Maurice Cummins (Fine Gael)

Despite what the Minister may say, they felt the bailout was for them. As for the bankers, they show no sign whatsoever of changing, with the appointment of insiders to lead them forward and protect their own interests with no thought for taxpayers or their customers.

It is over two years since the financial crisis began and, since then, Irish businesses and families have been struggling to get access to credit. A review of lending to SMEs conducted by Mazars at the request of the Government, which reported in early July, showed that 30% of small businesses had been declined credit in the period from June 2008 to February 2009, and that trend has continued since. While the highest decline relates to construction and real estate, as one would expect, there were also high decline rates of 36% for general manufacturing, 27% for hotels and restaurants and 26% for financial and insurance services. The most common reason cited by credit applicants for the decline of their application was a change in bank lending policy, which says much. Evidence of tightening credit conditions across the country are also supported by the euro area bank lending survey administered in Ireland by the Central Bank, which shows significant tightening of lending standards by banks to both households and businesses throughout the year and no improvement between January and April of this year, which is the latest date for data. Lending standards in Ireland are shown to be tighter than in all EU area countries.

While NAMA will give the banks access to extra funding from the European Central Bank, Professor Patrick Honohan and Colm McCarthy have both raised doubts as to whether they will use this funding to finance extra lending or to pay off liabilities to other banks and the international money markets. The four clearing banks alone are servicing expensive loans from other non-Irish credit institutions of €140 billion, which they are very eager to play down. The NAMA bonds used to purchase €36 billion in loans from Anglo Irish Bank and Irish Nationwide will be used to pay off creditors and investors and may not generate a single new loan from these broken institutions. Even for AIB and Bank of Ireland, the over-riding strategic imperative of the banks in the coming years will be to improve their capital positions and to lower their overstretched loan-to-deposit ratios.

NAMA will not change this dynamic. NAMA will simply replace one form of non-deposit funding - inter-bank loans - with another - ECB funding. The banks will continue to feel vulnerable to a funding risk as the ECB inevitably winds down its extraordinary support measures over the coming years. Neither will NAMA improve the capital position of the banks, in large part because of the Government's reluctance to take significant equity capital.

Fine Gael cannot support the Government's NAMA approach to resolving the banking crisis because of its potentially colossal cost to the country, its uncertain benefits for business and the evident unfairness in asking taxpayers to take responsibility for the reckless behaviour of developers and banks. There are three fundamental flaws to the NAMA solution for the banking crisis. The first is that NAMA remains a secretive, tax-funded, politically directed work-out process for 1,500 of the most powerful, well-connected business people in Ireland. International evidence suggests that it would be less effective at recovering the loans than private banks. The second flaw is that NAMA will provide an unnecessary bail out of the risk investors in the banks. The third flaw is that NAMA still does not provide a credible mechanism to get credit flowing again to businesses. Given these flaws, it is no wonder that NAMA has not received international or domestic endorsement, with domestic independent economists, the ECB and the IMF all questioning fundamental aspects of the Government's approach.

The advantage to Fine Gael's good bank solution, which the French adopted after the disastrous experience with their own NAMA in the 1990s, is that the risks and responsibilities associated with working out the stressed developer related loans would remain with those professional bankers and investors who funded the loans and who are best placed to recover them. The primary responsibility of the State is to ensure we have a well-capitalised, functioning banking system that delivers credit to struggling businesses and households to get Ireland working again. This is a safer way for the taxpayer and is better for the economy.

NAMA will pay the banks €54 billion for the €77 billion in property loans. If the losses turn out to be very large, our proposal could well save the taxpayer €15 billion. Not only does our proposed solution have strong and expert academic support, it is also being implemented in practice in other countries. I formally second this motion and I trust we will receive the necessary report to have our amendment passed at the end of this debate.