Dominic Hannigan (Labour)

I welcome the Minister of State, Deputy Pat Carey, and thank him for his time. This is an historic debate for the Seanad.

Earlier the Minister for Finance, Deputy Brian Lenihan, spoke about the need to move on from why this legislation has had to be introduced. It is important, however, that we reflect on the reasons NAMA is needed and learn some of the appallingly hard lessons learned from the events of the past few years.

Many Members will remember the Ireland before the Celtic tiger. We know what it was like to grow up when times were hard. I remember when it started to turn for the better in the early 1990s. At the time, to paraphrase a quote from the popular film, "The Commitments", the Irish were the underclass of Europe. Then a new Ireland began, a proud and confident Ireland, sometimes brash but a welcome change to the drabness that went before. One could trace its beginnings to the time when "Riverdance" first hit the stage. All of a sudden, Ireland was a country growing in confidence with economic growth rates of between 8% and 10% year after year. As a nation, we had much catching up to do. Our wage rates were low compared to the European average. Our housing stock was older than in other developed European countries. As the economy grew, people became wealthier and we all got carried away in the surge of optimism and hope that swept the country.

Before we were happy with just a roof over our heads, but people now began to invest in property and looked to develop their portfolios. Some went further and went into property development. Banks were falling over each other to lend money, having found an available supply of finance and being able to lend to prospective homeowners and retail property investors. Developers were given loans of hundreds of millions of euro to finance properties which were increasing in value all the time. It was the same in the residential market. Banks loaned money hand over fist. There were many examples of young first-time buyers on average incomes of €30,000 to €40,000 getting loans for hundreds of thousands of euro to buy property. Developers were getting loans on the basis of deposits which themselves were little more than loans. Banks were also lending money to their own senior figures. In the residential market people saw their friends and neighbours trading up. Some borrowed to their maximum just to get on the property ladder. In a short time they were refinancing their properties on the back of higher prices. Ireland experienced its first property bubble.

While other countries had seen property bubbles such as the United Kingdom in the early 1990s, Ireland had not. As Senator Feeney said, we have learned our lesson. Until recently everyone was convinced the property market in Ireland would continue to rise. The Government was getting billions of euro into State coffers from stamp duty and capital gains tax on property transactions. Rather than introduce legislation or regulation, it adopted a hands-off approach. Then the inevitable happened. Just like the Dutch tulip bulb craze and the South Sea bubble, the house of cards came tumbling down. The economy crashed; with it international confidence in Ireland. Once when just a few short years ago we were used as a symbol of hope to new accession EU member states, we were now paraded as an example of incompetence. The "Riverdance" age gave way to Dustin the Turkey.

After a year in gestation, to fix the problem we have before us one of the most important and critical Bills in our history. The Minister for Finance is correct that there is little to be gained from attributing blame at this stage. What we must do is learn the lesson of the past decade and ensure the route we take produces the least worst outcome for the people. There are obvious lessons to be learned, ones upon which we can all agree. First, there is no such thing as easy money. People need to know that investment in a property bubble is nothing more than an investment in a pyramid scheme - a waste of money. The Government was wrong to rely so much on the tax take from stamp duty and capital gains tax. Governments across the world need to ensure better regulation of the banking sector.

What we do not seem to be able to agree on is what is the best road out of the current difficulties. It is agreed some form of asset recovery vehicle is needed. Fianna Fáil and the Green Party leadership, but not its members, are in favour of NAMA, while Fine Gael has its own ideas. The Labour Party has proposed a temporary nationalisation of the banks. The Minister for Finance has two problems with this option. The first is little more than a it-was-not-invented-here problem. He spoke about temporary nationalisation being part of the Labour Party's particular philosophy. In fact, he does not like it because he did not come up with it first. He also claimed such a move would cost the Government more. He said that without a shred of evidence to prove that would be the case. It would appear from listening to him that no consideration has been given to any alternative proposal for a way out of the crisis, yet the temporary nationalisation proposal is one favoured by the majority of economists. In August a letter in The Irish Times drafted by Professor Brian Lucey was signed by 46 leading economists from throughout the country all of whom favoured temporary nationalisation. Professor Lucey said he had contacted 250 economists and while they were all in favour of the proposal, they did not want to become involved in a back and forth exchange and did not sign it.

