David Norris (Independent)

I welcome the Minister of State, Deputy Seán Haughey. I have found this a disappointing debate. By and large, there has been much rhetoric supported by inaccurate statements but nothing radical in what has been said so far. I say this because we have been challenged from those on the Government side of the House to come up with new ideas.

I cannot claim my ideas are brilliant but they are certainly original. I came up with what I called the national property management agency three months before the Government. I returned to it four times and nobody paid the slightest bit of attention. Then we got the National Asset Management Agency. I may not know much about economics, but I certainly know a great deal about English. What are we talking about? How are the assets and in what manner are they? These are liabilities we are managing. Let us have the truth about this. It is important we understand that.

We are dealing to a certain extent with intangibles. We are dealing, we are told, with international confidence. Fitch - I spit the name out in contempt - and Standard & Poor's are the corrupt international organisations that eased us into this by their dishonest practices by accepting engagements from firms and being paid to rate those very firms themselves. That is how all of these toxic debt levels and these bastardised products got into our system, and we are still putting up with listening to these people spouting about us. They have the cheek to downgrade us again. The international community lost a marvellous opportunity for radical thought in gutting those people as they should have been gutted. They are not the solution. They are a large part of the problem because of the way in which they behaved.

There is also the confidence in the people. What are people to think? There seems to be a completely different scale of approach and a different logic when one applies economic tests at a macro level to what they are expected to deal with in their own lives. The Minister told the House that the cost would be €47 billion and he would add in an extra little €7 billion because of anticipated increases in value, and this was good international practice. How many people buying a house for €25,000 would give another €5,000 because it might increase in value? That is what the Minister is saying. He states the OECD and all the rest of them support him. They stated they may do this. The word "may" is very different from "must". The whole thing is being grossly overvalued and I am very concerned about this.

I make no apology for being radical. It is a pity there is not a more radical tradition in this House. In 1922, one of the founders of the State, Michael Collins, wrote to Desmond FitzGerald stating: "What we must aim at is the building up of a sound economic life in which great discrepancies cannot occur." He was speaking of discrepancies in wealth and position, yet we have allowed these people to get away with bankrupting the country. The pockets of the very people who have been put out on the side of the road and who were despised and treated with contempt by all the banking institutions during the good days are being picked to make up the deficit. I can go back even further. Thomas Jefferson stated:

I believe that banking institutions are more dangerous to our liberties than standing armies. ..... the banks and corporations .... will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

Let us come closer to home, to responses to what the Government is projecting. In recent weeks, Professor Willem Buiter, professor of European political economy at the London School of Economics, stated that the Government's approach to the banking crisis appears designed to maximise the risk to the taxpayer. There certainly is a risk. Even those, like myself, who are not expert economists can see this.

On the other side of the House there was a certain amount of posturing that we would get back to certain land values and that no country had suffered this without getting back within less than seven years. Let us hear the truth. It was a bubble and we all know what happens when bubbles burst. You do not come back, I assure you, and you are left with a little soapy mess on the floor. In Ireland between 1995 and the peak of the boom in 2007, the average price of housing and commercial property roughly tripled. If my colleague on the Government side wants a parallel, I will shout it across: Japan. Japanese urban land in the 1980s and Irish agricultural land in the late 1970s are closely linked. In Japan, between 1985 and 1990, the real price of commercial land in major cities tripled, exactly as has happened here, while the price of residential land doubled. Japanese banks buckled under their property debts, lending fell sharply and prices with it, the same as has happened here. By 2005, 15 years after the peak, the price of residential land had fallen back to its pre-bubble level while the price of commercial land had fallen by nearly 90%. We are not taking any account of this historic precedent or the precedent of the fall in the price of Irish agricultural land.

What may happen is that, at the end of this process, after the bubble has burst, we will be back to the pre-bubble prices. Have we considered the consequences of this economically? I do not for one minute believe we have. What happened is that the banks, encouraged by the Government, put their boot down to the floor while driving the vehicle about which my colleague, Senator Harris, spoke so eloquently. The whole thing was reckless, and I use that word specifically. Nobody has ever been prosecuted for reckless trading. If any of us had done this in an individual company, we would be in jail, yet nothing has happened in regard to the banks.

