I listened with some astonishment to what Deputy Fahey had to say, particularly his critique of the Fine Gael Party and other Opposition parties. The truth is that Deputy Fahey should hang his head in shame in this House in that he is a member of a party which, after 12 years in office, has brought this country to its knees. It presides over and is responsible for the greatest economic calamity in the history of this State. Deputy Fahey's concluding comments were especially interesting. I would say to the Green Party to beware of the embrace of Deputy Fahey and his Fianna Fáil colleagues. The Deputy's praise for the amendments the Green Party seeks to the NAMA legislation makes it absolutely clear that he and his colleagues believe the Green Party has no influence or impact.
We are debating this Bill for a very specific reason. Reckless banking, grotesque regulatory failure, ministerial and Government incompetence and a betrayal of the public interest lay at the heart of our economic and banking crisis. Bank directors are directly responsible. They were obsessed by personal status, dividends and salary or, as some liked to put it in more highfaluting terms, "compensation", for lording over banks in directors' boardrooms. They were more concerned with their own self interest than in ensuring the continued viability of the banks of which they were directors. Due to their irresponsibility, not a single person in any of the covered institutions who was a director in our banks prior to 2008 should today sit in the boardroom of a single bank.
Institutional investors also have a case to answer. Institutional investors who administer pension schemes and who dominate the annual general meetings of public companies and who are paid excessive fees for managing pension funds clearly took their eye off the ball. They were more in cahoots with the directors of the banks than they were interested in protecting the interests of pension-holders and the pension funds they administered. They failed to exercise any proper due diligence on behalf of those who contributed pension moneys on an annual basis to ensure that the products in which they were investing truly reflected the real value being given to them on the stock markets.
With regard to developers, arrogance, greed, hubris replaced all relevant commercial principle. They boasted not about which of them could secure the most commercially astute and viable deal but about which of them could raise the biggest loan. Bankers, with an eye on their bonuses, chased after developers across the length and breadth of this country with the enthusiasm of the Viagra salesman stalking the over-70s.
Deputy Fahey talked in this House as if Fianna Fáil has not been in Government for the past twelve and a half years. Political accountability for where we now find ourselves, political accountability to this House for the gross incompetence, not just of the previous Fianna Fáil-led Governments but also of the present Government, is something that neither Fianna Fáil nor the Green Party is able to recognise or respect.
Deputy Brian Cowen as Minister for Finance, will go down in history as the worst Minister for Finance who ever held office in the State. He sleepwalked through four years in office as bank lending expanded to an unprecedented level, property prices grew to insane levels and public sector expenditure increased to an entirely unsustainable level. Expenditure substantially in the years from 2003 onwards depended on stamp duty received as a consequence of the growing property bubble. As Minister for Finance he essentially became addicted not just to property but to annual increase in property values to meet the totally insane and unsustainable levels of public expenditure over which he had ministered.
Then as the hurricane clouds appeared on the horizon, as Minister for Finance he remained in denial of imminent disaster. In his 2007 budget, when property had stopped selling, when it was absolutely clear that the stamp duty on which the State was so reliant for meeting public expenditure was going to dry up, he increased current expenditure by 10%. That was done by a Government of which the Green Party was part and where two Green Ministers sat in Cabinet. The difficulties which confront the State today are compounded, not just by the foolish budgetary decisions made in 2007 but by the state of paralysis which Deputy Cowen, both as Minister for Finance and then as Taoiseach, seemed to be locked into throughout 2008. As piecemeal decisions were made to confront the increasing economic difficulties and public sector expenditure, no overall coherent strategy was ever articulated as to where the State was going. Outside of dealing with the issue of NAMA and the banking difficulties which confront us, it is still not clear what, if any strategy the present Government has.
The New Orleans and Irish experience have uncanny similarities. As the hurricane approached New Orleans, George Bush first ignored the danger signals and warnings and when the levees broke and the city was flooded, he went into denial and failed to act until far too late. As the economic and banking tsunami approached our shores, Deputy Cowen, as Minister for Finance, ignored the danger signals and warnings and when our financial levees broke, he went into denial and it has taken him far too long to act to try and protect jobs and to ensure that we make the structural changes necessary to stabilise our economic system and to travel down the road to recovery. As a consequence, there are now almost 450,000 unemployed and we heard yesterday that net emigration is taking place from our shores for the first time for well over a decade.