The proposal by the Government has been criticised also by one of the most eminent economists in the world, Joseph Stiglitz, who called NAMA criminal and also referred to it as robbing the taxpayer. He said it is, in the view of many, just the final step in the socialisation of losses and the privatisation of gains.

Just last week the Organisation for Economic Co-Operation and Development said that the Government should not rule out temporarily nationalising the country's banks. The organisation also said that any form of public ownership should be temporary and transparent and that a subsequent exit plan should aim to maximise the return to the taxpayer. We agree with that. We believe it would be a better option than the one being proposed. With our approach the State would acquire the shares in the banks, the bad property loans would be written down or transferred to an asset recovery vehicle and the bank would then be recapitalised. In recapitalising the banks the State is investing in something it would own and stands to gain when the bank is then subsequently re-privatised. A crucial feature of the nationalisation approach is that it dramatically reduces the risks involved in having to value the bad loans. What is being proposed instead involves us making a clear leap of faith, believing in the concept of long-term economic value.

I have the 35-page NAMA business plan in front of me. Each page represents €1.5 billion. Considering the importance of NAMA, I believe the document is far too high level. I say that because in the document, when it comes to asset types, there is no breakdown of those asset types in Ireland that are within the plan. That is especially relevant for the purpose of identifying the projects, if any, that have commercial viability in the future. For example, how much of the collateral consists of either finished or unfinished retail spaces in provincial centres? We all know that in the past 15 years serious pressure was put on local authorities, both planners and councillors, to rezone land left, right and centre. I saw at first hand the way those developers operated. A great deal of pressure was applied and the end result is that, today, huge tracts of land throughout the country are zoned for residential and retail space. All of those are now going wrong in terms of the ability of the developers to repay the loans on them and I am not sure how much consideration has been given to their true market value. There is probably enough existing supply of retail space to last us for several decades to come and unless the Government is expecting a massive increase in population, and our population is decreasing, or a massive increase in the amount of money available to spend on these places, and according to the OECD we will never get back to those levels of expenditure, the projected incomes from those retail centres is probably pie in the sky.

When it comes to their long-term economic value I would like to know whether the Minister has done any macroeconomic analysis of future retail possibilities to see if these empty, partly built and potentially built retail values have any value at all. Many of them could be vacant for years. I could take the Minister of State for a walk around Ashbourne any night of the week but he knows well the number of empty spaces in towns like Ashbourne, Navan, Dundalk and Drogheda. How will we ever fill those spaces again? I do not believe we can work out a long-term economic value that is anywhere close to the figures and suggestions contained within that document.

Our desire is that the Minister will accept an amendment on Committee Stage on the question of what we should do with those empty retail spaces. The Minister of State will be aware of the lack of any facilities for young people in towns like Ashbourne. Youth cafés are closing all the time. There may be some way of using, even temporarily, the empty retail shelves which will remain empty for years to come. They could be on five-year leases at a peppercorn rent to enable local youth clubs, youth cafés and community groups to avail of premises they currently do not have the funds to avail of.

We are all aware of the vast improvement in hotel stock but do we now have an excess supply of hotel rooms? We are unlikely to see these rooms occupied to the degree they were some years ago. Hotels have been built along the Border and in the midlands which may never break even. Those are now included within NAMA's business plan and I wonder if an analysis has been done of the long-term economic value of those hotels.

I am not sure about the cash flows projected in the business plan or whether they have been sufficiently stress tested. It is frightening that the proposals are still developing. It is appalling that two weeks ago we saw the concept of the special purpose vehicle hitting the stage. I am concerned that something else is coming down the line or that the Minister has other proposals that have not yet been considered. We are in a position where the Minister is making up details as he goes along. I do not expect the Minister to change horses at this stage, although I urge him to do so. I am afraid he is not for turning but I hope he will consider accepting some amendments on Committee Stage.