Jim Walsh (Fianna Fail)

I join in welcoming the Minister of State, Deputy Mansergh, to the House for this very important debate.

The business plan is an aid to the overall analysis and discussion of a complex and unprecedented project. The points made by Senator Donohoe are worthy of some response from the Minister of State. The information on derivatives is reasonably sparse. I can understand that. Senator Boyle outlined how NAMA fits into the overall picture. The banking situation contains an amount of distressed loans. In addition, there is the budgetary and fiscal deficit, which is challenging, and which it is essential to address if we are to restore confidence. Finally, there is the overall economic situation and the unacceptably high level of unemployment. I am pleased to note that commentators have said that at least unemployment will not reach the earlier predictions of 15% to 17%.

Our exports are holding up well. The investment in the national development plan and other stimulus packages will be needed to maintain the economy. Since the crisis developed more than 14 months ago I have been struck by the number of Government and Opposition politicians who have applied themselves to research and made an input into the most serious challenges we will face in our lifetime and that the State may have ever faced economically. I pay tribute to the Government and to the Minister for Finance in particular for facing up to those challenges. I have been impressed by what has been done in the banking area in particular.

I will not pretend, any more than anyone else in this House can pretend, that we are experts in the field and that we can comprehend the complexities of everything that is being done but looking at the various options that have been put forward NAMA appears to be the soundest. It is based on models that were used previously, especially in Sweden in the 1990s. When Sweden chose that option two factors assisted the process which they acknowledged subsequently, namely, that there was considerable political consensus for the measure within parliament. We have not had that here, which is a pity. The more important factor is that it was done against a background of a benign global economic situation, which is not the case either. Therefore, we are doing it in riskier times and we need to be mindful of that.

I compliment the Minister of State on the many debates he has attended in the House on the economy. If we do not do something about the distressed loans in the banks through the engagement of NAMA then credit flows into the economy will be retarded. Therefore, we must be ready when the global economic upturn arrives. There are some doubts about the prediction of that. If one goes back a month people were perhaps more optimistic than they are today. The situation is changing all the time: it is in a state of fluidity. I think that will remain the case until some time next year. Ultimately, as the Minister of State rightly said, the upturn will happen. There is no doubt it will happen, as these things are cyclical. We have been talking ourselves into a serious erosion of confidence and almost into a depression. I warn against that. We need realism. I am not looking for false optimism, but on the other hand the negativity that is being injected every day into the public mindset is definitely counterproductive to what we are trying to achieve and will, ultimately, have its own effect on the downturn.

Some of the borrowing that took place in the past was sentiment-based credit, founded on optimism. I am not sure that even when we take those loans from the banks following the issue of bonds to off-set the NAMA structure that it will give rise to any immediate flow of credit into the economy. First, confidence in the investor sector will have to be restored. An issue that is sometimes overlooked in the debate is that there is not the same demand for credit that existed previously. There has also been a culture change within the banks. When Lehman Brothers and Bear Stearns collapsed that sent shockwaves throughout the global economy which affected everybody, even down to consumers. Something we have not accepted is that people working in the banks also took that shock.

From talking to people in the accounting world who represent businesses at different levels and who have been negotiating with banks, they are finding that the culture change within the banks means that small loans for the business sector that would have been processed almost within a number of days are now taking six to eight months to process even in situations where there are sound business plans. It will take some time to get that culture back to a more prudential level of lending rather than back to the irresponsible lending we saw in the past.

Senator MacSharry and others have spoken strongly about the level of personal debt. That is an area of concern to me also. Some, but not all of the debt is attached to mortgage repayments and there is an increase in house repossessions. That is having an impact on consumer spending and consumer confidence. It was stated in the programme for Government that the Government would examine how best to approach that issue. I wonder whether some proportion of the bonds that will be made available to the banks at 1.5% could be directly off-set to address that issue.

Senator Boyle complimented the Minister on bringing forward the draft NAMA Bill, which gave an opportunity to commentators and, in particular, the political parties to have an input into the evolution of the Bill that is now before the Dáil. I welcome the publication of the interim business plan. I expect significant changes to be made to it, as was the case with the Bill as a consequence of the consultation period, especially after the due diligence on the loan books of the banks has been carried out. That will help give a shape to the plan. Currently, we are working on assumptions within the business plan. One thing struck me about the figures. There is quite a lot of information in the plan but there are missing links in it also, which I understand. I note the €77 billion is made up of the net original loans of €68 billion and an interest roll-up of €9 billion. When account is taken of the market value of the loans at €48 billion and their estimated long-term value at €54 billion, it is projected there will be a 30% loss on the loan book, which will bring the market value of the loans at €77 billion down to €54 billion. However, if one takes it that the €9 billion is mostly attached to non-cash generating land banks, it is fair to assume that €9 billion is a straight write-off. When I do the sums, deduct that €9 billion and reduce €68 billion to €54 billion, I only get a 20% write-down. It comes back to the collateral that has been given. I suspect in most instances it is probably not greater than the assets upon which the loans were based.

There are risks in this process, as there is in everything, but unless we take an initiative, which hopefully will be successful, we will find that, as European and global economies pick up, we will be unable to avail of that for some considerable time, perhaps a decade or longer. I welcome aspects of this process and we will have an opportunity to elaborate further on it when the Bill comes before us in the next few weeks.