Joe O'Toole (Independent)

I welcome the Minister of State to the House. I pushed hard for the debate because at the time I thought there was a need for discussion of the different views put forward, particularly by Fine Gael, the Labour Party and consultants outside the House. I listened with some fascination to the entire proceedings of the joint committee and the debate was exactly what should have taken place a month ago. It was a superb meeting. It was a classic example of how joint committees should work and how they can give added value to politics. The meeting highlighted the confidence and knowledge base on which the proposal is built and people with worries should have gained a great deal of reassurance.

However, the Government seems to shoot itself in the foot every time it turns around. A list of frequently asked questions relating to NAMA should be put together and made available on the Department of Finance's website to deal with much of the nonsense uttered recently about the proposal. I welcomed the idea of us owning the land at the beginning because, like Senator Butler, I would like to feel at the end of the day that we owned it, but I pointed out there were issues I did not understand. I could not understand them because they were not explained.

Many important issues were clarified this morning. A steering group was set up and Dr. Bacon stated on a number of occasions that on a daily basis he is in contact formally and informally with the NTMA, NAMA and the Central Bank regarding the financial side. That is important in light of the way many Members responded to the comments of Dr. Michael J. Somers at a recent meeting of the Committee of Public Accounts. Issues still need to be clarified but there seems to be a lack of communication between the bodies concerned. I pay tribute to the solid performance of the Fine Gael team at the meeting. They put questions, dealt with issues and engaged with the witnesses. Deputy Richard Bruton was very impressive.

It is crucial that we examine what kind of banks we want in the future. I acknowledge that is difficult to do now as we try to sort out the current structure but a number of fail-safe measures should be built into the system. Banks should not be allowed to become so large that they can hold the country to ransom or stifle the country's development by not allowing cash to flow or whatever. It must be ensured they operate as banks. Even if they take on insurance arms and so on, they should be regulated as banks.

We have had long discussions in this House. It is easy to look down on the regulators and comment on how bad they were etc. They were as good as we allowed or wanted them to be because the minute they got in the way of people doing their business or created more paperwork, there was huge opposition to them. When the Central Bank increased the tier 1 capital requirement of financial institutions in January 2008, the banks, in particular, Anglo Irish Bank, kicked up about it, stating that it would create difficulties.

The Minister must examine new ways to capitalise banks. Instead of setting a figure for the capital a bank must have as an asset base to cover its loans, it must be recognised the figure can fluctuate. It can go down in good times and up in bad times. How can good and bad times be measured? The level of risk attaching to loans can be measured in a simple way. If one runs a business, builds up debt and does not repay it on time, one can sell it to a debt collector or through various different financial instruments. The market measurement of one's risk is what one pays for it. The same mechanism applied to the Government's sale of bonds last week. The State has to pay a higher price than Germany for borrrowings, which is a measure of the risk of the country. The banks can do the same. On that basis, the regulator should be in a position to demand additional capital. If the bank does not provide it, the regulator should have the opportunity to take over the bank, which would happen at an earlier stage. That is what we have to look at in future.

How will valuation work? I do not know but I heard additional information to the effect that it will be measured on the basis of current value and predicted value. I know this is the length of a piece of string but that is not the point. This is thinking in the right direction to the effect that if results do not meet the predictions, a clawback from the banks will be sought.

Senator Butler commented on building costs, which are a crucial part of valuation. If an auctioneer 30 years ago wanted to value a bungalow a mile outside a town or work out how much it would cost to build one, he or she knew pretty well the cost of a half-acre site and would go within 15% either way of that. He or she knew the cost of the building materials, the point made by Senator Butler, and the cost of building, which is the cost to pay people to turn the materials into a house and the profits on top of that. In those simple days of old it was one third, one third and one third. If one multiplied the price of a site by three, that was more or less the cost of a house in those days.

This has changed but one factor that is still quite solid is the cost of the materials. We can consider various aspects of a building in Ballsbridge but we could work out a two-thirds valuation of it because we know how much it would cost to build it and we know the cost of materials used to build it. It is interesting that a figure is beginning to emerge without anybody saying it for the cost of the €80 billion, €85 billion or €90 billion of between one half and two-thirds. It may not come to that but it is not a bad starting point and is sensible. This is what emerged from what was said by the Minister, Mr. McDonagh and Mr. Bacon at the meeting of the joint committee today, from what the Minister said on "The Week In Politics" over the weekend and from what the Minister of State, Deputy Mansergh, said in this debate.

Will constitutional issues arise from building in a clawback? I do not see it as long as it is included as a condition now. Let us remember the discussion we had earlier on the deal with the congregations in 2002 and allow flexibility to deal with what the Americans would call a "known unknown". We would sign off in the knowledge that were an unknown value not to reach a certain level, a clawback would come into play. There is no constitutional problem if we enter into it on that basis.

Whereas NAMA will not be in the business of liquidating the assets and selling them off in car boot sales or fire sales, it will none the less take control of them and the collateral assets that have been put in place. This is a relief. Ordinary people do not realise what is going on and this is why the Government has a job to do. It needs to explain to people that this is not handing money to the banks but about taking control of the debts and managing them properly and sensibly that will not cost too much or more than is necessary and will allow us to claw back so we do not lose anything.

Through all the various criticisms that have been made of the Government I have said consistently that I am watching closely and do not think the Government has made more mistakes than any other Government and, in fact, has spent and risked less. The US Government has put $1 trillion into its banking system and has made no progress. Our plans are in a more solid position than the US economy. I would be more confident, secure and comfortable with what we propose to do than what has been done in the United States so far.