Ireland can tackle head-on the significant threat that impaired assets pose to the Irish financial system. The establishment of NAMA has been supported by the European Union Commission, and we all heard Commissioner Almunia express his views in recent days. It has also been supported by respected institutions such as the International Monetary Fund and the European Central Bank. I make this point simply to emphasise that the commentary to the effect that this is a sinister attempt to bail out bankers or, worse still, to bail out developers and habitués of a tent in Galway does not add to the debate and is doing something of a disservice to the general public.

The financial markets have already responded positively to NAMA. The question that arises is how it will operate. That question has been asked time and again in e-mails and messages to me, the Members opposite and every other Member of the House. As I said, the idea is not a new approach. NAMA will buy land, development property loans and certain associated loans from the banks at prices that are well under the current book values of those loans. NAMA will start with the largest systemic exposures across the institutions and it is expected that by the middle of next year, most of those loans will be transferred. The system can then start getting itself back to normal. NAMA will leave behind smaller, cleaner and better funded banks that can focus their resources on their core function of lending to a productive economy. I would hope that at that time we can also start talking about real regulation that will ensure we do not go back to where we came from.

The most common assertion is that NAMA is a way of bailing out greedy bankers, and it is understandable that members of the public should have that view. People who have been treated less than respectfully by banks would be less than human if they did not wish to visit their wrath upon bankers and banking institutions. The reality, however, is that the majority of people who work in the banking system were not responsible for the current position. There was a core at the top, and there is no doubt there was a rotten culture there, but we cannot visit our wish for revenge on every member of the banking fraternity, nor can we visit it upon everybody who has made investments in banks over the years.

NAMA will not be permitted to operate as a bailout mechanism for anybody, and certainly not for anybody who has behaved or operated irresponsibly. The important point, which is repeated time and again but lost sight of in the shouting and hectoring, is that NAMA will treat those who took out those development loans and related loans as borrowers who will continue to have the full amount of their loan due for payment. They will have a duty to maximise taxpayers' returns.

Nor is NAMA a builders' bailout, as is often suggested in the heat of political debate. The complaints by the Construction Industry Federation suggest that NAMA is not seen by it as a bailout. Recent well publicised comments by a leading developer attest to that. NAMA has been designed to ensure a properly functioning financial system, with funds available to lend to sustainable businesses. A properly functioning system will provide access to credit for completion of worthwhile projects.

Whether the banks are getting off scot free is another issue which has exercised the minds of many people but they are not getting away scot free. The legislation includes a risk-sharing mechanism that will protect the taxpayer from overpayment of assets to be transferred to NAMA. The legislation also provides that if NAMA should make a loss in any given year, it will have the option of not paying any interest or coupon payment on the debt concerned. That is a provision we should all welcome but I do not believe it has been properly debated.

In addition, there is the question of the levy. I am pleased the Minister for Finance has made it clear that a levy will be introduced purely as a precautionary measure. The levy is the final insurance that the taxpayer will not be visited with the costs of profligate behaviour by bankers or builders. Although it is not expected that the levy will have to be used, if it does have to be used, it will ensure that the taxpayers do not pick up the full cost.

I was surprised recently by the comments of Professor Joseph Stiglitz, the distinguished American economist and Nobel prize winner from a number of points of view. Although I am familiar with his work, I regard any economist coming from the United States where there was such an extraordinary meltdown, making the comments that he made - the suggestion that it should be just left to the market to clear up matters - as proposing a very odd approach. Anybody who is conscious of the recent experience of US finances, particularly in the money markets, would not reasonably come to the conclusion that letting the market take its course is the best solution. All we have to do is reflect on what happened in the case of Lehman Brothers. Lehman Brothers was allowed to collapse because that is what the market dictated but the reality is that the cost of letting Lehman Brothers go has run to trillions of dollars. I am not sure that many people with the benefit of hindsight would argue that was necessarily the best approach.

The important point is that NAMA will not pay above the odds for impaired loans. That was part of Professor Stiglitz's argument. The European Commission would not allow NAMA to overpay for assets as it would be a violation of EU state aids. That does not mean that NAMA will pay only current market values which, under current stress market positions, would imply fire sale values because a fire sale would not be the best approach.

In citing the comments of people from outside this country, people have conveniently overlooked what Ben Bernanke has had to say. He had a distinguished record in the Federal Reserve. He made the point that a fire sale approach to assets in the distressed banking system is not the best way forward. In fact, he suggested that it was a mistake. Like other governments around the world, we reject the idea of forcing distressed assets to be unloaded on to a market that simply cannot handle them. That is the reason the EU framework is more supportive of the NAMA approach. The European Central Bank has said that the allowance for long-term economic value should not be unduly large but it favours the long-term economic value approach. Logically, it is the only approach that can be adopted. The estimated cost of the long-term economic approach by NAMA is €7 billion, as has been repeatedly pointed out by Deputy Burton. NAMA will have to achieve less than 10% of an uplift over a decade to cover that cost and that point has not been factored into the debate. The Central Bank has indicated that the allowance "does not seem out of proportion with the range of potential upward price movements, especially when a risk-shared element is included".

There are measures that will mitigate the risks to the taxpayers which are worth repeating. First, there will be a part-payment in the form of subordinated debt. Second, payments will only be made if NAMA is making a profit. Third is the level of State ownership, as the State already has warrants equating to 25% of Bank of Ireland and Allied Irish Banks, and it fully owns Anglo Irish Bank. There are also building and mutual societies involved. In view of this the taxpayer has a substantial stake in the agencies being supported. There is also the issue of the levy.

The common good is not served by trying to avoid unpopular political decisions. The argument made here and outside this House that we can simply walk away from this is not based on any economic analysis. The reality is we cannot do that and we must deal with the issue, whether we like it or not. If we have views about banking and builders and whatever they are, the matter must be faced as the common good of the country requires a return to economic growth. Such growth will only come about if we can create a banking system that will have credit flows. The NAMA approach seems to be the best and most viable approach to creating credit flows and helping viable businesses.

One of the most contentious issues in the e-mail traffic we have all received is the question of valuations. The basic premise for the valuation framework is that NAMA is paying significantly less than the book values of the loans - some €54 billion compared to a book value of €77 billion. That represents an estimated aggregate discount of 30%. The point must be made that the final figures are not to be established until we have had the analysis of each individual loan. The estimated market value of the loans currently stands at €47 billion, and this is based on certain assumptions and information about the property market, including a fall in average property values in the State of approximately 50% since the peak at 2007. That is not an unrealistic assumption.

The current estimate of the allowance for the long-term economic value is €7 billion, and each loan must be valued individually. Each loan, including the value of collateral and securities associated with it, will require a separate valuation once the Act has commenced, so the final figure may be different from the €7 billion figure which has been repeated so often and stridently, particularly by Deputy Burton.

As each loan must be valued individually in accordance with valuation methodology, the estimate of the price to be paid for the assets which is being broadcast and which has been used in the debate so far is provisional. Not a single cent will be paid for a loan until it has been subject to a thorough due diligence examination. The ultimate value to be paid is defined with regard to EU guidance on the long-term economic value. It is worth putting these issues on the record because there has been a misinformed public debate. It is easy to understand why this has come about because there have been strident arguments put forward without much logic applied to them.

Another question which is posed in many people's minds, and going back to Professor Stiglitz, is the fire sale solution. Why not force the banks to sell their assets for whatever they can get? We might feel that this is what the banks are due and that it would wreak a sense of retribution on the banks from a scenario they have themselves created. Our individual feelings about the banks should not determine what is in the long-term public interest and a fire sale simply would not be in this interest.

Forcing the holders of loans to sell assets at prices below those at which they could rationally expect to realise in the near future would not mend a banking system that is seriously broken; the opposite is the case as it would dig an even greater hole. Such an arrangement would not put our financial system back on track and would upset it even further. As has already been mentioned, we must address the health and stability of the banking sector if we are to get the economy moving again.

Letting the market take its course would worsen an already bad position and that is why I am surprised that any group of economists in this country or elsewhere would line up behind this view. Using unsubordinated bonds puts the banks at risk if NAMA were to lose money, which is not our expectation, and approximately 5% of the total consideration will be in the form of subordinated bonds. The levy will also be in place so the interests of the taxpayer are very well protected.

In the context of the risks taken by the taxpayer, it is interesting to address the question of the valuation and what is required for the taxpayer to break even on NAMA. If we take the subordinated debt into account, it is estimated NAMA would have to achieve an uplift of less than 10% over the current market values of the assets over ten years to break even.

I canvassed in an estate recently with the Acting Chairman in Tallaght. It is an estate with which I have a personal affinity and I remember in a previous distressed time when houses in it changed hands for £4,000 or £5,000. The Acting Chairman knows as well as I that even in the current distressed market 20 years later, the houses are significantly more valuable than that.

Under the NAMA proposals, it is reasonable to suggest that a 10% uplift over the current market figures in a ten-year period is achievable. From experience, I cannot believe anybody would argue that this will not happen. Considering what has happened in that estate in Tallaght over 25 years since it was built, including the peaks and troughs, over a ten-year period it was easy to achieve a 10% uplift. If a 10% uplift on property values is achieved or prices kept pace with the general rate of inflation, the taxpayer would be insulated. There is no assumption built into the NAMA proposition - it is important to say as much - that peak property prices will or must be achieved. It would be economically irrational to make such a presumption and it is not in the legislation.

There is also the Labour Party proposition. Why not simply nationalise the banks and bring all of them into public ownership? The full nationalisation of Allied Irish Banks and Bank of Ireland, which is what the proposal amounts to, has been ruled out on the basis of information which has come to us through due diligence and stress test exercises undertaken in March on the State's purchase of preference shares in the banks. Other information on expected future bank losses indicates that full nationalisation is not necessary and would be unhelpful in reconstructing some sense of support or confidence in the Irish banking system in the medium and long term.

