Liam Twomey (Fine Gael)

I thank the Minister of State for his presentation. As he pointed out, we will be dealing with the NAMA Bill in the next two weeks, but it is nice to get an update on what is going on. There are significant concerns about NAMA and where it is going, including the figures thrown out by the Minister of State in his speech. He states that the original value of the loans taken over by NAMA was €88 billion, but that their value dropped to €77 billion when it was first proposed that NAMA take them over, yet €9 billion of this money was roll-over interest. Therefore, the value of these loans dropped from €88 billion to €68 billion over a very short time. A huge percentage of these loans were taken out from these banks over three or four years during the peak of the market. That is why we are seeing such massive drops in the value of these loans over a relatively short period of time. When they were first issued, the loans were valued at €88 billion but now they are worth €47 billion. That is a significant drop in value, but the concern is that values are still dropping.

A total of €28 billion of these loans are for land only, €21 billion comes from development and €28 billion comes from mixed land and development loans. If I valued my house and my surgery at the peak of the market, these would have dropped to half their value today, but that is a house in which I live and the practice is a fully functioning business. It is not a piece of land in a provincial town which was bought for millions of euro per acre. If good properties have dropped to half their peak value, much of this stuff is almost worthless in financial terms. I do not see a recovery in the period of time to which the Minister of State refers. The Minister for the Environment, Heritage and Local Government is at pains to point out to us that we have rezoned enough land to keep us going for 30 years. There is a glut in the market and I do not think it will be cleared in ten years.

I am not saying that my opinions are better than those of the Minister for Finance or his experts. There is much speculation on what will happen with NAMA, just as there is much speculation about what happens in the markets anyway. Every year, the Financial Times asks a number of financial experts which stocks they believe will rise and which stocks they believe will fall, and these opinions are compared with stocks that are picked by monkeys, or randomly picked stocks, and invariably the monkeys win. We do not know what can happen in the future. We do not know what will happen next year and we certainly do not know what will happen in five years. When we try to predict what will happen in ten years, we are really in the land of guesswork. We can only make an informed opinion, but I do not think we can trust it that much. That is why there must be transparency and accountability to the Irish people regarding NAMA. We just do not know what will happen in the next decade. It is almost impossible to do a cost benefit analysis on the decisions being made by NAMA and the special purpose vehicle that the Government has set up to run NAMA.

When the Minister for Finance is receiving his Christmas cards from the bankers in the Cayman Islands, Barbados and Monaco, he should be careful with some of the things he is saying. I was taken aback by his remarks in the Dáil on Committee Stage of the Bill. He mocked the Opposition and claimed that when history is written in years to come, there will be questions as to why the Opposition focused so much on this special purpose vehicle costing €100 million, even though the central issue is costing the taxpayer €54 billion. If one of these bailed out bankers went to see the Minister tomorrow morning, thanked him for the bailout, but told him the bank was going to set up a special purpose vehicle for some of the loans and then put them off balance sheet because it did not want to show people what was going on, the Minister would fire that banker if he could get his hands on him. He would say that this is the sort of thinking that has got us into the mess in which we find ourselves.

The idea that we should not be worrying about the SPV is nonsense. It is just an accounting trick. We are trying to keep the €54 billion off the books because it will otherwise directly affect the national debt of this country. It is just a mechanism. Every person who buys Government bonds over the next decade will be well aware that there is an SPV managing massive loans on behalf of the Irish taxpayer. That will be taken into account when we are trying to obtain international loans. There is a need for a full explanation of the SPV to the Irish people. Which investors will be on the board? How will the board be structured? What type of governance will exist? How much direct control will the Government actually have over the board? We do not want the sort of answer we get from Ministers when they tell us they have no control over bodies like CIE and the HSE. We will not accept such an answer when we ask the Minister for Finance about the SPV that will be responsible for €54 billion of taxpayers' money. The Government will have to stick to the core principles of accountability and transparency when it is establishing the SPV's corporate governance mechanisms. If it does not do so, it will lose any remaining goodwill among the people for the National Asset Management Agency Bill 2009.