There is an essential need to get credit and liquidity flowing into our economy. The Fine Gael critique of the NAMA legislation which Deputy Fahey ignored is that there is nothing in the legislation which guarantees that credit will start flowing, that small and medium-sized businesses will be able to access the funds they require to remain in business and preserve jobs. There is no guarantee of any description that when funds are made available to the banks, the banks will not simply retain those funds to improve their capital position. There is nothing in the legislation that will ensure that within the next 12 months there will be any major economic change in the state of this country because of the timeframe that will be required after this legislation has passed through both Houses of the Oireachtas — as seems inevitable with the support of the Green Party and Fianna Fáil Deputies. It will take very many months for the structure prescribed by NAMA to bring about the effect intended of making funds available to our banks to even test whether there is any reality in their increasing liquidity and credit. There is a real timeframe problem with this proposal which Fine Gael's proposal for a good bank addresses and which would facilitate liquidity flowing at a far earlier point than is even envisaged in the context of the Minister's proposal.
With regard to the financial institutions that are being bailed out, 40% of the borrowings relate to Anglo Irish Bank and Irish Nationwide Building Society. Both are basket cases, neither of which will provide credit or liquidity to the business sector. These are two banks, operated by chairmen and chief executives in the shape of Mr. Seán FitzPatrick and Mr. Michael Fingleton as if they were Russian oligarchs running financial institutions and manipulating those institutions for their own personal benefit. Reckless banking is at the very heart of our economic collapse and the origins of the property bubble commenced in 2002 to 2003. Anglo Irish Bank was the rogue bank which led the way and the rest, like sheep, subsequently followed. In the period 2002 to 2003, ratios of loans to customer deposits started to rise and then continued to rise beyond anything sustainable. Basic banking and regulatory prudential principle meant that the ratio of loans to customer deposits should have been maintained in the region of 80% to 90% but from 2003 onwards such principles were totally abandoned. Exceeding 90% meant exposing the liquidity and solvency position of a bank but from 2003 onwards, Irish banks turned to highly volatile inter-bank markets to obtain inter-bank deposits. As Peter Matthews pointed out in last Sunday's edition of The Sunday Business Post, analysis of the most up to date published accounts of the six Irish banks and building societies reveals loan to customer deposit ratios rose to their current weighted average of 173%, far above the 100% maximum limit. The scale of the failure on the part of the banks, their directors and regulators, is breathtaking. This failure also lies at the door of a Minister for Finance in the shape of the current Taoiseach who should have listened to the warnings being voiced by those who knew better but who chose to ignore them. In conjunction with other members of his party, he chose to deride and abuse anyone who suggested that the level of borrowing from our banks, the extent of the property bubble and the level of borrowings which individuals were having made available to them were creating a huge problem.
Now we have the NAMA proposal and the concept within it of long-term economic value. This has been discussed at great length in this debate. It is difficult enough in the current climate to ascertain the current market value of a property. Long-term market value is nothing other than hope value. Various factors, detailed in the legislation and draft regulations, to which regard is to be had to determine long-term economic value are the same factors which so-called experts relied on to tell us, in 2005 and 2006, that Irish property values were reasonable and based on true market value and that if there was any cyclical change there would be a soft landing. Long-term economic value is nothing other than a journey into the unknown.
Under the terms of this legislation, the concept of long-term economic value is to be applied with regard to land. The Minister is supposing, as Deputy Fahey did, that there will be a 10% increase, at least, in the value of property over the next ten years. There may be in some property but who says there will be in land? Vast areas of former agricultural land have been rezoned and some have been bought in the hope of obtaining a rezoning. Land has been bought at enormous prices with huge borrowings from financial institutions. Who would bet that vast tracts of that land would increase in value by 10% in the next ten years. That bet is being made by the Government on behalf of taxpayers.