It is not helpful to continue debating the idea that all the banks are basket cases that must be nationalised. Once an institution is totally nationalised, the State must sustain it, as we have seen this in the case of Anglo Irish Bank. If there was no directly criminal activity in that case, some of those involved operated with criminal intent and a cavalier disregard for moral behaviour as bankers.

The State must ensure the minimum capital would be maintained in an institution. If that is not done, the institution ceases to be a bank and all the liabilities become an immediate charge on the State and therefore on the taxpayer. The concept that nationalisation would somehow or other make this problem go away is not based on logic. If Allied Irish Banks and the Bank of Ireland were to be fully nationalised, the shareholder would have to be compensated, unless we decided to steal the assets that exist for shareholders. Such shareholders are not all fat cats; many thousands of unfortunate people invested their life savings in those banks.

At current share prices, this would amount to a €5 billion cash payout before a single cent of new capital could be injected. Where would that money come from? The Labour Party has not said where this additional capital could be found. New injections of State capital would have to be borrowed on world markets at interest rates of at least 5%. NAMA bonds will pay much lower interest than that. The cost of the NAMA proposition is significantly lower than the cost of the Labour Party nationalisation proposition. Full nationalisation would inevitably result in Ireland's sovereign credit rating also being downgraded. I have never heard Deputy Burton or any of her colleagues factor this into the debate, and yet it is an element not only affecting State borrowing but which would have a knock-on effect for every taxpayer in the country. If we are to engage in a logical debate on NAMA and nationalisation, we should proceed to do so.

For a party whose members have a long tradition in and who have made a very respected contribution to business, I am surprised that Fine Gael would suggest that we follow the example of Lehman Brothers and simply default on our debts. That model has nothing to commend it, nor has the idea of a magic bank. Fine Gael's propositions in this area are premised on significant levels of default by Irish banks. The party's proposition in respect of a wholesale bank is that the State would inject €2 billion in capital in such an institution and that on the basis of this money - having already defaulted on our debts - would effectively borrow a further €40 billion. With respect, the figures put forward in this regard simply do not add up. I am of the view that a legacy bank, which is another proposition offered by Fine Gael, would have ruinous repercussions for Ireland.

Rather than putting forward propositions that are unworkable, we should focus our efforts - I hope this will be done on Committee Stage - on making NAMA work. NAMA is a proposition that is fundamentally sound. I have never suggested that all wisdom resides on this side of the House. Such a claim would be arrogant nonsense, particularly in view of the fact that it is not the case. There are people on all sides of the House who, from an economic perspective, have good contributions to make. Rather than chasing chimeras or shadows - which is the basis nature of the propositions put forward by the two main Opposition parties - we should pool our resources to ensure that NAMA works. This should not be done from the point of view of vindicating a position adopted by the Government but rather from a recognition that it is the correct action to take.

This is the first opportunity I have had to address the House in the aftermath of the recent referendum. Obviously, I am extremely pleased on a person level with the result thereof. Fine Gael and Labour showed real and practical patriotism in respect of the referendum campaign. I informed the leaders of those parties and their spokespersons on the matter of that fact in private. NAMA is also an issue on which practical patriotism could also be shown. If we pool our resources, we will make the NAMA proposition work.

Photo of Dinny McGinleyDinny McGinley (Donegal South West, Fine Gael)
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I wish to share time with Deputy Catherine Byrne.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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That is agreed.

Photo of Dinny McGinleyDinny McGinley (Donegal South West, Fine Gael)
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I welcome the opportunity to contribute to the debate on this Bill. This is probably one of the most important debates that will take place during the lifetime of this Dáil. In fact, it is probably one of the most important in the history of the State. In years to come people such as I, who are fortunate to be Members of the House, will probably be asked how we voted on NAMA. This debate will probably rank with the treaty debates or some of the great debates that were held at the beginning of the Second World War.

The enactment of this Bill will have economic and financial repercussions for future generations. What we are doing is transferring almost unlimited billions to the banks and financial institutions. What is being done constitutes a direct transfer of money from the current and future generations of Irish taxpayers to the institutions which have contributed so much to bringing us to the edge of financial ruin and national bankruptcy.

For centuries, our banks were looked upon as being institutions of probity, security, responsibility and conservatism. They looked after our savings - those of us who had any - in a prudent manner. They financed our home mortgages, supported domestic purchases and, in particular, supported business and enterprise - the engines of our economic development. The banks always acted in the interests of their shareholders and investors and were considered to be solid and reliable pillars of our economy and our nation and were a symbol international financial status.

It is generally agreed that banks are a necessity for a thriving economy. They provide the credit that is an absolute necessity for business and industry to operate successfully and to thrive. Today, however, Irish banks are unable to provide such support because some of them are already bankrupt, while others are on the verge of bankruptcy. We need not dwell at length on the reasons our financial institutions have arrived at this juncture. Suffice it to say that in recent years they were sucked into the property bubble and formed an alliance with developers in order to inflate an unsustainable boom. All of this was tolerated and at times orchestrated and encouraged by an indulgent Government which failed miserably to employ proper regulation and supervision.

That which I describe was at best an unholy alliance and at worst a conspiracy between the Government, the banks and the developers, who are responsible for transforming Ireland from a booming first world economy to the economic basket case of Europe and the developed world. For some years, we had a first world economy but, unfortunately, we also had a Third World Administration. On many occasions in recent years we were informed by responsible Members of this House and similar individuals outside it that we had the best economy and highest per capita incomes in the world, that Ireland was the richest country in the world, etc. However, it was all built on sand.

Over a period of years we were continually informed that property was the "only game in town". That phrase almost became a cliché. I become afraid when I hear something being referred to as the only game in town. Anyone who disagreed with the assertion to which I refer was accused of talking down the national interest and being out of step with the national consensus. That consensus was comprised of the developers, the banks, the Government and even the national media. During the period to which I refer, the property supplements of national newspapers were bigger and more widely read and studied than the news or sports sections of those same newspapers. Like the Government, the newspapers were also making huge profits on the building and property boom. It was, therefore, in their interests to keep the boom going and to talk it up.

The Taoiseach's immediate predecessor suggested that those who questioned the bubble should commit suicide. That was unbelievable. Nevertheless, a number of economists such as David McWilliams, Professor Morgan Kelly, our own recently recruited colleague, Deputy Lee, and even Alan Aherne - who addressed a Fine Gael conference in Galway three years ago - forecast that the bubble would burst. However, these individuals were dismissed as being at best eccentric or at worst irresponsible. It is now time to see who was right.

How could anyone justify the building of 90,000 dwellings per annum in a country of just over 4 million inhabitants when the UK - the population which is 12 to 15 times greater than that of Ireland - was building only 140,000 to 160,000? If the UK had been obliged to match Ireland on a per capita basis during the period in question, the authorities there would have needed to build over 1 million houses per annum.

During the period to which I refer, banks were allowing people to borrow ten to 12 times their annual income in order to purchase houses and apartments that were inferior and the prices of which were inflated. As a result, many young people who purchased in recent years find themselves in negative equity and are paying for houses that are currently valued at less than half the purchase price.

This is the financial millstone we have tied around the necks of thousands of young couples. That millstone was created by three guilty parties. Everyone recalls the national madness that saw hundreds of people sleeping for days and nights outside nearly or newly completed housing schemes in order to be the first to purchase. We also recall the unscrupulous practice of builders and sellers in increasing purchase prices overnight. How many times did we hear the word "gazumping" during that period? Gazumping was another despicable practice of the boom but no one refers to it now. It is those who encouraged the practice of gazumping that we are going to bail out. It is these people that NAMA is designed to cater for.

Members will recall the conspiracy whereby sellers, in cahoots with banks and other lending institutions, estimated the amount a person could borrow and settled the price accordingly. Such an amount bore no relation to cost or value for money and represented criminal exploitation in the first degree.

Then one comes to NAMA, which is designed to bail out the same institutions and developers that have plunged us to the verge of national bankruptcy. Members are being asked to accept a formula devised by those who largely created the mess and which could cost taxpayers up to €90 billion. One is told this is the only show in town and one then hears that in the main, builders and bankers are in favour. Their support alone is enough to send shudders through a society that has been brought to its knees by the greed of both sectors.

Once again, people are being told this is the only game in town. Where has one heard that cliché before? At the height of the property boom; it is true that history repeats itself. Anyone who questions NAMA is talking down the national interest or is out of step etc. and I have heard it all before. While the Government unfortunately does not appear to be learning from recent economic history, many independent economists and academics have done so. It is difficult to find an economist who is outside the Government loop and who supports NAMA. They see it for what it is, namely, a huge bailout for those who have brought us to this tragic situation. It is significant that all the commentators who are in favour represent the banks and financial institutions.

Irish banking is a big business and in recent years has been cursed by a culture of cronyism that has bordered on being financially incestuous. The same faces keep coming out of the woodwork repeatedly. It is a case of your joining my board, my joining your board, our joining his board and their joining our board, as the same faces come up continually. Their conduct usually is epitomised by sharp practices, shady deals, financial shortcuts, inside dealing and highly unorthodox financial shenanigans. Due to a lack of regulations and supervision, much of this is overlooked. Actions that would land one in jail in other jurisdictions, such as the United States, are tolerated and overlooked in this little country.

We now are in the process of handing over countless billions to these institutions. I understand that one of the most notorious of such institutions, Anglo Irish Bank, is being earmarked for €28 billion. This is a bank that probably never sanctioned a mortgage to a house purchaser in all its existence. How many of these billions will percolate to the ordinary borrower or business man or to the entrepreneur trying to create or even save a few jobs? The answer is nothing; not a single euro. Nevertheless, it is stated that this is the only game in town.

The principle on which NAMA is based is utterly crazy. We are being asked to buy property not at market value but at what it may be worth in five to ten years time.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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The Deputy has spoken for ten minutes.

