Dáil Éireann debate -
Tuesday, 6 Jul 2010

Vol. 714 No. 4

Leaders’ Questions

Deputy Enda Kenny

In the past half an hour or so, the report of the independent group on mortgage arrears and personal debt has been published. The report shows clearly that the reckless management and incompetence of the Government are now casting aside the approximate 33,000 people in mortgage arrears and the 250,000 in negative equity. The strain, anxiety and pressure on these people are difficult to understand or estimate and are far removed from the thinking of the Government. One of the only recommendations of the report is that both borrowers and lenders should act in good faith at all times. It is clear from the report that there will be no NAMA for those in negative equity and no sweetheart deals for those in either mortgage arrears or negative equity. This is a clear and deliberate contrast from the treatment meted out by the Government to both Anglo Irish Bank and NAMA itself. Greed and incompetence drove a situation where two independent banking reports indicate that 75% of our problems were caused by mismanagement and incompetence at home by Government.

In view of the fact that 250,000 people are faced with negative equity and over 30,000 are in mortgage arrears and in view of the fact that last week the Taoiseach admitted that over €20 billion pumped into Anglo Irish Bank has gone into a black hole and will never be seen again and that, apparently, this will be followed by a further €6 billion, €8 billion or as yet undetermined amount, will he confirm that there will be no further moneys pumped into Anglo Irish Bank? In respect of NAMA — which the Minister for Finance said would provide a wall of cash for business and provide a profit of €4.8 billion — what is the Government's estimate now of the hundreds of millions of losses that may well accrue from it?

The Taoiseach

Deputy Kenny misrepresents the position. There are no sweetheart deals with regard to the National Asset Management Agency. The dealings are on a loan by loan basis and they have been aggressively valued. We were the first country to do that and there is every prospect that will be recognised. There is no question of imposing a national asset management style approach to residential customers. We do not propose — as the Deputy seems to — to take the assets and sell them, because that is what NAMA will do. I cannot understand from where the Deputy's fuzzy thinking comes on NAMA.

(Interruptions).

An Ceann Comhairle

The Taoiseach, without interruption.

The Taoiseach

The Deputy's line is a nice line to throw out, but if he thinks about it he will see it has the very opposite effect of what he claims he is trying to do. The Deputy should not put out his little by-lines and then expect they will not be referred to in the response. There is no question of doing that. What we are trying to do and what the interim report on mortgage arrears and personal debt is trying to do is to bring forward practical steps. The report makes certain recommendations to the Financial Regulator, which will be acted on and which he will seek to implement. Thankfully, the number of repossessions here has remained very low. This reflects the measures that have been put in place in the past two years and the code of conduct for covered institutions has had some effect. The need for people to engage, the question of a resolution process that will provide for consistency across the board for all institutions, and the avoidance of payment of penalty interest for borrowers who obtain the mortgage interest supplement — these are all of important practical assistance to the 30,000 people who find themselves in arrears for 90 days or more and the similar number who may have entered into forbearance arrangements with their lenders. While it is a big issue for every individual family which finds itself in that situation, in the overall context of the number of mortgages taken out in this country, the number in difficulty is a small percentage of the total. However, there is no room for complacency. The work of the group is ongoing and it will come forward with further recommendations in several months time. It is not correct for the Deputy to make the assertions he is making in this regard.

In regard to the NAMA situation, the central projection has been brought forward and that report will be published today or tomorrow. The central projection suggests there will be some profit made by NAMA. It also sets out other scenarios, some of which would see a higher profit for NAMA in certain circumstances and, given that we are dealing with a ten-year projection, it also refers to a lesser case scenario of some losses. Any such losses will be levyable as a surcharge on banks in any event. The portrayal of the report as showing that NAMA will be loss-making is not correct. The central projection sets out a profit over that period based on the data it has now, and those data relate to the information it has received as a result of the engagement it has had since last autumn with the banks. The draft plan stated very clearly in its first sentence that it relates to information that was then being furnished by the banks. There has been a rigorous and aggressive assessment of all loans on a loan-by-loan basis, and what has emerged is set out in the annual report today.

