Maria Corrigan (Fianna Fail)

I appreciate the opportunity to contribute to this important debate. In recent months it has been crucial that the public, external bodies and other interested parties have had an opportunity for a lengthy debate and consideration of the National Asset Management Agency Bill. In the course of today's debate it was said the Bill bails out developers and banks, but it is actually about rescuing and rehabilitating the economy for the benefit of future generations. This is to be achieved through supporting banks into functioning states and an expert management of assets to realise maximum potential.

As many Senators have contributed, I will endeavour not to repeat their comments, but I wish to state something in the context of the Minister's speech. He outlined how, at the time of the recapitalisation of AIB and Bank of Ireland, a package was put together from which the Government received preference shares with a fixed dividend of 8%. Attached warrants provided an option to purchase up to 25% of the ordinary share capital of each bank. Operational and pay restrictions were also parts of the recapitalisation package, as was a credit package that imposed new obligations on the banks in their dealings with small and medium-sized enterprises, SMEs, and mortgage holders.

I must mention the anger and unease among the public at the recent announcement by AIB that it intends to award its staff a pay increase. As people grapple to come to terms with job losses and pay cuts and are then asked by us to accept that it is necessary for us to provide public backing for banks, for AIB to have made such an announcement demonstrates, at best, a disconnect with reality and, at worst, a contempt for the public and the State.

Regarding the credit package which imposed new obligations on the banks in their dealings with SMEs and mortgage holders, I previously raised in the House my concern that what was actually occurring was different from what we were being told. Like all of my colleagues in the Chamber, I have heard disturbing accounts of the experiences of business owners struggling to keep their businesses afloat and of their dealings with banks. Recently, a family member of a business owner approached me. The businessman in question had an overdraft and a relatively small loan from a bank. He had received a telephone call from the bank to tell him that the overdraft was being withdrawn and that his loan was being called in. The following day, he had received three telephone calls from the same person asking him where the money was. Three times every day for three weeks, that person would call him to ask where the bank's money was. This approach was taken by one of the more prominent banks.

To my mind, such behaviour borders on bullying, harassment and intimidation and placed unnecessary pressure on people who were already struggling. After one gets the first call, one knows that the money is owed and that the bank is looking for it. This approach is not consistent with the message of support and flexibility in respect of SMEs conveyed by the banks to the Government. Therefore, I welcome the amendment to the Bill to provide the Minister for Finance with the power to issue guidelines to the participating institutions on lending practices and procedures to improve the flow of credit to SMEs and, if necessary, other sectors. Improving the flow of credit to SMEs is an essential ingredient in rehabilitating the economy and I urge the Minister to take every step he can to ensure this occurs. I appreciate the difficulty he outlined in finding the correct balance in assessing risk and I welcome his proposal on the development of an appeals mechanism.

I was struck by Senator O'Toole's comments. He eloquently made the point that, in discharging banks' responsibilities to shareholders, they may not be in a position to provide such credit to businesses upon weighing the risks. This is a valid point. As he spoke, the thought crossed my mind that had the banks had the same sense of responsibility in recent years, we might not be facing our current difficulties.

In addition to the amendment to the Bill, it may be necessary to consider other mechanisms to free up credit to SMEs. Will the Minister for Finance consider the establishment of a State mechanism of providing credit that could be utilised via agencies such as the county enterprise boards?

A critical aspect of the survival of SMEs is how banks treat existing loans and overdrafts, not just the provision of new credit. Given some of my contacts, a contributing factor to people's struggles with loans and overdrafts is the failure of debtors to pay invoices. While I appreciate that some degree of this reflects a difficulty on the debtors' part in accessing credit and may be alleviated by measures to improve credit flow, strong anecdotal evidence demonstrates that another significant factor may be opportunism. Some companies may be taking advantage of the crisis to hold off on the payments of invoices and bills. I have heard stories of shelf companies being established through which refurbishments or jobs are contracted out. When the jobs are completed and the invoices presented, the shelf companies do not pay. They do not have any assets and go into liquidation with nothing to pay the people who put the materials and labour into the jobs. Prior to going into liquidation, the shelf companies hand the property or asset back to the overall board which then continues to operate the asset in a successful manner, benefitting every day from the materials and labour invested in the unpaid for building.

To my mind, this is tantamount to thievery. It is an action that is not illegal, but it should be outlawed, given its serious consequences for businesses that are trying to stay afloat but are told they must register their claims for payment with receivers or liquidators. This is not acceptable and we must take some measure to protect them. Failing this, a number of SMEs will go out of business, which will have an impact on their employees' jobs, those employees' families and any other businesses to which those SMEs owed money. Thus begins a spiral of disaster.

In addition to taking legislative steps to prohibit such practices, the State has a moral responsibility to ensure none of the agencies within its remit is benefitting from them. In particular, I am thinking of organisations such as Anglo Irish Bank which has been nationalised. I have been approached by an individual whose company acted in good faith and completed a job for another company. The individual's company then faced financial difficulties and the operation of its asset was taken over by Anglo Irish Bank. Anglo Irish Bank is now overseeing the operation of that asset, which is doing extraordinarily well, but it is doing well on the back of the labour and materials that have already been paid for by that individual and his business. He will not survive much longer than the next few weeks. As we have nationalised Anglo Irish Bank there is a moral responsibility on us to ensure that neither it nor any organisation nor agency under our remit should benefit from such practices.

I was very taken with the point made by Senator Quinn. While they do not come directly within the remit of the NAMA legislation, one cannot have a debate on the economy without referring to the pressures faced by individual mortgage holders. I noticed that some newspapers yesterday had reports indicating that 1% of Bank of Ireland's mortgage holders are in arrears for more than 12 months, which amounts to approximately €750 million. That is a significant debt in one bank alone, and that is just a snapshot of the situation. There are difficult times ahead and it is imperative to get people through the next 12 to 18 months. Constituents have contacted me in despair reporting that they have received seven-day demands preceding the commencement of repossession orders for the family home for arrears of less than €6,000. It is not in the interests of society or the State for any family home to be repossessed in such circumstances. I urge the Minister to consider what practical supports can be put in place to address that issue.

The Minister has set out the case for supporting NAMA and he has outlined its importance. I accept that, but I make the point that NAMA alone will not rehabilitate the economy. It is a core ingredient, but it must be accompanied by additional measures to address, for example, how we can support SMEs with credit flow and individual mortgage holders. I wish the Minister well. The country is depending on the success of NAMA.