Photo of Dinny McGinleyDinny McGinley (Donegal South West, Fine Gael)
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I was about to conclude. I wonder whether the same banks would grant a similar concession to their hard-pressed customers and borrowers. Evictions and repossessions are their game. I will conclude by paraphrasing Churchill, the great parliamentarian. As the deluge subsides and the waters fall short, we will see the bankers and the developers emerging once again. Theirs will be one of the few institutions that will have been unaltered in the great financial crisis that has engulfed this country. For this reason, I oppose NAMA.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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Deputy Catherine Byrne has nine minutes.

Photo of Dinny McGinleyDinny McGinley (Donegal South West, Fine Gael)
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I apologise. I was generous with the Minister of State and the Acting Chairman should allow the full ten minutes to Deputy Catherine Byrne.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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I will be sympathetic to Deputy Catherine Byrne.

Photo of Dinny McGinleyDinny McGinley (Donegal South West, Fine Gael)
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I know. The Acting Chairman is Deputy Byrne's neighbour.

Photo of Catherine ByrneCatherine Byrne (Dublin South Central, Fine Gael)
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I thank the Acting Chairman.

During these difficult economic times, when people are finding themselves in situations they never imagined, such as being unemployed, fighting to keep their homes or struggling to survive on social welfare benefits, hope and optimism is what keeps everyone going. One hopes the Government will do everything in its power to help this country climb out of recession. One hopes that those who got us into this mess will be brought to justice and one hopes the mistakes of the past will never be repeated. However, the Government's proposed National Asset Management Agency fills me not with hope but with dread.

I have tried hard to make sense of what has happened in Ireland in recent years and of how the Government plans to rescue the economy. However, it now is clear to me that NAMA is not the answer. It simply constitutes another example of the Government's mismanagement, which will have serious consequences for all. It is beyond belief that the Government intends to pay €54 billion for €77 billion worth of toxic loans, which actually is €7 billion more than they are worth, in the hope of making a good return. NAMA will be greatly dependent on the property market bouncing back but there is no guarantee this will work and there are no guarantees that NAMA will not bankrupt the country. NAMA is a huge gamble on the part of the Government and the taxpayer will be obliged to foot a bill that is the equivalent of €34,000 for each household. This is the reason I cannot and will not support NAMA.

When the present Government was formed in 2007, the future looked quite bright for Ireland. However we became greedy and many people lived beyond their means. When the global downturn struck, people were not equipped to deal with it. There were no provisions for a rainy day, no savings in the coffers and no way back from gross overspending and investment in bricks and mortar. Although the property bubble carried us a long way, it then burst and left thousands of people with homes they could not afford and mortgages they could not pay back.

I am genuinely saddened that so many young people who stepped excitedly onto the property ladder now struggle with huge mortgage repayments on homes that are in negative equity. People were bombarded by the banks offering 100% mortgages and overdrafts and it seemed as though money really grew on trees. We now have one of the highest proportions of mortgage debt in the euro zone. During the years of the Celtic tiger, property prices rose continually and houses sold at hugely inflated prices. Although deep down we knew this would never be sustainable, that was ignored and suddenly it was all over. Thousands have lost their jobs and now rely on social welfare benefits or seek help from the Money Advice and Budgeting Service, MABS, or the Society of St. Vincent de Paul.

Recent figures show that 27% of MABS clients are experiencing problems in making their mortgage payments, which constitutes an increase from a figure of 18% in 2006. Many also are finding it hard to repay personal loans, credit card bills and even household bills. The Society of St. Vincent de Paul, which has a long and proud tradition in Ireland of helping those in need, faces new challenges in helping individuals and families who are sinking beneath heavy debts. In many cases, it also is helping people who are struggling with depression and suicide brought on by the stress and fear of losing their homes or being unable to survive financially. In the face of the current unemployment rate of 12.6%, many people face difficult times and for them there is no easy way out. They will carry the burden of huge debt for many years. Moreover, for those who simply cannot meet their mortgage repayments, repossession is a real fear. Repossession orders rose by more than 100% last year and the banks now have thousands of repossessed properties on their books of which they cannot rid themselves. Common sense is called for in respect of this problem. As the banks know they will be unable to sell these repossessed properties, they should consider allowing young people to remain in their homes and renegotiating proper terms with them. Perhaps their customers could pay the interest only for a while or perhaps the term of the loans could be extended. This would mean fewer repossessions and still would generate some revenue for the banks. Taking people to court or sending them to prison because they owe money is not an appropriate option and one cannot draw blood from a stone. For those whose homes are repossessed, few options exist. Social housing has dried up as waiting lists for council housing are very lengthy and homelessness now is a real possibility for some of those affected. This is all the more difficult to stomach because thousands of apartments and houses, which were built nationwide in the past ten years on foot of the economic boom, now lie empty.

I understand the Department of the Environment, Heritage and Local Government recently announced an initiative to hand over 3,700 affordable housing units to local authorities to address the need for social housing and in theory I welcome this step. However, it is vital that those who are most in need and who have been waiting longest will be housed as a priority.

The rent supplement scheme should also be overhauled to address housing needs. Some 91,000 people receive rent supplement. Last year the Government paid approximately €400 million on rent supplement to landlords across the country. If tenants were housed under voluntary housing or local authority housing schemes it would save the State millions and the standard of accommodation would be better. Many private properties in this scheme are in a terrible state and the taxpayer is funding them.

Meanwhile, NAMA proposes to bail out almost 2,000 of the biggest business people in the country and the Irish taxpayer will carry the risk. I cannot understand how the Government defends such reckless behaviour. The country desperately needs strong and visionary leadership but, if the past few days are anything to go by, this is a long way off.

We badly need to get credit flowing to keep the country afloat. It is beyond belief that a small business cannot borrow €10,000. It is almost impossible to secure a loan from a bank. How can we expect small and medium sized businesses to survive in this climate? Each day I meet many people working in the local shops struggling to keep the doors open and to keep people employed locally. Why do we not turn our attention to the post offices? They are as stable as anything else in this country. Perhaps we could examine some way of providing small loans to businesses to keep them afloat.

The Minister of State referred to Fine Gael's good bank approach. I have read this policy and have listened carefully to the Fine Gael spokesperson, Deputy Richard Bruton. It is beyond belief that today we realise that NAMA is the only option in this country. Fine Gael has an alternative and the Minister should take this on board. NAMA is wrong for the country and for the many people who have suffered greatly, not through their fault but because of the reckless spending of this Government.

Photo of Brendan KenneallyBrendan Kenneally (Waterford, Fianna Fail)
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While he is not in the Chamber at the moment, I wish to record my congratulations to Deputy Kirk on his elevation to the post of Ceann Comhairle. I am sure he will do an excellent job. I was sorry to see Deputy O'Donoghue step down from the post. He did an excellent job and was seen as very fair by everyone. I will not go into anything else around that issue.

I welcome the opportunity to speak on NAMA, which I agree is the preferred method of resolving the banking crisis. It is not a bailout of bankers, the mantra that has been trotted out time and time again. Nor is it a bailout of developers, it is a bailout for the country. We must put the country first and get on a sound financial footing. We must be seen to be do something credible internationally. Otherwise, we would not be able to borrow on the international market to sustain us.

It is incorrect to say that bankers are being soft on developers or those who owe money. Today I read newspaper reports on Anglo Irish Bank taking proceedings against some of the developers who owe money to the bank. This is what NAMA will do when it takes over the loans. Let nobody be under any illusions: developers will be chased for the money they owe and must pay the money or face being liquidated. At one stage banks thought they would get a soft ride due to NAMA but they realise that this is not the case and that they must repay. They will pay for any NAMA losses, as the Minister has made clear. The banks did not want this but it is included in the legislation.

From speaking to business people in my constituency, I know there was much uncertainty last week about how long the Government would last because of the Green Party conference. While the Green Party members agreed with NAMA by and large, they did not want to see the Government falling because they see that something must be done. We are attempting to do this through NAMA and, if the Government fell, we would be back to stage one. This would involve putting this recovery on hold for a number of months which would be to the detriment of the country. We must be ready to get in on the upturn that is starting to happen elsewhere. I saw reports about Singapore on television last night. Growth in the third quarter was 15%, while it was 1% for the same period one year ago. We do not know how long this will take but we must be ready when it comes. I commend the Minister for Finance on the way he has addressed this issue. He has made it clear that he is willing to make changes to legislation if they are warranted.

Deputy McGinley referred to Deputy Lee and his comments on the building bubble. Before he was a Deputy, when he was a reporter for RTE, he thought NAMA was a good idea when it was first suggested. He was supportive of it at the outset. Now he must sing a different tune because he is in the House and is a member of Fine Gael. Since he left RTE, economic reporting on the station has become far more balanced. Some on the Opposition benches are opposed to NAMA as a concept but they can have an important part to play by suggesting amendments to this legislation. That will ensure it is as workable and comprehensible as possible.

I refer to the comments of Alan Dukes and Garret FitzGerald. There are critics of NAMA but there has been much support and we should not forget this. IBEC referred to the Irish situation as tough but manageable and stated that "NAMA, more action on the public finances in the budget, a "Yes" vote in the Lisbon referendum [this statement was issued prior to the referendum] would all help to improve the country's image abroad".

I was abroad in the past few days as Chairman of the Joint Committee on Justice, Equality, Defence and Women's Rights. Some 22 of the 27 EU countries attended the meeting. They had been following Ireland's Lisbon treaty referendum very closely. They were all very relieved at what we had done. Their attitude would have been that if Ireland did not want to come along, they would have moved on without us. We did the right thing on the Lisbon treaty and this is part of restoring our credibility internationally. We must also do so in respect of NAMA.

