Liam Twomey (Fine Gael)

I thank the Minister of State for his contribution. While I was unable to attend today's meeting of the Joint Committee on Finance and the Public Service, I understand the joint committee had a long debate on the National Asset Management Agency and that many issues of concern were discussed. Given the complexity of this issue, further questions will need to be asked in the months and years ahead.

The Minister of State described the Government's response to the financial crisis as "structured and considered". It has also been incredibly expensive. The combined personal debt held by every man, woman and child in the State amounts to more than €100 billion, while Government debt is set to increase to more than €70 billion by the end of the year. In addition, Government bonds will be issued to pay the costs incurred by the National Asset Management Agency, which the Minister acknowledges could reach €90 billion. The State is already bailing out banks and the final cost of this measure could reach €20 billion. Essentially, therefore, the State has acquired new debt of more than €100 billion since the previous general election and no end to the problem is in sight. Many people find this difficult to comprehend.

I sometimes believe that officials in the Department of Finance must feel as the crews of U-boats under attack must have felt during the Second World War. As they descended deeper and deeper in their efforts to avoid depth charges, the sailors had to listen to the hull of their vessels creaking and cracking and must have wondered whether they would manage to escape. Similarly, given the scale of our debts, departmental officials must wonder whether the whole edifice will collapse upon itself. We have not returned to the 1980s but we have entered a new era. We have not, since the foundation of the State, had similar levels of personal and Government debt. This issue must be discussed on an ongoing basis because we cannot assume things will happen.

The Minister of State indicated that developers will be held liable for their debts and will have to pay back their borrowings in full. He is engaging in a form of grand-standing because it is clear NAMA will not have a hope in hell of seeing much of the money. For example, if the value of a developer's assets and borrowings is €350 million and €1 billion, respectively, the difference will have vanished into thin air because land prices, especially prices for development land, house prices and the value of bank shares and stocks have gone through the floor. It is pointless, therefore, to argue that the Government will get back the money borrowed by developers because few developers will be in a position to pay it back.

The Minister of State referred to the imposition of a levy on the banks. How much will the banks pay under the new levy? Most of those with whom I spoke who have a better understanding of finance than I do have told me such a levy would not be workable. They argue it would be preferable to leave bad debts with the banks if the alternative is for the National Asset Management Agency to impose a levy in five or ten years' time because it has been unable to realise the value of the assets. Such a levy would hinder the operations of the banks for years.

In recent years, the banks have rolled over interest on many development loans and many developers have not paid interest on their loans. In some cases, they have not even made repayments on the capital they have loaned, yet the banks have not taken action. One does not read many reports about banks taking developers and builders to the courts. The banks appear to be happy to free-wheel along, building up debts and problems. The people who will pay for the problem in the long term are those who do business with the banks. This will be achieved through increased bank charges, fees and costs, including the cost of borrowing money.

Comments were made about fixed-term mortgages. If the Minister is serious, he must put the boot into the banks to ensure they run their businesses properly. Otherwise there is the perception of the three groups - the holy trinity - which are involved in this problem, the Government, the banks and developers. If the Government is as incompetent as the other two, I see nothing improving in the next couple of years. That is important when one considers the vast sums of money involved. NAMA will generate €90 billion of debt for the Irish people over night and one really needs a sense that the Government knows what it is doing here and that it is rapidly trying to transform this.

The economic situation is completely different from that from which this model came, that is, Sweden in the 1990s. When Sweden nationalised its banks and bought up all its toxic assets, it was still dealing with a growing global economy. We are dealing with a contracting global economy and there is no guarantee that these assets will have any greater value in two or three years' time. No matter what might happen in the overall economy, many of these assets will remain depressed. As nobody believes that his or her house will be worth next year, the year after or even in 2012 what it was worth in 2006, why should we believe that development land or commercial properties which the Government is taking into NAMA will have that value? It is the stuff of daydreams. The reality is that these are depressed assets. They are toxic assets and they will remain so for quite some time. The Government should speak of how it will make NAMA work in that way.

