National Asset Management Agency Bill 2009: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

I am pleased to present the Bill to the Seanad. While the views expressed by Members of the Oireachtas over the last few months have differed in many respects, we are all agreed that the National Asset Management Agency is an important item of legislation in the history of our country. For that reason I look forward to hearing the views of Members of the Seanad during the course of this debate, which I expect will be both constructive and informed. I have just been briefed as regards the amendment to the motion on Second Stage tabled by the Fine Gael Senators. I hope it does not set the tone for the debate, because I believe Seanad Éireann can do very constructive work on this Bill.

It is impossible to overstate the fundamental importance of the resolution of the banking crisis to economic recovery. That is why this Government, like governments and central banks across the globe, has provided substantial support to the financial sector and the broad economy in its management of this global crisis. Normally I would not wish to cover old ground, but it is important to consider what has happened in the last year because it sets a context for the Bill.

Just over a year ago the banks in this country were on the brink of financial collapse. The flow of credit, the lifeblood of any economy, was under threat. It was crucial that the Government acted decisively, and we did, as indeed did this House. With the introduction of the bank guarantee scheme we ensured our banks and financial institutions continued to have access to vital funding from the international markets. This funding is vital to ensure that all customers can go about their daily business in the knowledge that their deposits are secure.

Other countries followed our example and introduced various forms of guarantees. This resulted in challenging funding conditions once more for Irish financial institutions. The Irish banks did not have large exposures to complex toxic papers like some other institutions in the world. However, high levels of speculative property lending in which the banks had engaged left them heavily exposed to a falling property market. With the international money markets being squeezed, there was a heightened awareness of banks' capital ratios. This new focus on high capital ratios caused banks to hoard capital in order to protect their balance sheets. This had a damaging impact on the availability of credit to both business and residential customers.

In addition to the nationalisation of Anglo Irish Bank to prevent it from destabilising the rest of the banking system and the economy, the Government moved to recapitalise AIB and Bank of Ireland. This support was not unconditional, in return for the investment the State received preference shares with a fixed dividend of 8%. Furthermore, warrants attached to the shares provide an option to purchase up to 25% of the ordinary share capital of each bank. These have gained significant value since the investment. Operational and pay restrictions were also part of the recapitalisation package as was a credit package which imposed new obligations on the banks in their dealings with small and medium sized enterprises and mortgage holders.

Having stabilised the funding situation of the financial institutions, we then had to turn our attention to dealing with the risk to their balance sheets. The Bill that we will debate in the Seanad over the course of the next few days will give effect to this crucial next step. I have always accepted the importance of debate on this topic. That is why I published the draft NAMA legislation for consultation on 30 July this year. I wanted to facilitate an informed debate and learn from constructive suggestions. Since then many useful suggestions have been put forward and I have taken the best of them on board.

While there has been much debate on the subject of alternatives to NAMA, it is my firm belief that the asset management approach is the best option for ensuring a properly functioning banking sector that can carry out its role. The Government's decision to establish NAMA was taken following expert advice. Before any decision was made we listened in detail to the advice of the NTMA, the Financial Regulator, the Central Bank and our financial and legal advisers.

The asset management approach has a proven track record internationally. Our proposal has received the backing of the IMF, the ECB and, in recent days, the OECD. Furthermore, despite the disappointing downgrading of our credit rating by Fitch last week, that particular agency nevertheless expressed its belief that NAMA would be successful in rehabilitating the banking sector. This is an especially encouraging development with regard to the whole NAMA initiative.

Of course, much of the debate has centred on the risk involved in NAMA. I accept that resolution of the banks' difficulties involves risk and that it is a risk that the private sector cannot take. That is why the Government, just like governments all over the world, has had to step in. However, another risk that needs to be given prominence is the risk to the economy of not acting decisively and promptly. Doing nothing is not an option. No sensible person believes that it is. To protect jobs we need an economy that is growing. An economy cannot grow without a properly working banking system. If we do not act now to free our banks of their higher risk loans, we will not be in a position to benefit from the economic recovery that appears to be emerging in the United States and Europe.

The reasoned amendment speaks of the Bacon report. An edited version of the Bacon report was published but a vast amount of information on banks and their customers contained in the report cannot be put into the public domain. That report was one of economic analysis and in doing that analysis and a review of international literature Bacon identified only two options to address this problem, one to insure the loans and the other to buy them which is the option we have taken. There was no reference whatsoever in the report to the kind of approach elaborated by Fine Gael and no serious economic commentator has at any stage endorsed Fine Gael's proposed alternative. I regret to have to say this because it has persisted with its proposal throughout these debates. The Lower House has democratically approved the Bill and the Seanad could do a major service to the public by examining the detail of the legislation rather than reheating an argument about a bank whose only systemic importance appears to be to Fine Gael. This national recovery bank cannot be set up within any reasonable period to promote the extension of credit in the country. As a former leader of Fine Gael, Dr. Garret FitzGerald, has pointed out, defaulting on senior debt is not an option for this country.

In respect of the Labour Party's proposed alternative that public ownership is an important issue in this context, we have already been required to take a substantial part of our banking and building society structure under public control. The assets we are taking over from the institutions covered by the agency amount to approximately 55% of public ownership or control, as a proportion of the total assets which it is envisaged the agency will take over. The Labour Party, given its political tradition, has raised important issues about public ownership and I have no difficulty with that. There is, however, a question of balance. The issue is not whether we should have public ownership or control but whether we should have 100% public ownership and control. I believe that some residual presence on the markets and in private ownership is essential for the well-being of our financial institutions. I am sorry to have to go back over the Second Stage debate that has been taking place since last August but I do so because it is very important that here in the Seanad we focus on the actual provisions of the legislation. They are important and deserve extensive scrutiny and I am more than willing to accept constructive amendments and add to the Bill and improve the operation of this legislation.

We are entitled to have a Second Stage debate here too.

I am not questioning the Senator's right to a Second Stage debate but while it is against the tradition of this House to comment on the other House the Second Stage debate there continued into Committee and Report Stages with the same arguments being rehearsed on those stages that had been dealt with on Second Stage. They had been dealt with in committee in August, and have since been dealt with time and again. This country must move on. We will not rescue our banking system if we do not make a collective effort to repair it. That is essential and that is what the Government is doing.

The Bill has been the subject of intense and passionate debate, not only during its passage through the Dáil, but ever since I published the draft discussion document at the end of July. I thank the various parties, including Deputies and Senators, and welcome the constructive proposals they made at various stages in that public discussion. The lengthy debate has resulted in an improved and robust Bill which I am pleased to present to the Seanad.

This is an important Bill. It ensures the appropriate structure and mechanisms are in place for NAMA to perform its functions and achieve its purpose. Arising from the debate in the Dáil, I have made several amendments. While I do not intend to go through every amendment, I will briefly outline the most significant changes.

I introduced a Report Stage amendment which provides for a future surcharge on the participating institutions in the event of NAMA making a loss. While I do not expect NAMA to make a loss, it is nevertheless appropriate to afford the taxpayer maximum protection against any possibility, however unlikely, that a loss may eventually arise. Any such protection must, however, be balanced against the risk that the application of a statutory surcharge could result in the participating institutions having to provide for a future liability in their accounts, in line with international accounting standards.

The proposed amendment in the Bill strikes this balance. The basis of this charge, if applicable, will be a report by NAMA on its aggregate profits or losses from its establishment to the date the Minister for Finance seeks the report. The report will be certified by the Comptroller and Auditor General.

The Dáil has approved the provision for a tax on windfall gains arising from the future rezoning of land. The proposed measure introduces a new 80% capital gains tax rate on a windfall gain relating to disposals and rezoning decisions on development land. I will introduce a further amendment in the Seanad this week to ensure absolute clarity on a subject that is very complex in terms of striking a balance between achieving its purpose and ensuring it is not applied unfairly.

One area of common ground between all political parties has been the fundamental need to restore credit to the small and medium-sized enterprise sector, SMEs. This concern, held by Deputies across all parties, is the basis for introducing this legislation — to ensure the return of the flow of credit to businesses. This is an important issue and one of the first objectives of NAMA is to facilitate the flow of credit to the real economy. On Report Stage in the Dáil I introduced an amendment to provide the Minister for Finance with a power to issue guidelines to the participating institutions on lending practices and procedures to improve the flow of credit to SMEs and, if necessary, other sectors. The power is a wide-ranging one and will allow for a response adapted to the particular circumstances of different sectors and at different times. It is not a power that can simply be exercised prior to the entry of the participating institutions into the agency scheme. It is a power that can be exercised from time to time as occasion requires. This approach recognises this is a complex situation and allows for a flexible response to changing credit needs. It is essential the banks continue to lend to creditworthy businesses and individuals. The amendment's purpose is to provide the Minister with the legislative power to issue guidelines to the participating institutions on this important issue.

The banks are generally in the best position to make the commercial decision on whether they should make credit available for a particular business proposition. They are familiar with their existing customer base and have considerable expertise in analysing these propositions, including the terms and conditions under which they are prepared to lend. However, there is a danger they have become too risk averse and businesses are entitled to be certain their applications have had a proper hearing. It is clear, therefore, that there is a need for an appeal mechanism to have a decision reviewed. It is not enough for the Minister to take power to issue guidelines. The Minister must be in a position to see these guidelines are complied with. Hence an appeal mechanism is essential and such a provision has been included in the legislation. This is a complex issue that needs to be teased out with all stakeholders. My objective is to ensure mechanisms are in place, with a strong input from outside the banks, to allow potential borrowers a right of review where credit has been refused. Discussions are ongoing on how this can best be achieved.

The Bill has also been amended to cap the amount to be spent by NAMA on the acquisition of bank assets at €54 billion. As preparations for NAMA have advanced, it has allowed us to further hone our estimates of the assets to be acquired and how much they are likely to cost. It is appropriate a cap be placed on this amount so as not to potentially expose the taxpayer to an ever escalating amount of assets. Any order to vary this cap can only be made by positive resolution of Dáil Éireann.

With regard to risk-sharing, the legislation has been amended to include a maximum amount of subordinated debt securities that can be issued by NAMA in consideration for the acquisition of bank assets. That maximum is to be 5% of the consideration paid for the bank assets.

There is a balance to be struck between maximising the amount of risk shared and helping the economy and people by putting the financial system back on track. If too much risk were left with the banks, it could limit the extent to which they were freed to lend in support of economic development. It is imperative the banks are not lumbered with unnecessarily high contingent liabilities. Subordinated bonds are a method of sharing the risk associated with the agency. They put the banks at risk if NAMA were to lose money, which is not our expectation, without giving them an upside concerning the gains.

Public debate and press commentary have naturally focused on the price NAMA will pay for loan assets. Senators will be familiar with the provisional information I circulated to the Dáil in September on five of the covered institutions where we had the opportunity to carry out some analyses and stress-testing in the past year. Based on these assessments, NAMA estimates it will purchase loans with a book value of €77 billion for €54 billion. This is a projected discount of 30% which will inflict significant losses on the banks and their shareholders. The sum of €47 billion is the estimate of the current market value of these loans and the estimated aggregate purchase price includes a further €7 billion to reflect long-term economic value. Long-term economic value is an integral part of the valuation process to ensure the goal of stabilising the financial system is achieved and that, as a consequence, we are in a position to support economic recovery. The approach strikes a balance between recognising and reflecting the long-term potential of assets transferred to NAMA, while minimising any potential risk that the agency will make a loss.

Concerning the estimates I gave Dáil Éireann in September, it is important to make it clear this is a top-down estimate, not a bottom-up valuation. The legislation provides for a bottom-up valuation. A final figure cannot be arrived at until that valuation is concluded. It was essential in the interests of transparency and putting the maximum amount of information into the public domain that as Minister for Finance I disclosed our estimate based on our top-down view of what we saw in the financial institutions. The figure is an estimate and subject to the bottom-up valuation, the detailed loan-by-loan valuation required under the legislation. That bottom-up valuation will give the final picture.

The valuation methodology adopted is based on European Commission guidance which states the transfer value for assets will inevitably be above current market prices to achieve the relief effect. Since so much time in this debate has been devoted to the issue of long-term economic value, I want to reiterate the Commission's guidance. The Commission has stated transfer values will inevitably be above current market prices to achieve the relief effect. It has also stated transfer values may reflect the underlying long-term economic value of the assets involved. Our approach reflects the fact that the market for these assets is distressed and likely to return towards normality over time. I emphasise again that the success of NAMA does not rely on a return to bubble prices in the property market. NAMA will break even with modest growth in property prices over ten years. When the risk-sharing measure is factored in, it is estimated NAMA will have to achieve less than a 10% uplift over current market values on its assets over ten years to break even. Further improvements were made to the valuation methodology during debates in the Dáil. Changes made include limiting the uplift for long-term economic value to ensure the application of the valuation methodology will not result in an inappropriate overpayment for loan assets. The changes also provide for possible circumstances where the price paid for certain categories of assets may not exceed current market value.

In the area of valuation we have included in the Bill two key risk-sharing measures to protect taxpayers from the risk of loss. Part payment in subordinated debt balances protecting taxpayers with incentivising the banks to discharge their role in managing the loans efficiently. Furthermore, if NAMA makes a loss on winding up, a levy by way of a surcharge will be applied to participating institutions to make up this loss.

Senators will know that I made it clear on several occasions that discussions with EUROSTAT were ongoing to determine the accounting treatment of NAMA debt, leading to the decision last month by EUROSTAT that NAMA debt would not be added to the general Government deficit. The importance of keeping NAMA bonds off balance sheet should not be taken lightly. As a small country, having our asset relief mechanism on balance sheet, while other countries had theirs off it, could create significant anomalies when international market analysts or investors were comparing Ireland to others as regards EUROSTAT debt and deficit statistical returns. The statistical treatment does not change the fact that operations of NAMA will lead to an overall increase in the amount of the State's potential liabilities. Nor should it be overlooked that these liabilities will be matched by a countervailing asset holding.

The master special purchase vehicle will be established by the NAMA board to conduct the purchase, management and disposal of loan assets identified and valued by NAMA. It will be a separate legal entity, jointly owned by private investors who will own 51% of its ordinary equity and by NAMA which will hold the remaining 49% ordinary equity. The subscribed capital of the master special purchase vehicle is likely to be €100 million which has been accepted by EUROSTAT as being appropriate. This is a tiny fraction of the total consideration involved in NAMA. The special purchase vehicle will be run with the objective of making a profit on the purchase and management of the assets it acquires from the financial institutions. This will be for the overall benefit of taxpayers. The potential return to private investors is capped annually and at maturity and restricted in a rational way to the amount of their investment. If the master SPV makes a loss in its lifetime or is wound up, the equity invested and associated undeclared dividends will be lost.

Senators should bear in mind the following important points. A detailed legal shareholder agreement will be put in place to ensure that at all times the board will have a veto over the master SPV actions and decisions. This will protect the interests of all Irish citizens. I intend to issue a direction to the board that not a single decision should be made or allowed to be passed by the master SPV which will not be in the best interests or in line with achieving the objectives and purposes of the legislation. Also, the use of private investment in this way is not unprecedented. It will bring the Government accounting debt treatment of the Irish asset relief measure into line with other European financial stability and relief measures.

Following concerns raised by Deputies during the Committee Stage debate in the Dáil, I have made a number of alterations to the Bill which ensure the master SPV and group entities are addressed in more detail in the legislation. The changes confirm that certain provisions explicitly apply to the National Asset Management Agency group entities, including the master SPV. For example, amendments made ensure the Prevention of Corruption Acts apply to all directors on the boards of NAMA group entities and that duties applying to the board members will also extend to the boards of the group entities. In addition, the detailed reporting requirements in Part 3 of the Bill will also specifically apply to the activities of the group entities.

The establishment of the agency is a prerequisite for economic recovery and the generation of employment. In cleansing the balance sheets of Irish banks, it will allow them to focus their resources on discharging their essential role in the economy which is to provide credit and we have included in the Bill legislative provisions to ensure this will happen. In tandem with the other initiatives the Government is taking to restore competitiveness and bring order to the public finances, having the agency up and running as soon as possible will ensure we are well placed to take the earliest possible advantage of the economic upswing when it takes place around the globe and in our export markets. The legislation I am introducing in the Seanad today reflects detailed consideration of how the agency will need to operate to protect the significant investment of the State and generate a return for the taxpayer.

I thanks Senators, without exception, for convening Seanad Éireann on a Monday and giving this legislation the degree of attention I know they want to give it. It is appreciated by the Government that all Senators have put their own personal interests and diaries aside to give the legislation full consideration. I very much appreciate this. I ask Senators to examine the proposal in detail and look forward to hearing all views expressed in the debate. The establishment of the agency is critical for the future of the country and I hope Senators can see their way to support it.

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Seanad Éireann declines to give the Bill a Second Reading on the grounds that:

(i) the Government has published neither the Bacon report that underpins the NAMA proposal nor any proper analysis of this enormous initiative in terms of

(a) the enormous risks for taxpayers of using a dubious and politically influenced valuation methodology to pay for €90 billion assets of highly uncertain long-term value;

(b) the growing doubts regarding its impact on bank lending;

(c) the growing concerns from creating a secretive, politically directed, State managed, tax funded work-out process for 1,500 property developers, and

(ii) the figures in the draft business plan are not credible and have not been backed up by rigorous analysis.".

The debate on the NAMA legislation is taking place without any serious debate in either House of the Oireachtas on any other proposals to deal with the crisis in the financial sector. The Minister's remarks do not add much to the debate when he is critical of other political parties and their proposals. He may hold firm that NAMA is the only show in town and even though we do not necessarily agree with him, we will do our job as legislators in both Houses of the Oireachtas. Nobody will get any pleasure if this measure fails and the economy suffers subsequently. Nobody will get any pleasure from saying to the Minister, "I told you so," if anything goes wrong with the financial services sector. We are here to try to make things work. None of the Minister's experts is infallible. The Minister is not infallible, neither is anybody on this side of the House. Many of the same experts and Ministers who were telling us the economy was booming only a short while ago are the very ones who are now telling us that this is what we must do to save our bacon. We have landed ourselves in an unbelievable crisis because nobody is God in this country. Repetition is not bad, as the Minister wells know. We have often changed our outlook on many issues by constant repetition of debates, not just on what happens in this House but also outside it. Repetition can make us change our minds.

I want to deal with three specific issues. When the legislation is finally passed, I ask that the Minister refer it to the President immediately for referral to the Supreme Court. It must be examined by the Supreme Court because of the specific powers granted in the legislation in regard to private investors and the SPV and because of the powers the Minister will have over it and its assets. The legislation must be examined by the Supreme Court because constitutional, commercial law and property ownership issues arise. The powers of the Minister under the legislation must also be examined by the Supreme Court. I accept that the Attorney General has dealt with these issues but the certainty of a Supreme Court judgment would be vital before we start using the legislation.

We must also bear in mind the concerns of banks which are not participating institutions. The size of NAMA is also an issue. There is the issue of the State owning vast amounts of development land for ten years and the potential distortion of the market. It could be said it was that distortion by a small group of private individuals owning large tracts of development land that got us into this mess. There is, therefore, a need for us to be more open in this discussion.

There are major difficulties with the legislation which cross financial, socio-economic and planning issues. They are worthy of detailed debate but when the debate which may be repetitive is concluded, the legislation it should be referred to the Supreme Court to validate it on behalf of the Oireachtas and the people.

There are major political concerns associated with NAMA. There are the obvious political concerns about its structure and functions, the potential conflict of interest, the perception that the banks are getting a bail out and that developers are being let off the hook by ordinary individuals. Taxpayers can see this in two ways. They can see it in the way the Minister would like them to see it — forgive and move on, but many also want retribution because of the mess the country has been landed in by developers and bankers. So far the public sees the banks in a business as usual mode. That is not good from a political point of view. If the bankers feel untouchable, to some degree developers are not much worse off.

In the course of the debate since it began in the past six months there has been much macho grand-standing on the part of Ministers that the Minister for Finance will go after developers for every cent but that has been exposed as a hollow threat. The Minister cannot touch the personal or business assets of a developer if they have not been used as security for other assets that will end up with NAMA. Furthermore, NAMA will not have access to the Revenue files of the 40 to 50 individuals and others who brought the country's financial system to its knees. Al Capone remained untouchable in the city of Chicago until the revenue boys went after him. If the Minister were serious about being tough in addressing what is going on in the financial sector and the people who landed us in this mess, he would have some role for Revenue in terms of the way NAMA will operate but I do not see such a role. There is no clear role for Revenue in regard to what is happening. The Minister knows what I am talking about because many developers have managed to put away certain assets that will allow them to come back into business once the heat over NAMA has died down.

There are parallel political concerns that are just as important to the public's acceptance of NAMA. I will only mention a few because many others will discuss them. There is the issue of distressed home loans and the threat of repossession for 35,000 home owners. There is the issue of fixed mortgages, to which nothing more than lip service has been paid by all Government representatives in the House in the past few months.