IBEC stated that it gave conditional welcome to the publication of revised legislation establishing NAMA. The IBEC director general, Danny McCoy, stated, "It is in everyone's interests that we move quickly to repair our banking system and restore the flow of credit throughout the economy". Speaking on RTE's "This Week", Alan Dukes described the Fine Gael proposal to set up a national recovery bank as "very cumbersome, very doubtful of success and much less clear" than the NAMA proposal. Mr. Dukes said the establishment of NAMA was the Government's best option. The former Fine Gael Taoiseach, Garrett FitzGerald, made a stunning intervention in the NAMA debate, warning that a Dáil rejection of the Government's banking or budgetary proposals could throw our State into the hands of the International Monetary Fund. That is something we do not want to see happening.

It is in the interest of all of us that we get this right and I know that will be supported on all sides of the House. We may have various proposals for tackling the matter but we are all in this together and we must get it right for the sake of our country. NAMA management has already admitted it does not have the expertise to value the €77 billion of developer loans and how could it? The suggestion is that a panel of auctioneers will be engaged to do so. Indications are that discounts of 30%, which would mean a valuation of €54 billion, will be applied. It is difficult to quantify whether this is the correct figure as there is little or no market at present. The banks are not lending to accommodate such purchases, and if they were to whom would they lend in the current climate? As most of the developers have assets which will be transferred to NAMA it will limit the scope to deal with traditional clients for the disposal of these assets.

The Government, in going the NAMA route, is in a difficult situation. If the assets have too low a discount, while it may in the short term help the banks' balance sheets, it will result in the asset value being too high to sell on and will only stagnate the entire economy. If the impaired asset values are too highly discounted it will result in serious consequences for the banks' balance sheets and involve the Government in substantial capital injections to recapitalise the banks and eventual nationalisation of the banks thereby leaving the taxpayer further exposed.

I am opposed to the nationalisation of the banks as I feel the cost of borrowing to this country would increase as a result. We must engender confidence and consider international perceptions. By nationalising the banks we would send out the wrong signals internationally. It would also cost us much more as interest rates on what we are borrowing internationally would increase, which would be to the detriment of what we are trying to achieve.

What is most important is to ensure that these toxic assets are sold on to outlets that will develop them and get the construction industry moving again. If the assets are too highly valued they will stay dormant for years and no benefit will accrue to the Government, taxpayer or future employment prospects. This second alternative is probably the best option as it would give the Government and the taxpayer the best end result and would remove some of the risks that NAMA holds.

International asset management companies such as New York-based Blackrock and the Western Asset Management Group in San Francisco are long established in this field of activity and a public private arrangement with the Government would ensure that somebody with expertise would correctly value the assets. This has happened elsewhere and international expertise exists to managing this. With their track records they will be certain to make a profit, in which the Government and the taxpayer would participate, and they have international contacts to enable them to sell the assets to somebody who can develop them and create employment.

It is most likely that in going the NAMA route some of these agencies will become involved to a lesser extent with no benefit to either the Government or the taxpayer. It would allow these agencies to cherry-pick the best value for money assets and leave the vast majority of impaired assets much harder to dispose of, with very serious consequences for the Government and taxpayers. This would result in a very prolonged recession and much slower economic recovery. I am unsure what interest these groups would have in such a situation and perhaps there might not be any such interest but it is something that could be explored. The Minister is open to exploring all of these possibilities.

Another very important reason international asset management agencies should be involved in this process is that we must take into account that almost €34 billion of the €77 billion is related to assets in the UK, Europe and the US. Surely their overseas expertise would be extremely important in valuing and disposing of these assets. Much criticism has been made of the way we suggest that these assets will have a certain value. The likelihood is that the fall in the book value of assets held internationally will probably be less than the fall in the book value of those in this country; overall we will probably hit the figure the Government suggests we will.

The very significant knock-on effect to the Government in engaging with international asset management agencies would leave the Government in a stronger position - once the toxic debt of €77 billion is removed - to concentrate on a solid plan to sort out the banks. The banks would need more recapitalisation and the Government could consider the possibility of merging the two main banks. We tend to consider the two main banks in this country, Allied Irish Bank and Bank of Ireland, as large banks. However, they are not. Internationally, they are very small players and we should take this into account in the future. I do not suggest that we should merge them but it will have to be considered at some stage. While that is a debate for another day, it should be noted that such a step should encourage the vast amount of deposits which has left the country to be repatriated. It would also encourage deposits from abroad, which is another side of the matter which we should consider. It would help to restore Ireland's credit rating and attract foreign investment.

The confidence of which I spoke earlier is the theme running through my contribution. We must disseminate it internationally and this Bill is the best way of doing so. We could then move on to leave the Government to the very urgent task of tackling job creation. At present, the number unemployed stands at approximately 450,000. Many thought it would rise substantially from this but thankfully the indications seem to be that it has begun to level off.

I have spoken to the Minister, and the Minister is more aware of the issue than I am, about introducing a mechanism or formula to ensure the banks lend to small businesses to allow them continue. This is not happening at present. I do not know how we can force it but it must be done. The Taoiseach and the Minister for Finance have repeatedly told us over the past 12 months that we are in uncharted waters. This is true, and anybody who was born in the 1940s or 1950s-----

Photo of Joe CostelloJoe Costello (Dublin Central, Labour)
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We are still in them with no sign of getting out.

Photo of Brendan KenneallyBrendan Kenneally (Waterford, Fianna Fail)
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-----will never have witnessed such a devastating downturn of the economy. While we had ups and downs in the 1960s, 1970s and 1980s, what has happened since 2007 is completely unprecedented.

We have only one chance to get this right. It would be prudent to ensure we have the proper international expertise to help us sort this out. This is undoubtedly the most important political decision in our lifetime. This has been stated by more than one speaker and it is a fact. The future of this country and generations to come totally depend on us making the right decision.

Whatever we end up with, we must all work with it and I include in that cross-party and all shades of political opinion. There is no point in getting into a game of political point scoring. We must send out a very strong message on Ireland Inc. internationally and we will not do so if we are arguing among ourselves. Internationally, we need to be considered again as serious players to sort out the various problems we have. While this very proactive decision may not suit the banks' balance sheets in the short term, nevertheless the future of the country and its people must take priority over any short-term fix. The rewards then will be all the greater.

Apart from commercial assets included in the €77 billion, a substantial portion relates to residential and unfinished houses and apartments. It is estimated up to 150,000 residential units remain unsold. Considering there is such great value in the market, I asked friends working in the banking sector why fewer mortgages have been taken out. They explained the banks have reverted to a previous practice in that a person looking for a 90% mortgage must put down a 10% deposit. We should never have moved away from that practice but it happened. Many people do not have the 10% deposit to put down because they got out of the habit of saving, despite the efforts of the former Minister for Finance, Charlie McCreevy, with the special savings investment account scheme, SSIA. People must realise they must have a deposit before they can get a mortgage. At least that will mean they will have manageable mortgages which did not happen in the past.

It is projected that overall income this year will be reduced by more than €15 billion compared to 2007. This, coupled with social welfare expenditure expected to come close to €20 billion, makes for a serious situation. It was recently reported on RTE that approximately 130,000 mortgages are in negative equity of which 50,000 holders are unemployed. This is projected to rise to 250,000 and 100,000 respectively in 2010.

The two most important issues to be dealt with are banking and unemployment. If banking is correctly dealt with, then employment will have every chance. The Minister for Finance is trying to keep politics out of this as much as possible, as it more an issue of how best to tackle the problem. I accept the bona fides of the Opposition parties. While I may not agree with them, I believe they are putting forward what they genuinely believe to be the right solution. Assuming this legislation does complete its Second Stage in the House, I would hope that everybody can work together in order to get as good a Bill in place as is possible.

Photo of Jan O'SullivanJan O'Sullivan (Limerick East, Labour)
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I wish to share time with Deputy Joe Costello.

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

Photo of Jan O'SullivanJan O'Sullivan (Limerick East, Labour)
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The former US president, Thomas Jefferson said of banks in 1802:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.

This is an apt description of our current banking situation.

On the Pat Kenny radio show this morning, I heard of people who have woken up homeless and others in the courts defending themselves against the banks while trying to hold on to their homes. Many were losing their homes to the very bankers and banks that we are now bailing out with taxpayers' money. There is no danger these bankers will lose their banks or any property of great substance to themselves such as their homes.

I know a young couple with two small children who own a house in a Dublin suburb. Recently, the husband lost his job while his wife was a stay-at-home mother. They had to hand back their home to the bank, walk away from it and return to her parents' house to live. They have been told by the banks never to come looking for a loan again because they have been blacklisted. This is what is happening to the ordinary people of Ireland.

I know a person who had a small financial business which was closed down by the Financial Regulator ten years ago for a relatively small infringement. That is the same regulator who sat back while Anglo Irish Bank built up its losses over a small number of years to the point that of the €77 billion NAMA lump sum, €28 billion relates to the bank. Anglo Irish is now a zombie bank which lends to no one while its customers were a small number of wealthy property developers. Yet, the nation must now bail it out while shamefully, this House voted to underwrite and guarantee it.

The leader of the Green Party, Deputy Gormley, who is present in the Chamber, steered a vote in favour of NAMA through his party last weekend. How does he feel that loans of €28 billion were allowed to build up in this bank which the taxpayer must now underwrite? Whatever about gambling, which is what it was for these property developers and speculators, NAMA is gambling with taxpayers' money and an unknown future. We are being asked to take on board a hope value. Fintan O'Toole wrote in an article during the early stages of the debate on the agency that it will lead to the NAMA-isation of our finances being built into the future economy. We will, he pointed out, be dependent on the properties taken on having a value in ten years time which will equate with the amount of money the taxpayer is now putting into the scheme.

