Brian Lenihan Jnr (Dublin West, Fianna Fail)

We are all agreed, I take it, having dealt with the wider economic issues in the debate. I have to give the viewpoint of the Government there. For many years all of the parties advocated higher expenditures and lower taxation. We now have a very serious public financial problem, which poses a far greater threat to this country than the matter we have been discussing this evening, and at length in recent weeks. However, we all agree that credit supply is fundamental and that the essential and most important aspect of NAMA for all of us is to ensure that credit is available to support the economy. As long as the banking system is dysfunctional, that credit supply will not be present. All Senators accept that, I believe, and the issue then becomes what is the practical way to address that problem.

Again, if we look at the points of principle advanced here, the argument is that some new bank should be established, which will not be in a position to advance credit for a considerable period of time. It is not just a matter of giving a billion to a person and then he or she will set up a bank. It is not the case that if someone gets a billion, he or she will automatically get €10 billion or €15 billion from the European Central Bank to fund that bank. Such a bank has to obtain loans and deposits before it can even deal with the European Central Bank, so the idea that a new recovery bank can be set up by a magic wand in a few months time and establish credit in this economy is entirely fallacious.

That is why no serious commentator has even entertained the national recovery bank proposal. I would welcome the establishment of new banks in Ireland, but the difficulty Ireland is faced with is that many of the banks that came in here and contributed to the growth in credit, which were owned by overseas interests, have now withdrawn from this country and are not effectively providing credit in it. Senators have to be aware of the real position this country faces, and some have acknowledged it. Unless we have a sustainable banking system we will not have credit. It is not a matter of simply enacting laws, setting quotas and ordering the banks to lend money. One cannot jump out of one's coach like a highwayman and arrive across the bank counter to say, "Hand over the money", if the banks do not have the cash. Any person on the street can see the banks have run low on cash. That is why they required a guarantee and why the main banks, and Anglo Irish Bank, required capitalisation. That is why at this stage we have to follow best international practice and set up an asset relief agency.

I am making the case in principle for the asset relief agency because no valid alternative was advanced in this debate. In fairness, Senator Regan made the case, and I accept the point, that he would prefer to see the insurance based model which has been adopted in the United Kingdom. However, that model would mean we would collect insurance premiums from banks now to ensure their losses in the future. Given the scale of the losses in the Irish system, I respectfully suggest that this would expose the taxpayer to a far more indeterminate contingent risk and would fail to convince investors either at home or abroad that our banks were in a proper condition because the liabilities caused by excess lending and the losses on the banks' balance sheets would remain unquantified and indeterminate. The taxpayer would have the recompense of a small contribution for the bank in return for an extraordinary contingent liability in the future, having to insure every developer's loan on the materialisation of a loss. The taxpayer would fully indemnify the bank for that loss.

That was what the risk insurance proposal meant. It was the only alternative entertained by the economic consultant retained by the Government.