There is still the serious issue of banks withdrawing overdraft facilities from small and medium-sized enterprises, a matter on which the Minister must be strong. He must not say he will do this or that. He must be extremely strong on the issue because senior management in the banks has instructed individual branch managers that they will be held responsible if they stand up for small businesses looking to have their existing overdraft facilities continued. This issue is not about the banks lending in a recession but about them reducing their overdraft facilities before they are fully audited by NAMA. Banks see overdraft facilities as loans. They want to reduce overdraft facilities in order that they will be seen to have lower loan figures when fully audited by NAMA. This is a clear case of the banks trying to make themselves look good with no regard for the consequences for the businesses involved. Every Member of this House and the Lower House is in direct personal contact with a huge number of people on this issue. The Minister is the one who will need those businesses. If cashflow problems close businesses, the Minister is the one who will end up paying for it through increased unemployment benefit payments and there being fewer at work resulting in him losing out on income tax. There is a need for the Minister to deal seriously with that issue of overdraft facilities for small and medium-sized enterprise, not merely to state he will insert something into the legislation on Report Stage. He needs to do something about that.

There has been much talk on the legislation about social capital and the way NAMA can be used to influence local issues and small businesses, and I want to raise with the Minister another issue, which is not strictly related to NAMA but at which he might look. Often companies tendering for Government projects are requested to have a minimum turnover before they apply for a tender. Would the Minister give consideration to the proposal that maybe there should also be a maximum turnover outlined? Some of the very big companies are competing with small local companies for what normally have been considered small Government procurement projects and maybe the tender process should include not just a minimum turnover but also a maximum turnover to help small companies survive in these more difficult times and compete with bigger operators.

I raise another political consideration to legitimise NAMA in the eyes of the general public. Last Thursday night I proposed that shares in NAMA's SPV could be sold to the citizens of Ireland along the lines of the national loan bonds of the First Dáil. This would allow every citizen to own NAMA. The Minister's response that night was insulting to taxpayers who are paying for this enterprise. The Minister for Community, Rural and Gaeltacht Affairs, Deputy Ó Cuív, came in here and stated the board of NAMA would prefer large institutional investors. To some degree, that gives the sense that the privileged few continue to be the ones first and foremost in the mind of the Government. The Minister, Deputy Ó Cuív, also stated that the ordinary man and woman does not need to get burnt by investing in NAMA. He clarified this remark by stating that many individuals in Ireland who do not have vast resources were burnt by investments they made during the course of the Celtic tiger, and that would be a reason they should not invest in NAMA. That is demeaning to the intelligence of the average Irish man or woman.

He also stated that setting up a scheme such as what was done for the privatisation of Eircom would delay the setting up of NAMA. If the Minister, Deputy Lenihan, wants something that is truly democratic, that is inclusive to the Irish people who are paying for this and that gives an opportunity to every citizen to decide whether he or she would like to be part of this, he could look at my proposal to see if it could work — in fact, he could make it work.

Like any Irish citizen, I understand the concept of risk. I have been burnt by what happened in the financial services sector in this country. The Minister is putting his confidence in this and is saying this will work, but we all know it carries a certain risk. If he really wanted to legitimise this SPV, NAMA and this rescue plan in the eyes of the people, let them own it and be part of it. If the Minister persists with this approach to rescue the financial service sector, it might do him no harm in the long term if the Irish people also feel they have a role to play in this.

We need to review constantly the political aspects of NAMA. The Minister for Finance can dismiss the need for repetition and dismiss other parties' viewpoints——

Senator Twomey has been constructive. I am not criticising him.

The Minister has. It does good to review constantly the political aspects of NAMA. The NAMA project has the potential to cost the same amount as the HSE spends in the lifetime of an average Government. In its five-year history, the HSE, with its excessive secrecy, chronic lack of information, lack of accountability to the Oireachtas and desperate policy decisions, has lost the complete confidence of the Irish people. In reading the debate on NAMA in the lower House, I have read words like accountability, transparency and corporate governance. I clearly remember those words used when I was the Opposition spokesperson on health and children when we debated the establishment of the HSE with the Minister, Deputy Harney. In fact, the Minister, Deputy Lenihan, was a junior Minister in that same Department when we debated that legislation.

Sadly, the words most often used in public discussion about the HSE are incompetence, negligence and criminal.

Is that word "criminal" used as well?

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.

I formally second the amendment. The Minister and the Government are at pains to state that NAMA is not a bailout for the bankers and developers. I can certainly state it is not a bailout for taxpayers. It is a sentence on taxpayers which will have devastating effects on their standards of living and impose a massive debt on each and every household, a debt for which they were not responsible in any way, a debt caused by bankers, developers and a Government which stood idly by and was arrogant enough to suggest that people who questioned its policies should consider suicide. Government backbenchers cannot be absolved either. Where were the Mattie McGraths of this world when the ship of state was navigated towards the rocks?

When the details of NAMA were outlined, I heard on a radio programme that several developers were wining and dining in Spain, and when they heard the details of NAMA, they toasted the Minister and NAMA. They obviously believed the bailout was for them.

That is pure hearsay.

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.

I welcome the Minister and pay a personal tribute to the great effort he has been making in the past year to overcome unprecedented difficulties. I am sure it has been quite a substantial sacrifice for him and his family. I thank him for his efforts, his enthusiasm and his determination to find the appropriate solution to these problems.

I am a fan of NAMA. Anybody in this House over the past year would know that. Before it emerged that we were going to go down the route of the asset management route, I had been calling in this House for us to look at what the Americans might call an aggregator bank where we would pool the toxic debt, centrally manage it and try to work through it. As a concept, I am a fan of NAMA. We have the appropriate template from which we can rebuild our financial system, rehabilitate it, and achieve our primary goal of getting credit flowing to help viable business to continue, encourage new businesses to start and get much needed credit to families throughout Ireland.

Senator Twomey was extremely constructive in his debate, as was Senator Cummins in the main. However, I always have an issue when I hear about how we on this side of the House got the country into the mess exclusively, and it was all about bankers, developers and tents in Galway. All of this rubbish is tedious and tiring in the extreme.

(Interruptions).

I do not interrupt anybody in the House. We had an unprecedented period of growth in this country over many years. All sides of the House at all times always called for more expenditure, more services and higher wages, even though pay and expenditure were being increased across the board. All of this was in a situation where money was available at 2% from the ECB at growth levels of 8% to 10% per year. There is no question about it; we overcooked the situation. The fact that we are in the eurozone means we do not have direct control over our own interest rates. Perhaps that did not help us at that time, although we are very lucky to be in the eurozone when one considers the overall picture.

There are many reasons to explain why this happened. There is no question that if we had the benefit of hindsight, there are certain things we would have done differently. The reality is that the Government operates in a real time environment. I am glad the Minister has introduced these various measures, such as the bank guarantee scheme, the nationalisation of Anglo Irish Bank and the very thoughtful process with NAMA. One might say that the Second Stage debate on this has been ongoing since last July. That is to be welcomed because it has evolved through that period and improved. It will continue to improve this week and I welcome the fact that the Minister has made it crystal clear that he is more than prepared to take on board any constructive amendments or suggestions to make even better what clearly is a vehicle that has been met with much national and international approval.

NAMA is one of the most important initiatives the State has ever undertaken. It is vital it works. NAMA will purchase the land and the development loans of the banks at a rate and will be centrally managed over the years ahead. It is vital the people on the board of NAMA have absolute credibility. There is a great level of understandable anger among many members of the public at the pace of our decline, where we have gone from a surplus to a 12% deficit in two years. As a result of that, we are all seeking to get our pound of flesh. However, it would be foolish in the extreme if we sought, metaphorically or otherwise, to set up the guillotine on St. Stephen's Green and begin to line up every banker, developer, politician or otherwise who we know.

Just the stocks.

To do that would undermine due process as well as our ability to get through this and tap into the national expertise and talent that exists. Many people throughout the banking system, politics, the public service, the Opposition and the Government have things to offer in this debate. Just because people worked for a particular institution or have a particular political affiliation does not take away the fact that they may have something very constructive and worthwhile to offer in this debate.

We have focused on three main areas during this debate, namely, the special purpose vehicle, risk sharing and the long-term economic value. I am not at all paranoid about the concept of the special purpose vehicle. All aspects of this process will require the utmost level of scrutiny to the fullest extent possible, be it through the Houses, their joint committees and the various other watchdogs that can be put in place. It is vital we have absolute transparency and accountability, notwithstanding the fact that there are some aspects to NAMA and the special purpose vehicle that will not be open for competitive reasons.

When the Oireachtas joint committee was considering the draft Bill that was published over the summer, there was a suggestion of an oversight commission that would be given access to all aspects of NAMA, even the commercially sensitive information, so that the public could have even more confidence in the situation. Once established, NAMA will create the special purpose vehicle for the purchase, management and disposal of loan assets identified and valued by NAMA. For credibility reasons, it is vital the appropriate investors would be sought. It is not credible to have the banks as mainstream investors in the 51% stake. This needs to be looked at. Obviously, securities are to be guaranteed by the Irish banks, but many people are wondering why the SPV is necessary.

One of the key aspects of NAMA, particularly since the SPV has been mentioned, is communicating this situation to the public in, for want of a better expression, ladybird language. I am not an economist and while I may have learned a few terms over the last 12 months during economic debates, I do not have the qualifications, experience or background in economics of Senator Ross, for example. For the most part, the general public are in the same position as myself. I would like to see a simplified explanation of the SPV and the workings of NAMA. Perhaps this could be examined by the Minister, whether it is done through the national media or otherwise. Many of the debates on the airwaves and in the print media are confusing people because of their complex and highly technical nature. That gives rise to people not giving the full picture by resorting to hyperbole and political point scoring, which is dangerous. We would be well served if we could get that message out there. It may be too expensive to send a leaflet to every household, but this matter could be outlined on the airwaves in the simplest possible language for the public's benefit.

It is envisaged that the majority of private investors will come from pension funds. I have a slight concern in that regard because some pension funds are owned by banks, so I would like to hear the Minister explain where those investors would come from.

Concern has been expressed as to why the SPV was only mentioned last week. I am not paranoid about it because EUROSTAT had to make a ruling and once that ruling was made it was quickly left in the public domain. The benefit is that it will keep the level of debt off the balance sheet, which is appropriate. It is part of the country's debt, but it is appropriate that it be treated differently. It is underpinned by a property portfolio which will be managed over a period, whereas the sovereign debt is underpinned by the reputation and performance of the State overall.

I welcome the fact the Minister has already accepted some amendments, including one seeking to apply the provisions of the Prevention of Corruption Act 2001 to all members of the NAMA board, as well as all directors of any NAMA group entity, such as the SPV. The legislation will require that NAMA and all NAMA group entities will have a register of interests of all board members and staff, which his very important. In addition, reporting requirements in Part 3 of the Bill will also apply to the activities of NAMA group entities. The powers and rights that NAMA has in its dealings with participating institutions will attach to NAMA group institutions.

I note that Robbie Kelleher of Davy Stockbrokers stated the SPV seems to be a technical vehicle that gets debt off the balance sheet. He said he did not think it had any significant implications for NAMA. Many commentators have noted that it is quite an achievement for the State to have been given the go-ahead by EUROSTAT to implement the SPV.

One can see the motivation of the investors is exactly the same as that of the State. The aspect of private interests is positive from my perspective and it is clear that they will want to make a profit. My colleague, Deputy Michael McGrath, said that on "Prime Time" last week and I agree with him.

If possible, I would like more information on how the tax surcharge will be calculated. Is it payable at the end of ten years or will an amount be paid annually? What percentage will it be? Presumably it will relate to the amount of loans taken over from each bank, but how will it work out if some banks are profitable while others are not? I welcome the risk-sharing mechanisms that have been put in place by NAMA. I want more details on the surcharge, however, to ensure that is the case with subordinated debt.

The Minister mentioned that we will have bottom-up valuations to follow the top-down ones. As someone with experience in valuing and auctioneering, I presume those valuations will be less. Therefore I assume we will pay less, but I want to get a little more information on that. As preparations are made for these bottom-up valuations, I gather that various processes are being undertaken to secure the expertise that is required from a number of companies throughout the country. I wanted to make sure the appropriate geographical spread will be applied. It would be a mistake, for example, to go with reputation rather than specific local knowledge. In that regard, I hope each part of the country will have appropriate local knowledge when calculating these values.

Like everybody else, I am concerned about our ability to ensure the banks lend again. It is important to get a level of credit flowing to a greater extent than we currently have. Having said that, I do not particularly want it to be easy to get money. Part of the reason we are in this mess is because it was too easy to get money. I will always recall the finance company whose television advertisements made it sound like all one had to do was ring up to get a loan. All these people were being interviewed about how they managed to consolidate all their debts into one and still had enough money left over for a new speedboat. It was hilarious.

I hope this debate throws up some suggestions as to how the Minister could amend the Bill to get credit flowing, while at the time maintaining a level of robust underwriting that would not encourage the kind of madness we saw over the last number of years. We are a long way from 8% growth levels, but we should take that point on board.

We must ensure those who did nothing to deserve what is going to happen to them will not suffer most. It is vitally important for the purpose of credibility and basic justice that the first line in the queue for any potential loss is taken by developers. Given what has been outlined in NAMA, we are going to pursue developers and borrowers to the nth degree to ensure the maximum moneys are recovered in line with the loans that were taken out, or that the security in terms of assets will produce that.

After that, banks should take the next place in the queue before the taxpayer gets anything. It is vitally important that should be the case and that the banks will pay. We come back to the tax surcharge and I look forward to getting more detail on it.

As the Minister said, NAMA is widely supported and endorsed by such bodies as the IMF, the ECB and, more recently, the OECD, in addition to a variety of financial bodies throughout Europe and America. This undoubtedly gives Ireland the assurance and confidence that NAMA can and will succeed over time. The Minister mentioned that, while downgrading Ireland to an AA minus rating, Fitch noted the long-term outlook is stable. The rating agency also commended the Government for its vigorous fiscal consolidation response to date, given the likely success of NAMA's rehabilitating the banking sector.

Last Friday, the former Taoiseach Dr. Garret FitzGerald expressed his support by saying he thought the Government's policy approach was the correct one. Another former leader of Fine Gael, Mr. Alan Dukes, said the same, as have many other commentators. The OECD report said that further recapitalisation may be necessary, but should be temporary. The Minister has said that if that is necessary it will be done by taking a greater stake. Mr. Dukes summed it up perfectly well by saying simply that of all the plans on the table, NAMA was the correct one. It is interesting to note that, today, we have not yet had any mention of the Fine Gael national recovery plan.

The Senator has and he will hear a lot more of it.

I apologise. In any event, everybody agrees, irrespective of whether he or she is prepared to admit it publicly, that NAMA is the correct approach. It is the approach we must continue to tease out and improve in the Houses over the coming days. It is the most appropriate and best vehicle to get our financial system moving again while at the same time protecting taxpayers and the public interest to the fullest extent possible. The chief economist of Goldman Sachs, Mr. Erik Nielsen, stated NAMA was just the latest in a series of impressive steps by the Irish Government to clean up this mess.

I pay tribute to the Minister on his single-minded and determined approach and I hope that, over the coming days, this House can play its part in helping to improve what is already a good template for economic recovery.

I wish to share time with Senator Harris.

Is that agreed? Agreed.

I welcome the Minister. NAMA has been a very hard sell. This should be as non-political a debate as possible. Although I believe NAMA is wrong, the Government has approached it in a fairly non-political manner. It is genuine about the NAMA project and has not been as conscious of the political implications of its approach as it has been in other areas. This is welcome to those of us in the Independent benches.

If the Government had adopted a political approach, it would have done something different and a little more populist. The proof is that the two principal players or constituencies that will suffer as a result of NAMA are the developers and builders. It should be acknowledged that this is probably politically inconvenient for the Government. That it is also inconvenient for the taxpayer is probably even more inconvenient for the Government.

It should be acknowledged that the Minister has approached this matter in an extremely courageous way and has a grasp of detail that is as good as one could expect from any Minister for Finance. It is underlined by the fact that he has so few civil servants with him today. I doubt if any of them will be particularly worried that he went off script in his speech this morning. He did so very fluently.

It would be helpful if the political points were removed and we examined the legislation as coldly as possible. Those of us who do not believe NAMA will work must state quite clearly why it will not or why it is not the best solution. My saying the legislation is actually not a bailout for the bankers and builders will annoy Members who believe the opposite. It is a bailout for the bankers but not the builders. It will not work if it is a bailout for the builders. If the builders are to be relieved of some of their debts under NAMA, there is no possibility of it ever working. These are the people who are to be squeezed as much as possible, and rightly so.

There is no doubt the legislation is a bailout for the bankers. This is coded in everything the Minister and everybody else is saying. They do not use the term "bailout" because it is politically difficult for them to do so. However, in effect, the legislation is stating Ireland's banking system is bust and that we must do something about it. I find NAMA so difficult to accept not even because of the fact that the State is paying far too much for the assets but because it is such an incredible gamble in respect of what is to happen to assets. NAMA is nothing but a gamble with the assets and debt of the country. It is built on two principal assumptions, one being long-term economic value and the other being current market value.

It is when we talk of such concepts that we move into a fantasy world. The calculations made, which are all dressed up in complicated European Commission-type terminology, have all the characteristics of calculations made after having determined the result one wants in advance. That is a very easy thing to do, but it is quite complicated in mathematical terms if one wants to make it complicated. The Government is constantly talking about modest desires, such as an increase in asset values in the order of 10% in ten years, after which it believes everything will be alright. This is very modest. There is no earthly reason for believing property values will increase by 10% in ten years. I cannot believe anybody can assume it so blandly. The only reason people make this assumption is that there has been an upward trend on the graph historically. However, there is a very fast downward trend at present. The result is that the Government has picked a point somewhere on the graph and stated current market values are to be determined on that basis. The indications are that the current market values, as estimated by the Government, are far too high.

It is virtually impossible to know what current market values are. In many cases, they are zero. The Government's assumption in this regard has all the features of backward calculation. Once one creates a base for current market value, one adds a figure to determine what is called long-term economic value. This leads one into a fantasy world in which one says all will be okay on the grounds that what one has predicted will happen in ten years. I do not believe this.

If I were asked what I believe property values will be in ten years, I would say they will be lower than they are at present, given that one can say what they are at present. The Government would say the opposite. I have not a clue whether I am right or wrong, nor does the Government. Therefore, the values we are deciding upon are false, make-believe values, yet the most important Bill ever to be considered in a Seanad of which I have been a Member is based on utter fantasy. This is very dangerous. I can understand why the Government is doing this and why it is necessary, and I can understand how desperate it is, but its figures are not in any way realistic or provable.

I have always felt the nationalisation route is correct. I do not know what the cost would be, nor does anybody else, just as we do not know what the cost of NAMA will be. Nationalisation has one or two features that are preferable to the NAMA model, one of which is the idea of certainty. The first reason it would be better to take the nationalisation route is because it would finally force us to believe the State is more powerful than the banks. What we have seen during the consideration of the NAMA proposal is that the banks have continuously had the Government on the back foot. Nationalisation should put an end to that.

During the Order of Business this morning, I stated AIB has come forward with a solution, or supposed solution, which appears to have been agreed by the Department of Finance, to end confrontation with the Government over who should be the next chief executive. AIB is the third or fourth bank that has appointed an insider to take over, even at this critical time. The last thing we want is insiders in the banks. NAMA will allow the banks a degree of independence that they do not deserve. We have seen this pattern already. We saw it in the case of Bank of Ireland, where the Minister skilfully and rightly removed the governor and chief executive. The governor was replaced by a Bank of Ireland lifer who had returned. While he may be a talented man, he is deeply imbued in the bank's ethos. The heir apparent of the deposed chief executive took over, an insider appointed in a big hurry within a few weeks.

When the chief executive and chairman of AIB resigned, there was an immediate appointment of a chairman from inside the board. An announcement on the appointment of a chief executive has not yet been made; therefore, it is not too late for the Minister to change his mind, but there has been a stand-off between him and AIB for six months on who should be the chief executive. Apparently, there is a so-called compromise that, as I stated on the Order of Business, is unacceptable for two reasons. First, the candidate is an insider from the board, the chairman. Second, he is defying all of the rules of corporate governance. The situation is worse than it used to be, as there would be an executive chairman who would have too much power. Our problem with some of the banks was that men had too much power. It was almost as if they were running little feudal kingdoms. This should not be allowed.