The people being asked to bail out the banks include the primary income earners in their families who lost their jobs and face an uncertain future with household bills to pay including large mortgages. They include the owners of small indigenous companies that cannot gain access to credit from our banks to continue trading. They are the taxpayers who are burdened with pension and income levies on top of the uncertainty of additional cuts and the possible introduction of water and property charges. They are the people trying to manage on social welfare who never got caught up in the property bubble or benefited to any great extent from the Celtic tiger. All are trying to live their lives when all sorts of obstacles and challenges confront them while the once-hailed builders, developers and bankers, portrayed as the elite among us and who profited immensely on the back of ordinary workers and taxpayers, see NAMA as the lifeboat coming to rescue them.

My question as to where all the borrowed money has gone remains unanswered. Many of the developers borrowed money to build large developments, units in which they charged between €400,000 and €600,000. The moneys handed over by the ordinary people who bought these houses must be somewhere. The young couple I referred to earlier were told by the bank they would have to find the money to pay back their loan. Is there any real effort being made to go after the moneys the developers borrowed?

Last week, Professor Joseph Stiglitz, Nobel laureate in economics and a former chief economist in the World Bank, after a lecture at Trinity College Dublin told an interviewer:

[NAMA] is the kind of highway robbery which we see happening all over the world, with guns pointing at the heads of the political leaders and the bankers claiming the sky will fall down and the economy will be devastated unless they get this money.

He went on to say that the valuation system should take into account the compounded value, what would be compound interest if it were a loan for a house, and that we should seek much more for the long-term value of the properties included in NAMA.

What disturbs me most is that there does not appear to be any attempt to change the culture of banking for the future. I cannot see any instrument in the Bill that will make bankers change the way they do business with small companies that are trying to borrow money and are being refused, despite all the money the taxpayer is putting into the banks. The banks should, for example, be forced to give favourable charges and interest rates to businesses over the next few years. I refer to ordinary, small, indigenous industries. There is also a service called factoring and invoice discounting for which banks charge. A person who runs a small business made the practical proposal to me that the banks be forced to provide this service free of charge. Specific measures should be taken to ensure the bankers give favourable terms to these small businesses in their time of difficulty. I cannot understand why that cannot be done because it is taxpayers' money that the Government is putting into these banks. Why can they not be given the money with basic conditions? If the Minister for the Environment, Heritage and Local Government were giving a grant tomorrow to an organisation, his Department would be able to lay down the terms and conditions under which, and to say exactly how, it should spend the money.

Nothing seems to have been learnt from the failure of unbridled capitalism around the world and the failure of banks and developers to use money in any way that makes sense such that they have lost all this money at the taxpayers' expense. There does not seem to be any mechanism by which, or any intention of doing anything, to change this culture which failed so miserably.

Photo of Joe CostelloJoe Costello (Dublin Central, Labour)
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I thank Deputy Jan O'Sullivan for sharing her time with me. The issue we are debating today is probably one of the most important we will ever debate in this House because its implications are so enormous.

NAMA is the Government's second colossal emergency measure to bail out the banks and financial institutions which caused the economic crisis. The State's bank guarantee of nearly €500 billion in the Credit Institutions (Financial Support) Act 2008 is now being underpinned by an asset management agency to try to prevent that ill-thought out guarantee from exposing the taxpayer to grave financial losses. The reverse, however, is the case because this is a catch-22 for the taxpayer. If the financial institutions go bust, the taxpayer picks up the tab from the original guarantee; if the asset portfolio is maintained at an artificially high level of value to bolster the stability and viability of the financial institutions, the taxpayer picks up the tab. Heads or tails the banks win.

The entire banking system cannot be blanket guaranteed without the taxpayer picking up the tab for the moneys that have evaporated. That seems to be what has happened. Where has the money gone? It can not have disappeared into thin air but in this case it appears to have done so. The asset valuation that is now being projected at a 30% markdown is already dumping significantly on the taxpayer. The recent fiasco involving ACC Bank and Liam Carroll indicates that the real market value of property portfolios is the reverse of the Government's national valuation for NAMA. Mr. Carroll's properties, that were the subject of the court hearings, have a market value of only 25% to 30% of their original monetary valuation.

NAMA is the saviour of the property developers, speculators and the banking system precisely because this measure operates against the best interests of the taxpayers. It is a high price to pay for mismanagement, negligence, greed and fraud by those "pillars of society" who lived high on the hog for the duration of the Celtic Tiger. The stated purpose of the NAMA Bill is "to facilitate the availability of credit in the financial markets of the State." There is absolutely no assurance that the banks will extend credit to hard-pressed businesses in Ireland. The banks have been already financially guaranteed and refuse to part with this credit. They have received €7 billion of taxpayers' money and the credit purse strings have not loosened one whit. The European Investment Bank, EIB, extended a borrowing facility of €30 billion over a year ago to provide credit for small to medium enterprises. While the Irish banks have drawn down a mere €300 million between them, it is not clear whether they have lent any of that money to small and medium-sized enterprises which are daily going to the wall because they cannot get a credit facility from the financial institutions.

The banks are simply refusing to lend money to citizens and businesses. They have no faith in the Irish economy and will not necessarily have any faith in it when NAMA is in place. The irony is that they were responsible for causing the recession and now that it exists they will not lend money because they do not believe it is a good deal and feel that the small and medium-sized enterprises are too risky.

The Green Party, whose leader is in the House today, had a glorious opportunity last week when it was renegotiating the programme for government and seeking concessions on the content of NAMA. It should have insisted that the Minister for Finance make it a statutory condition of the NAMA legislation that there would be a correlation between the banks' participation in NAMA and their provision of credit to the business sector, particularly small to medium sized businesses which are the life blood of the economy and account for 50% of all employment, and that this be done at a reasonable rate of interest. It could and should have done that, but it did not. NAMA is a ticking time bomb for the taxpayer which may eventually explode causing serious collateral damage. There is a banking crisis and a modern economy cannot function without a functioning banking system. We need a functioning retail banking system that will provide credit to citizens and businesses. The Labour Party has proposed temporary nationalisation which would allow the banks to clean up their balance sheets without exposing the taxpayer to unnecessary risk.

The boardrooms of the banks remain essentially the same except for Anglo Irish Bank which has been nationalised. For example, nine of the ten directors of AIB are unchanged apart from the two public interest directors. The banks cannot be reformed without a clean out of the dysfunctional boardrooms which brought us to this sorry state. The Green Party should have targeted this too in the negotiations which took place recently but I did not see this happen. No country can allow its economy to be the plaything of private banks and financiers. We must establish a state bank which will cater to the needs of the Irish economy and the Irish people and not to the dividends of the private shareholders. This state bank will ensure the financial needs of small and medium-sized businesses are catered for and should also have a direct role in drawing down funds from the European Investment Bank, the European Reconstruction And Development Bank and the European Central Bank. This would be one way to ensure the economy becomes the main thrust of a particular aspect of the banking system rather than the private reward of shareholders and bonuses for directors. Finally, there is a need for a stimulus package. The haemorrhaging of jobs must be stopped and the creation of new jobs must be stimulated. The US and main EU economies have received substantial investment packages from their governments. All the Government seems able to think of is to raise taxes, impose cuts and bail out the banks. Such an approach can only deflate the economy, will reduce tax intake and increase unemployment.

For the Government, NAMA is the only show in town, or TOSIT, as it is called. It is its big idea and it is a dud.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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Deputy Seán Connick has 20 minutes.

Photo of Seán ConnickSeán Connick (Wexford, Fianna Fail)
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I am delighted to have the opportunity to make my contribution to what is, as many speakers have said, probably the most important legislation ever to pass through this House, certainly in the lifetime of this Dáil and probably in our lifetime in this Parliament.

I thank the Minister for Finance, Deputy Brian Lenihan, his staff and his advisers for all the work they put into the Bill. The old phrase, "a lot done - more to do", is very apt in respect of this Bill. We all know NAMA is, and will be, work in progress for many years ahead. It is the best and only option for us to try to manage our way out of the very difficult financial situation in which we find ourselves and our banking system. While not trivialising our own domestic problems, we must also deal with the worst global downturn and economic collapse since the Great Depression. Last year, this Government had to readjust and manage the collapse of our tax receipts, the construction industry and the global downturn. Our exports have held up extremely well but our competitiveness has been weakened - of that there is no doubt. We lost thousands of jobs as a result of that. We have also had to deal with a massive devaluation of sterling against the euro, which continues to be of significant concern to all of us. This is also impacting seriously on our exports to what, traditionally, was our biggest market. We also took €10 billion out of people's pockets in the adjustments in the budget which has had a real impact on people's lives. This decision was not taken easily and resulted in real pain for people. We understand that.

The Opposition would have us believe it is all Fianna Fáil's fault, of course. In its regular efforts to bay for blood from this Government it has been assisted by a hostile media. Politics in this country has become soundbite central, with "blew the boom", "bailing out the banks" or "bailing out the developers" being the cries, or that boring old taunt, "the Galway tent", which is constantly trotted out. The tent is gone, by the way, although it may be difficult for some people to accept this. Funnily enough, it has been replaced by a Fine Gael tent at Punchestown. People should be careful and watch out for that and where it might take them.

The Opposition's behaviour throughout this crisis has been appalling. Its Deputies are so anxious to get their hands on power they are prepared to say anything and are backed up by a largely hostile media commentary. We have a few friends in the media, for example, Gerry Ryan, Senator Eoghan Harris and Brendan O'Connor, who have occasionally shown the courage to go against the tide and I acknowledge that. I have sat in this Chamber and been shocked at the recklessness of some of what has been said. Have the Opposition leaders, Deputies Enda Kenny and Eamon Gilmore, stopped for a second to think of the message they are sending out? Have they and their spokespersons on finance, Deputies Richard Bruton and Joan Burton, done so? They all seem to have forgotten the banking system works on confidence. They constantly refer to appearances by the banks before an Oireachtas committee over a year ago during which the banks said everything was okay. One shudders to think what would have happened if they had said there was a problem. That might have caused a run on the banks resulting in a bank collapse. The consequences of that would be a calamity too great for me and many of us present to contemplate. The so-called alternative government cannot agree on a solution for the banks in addressing the correction of the public finances. Its parties have many policy differences in every sector yet want us to believe they could do a better job. The parties with all the answers and none of the solutions will have to wait a bit longer, I am afraid.

