Frances Fitzgerald (Fine Gael)

I was discussing the changes in valuations and referred to the Irish Glass Bottle Company site in Ringsend as an example. It is widely acknowledged that careless, inflated valuations contributed to the banking crisis. In the context of NAMA, many questions are left unanswered in this regard. I ask that the Minister expand on the issue.

International precedent and experience clearly show that a State body does not have the same degree of effectiveness as the private sector when it comes to recovering bad debts. I am interested in hearing the Minister's response in respect of this matter. Only last November the International Monetary Fund, IMF, concluded a study of banking and property busts in seven other countries where the NAMA approach had been adopted. The study found that government owned asset management companies appeared largely ineffective in resolving distressed assets and that this was mainly due to political and legal constraints. It also found that the use of asset management companies was positively correlated with peak non-performing loans and fiscal costs.

A number of speakers referred to the potential cost of consultancies. As a result, the Minister must reassure Members that these costs will be controlled and managed in a way that is beneficial to the taxpayer. The IMF believes NAMA-type bank rescues can, in layman's terms, cost the taxpayer an arm and a leg. The latter is primarily caused by the politically motivated decisions that can be taken as opposed to the making of more objectively based decisions which would be in the interests of the taxpayer. I hope the Minister will address this matter.

I referred to the need to ensure credit flows. Section 210 of the Bill refers to the Minister issuing guidelines on lending to financial institutions. Has he published these guidelines as yet or does he intend to publish them? Will he indicate what will happen to financial institutions which avail of NAMA but which do not adhere to the guidelines? Are penalties laid down in the legislation in respect of such institutions, or what powers are available to the Minister in the event that the guidelines are not implemented in the way he envisages?

The Minister has stated doing nothing is not an option. No one in the House is proposing that action should not be taken. Fine Gael published a detailed alternative banking strategy. The Minister has been keen to criticise that alternative and did so again earlier. However, I must make the point that the NAMA model has also been heavily criticised by Professor Joseph Stiglitz, Professor Willem Buiter and others. There are questions relating to NAMA which the Minister must answer. One of the key questions revolves around credit flow. How can the flow of credit be guaranteed? What is to stop the scheme being turned into an inter-bank bailout? If the latter happens, we will have failed in what we are trying to do in the context of establishing NAMA.

The Minister referred to the views of the international community and its response to NAMA. People tend to quote the parts of statements issued by the ECB, the IMF and the OECD which appeal to them in respect their proposals. Was it not the view of the ECB and the IMF that NAMA should not pay above market value for bad loans and assets? The ECB appears to be particularly adamant in respect of that matter. Perhaps the Minister might address it.

Some €5 billion is set aside in the Bill for what is termed a "working out" strategy. I understand why this money is being allocated, particularly in the context of, for example, half-finished housing estates. Such estates constitute a major problem. There are apartment complexes in which only a couple of dwellings are occupied, while all the others remain empty. It is envisaged that the working out strategy will be available to developers who were involved in building such estates and complexes.

There are questions to be posed about oversight and decision making. We are aware of the unhealthy relationship between banking and property developers and where it has led us. Will the Minister indicate how matters in this regard will be managed? How transparent will be the decision-making process? Sometimes when people are attempting to solve a problem, one ends up with a reflection of rather than a solving of that problem. There is a failure to ensure different attitudes are adopted and different processes put in place. The property loans and toxic debts for which NAMA will assume responsibility were managed in a certain way and we must ensure new governance mechanisms are put in place in order to ensure they will be managed differently in the future. As we are aware, some of the same players will be in place and we must ensure the relevant issues in that regard are dealt with under NAMA.

The Minister is probably conscious of the extensive media contributions made by Mr. Peter Matthews in recent times. Mr. Matthews maintains that there is a perceived error in the business plan which will turn NAMA's projected profit of €5.48 billion into a loss of €12.6 billion. I know the Minister is interested in what Mr. Matthews has to say and would like him to respond to some of the figures the latter has been quoting in public with regard to some of the assumptions made in the business plan. There are a number of serious concerns about the plan and Mr. Matthews' observations, if correct, could have major implications. I would like to hear the Minister's comments on this matter because, with the passage of the legislation before us, the taxpayer will be asked to shoulder a massive burden. Therefore, it behoves us to address the serious issues raised in the public arena during the course of the debate on the Bill.