I am not normally an advocate of nationalisation, but the banks are a crucial part of the economy and are in a bad way. Presumably, nationalisation would give the Government the power to overturn the banks which are retrenching and winning a power game. This is an important matter. The Government is right — we cannot let the banks go bust. We must rescue them, but we must do so on our terms, not theirs. With NAMA, we seem to be doing all of the good in bailing them out, but we are giving them autonomy they do not deserve. Unfortunately, nationalisation would be a better solution in this regard. If the Opposition is genuine about tackling the problems of small businesses, nationalisation might help for a period, about which the Opposition is right. However, the banks are defying the Government on the issue of small business loans. I read the formula in one of the banks' published documents on an agreement between them and the Government. Although I cannot remember the words, it stated they had agreed on the availability of more loans for small businesses. That was meant to be a concession. The loans were available, but only on terms that were impossible for small businesses to accept. They were unacceptable because the terms were penal or difficult. There was wordplay. The banks stated they would make loans available because the Government wanted them to do so, but no one was able to take them up.

These guys need direction and to be dictated to. Every time they are let off the leash, they come back and outplay the Government at this game. They have done it for decades and will continue doing so. In NAMA there is no mechanism for restricting them in these activities. In their current form, banks are not fit to appoint their own boards and should not be allowed to do so. History teaches us that they form clubs, pay themselves too much and do not perform any exercise in lending to small or other businesses which need money. They maintain that they do not lend to small businesses because they are not creditworthy. Nationalisation would have been preferable because it need not have lasted forever. We could have placed the banks in State ownership for a time with the express intention of refloating them. If they had been nurtured properly and started to make profits, there would have been no reason not to refloat them. It would have been a simple and practical measure like putting an invalid into a convalescent home. As everyone accepts, it would also have removed our terrible pricing problem. The real objection to NAMA, as identified by the Minister and which sickens him to keep hearing——

The Senator has one minute of the agreed time left.

I am sorry. I gave Senator Harris only so much time.

The Senator can take his time.

There is a real pricing problem. The figures are simple — the pricing mechanism has benefited the banks, while the taxpayer has suffered. We all know that the taxpayer is subsidising the banks, but this would not necessarily be the case had the banks been nationalised. There would not have been a pricing problem because the assets would have belonged to the State.

As I have only one minute left, I had better be quick.

There is less than one minute left now.

I have only one other major point to make. There is a real problem with the NAMA industry. I was staggered when I saw the figures for what the State will pay out to all of the agencies involved over ten years. Will it be €2.4 billion?

That is in fees. The money could be spent this year instead of throwing it away to the people concerned. The Minister mentioned experts and expertise. I was a stockbroker for a long time and never came across anyone in that world who knew much about which stocks and shares to buy. This is the expertise in question. I have never come across anyone in the auctioneering world who knows how to value properties properly. I would not expect them to be able to do so. Why in the name of God are we paying such people €2.4 billion? We are and will be told what we want to hear and the Minister will pay them for it. Senator MacSharry referred to Davy Stockbrokers which is already peddling the Government's line about the economy. Its people are the only ones who are.

The Senator is taking from Senator Harris's time.

This may not be unrelated to the fact that many gigs are being offered in the NAMA business. Brokers will be looking for them.

They are actually more optimistic than us.

That is correct, in which case they are guaranteed to get the work. It is the Government's line. Auctioneers will do the same. They will give NAMA the valuations it wants in return for fees. We do not need such a NAMA industry because no one will be independent, yet they will receive significant sums from the taxpayer. This activity would not be required were nationalisation involved.

I welcome the fact that there will be an Oireachtas committee, but I do not welcome the Bill in its current form because the principle behind it is a fantasy.

I am not going to avoid the mechanics, but I want to remind the Seanad that NAMA is as much a political vehicle and part of the political economy as it is an economic vehicle. I agree with Senators MacSharry and Ross in their tributes to the Minister. As I stated in the House two years ago, we were at the beginning of a long war. In this war one needs a leader who is prepared to be seen at the hardest point of the battle. The Minister has not been hanging back. He has led from the front, which is the first requirement before any battle plans are made. One needs someone with the courage to lead, which is the case with the Minister.

The next question is whether the vehicle, the tank, so to speak, that the Minister has devised to win this war, is fit for purpose. All one can say to that from a political point of view is that we do not know. Like all human projects that project into the future, they are contingent. Everything human is fundamentally flawed. Everyone who says that he or she has a panacea for the future or that this or that will work is not telling the truth. All we can do is to prepare a special purpose vehicle to carry us into the future and prepare as well as we can for the journey. That is what the Seanad is doing today and what the Dáil has been doing, namely trying to get that vehicle up to standard to make it fit for purpose to carry us into the future, but we do not know and we cannot give any guarantees about where it will arrive. That is in the nature of the human project. We should modify our expectations and stop talking as if there were some perfect human project. NAMA is as good as the men and women who will run it.

NAMA is a necessity. In terms of its philosophical foundation it seems to me that NAMA is a creature of need in a field of contingency. That is to say, we need it but everything that will happen to it is contingent. I support NAMA, not because it was the only possible way of dealing with the crisis but because it is now the only possible way of dealing with the crisis. It seems to me that like marriage, one commits oneself to it, and that one knows there will be messy parts to it, but by and large one hopes it will work. One does one's best and one does that honestly.

And you end up getting screwed.

The Minister should not give any hostages to fortune. None of us should give hostages to fortune. All the Minister can do is say, "This is the best I can do". We should give it a fair wind.

That does not mean that there are not problems with the proposal. There are two problems with NAMA. They are both problems of public perception. The first is that it is seen as a bailout. To deal with that, in a kind of populist mode, reference has been made to surcharges and talk of further punitive measures and regulations. The question of bailout and profits would be more usefully tied to the relaxation of the lending mechanisms about which Senators Ross and MacSharry spoke so eloquently. Rather than hounding the banks on the matter of profits and surcharges, I would be happy if any profits they made were immediately released to small and medium-sized business enterprises and used to bring about the relaxation of credit that we so desperately need. I do not believe the public perception that this is a bailout for developers and bankers is well founded. Senator Ross is correct in that regard. That will not prove to be the problem in the long run.

The second problem with NAMA is the most important one, namely, the danger that those in default seem to be liable on far too narrow a front. If builders are in default we must widen the circumstances in which their wealth and capital is only accessible in terms of the narrowness of the loan they contracted originally. To prevent the public from having a well-founded scepticism, we need measures to ensure that on default of a loan, we can get some access to the other wealth of defaulters that is protected by the usual mechanism of putting their wealth in the names of family members or by using other vehicles. The current banking regulations on the recovery of debt seem too narrow and that is something the Minister should examine.

NAMA has no mechanism currently to circumvent normal banking practice to make good the loans. By that I mean that if a company or other entity cannot pay back its loans, it may walk away from them to the extent that other security guarantees are not involved. NAMA should be empowered to apply new rules that would force the parties to the loans, namely, the borrowers, to repay their debts even from resources that were not part of the original security, provided it is possible for them to do so. Under normal circumstances a bank might write off the debt. These are unusual circumstances and we need to change the rules. It might be necessary to follow purely commercial lines in the national interest but it is wrong to place an unbearable burden on the taxpayer to shelter the wealthy from their own losses. We need new rules and new criteria for dealing with this issue.

I found some aspects of the Dáil debate frivolous, time wasting and too full of party partisanship. I wish the Opposition, in particular the Fine Gael Party which has so many illustrious former leaders and members telling us that for better or worse NAMA is the only game in town, would lend its great resources and expert knowledge to improving the Bill rather than debating the foundations of the world from the beginning, so to speak. There is no question of having a different car for the journey. We have this car for the journey. It is the only car we have. We should fine tune its engine and make it fit to get us to our destination. Stopping the debate every so often to argue about whether we should have started out with this car is not useful at this stage.

NAMA is a necessity. It is not simply an economic measure but an act of political economy. It is carried out in contingent circumstances by flawed human beings so we should approach the journey armed with the political virtue on which all other virtues are conditional, namely, courage. NAMA meets Aristotle's definition of courage as a halfway point between cowardice and foolhardiness. We would be cowardly to do nothing. It is not possible for us to do nothing. We would be wrong to be foolhardy. NAMA is neither foolhardy nor cowardly. It is a brave project. It is most likely a flawed project but we should give it a fair wind, which is why we should all say to the Minister, bon voyage.

The National Asset Management Agency Bill is the most significant Bill the Houses of the Oireachtas have had to debate for many years. It is era-defining legislation. In fact, it is an era-straddling Bill. It brings to an end the Celtic tiger period of prosperity when our economy improved to the largest possible extent in our political history. It also deals with many of the excesses of that period that have made us consider a Bill that otherwise we would prefer not to introduce.

As other Senators have indicated, it is the essence of political leadership that Government makes proposals which are seen through and debated in both Houses of the Oireachtas to ensure the vehicle that results is the best possible one. I share in the support expressed for the Minister in the process we have followed since last July when the draft Bill was published as a consultation document. Changes followed before the official version of the Bill was published and the debates that took place in the other House resulted in the acceptance of many amendments. The last stage is the debate in this House where consideration has already been given towards a further refinement of what needs to happen. As part of that process there has been already much discussion on the available alternatives. Although I share much of the uncertainty of every Member of both Houses about our future in terms of whether NAMA can and will work, a number of measures have made me more confident and allowed me to give my personal support to what is being proposed.

The National Asset Management Agency is more likely to work than the alternatives that are available to us. The difference between the NAMA approach and the other approaches, namely, nationalisation, whether full or partial, full recapitalisation or the irresponsible default process that has been suggested, is that with most of the other approaches the capital is needed immediately and the cost of that will be carried by the taxpayer. In addition, the capital repayment of that initial infusion of funds will only come about after an uncertain period of time with an uncertain result ensuing. With NAMA, there is a cap on the amount of money that will be put in. There are mechanisms for how most of that money will be made up in the form of the value of the assets that underpin the loans, the risk sharing element, the value of the shareholdings in the financial institutions and the tax surcharge. On that basis I am confident that even if a loss ensues after ten years, the role of the taxpayer as a result of this Bill, in forming this agency and in dealing with this problem, will be dealt with by the institutions becoming viable and becoming the engine they must be for a more prosperous economy in the future.

With regard to the proposals being made, especially the tax surcharge, the Minister has been most forthcoming in responding and amending the Bill in ways my party believes have improved it. The issue of whether there should be a tax surcharge or a bank levy has been most prominent in recent debate. While a bank levy has more attractions and a great deal more certainty, there is not a great deal of difference as to what both will achieve. Senator MacSharry raised the need for more clarification as to whether the surcharge can apply in situations where some of the institutions might not be profitable after the ten-year period. If we are talking about the profitability of the banks after a ten-year period, we are already conceding that we believe there is a possibility that NAMA will fail, and to a significant extent. I am very confident profitability will be restored.

Senator Harris asked how we can make best use of that profitability and how the funds can be redirected. I do not see it as a punitive measure. We must put in this Bill the legislative means by which the financial institutions, after receiving this rescue, which is probably a better word than bail out, can be shown to repay the taxpayer in the fastest time possible. There is a further change in the tax surcharge that I favour inserting, and the Minister might consider it. There is a difficulty with the question of contingent liabilities, and this is why the bank levy was seen to be the less effective vehicle. I do not foresee any difficulty if, before the ten years are up and the banks are seen to be profitable, an element of the reserves that are produced by their future profits are put aside in the event of being called upon after ten years. I would not consider that a contingent liability and it would mean we would not have to wait until ten years for the banks to be making profits as we could see the progress in the meantime. If such an amendment can be framed, I believe it would improve the Bill further.

With regard to the windfall tax on rezoning, some have chosen to make mischief about this proposal which the Green Party put in place. This is not proposed as a revenue-raising measure. It will stop the excesses that were brought about by the type of open conspiracy we saw over the past ten years between banks, builders, developers, auctioneers and solicitors. It will ensure land and the planning system will be used properly in the future. The measure is meant to be a disincentive, not to raise revenue. The real question we must ask ourselves is how NAMA will work in the future. This Bill will not solve all our problems. It is quite likely that in the ten years there will be further amendments as we see how the process moves forward. There will be changes in various Finance Bills, in company law Bills and, in particular, in planning and development Bills. We must see this as a process that will be followed and improved as time passes to meet the uncertainties several Senators have mentioned.

The central aim of this legislation is to ensure lending to small and medium enterprises. There is still a great deal of uncertainty about this. Some of the amendments the Minister made to the Bill and which he intends to refine further seek to address this issue because it is at the core of what it is hoped NAMA will achieve. The same problems would exist with any other of the alternatives available to us, particularly nationalisation. The difficulty for the Minister is that he cannot direct, but I believe he can specify. Some of the approaches he has taken will go some way towards doing this. The hope is that the size of the amount of money being made available will itself be the lending instrument that will get our economy to grow. Again, however, this measure must be kept under scrutiny. The accountability measures that have been put in place, especially the Oireachtas committee, will help in this process.

Questions have been asked about the assessment method. I have put some concerns on record. We need not see NAMA as something that is starting from a year zero approach, if Members will pardon that analogy. The property market is still in a state of fluidity. It is three years since the height of that market and there is a possibility of a further decline in property prices. However, despite much of the debate that has taken place about the figures in this Bill and in the business plan for NAMA, the figures are still relatively modest, even in the event of a further decline in the property market. There is a ten-year period involved and traditionally the property market has worked in seven-year cycles. The proof will be in the pudding. What is important is to have the mechanism in place to see if and how it is working and, if it does not appear to be working in the short term, to see how it can be refined.

The question of long-term economic value has bedevilled this debate from the start even though an individual who purchases a house does so on the basis of long-term economic value.

That is the point.

Perhaps they are buying it to live in first before selling it.

Members should not interrupt.

The borrowing of money at a cost that is far higher than the value of the house itself is the concept of long-term economic value. To the Minister's credit, the amendments that have been made acknowledge that there must be some assets included under NAMA that can only be taken at current market value. Indeed, some assets that will be acquired have minimal and even zero value. Different classes of assets are involved, for example, finished houses, unfinished housing estates, undeveloped land and properties in different markets where the economic cycle is operating at different levels. The assets include property in the UK, Northern Ireland and the United States. On that basis, the figures that underpin NAMA are relatively modest.

One can anticipate party political points being made with every Bill proposed by a government but what has been unfortunate in the wider debate is the talk about the question of morality. That is way out of line. As Senator Ross said, the people who benefit least and will, in fact, suffer most in a punitive sense are the builders and developers who brought us to this difficulty. The reality is that we have been living in a culture that rewarded the property market to a greater extent than our economy could sustain. There is much catching up to do as a result of the excesses in the past. I do not see NAMA as a creature of any political philosophy or of the banks, builders or developers, and I have every faith and confidence in the civil servants who have been entrusted to run it. It will be a mechanism to repair previous excesses and to put in place something different that does not restore us to the bubble levels of the Celtic tiger but is sustainable. If we consider NAMA in those terms, I believe we have a vehicle that can achieve, restore and ultimately, because it must, gain the necessary public confidence for our economy and society to prosper.

I wish to share time with Senator Ivana Bacik.

Is that agreed? Agreed.

It is true there are no certainties in this matter. There can be no certainty on anybody's part. In particular, the Minister cannot be certain that what he hopes will occur will actually transpire. There can be no certainty associated with the assertion — Senator Boyle spoke about this with some confidence — that matters will come right. None of us can be certain with regard to what is going to occur. That is a measure of how momentous and serious is this debate.

We have reached the 11th hour and the Government has signalled that the legislation will return to the Lower House on Thursday, which constitutes a curtailment of the debate in this Chamber. In such circumstances, there is a sense of inevitability regarding Members' approach to this debate. However, this should not mean we should set aside our serious and genuine objections to what the Minister is proposing.

Like other Senators, I recognise the Minister's good faith about the way he has approached this matter. I sometimes feel uncomfortable making that point in respect of Government Ministers. I assume good faith on the part of members of the Government, whereas other Senators often use half of the time available to them to inform a Minister that he or she is a great man or woman. I operate on the basis that the Minister for Finance is doing a professional job for the country and believe this is also the basis on which he operates. He does not, therefore, require to be congratulated. In so far as it is important to say so — particularly on a personal level — the Minister's input has been considerable, if wrong-headed, in recent months. However, that input has been solely motivated by the need to act in the very best interests of the country.

Unfortunately, in the context of what has occurred in the past 15 years, the Minister is dealing with a legacy created by the Government and his party, as a component thereof. It is fine for Senator MacSharry to express his frustration and annoyance that this point continues to be raised. I will not treat him to a few minutes' worth of material on the Galway tent. Owing to time constraints, I will not refer at all to the history of Fianna Fáil, its associations, etc. but if I had time, I would gladly do so. I am referring to Fianna Fáil as the party of Government; I am not interested in its historic links with the building industry or anything else. Fianna Fáil was in office when our current difficulties emerged. It was in power when my party brought forward proposals to the commission established in the late 1990s to examine the matter of house prices. If I am not mistaken, the Minister may have been Chairman of the Joint Committee on the Constitution when that issue was dealt with. If he was not, he was certainly in and around the Houses at the time.

I was not Chairman when the issue was dealt with.

At that time my party argued, in trenchant terms, that there was no requirement to amend the Constitution in order to implement the principal recommendations made in the Kenny report which was published 35 years ago. These issues were canvassed and debated during the lifetime of the last two or three Administrations. It is not satisfactory for those opposite to simply state they are not to blame and that everything happened around them and that they had nothing to do with it. That is simply not the case.

Regardless of who is in power, the Government retains principal responsibility for what happens in respect of any matter. It has such responsibility with regard to oversight, regulation and monitoring, particularly in the context of the financial institutions. When I studied economics many years ago, I came to understand that the banking system worked because we had a strong Central Bank and that this was the real legacy in respect of what happened 50 or 60 years ago in countries across the globe. I also came to understand the bank had functions in respect of regulation and monitoring and was in place to ensure the financial institutions and commercial banks did not engage in excesses. If one drove through Rathmines five years ago, one might have seen a billboard outside a particular institution inviting people to take out 100% plus mortgages and that if they did so, they would be given a new car. Members of the Government knew there were these excesses. It is not enough to state we did not think this behaviour would have the impact it appears to have had.

Senator Boyle has stated the notion of long-term economic value is bedevilling the debate. Long-term economic value is the essence of the debate on NAMA. I love the Minister's references to ideology and his condescending statements to the effect that the Labour Party holds a certain view on nationalisation because it is bedevilled by ideology. The real ideology relating to this matter is that of certain people, including the Minister, who will do anything to avoid nationalisation. These are the very individuals who will proceed to nationalise the banks in six months' time. That is the problem for the Minister.

I do not want to be excessive by using the word "countless" but I could certainly refer to quite a few comments made by the Minister, particularly during the course of the crisis that occurred 12 months ago——

Yes, quite a few.

——in respect of how he perceived the position, what he thought would occur in the future, what was the strength and robustness of the banks etc. It was also stated the Government would never nationalise any institution because such a policy would be completely wrong-headed. However, Anglo Irish Bank was then nationalised. Is someone from the Minister's Department already working on the script he will deliver in the House on the night on which he comes here to nationalise one of the other banks?

I return to the issue of certainties. I accept that there are no certainties associated with the argument relating to nationalisation. In view of Senator Ross's support for nationalisation, the ideology relating to the latter could hardly be left-wing in nature. I do not claim, either on behalf of my party or anyone else, that there are certainties associated with the proposal that the banks ought to be nationalised on a temporary basis. However, I am aware that this has happened elsewhere.

Senator Boyle referred to confidence. The only confidence in which I am interested is that which has some basis to it. I am not interested in confidence based on hope or wishing that matters will come right. As legislators, we are supposed to seek some evidence of this confidence. The approach of nationalisation has been employed in other countries and proven to be successful, albeit at a cost. The one thing of which we are all aware is that what we are doing is going to cost us an enormous amount of money. Taxpayers, my children and everyone else's and perhaps our grandchildren will all be saddled with the bill. The question is how we can minimise the cost. I genuinely accept that the Minister is interested in minimising the cost to the taxpayer. I do not, however, accept the notion that NAMA should deliberately and knowingly overpay for assets.

On long-term economic value, Senator Boyle does not appear to understand the prospect of a property either rising or falling in price is already included in what we understand to be market value. If I purchase a house, I am aware that there is a prospect, possibility or even hope it will increase in value or that there is also a risk that it will decrease in value. That knowledge is incorporated in one of the laws of capitalism — the Senator probably does not need a lecture from me on the latter — namely, that of supply and demand. In the context of the laws of capitalism, long-term economic value is a fiction. It is a direct intervention in the dynamic relating to prices being determined by the law of supply and demand.

I have read most of the material in respect of this debate and would like someone to draw my attention to how and on what basis the uplift amount of 15% — as opposed to any other figure — was arrived at. On a number of occasions the Minister has indicated that it was part of the best advice he had received. He stated Professor Honohan and his predecessor, Mr. Hurley, thought it to be reasonable. He consulted both men and others in the matter. However, I would like an evidence-based argument to be made as to why this figure, as opposed to any other, is deemed appropriate. Was it simply plucked from the ether? I do not intend to criticise the Minister but he was not in a position to supply a figure until the Second Stage debate in the Dáil. What mechanism was used to arrive at that figure and how may we rest assured that it is accurate?

