Michael D'Arcy (Fine Gael) | Oireachtas source

Senator Sean D. Barrett has done something with which I am not overly pleased as a public representative, that is, he has made us think about issues, which makes us dangerous animals. I missed his contribution, but I was most interested in the e-mail I had received from him on the matter. However, I am conflicted about his proposal because, while it is a great idea that has worked in a jurisdiction which is not alien to ours, I am concerned that the Irish psyche is different from that of people in Germany or Denmark. The housing sector in Ireland needs something to make it operational again.

I have repeatedly pointed out that the number unemployed in Ireland is not 440,000 but 300,000. These 300,000 people were working 36 months ago. The remaining 140,000 who were not working at the peak of the boom are still not working and I do not believe they want to work. Every single one of the 300,000 who were working three years ago want to work. An enormous proportion of these individuals worked in the construction sector. It was easy for young men to leave school early, get a shovel and earn large wages. Six weeks ago I noticed a full page newspaper advertisement for Savills which was selling 1,000 apartments in seven developments in Dublin city. I am almost certain these apartments are in the possession of NAMA. They were being advertised as being under different management and rented. The future of the housing sector lies in those apartments being put on the market to set a base price which would flow throughout the country.

I am not certain about the Government's opinion on Senator Sean D. Barrett's proposals, but I am prepared to give them a fair wind. I do not know if they would work, but I would like to explore them further. We require more than a two hour debate if we are to tease out the issues involved. I have to admit I do not know enough about the subject or sufficiently understand the intricate details set out in the explanatory memorandum to state whether the proposals would succeed in this country. However, I am grateful to the Senator for giving us an opportunity to learn more about them.

We would have hit the perfect storm financially were it not for the fact that interest rates remained historically low. Without such low rates, we would be in 1930s territory and speaking about recession rather than depression.

This legislation is prudential and I am satisfied that is the way Irish lending should be. However, there is a dichotomy currently. We are telling the banks they should lend, but at the same time we are telling them they should leave people in their homes, although many of these people will not stay in their homes because they have completely over-borrowed. The Personal Insolvency Bill will be available. If people have over-borrowed to the extent I am aware some people have, there is no prospect they can remain in their homes. I am dissatisfied by that, but it is the reality. The Personal Insolvency Bill is on the way and we are satisfied that is the start of the process. However, in truth we do not know how the legislation will work in practice. The theory of how it will work has been debated in the other Chamber and it will come to us in November. However, I am unsure it will work as well in practice as in theory, but we hope it will work.

I am also concerned that while the local value ratios at 80% are prudential, they are perhaps even more prudential than the banking sector's way of lending now. In my time with local authorities, I always observed that the local authorities were better at providing loans to certain sectors of society, people who could not get loans from the lending and financial institutions. Local authorities went beyond the standard prudential rate, because they knew the people who were borrowing and knew their families. They also knew which families repaid their loans. It was always the same families who repaid and always the same families who did not. That local knowledge existed within the local authorities and among most of the local councillors. My concern is that if this legislation prescribes an 80% loan to value ratio, we will exclude the input of that local knowledge. That would be a mistake.

I was heartened by what Fiona Muldoon said yesterday. It is about time somebody from the regulatory sector put the boot into the banks. Many of us here, from both sides of the House, have tried to do the same, but to no avail. The banks are still the same in my experience. I must tell Senator Barrett that the use of the term "microprudential legislation" is new to me, but I am open to learning and to listening.

I have a concern that while the bond system has operated as it has for centuries, this smacks of what happened in the United States. I understand however that the intention is that what happened in the US, where they bundled them up and started selling them to each other, will not happen here. That caused a huge problem in the US. I remember reading an article relating to the United States, where they have the three strike rule with regard to felonies. On the third strike, even if minor, culprits go down for 25 years. People in the United States who had two strikes against them were getting loans. These were being bundled together and sold within credit institutions in the United States and this created a huge problem further down the line.

Page 4 of the explanatory memorandum mentions the balance principle. I have a concern in this regard. Irish society went through much of the same as we are going through today in the late 1970s and early 1980s. I remember hearing people say we would never go back to that again and that there was no way we would ever make the same mistakes again. However, as capitalism goes unchecked over time - I speak as someone who supports capitalism - the problem is that it gets out of hand and greed takes over. We believed we would never get back to this position, but we have got back here with a vengeance. It is many times worse than what happened in the 1970s and 1980s, but I do not believe the Irish mindset is prepared to purchase at the loan to value ratios we should be at.

I would like to know what the situation with regard to home ownership is in Denmark. In Ireland and in the United Kingdom, a man's home is his castle. That is the mindset in these islands. However, that mindset is not so strong on the Continent and I suspect home ownership is much lower in Denmark than in Ireland or the United Kingdom. The Irish psyche is intent on home purchase. I was not as dead set against 100% mortgages as some people were. Quite a few people were caught in the trap where they were renting and did not have the opportunity to put together enough cash to pay off or purchase the 92% or 85%. In Ireland, people set their minds to purchasing their home and becoming a homeowner. The difficulty was that banks lost the run of themselves. They also lost the ability to decipher which people could and could not pay. This was compounded further by the fact they did not care. Their objective was to lend the money and then chase it, because their bonuses were linked to the money going out. Therein lay the problem. The regulators, the Central Bank, the European institutions and others lost control also. They too let the animal off the leash.

I would like more detail on this Bill. I am not satisfied that two hours of Private Members' debate is adequate to deal with a Bill intended to radically reform Irish lending institutions. However, I am open to its intention and to giving it fair wind, but would like to go through it in much more detail, whether here, in committee or elsewhere.