The Government has got many of its figures wrong. The Minister insists that NAMA will meet its own debt servicing costs. He is recklessly ignoring the fact that the 1.5% introductory discounted rate on which he bases his calculations for the €54 billion in new borrowings will, inevitably, increase as the European economy comes out of recession. The long-term forecasted ECB rate is 3.8% over the next ten years. When the agreed 0.5% over the main ECB re-financing rate is added, average debt funding will cost 4.3%, it is estimated, over the next ten years. This will produce running costs of approximately €10 billion in respect of NAMA in the next ten years.
In the context of the value of the loan book, we are told that €9 billion is rolled-over interest owed by developers which has not been paid to the banks. What we do not know, and what the Minister has not yet told us, is the monthly increase in this roll-over figure. How, for example, will it stand in 12 months time? Will the roll-over of €9 billion have reached €12 billion in 12 months time? For how long will the roll-over be permitted? These are issues of substantial relevance which remain to be clarified.
In the context of long-term economic value, there is a contradiction at the heart of the legislation. The provisions which allow a price between the market and long-term economic value to be used in the determination of value of lands are entirely different from later provisions in the Bill which provide for the vesting of property in NAMA when property owners fail to meet their financial obligations. Where property is vested the courts are asked to determine the likely sale price of the land or property if sold within three months of the court proceeding. The courts are being asked to determine the current market value at the time of an application for vesting. If NAMA has taken over land based on a long-term economic value and if a developer finds himself in a court system where the land may be vested in NAMA at a lower level of value and wants to protect other property or assets used to guarantee bank debt, what will happen? The developer will demand access to information to ascertain the value NAMA attached to the land when the loan was taken over. NAMA will give a bank X amount for the loan in the context of bonds which can be cashed, but will seek to attribute to the developer a lower value. There is an inherent contradiction in the value provisions in the legislation, which is an invitation to litigation. It will facilitate developers ensuring substantial delays in NAMA taking action to have property vested in it when there is a default in repayment.
There is no indication in the legislation of for how long NAMA will allow loans to be rolled over. When property has collapsed in value and loans continue to roll over, the debt increases. For how many years will roll-over be allowed? There is no clarity to this. What happens if a developer comes to NAMA and says, "You can take my property. You do not need to take a court case. I will vest it in you but please do not proceed on foot of any guarantees". What direction is there in the legislation to clarify the action NAMA might take in that context?
There have been extraordinary revelations about the behaviour of our banks. In the United States, within months of investigations having been conducted, bankers were arrested and some imprisoned. In the context of the conduct of certain institutions, in particular Anglo Irish Bank and Irish Nationwide, it is extraordinary that no prosecutions have been initiated. I am conscious of the importance of saying nothing in this House which might prejudice a prosecution. However, I wonder what is the reason for the delay. Is it that those investigating the accounting systems and the conduct of people within those institutions have discovered that much more was known by the regulator and the Minister for Finance of the day than has been disclosed? Would a prosecution be an embarrassment and is that why it is being avoided? Anglo Irish Bank can best be described as a rogue bank. Is there a conflict of interest? Is it the objective of the Minister at some stage in the future to float off this bank again for public quotation on the stock market and is there a conflict of interest to the extent that there is a concern that if prosecutions are taken they may inhibit the possible future flotation of a reconstituted Anglo Irish Bank? If that is the case it should not be the case.
The general public find it extraordinary that a year after so many revelations not a single prosecution has taken place. In the United States one banker, Mr. Madoff, has been sentenced and imprisoned. In Ireland, those responsible for the debacle we are confronted by have, largely, made off to Marbella and Puerto Banus and are celebrating their golden handshakes on the golf courses in that region. That is not acceptable and the time has come for the Minister for Justice, Equality and Law Reform to come to the House and tell us why these investigations are so slow and whether prosecutions are anticipated? Anglo Irish Bank is a nationalised bank controlled by the State. There should be no difficulty in the investigative authorities accessing all of the information required to address the problems that have arisen and the dreadful disaster that the bank has brought on the country.