Many terms have been used during the course of the debate on this matter. There was a stage when the Minister used to become extremely annoyed with regard to the use of the term "bailout". He has, however, become somewhat more relaxed in that regard.

He became used to the word.

Perhaps that is the case.

I have no difficulty with it, once it is not linked with the word "developers".

That is interesting. The Minister has anticipated the point I was going to make. We will have the argument on another day as to whether NAMA constitutes a bailout for developers. A good argument can be made to the effect that it does constitute such a bailout, even if only in the context of the delay of which developers will be able to avail.

In accordance with the order of the House this morning, we must suspend proceedings until 2.30 p.m.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.

I welcome the Minister of State at the Department of Education and Science, Deputy Seán Haughey. Senator White was in possession before the suspension.

I welcome the Minister of State. Prior to the sos, the Minister for Finance was close to agreeing with me. Whereas he certainly would not be prepared to accept that this measure constituted a bailout for developers — a debate we can have another day — he was less concerned, annoyed or irritated with the suggestion made by Senator Ross that it clearly constituted a bailout for the banks. Senator Boyle referred to it as a rescue, a word the Minister preferred. I will not quibble as to which it is. However, we should be clear for ourselves and the public that what we are doing constitutes a bailout for and a rescue of the banks which are in such difficulty.

I want to touch on some issues that have already been raised and ask the Minister to comment on them. He introduced an amendment in the Dáil to what is now section 210 of the Bill which deals with guidelines on lending practices. I presume this was a response to legitimate concerns that, although the NAMA project is stated to be one that will bring about a change in the lending practices of the financial institutions and lead to a resumption of lending by the financial institutions, there is no guarantee this will occur. Very often the language used in ministerial speeches, as on this Bill, hedges on that question. For example, the word that appears most often in speeches — I think it appears in the Bill also — is "facilitate". It is suggested the measures will "facilitate" the financial institutions in returning to the job we all thought they were in place to do. I noted in an earlier speech in which the Minister was justifying the proposals made in the NAMA legislation that he said they would "thereby" bring about a resumption of lending practices. There is no guarantee this will occur and the Minister has, belatedly, responded by introducing the provision in the Bill, whereby he can introduce guidelines. However, we need more clarity on the issue and the public must be given far more by way of reassurance that a resumption will occur. There is a need to hear more than that the Bill "facilitates" a resumption of lending, "allows" the banks to resume lending or will bring about a scenario "whereby" the banks will be able to do so. That language does not deal with the question of whether it will happen. If greater certainty does not emerge from the Government on the matter, why should we accept its faith and hope this will occur, particularly given we are spending so much of this and future generation's taxes on this expensive and uncertain project?

I have never accepted that NAMA is the only game in town or represents the only legitimate approach to the problem. I accept that there is no basis for doing nothing and nobody has argued that we should wash our hands of the problem and hope everything will come right. Everybody accepts some action must be taken. However, I do not believe that throughout the long months of the summer and autumn the Minister investigated all avenues — certainly not to my satisfaction — in order that he could assure us this proposal was the only way to proceed. It does not seem to have the international or academic support often invoked by the Minister on its behalf. Some professional economists have come out in favour of it, but they seem to be largely individuals — good as they may be — who work for the existing financial institutions. While I do not suggest they have their comments written for them, we must take what they say in the context in which they find themselves.

We have seen the newspaper interventions by the 46 economists. The IMF is often invoked in support of NAMA, but what the IMF stated was that these asset management strategies were acceptable and legitimate, but that it was preferable they should happen alongside nationalisation. The OECD has also stated nationalisation should not be ruled out. Many of the bodies which have been invoked in support of this proposition are far less enthusiastic than has been suggested. One main belief among all of them is that it is good the Government is doing something. A measure of their relief is that, at least, it is seen to be doing something in the international context. That is what the European Union and international financial markets want to see.

I am very grateful to Senator Alex White for sharing his time with me.

I welcome the opportunity to debate the NAMA legislation in the House, as many of us had sought that opportunity. As I said on the Order of Business, it is unfortunate the business has been ordered by the leader of Fianna Fáil in the House in the way it has been. I cannot understand why we cannot have more time to consider NAMA, particularly on Committee Stage. Given that the legislation was published more than three months ago, on 13 July, it appears there is a certain macho posturing on the idea that the Seanad should have to sit through the night. A more efficient and orderly way to allocate the same length of time to the debate could have been found.

I would describe NAMA as the biggest gamble the taxpayer has ever been asked to take. Deputy Joan Burton, the Labour Party spokesperson on finance, described the €54 billion NAMA gamble in the Dáil as a debt of €12,000 for every man, woman and child in the country. Therefore, as has been acknowledged by everyone in the House, the legislation is of major importance. The debt will bind our children and grandchildren. Those of us who are critical of the legislation are trying to be constructive and make our criticisms in the hope the plan will succeed. This is the gamble on which the Government is placing all its bets. I have described it earlier as the triumph of optimism over aggression. It is too optimistic in its attempt to rescue or bail out banks, and insufficiently aggressive in terms of pursuing those who owe such enormous sums to the banks. The Minister stated the asset management approach was best for ensuring a properly functioning banking sector. However, as Senator Alex White said, it was never the only game in town. The Government has presented it as the only game, but it is not. The Minister in his speech essentially acknowledged this, saying it was his preferred option, but clearly there were other approaches. The alternative of temporary nationalisation, which the Labour Party has been pressing and which Senator Ross spoke in favour of, clearly should not have been ruled out by the Minister and should have been favoured over the asset management approach. The Minister said his proposal received backing from the IMF, the European Central Bank and the OECD and dismissed, essentially, Fitch's downgrading of the Irish credit rating.

The alternative read on this, as Senator Alex White said, is that the international financial markets and the organisations mentioned require stability and certainty in the Irish response to the crash. The worst thing is to be indecisive. They seek a decision, something that achieves certainty. Temporary nationalisation could equally have done that. The bank guarantee scheme last December was an example of decisive action by the Minister. We acknowledged that, but we said it was the wrong decision at that time. It was somewhat akin to Tony Blair and the war in Iraq. He made his decision in that regard for his own particular reasons, but for the wrong reasons. Once the bank guarantee scheme had been passed, NAMA appeared to have been developed as a consequence, as were the nationalisation of Anglo Irish Bank and the recapitalisation of AIB and Bank of Ireland. Once we had shored up or guaranteed all the bad debts without selectivity, we were faced with having to deal with the consequences and yet the dogs in the street knew before the vote on the bank guarantee scheme in September 2008 that Anglo Irish Bank was already a dead bank walking. It has since been described as a zombie bank. We now know the enormous exposure to a very small number of developers with that particular bank, and of course that ultimately led to its nationalisation. I well recall the debate through the night where the only people to vote against the bank guarantee scheme were the Labour Party Senators and I, as an Independent Member. We voted against it because we did not believe a wholesale guarantee methodology was the correct approach. The news we received, subsequently, about the behaviour of Anglo Irish Bank in particular, and other financial institutions such as Irish Nationwide, has really borne that out.

There is no point in dwelling on the past, however. In the short time left I want to ask the Minister some key questions, to which he might respond when he returns to the House. I am glad to see the proposals for the surcharge and a windfall tax which essentially flowed from the NAMA proposal. We hope the NAMA scheme will work, but we are very fearful it will be too big a risk for the taxpayer and we will all be paying for it for generations. I ask the Minister, specifically, whether he has considered introducing a Tobin tax. What about looking at ways to make the financial sector pay through a tax on international transactions? The Tobin tax idea has been around for a long time. Prime Minister Gordon Brown embraced it at the weekend in a somewhat surprise move. It is something that is gaining traction and I ask whether the Minister might contemplate introducing that.

Again, Deputy Joan Burton has spoken about the need for an ethical framework for banks. Lest it be said we are just being critical, I was interested to see at the weekend that there are alternative approaches. Christine Lagarde, the French Minister for Economic Affairs, Industry and Employment, instead of relying on exhortations to the French banks to free up credit and lend to small businesses, has taken what is described as a more directive based approach. She has appointed a credit mediator and insisted that banks that fail to extend credit lines to viable businesses are named and shamed. So far, some 10,000 firms have been helped and the French economy, it must be noted, has been receiving much more positive financial ratings in recent quarters. She has introduced regulations placing limits on banker bonuses. A much more directive based approach could have been taken here, therefore, rather than the provision to which Senator Alex White referred, namely, the power of the Minister to issue guidelines, only introduced in the Dáil in section 210. This does not go far enough in ensuring the desired result of NAMA is achieved, namely, that banks free up credit for small businesses which are struggling so hard.

I have a few other key questions. The elephant in the room is the haircut or discount on the NAMA assets, €77 billion on which a discount of more than 30% has been given. We debated the NAMA business plan in this House and I raised the question of the haircut of 37% of the overall value and the enormous proportion of the €77 billion NAMA loan portfolio relating to Anglo Irish Bank, equivalent to a €28 billion exposure. The Minister and his advisers, of course, will be well aware of this, but it means that what has been described as a bailout for banks is in particular a bailout for Anglo Irish Bank, which will account for more than one third of the assets taken by NAMA. Others have asked the reason for this discount and how this figure was reached. The idea of long-term economic value, which has been extensively teased out, still remains fictional in essence. We still have not seen the real basis for this fictional notion that is so crucial to the working of NAMA.

One thing that jumped out at me from the NAMA business plan, about which I asked in a different stage of the debate, was why the administration of all but the top borrowers was to stay with the institutions rather than with the agency. Again, I cite my comment that NAMA appears to be a triumph of optimism over aggression. The Minister has told us before that NAMA will pursue aggressively the borrowers, those who are exposed, and yet we saw with ICC how some banks are pursuing aggressively, and the Irish banks were not prepared to do this in that particular case. We see in the NAMA business plan that the administration of the top 100 to 150 borrowers and their loans is to stay with the institutions rather than being transferred to the agency. Will the Minister say why NAMA is not going to take on the task of administration, pursuing all the borrowers rather than just the top 100 to 150?

A further question is how the assets will transfer ownership from individual lenders to NAMA. Clearly NAMA is taking on the management of some of the top assets. It is taking, in some cases, enormous powers over half-completed construction sites, including the power to complete construction in some cases. There will have to be transfers of title. Again, there is a great deal of detail, some of which is in the Bill, in terms of vesting, but some of which is not.

The points raised by Senator Ross in terms of the immense benefit that nationalisation could have offered, instead of the NAMA approach, is an argument that must be answered by the Minister. Again, I ask him why we have simply nationalised the worst of the banks and not the others. Why are we not willing to accept control by the State of the other banks, some of which clearly have much healthier loan portfolios than Anglo Irish Bank? There would be a much lower rate of default on those loans. Why is the State not doing so it could control the operation of those banks in the public interest? We are merely talking about temporary nationalisation, not a permanent state of affairs. We are talking about the need to ensure certainty and the effective and efficient operation of the banking system. The need for the State to take over and control the way the banks act is to ensure they act no longer in their own self-interest, but rather in the public interest so that, in the words of Senator Ross, the State is more powerful than the banks. With NAMA, however, we see the banks calling the shots, apparently keeping the upper hand over the State, with the latter bearing the entirety of the risk, which the Minister in his speech said the private sector was not keen to take. Resolution of the banks' difficulties, he said, involved risk. It is a risk the private sector is not willing to take, but it is one the Irish taxpayer is being asked to bear to the tune of €12,000 for every man, woman and child, and for generations to come. We owe to the tens of thousands who marched last week and to the many thousands of people for whom this will remain a burden into the future to ensure the option we choose is the best one for all of us.

I support the Bill because the alternative proposed is neither as financially sound nor as acceptable to the marketplace in terms of its immediate knock-on effect on those who have invested in the banks which would lose the high standing they need. This party holds no brief for the banks. We are protecting the economy, to which there is no alternative. We saw what happened in Japan when the Government failed to intervene and there was a ten year slump because the "zombie" banks could not lend. That crisis could have been avoided, although the Japanese debt bubble was significantly worse than ours. The deal the Minister for Finance struck with the banks, whereby he gave them €7 million and received a coupon of 8%, will fully fund the non-performing part of NAMA. We are paying 1.5% for money and getting 8% in return. The interest the Minister will receive from the banks on that coupon will fully cover the €30 billion of non-performing loans.

Many do not give the full facts which are that of the €77 billion book value, there is €99 billion or €100 billion of securities in the first instance. They have been substantially written down, which is fully recognised. Those who gave the securities have lost them. That money is gone and they will never retrieve it. Whatever securities were given — banks insist on securities — the developers and builders who gave them have lost these assets. The Government then gave €54 billion of the €77 billion recognising fully that the asset value was €47 billion; therefore, it has given €7 billion up front. For this we have taken our equity stake in the banks and ensured our position has been maintained by reiterating that at the end of the term, if there is still a shortfall, the banks will be expected to pay and that there will be a levy on them to do so. Meanwhile, people do not discuss the fact that €54 billion is going into the economy and that the banks will lend from this sum.

World economies appear to be moving out of recession. America has, as has the United Kingdom where property prices are rising. Not all of the loans are in Ireland — 34% are held abroad, in the United States, the North of Ireland, the United Kingdom and elsewhere in Europe. There is good reason to believe, therefore, that the news is not all bad. In any seven year cycle from peak to trough of a fall in property values there has been no instance, not even in the Great Depression, in which the peak was not reached again seven years after hitting the trough.

Yes there is: Japan.

Among world economies——

The Japanese economy was down for 19 years.

——there is no country in which property prices did not reach their original price seven years after falling into a trough. Those who say we will lose money and that we have imposed this debt on our children err. We can reasonably expect this will be self-financing.

Agricultural land prices in Ireland were depressed for 19 years.

The slow-down in property prices that we predicted when the banks over-lent was exacerbated by the near collapse of the world economy and credit market a year and a half ago. Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac and AIG all fell; therefore, it is no wonder that people are fearful because a year and a half ago we did not know whether we would have a banking system or whether we were heading into the second Great Depression. The confidence the Government has engendered by proposing the establishment of NAMA has steadied the nerves and helped the Irish banks. Our 25% share in the banks has significantly increased in value since we took it up. The news is not all negative because we are getting an 8% coupon on the money we lend to the banks and the value of our shares has increased significantly since we acquired these assets.

Taking the off-balance sheet lending is very prudent because this should be a self-financing vehicle. Over the course of 11 years we can reasonably expect it will at least break even. That is why an independent board has been set up. It is fully transparent to the Houses to ensure we get good, marketable value for the moneys we invest in NAMA. Some commentators in the marketplace are not doing us any service, in particular, those who suggest we leave the euro area. Having the euro saved us from the currency traders and sharks in the market. It is said sharks can sense blood in one millionth of a part of water. I can only imagine what these sharks thought at the suggestion the Irish pound be reintroduced. The currency would have collapsed because the traders would have traded against the Irish pound and left us in an impossible situation with a bankrupt country. The euro was the saving grace and the fact that the European Commission came to our aid with a plan to fund this to the tune of €54 billion at a figure of 1.5% will ensure the success of NAMA, as we are paying the lowest possible rate and allowing the money to be reinvested in our banking market. It is possible that there will be a shortfall, in which case the banks will be levied. They will have clean balance sheets for the next 11 years. They will be able to trade and grow and use the €54 billion to make a profit. There is no cogent reason to believe they would not have profits available if there was to be such an eventuality.

If the world economies pick up, it is possible there will be a small profit from this venture. I do not, however, have a crystal ball and cannot see the future. Those who claim knowledge of how the economy will go and the percentage of debts that will default are looking into crystal balls and do not know any more than the rest of us. We can use previous experience which tells us we have no choice but to invest. There is no better vehicle for getting the economy going again than the banks. It is possible that we will end up with more shares in them. If that happens, so be it because at the end of the 11 years the banks will be profitable, with all their bad debts taken off balance sheet. It is reasonable to expect we will have a larger share in them such that today's naysayers will not wish to speak about how they spoke about NAMA but rather take the credit for the benefits that will have accrued in the interim. It was interesting to hear earlier speakers refer to how the Government operates. I listened with particular interest as one Member opposite strongly suggested the Health Service Executive is an organisation that is strongly denigrated. There is no doubt that on one occasion the HSE was substantially ripped off when it agreed to pay for extra people on the medical card scheme. The newspapers at the time referred to it as a headage payment of €600 per person. When one goes into negotiations, one does so in good faith. The person the Government negotiated with at the time was Deputy James Reilly, the then head of the Medical Council. That has cost us millions of euro.

The Senator means the Irish Medical Organisation. The Medical Council is not a negotiating body.

If the Opposition wishes to talk about waste, it should remember it too has been a substantial contributor to it.

That was an absolutely extraordinary way to end a contribution on NAMA. Suddenly, it is all the Opposition's fault, a party that has not been in government for the past 17 years, for the setting up of the HSE and all its attendant waste.

What I do agree with Senator Hanafin on is that this is a historic debate and legislation. No matter how long one spends in politics, one asks the question, "When I am gone, will I have achieved anything?" The one certain matter in this debate is that after all Members have moved on and the Seanad has changed, or otherwise, NAMA will still be in existence. NAMA is a legacy to the way our country was run and mismanaged and to the chronic manner in which the economy was overheated and under-regulated between 2002 and 2007.

As I was getting ready for this debate, I recalled the last several lines of Shelley's "Ozymandias", which I studied for my intermediate certificate:

‘My name is Ozymandias, King of Kings:

Look on my works, ye mighty, and despair!'

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare,

The lone and level sands stretch far away.

NAMA is the colossal wreck that generations to come will have to live with, manage and guide the economy through. The Government spoke about building stadia and bowls to recognise its legacy. However, NAMA will be its legacy.

The Minister for Finance and Members opposite claim NAMA is the only game in town with no other option commended or established. That is not true. Many of the people cheering for the agency are the very people who will benefit from it when it is established. Those who claim this is the only way to manage the banking crisis are the same people who will be looking for the contracts and work that will be necessary to make this project work. It is essential that any debate on the agency, now and in the future, has an atmosphere of vigorous dissent and constructive criticism.

Earlier today the Minister claimed this is the main model with which to move forward. One writer very strong in her warning about what was going to unfold was Gillian Tett, assistant editor of the Lex column in the Financial Times. She stated:

...in most societies, elites try to maintain their power not simply by garnering wealth, but by dominating the mainstream ideologies, both in terms of what is said, and also what is not discussed. Social ‘silences' serve to maintain power structures in ways that participants often barely understand, let alone plan.

We cannot allow this to happen in the construction of this vehicle. We must ensure it is not surrounded by silence but that it is contested because the stakes are simply far too high.

It is important that in this debate we focus on how to improve and change the legislation. There are five points that Fine Gael makes about the Bill. First, as Senator Hanafin touched upon, is the concept that there is no economic cycle at which the prices of the assets have not come from a trough back up to the peak at which they started. That is exactly what we must avoid. That is bubble economics which got this country into the current state.

The NAMA business plan is predicated on house prices going back up. Thankfully, they will not return to the prices they started at because no business plan could make such an assumption. However, it makes the assumption that house prices will rise by 10%. As I said on the Order of Business, the sole job of politicians in the years to come must be to make items cheap in our country. It will not be an easy job and may sound like a small one. We will be in an environment of falling wages and increased interest and tax rates. Our job will be to bring down vigorously the cost of living. I am philosophically opposed to any business plan based, as is NAMA's, on a return, no matter how small. We cannot have a survival plan for our country based on bubble economics, the basis of this legislation.

Section 129 states "a participating institution shall act in utmost good faith at all times in its dealings with the Minister and NAMA". How can we ensure good faith will be maintained and discharged? The answer lies in section 208, a provision that has not been touched on so far but may end up becoming one of the most potent parts of the legislation. It states the Minister may "direct a participating institution to draw up or amend, within a specified period, a restructuring plan for the purposes of this Act".

What is the future structure of the Irish banking sector? How many will be employed in it? How large will the banks be and in which sectors will they operate? In an earlier debate with the Minister of State at the Department of Finance, Deputy Martin Mansergh, I said a legacy of this is that we can never have a bank again in Ireland that is too big to fail. I was laughed at for making this point. However, the Governor of the Bank of England, the European Commission and, God help me, the Tories are now saying it about their respective banking systems.

They listen to those fellows.

The issue is how we create a banking environment and structure so we never end up with an interest, particularly the banking sector, becoming so powerful it can challenge the democratic institutions of our State. It is so powerful that the democratic institutions of this State have no choice but to weigh in behind it, do all they can to support it and take extraordinary gambles on its behalf.