I wish to quote Peter Mathews, a person I respect and trust. When he was speaking in a recent debate, people shouted questions at him and he had the answers. He was able to think on his feet and he knew what he was talking about. He has said:

Because as the regulator and every bank director should know, the boards of banks should always act strictly in accordance with the prudential principles of fractional reserve banking. In simple terms, the boards of banks should ensure that the ratio of loans to customers-customer deposits is maintained in the region of 80%-90%.

It was not, however, and the banks went way beyond that, as we all know. There was an unimaginable expansion in credit creation globally and Ireland got involved in that as well. In Ireland, beginning about 2002 and leading up to the crash in 2008, a period of five or six years, we completely reflected all of this reckless behaviour on the part of the American and European institutions.

The consequences are frightening. Mr. Mathews continued by making assumptions which I can understand to a certain extent. The Minister of State, Deputy Mansergh, in an earlier debate spoke about targets and assumptions but he did not give any clear detail. Mr. Mathews does. He suggests we should assume we cannot recover more than 100% on a loan and points out that current recovery rates are 25%. Let us take the Irish Glass Bottle site as an example of the market. These people were always talking about the market, market values, the market economy and market forces which would rectify everything, yet we are protecting the banks against the operation of the market. One economist warned last year that "buying the assets at inflated prices would amount to a back-door recapitalisation of the banks", and that best practice "is for the banks to recognise the losses on these loans up front and sell the assets at fair market value". Who said it? None other than Dr. Alan Ahearne, now senior adviser to the Government.

We are told there is a systemic importance to all these banks, including the laughable Anglo Irish Bank. What does the Nobel prize winning economist, Professor Stiglitz, have to say about it? He said:

Countries which allow banks to go under by following the ordinary rules of capitalism have done fine. The US has let 100 banks go this year alone, as did Sweden and Norway ... [In Ireland] this bank bailout is a simple transfer from taxpayers to bondholders, and it will saddle generations to come. The only thing that might give you solace is that, as chief economist of the World Bank, we see this type of thing happening in banana republics all over the world. Whenever a banking crisis happens, the financial sector uses the turmoil as a mechanism to transfer wealth from the general population to themselves.

This is what is happening.

I would like an answer to some questions. First, since we are determined to buck the market and not give the market value, as established by precedent, on what basis does the Government believe the market is wrong in this sole instance? I am interested to see that the Government side and the Government in the other House quoted in its support various wonderfully influential and important people from countries that had got out of this kind of difficulty. For example, the former Swedish Minister, Mr. Lundgren, was quoted as being fully in support. This is a report of what he said:

'It doesn't sound like the right solution to buy assets from private banks,' Lundgren said in July. 'Market economy dictates that if we put in capital we should have the kind of influence and ownership that goes with the capital.' A fortnight ago, Lundgren re-iterated this view, telling Morning Ireland that nationalisation was the only viable option. Bank shareholders must 'pay first', he said. 'I'm a conservative and always will be' but 'nationalisation is something you shouldn't be afraid of since you can privatise later on'.

There is also a report of the IMF's comments: "Insolvent institutions … should be closed, merged, or temporarily placed in public ownership … there have been numerous instances (for example, Japan, Sweden and the United States)".

I commend Peter Mathews' article, headlined "NAMA will lose €12 billion". He describes NAMA as the Titanic. It is not. We are on the Titanic. There is a distinct possibility that NAMA is actually the iceberg. I hope to God it is not the iceberg but I am concerned it is. I am concerned that we have not worked it out completely. One good thing has happened. This debate has unearthed certain aspects of our finances and certain gaps in our information. I was horrified when the Minister of State, Deputy Mansergh, said we were dealing with data supplied by the banks themselves, despite their having been involved in the most appalling practices. I am sorry, but I cannot support the Bill. I said in January that I felt all the banks should be put together and nationalised and the property assets managed in the interests of the people. That is what the founders of this State said as well. I do not mind if I am an old pinko.

I read the business plan and it worries me. When I look at this diagram from the business plan, it looks for all the world like a nuclear reactor. If this plan goes through and its intentions are correct, I hope it comes to the rescue of our people. I am sorry to say, on the evidence produced in this House, that I seriously doubt it.