There are ongoing concerns about the devaluation of the properties that will be dealt with by NAMA. Property values have dropped over the past six months and continue to drop. We do not know when the market will bottom out, but I do not think it will happen for a number of months. I am surprised that these loans have not been subject to deeper due diligence. When the banks really open up their books, I have a feeling NAMA will discover that these loans are worth even less than the Government thinks they are worth at present. Has the Government put arrangements in place in case it is discovered that these loans are not worth €47 billion, but are worth closer to €40 billion? God forbid that they are worth even less than that. If it is the case that there is €9 billion of roll-over interest, quite some time has passed since those who owe this money to the banks stopped paying interest. Therefore, the loans have been in a distressed state for some time. I would say they are pretty toxic. The Government needs to apply its systems of accountability and transparency to NAMA fairly quickly. It should find out what these loans are like and give the people the relevant details. We do not want to be landed with another surprise next year, which is what would happen if the Government were to discover at that stage that these loans are worth much less than it thought in May or June of this year.

I would like the Minister of State to comment on another issue in his response. Throughout the debate on NAMA, Ministers have used the populist line that the Government will go after developers who default on loans. Nothing about this legislation is constitutional in any way. How can the Government go after developers when there is no security on their loans? Some developers have been incredibly clever. The normal rules of engagement did not apply to developers whom the banks approached to lend them vast amounts of money to buy property. If I were to apply for a loan to buy property, the bank would seek to use practically everything, even the shoes on my feet, as security before it would give me a penny. As the banks courted these developers to get their business, many of them did not use their own personal assets as solid security. As we saw in the Carroll case in the High Court and the Supreme Court, many developers used businesses that were connected solely to their commercial lives rather than their personal lives as security. If one of these developers bought a property for €55 million or €56 million on the basis of a trust that is in the name of another family member and without any other form of security, am I right in saying the property cannot be touched? Such cases can be encountered throughout the country.

As far as I am aware, nothing in this legislation will allow the Minister for Finance or the board of NAMA to approach the Revenue Commissioners to get a full list of all the property transactions or the complete tax details of any of the 100 developers who will be managed personally by NAMA. There is nothing in the Bill to say that details of the developers' tax affairs can be handed over to NAMA so that it can look through their accounts and ascertain what sort of property transactions they were involved in over the past five or ten years. Any developer of this calibre will have had access to sophisticated financial information over the past decade and thereby established a number of trusts and bought a number of personal properties that have nothing to do with their commercial activities which are now in such a mess. The Government is saying it will take a gung ho approach to Irish financial regulation by going after these guys, but the reality is that it cannot touch them. As their personal assets are untouchable, the Government will be able to go after their most valueless assets only. Recent media reports have suggested that some of these individuals have transferred assets to family members in advance of the establishment of NAMA. There is nothing retrospective in this legislation to prevent them from doing that. They can transfer assets worth €1 million, €2 million or €10 million to members of their families before handing over the dross to NAMA and asking it to sort out the mess. I ask the Minister of State to comment on this aspect of the matter in his reply.

The Government said that the need to improve bank lending was one of the reasons for the introduction of NAMA, but bank lending has not improved by one iota since we started talking about the transfer of billions of euro in taxpayers' money to NAMA. The reality is that bank lending will not improve until the economy improves. The Government cannot make the banks lend any more money. They will not consider doing so until the economy improves. The Government needs to stop saying things that are clearly untrue about matters it cannot affect.

The Green Party had referred to the social capital element of the issue of subordinated debt, but that seems to have fallen off the radar. Is serious consideration being given to the social capital proposal in regard to some of these NAMA loans? What does the Government have in mind? I hope the Minister of State will answer some of these questions when we have a more in-depth discussion on NAMA next week. Perhaps answers will crop up in the continuing debate in the other House.

While the maintenance of a healthy and functioning banking system is of systemic importance to the economy, that should not be done at any cost. We will keep an eye on the risk the Government, which does not really know what will happen in the future, might bankrupt the country, in effect, by spending too much money on something it considers to be systemically important. The Government threw out the proposals that were made by the Opposition a number of months ago. I note that our "good bank, bad bank" proposal has been taken up by the British Government. The Government should maintain an open mind when those of us on this side of the House make suggestions. One never knows. It might learn something from us.