My fourth point concerns an issue that has not been discussed but which I believe will be discussed in the coming years. It is something that has moved from the horizon as we move towards the establishment of NAMA. It concerns the decision this House made last October regarding the operation of the banking guarantee scheme. This is something we will have to explore again when the NAMA legislation is passed and this body is up and running. What will be the interplay between this institution, which will remove the toxic loans from the balance sheets of the banks, and those same banks that are operating under a guarantee provided by the Irish taxpayer? How will those two aspects work? How will they gel together? Will the creation of NAMA and the actions it will take provide a need upon which the banking guarantee scheme was created and extended? It is crucial that any business plan, which this organisation depends on, that is predicated upon house prices or asset prices rising again is something that must be challenged here.

A book entitled This Time is Different: A Panoramic View of Eight Centuries of Financial Crises has just been published. It is a history of eight centuries of financial bubbles and it makes the point that every time a government or a society is dealing with the consequences of a financial collapse or a banking industry collapse it says that the next time around it will not make the same mistakes. The question we must ask ourselves as we examine this legislation is whether NAMA, the business plan upon which it is based and the assumptions in terms of what will happen to house prices in the future are not based on what happened to us in the past four or five years.

Where do we go with this legislation? One lesson we have learned from it is that we can never again have a situation where the economy is the sole master in terms of where society is heading. I am not a member of the Labour Party. I believe in the potency and, at times, the supremacy of free markets but there is no doubt that that potency can only happen in an environment of regulation and one that recognises, as other speakers said, that the human spirit, human understanding and the way we look into the future is fragile. Nobody has a crystal ball. Nobody can predict what will happen in the future but we should ensure that the future we are carving out, which is what this legislation is all about, is not based on the bubbles and the increases in prices that led to our country getting into this deplorable state in the first place.

I congratulate some of the speakers on the good quality of debate that has centred around the NAMA issue. I can only speak from my experiences of the past 35 years in running and being involved in businesses and the one lesson I learned in that period is that one cannot run a business without a credit system, and the banks are the only credit we have in this country. We have now produced new legislation in this House to ensure our banking system will start working properly again in the interests of the economy and ensuring the mistakes they made, along with many other countries throughout the world, are not repeated. Many mistakes were made in the banking system and legislation is important in terms of trying to right the systems that went wrong.

We currently have a banking system that does not have sufficient money to lend into the economy to ensure our small, medium and even multinational businesses are performing. This is an opportunity for the Government and the country to ensure the banks are fully capitalised with a €54 billion injection. It also gives the banks greater freedom to become an important player in the economy again by lending to the people who are productive in the economy. In examining this legislation it would be wrong to believe we will ever see credit being made available to the same extent it was in the past. We do not want to see that. We must ensure that does not happen because that is what got us in the trouble we are in. That is the reason we must bring in this important legislation to deal with that.

I have heard many criticisms of NAMA but I did not hear one solution——

The Senator was not listening.

——that would work. I say that looking at it from a business point of view. We are a capitalist country, whether we like it or not. We are not a socialist country. We would like to think we are but we are not, and the people who control the capital——

We also think we are a Catholic country but we are not.

The former Taoiseach, Deputy Bertie Ahern, said he was a socialist.

We saw the trouble that got us into.

I was about to say——

We have not had the full Ryan report yet but I am looking forward to it.

I take it he is not going to the park.

I said in my earlier contribution that we cannot go down that road again. I congratulate Senator Twomey on his earlier contribution which was very constructive. That is what I would like to hear in this debate. How can we make this legislation better? That is what this House is about. It is about ensuring that when legislation comes to this House we have an opportunity to highlight our experiences in terms of how we can contribute to that legislation.

In terms of questions I would ask, we will have many investors coming into this country and they will be looking to buy up property from NAMA. This is where we must ensure safeguards. It is fine for investors to come in and buy up property but from where will they source their labour content? This is where the special purchase vehicle comes into play because if we were to use the European context, labour from any part of Europe could be used. I am not against that but we should be able to employ our own labour. We have 400,000 people unemployed and this is where the special purpose vehicle comes in and which EUROSTAT has approved. It privatises the debt, although it is not a debt as such, as we all know, because there is capacity to repay that debt. It is not on our books as such but it is a private vehicle. I ask the Minister to ensure this vehicle can work equally as well for us when it comes to people buying development property in this country from NAMA. That is an important point. We should see if that vehicle works for us and, if not, we should set up another vehicle that will ensure this is the case.

A year and a half ago a major problem arose with the banking system in that our banks were about to fall. The banks must be mindful that the people and the Government came to their rescue. The banking fraternity should not be allowed forget this.

Many asked where we will facilitate the mortgage holders who might get into trouble at a later stage. This is not the vehicle to deal with mortgage problems and separate legislation should be brought in to deal with those. That said, I suggest that the banks should be allowed take equity in such property. Those who cannot meet their mortgage commitments should be allowed to rent for a period from the bank. That way there would not be empty houses throughout the country. It is also important that one could defer payment for six to 12 months and make interest-only payments.

There are many ways we could legislate to ensure the banks have a social conscience for what the people and the Government have done for them. The approach should ensure there is no reason for a second NAMA which could be catastrophic in that there could be 35,000 unable to meet their mortgage commitments if interest rates rose substantially. We must legislate for that.

We also will be able to look at how well NAMA works as a vehicle. The banks will then be in a position to ensure normal business continues. If there is an upturn in the world economy, it is important our banking system is ready to take the opportunities which it, rightly, should be in a position to take.

I regret that this legislation was not further advanced three to four months ago. I would like to have seen that, but it is complex legislation and a deal of work has gone into it. The Minister played a major role in ensuring this legislation with us today. Do not forget that the critics, the economists and members of different parties fought him tooth and nail. He even had to turn around and say to the economists that he would meet them, and none of them turned up. On the Pat Kenny show, the Minister put it to them either to put up or shut up. The Minister has been outstanding in ensuring this legislation is with us today. That is why it took so long.

This has been a broad debate, which is good. While we all applaud long debates, they take their toll on the business sector. The business sector can do things overnight. This is the different between the private and public sectors. It takes so long if one wants to reduce the workforce in the public sector, as against the private sector where it is done overnight.

Senator Butler has one minute left.

It went quickly.

It is important that there be a proper debate and we ensure the legislation is strengthened where it needs to be. I ask the Minister to ensure the vehicle we have in place for the private sector does not take in the entire European context in terms of employment. That is a vital matter and I want to ensure it is copperfastened within the legislation.

I welcome the Minister of State, Deputy Seán Haughey. I have found this a disappointing debate. By and large, there has been much rhetoric supported by inaccurate statements but nothing radical in what has been said so far. I say this because we have been challenged from those on the Government side of the House to come up with new ideas.

I cannot claim my ideas are brilliant but they are certainly original. I came up with what I called the national property management agency three months before the Government. I returned to it four times and nobody paid the slightest bit of attention. Then we got the National Asset Management Agency. I may not know much about economics, but I certainly know a great deal about English. What are we talking about? How are the assets and in what manner are they? These are liabilities we are managing. Let us have the truth about this. It is important we understand that.

We are dealing to a certain extent with intangibles. We are dealing, we are told, with international confidence. Fitch — I spit the name out in contempt — and Standard & Poor's are the corrupt international organisations that eased us into this by their dishonest practices by accepting engagements from firms and being paid to rate those very firms themselves. That is how all of these toxic debt levels and these bastardised products got into our system, and we are still putting up with listening to these people spouting about us. They have the cheek to downgrade us again. The international community lost a marvellous opportunity for radical thought in gutting those people as they should have been gutted. They are not the solution. They are a large part of the problem because of the way in which they behaved.

There is also the confidence in the people. What are people to think? There seems to be a completely different scale of approach and a different logic when one applies economic tests at a macro level to what they are expected to deal with in their own lives. The Minister told the House that the cost would be €47 billion and he would add in an extra little €7 billion because of anticipated increases in value, and this was good international practice. How many people buying a house for €25,000 would give another €5,000 because it might increase in value? That is what the Minister is saying. He states the OECD and all the rest of them support him. They stated they may do this. The word "may" is very different from "must". The whole thing is being grossly overvalued and I am very concerned about this.

I make no apology for being radical. It is a pity there is not a more radical tradition in this House. In 1922, one of the founders of the State, Michael Collins, wrote to Desmond FitzGerald stating: "What we must aim at is the building up of a sound economic life in which great discrepancies cannot occur." He was speaking of discrepancies in wealth and position, yet we have allowed these people to get away with bankrupting the country. The pockets of the very people who have been put out on the side of the road and who were despised and treated with contempt by all the banking institutions during the good days are being picked to make up the deficit. I can go back even further. Thomas Jefferson stated:

I believe that banking institutions are more dangerous to our liberties than standing armies. . . the banks and corporations . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

Let us come closer to home, to responses to what the Government is projecting. In recent weeks, Professor Willem Buiter, professor of European political economy at the London School of Economics, stated that the Government's approach to the banking crisis appears designed to maximise the risk to the taxpayer. There certainly is a risk. Even those, like myself, who are not expert economists can see this.

On the other side of the House there was a certain amount of posturing that we would get back to certain land values and that no country had suffered this without getting back within less than seven years. Let us hear the truth. It was a bubble and we all know what happens when bubbles burst. You do not come back, I assure you, and you are left with a little soapy mess on the floor. In Ireland between 1995 and the peak of the boom in 2007, the average price of housing and commercial property roughly tripled. If my colleague on the Government side wants a parallel, I will shout it across: Japan. Japanese urban land in the 1980s and Irish agricultural land in the late 1970s are closely linked. In Japan, between 1985 and 1990, the real price of commercial land in major cities tripled, exactly as has happened here, while the price of residential land doubled. Japanese banks buckled under their property debts, lending fell sharply and prices with it, the same as has happened here. By 2005, 15 years after the peak, the price of residential land had fallen back to its pre-bubble level while the price of commercial land had fallen by nearly 90%. We are not taking any account of this historic precedent or the precedent of the fall in the price of Irish agricultural land.

What may happen is that, at the end of this process, after the bubble has burst, we will be back to the pre-bubble prices. Have we considered the consequences of this economically? I do not for one minute believe we have. What happened is that the banks, encouraged by the Government, put their boot down to the floor while driving the vehicle about which my colleague, Senator Harris, spoke so eloquently. The whole thing was reckless, and I use that word specifically. Nobody has ever been prosecuted for reckless trading. If any of us had done this in an individual company, we would be in jail, yet nothing has happened in regard to the banks.

I wish to quote Peter Mathews, a person I respect and trust. When he was speaking in a recent debate, people shouted questions at him and he had the answers. He was able to think on his feet and he knew what he was talking about. He has said:

Because as the regulator and every bank director should know, the boards of banks should always act strictly in accordance with the prudential principles of fractional reserve banking. In simple terms, the boards of banks should ensure that the ratio of loans to customers-customer deposits is maintained in the region of 80%-90%.

It was not, however, and the banks went way beyond that, as we all know. There was an unimaginable expansion in credit creation globally and Ireland got involved in that as well. In Ireland, beginning about 2002 and leading up to the crash in 2008, a period of five or six years, we completely reflected all of this reckless behaviour on the part of the American and European institutions.

The consequences are frightening. Mr. Mathews continued by making assumptions which I can understand to a certain extent. The Minister of State, Deputy Mansergh, in an earlier debate spoke about targets and assumptions but he did not give any clear detail. Mr. Mathews does. He suggests we should assume we cannot recover more than 100% on a loan and points out that current recovery rates are 25%. Let us take the Irish Glass Bottle site as an example of the market. These people were always talking about the market, market values, the market economy and market forces which would rectify everything, yet we are protecting the banks against the operation of the market. One economist warned last year that "buying the assets at inflated prices would amount to a back-door recapitalisation of the banks", and that best practice "is for the banks to recognise the losses on these loans up front and sell the assets at fair market value". Who said it? None other than Dr. Alan Ahearne, now senior adviser to the Government.

We are told there is a systemic importance to all these banks, including the laughable Anglo Irish Bank. What does the Nobel prize winning economist, Professor Stiglitz, have to say about it? He said:

Countries which allow banks to go under by following the ordinary rules of capitalism have done fine. The US has let 100 banks go this year alone, as did Sweden and Norway ... [In Ireland] this bank bailout is a simple transfer from taxpayers to bondholders, and it will saddle generations to come. The only thing that might give you solace is that, as chief economist of the World Bank, we see this type of thing happening in banana republics all over the world. Whenever a banking crisis happens, the financial sector uses the turmoil as a mechanism to transfer wealth from the general population to themselves.

This is what is happening.

I would like an answer to some questions. First, since we are determined to buck the market and not give the market value, as established by precedent, on what basis does the Government believe the market is wrong in this sole instance? I am interested to see that the Government side and the Government in the other House quoted in its support various wonderfully influential and important people from countries that had got out of this kind of difficulty. For example, the former Swedish Minister, Mr. Lundgren, was quoted as being fully in support. This is a report of what he said:

‘It doesn't sound like the right solution to buy assets from private banks,' Lundgren said in July. ‘Market economy dictates that if we put in capital we should have the kind of influence and ownership that goes with the capital.' A fortnight ago, Lundgren re-iterated this view, telling Morning Ireland that nationalisation was the only viable option. Bank shareholders must ‘pay first', he said. ‘I'm a conservative and always will be' but ‘nationalisation is something you shouldn't be afraid of since you can privatise later on'.

There is also a report of the IMF's comments: "Insolvent institutions ... should be closed, merged, or temporarily placed in public ownership ... there have been numerous instances (for example, Japan, Sweden and the United States)".

I commend Peter Mathews's article, headlined "NAMA will lose €12 billion". He describes NAMA as the Titanic. It is not. We are on the Titanic. There is a distinct possibility that NAMA is actually the iceberg. I hope to God it is not the iceberg but I am concerned it is. I am concerned that we have not worked it out completely. One good thing has happened. This debate has unearthed certain aspects of our finances and certain gaps in our information. I was horrified when the Minister of State, Deputy Mansergh, said we were dealing with data supplied by the banks themselves, despite their having been involved in the most appalling practices. I am sorry, but I cannot support the Bill. I said in January that I felt all the banks should be put together and nationalised and the property assets managed in the interests of the people. That is what the founders of this State said as well. I do not mind if I am an old pinko.

I read the business plan and it worries me. When I look at this diagram from the business plan, it looks for all the world like a nuclear reactor. If this plan goes through and its intentions are correct, I hope it comes to the rescue of our people. I am sorry to say, on the evidence produced in this House, that I seriously doubt it.

I am tempted to reply to Senator Norris that if we are on the Titanic, the relics of the Titanic are worth a fortune at this stage, but I do not mean to be facetious.

That is not much good to us.

This legislation is very important. As the Taoiseach said last week, this is where the Seanad can prove its worth and demonstrate it does not fall down in terms of partisan scrutiny of the legislation. So far, I am happy that contributors to the debate are interested in moving forward with the vehicle we now have, and to the best of our ability try to resolve the financial difficulties we face and the threat to the sovereignty of the country that the banking crisis has brought on us. This is where we are at and what we must deal with. Our purpose is to try to make the best of this scheme and of this Bill.

There are major faults with the Bill, one of which is the predication and measure of the growth of the economy on the growth of property prices. That is very regrettable because it is what got us into trouble in the first place. Our growth was based largely on the development of the property industry, property prices and development land prices. That is what led to the growth of this economy, and it was not sustainable. If we had taken that away, the economy would have been growing much more slowly but more sustainably. This Bill continues to use that measure of property price growth as a measure of economic growth. This is regrettable, because as Senator Donohoe pointed out, we should not be looking for a return to the situation in which we found ourselves. So many people have expressed a wish that we get back to those high prices. I remember being in debates over the past seven years when we were lamenting the growth in house prices, because it was a major problem to get people to own houses.

The banking of foolish greed allowed loans for development sites of over €400 million in central Dublin for a few acres. That is crazy when one thinks about it. The price of that land was transferred to the ordinary citizen through inflated house prices. That is regrettable and I am glad it is over.

I share Senator Ross's worry about what he calls the NAMA industry. It was very foolish to write into the Bill an advisory cost of €2.5 billion over the lifetime of NAMA. It is crazy to announce to people how much money will be spent on professional fees at the outset. We are facing a very difficult budget as we are looking to save €4 billion for next year, yet we are prepared to fork out €2.5 billion in professional fees and services over ten years to get this right. Many people are already earning a wage in the public sector who will have that level of advice. We might need a little bit more, but I agree with the Senator who said it was no wonder so many economists and estate agents are rushing to support NAMA. There is a vested interest and we need to caution against it. It is in this debate that we should highlight these issues. Many of these experts did not predict what was going to happen, so what are we buying? The Minister already indicated he would be looking for a reduction in professional fees in the budget, yet it is foolish to indicate we are prepared to pay up €2.5 billion in professional fees over the lifetime of NAMA.

Some of the other speakers have spoken about nationalisation. Senator Bacik spoke about this and made some parallels with the Iraq war. Just like the Iraq war, nationalisation is easy to get into, but very difficult to exit. Had we gone down the nationalisation route, there would have been many arguments about when it would be right to remove ourselves from the banking system. It is easy to get into it, but much more difficult to get out of it.

Senator Ross indicated this is more of a bailout for the bankers than for the developers. However, I argue it is really a bailout for the economy. We need to recognise that. The Labour Party took all the plaudits earlier for not supporting the State guarantee scheme last year. However, the decisions taken by that party have huge consequences. The fact that all other parties supported the State guarantee system meant we could continue to bank and exist as a sovereign State. What the Labour Party failed to recognise is what would have happened had we all taken its option. The country would doubtless have gone bankrupt. While the party members are applauding themselves for having taken their stand, they failed to recognise what might have happened. Thankfully, the banking system was saved, so we were able to continue as is, which is why we are faced with the issue that is NAMA.

NAMA is a balance between value for the assets and the risk to be taken. There has to be a question of overpaying for the assets. Senator White criticised this as a flaw with NAMA. However, it was critical to get the balance right between valuing the assets, which would allow the banks to recapitalise, and taking on the appropriate level of risk. That is why there must be a disparity. Were there not to be a premium paid on the assets, the banks could collapse anyway. We really need to look at how we can take on board everybody's concern. We need to remember this is taxpayers' money. It is not a case of the Government protecting the bankers. The Government is taking the taxpayers' money and applying it to shore up our economy and our banking system, because without that system, we cannot have a viable economy.

It is vitally important to encourage banks to lend to small and medium enterprises. We need to have money going through the veins of our system and the way to do that is by shoring up a proper banking organisation that will have the ability and strength to lend out to other risky organisations. At the end of the day, banks measure risk for industries and businesses that may have cash flow problems. It is vitally important that the banking system has enough confidence to bring cash flowing back into the veins of the economy. I hope it never goes back to the way it was when reckless financial greed was foolishly encouraged. The Government must take responsibility for the situation in which we ourselves today, but we rarely hear that the Opposition wanted the Government to go further because it had to oppose for its own sake. I listened to Fine Gael Members giving out about the Government for getting us to where we are today, but the Opposition should recall that it continued to fuel the same level of enthusiasm. It did not state, "It is time we called a halt to all of this."

In many instances, it wanted the Government to go further.

I was about to preface my remarks by complimenting previous speakers, but Senator O'Malley spoiled an excellent contribution with her last paragraph.

She threw it away and lost it.

It was all going so well.

It was an own goal. The legacy of the Progressive Democrats is a failed ideology.

One cannot beat genetics.

The Senator should rise above the bait.

I welcome the Minister of State, Deputy Seán Haughey. I compliment Senators Twomey and Donohoe on their remarks. I agree with Senator O'Malley that we are obsessed with growth in property prices, including development land. It is time we moved away from this. We must inject realism back into the economy. I wonder, however, if we have moved away from that aspect at all.

This debate is about the future. As Senator Harris eloquently put it, we are in the middle of a war. I agree with him that we are in the middle of a battle which requires us to confront the matter on behalf of future generations. We must clean up the corporate image of Ireland plc and examine the banking institutions. In addition, we must examine the role of the banking regulator and offer investors a good place in which to invest. For the record, Fine Gael has brought forward a different model. I hope, therefore, the Minister for Finance and others will listen to our alternative proposal.

It is an alternative.

Senator Buttimer to continue without interruption.

It is okay; I will not rise to the bait.

Please, Senator.

Senator Leyden may huff and puff, but this is a very serious issue. It is about Ireland's potential to create and retain jobs. It is about homeowners who come into offices every day and are struggling. They are afraid the bank will repossess their home.

The uncertainty over the potentially enormous cost of NAMA for all of us is one of the reasons we should reject NAMA as it stands. If we are asking the public to fund a bailout of the banks, the Minister should sketch a clear road map explaining the nuts and bolts of NAMA. We all accept that it has flaws and, to be honest, no one in this Chamber has the absolute answer. However, we are sent here to represent the people who want at the core of Irish life a banking system that is sound, trustworthy, accountable and transparent. In addition, it should allow credit to flow to small and medium enterprises, as well as to electricians, plumbers, painters and decorators. In that way, business people in Cork city would be able to get money to fund their overdrafts, pay workers and allow the system to flourish with job security at its core. This is not about political point-scoring but about getting the country working and retaining jobs. NAMA is not the only show in town because there is an alternative — Fine Gael's good bank-bad bank model which offers a solution. We all agree on the need for a well capitalised banking system but protecting the taxpayer must be at the heart of what we are doing.

