John Gerard Hanafin (Fianna Fail)

I support the proposal on the National Asset Management Agency. I am conscious of the fact that the media will allow a view to be represented that the Government is going to bail out the banks, and will mention five or seven different areas where money is vitally needed. Do they really think that the Government, with so many political minds, has had collective amnesia? I admire some people for their political nous and their instinct to see around corners. Do we really think that if it was not absolutely necessary to ensure the survival of our banking system, the Government would have taken the course of action that it did? The €7 billion was necessary and it meant that other necessary projects had to be forgone. Those projects forgone included positive developments in the constituencies of the representatives involved.

No matter what Government was in power, there was no doubt but that money had to be put into the banking sector. The banking sector is similar to the human body. It needs a blood supply and that is credit. That was completely drying up because confidence was gone and there were non-performing assets, and the world situation made it more difficult to borrow. The Government has ensured, through the National Asset Management Agency, an orderly development of Ireland's current situation. It has ensured that the banks will have liquidity. There have been and still are difficulties with that liquidity,but, notwithstanding that, without the absolutely necessary course that the Government took, our banks would be in a very difficult situation at the moment.

Further analysis shows that there is a probability that this asset agency can take the long view, something which the banks cannot do. They can watch for the developments that can take place within the property sector over the next ten or 15 years. The Government is not without resources. Once we have taken control of the assets, would it not be prudent for the Government, as a major holder of property in the State, to reduce the tax on the purchase of property? If it is reduced to 2%, it could stimulate that sector. The Government will also have the ability, when the world economy picks up, to increase mortgage interest relief, possibly even doubling it at top marginal rates. As we have become a major holder of property, we now have a vested interest in ensuring that the orderly disposal of that property is aided by what the Government is in a position to do at any particular time.

The Indonesian model has been mentioned as an ideal model for the Irish situation. That may well be the case, but I would also refer to the Swedish model. The director general of the Confederation of Swedish Enterprise, who was previously Secretary of State at the Swedish Ministry for Finance, has given us some indicators of what we should do. He is in favour of the National Asset Management Agency. He stated that if an economy is hit by a financial crisis, the most important step is to maintain liquidity in the banking system and to prevent the system from collapsing.

The prompt and transparent handling of the banking sector problem is also important. Terms for recapitalisation should be such as to avoid moral hazard problems. Such problems have been avoided because, despite what the Opposition has stated and despite the undermining of the Government's work, the National Asset Management Agency was not put in place to bail out friends of Fianna Fáil or anybody in that category. However, those statements did us harm internationally. The reality is that it was an absolutely necessary step at that time and it remains necessary.

The director general of the Confederation of Swedish Enterprise also mentioned that a government's budget and monetary conditions can help to mitigate the economy's tendencies. In other words, we must make sure that we do not go into a deeper recession. I suggest that it is now down to looking at how the National Asset Management Agency will operate. It appears that the banks will use Government bonds issued by the NTMA as collateral for the purchase of the assets, some of which are toxic. The important point is that not all assets purchased will be toxic.

It appears that management of the loans, which is an important portfolio, will be undertaken by the banks. This is prudent because the loans were originally undertaken by the banks. As well as this, staff at the banks will be rotated to ensure people who issued the loans will not deal with management of the securitised assets.

A total of €90 billion before writedown is expected. It is important to point out that there is to be an extensive writedown to real value. The point has been made that this is likely to result in a further draw from the banks, but that makes prudent sense. Were we to find in ten years' time that the banks had substantially regained their strength and were profitable but the Government in the form of the National Asset Management Agency found itself short, it would be correct for the legislation to allow us to revisit the banks to ensure we obtained recompense for any balance outstanding. We are ensured at every stage of a strong possibility of getting a return. In light of the experience of the Swedish model, it is distinctly possible, with world trends, that a profit will be made. I look forward to the day that happens. It appears that the loan books of the banks are such that many of the loans are of the bespoke variety. Each of these loans will have to be examined to ensure fair value is achieved. There may be a substantial readjustment of the underlying agreement in the asset value. This will take time.

The National Asset Management Agency has requested assistance and advice on how to proceed. I believe it has received 600 applications of financial advice, including from the international sector, which is welcome. The agency will have a workforce of between 30 and 40 people, including senior managers, asset managers, corporate finance and legal staff and a supervisory panel. It will be run tightly and cost-effectively.

The National Asset Management Agency will be a good and properly constructed subsidiary of the successful National Treasury Management Agency, ensuring it operates within strict guidelines, to the highest standard and is provided by a minimum number of people. This agency will not become a major industry, rather it will be maintained as a cottage industry with the majority of gains accruing to the State. Based on the Indonesian and Swedish models it is reasonable to assume we will see a profit from this venture at some stage.