Deputy Enda Kenny

There is no fuzzy thinking here. The Taoiseach said the taxpayer would not be at a loss because of the injection into Anglo Irish Bank. We now have a situation where he admits that more than €20 billion is lost forever down a black hole. Think of what could be done in our country if that type of money were being pumped into construction, infrastructure or jobs.

Second, the Taoiseach was wrong when he and his Minister said that NAMA would provide a wall of cash. More than 800 businesses have gone to the wall since the start of the year. Some 452,000 people are out of work and thousands more are facing an uncertain future because of the reckless mismanagement of the economy by the Government.

Third, the Taoiseach was wrong when he said there would be no sweetheart deals. Am I to understand that on a loan-by-loan basis, NAMA has already made particular conditions for one very large developer who is unable to comply with the loan conditions granted in the first instance? There are no sweetheart deals for those in negative equity. There are no sweetheart deals for those who cannot pay their mortgages. Yet it appears the same old circle comes around again for Fianna Fáil in government whereby particular operators can be given sweetheart deals.

The Taoiseach also said — and he was wrong on this — that NAMA would provide a profit of €4.8 billion. Yet the Minister for Finance himself — not anybody on this side of the House — spelled out a situation where, he said, hundreds of millions of euro could potentially be lost. If the Taoiseach is saying the Minister's thinking is fuzzy in this regard, he should take that up with the Minister.

The Taoiseach was wrong in respect of the wall of cash; he was wrong in respect of the sweetheart deals; he was wrong in respect of credit for business; and he was wrong in his assessment of how this process would help the economy to pick up. Will he at least take his courage in his hands, as the leader of the worst Government in the history of this State, and go to the country in order to let the people decide what they want in terms of government for the future?

Deputy Bernard J. Durkan

Hear, hear.

Deputy Noel Dempsey

When that happens you will be found out again, Enda.

Deputy Enda Kenny

Let the people decide whether they want a party with a serious plan to get our country back to work and to sort out the economy——

An Ceann Comhairle

Does the Deputy have a question?

Deputy Noel Dempsey

He does not understand the answers, so he has to keep saying the same things.

Deputy Enda Kenny

——or that crowd over there, a Government which offers statements and principles that are grossly untrue time after time. It will stand condemned by its own words.

The Taoiseach

I will try to deal with that stream of consciousness as best I can.

(Interruptions).

An Ceann Comhairle

The Taoiseach should be allowed to respond without interruption.

The Taoiseach

First, the Leader of the Opposition decides to attack the integrity of the board of NAMA which has a statutory authority from this House to operate independently of anyone else based on the provisions laid out in the relevant Act. He is suggesting that the integrity of those individuals should now be impugned.

Deputy Enda Kenny

The Taoiseach said there would be no sweetheart deals.

The Taoiseach

That is ridiculous. If that is the level of debate we are going to have, it is just a joke.

Deputy James Reilly

The only joke is standing before us.

The Taoiseach

Here we go again.

The scenario outlined in the draft plan for the National Asset Management Agency of a profit of €4.8 billion was based, as stated in the first sentence of that report, on the information being provided by the banks at the time. The agency has now produced its quarterly report, as required under the Act, and is setting out its central projection based on current asset valuations, projecting forward for the next ten years. The board is making the point that the agency should emerge with a profit, as it sees it. The report sets out other scenarios where the agency might make a higher profit or else make some losses. If losses do emerge, they will be levyable on the financial institutions concerned.

That is what the board of NAMA is saying, but the Deputy is misrepresenting that. He is trying to suggest that I am saying one thing and the Minister is saying another. The National Asset Management Agency is making the assessment on the basis of the detailed data it now has which are based on the loans it has brought over from the balance sheets of the banks. The purpose of the agency is to provide for a viable banking system and to provide the prospect of credit. The Deputy is suggesting he has the right policies, but his policy in this regard was to default. The European monetary system is prepared to bring forward provision in the order of €750 billion to protect the currency on the basis that it does not wish to see any default. The Deputy, however, is bringing forward the idea that we in this country we can have a default mechanism.

Deputy Enda Kenny

It would have saved €6 billion. Some €20 billion has been lost.

Deputy Enda Kenny

Clearly, if we had done that we would not have a banking system at all. The Deputy should go off for the summer and try, with his new finance spokesman, to come up with a policy that can actually be debated.