I agree with Senator Norris that not one person has been condemned, convicted or put in jail.

They must be friends with somebody.

Look what happened in New York. Bernie Madoff was given a life sentence. There is accountability there.

It would not happen in Ireland.

The Minister has said the banks are best placed to make commercial decisions to allow credit. They may very well be, but they are not allowing credit to flow and therein lies the crux of the problem. They consider that their best friends are their investors and shareholders but to hell with borrowers such as small businesses or homeowners. That is not right. I am not an economist, but I will defend the right of those who are creating employment. They took risks to employ and provide a service, yet they are now being let down. That is the core of the matter. If we want to consider the holistic approach, we should take Senator Donohoe's eloquent speech as a benchmark.

In reality, we had banking regulations with no accountability. In order to move forward we must learn from the past. Never again should we have to face such a catastrophic crisis. It was like Armageddon and it is our duty to ensure there is no recurrence. Small and medium-sized enterprises, including smallholders and small employers, are the lifeblood of our society, yet they are being sucked dry. If we do nothing else in this debate, we should bring forward a plan to create and retain jobs. Senator Twomey has said we need to be strong and he is correct. That is why the Opposition has proposed a strong, determined, apolitical message about an alternative banking system which would provide a lifeline for this country.

The Minister referred to cash flow and credit which must be made available as a consequence of NAMA but I do not see it happening. Senator Ross said the Bill represented a bailout for the banks and he is not wrong. This is akin to the Minister and his ministerial colleagues going on a trip to Las Vegas to play Russian roulette and putting the whole store on number five black. If it does not come up, we are all finished. The documentary evidence from foreign experts does not support the Minister. However, we have an alternative viewpoint. Senator Ross spoke about people living in a fantasy world. Senator Donohoe spoke about economics. That is what we have in front of us. What are the current market values? What will property values be in ten years? The reality is that nobody knows. This relates to Senator O'Malley's point on property prices and market values. We are playing roulette on behalf of the people. The future prospects of the banking institutions are vested in NAMA. The taxpayer should not take a hit for the mistakes of others. That is why I fundamentally disagree, politically and ideologically, with NAMA. We are asking the taxpayer to go to the front line and prop up the banking institutions.

We discarded the French model. When France had the equivalent of NAMA in the 1990s, it was a disaster. In the United Kingdom a good bank-bad bank model has been used in respect of Northern Rock and Bradford & Bingley. In the United States Washington Mutual has been divided into a good and a bad bank.

The Minister spoke off script and condemned the Fine Gael approach. However, we have listened and sought alternatives to NAMA. The advantage of the good bank-bad bank solution would be that the risks and responsibilities associated with working out distressed developer-related loans would remain with those professional bankers and investors that funded the loans and are best placed to recover them. The advantage of Fine Gael's proposal for a national recovery bank over the proposal for a national asset management agency is that new State funding for the banks would be directly linked with new lending into the economy. Instead of buying toxic developer loans with highly uncertain value, as under NAMA, the taxpayer would be buying higher quality loans directly linked with new jobs and economic recovery.

It has not been costed.

There are to be no interruptions. Senator Buttimer has just over one minute remaining.

I will show it to the Senator and keep it very simple for him.

I said there were to be no interruptions.

I will keep it very simple for him.

If Senator Twomey wins six general elections, he will know all about simplicity. He should try it some time.

Senator Leyden should not interrupt.

Senator Leyden is embarrassed and should go away and read about the Drumcondra Mafia to learn what has happened in the past 12 years. Today we see the political and economic legacy of his party in government. We are under the cosh——

Senator Leyden could not tell the difference between sterling and dollars.

Senator Twomey should not interrupt. He is not being fair to Senator Buttimer.

I do not want to be critical in that Senator O'Malley and I will have a good battle but I must make the point that nowhere in the legislation is it prescribed that NAMA should get credit flowing again, thereby generating employment and confidence.

The Minister of State, Deputy Roche, may nod to heaven, but I do not mind.

I did not say anything.

We need a functioning banking system to get the economy back on track. That requires leadership by the Government. I commend the Minister for Finance on his stewardship of the debate in the other House. He is passionate about the matter, as he should be. Whether he is listening to Deputy Ahern, Mr. McWilliams or his aunt Mary, I do not quite know, but we need to get credit flowing. The Bill will not achieve this. I commend the Fine Gael alternative to the House and hope the Members opposite will vote for it.

When Hell freezes over——

We are on the Bill.

I am speaking to it. When Hell freezes over, we will vote for Deputy Buttimer's proposal.

I welcome the Minister of State, Deputy Roche, and his officials from the Department. I have been assured all the statements made today will be conveyed to the Minister for Finance and that he might be in a position to respond. I commend the Minister of State on his excellent work on the Lisbon reform treaty which he worked so hard to have accepted in the referendum on 2 October. Great credit is due to him. Without the treaty, we would now be in very difficult circumstances.

I welcome the National Asset Management Agency Bill 2009 which is a very detailed document. It is one of the most important Bills to come before the House and will possibly prove to be one of the most important ever. It has many consequences for the economy. The Government has considered it in great detail and there was no real alternative. The alternative proposed by Fine Gael is nonsense. NAMA is the only game in town——

The Senator does not even know what a good bank-bad bank solution entails. He does not know what he is talking about.

Senator Leyden to continue without interruption.

If I asked him to explain it, he would know nothing about it. He is only saying——

Fine Gael cannot explain its policy; it cannot cost it and is not in a position to do so.

(Interruptions).

Senator Leyden to continue without interruption.

It is not my responsibility to outline to Fine Gael its own proposal when it has not worked it out.

Has Senator Leyden looked at his own party's business plan?

It is opposition for opposition's sake.

Senator Leyden would know all about that.

He should take a leaf out of the book of Mr. Alan Dukes, the former leader of Fine Gael behind the Tallaght strategy.

I would love to give Senator Leyden ten minutes of my time to explain the good bank-bad bank proposal.

Mr. Dukes was prepared to work in the national interest. The price he paid was the disloyalty and betrayal of the Fine Gael Members in this House——

(Interruptions).

Members must not interrupt continuously. Senator Leyden is seeking interruptions and should stick to the Bill.

We are delighted to respond.

I will stick to it. I seek the Cathaoirleach's protection.

If the Senator proceeds in the way he is proceeding, I will be unable to protect him.

The ECB opinion on NAMA contains a number of key points. It welcomes the fact that NAMA is designed to comply with EU state aid rules. The bank's funding and support for the legislation is key. Without these, the Bill would not and could not work. I support it because individual banks would not be in a position to provide funding if the European Central Bank did not lend to the State. The State will continue to exist but we cannot give the same guarantee for any bank. Ireland Incorporated will exist for a very long time, which is why the European Central Bank is supporting the NAMA proposal. The endorsement on 2 October was crucial to the future of the European Union. Our vote in favour of the treaty has been rewarded with the support of the European Central Bank.

I will not go into great detail because the Minister has done so. I will not repeat what he has said on all these issues. Submissions have been made by many external bodies. I have submitted them to the Department and will not read them into the record. I acknowledge the submissions made, including those by Joseph Corcoran Consultants, Brian Flanagan, Peter Mathews and Emmanuel J. Sweeney who made a very good submission. I will make them available to the Department because their authors are aware of all the issues involved.

I must give it the good bank-bad bank proposal also.

I ask the Minister and his officials to consider them. The advantage of being in the Seanad is that we have such submissions sent to us. I am sure they were sent to many Members. I have not had the opportunity to examine them all in detail. It is a matter for the Department which I ask to examine the matters raised.

"Special purpose vehicle" is an interesting term. It is a Fianna Fáil BMW, not a Fine Gael Lada — that is the best way to explain it. Senator Harris referred to the type of vehicle it would be.

Could one drink and drive in it?

No interruptions, please.

The ingenious idea is to take on the awful responsibility that is Government borrowing. The Minister carefully outlined what the SPV is and can do. In conjunction with the SPV, what role does he see for the Office of Public Works, OPW? I have searched through the Bill. Why is the most important property agency being excluded from it? Will the Minister consider an amendment to include the OPW which provides suitable accommodation for Government services, manages and maintains the State property portfolio, has the largest architectural process and has expertise in the valuation and development of properties? When the Minister concludes, perhaps he will show the reference to the OPW in the Bill. It is managed by commissioners under the Minister of State at the Department of Finance, Deputy Mansergh. Why should we establish new agencies to carry out the assessment and completion of some of these projects?

It has a role. The OPW is a success story. From the buildings of the Department of Agriculture, Fisheries and Food to Dublin Castle and Farmleigh House, it organises, manages and controls properties. Were I in Opposition, I would table an amendment. Of course, I would not be able to support it.

Teach us our business.

However, I would examine the Bill constructively to determine how to improve it. Since the Minister of State used to have responsibility for the board of works, he knows how effective is the OPW. I never served in that section of the Government, but it is one of the most effective organisations. The quality of the buildings it has designed and maintained should show that it would be an ideal SPV. This would reduce the cost of managing and maintaining the properties under State control. I make this genuine request. The Minister might be able show that the OPW is included in section X of the Bill because I cannot find it.

I am intrigued by the membership of NAMA, a matter covered on pages 31 and 32 of the Bill. For some time, the same old sections have been included in every Bill that I have dealt with. Deputies, Senators and councillors are excluded from membership of NAMA and the SPV. Why? Senator O'Toole is vice chairman of the Personal Injuries Assessment Board and is doing a great job. I could name any Senator, excluding the Cathaoirleach since he could not take the job.

Some Senators have banking qualifications and would be ideal members. Who would be better to go into NAMA and shake things up than Senator Ross? I will not name everyone, although Senator Harris is encouraging me to speak to Senator Quinn. Every Member, including my esteemed colleague, Senator MacSharry, would be qualified.

Why exclude them? I am not saying they should be appointed, but they should not be subjected to an exclusionary article. I am referring to section 19 which states that NAMA's members cannot be Members of the Houses or the European Parliament. If they have the good fortune to be nominated to local councils, they must leave NAMA. A qualified person who might be the best candidate to work with NAMA would be excluded owing to his or her membership of a local authority. I cannot understand it. I am not saying these people should be appointed but neither should they be excluded. The only other people who are excluded are bankrupts. Let us be fair to our own people, including Senators. Members of this House would play an important role if given an opportunity. How better could the House be involved? There is time to change this section.

The House is being used in a constructive manner. In my time, I have tabled Bills and amendments. This time, the Seanad is not being excluded, as the Bill is returning to the Lower House. Anything the Minister takes from us will be included in the Bill, as it has been agreed that the Bill will be amended in this House. Recently, we were landed with Bills and were unable to change them because the Dáil had already gone into recess. This time, we can change the Bill.

There is an intriguing section on page 130 that I have never encountered previously.

The Senator has one minute remaining.

I am glad I managed to mention this before my time was up. Lobbying NAMA will be an offence. Similar provisions have not been in any previous Bill. It removes the role of Deputies and Senators, as it will be a criminal offence to lobby NAMA. We will be asked to make representations for projects or so on. I want Oireachtas Members to be excluded from this provision, especially those who are lobbying on behalf of their concerned constituents. That is not a question of lobbying. Rather, it is a question of making submissions to NAMA, but we would still be committing an offence. We could not be pursued if we made our cases here, given parliamentary privilege, which the Cathaoirleach would defend. If we have a case to make to NAMA, we must do so in the House under parliamentary privilege. While I am prepared to do so, I would prefer it if Members of the Oireachtas or the European Parliament who were carrying out their responsibilities on behalf of constituents were not liable for offences if they made cases.

I could say more about the Bill, but I commend it to the House and wish it success.

I welcome the Minister of State. I was listening carefully to this interesting debate while I was in the Chamber or down below. During the year, I read a quote by an American columnist who stated: "The safest way to double your money is to fold it over once and put it in your pocket." It was the best advice. Given what has occurred in the past year, we allowed ourselves to get greedy and to take steps we should not have taken. However, we must remember that we did well in the 1990s and the early part of this decade. It went wrong when we overstepped the mark.

I enjoyed listening to many of the contributions. I noted the comments of Senator Harris. In the context of NAMA, he referred to the economy being a little bit like a marriage in that one does one's best, but one is not guaranteed it will always work. The most we can do is concentrate on improving the Bill. I will not discuss what we could have done in the past. We will have NAMA, so we must ensure we make the best of it by querying it.

Perhaps some of my questions have already been answered. This is such a detailed Bill that it is difficult to know. How can NAMA estimate the value of properties on the current market when so few normal property deals are being done? NAMA will control a great deal of property, so what should it do? A few minutes ago, Senator Leyden discussed using the OPW. There is a tradition in that respect as the OPW could be used successfully. Perhaps this is the benefit of a debate in the Seanad. What will or should NAMA do with its property? Will it build new homes? If so, will that only add to the glut and affect prices? Is it possible that there will be both a NAMA guarantee and some form of nationalisation of one or more of the large banks? If so, surely the European Union and Commissioner Neelie Kroes, who is in charge now although she might not be later, could not allow the banks to be semi-private. Either they are private and have to pay back the money they owe or they are fully nationalised. I do not believe the European Union would allow us to have a half and half situation. It would not allow us to hedge our bets on that basis because if that were the case the Irish banks would have an unfair advantage over foreign banks such as Rabobank.

NAMA was set up mainly to remove bank loans for commercial property and land from the guaranteed institutions but what about loans for private homes? They come to the fore after commercial loans and are linked to unemployment. Private home loans have not presented a problem to date but it is clear that if the economy does not improve they will become more important. I am not sure that has been taken into account, given that NAMA was set up to address loans for property development rather than loans for private homes. If someone's income goes down by 10%, at the same time as his or her home reduces in value by up to 40%, he or she will still have to pay that loan. I am not sure we have received an answer to that serious question. Will banks face huge hits, and are they being taken into account in NAMA's projections? I do not think they are. Development property loans have been taken into account but not loans for private homes.

Surely the proposed 80% levy on land will delay the recovery of the land and property market, reduce current values and be an obstacle to NAMA selling land at an acceptable price. I am not sure I understand why the debts of Anglo Irish Bank are being covered by NAMA. What we need is to assist the banks that lend to small and medium enterprises. Anglo Irish Bank never lent to SMEs. It is a red herring to suggest that aiding Anglo Irish Bank will help our economy. I predict that Anglo Irish Bank will not even exist in a few years as there is no real need for it. We are all enthusiastic about getting lending to small businesses and private enterprise but I am concerned when I hear talk to the effect that the Government should be doing something to push the banks into lending. If we have a stake in the ownership of the banks I would prefer to see them make sensible decisions. I would not like us to specify that they should lend according to criteria other than good, commercial ones. As a taxpayer, I would not want to be a shareholder in a bank that would make bad decisions just because we are howling for them to lend to businesses.

I have concerns about the accountability of NAMA. We have recently been informed about the special purpose vehicle, SPV, of NAMA. I keep saying SVP which is the Society of St. Vincent de Paul. What really worries me about the SPV is that it will be a private company. That means the debts taken on by the SPV will be off-balance sheet. Perhaps the Minister will indicate if I am incorrect. We will still have to borrow the money but it seems to be a fudge to look good in the European Union. I have said that before. The EU has no choice but to accept the Government's plans because if we borrowed €53 billion or some such amount our budget deficit would be approximately 30% to 35% which would be unprecedented and could not be tolerated under EU rules. In short, it is an accounting trick but it is not fooling anyone. We still owe that money even though we are taking it off the balance sheet. I accept the European Union has approved of this mechanism and it has approved a similar approach in Germany but we are fooling ourselves if we think our debt is less than it is.

What concerns me most is the accountability of the special purpose vehicle. What will happen if we want to look at how the bad debts are performing? The Government could say it cannot report on a private company. Having a private company is a huge accountability issue. It is possible that ten years down the line it will emerge that we are even more in debt, to the tune of billions of euro, because the SPV has kept details hidden from the gaze of accountability we should direct at it. That is a major concern and I wish to see measures introduced in the Bill to ensure the SPV is not secret and is required to disclose how the bad debts are performing.

There is a possibility that a second derivative crash is on the way. We must prepare for the worst. What we are experiencing is a pure vanilla property market crash. I love that term. However, what may well happen — I hope it will not be the case — is that we will experience what economists call a second derivative crash. We have seen how there is a major problem in banks getting funding. They cannot borrow money for three months on the interbank market any longer in the way they used to do. In crude terms, the banks have gone bust and they cannot get access to funding. That situation will probably get worse in the next few months.

Given the rising number of people becoming unemployed, we will see an increase in the number of people who are unable to pay their mortgages and credit card bills, which will be a serious situation. Many people took out mortgage insurance, but that usually only lasts for one year, so there is a real danger that by Christmas time, we will see a massive deterioration in our circumstances. Even the International Monetary Fund has recommended that NAMA be extended to cover mortgages. I am not sure of the exact situation in that regard. I am pleased that banks are not foreclosing yet, but there is a danger that once the Bill is passed they will be much more aggressive. We need to consider how we will handle that. If a house is worth, let us say, €500,000 to the bank but it is not producing any cash flow, the bank will act in a purely business-focused manner and sell the house. We need the banks to act in a business-focused manner. As taxpayers, it is our money.

On the question of nationalising the banks, with NAMA we are pretending that loans are worth more than they are, but if the Government had bought the loans at their much decreased current market value, it would have to consider recapitalising the banks separately. I question the assumption by NAMA that we are at the bottom of the property market. We hope we are. The thinking behind NAMA is that it will buy the banks' bad debts. However, that is founded on a massive assumption, namely, that we are at the bottom of the property market. That is a completely arbitrary assumption that is backed up by hope but based on no evidence. The Minister, Deputy Brian Lenihan, has given no justification for paying the proposed amount for the bad debt. One only need to look at the market to see there is no real action in the housing market. We keep hearing about green shoots but crucially, there is no volume in the market so the prices currently paid for property do not reflect the true market value. That is why I am extremely wary of the assumptions that NAMA has made to justify the prices it will pay for the bad debt. There is also an assumption by NAMA that property prices will return to strong levels. The Minister indicated NAMA would need a rise in property prices of less than 10% from current levels over the next ten years to break even. That might be wishful thinking. There is no reason to assume prices will rise. People are losing their jobs and for those who manage to keep their jobs, their wages are going down, so people in general will have less money. Accordingly, people will have less access to loans so they will pay less, for example, for property. In economics, that is known as a deflationary fall. We might never see the hoped for rise in prices.

Let us look at what happened in Japan where there was a massive property boom in the early 1990s. As Morgan Kelly pointed out in The Irish Times, by 2005, which is 15 years after the peak there, “residential land had fallen back to its pre-bubble level, while commercial land had fallen by nearly 90%”. Even when the Japanese economy was growing, property prices were still massively depressed. Many people are claiming Irish property prices will recover once the economy starts to grow again — we all hope it will. I do not wish to be a——

I was trying to think of who it was and Pollyanna came to mind. I do not wish to be a Jeremiah but we must bear in mind the Japanese lesson. There is always the same old argument that Ireland is unique and different; I, too, have said it on many occasions. However, it is not different and we must take this on board. During the boom we were able to secure low cost money in Europe to fuel the market and now need money again to reflate the economy. The fact is, however, that nobody is lending to us or is likely to do so. For that reason I am sceptical that property prices will increase in ten years.

Why are the Anglo Irish Bank accounts not being released until December? They would usually have been released in September but that date has been extended to December. I do not know why. I query it in the belief we can make a success of NAMA if we have sufficient knowledge. That knowledge should not be kept away from us.

I have been listening to the contributions from all sides of the House, some of which were very good. In fact, the more I listened, the more confused I became. If I did not go away and do my own thinking, I would agree with points made across the board on various issues. However, a time comes when one must do one's own thinking on it.

I started with the history. Why do we have NAMA? The banks nearly collapsed and the economy was under huge threat. The guarantee was provided, which gave access to funding from the international markets. It was also necessary to protect customers by ensuring their deposits would be secure. The second issue was the vulnerability of the banks due to their over-lending to developers. As a result, the property market collapsed. I listened to the points made about the good bank-bad bank concept and they were worth thinking about. I also listened to the argument for short-term nationalisation. One could say the jury is out on that concept. I continued reading about it and noted that the NAMA proposal had received the backing of the IMF, the ECB and the OECD. That is good enough for me. It is the way I believe we should proceed.

One of the necessities for economic recovery is a good banking system to serve the needs of the wider economy. We must also try to retain and create jobs. Otherwise, the economy will collapse. That is my base for proceeding. The objective of the Government is to facilitate the flow of credit to business and ensure Ireland is best placed to take advantage of the global recovery when it occurs. The interests of the taxpayer must be protected to the maximum extent. That is the core of my thinking. The purpose of NAMA is to take the at-risk loans from the banks' balance sheets, to free the banks to facilitate the flow of credit to the real economy and to promote lending to small and medium-sized businesses. That is the top priority.

