Marc MacSharry (Fianna Fail)

I join others in welcoming the Minister of State, Deputy Mansergh, to the House. I am pleased to have an opportunity to make a few points about the NAMA business plan. Like others, I have made it clear in this House over many months - even before NAMA was proposed - that I am in favour of aggregator bank style vehicle to help us to get out of the drastic situation we are in. The NAMA proposal is an acceptable version of such a vehicle, which involves the pooling of toxic and impaired assets so they can be centrally managed. I am delighted that the NAMA proposal is based on the American model of an aggregator bank, although I have to say it makes many improvements on that model. The wisdom of the proposal has been acknowledged throughout the world, not least by the international markets and eminent international entities such as the IMF, the ESRI, the Financial Times and Goldman Sachs. That this approach to dealing with our difficult position is the correct one has been acknowledged by many people, including the great Dr. Garret FitzGerald and Mr. Alan Dukes.

None of us would have wished to be in this position. We could spend many months debating how and why we are in this situation. That would be great scenery for the public, but it would get us no closer to finding the solutions for which we all strive and yearn as we navigate through these difficult international and national economic times.

The Minister of State has elaborated on a number of the details of the business plan. I welcome its publication by the Minister, Deputy Lenihan, towards the end of the Second Stage debate in the Dáil. It adds great transparency to the process. I am sure it will maintain openness in respect of one of the most important initiatives the State has ever undertaken and provide some clarity on how NAMA and its organisational structures will operate.

As the Minister of State, Deputy Mansergh, mentioned, the plan focuses on the purpose and objectives of the initiative; the key parameters; much of the work carried out to date; preparatory work carried out to date; the work programme for the year ahead; the asset valuation and transfer process; the credit management and servicing arrangements; and the key risks facing NAMA.

Immediately after the publication of the plan, Professor Kinsella of UCD announced his views. He is a critic of aspects of NAMA but stated the business plan was credible and would be deemed such by international commentators. He stated credit ought to be given where credit is due and that the plan is very specific, one which markets will find credible. We obviously share his point of view and welcome his comments.

Senator Twomey, I believe, stated it was impossible to do a cost-benefit analysis of our plans. On the contrary, we have provided such an analysis to the fullest extent possible. Fine Gael carried out no costing at all on its good bank-bad bank proposal. It is clear that the party felt it was impossible to do a cost-benefit analysis of its plans. We on the other hand have tried to provide the best possible one based on international best practice and historical references. Within that, we have found the vehicle that will take us through these difficult times.

As the Minister of State said in this House and as the Minister stated in the Dáil, it is projected that NAMA will make a profit of €5 billion by 2020. This is based on the estimate that 20% of the loans taken over by NAMA will default, meaning that €62 billion of the €77 billion being taken over will be repaid. When the provisional figures to which the Minister referred are valued on a loan-by-loan basis, the amount will be less than that. There is no proposal to pay telephone number prices for land that is only of agricultural value. If the panel of valuers to be appointed believes the land to be worth a certain amount, that is what will be paid. The appointments are being made at present.

It is absolutely reasonable to assume, on the basis of my limited experience of business, that over a ten-year period there will be a 1% increase in the values, on average. If one were to carry out an analysis of trends over the past 40 years, one might find it incredible to note that the decade in which prices rose the most was between 1970 and 1981. The increase was in the region of 600%, which is incredible. Those times were very different and I am not saying they are remotely comparable to today, yet it is interesting to note some of these points.

As the Minister of State said, the ten biggest loans, amounting to €16 billion, are due to be transferred by December. However, it could be January, as the Minister stated yesterday. I am not at all paranoid about the timescale. I welcome the unprecedented Committee Stage that is taking place in the Dáil in terms of the time allowed and listening on the part of the Minister, his officials and his colleagues in Government. I welcome the Minister's openness to worthwhile proposals and his willingness to take them on board, although not many of the Opposition's amendments included in the 80 or 90 amendments made to date were considered worthwhile according to the informed view of the officials and the Government. Many more amendments will be made today.

There is a proposal on imposing a levy on banks in the event of NAMA making a loss, although I do not believe this will be the case over the medium to longer term. I would favour such a levy and am interested in the debate on how it might work. We will look with interest at how the Select Committee on Finance and the Public Service will deal with this proposal which I favour.

NAMA's organisational structure, as outlined in the business plan, will be streamlined and the board will consist of seven members appointed by the Minister. There will be a chief executive officer and the chief executive officer of the NTMA. The agency will have five divisions led by the head of credit and risk, the head of portfolio management, the head of business banking and lending, the head of business services and the head of legal and taxation affairs. There will be in the region of 70 staff.

NAMA does face risks. I am hopeful, if not confident, that over the medium to longer term, there will be a profit. If not, we will have the subordinated bonds to fall back on, on which bonds no capital or dividend would be paid in the event of a loss. It may also be possible to levy the banks if there is a loss.

One economic commentator stated, "heads the taxpayer wins, tails the banks lose". Given the palpable and justifiable anger of the public, it is vital the hit taken with regard to any losses or risk first affects those developers and bankers who operated under what was a somewhat reckless international and national financial regulatory regime. They must be the first in the queue and the taxpayers must be protected to the fullest extent. On the basis of the proposals for NAMA, its business plan and the amendments in consideration in the other House, I believe we have achieved such protection.