There are no experts in this. It would be great if it transpires that we are wrong and these assets become substantially valuable in a short time. That would mean we as a nation can do something about the approximate €300 billion national debt. However, it is far more likely that will not happen and we need to be realistic about how we plan our future finances on that basis - I get the impression the Government is not looking at it from that point of view.

I would like to know more about how NAMA will work. If we can see that the developers cannot pay for it and that the banks are not really in a position to deal with it, we need to know what is the superstructure and who are the persons involved. I pointed out previously that a big developer will have legal experts, property experts and financial experts managing his or her property portfolios and projects and that the banks will also have specialists working with these developers. When these projects move to NAMA there is a sense that some of that responsibility might go with it and I do not see the Government planning on taking on 600 to 700 persons to make NAMA function. There are only approximately 40 or 50 persons who are responsible for most of the mess we are in and if each of them employs between 30 and 40 people, there will be between 1,500 and 2,000 presently employed in trying to deal with this mess. Having a half dozen persons in the National Treasury Management Agency giving assistance to a new organisation called NAMA does not inspire the confidence needed if these are the figures being employed at present. We need to know whether this is merely an oversight role or will a large number of people be taken on by NAMA to manage this fund in the future? Those are the sorts of core questions the Government needs to answer to instill confidence that NAMA will work.

My fear always is that somehow it will be the poor taxpayer who will get lumbered with this, that the €90 billion will be written up as Government debt, given as bonds to the banks, eventually there will be a fire sale of these toxic assets and in a couple of years' time the ordinary citizens of the State will suddenly realise that the national debt has ballooned under the present Government and they are being more or less left with it. There is a serious risk of something like that happening no matter what the Minister of State tells us.

I ask the Minister of State to outline in his response whether the Government has looked at alternatives. I refer not to alternatives as big as NAMA but to alternatives that might not cost as much. For example, has the Government looked at directly forming property funds or property trusts? Has it looked at one of the solutions I put to it, namely, taking over Haven, which is an SPV of the EBS, and using that to rush money into the economy? Apparently, that has been dismissed by the Minister. How much research did the Government conduct on other solutions that were presented to it? These solutions would not have dealt with this crisis in the same way but they might have helped give those green shoots of the economy, about which everybody keeps speaking. I suppose the biggest fear is that when we come to the end of all this in two or three years' time we will have achieved nothing.

The Minister of State gave explanations about what happened to Japanese banking. What happened was a complete paralysis of both the banking sector and the political establishment in that country in the way they dealt with this issue. Funnily enough, exports seemed to recover quite quickly in Japan, but banking and finance was totally paralysed. The circumstances there were different from those in which we find ourselves. This is new and the Government should not rigidly apply what worked in other countries in the expectation that it will work here because there is no guarantee of that.

When people read what the Minister of State said today they will be flabbergasted. The sums we will commit to sort out the banking crisis would pay for the educational sector for the next decade. It is a massive amount of money. Even the interest built up on that every two years would probably pay for one year's education in this country. We know the return we can get from a well resourced educational service, yet we are not really getting the clear answers from the Minister of State on what may happen with NAMA.

Another aspect the Minister of State did not point out are the substantial legal issues cropping up to do with NAMA. It is not merely that there are good developers who do not want to see their properties and portfolios taken over by NAMA. Many of the developers would have protected themselves when they were taking out these massive loans. Most of the developers when developing big sites would have treated each site as a new limited company where their exposure would be limited enough. It was surprising to find big developers with personal guarantees on some of these massive developments. I would say that a significant number of these developers did not make personal guarantees and may even have protected their good quality assets from some of these developments. If they have set up such limited companies on some of these big sites which have clearly become toxic, the Government is not in a position legally to go after those developers' other resources or funding. Legally, one cannot go after persons who may be involved in another capacity, for example, where a person might have a 10% or 15% share of a big development. The main shareholder may well need to go into NAMA, but these smaller individuals may feel that that is not necessary and that the Government is damaging the value of their property assets by pulling them into NAMA and letting them sit there for a number of years. These are the nitty-gritty matters about which we do not hear much from the Minister.

We all now understand the big picture as to the nature of NAMA but, as a former Taoiseach stated, it is the small details that trip one up.