I compliment the Minister for Finance, Deputy Brian Lenihan. He made this proposal last April. The newspapers and the media have been discussing it daily. The draft Bill was produced in July and there were further discussions on it. Nothing has been debated more, yet we have not drawn final conclusions. I compliment the Minister on taking the lead and having courage. He produced the Bill and listened. I listened to all the debates in the Lower House and the Minister took on board many of the points made by the Opposition and some Government backbenchers. We must examine this proposal and do our best to bring about global thinking in the Oireachtas. The jury is out and we are all rambling around.

The Opposition claims this is a bailout for developers and the bankers. It is not. What is borrowed will not change. The loans will be transferred to NAMA and the agency will have a statutory duty to maximise the taxpayers' return. The Bill provides the agency with the powers it needs to pursue borrowers and enforce security. I read that in some cases this will mean the borrower's personal assets will have to be assumed by NAMA. I do not like the use of the term "in some cases". If the agency must pursue borrowers and delve into the private assets, it should do so.

It has been said we are paying too much for the loans. Of course, it is a gamble. What will be the long-term economic value? I listened to Senator Ross speak this morning about this fantasy world and how it was not possible to know what would happen in the future. God knows, none of us knows what will happen in the future. We do not know whether we will be alive to determine where we are going with the NAMA concept. He suggests this is all wrong for ten years into the future. Nobody can make that statement or say it is a fantasy or make-believe world.

The objective of NAMA is to provide a flow of credit. The banks are in the best position to make credit available. The Bill is not flawed. I congratulate the Minister for giving a lead on NAMA, on which he has consulted widely. I was interested to hear Senator Harris describe the SPV as a car taking us on a journey. It might break down and if it does, we will handle it. However, if we complete the journey, we will reach our objective. The SPV is that mechanism and we should think of it in that way. I am not sufficiently knowledgeable about the SPV mechanism and look forward to further discussion on it. I am worried about whether NAMA has total control. It will have the final veto on its work and about the debts. However, who are the people who will take over the management of this mechanism? That concerns me a little.

I do not have much more to say on this issue. The future of the economy is at stake whether we use the good bank-bad bank concept, nationalisation or the NAMA proposal. After listening to the debate, I believe NAMA is the way forward. Let us go with it and put the mechanisms in place to make it work. Let us pull together on the issue. Ultimately, we must protect the taxpayer, the economy and create jobs.

I did not read the relevant section but Senator Leyden raised the appointment of the board of the agency. Former Deputies and Senators are excluded, as well as councillors, who are very bright and would be an asset on the board. We should change this and not just decide that nobody who was a public representative should be on the board. I cannot understand the thinking behind that provision. Why is this? Is it believed we are corrupt in some way and would influence the board? I support Senator Leyden's statement on the issue.

Senator Leyden also referred to lobbying. This is also a matter of serious concern, particularly when one considers that all Members are lobbied all the time. If the legislation is passed, will this mean Members will be out of order if they have discussions with people who want them to make representations on their behalf?

My main point is that NAMA offers the best route forward. I accept it is a gamble. However, life is a gamble. I am of the view that ten years from now property values will have increased somewhat because nothing remains fixed. Such values may fall further in the coming months but they will also rise again. We should not criticise the Minister. We should instead wish him luck and hope he gets it right. The Minister is a good listener and knows what he is doing. I wish him the best of luck in having the legislation passed and in ensuring the activities of NAMA will be properly monitored.

The Minister for Finance, Deputy Brian Lenihan, stated that we should not focus on generalities but rather concentrate on the details of the Bill. Notwithstanding that this is Second Stage, it is appropriate to consider the general picture and to stand back from the detail. One can become lost in that detail. When, however, one steps back and considers what is the basic road down which the Minister is leading us, one realises he has effectively suggested there is no alternative. That is now the conventional wisdom.

NAMA was never properly debated before the Minister, in the wake of Peter Bacon's report, announced its establishment last April. A public debate did not take place. NAMA was put forward by the Minister and the Government and they were obliged to win the argument in respect of it, come hell or high water and notwithstanding the cost to the State.

The IMF indicated the banking sector here became too big for the economy. In such circumstances, the Government has decided to save the entire sector. Regardless of whether it is of systemic importance, no Irish bank will be allowed to fail. At a time when our public finances are deteriorating rapidly and when national debt is rising, we have been presented with intervention on a scale that is entirely disproportionate to the size of the economy. This is evident from the overall cost of NAMA when compared to that of United Kingdom's insurance scheme in respect of its banks.

Not only has a debate not taken place in respect of NAMA, but any alternative put forward has been rubbished. It has been stated there is no alternative and that the idea to establish a good bank is both rubbish and overly complicated. If one examines the redacted version of Peter Bacon's report one will discover that just before offering his conclusions he puts forward the argument that an asset guarantee approach, such as that which applies in the United Kingdom, would be preferable. Mr. Bacon states:

Notably, from the Government and banks' point of view, there is no initial outlay for the Government and therefore no impact on the fiscal deficit. For the banks, risk is transferred but equity capital does not require to be written down and the assets remain on their balance sheet and crucially, under their control. Conversely, in the case of asset sales the deficit of the Government is adversely impacted from the outset, since it must directly or indirectly purchase the impaired assets. For the banks sales of assets at written down values will adversely impact equity investors and may require them to recapitalise, as losses are realized upfront. Intuitively, these aspects alone tend to favour the guarantee approach over sale of assets.

In essence, Peter Bacon reaches a particular conclusion. However, on foot of the circumstances involved in Ireland, he reverses his thinking. I am of the view, therefore, that his conclusion does not follow his reasoning. Mr. Bacon chooses an option which raises the most problems for the Government and the taxpayer at a time when the economy and the public finances are in a perilous state.

It has been stated there are no options or alternatives and that NAMA is the only game in town. It is important we engage in constructive debate on legislation, particularly a Bill of this magnitude, that is brought before the House. It is somewhat late in the day but I must place a number of facts on the record. The Government is establishing NAMA within the parameters set down in a European Union framework document, namely, the Communication from the Commission on the Treatment of Impaired Assets in the Community Banking Sector, which was adopted by the European Commission in March. It states:

(11) More specifically, the budgetary situation of Member States will be an important consideration in the choice of management arrangement for assets subject to relief, namely asset purchases, asset insurance, asset swap or a hybrid of such arrangements. [As the Commission outlines, there are alternatives.] The implications for budgetary credibility may not differ significantly between the various approaches to asset relief, as financial markets are likely to discount potential losses on a similar basis. However, an approach requiring the outright purchase of impaired assets would have a more immediate impact on budgetary ratios and government financing. While the choice of management arrangement of impaired assets is the responsibility of each Member State, hybrid approaches whereby bad assets are segregated from the balance sheet of banks in a separate entity (either within or outside the banks) which benefits in some way from a government guarantee could be considered. Such an approach is attractive as it provides many of the benefits of the asset purchase approach from the perspective of restoring confidence in the banking system, while limiting the immediate budgetary impact.

(12) In a context of scarce budgetary resources, it may be appropriate to focus asset-relief measures on a limited number of banks of systemic importance.

The latter provides an indication as to why we are intervening in respect of all of the banks.

The document to which I refer is the European Commission's framework on government intervention to assist in restoring viability and credibility to the banks. It sets out all of the options and, like Peter Bacon's report, specifically highlights that the approach the Government has chosen is the worst possible one to adopt at a time when the country faces serious financial difficulties. It must be remembered that, regardless of the impact of NAMA, the national debt will rise to 100% of GDP within a year or two.

It is important that people realise that the debate on this matter has been smothered on foot of the Government's determination to insist on an approach which will doom the economy. The European Commission's document also states:

(38) Where the valuation of assets appears particularly complex, alternative approaches may be considered such as the creation of a "good bank" whereby the State would purchase the good rather than the impaired assets. Public ownership of a bank (including nationalisation) may be an alternative option, with a view to carrying out the valuation over time in a restructuring or orderly winding-up context, thus eliminating any uncertainty about the proper value of the assets concerned.

The notion of establishing a good bank to solve our difficulties is not, therefore, one exclusively espoused by Fine Gael. It is also to be found in the framework document of the European Commission. It is a concept which the Government refuses to entertain or discuss.

What we are debating is a framework Bill. The business plan relating to NAMA provides figures in respect of the anticipated cost to the State. That business plan is based on assumptions, some of which have already been undermined by valuations of, for example, the Irish Glass Bottle Company site of the Dublin Docklands Development Authority. It has also been undermined by the exposures in the High Court cases.

This business plan and the details of the subventions we are giving to our banks have not been approved by the European Commission and I have yet to receive any clarification from the Minister on our position when the legislation is passed. The Minister blamed protracted debate in the Lower House for causing a collapse in Irish bank shares last week. I fail to see how this is the case when whatever scheme is adopted by the Minister on foot of this legislation must be formally approved by the European Commission. There is an issue, therefore, with regard to the timescale. Once we have approval, we will then come back to these guidelines to see how the Government has dealt with the valuations and the divesting of assets of banks which are not essential to requirements and which would assist in the recapitalisation of our banks. We are dealing with the general framework here, but there is a long road to go yet before this is a done deal.

The communication I am speaking about states with regard to state aid procedures that member states notifying asset relief measures must provide the Commission with comprehensive and detailed information on all the elements of relevance with the assessment of the public support measures under the state aid rules as set out in the communication. Again the way to smother debate was to point out that the IMF, the OECD and the European Commission all approved the NAMA approach. Any other alternative was not to be considered. However, the Commission has not approved it. This communication specifically states that the design of the method of intervention is for the member state. However, that does not relieve the member state from the scrutiny by the European Commission or from adherence to EU state aid rules. Therefore, I anticipate many changes in the NAMA programme before it is finally implemented.

It is often said that everyone and all the authorities support the NAMA option. The Financial Times expert, Martin Wolf, when asked what about a bailout that involved the Government buying bad loans at higher rates said it was a very bad idea and he had always been against it. He said it was a concealed subsidy and a waste of money and that Government money could be used more effectively to capitalise the institutions in a direct subsidy rather than simply take away the bad assets, thereby leaving taxpayers with a large potential loss. Others whose opinions I and most people respect are not happy with the Bill, among them Joseph Stiglitz, Dermot Desmond, David McWilliams — if I may mention his name — and Colm McCarthy, adviser on public expenditure.

I remind Senators those people are not here to defend themselves.

Much of the debate on this legislation has concerned the extent to which the loan values will be written down and, therefore, the extent of the subsidy to the banks. However, there is an issue with regard to the funding of this project — the bonds which are provided to the banks, which will be at 0.5% or 1% above European Central Bank rates. We are, essentially, borrowing short and lending long. This is exactly what caused the problem in the first place with our banks. The special purpose vehicle, SPV, again takes this whole enterprise off the balance sheet of the national finances. It uses the mechanism which has led many of our banks into the current crisis, where we had off-balance sheet liabilities which, ultimately, undermined those banks.

Another aspect to the EU state aid rules is that it is not provided in the rules that enterprises which are non-viable will be granted aid. That issue arises in the case of Anglo Irish Bank. My final point relates to the surtax which is a substitute, supposedly, for a levy on the banks to ensure they share some of the burden. I question whether the Government has got approval from the European Commission for that surtax. It seems inconsistent with our single corporation tax rate.

I welcome the Minister of State at the Department of Foreign Affairs, Deputy Dick Roche. I congratulate him as one of the personalities who helped galvanise the voters and bring about a successful referendum on the Lisbon treaty. We are over that hurdle and I commend him on the work he did in that regard. His unique personality helps us win such major competitions and keep us on the road to recovery.

It is a pleasure to have the opportunity to talk about the National Asset Management Agency Bill 2009. This Bill is central to the economic recovery of this small country and must be finalised to allow the Government move on with the business of running the country. As a business woman, supporting enterprise and job creation are my principal concerns. Since 2000, Ireland has been losing ground in terms of international competitiveness. National income is declining rapidly and unemployment is rising sharply. NAMA has a key role to play in resolving this issue of credit availability.

Export-led growth is a key part of any long-term strategy to maintain living standards and secure long-term prosperity for the nation. The issue of access to credit for small and medium enterprises has been raised repeatedly with me at meetings with business organisations such as the Small Firms Association, SFA, the Irish Small and Medium Enterprises, ISME, and my nominating body, the Irish Exporters' Association. The problem assets on the banks' loan books must be dealt with. Then the banks, it is hoped, will be able to attract the resources to resume sensible lending to enterprise.

We have seen negative growth in private sector credit in almost all sectors. The volume of new business and personal credit loans is down considerably. Irish banks rely heavily on financial institutions abroad for funding and the uncertainty surrounding the scale of losses on the banks' balance sheets has made this funding more difficult and costly to attract. Thankfully, Jean Claude Trichet and the European Central Bank are standing shoulder to shoulder with us. Businesses must be assured that the banks will be given formal and specific direction as to what is expected of them. The banks should be extremely grateful for the continued support of the citizens. In return, they are expected to provide appropriate credit to businesses to protect and create employment.

NAMA will only succeed if it results in increased lending to viable businesses. It is in everyone's interest that we move quickly to repair the banking system and restore the flow of credit throughout the economy. Unless this happens, the economy will stagnate and there will be no recovery. It is essential that the Government and banking sector work together to ensure credit to business is fully restored. In this regard, transparency and robust oversight of NAMA's activities are vital to ensure taxpayers' interests are safeguarded.

The Government is not complacent about the significant increase in job losses. It is striving to enhance our competitiveness so that demand for labour improves. It is also important that we bring stability and sustainability to the public finances to facilitate confidence internationally in the economy. NAMA must be finalised as quickly as possible and without further distraction. It is up to the Government and Fianna Fáil to lead from the front and restore our economy to a growth economy.

I would prefer it when speaking nach mbeadh na daoine ar an taobh eile den Tí ag caint ag an am céanna. I find it very distracting.

I am glad of the opportunity to say a few words on this important legislation.

When the then Governor of Arkansas, Bill Clinton, was travelling the length and breadth of the United States in the summer and autumn of 1992 seeking election to the presidency, he coined the phrase, "It's the economy, stupid". He was referring to the fact that among all the issues affecting the people of the United States, the core concern was the state of the economy. As we in this House debate the political events of the day, at the very core of our thinking should be the issue of jobs, and our phrase should be, "It's jobs, stupid". Whether it is NAMA, public sector reform or budgetary policy, we must ask ourselves if the passage of particular legislation will be good for job creation or whether it may be improved. The issue of job creation is key to this legislation and concerns me because the Minister's commitments and desires for a response from the banking system do not appear to go far enough. The economy, as we know, is broken.

If the economy were a big jigsaw puzzle, the NAMA legislation would be a major part of it and would need to be put in place in a constructive and effective fashion. It is difficult to know how long the NAMA project will take to come to fruition. It is in all our interests that it should, but it is fair to say that judgment day as regards how it is working will not take five or ten years. Judgment day will occur in the next 12 to 18 months maximum, when we can clearly see whether credit is flowing to small businesses. That is what is urgently required, to get people back to work and keep them working in small enterprises. Bank credit is at the core of our problem, with credit facilities being made available and banks being open for business at the centre of the solution process.

I have never seen the NAMA project as being about bailing out developers or particular bankers. I have seen it as being about trying to fix the banking problem. Our banks have broken down, there have been shocking misjudgments and erroneous policies among banking people, but we are where we are. This is our new starting point and we must try to aim for legislation and a banking methodology that not only work but put people back to work. It is ironic that we are commencing this debate in the Seanad on the 20th anniversary of the beginning of the end of state socialism in eastern Europe. That form of government after an experiment lasting 30 or 40 years crumbled and fell, and the beginning of the end came about 20 years ago. We in this country are dealing with the fallout from the failure of unregulated market forces, with markets and financial experts and economists literally going out of control and making very bad decisions which the taxpayer now has to address.

That is our starting point today, and the Bill, which has had such a significant airing in the other House, is being presented as the Minister's solution. As my colleagues have said, other valuable options have been put forward by people such as Deputy Richard Bruton of Fine Gael, with the "good bank, bad bank" strategy. However, I am a political realist. I know what the vote was in the other House and I expect I can say what the vote will be in the Seanad at the end of this process. The NAMA legislation is what we are left with, and that is what will be enacted. Our obligation here is to try and ensure it works well, but most importantly, that it works to restore confidence and credit, ensuring that small enterprises have the funds to get out of their current difficulties.

Members of the public tend to highlight two or three main topics, which should be reflected on by those engaging in the debate. They are concerned about how secretive some of the NAMA provisions may be. Many of the decisions will be made behind very closed doors and that, too, is somewhat ironic because it was precisely this type of decision making which caused many of the problems we have. In the legislation, some of the centrally important decisions in relation to valuations and future planning will be very secretive and that is why it is important the Oireachtas should have a role to play, not just in passing the legislation but in putting in place mechanisms by way of appropriate committees so every word and work of NAMA is open to the political scrutiny of Members on behalf of the people.

Our constituents, friends and neighbours are obviously very worried about the valuation process. This has been mentioned by virtually every speaker in both Houses. Why are we paying what appears to be an over the top rate for assets which have really shrunk in value? We could have a philosophical debate about long-term values and how growth is expected, but it appears to me as a layman that the Irish taxpayer, who is becoming "Mr. and Ms Bailout" for the financial interests, is being obliged to pay premium rates for these assets. The Minister has given his interpretation as regards why this is happening, but people are genuinely concerned that we are paying over the odds and making a bad situation worse. I realise we shall be dealing with this in much greater detail on Committee Stage, but it is one of the central areas of concern as far as the public is concerned.

Going back to my initial point, the other serious matter of concern is whether, from the viewpoint of getting credit flowing, the legislation will work. The Minister for Finance, Deputy Brian Lenihan, took nearly two pages of his script to deal with this. He introduced an amendment to provide guidelines to improve the flow of credit to SMEs, and if necessary, to other sectors. Guidelines are very aspirational, but small business is in a desperate position at present. I am not really sure that guidelines on their own can dig them out of the hole they find themselves in as a result of the lack of credit. We need to go beyond strong statements from the Minister. We need strong action and legislative demands on the financial institutions to respond to what has been granted to them, by again making credit available for small businesses. If that does not happen within the next few weeks and months, this legislation will be quite irrelevant because of the flow of jobs out of the country, loss of tax revenue and the disappearance of hope. The result will be such economic and political pressures that rather than the four-letter word, "NAMA" being at the centre of the debate, it will be the three-letter word, "IMF".

If we want to keep control of our destiny, politically and financially, job creation and jobs must be at the core of everything we do and every issue we respond to, regardless of whether it is the financial crisis, public sector reform, the budgetary crisis or the marches on the street. I am worried that from a jobs perspective we are not putting in place the guarantees to ensure the banks and financial institutions will respond to small business. I hope that on Committee Stage the Minister of State and his colleagues will be willing to respond favourably to the Opposition amendments on this core issue which is central to the legislation.

I am the first to concede that we need banks and bankers although those words may not be popular. Without them we would not have an economy and without that we will not have jobs. The jigsaw is broken and the pieces need to be put together again. A banking system is at the core of the economic equation which we must solve. We must be concerned about the pressures we can apply to the banking system from the perspective of jobs and small enterprises. We have one chance in this legislation over the next two or three days here and one day in the Dáil to get it right. Aspiration and guidelines are not sufficient. There are many excellent proposals in the Bill. The Government could have followed other routes. Fine Gael offered a viable alternative but we appear to be left with this. We must try to get it right for the sake of jobs.

I have not had a chance to mention the special purpose vehicle which has now become a master special purpose vehicle but I understand its financial parameters and that it will be off the Government loan projections. Its introduction on Report Stage last week made it seem like an afterthought. While there was a need for the European Commission to approve it, introducing major changes in that way does not do much to instil the public confidence we need.

We discussed the NAMA business plan in the House a fortnight ago when I argued that most people have some passing knowledge of NAMA, much of it negative. It is up to the Minister of State and his side of the House to try to change those public perceptions, concerns and fears and to respond to positive amendments. When the process is finished in two or three weeks' time and definitive plans are put in place, it would be helpful if the Minister for Finance were to write to every household in the country to outline clearly the concept behind his proposal, what it will cost, what he expects to stem from it and to give people some degree of optimism. This would transmit hope to the people and illustrate that the Government has a plan. I urge the Minister of State not to ignore the fact that without a jobs plan as part of this debate, we face a bleak future.

I feel honoured and privileged to have an opportunity to contribute to a Bill the like of which we will not see again in our lifetime. I was in the House to hear the opening presentation by the Minister for Finance which was a very good speech. I have been listening to the speeches throughout the day in my office. Each has been very good in its own right. I was struck, however, by two sentences in Senator Harris's speech. He said that one must lead from the front and not hang behind. He complimented the Minister for Finance on doing that. Senator Harris said that NAMA is a political vehicle as much as an economic one. How true that is. It really is a political vehicle and it needs all parties and the nation behind it. NAMA is essential for the financial future of our country.

