Seanad debates

Monday, 9 November 2009

National Asset Management Agency Bill 2009: Second Stage

 

12:00 pm

Photo of Liam TwomeyLiam Twomey (Fine Gael)

Yes. The Minister will be aware that is the case. Many of the aspects of what happened in Leas Cross and how people have been neglected are criminal. The Minister is not too long gone from that Department to know what was going on at that time either.

The Minister knows the HSE as I do. It is full of people with the greatest integrity who want to serve the greater good no matter how difficult it is at times, but in some respects they have been sold out by political expediency and political incompetence in the management of the HSE.

I read the Minister's views, as expressed in the lower House, and I hope they are genuine. They seem to indicate that he is against quangos and this lack of political accountability, and that he really wants to make himself responsible for the NAMA project since this is the road he is taking, and I hope he will stick to that.

The biggest issue in that aspect of this debate is the economic one, and the figures are truly staggering. This is what we know so far: €88 billion was the value of the loans when they were taken out initially, €68 billion is outstanding on these loans, €9 billion is roll-over interest or interest not paid over on these loans. That is from where the €77 billion comes, but there is €68 billion outstanding on these loans. This €68 billion was valued at €47 billion when the Minister was establishing NAMA, and it is possible that it is worth even less now. The Minister has added an additional €8 billion for long-term economic gain and, therefore, €54 billion is the potential taxpayer liability for NAMA. That, in itself, is quite staggering, but there are other political concerns in the wider economy that have a knock-on effect. There is a possible subsequent bank recapitalisation. Although we do not know, the figures the Minister is getting probably show it will cost in excess of €10 billion after this project is finished.

The economy is continuing to retract faster than we expected when the Minister made his budget speech in April last, and unemployment is still growing, although at a slower rate. The national debt grew by €25 billion this year. That sum is half what the Minister is putting into NAMA. Looking at this point as the Minister's budget is coming up in four weeks' time, his expenditure is approximately €56 billion or €57 billion per annum and his income has collapsed to €31 billion.

Taking the wider economic position, what the Minister is doing with NAMA is some big gamble. This is why we need this sort of discussion. However NAMA is structured, the Minister is also selling this to the people and right now they see the taxpayer taking 95% of the responsibility for this project and the banks taking 5% of the responsibility.

Having listened to some of the Minister's speeches and some of what he stated in the lower House, he seems confident that NAMA will make a profit in time. The only reason for placing almost full liability on the taxpayer is that he has supreme confidence that NAMA will work. I ask him to outline what incentives are in place to ensure the banks get the best deal for taxpayers' generosity.

I want the Minister to explain how this 5% subordinated debt interacts with his confidence in NAMA. If his confidence in achieving a profit for NAMA is true, is there any need for the subordinated debt because we will end up paying more for the subordinated debt? Is it really an incentive to make the banks do their work, and how much of an incentive is it to them? The Minister might explain that. If he thinks NAMA will work, should he have included this subordinated debt at all or is there a role for it in making the banks work?

The Minister's confidence in making a profit is strong because he structured NAMA in a way that diverges significantly from the model as proposed by Professor Honohan, who is considered an expert on these issues and who is now Governor of the Central Bank. Professor Honohan's proposal was very much for joint ownership between the banks, the bondholders and the State, and much of the initial debate on NAMA focused on that issue. One of the professor's concerns is that when the State alone is involved, it often fails to recover assets fully. The Minister might give us more background because, while it might be repetitive, it helps to explain why the Minister diverged so significantly from the model proposed by Professor Honohan, who is an expert on these issues. Is it because the Minister has supreme confidence that this will make a profit? If that is the case, perhaps he could explain why the Minister, Deputy Ó Cuív, came to the House and dismissed the role the taxpayer could play in the SPV because they might end up getting burned, as he put it. I am sure we can explore more fully why the Minister for Finance has already rejected the other options. He seems to have been very conservative, or more conservative than normal, in the way he structured this.

We should also comment in regard to the European Central Bank. It is possible for the banks to transfer all of these bonds to the European Central Bank relatively quickly and draw down the money from that. If something like this were to happen, we would quickly find ourselves controlled by the European Central Bank given the amount of money the Minister has already borrowed from it. I want to know what effect being so much in hock to the ECB may have not just on NAMA but on the wider control the Minister has over the Irish economy. If the banks dispose of these bonds to the ECB, they could go on their merry way and the Minister could not do much about it because if he tried to call in some of these loans, he could trigger another financial crisis. He has left the banks very much as they are - as large institutions with the "too big to fail" tag stuck firmly on them. Therefore, in some respects he has lost control of how the banks may operate in the environment after NAMA, unless he can do something when he has to recapitalise them afterwards with in excess of €10 billion. I would like to hear the Minister's views in regard to what will happen after NAMA.

The review of the draft NAMA business plan gives as good an overview as any on the complexities and cost of NAMA. The Minister is already behind schedule, according to his draft, but even beyond that it would be hard to see how he could keep to the tight schedule he is planning unless he has a significant amount of that work done already. Massively complex issues are involved. Rather than just pushing this legislation through both Houses, the Minister should set up a process whereby he would come back on a regular basis to discuss this, and not just come back to the Oireachtas committee that will be "overseeing" or "scrutinising" this issue - there was a play on words in the Lower House with regard to how this committee should be described.

It is incredibly important that we are kept up to date as to what is happening with NAMA. It is not just €54 billion of Government bonds and, therefore, we can all say the job is done and let us move on to the next issue. The hard work only starts now - for the Minister and for everybody involved, particularly the people of Ireland. When the Minister responds, perhaps he should consider ways to legitimise the NAMA issue by getting the people involved. He should not be so dismissive of the Opposition on this issue, although I accept the Minister is left with ultimate responsibility for it. However, as I said, nobody wants to have to say "I told you so" and nobody wants to see this fail. It NAMA does not work out, it will be catastrophic for the people. We will do our best to make it work as well as possible but we will remain critical and we will give it the critical oversight it requires.

I thank the Minister for attending.

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