(Interruptions).

A Deputy

The Taoiseach should go off into the sunset.

Deputy Eamon Gilmore

I too have been reading the report from the Government dealing with the problems mortgage holders are having in repaying their loans. The report includes 41 recommendations. There will be a lot of letters written back and forth between lenders and borrowers but the only firm recommendation I can see is that the one-year moratorium on legal action by lenders cannot be extended. That stands in stark contrast to what we are learning now about the real situation in NAMA.

Yesterday there were two newspaper articles, one in The Irish Times and the other in the Irish Independent, both of which seem to be based on fairly well informed briefings, both stating that what we were told in the original business plan for NAMA turns out not to be the case at all. The original plan told us that 40% of the loans that would be transferred to NAMA would be performing loans which would be cash flow generating. It turns out, if the newspaper reports are accurate, that this applies not to 40% but to 25% of loans and that, as a consequence, the projections made for NAMA will not now be fulfilled. The Minister for Finance came into the House when he was proposing the NAMA legislation and told us all that NAMA would not only wash its face but would make a profit of €4.8 billion. If these reports are accurate, there could instead turn out to be a loss of several hundred millions of euro.

Is it true that only 25%, not 40%, of loans are performing based on the case-by-case analysis that has been done by NAMA? If that is true, can the Taoiseach explain to us why the original business plan for NAMA that was presented to the House has turned out be a bit of a financial fairy tale? Will the Taoiseach confirm that when the Minister for Finance came before us and asked us to approve NAMA, that he did so on the basis of projections which now turn out not to be accurate? If it is the case that they are not accurate, can the Taoiseach inform us why this is the case? Is it because the banks lied in providing the original information on which the 40% estimate was made?

Deputy Tom Hayes

Not for the first time.

Deputy Eamon Gilmore

Or, is it the case that the developers were messing in the period between the time NAMA was first announced and when the first loan was transferred to NAMA? Was there a situation whereby after NAMA was announced a certain amount of financial hanky panky took place and people decided that if the taxpayer were to end up taking on this burden, then perhaps a given loan did not have to be repaid at all? Is there evidence of growing non-repayment from the time NAMA was announced? This is all based on newspaper reports. Has the Government received this report from NAMA? If so, when will it be published?

The Taoiseach

There has been some misunderstanding of the plan in advance of its publication. It is not true to say that NAMA now expects to make a loss. There are three scenarios set out in the plan. Under the central scenario, based on current expected asset recovery values NAMA is projected to make a profit. There are two other scenarios which are variations on the central projection, one in which NAMA makes a larger profit and one in which it makes a loss.

Deputy Joan Burton

One would not get a loan in a bank based on that.

The Taoiseach

The whole purpose of a business plan is to estimate the outcome under different assumptions. We have had an argument in the past regarding whether risk assessments were put in place.

Deputy Joan Burton

Who made the assumptions?

Deputy Tom Hayes

This will come back on the Government after the next election.

The Taoiseach

At issue is the draft plan brought forward in October, the first line of which states it is based on information provided by the banks. As the House is aware, there was much surprise in the banking system as to the aggressive nature of the writedowns with which NAMA came up. NAMA has decided, based on the data it has, what the value of those loans is and has paid accordingly. That is the reason.

I refer to the performance of loans. Some 25% of the loans are performing, but that does not change the value of collateral and present asset projections. That they cannot be paid by the borrower does not take away from the fact of the value of the underlying asset and the collateral which applies to it.

Deputy Joan Burton

That is our money.

Deputy Olivia Mitchell

We are unlikely to sell them.

The Taoiseach

Everything set out by NAMA confirms the aggressive nature of what it was doing to ensure we got a proper read on where we are at. This was done by NAMA and it has brought forward its central projection today which suggests that it still believes, based on the present asset values at the present time, that it will make a profit. With regard to whether it ends up with a loss, that would be addressed by a levy on the banks as the legislation provides for.

Deputy Olivia Mitchell

Whatever the Taoiseach prefers.

A Deputy

Whatever the Taoiseach is having himself.

Deputy Pádraic McCormack

One cannot get blood from a turnip.