Regarding blowing the boom, what about the record levels of expenditure invested across every programme of Government over recent years? People seem to forget that. Every village, town and county in this country has benefited. People have seen the benefits of investment in schools, health services, roads, sports halls and across all sectors. There was the small matter of the pension reserve fund, a mere €20 billion we managed to save through all that time against the backdrop of an Opposition calling for more expenditure. In those times there was no mention of fiscal rectitude. The Opposition was as visionary as all the economists who suddenly arrived on the scene in the past 12 months to say, "I told you so". Where were they two years ago? In fairness, I set apart Deputy George Lee who was eventually going to get it right, having predicted a downturn for almost ten years in a row.

On bailing out the banks, the subject does not sit easy on the shoulders of any of my colleagues in Government. If we had our way, we would not give them a penny. However, without a functioning banking system we will not have an economy and the risks to the economy are now so great we must fix our banking system first. NAMA is the best method of doing this. It allows us to manage our way out of debt and allows our banks to get back to the business of ensuring funding is available to business. It restores confidence in our banking system and gives us the opportunity to deal with the many unfinished sites and projects that will have value and, in time, will give a positive return to the Exchequer.

I welcome the recent news that a levy will be applied to banks if a loss is made at the end of this scheme. I would also like to see banks working closer with small businesses, showing the flexibility required to ensure that such businesses will survive these turbulent times. Decisions must be made again at bank manager level rather than in the boardroom in Dublin or anywhere else that is removed from what is happening on the ground. People in business are under serious pressure. I recently met a publican, a good friend, who had a direct debit returned because he was €1.93 over his limit. It cost him €18.50 to deal with that issue. Surely this is not playing fair. Discretion must be applied. When my friend went to the bank he was told decisions were made in Dublin. One can see the difficulties this causes. Banks need to be told to behave in a way that is helpful in getting us out of the current mess. Hiding behind best banking practice in this situation will not work. The banks had a significant role in getting us into this mess and must now play their part in helping us to get out of it. There are no free lunches. As we take measures to save the banking system, the banks must take measures to save us and our economy.

I turn to a matter of considerable concern to which Deputies on all sides of the House have referred, namely, mortgages and the difficulty people are finding in coping. My colleague in the Seanad, Senator Marc MacSharry, recently produced a document of merit which warrants further consideration. He and other contributors offered a number of solutions, including interest-only payments. Obviously, that is not a permanent solution but it might consolidate people's affairs and give them the opportunity to get themselves out of the situation in which they find themselves. Perhaps time limits might be set with the interest period being without penalty. This would have implications for some aspects of the mortgage but is worth considering and I ask banks to look at such options. Permanent extensions of a mortgage period or extending a 25 or 30-year mortgage are such options and might be examined. There is the possibility of renting back a property from the lender. In this situation the default on the mortgage is taken back by the bank which re-rents the property to the original mortgagee. A moratorium, or breathing space, could be looked at because fixed rates are causing great difficulty for people who bought at a time when they thought it prudent to fix rates but now, with the lowering of interest rates, they are paying hundreds of euro more than they should. Surely addressing that debt problem by means of a lower current rate is better than getting no payment at all or having a default at a much higher rate. I call on the banks to look at this.

Regarding the redrafting of the terms of a mortgage, there are some new mortgage holders who probably should never have been approved, many of whom went to mortgage brokers. I deal with people in my constituency office every day who face enormous mortgage repayments and, unfortunately, are now on social welfare. In many cases, there is no way out for some of these people because the scale of the mortgage is such it should not have been given. We need to address this issue and I call on the banks to consider it again and see if they can do anything about it.

Most builders I know have gone bust. Those who are trying to struggle on are doing their best to keep a man or two in work. For some builders everything has gone and they may lose their homes. Previous speakers asked where the money has gone. It went into further sites and developments and was eaten up. However, it is time to stop demonising them. The majority of the jobs lost, more than 100,000, have been in the construction sector. It is possible that up to €10 billion of our current Exchequer shortfall comes from that sector alone. If we are to get out of this situation, there is no doubt but that we will need a fully functional construction sector.

We must stop the myth that borrowers and developers will walk away scot free because it is not true. At local level, the builders who present at our constituency offices are in serious difficulties and their banks are pursuing them rigorously. When NAMA takes over, the loans transferred to it will not be written down and borrowers will continue to owe the entire amount borrowed from the bank. Many well established construction firms need a break. They have viable projects in the pipeline and NAMA must work with them to try to maximise returns. If NAMA is a success, which I believe it will be, what will be the Opposition's stance? The winners at that stage will be the taxpayers, which is proper order.

It is only fair to say that everyone is angry and frustrated with what has occurred during the past 18 months. Hindsight is a wonderful tool, but no one could have foreseen the collapse of the global financial system. We did the right thing with the bank guarantee on 30 September 2008 and we are doing the right thing now with NAMA's establishment. I understand the concern, hurt and difficulty being experienced by people and many are in what I refer to as "walk away trouble" and may never recover. Many people have seen their hopes and dreams dashed, but we must find a way out. NAMA is an important component in getting the economy functioning again.

Our decisions last year, which saw €10 billion taken out of public expenditure, have hit people hard and we have further tough decisions to make in the coming months, but they must be made in the country's interests. We must restore our competitiveness. While there are signs that we are addressing this matter through falling prices, we have some way to go and the nation must buy into what we are trying to do. For this to happen, we need everyone on board, including a hostile media. Social partnership must be re-established with a new realism and a determination to refocus our efforts on putting Ireland Inc. back in business and preparing it for the global upturn when it comes.

The Lisbon treaty has been passed and a new and refocused programme for Government has been agreed. I compliment the Minister for the Environment, Heritage and local Government, Deputy John Gormley, and his party on their work at the weekend. Let us ensure that any of NAMA's current shortcomings are addressed by amendments proposed during the coming weeks. Its swift passage through the House is critical because businesses cannot hold out much longer. Then, we must focus our attention on the upcoming budget.

Recently, I have received many e-mails, telephone calls and clinic visits from people from every background who are concerned about NAMA and its consequences for their futures and the futures of their children. The public want to see people who have contributed to the difficulties in our banking system brought to justice. They want to see them led away in handcuffs and jailed. It is only proper that justice be served on those who behaved reprehensibly. The public's confidence also needs to be restored. They must have faith in the senior managers and directors of our financial institutions, and they need to know that their deposits are safe. This will take time and effort on everyone's behalf. The Government is committed to a complete reformation of the banking system, which I am confident it will achieve.

Social benefits from NAMA are possible. With so many people on housing lists, there will be an opportunity to purchase or take long-term leases on unsold apartment blocks or housing units for social and affordable housing. This initiative should be pursued with vigour in the months and years ahead. Other uses could include the acquisition of land for schools, public parks and social housing. This is something that I would like to see occur and I encourage the Minister to ensure that these options are fully explored and delivered.

Regarding the banks, it is vital that a commitment by the two main banks be secured and put into practice to boost lending by increasing lending capacity to small and medium-sized enterprises and to help first-time buyers. We must adopt a new approach that sets new standards in banking regulation and corporate governance and creates a new and enhanced role for the Central Bank.

Much has been written about NAMA and many concerns have been raised, particularly regarding risk-sharing. I share these concerns and hope that the new levy under discussion will be supported and included in the amendments to the Bill.

In Wexford last night, we met landowners along the Enniscorthy and Newross bypasses who were concerned about the new windfall tax of 80%. The Minister for Finance has assured us that the tax will not apply to lands acquired via CPOs, but I call on him to make a public statement in that regard. People have enough concerns without believing that such taxes will be imposed upon them at this time, so clearing this matter up would be helpful. Concern about the sale of sites by farmers was also expressed. There was a call for the roll-over tax of 25% of capital gains tax to be abolished. As in most CPO cases, the land is replaced by the farmer. I call on the Minister to reconsider this issue.

The State will provide bonds to the value of €54 billion to the banks. In return, the State will acquire assets which, if managed properly, will and should return a profit to the taxpayer. While I accept that there is a risk, the risk posed by doing nothing is not an option and could have far greater consequences for the country.

Losses will be incurred by the banks and their shareholders and NAMA will move against any borrower who will not or cannot repay his or her loans. Further reductions in risks to the taxpayer will come in the form of prudent and realistic assumptions about future property prices and equity stakes in the banks, which I welcome. NAMA is expected to pay its way through interest received from the performing loans.

I do not underestimate the task lying ahead, but we are following a plan of action that should help us to stabilise the situation and get our public finances back in order. We have delivered on the Lisbon treaty and our new programme for Government has been agreed. NAMA is on the way and we will succeed in fixing the banking system. Next up is budget 2010 and we must continue our efforts to restore confidence in the economy, which will lead to job creation, restore our competitiveness and get this great country back on its feet. With the help of the people and all sides of the House, I am confident that we will achieve our goals and make a success of this important legislation.

Photo of David StantonDavid Stanton (Cork East, Fine Gael)
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I am pleased to be able to contribute to this important debate. I have read as much about the matter as I can, including debates in the House and the media, and the more I read, the more confused I get. How did we find ourselves in this mess? I considered countries like Canada, which has what is known as a boring and conservative regulatory system. Canada has come through the infamous global financial crisis. Many commentators on the Government side are wheeling in the crisis as an excuse for this mess. Perhaps they are right to do so, but how was Ireland so exposed?