I once referred to our receiving our "pound of flesh", as I once put it in a debate with Deputy O'Donnell from the other House. I would like my pound of flesh and share much of the anger felt by others. However, I am confident that due process will satisfy our wish in this regard as we work through the processes of NAMA in navigating these difficulties over the coming year and on foot of forthcoming budgets.

On the question of accountability, the considerations of the NAMA proposals over recent months by the Joint Committee have led to suggestions that there should be an oversight commission. The Minister was to consider this. I am listening to the debate in the other House to ascertain what further improvements can be made in this regard. As matters stand, accountability and reporting requirements are such that quarterly reports must be submitted to the Minister and the Houses of the Oireachtas, annual accounts must be submitted to the Minister, the annual statement must be submitted to the Minister three months prior to the end of the financial year, the Comptroller and Auditor General must audit NAMA's accounts, and the CEO of NAMA will be required to give evidence to the Committee of Public Accounts when called upon to do so. All these are positive aspects of the business plan and I very much welcome them.

There has been some talk in recent days about the special purpose vehicle. I am not at all paranoid about this. Clearly, more detail will have to be known but it is perfectly clear the reason behind it is to maintain a position in which the lending and accounting will be off the balance sheet. This is important in terms of our debt ratios and the cost of funds to Ireland. When we keep the ratio low and keep the NAMA debt portfolio out of the general EUROSTAT considerations, it is certainly positive.

I have questions about the special purpose vehicle. For example, with the limited return proposed in the briefing document circulated some days ago to the private investors, it is difficult to ascertain who the investors will be. Will it be the banks or pension fund managers? Why would they invest if the return were limited to approximately 10%? I would prefer a little more detail in this regard but I am sure it will emerge in due course. Even without the EUROSTAT decision, NAMA would have set up special purpose vehicles. This was provided for in the legislation and I welcome it.

Even if private investors were to have majority control over the loans, which they theoretically will have with 51% of the special purpose vehicle, 49% will remain with NAMA. NAMA's board members will have an absolute veto on any issue. This is a further protection and comfort for anybody with concerns. At the end of the day it will be the private investors' goal to ensure that they recoup the loans and make a profit. If that were the case there would be more incentives for them to do well in that regard.

Overall, I welcome the publication of the business plan. I am pleased the appropriate time is being taken over it. While we cannot afford to lose a day in the context of getting NAMA up and running, equally, I welcome the time that has been given to the detail, and the openness of the Minister and the officials to listen to any suggestions that have been made and to take some on board, perhaps not as many as the Opposition might like but, nevertheless, I do not recall a process such as this in the past.

There has been much talk about a social dividend to this situation. Deputy Bruton referred in the other House to a NAMA for the public, for mortgage defaulters and others. Aside from the NAMA debate, which needs to be separate, the issue of potential mortgage defaulters needs to be dealt with. The Minister for Finance, Deputy Brian Lenihan, and the Taoiseach, Deputy Cowen, mentioned in recent weeks that there is no evidence to suggest such a proliferation of mortgage arrears or defaulters that would require something to be done. They pointed to the Irish Banking Federation protocol and the code of conduct for dealing with arrears, and I agree with them.

The Government is being advised by Rothschild. On the ground where people such as me operate, there is evidence to suggest that families are coming under pressure. While it might not currently be the kind of pressure that requires consideration of repossessions or serious default, given the inevitability of interest rates rising when the eurozone economy begins to improve our employment situation will not be able to improve relative to the pace of the rise in interest rates and the improvement of the eurozone economy. As we constitute less than 1% of that economy, rates will go up.

As I said many times previously in the House, in many ways part of our problem was that with 2% money available and 8% growth rates we all got a little bit out of control in terms of spending. If one takes the average couple with a double income and no children who pushed themselves to the pin of their collar to buy a house for €350,000, perhaps now one of them is unemployed and the second person has experienced a reduction in salary, and they might now have two children. If interest rates climb by 2% or 3% they face a serious situation.

As the Minister of State, Deputy Mansergh, is aware, as are Members of the Seanad because I have laid the report before the House, I and others have come up with a set of proposals that could form the legislative basis for a series of measures that could be introduced to help prevent what could be a social catastrophe. It is not that I am trying to scaremonger. The report is based on research and has been put together by a representative sample of professional people who are in the know in the industry and in life.

I do not advocate that the Government should set up a scheme whereby it would pay people's mortgages or write off debt. We advocate that people would be given breathing space. They would still owe all the money but we would give them a longer level of moratorium and renegotiate a lower rate for a period of time. I worked in the areas of banking, business and auctioneering, professions where much of the blame might lie for the difficulties of the past. We should focus on ways to implement such measures rather than the many less obvious reasons not to listen or to implement them.

That point is not directly related to NAMA, which is an appropriate vehicle to lead us out of the mess in which we have found ourselves. The Minister, Deputy Brian Lenihan, is susceptible to ideas. His demeanour has been to listen and he has displayed a great ability to improvise and adapt as the situation has developed. As we have continued to improve NAMA we will have a vehicle that will help us to navigate these difficult waters. I thank the Minister of State for coming to the House. While it is not directly related to NAMA, I ask him to take on board my closing remarks on mortgage defaulters.