Deputy Eamon Gilmore

The draft plan, as the Taoiseach calls it, is beginning to read more and more like a daft plan. The Taoiseach's Minister for Finance stated 40% of loans were performing in the draft or daft plan that was presented to us for NAMA. The Taoiseach is now acknowledging that it is 25%. Originally, we were told the discount applied would be 30%. Of course, it turned out that when NAMA got to work on it, more aggressively it appears than anyone in Government, the discount is significantly more. The real situation is that what the Taoiseach has presented to us and what has been presented to us repeatedly by Government in respect of NAMA has turned out in the cold light of day not to be accurate. The Taoiseach has been way off. He was way off on the numbers of performing loans.

An Ceann Comhairle

Can we have a question please, Deputy?

Deputy Eamon Gilmore

He was way off on the discounts.

Deputy Bernard Allen

Then the Taoiseach tries to lecture others on it.

Deputy Eamon Gilmore

The Taoiseach was way off in respect of where NAMA will end up and whether it will make a profit. The Taoiseach is now suggesting two scenarios in which it might make a profit or a loss.

The Taoiseach

There are three scenarios.

Deputy Eamon Gilmore

It seems the reality is that the Taoiseach does not know from one month to the next where he is going with this and where it will end up, other than that the taxpayer of this country will, for decades to come, have to shoulder the burden of the mess he has created and allowed to continue.

An Ceann Comhairle

Can we have a question please, Deputy? There is limited time for Leaders' Questions.

Deputy Eamon Gilmore

Yes. I thank the Ceann Comhairle for his help. The Taoiseach stated that he expects NAMA will still make a profit. Will he indicate his estimate of the profit NAMA will make?

The Taoiseach

It is not my estimate. NAMA is making these reports as required under the Acts. Some of the amendments discussed and accepted by the Minister at the time enable NAMA to bring forward in a transparent way on a quarterly basis what the arrangements are. Deputy Burton seems to know. Perhaps she could brief her leader.

Deputy Joan Burton

There are some bizarre amendments.

The Taoiseach

I made that point exactly. I am simply helping out the Deputy. I might get some kudos.

Deputy Eamon Gilmore

We would not get to know the information at all otherwise.

The Taoiseach

That is not the case at all. The Minister has been committed to dealing with the matter in an up-front way at all times. The central projection that NAMA has set out based on the up-to-date situation is that it will make a profit of something of the order of €1 billion. That is the central projection. It is set out over a ten year projection period based on current expected asset recovery values. During the next ten years issues will arise in terms of values and the recovery of the economy etc. This will all be dealt with on a case by case basis. It proves the wisdom of the NAMA approach of dealing with every loan on a case-by-case basis. It also disproves the idea put forward by the Opposition at the time that in some way there was some padding going on between the banks, those clients and NAMA as regards what the value would be.

Deputy Pat Rabbitte

The banks were lying.

Deputy Joe Costello

The banks were lying.

The Taoiseach

I hold no brief for that. The point I am making relates to the policy response to the banking crisis. The asset management agency set up will enable us to obtain a viable banking system. The proposal at the time from the Labour Party was to temporarily nationalise all the banks. If one nationalised all the banks one would be allowing the taxpayers to fund arrangements of all those banks and all the capital required.

Deputy Pat Rabbitte

We have nationalised them anyway.

(Interruptions).

The Taoiseach

No, we have not actually. The Labour Party's proposal was to nationalise all the banks.

(Interruptions).

An Ceann Comhairle

Can we have the Taoiseach without interruption, please?

The Taoiseach

The Labour Party's proposal was to nationalise all the banks, including the commercial banks.

Deputy Eamon Gilmore

No.

The Taoiseach

That was the position. The fact of the matter is, thankfully, Bank of Ireland has raised capital on private markets which has saved the taxpayer that consideration.

This report will be published. It will set out the situation and the central projection. I am outlining the factual position and the other scenarios. The report is simply making those scenarios available to the public so that people can see over the next ten years what the variation in projections will be. The important thing for taxpayers to know in respect of the NAMA operations is that were any losses to emerge after this ten year process, these issues are subject to levy and there will be a surcharge on the banks. That will go back on the banks' liability as far as we are concerned.

Deputy Pat Rabbitte

As Deputy Gogarty would say, "It is a nightmare".