Eugene Regan (Fine Gael)

I will preface my remarks by drawing attention to what the Minister for Fiance said yesterday in the Lower House and what the Minister of State, Deputy Mansergh, is saying today about delay. I find it extraordinary that they are talking as if it is the fault of the Houses of the Oireachtas that there is a delay in introducing the NAMA legislation. The Minister for Finance chose to publish a draft of this legislation before the summer. He also chose not to recall the Dáil to pass this legislation. It has been his decision to have a protracted public dialogue on the issue. The legislation was only introduced recently in the Lower House. We are not dealing here with the legislation itself but with the business plan which is an adjunct to the Bill. In suggesting that both Houses are in some way at fault in causing a delay, the Minister for Finance is denigrating the Oireachtas. I have no doubt the Minister is doing that in the context of the fall in bank share prices yesterday. He is intent on implying a criticism of Members of the Oireachtas for causing a delay, which in turn caused concern in the markets. It is a cheap shot and I ask the Minister to clarify the position in this House.

The importance of scrutinising legislation is self evident. However, the importance of scrutinising this legislation is paramount since it is probably the most important Bill ever to come before the Oireachtas in terms of its scale, risk and impact on the country's credit worthiness. This is a major undertaking even if the accounting practices the Minister wishes to pursue will keep it formally off the figures for the national debt. To suggest there should not be proper scrutiny in these Houses of the NAMA legislation, as the Minister is suggesting, is inappropriate. A considerable number of issues have emerged which were not quite clear when the Minister initiated this project. We were led to believe that it had the approval of the European Commission and the European Central Bank, but in fact it has not been formally approved. We have seen that the European Commission in particular has taken a specific line with these type of projects in recent days which is quite strict, and has an impact on the markets and on the manner in which governments can act in subsidising their financial institutions.

The Commission is concerned that undue state aid to banks will distort competition and present moral hazard. It wants state aid granted during this crisis to be repaid quickly by financial institutions, encouraging them through raising equity and capital or asset sales by the banks. It is also true in the context of EU state aid policy that the Commission does not approve of state aid to companies that are going out of business. I shall come back to that point.

The ECB has also made clear that it does not want the Government to pay excessively for the loans in question. There is no question but part of its approval rests on a preference that the banks remain substantially in private hands. That is acknowledged. We have been led to believe there is no alternative to NAMA. However, the scheme approved for Northern Rock in the United Kingdom, which involves a good bank-bad bank approach, proves otherwise. Also in the UK is the variant of insuring a proportion of bad loans, so the notion that there is no alternative to NAMA is misleading, loading the argument in favour of a project which we all know risks bankrupting this country.

We are led to believe the whole purpose of the legislation is to lead to more bank lending. However, the latest euro area bank lending survey concludes that banks, including the Irish banks, are tightening up on credit terms and lending. We are also led to believe the draft Bill and the business plan provides the necessary transparency in relation to this project. Very recently, however, we learned that there is a whole new aspect to this operation, namely, the special purpose vehicle, SPV, designed to keep the debt involved off the national balance sheet, the type of accounting that got the financial institutions into trouble in the first instance. We, on a national scale, are undertaking a similar type of operation designed to camouflage, in effect, the true import of the NAMA project. Why was this SPV arrangement not disclosed by the Minister until recent days?

We are also led to believe that one of the main purposes of the NAMA project is to allow the banks to improve their balance sheets and lay the basis for the raising of further capital. Given the recent share prices in Irish banks, there is serious doubt as to their ability to do just that. As regards the business plan, the Minister's economic advisers indicated at one point that NAMA would wash its face every year. However, when the business plan was produced some weeks later, it projected in real terms a €4.5 billion profit. While I appreciate that it is important for the Government to put the best face forward in relation to this operation, it has made assumptions, not all of which were outlined in the business plan. It is important that it shows a profit whatever it has to do as regards the assumptions. The assumptions follow the result to be achieved and not the other way around, because this has implications as regards how the matter is viewed by the European Commission in terms of state aid, and by the European Central Bank.

Some of the assumptions are already known to be false in terms of valuations. We have had a detailed examination of one of the main property developers and a scrutiny of its business plan in the High Court. We have seen the value of a very significant property portfolio, the Irish Glass Bottle site, revalued downwards by 85%. These are the type of loans that NAMA is taking over. We do not know, of course, the true values of the loans because no due diligence exercise has been done. In a sense, therefore, the Government is acting on the blind. However, there is one question I want to ask, as regards Anglo Irish Bank.

This is not a bank that is lending and it is unlikely to lend in the future. There is a serious question mark over its viability. The Government has already injected and lost €4 billion in this regard. What is the logic of including Anglo Irish Bank in this project when it has no future and will not be lending in the Irish market, which is one of the primary purposes of the NAMA operation? Some €28 billion in Anglo Irish Bank property loans are to be transferred to NAMA.

In that regard and in terms of commitments from the banks in general to credit lending, we find nothing in the Bill that commits the financial institutions and holds them to account in terms of lending in the Irish market, divesting themselves of any foreign assets which would enable them to do that and to organise their funding to ensure they realise the quid quo pro inherent in the project.