On 20 February 2001, the then Tánaiste and the Minister for Finance announced the establishment of a new structure for financial sector regulation. I remember that there was a considerable run-in to the debate and that there were many related issues because the Financial Regulator was to be set up as a separate body from the Central Bank. Indeed, the Central Bank was to be stripped of some of its powers. I will quote a press release:

The structure will include a new authority responsible for prudential regulation of both the banking and insurance sectors and for consumer protection. The new authority will be known as the Irish Financial Services Regulatory Authority (IFSRA). It will have its own Board, with an independent Chairperson. The Ministers intend to proceed immediately to establish an Interim Board for this new authority on a non-statutory basis which will appoint a Chief Executive and a Director of Customer Protection.

Let us fast forward to 20 January 2009 and a press release issued by the Joint Committee on Finance and the Public Service. Its chairman, my constituency colleague, stated:

The crisis in the Irish banking industry, which necessitated a €400 billion guarantee from the Government followed by a recapitalisation scheme and the eventual nationalisation of Anglo Irish Bank, has led to many commentators calling into question the role of the regulator and the Central Bank.

Deputy Michael Ahern further stated:

The principles-based or light touch approach to regulation employed by the supervisory authorities here had been widely criticised, with the regulator and the Central Bank panned for not stress-testing the sector hard enough and down-playing the risk of rising bad debts on substantial property loans. There is a growing consensus that both the Financial Regulator and the Central Bank should have been more proactive in curbing excessive and reckless lending, particularly in the property market.

This is a given. I note a major change was made in 2001 and at that time there were many misgivings about that change. One needs to read between the lines as to the reason for that change and to find out who benefited from that change and why a light touch regulation was introduced to enable this massive amount of credit to be available on the markets. Who benefited, why was it done and who did it? I refer to what was done in countries such as Canada which does not have the same problems. In Canada they kept to the old, boring conservative regulation and they do not have the problems we have, and Canadian banks are coming here to see if they can take over some of our banks.

I refer to the contribution by the Minister for Finance on this Bill. He stated:

Large levels of speculative property lending left the banks exposed to a property market which had passed the peak of its cycle. The property market shuddered to a halt. Sales of houses and other property stopped and repayments of interest and capital could not be met by borrowers. International providers of funding and capital recognised the risks, cut credit lines and in some cases stopped dealing with the financial institutions. In this weakened state, our banks started to hoard capital to protect themselves. Stress on their capital and funding positions understandably damaged the ability of banks to provide a vital flow of new and existing lending to the economy.

He went on to say that the banking system had let us down. I maintain that the changes made and the light touch regulation has caused this major problem for us.

I refer to a meeting of the Joint Committee on Finance and the Public Service on 21 January 2009, at which Mr. Jim Farrell, chairman of the Financial Regulator stated:

Under our principles-led supervision system, responsibility for the proper management and control of a financial services provider and the integrity of its systems rests with the board of directors and senior management. [My reading of his statement is he was saying it was the responsibility of the banks to regulate themselves.] Prudent risk management, ethical behaviour and transparency in business dealings are key values expected of boards and senior management in regulated firms.

It could be said that the banks were to blame. Mr. Farrell further stated, "It is clear that a more intensive form of regulation is now required." We know now this is the case but the horse has gone and now we are shutting the stable door, having opened it in 2001. Mr. Farrell continued, "We are also reviewing the governance structures of the institutions to ensure that there are proper systems of internal control."

The report by the High Court inspectors into the affairs of National Irish Bank published in 2004 concluded that, "The problem of DIRT evasion was an industry-wide phenomenon". The inspectors wished to record that in the first year of their investigations they believed they did not have the full co-operation of the bank. They said it appeared that ethical conduct was not a core value of the bank for a period of ten years and this value was sacrificed in favour of business growth and development, even if it meant defrauding the State or, in certain cases, imposing improper fees and charges on the bank's customers. The lesson for all businesses and for all aspects of Irish society is that our standards of conduct must be regularly reviewed and improved to match those expected of a developed society.

Where was the Department and the Minister in all this? The Government of the day changed the rules, brought in light touch regulation and let the banks do what they wished. No changes were made up to 2004. The High Court inspectors to inquire into NIB were appointed on 30 March 1998 and 15 June 1998. As far back as 1998 we knew there was a problem with the banking culture. Yet in 2001 the Government of the day changed to light touch regulation and took its eye off the ball until the Minister for Finance, the Financial Regulator and we all realise it was a big mistake.

I contend the mistake was made by the Minister of the day for much of that time, who is now the Taoiseach. He was the man in charge. The buck stops with him. The Taoiseach is to blame for a lot of the mess in which we find ourselves today and there is no avoiding that.

I refer to a point made by Deputy Connick in his contribution. He stated, "Most builders I know have gone bust." Many Deputies said, "We will chase the builders, we will chase the developers, we will go after them for every cent they have." However, most of them are gone wallop and, if not, they have had time to move their assets out of the country so they cannot be touched.

Deputy Billy Kelleher said that people who owe money to the banks will continue to owe them money, the same amount to NAMA, and will have to pay it back or be pursued by default in the normal way. Deputy Frank Fahey said that developers will continue to owe money. Many Deputies have stated this in their contributions but as the developers have gone bust, how will they repay the money?

The Minister opposite, Deputy John Gormley, was a teacher, as was I, and he will know it is recommended to make explanations simple. The financial services industry, and the pensions industry in particular, are brilliant at inventing a language of their own which the ordinary person is unable to understand. It uses flowery English that nobody can understand and which serves to obscure all kinds of points. As I understand, the banks borrowed money from bond holders or other international banks and, as the Minister admitted, they overdid it. They gave this money to developers who bought land and property and built apartments. That market has now collapsed. The banks are left with the debts, the international people are screaming for this money and if the banks do not repay it they will go under and we will lose our banking system. The Government then steps in and says, "Hang on, we will give you an IOU. We will call it government bonds but it is an IOU." The Government gives the banks an IOU which the banks exchange for cash from the ECB. The banks can then repay the bond holders with this cash and in one bound the banks are free and are out the gap even though levies have been imposed on them. The banks can now breathe a sigh of relief and go back to their boardrooms and relax. The ECB is holding the IOUs and the Government, the taxpayer, has to pick up the tab and repay those IOUs at some stage. Much of the development land that NAMA or the taxpayer owns is virtually worthless and there is currently no market for it. In my own area there are fields which were bought for millions of euro and, as one man said to me, "Sheep could not even eat the grass because it is full of weeds." The land will never realise the value of the money paid for it. How will NAMA get back that money?

It is hoped that in the future the value of this property will rise but this is only a hope as there is no proof it will happen. One commentator, Mr. David McWilliams said, "The idea of property prices rising while inflation is falling is something even Brian Lenihan, our Minister for Finance...would find hard to sell." This long-term economic value is very strange. Many commentators have spoken on NAMA. NAMA will be a very substantial State monopoly. Some people have stated that it will be the largest owner of property in the world, which is phenomenal. When one considers the numbers and the billions of euro involved, it is absolutely scary and the taxpayer is taking on this burden. Thus, it is only right that we should have a substantial debate and put forward alternatives. I am perturbed that the alternatives put forward are dismissed politically instead of being examined to establish if there are good ideas among them. Some international experts maintain the NAMA idea is not a good one and that it should be considered very carefully indeed.

Today, I encountered an interesting article by Professor Morgan Kelly in The Irish Times. He adds some comments to the debate and perhaps someone will respond to these later. We are all focused on NAMA, the debt, the properties and so forth. However, there is another elephant in the drawing room too, that is, the very substantial personal debt accrued by people and businesses throughout the State. I understand NAMA will start with loans of €5 million and work up. What happens to the loans below that figure still in the banks? Will they be left with the banks? Will the banks use the cash they get through the sale of the bonds to clear some of that debt? How big is it? Will the Minister will inform us when he is winding up of the extent of the personal debt that the banks are holding that will not be paid back?

In his article, Professor Kelly refers to "the destruction of the Irish commercial class, who we might have hoped to be an engine of export led recovery as they were in the 1990s", and that this is "likely to prove one of the most enduring and costly legacies of the properly bubble". There is another issue here. Several Deputies have referred to the fact that businesses are finding it hard to get cash from banks. We have all been critical of easy credit and I began my contribution this evening by referring to the availability of easy credit. My understanding is that the banks are lending and will lend to viable businesses. However, in our current economic climate, very few businesses are viable. Businesses are struggling and what is missing from a Government policy point of view is some form of a stimulus package to get businesses moving again and to get money flowing in the economy. Such a package does not seem to exist. The banks will get cash and sail off back to their boardrooms happy, and the developers are already out of the gap. Thus the banks and developers have been looked after. However, the taxpayer is left holding the baby to the tune of unknown tens of billions of euro into the future. Businesses cannot operate because the economy is going down all the time.

What proposals does the Government have to get the economy moving? It is not simply a matter of throwing good money after bad. Professor Kelly stated that "forcing banks to lend to SMEs will only compound our problems". This is in the case of SMEs that are not viable. He continued: "One condition of the Japanese bank recapitalisation in 1999 was that they lend to small firms, but the effect was to heap a second layer of non-performing loans onto existing property losses." There is an issue here which is a catch-22 situation. The way out of this is for the Government to start stimulating the economy such that we get a real economy working again, not simply a false economy or throwing money at the problem. We must do more than this and we must have imagination. He continued: "Even after the crushing expense of NAMA, Irish banks will still be seriously short of capital", a point I made earlier. Professor Kelly further stated: "Under the current, deliberately lax, international bank regulations, AIB and Bank of Ireland need capital of around €8.5 billion." The Green Party will aid Fianna Fáil in passing the legislation, but once NAMA is passed a very significant problem will remain. A very substantial recapitalisation remains to be carried out. It is unquantifiable but we will need a further €8.5 billion. I am concerned that the banks are being let off scot free and no pressure is being put on them.

Deputy Bruton proposed making money available upfront now through a good bank which would be totally ring-fenced, a State recovery bank with no toxic debts whatsoever. This would allow money to be available now for viable businesses. According to Professor Morgan Kelly it will be very difficult for such a proposal to work later.

Many speakers referred to the issue of what happens to the ordinary person who owes money to the banks. Yesterday, I received a call from a person whose husband was jailed because he owed some money. This is taking place along with house repossession and so forth. Some form of stimulus package from the Government to get the economy up and running is missing. There seems to be no idea or proposal forthcoming and nothing is happening. There is a good deal of lofty aspiration for the future, but nothing right now when it is most needed. This emergency has been before us for almost 18 months. It is a long time to wait for something to happen. An increasing number of people are unemployed and more people are appearing before the High Court and other courts threatened with house repossession. We are told we can expect a good deal more of this between now and the end of this year and into early next year.

It is important to discuss these issues and this is the most important debate we have held here. I want Committee Stage of the Bill completed in the Chamber, not hidden somewhere in the bunker. Mr. Colm McCarthy stated this country has gone bust, which scares the living daylights out of me. We must see real leadership and I am very concerned about NAMA, especially when so many international experts have expressed such concern. This is beyond politics. I call on all Deputies to really examine what is being said and written about this issue. Let us forget about the medical card, planning permission, the pot hole down the road and the vote in two years time; this is far more important than any of those matters.

Photo of Trevor SargentTrevor Sargent (Minister of State with special responsibility for Food and Horticulture, Department of Agriculture, Fisheries and Food; Minister of State, Department of Health and Children; Dublin North, Green Party)
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Ba mhaith liom mo chuid ama a roinnt leis an Teachta Uí Ruairc.

Photo of Johnny BradyJohnny Brady (Meath West, Fianna Fail)
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Is that agreed? Agreed.

Photo of Trevor SargentTrevor Sargent (Minister of State with special responsibility for Food and Horticulture, Department of Agriculture, Fisheries and Food; Minister of State, Department of Health and Children; Dublin North, Green Party)
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Tá díospóireacht thar a bheith tábhachtach ar siúl anseo. Nuair a foilsíodh an dréacht den reachtaíocht seo ar 30 Iúil i mbliana, cuireadh tús leis an díospóireacht. B'shin an cuspóir a bhí ag an Aire Airgeadais ag an am. Tá sé tábhachtach go mbeadh díospóireacht chuimsitheach againn.

In the time during which the debate has been held we have all been reminded that we are not here for the first time. Many of the problems under discussion have been aired previously, especially when my party was in Opposition. I refer to the way in which the property bubble was overheated and the unsustainable nature of that practice. Unfortunately, this has all been borne out in subsequent events. However, going back will not help us other than to allow us to appreciate that this has not taken place recently but has been brewing for a long time.

There is no one Minister for Finance or Government that represents the beginning and the end of this matter. However, I hope that everyone, having considered the matter, can appreciate that one of the mistakes we made was to treat money as a commodity. It was considered more important than food, caring or any of the other important responsibilities in society; it was an end in itself. However, such a commodity is not like cars or computers or the tangible parts of an economy which we all need. In fact, it is no more or less than a mechanism of barter. That may be difficult for people who deal with money all the time to appreciate because they are so sucked up in the accumulative nature of money, which is based around the economic growth model that has taken root. However, it is important to bear in mind that it is a mechanism of barter which allows people to specialise, and for all that it is very necessary and useful.

It means that not everyone has to be a mechanic because we can pay someone to repair the car. Not everyone has to be a farmer, but we can pay a fair price to people to grow our food. Not everyone has to be a builder either because others can build the houses we need. There are people who like to be a jack-of-all-trades and good luck to them, but they are rare and very special people. Ultimately, money allows us to have specialists so that society can develop and the quality of life improves as a result. However, we now have an urgent problem that cannot be debated for much longer. We need to act and that action requires some type of asset management agency. It is a painful readjustment strategy and must succeed because I do not want to contemplate failure.

It has to succeed in rebuilding trust and recapitalising our money system. Essentially, that trust is where I feel we need to do more work in the Green Party. We need to ensure that the social dividend aspect of the legislation delivers on the deal. The public is being asked to share the pain, so it must ensure that it gets the gain also. That is part of the equation. If it is to be trustworthy, it must deliver sufficient regulation. We have had a failure of regulation, which is clear in hindsight. Countries like Canada, which are not currently in the same difficulties - although they have a recession and there is much unemployment - were very strict when banks wanted to merge and would not allow that to happen. They could not overlook that situation. Likewise, the windfall tax is an aspect of community gain if a community has to take pain. There has been disquiet among IFA members, for example, on that situation, but people must distinguish between somebody who needs to build a house for a son or daughter, which is not a developer-style or re-zoning situation, and somebody in the large-scale developer league, with which we are all too familiar. I hope discussions can take place which will clarify and satisfy those concerns.

I have received a number of e-mails and would like to read part of one into the record. It is from a senior member of staff in a money-brokering division of a large stockbroker firm. To my mind, the correspondent has elucidated what people need to hear. I do not wish to name this person but the House will understand when I read part of the e-mail. As regards NAMA, he thinks it is a clever piece of legislation and the safeguards included are more than sufficient to safeguard the taxpayer. From his e-mail address, one can see that he works in a well respected stockbroking firm. One might say, "He would say that, wouldn't he?", and he is obviously inviting people to be suspicious, but if Members listen further I think they will agree that he has something worthwhile to say.

The area he works in is highly specialised. He is in a managing director's role in a money-brokering division and is probably best placed to see the effects the funding crisis has had on the banks. He states that the crisis has been brewing since May 2007 and he adds that it is fair to say that our institutions are close to pariah status in international money markets. He firmly believes that the NAMA proposal will solve this, as it will improve the loan-to-deposit ratio so significantly that it will see a flow of new funding into the country by next spring. He states that we will have the first set of clean balance sheets in Europe and a significant first mover advantage. He asks provocatively if it is a bailout for the banks and he answers: "Absolutely." He also asks if the banks deserve to be nationalised for their behaviour and the answer again is "Absolutely". He then asks if there is an alternative to the NAMA plan, but he does not believe there is a radical one. There may be variations on a theme, but no major alternative.

In his opinion, based on 20 years as a money broker, the implications for sovereign and bank funding if AIB and Bank of Ireland were to be nationalised would be nothing short of catastrophic. The flow of funds out of the country would be so significant that, he states, we would have the ECB and IMF here within weeks of it happening. People may ask why but, he states, the answer is evident from the flow of funds out of Anglo Irish Bank since it was nationalised, which he estimates to be in excess of €15 billion. Why does this happen? Simply put, an investor with €100 million to lend to Ireland this time last year lent €20 million to AIB, €20 million to Bank of Ireland, €20 million to Irish Life & Permanent and €20 million to Anglo Irish Bank and bought €20 million of Irish Government bonds. Once the crisis started, the overall limit of €100 million was probably reduced by anything from 20% to 100%. Let us assume the investor reduced his overall limit by 20% to €80 million and his individual limits to €16 million each.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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The Minister of State has one minute left.

Photo of Trevor SargentTrevor Sargent (Minister of State with special responsibility for Food and Horticulture, Department of Agriculture, Fisheries and Food; Minister of State, Department of Health and Children; Dublin North, Green Party)
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When Anglo Irish Bank was nationalised, it effectively became part of the Government of Ireland and its limit was incorporated into the Irish limit of €16 million, reducing the pool to Ireland by €64 million. Nationalisation of AIB and Bank of Ireland would have the effect of immediately reducing it by a further 32% at least as, he believes, that international investors would take flight. No amount of ECB money would replace this quality of funding and, in his view, it would lead us into a lengthy depression in Ireland. He says there is ample evidence that, on the back of the promise of NAMA, sovereign funding is improving. Based on his experience, he states that he would be 100% happy that, with the post-NAMA publication of clean balance sheets, funding will flow here and that the real economy will see the benefits. The banks will have to lend; otherwise, they will end up with a loan-to-deposit ratio of less than 100%. This will revive the economy.

This is not only about reviving our economy, but also about reviving our communities. As we have heard, the land bank will be large and there is a need for local authorities to come forward with ideas. That land should be used in the interim for the type of things I would like to see. I have spoken to farmers who regard allotments as a pension plan and there is potential in that area for food production. We need to train people in food skills. The Kenny report will be implemented when local authorities begin to take initiatives on how their communities are to be planned, rather than waiting for developers to do it. Likewise, credit unions have legislation that urges them to invest in their communities, not just in banks. While we need to capitalise the banks, we also need to invest in our communities. I hope that credit unions will be part of that, as well as local authorities.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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I call Deputy O'Rourke who has ten minutes.

Photo of Mary O'RourkeMary O'Rourke (Longford-Westmeath, Fianna Fail)
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Do I have ten minutes from now?

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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No.

Photo of Mary O'RourkeMary O'Rourke (Longford-Westmeath, Fianna Fail)
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Well then, that is impossible for me. I would just like to record progress and keep the debate going. I understood that I was sharing time with the Minister of State, Deputy Sargent.

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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The Deputy will have time after Private Members' business.

Photo of Mary O'RourkeMary O'Rourke (Longford-Westmeath, Fianna Fail)
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I will not be here at 8.30 p.m. In the one minute left, I wish to talk about an issue raised by Deputy Stanton. I also noticed a piece by Professor Morgan Kelly in The Irish Times today, calling on the banks to default on their debts and the Government to renege on the State guarantee. More than a year after the collapse of Lehmann Brothers investment bank in the US and the meltdown in Iceland, it is extraordinary that some so-called experts cannot see that widespread default is a recipe for ruin.

I wish to note progress. The debate will be taken up by somebody else at 8.30 p.m., but I will not be here.