Since the draft legislation on NAMA was published last July, hours of media debate and much newspaper print have been devoted to it. I am not an economist but I do not think there was any better proposal. A consensus has emerged after the long and detailed debate that is the only show in town and the only way to go. It is important to have other proposals and we do respect them but NAMA was the right one to choose. Senator Bradford said that we seem to be stuck with it. We are not stuck with it; the general consensus is that it is the way to go.

The whole western world has been in unknown financial territory since the collapse of Lehman Brothers in 2008. Our Government was brave and decisive in being ahead of the posse when it introduced the bank guarantee scheme. We know all about that because we sat and burnt the midnight oil until 8 a.m. We all know that a properly functioning banking system is systemically important for our economy. NAMA is the most practical and sensible solution to ensure we as a nation have a solvent and functioning banking system.

The greed of domestic and foreign bankers brought the economy into the abyss. The failure of our financial regulatory system abetted this crisis. We must learn the lessons of this terrible disaster. People of my generation have always trusted important institutions such as banks and the church. My late husband started at the age of 18 as a teller in the bank and worked his way up to managerial level. If he were to come back now he would not recognise what he considered to be the best educator he ever had. He would not recognise what Ireland has become as a result of this failure. He held the banks and bankers in high regard. The 18,000 bank officials are very good, upright, hardworking people. We spoke about them last week after the atrocity of the bank manager's kidnapping. They go about their daily business and work hard. They have been tarred with a the same brush as a few of the big guys at the top in management and on the boards who have let them, all of us and the entire country down.

The taxpayer rescued AIB 20 years ago. I prefer to say "rescued" than "bailed out". I do not like the term "bailed out" because it sounds like getting someone out of jail or doing him or her a good turn. A Fine Gael-led Government under Garret FitzGerald carried out that rescue. People have the highest respect for Dr. FitzGerald. He is in his 80s yet still has a bright, articulate economic mind. I heard him speak last week on "Morning Ireland". He is an amazing man. Nobody talked about a bailout back then. I am sure the action was referred to as a rescue. It had to be done in the same way we must rescue our financial institutions today.

We need a functioning bank system and we deserve and have a right to expect nothing less. We do not need the avarice and greed of the past decades. The banks are venerable institutions. Daniel O'Connell founded the National Bank which became a major part of the Bank of Ireland group. The man would turn in his grave if he were to see today what he started and where it is at. None of us ever thought we could reach that point. As the saying goes, "We are where we are and have to deal with it".

Anglo Irish Bank and its management are now a byword for greed and crookedness. The cost of rescuing the bank will burden me, my children and grandchildren for many decades. The other domestic banks are no better. They took on Anglo Irish Bank in the race to the bottom. The boards and senior management of these institutions should be pilloried. We also cannot let the Financial Regulator and the regulatory system off the hook. While the incumbent during all of this has resigned, the system must never again turn a blind eye in the way it did to what went on in the past decade. The debate which commits the country to borrowing billions of euro to rescue failure is vital. We must fix the problem and NAMA is the best solution. It is important, however, that we never forget. The sting in the tail in putting the final touches to NAMA will never leave any of us. All Members will remember and we will have long memories.

The Acting Chairman, Senator Bradford, speaking before me, was anxious, rightly so, about the banks not responding in a positive way to credit requests from small and medium-sized enterprises, SMEs, a concern all Members share. I was delighted when the Minister for Finance announced this morning that there would be an outside review mechanism for turned-down credit requests from SMEs by the banks. An outside body will not be behind closed doors and the public will have confidence in it.

I have been with my bank for 30 years and recently wanted to do a small job on my house. I am mortgage free and when I sought a loan, I had no problem in securing it. However, I could only get it as a commercial loan at 6.2%, as opposed to 3.2% for a home loan. Little matters such as this do not put the banks in the right light with the public.

Introducing legislation such as this must never happen again. The lesson we have learned is a valuable one and we all have long memories. Our children will have even longer ones. I welcome the Minister of State, Deputy Pat Carey, and thank him for taking his Monday off to come in and see us. It is not often we sit on a Monday but I am sure he did not appreciate having to come into the House today.

I wish the Bill well and look forward to contributing to it on its remaining Stages.

I welcome the Minister of State, Deputy Pat Carey, and thank him for his time. This is an historic debate for the Seanad.

Earlier the Minister for Finance, Deputy Brian Lenihan, spoke about the need to move on from why this legislation has had to be introduced. It is important, however, that we reflect on the reasons NAMA is needed and learn some of the appallingly hard lessons learned from the events of the past few years.

Many Members will remember the Ireland before the Celtic tiger. We know what it was like to grow up when times were hard. I remember when it started to turn for the better in the early 1990s. At the time, to paraphrase a quote from the popular film, "The Commitments", the Irish were the underclass of Europe. Then a new Ireland began, a proud and confident Ireland, sometimes brash but a welcome change to the drabness that went before. One could trace its beginnings to the time when "Riverdance" first hit the stage. All of a sudden, Ireland was a country growing in confidence with economic growth rates of between 8% and 10% year after year. As a nation, we had much catching up to do. Our wage rates were low compared to the European average. Our housing stock was older than in other developed European countries. As the economy grew, people became wealthier and we all got carried away in the surge of optimism and hope that swept the country.

Before we were happy with just a roof over our heads, but people now began to invest in property and looked to develop their portfolios. Some went further and went into property development. Banks were falling over each other to lend money, having found an available supply of finance and being able to lend to prospective homeowners and retail property investors. Developers were given loans of hundreds of millions of euro to finance properties which were increasing in value all the time. It was the same in the residential market. Banks loaned money hand over fist. There were many examples of young first-time buyers on average incomes of €30,000 to €40,000 getting loans for hundreds of thousands of euro to buy property. Developers were getting loans on the basis of deposits which themselves were little more than loans. Banks were also lending money to their own senior figures. In the residential market people saw their friends and neighbours trading up. Some borrowed to their maximum just to get on the property ladder. In a short time they were refinancing their properties on the back of higher prices. Ireland experienced its first property bubble.

While other countries had seen property bubbles such as the United Kingdom in the early 1990s, Ireland had not. As Senator Feeney said, we have learned our lesson. Until recently everyone was convinced the property market in Ireland would continue to rise. The Government was getting billions of euro into State coffers from stamp duty and capital gains tax on property transactions. Rather than introduce legislation or regulation, it adopted a hands-off approach. Then the inevitable happened. Just like the Dutch tulip bulb craze and the South Sea bubble, the house of cards came tumbling down. The economy crashed; with it international confidence in Ireland. Once when just a few short years ago we were used as a symbol of hope to new accession EU member states, we were now paraded as an example of incompetence. The "Riverdance" age gave way to Dustin the Turkey.

After a year in gestation, to fix the problem we have before us one of the most important and critical Bills in our history. The Minister for Finance is correct that there is little to be gained from attributing blame at this stage. What we must do is learn the lesson of the past decade and ensure the route we take produces the least worst outcome for the people. There are obvious lessons to be learned, ones upon which we can all agree. First, there is no such thing as easy money. People need to know that investment in a property bubble is nothing more than an investment in a pyramid scheme — a waste of money. The Government was wrong to rely so much on the tax take from stamp duty and capital gains tax. Governments across the world need to ensure better regulation of the banking sector.

What we do not seem to be able to agree on is what is the best road out of the current difficulties. It is agreed some form of asset recovery vehicle is needed. Fianna Fáil and the Green Party leadership, but not its members, are in favour of NAMA, while Fine Gael has its own ideas. The Labour Party has proposed a temporary nationalisation of the banks. The Minister for Finance has two problems with this option. The first is little more than a it-was-not-invented-here problem. He spoke about temporary nationalisation being part of the Labour Party's particular philosophy. In fact, he does not like it because he did not come up with it first. He also claimed such a move would cost the Government more. He said that without a shred of evidence to prove that would be the case. It would appear from listening to him that no consideration has been given to any alternative proposal for a way out of the crisis, yet the temporary nationalisation proposal is one favoured by the majority of economists. In August a letter in The Irish Times drafted by Professor Brian Lucey was signed by 46 leading economists from throughout the country all of whom favoured temporary nationalisation. Professor Lucey said he had contacted 250 economists and while they were all in favour of the proposal, they did not want to become involved in a back and forth exchange and did not sign it.

The proposal by the Government has been criticised also by one of the most eminent economists in the world, Joseph Stiglitz, who called NAMA criminal and also referred to it as robbing the taxpayer. He said it is, in the view of many, just the final step in the socialisation of losses and the privatisation of gains.

Just last week the Organisation for Economic Co-Operation and Development said that the Government should not rule out temporarily nationalising the country's banks. The organisation also said that any form of public ownership should be temporary and transparent and that a subsequent exit plan should aim to maximise the return to the taxpayer. We agree with that. We believe it would be a better option than the one being proposed. With our approach the State would acquire the shares in the banks, the bad property loans would be written down or transferred to an asset recovery vehicle and the bank would then be recapitalised. In recapitalising the banks the State is investing in something it would own and stands to gain when the bank is then subsequently re-privatised. A crucial feature of the nationalisation approach is that it dramatically reduces the risks involved in having to value the bad loans. What is being proposed instead involves us making a clear leap of faith, believing in the concept of long-term economic value.

I have the 35-page NAMA business plan in front of me. Each page represents €1.5 billion. Considering the importance of NAMA, I believe the document is far too high level. I say that because in the document, when it comes to asset types, there is no breakdown of those asset types in Ireland that are within the plan. That is especially relevant for the purpose of identifying the projects, if any, that have commercial viability in the future. For example, how much of the collateral consists of either finished or unfinished retail spaces in provincial centres? We all know that in the past 15 years serious pressure was put on local authorities, both planners and councillors, to rezone land left, right and centre. I saw at first hand the way those developers operated. A great deal of pressure was applied and the end result is that, today, huge tracts of land throughout the country are zoned for residential and retail space. All of those are now going wrong in terms of the ability of the developers to repay the loans on them and I am not sure how much consideration has been given to their true market value. There is probably enough existing supply of retail space to last us for several decades to come and unless the Government is expecting a massive increase in population, and our population is decreasing, or a massive increase in the amount of money available to spend on these places, and according to the OECD we will never get back to those levels of expenditure, the projected incomes from those retail centres is probably pie in the sky.

When it comes to their long-term economic value I would like to know whether the Minister has done any macroeconomic analysis of future retail possibilities to see if these empty, partly built and potentially built retail values have any value at all. Many of them could be vacant for years. I could take the Minister of State for a walk around Ashbourne any night of the week but he knows well the number of empty spaces in towns like Ashbourne, Navan, Dundalk and Drogheda. How will we ever fill those spaces again? I do not believe we can work out a long-term economic value that is anywhere close to the figures and suggestions contained within that document.

Our desire is that the Minister will accept an amendment on Committee Stage on the question of what we should do with those empty retail spaces. The Minister of State will be aware of the lack of any facilities for young people in towns like Ashbourne. Youth cafés are closing all the time. There may be some way of using, even temporarily, the empty retail shelves which will remain empty for years to come. They could be on five-year leases at a peppercorn rent to enable local youth clubs, youth cafés and community groups to avail of premises they currently do not have the funds to avail of.

We are all aware of the vast improvement in hotel stock but do we now have an excess supply of hotel rooms? We are unlikely to see these rooms occupied to the degree they were some years ago. Hotels have been built along the Border and in the midlands which may never break even. Those are now included within NAMA's business plan and I wonder if an analysis has been done of the long-term economic value of those hotels.

I am not sure about the cash flows projected in the business plan or whether they have been sufficiently stress tested. It is frightening that the proposals are still developing. It is appalling that two weeks ago we saw the concept of the special purpose vehicle hitting the stage. I am concerned that something else is coming down the line or that the Minister has other proposals that have not yet been considered. We are in a position where the Minister is making up details as he goes along. I do not expect the Minister to change horses at this stage, although I urge him to do so. I am afraid he is not for turning but I hope he will consider accepting some amendments on Committee Stage.

Cuirim fáilte roimh an Aire Stáit go dtí an Teach don díospóireacht tábhachtach seo. I believe it was John F. Kennedy who said that success has 1,000 fathers and failure is an orphan. I am amazed at the number of economists who are now rushing to claim credit for predicting the economic collapse we have seen in the past 14 months or so. Apart from people saying the property market was overheated I did not hear anybody predicting the likely fallout from the events that were happening on the global stage until June of last year at a meeting I attended at which the former chief executive officer of the Bank of Ireland, Mike Soden, said it had all the ingredients of what gave rise to the Great Depression in the early 1930s. At the time everybody was exceptionally surprised and probably felt that was over-egging the pudding but it turned out to be correct. When Lehman Brothers and Bear Stearns collapsed some months later, confidence evaporated from the global financial scene and that had knock-on consequences for economies and, particularly, for unemployment.

As somebody who did not have a financial or economic background but took on the challenge that faced him at the time as Minister for Finance, the Minister has shown tremendous powers of intellect in getting to grips with it, and I have told him this privately. I have said previously that it is probably a three-sided challenge for this State and for most states in that it is not only banking but also fiscal and economic, of which unemployment is the sad consequence.

In regard to banking, by taking preference shares in banks to give some element of stability and liquidity at a time when a nightmare scenario of collapse looked on the cards and the clever manner in which he put warrants into the various banks which will allow him take up to 25% of the ordinary shares, what the Minister did mirrored what Berkshire Hathaway plc did in regard to Goldman Sachs and was probably a good model to follow.

As we pass this legislation, it is imperative that in the unlikely event of the banks being able to come up with privately raised capital, they should not be in a position to redeem those shares the taxpayer has now funded. The taxpayer must be allowed to reap the profits that it is hoped will accrue from that risk investment taken and in so far as the banks now raise additional capital, it should not be against the redemption of existing investment by the State but to offset any future capital the State might be required to put into those banks. The principle of the co-relationship between risk and reward must be maintained in the interest of the taxpayer.

That is not to say there have not been many casualties from the banking crisis. It is common to point fingers at various people who caused this, but I am mindful of the comment made by Churchill in the early stages of the Second World War when he was under much pressure to open a debate on the performance of Baldwin and Chamberlain who maybe had Britain ill-prepared for the war:

Of this I am quite sure, that if we open a quarrel between the past and the present, we shall find that we have lost the future.

Our focus and concentration must be on ensuring that we extricate ourselves from this extremely precarious position.

It is no consolation that other banks and other countries are in similar situations. Ours may somewhat be exacerbated because of the unprecedented economic growth that we experienced over a decade or thereabouts, and also the significant increase in property prices as a consequence. We must recognise that the State must exercise strong influence, not only in the credit area. I raise a note a caution in that regard. We must get back to a situation where credit flows on the basis of the quality of the proposals and the risks put before them. I note the Minister is setting up an appeals system, which is probably the right way to go. It is imperative the appeals system includes experts in the field of credit control and banking risk. There is a danger in all of this that we could make a bad situation even worse.

I want to see the influence extended to the area of pay and bonuses of those who work within the banking sector. It was the short-term objectives of the bank boards and senior executives that led us to where we are. That involved an over concentration on excessive risk-taking in the pursuit of those short-term profits. That must never be allowed happen again.

I also noted that recently even bank personnel and staff down the line have been awarded a pay increase in the order of 3.5%. At a time when taxpayers are put to the pin of their collar, where most in the private sector, as a consequence of the reckless banking behaviour globally, are suffering pay cuts rather than enjoying pay increases, it is incongruous that we would allow a situation where those who work in those banks would be getting increases, particularly at a time of deflation.

People have criticised shareholders. Nobody has suffered more than shareholders in the banks. Indeed, we have seen that people put in their retirement nest egg and lost everything. It is unforgivable in many ways. Shareholders have suffered extremely badly.

Ordinary customers have also been badly burned in two ways, the first of which is that they cannot access credit. The second is that many had money thrown at them by the banks, probably made imprudent personal decisions as a consequence of that loose behaviour by the banks and are caught.

It is easy to point a figure at developers. At one stage the construction industry and developers had in employment, directly and indirectly, just short of 400,000. That has almost completely evaporated. It is essential for our economy that we get the construction industry back to a more normal and sustainable level of growth in order to underpin those persons' employment.

I note that an analysis of those who have been unemployed as a consequence of the downturn in construction shows that 40% of them have primary qualifications or less. They will not be easily re-employable in other areas.

The people who gained — the winners in this — were the senior banking executives and the directors. I note that some of them will have had their shares wiped out, but the moneys they were paid in remuneration over that period was nothing short of scandalous.

It is not only them. There is a need for corporate governance to be clearly examined with a view to ensuring all public liability companies have a system whereby the ordinary shareholder can exercise influence over exorbitant pay within those companies.

For the directors, many of whom would have been on six figure remuneration for what is a nominal period of time spent as directors, I suggest that the following system be looked at to get over the short-term focus which was a big part of the cause of this problem. First, their remuneration, which is, say, in the order of €100,000, should be capped. Second, I propose that 65% to 75% of that should be in the form of shares, which could not be sold or redeemed for a minimum period of five years. This would change the focus of bankers and of those in charge of banking to align them more with prudential banking and also with the medium-term performance of the banks, which would be required for them to achieve the value of the shares they got for the service they were giving.

Senator Ross has been strong on the point that the banks were too big to fail, and I have some sympathy with his argument. Undoubtedly, that has been the case and we must learn from it. That can foster imprudent risk-taking, and I think it did in this instance. The fact the banking sector is being rescued, of necessity, globally and here in Ireland, means we must factor that into our thinking and into our precautionary measures for the future.

I do not believe, as has been suggested by some economists, that a break-up of the banks is a good idea. There are economies of scale. The interest of Ireland Incorporated is such that we need relatively medium-sized banking players. The legislation underpinning all of that is essential. It should include severe penalties, including custodial sentences, for breaches of the law and for breaches of regulation. The principle of criminal negligence should be applied and should be pursued in this instance.

This applies not only to the bankers. There has been serious dereliction of duty by the regulatory authorities, both internationally and, most definitely, domestically. I would ask that the Garda investigation into banking behaviour be extended to cover the role of those who worked in our regulatory authorities who had responsibility, and to examine if and where they failed and if there is any criminal negligence attaching to them for that failure.

Of the alternatives mentioned, one is a new bank which, obviously, insinuates allowing the existing banks to become insolvent. I am not sure that would be in the interest of this country or in the interest of credit flows, either to the State or to any banks we might have here in the future. I hear the argument about nationalisation, but the banks would still hold the non-performing loans and still be in the same retarded and inhibited situation they are in at present.

While I do not welcome it and while it is unpalatable, NAMA is necessary. We must rehabilitate our banking sector, as the Minister stated. In that regard, we can take some confidence from Fitch which downgraded Ireland's credit rating, from the International Monetary Fund, from the EU, from the OECD and from others who have claimed this is the correct route to take. However, it needs to be pursued with a considerable degree of caution and I am hopeful that on Committee Stage we can give greater scrutiny to ensure it is the best possible quality of legislation to meet the serious challenges we face, within the banking sector and as a country.

I welcome the Minister of State, Deputy Pat Carey. I hope he is enjoying the debate which is slightly more informative than what he might have heard in the other House.

It is interesting to hear the point made by previous speakers who asked whether there were alternatives or whether this was the only game in town. It is not true to say that this is the only game in town. A number of other proposals have been put forward which I have gone through. When I examined the good bank concept and drilled down through two levels, I still concluded that a huge amount of bad debt would remain in the end and it was not clear to me how it would be dealt with or its impact on society. I examined the Labour Party proposal for temporary nationalisation but it did not actually address the problem. I am not saying NAMA is the only game in town but, as I see it, it is the proposal that has the best chance of operating, although I am no better at this than anyone else.

I completely disagree with the point made by Senator Eugene Regan that this in some way conflicts with European policy or European regulation, because it does not. That is a question we have put many times to the Minister. We have teased it out more than once with him and I am absolutely clear in my mind that what we are doing, whether we like it, is well within what has been agreed, discussed and negotiated with the European Central Bank and the European groups. It is important to put that on the record because to say anything else gives the wrong impression.

In terms of the issue of bankers' pay, which was touched on by a number of speakers, it would be very helpful if the Government came out clearly on this issue. President Sarkozy has been banging this drum for months now but getting very little public support from the other G8 and G20 countries. Last week, his Finance Minister, Ms Christine Lagarde, put forward a series of proposals exactly along the lines that have just been put to the House, namely, that controlling the pay of top bankers can only be achieved if there is not just national legislation but also international co-operation. What the French Government is now introducing is legislation which will control, or at least put constraints on, the pay of the top bankers in all French banks and in all French-owned banks operating offshore, which is superb. My understanding is that this issue is being raised with the Heads of State at the fringe meetings that are taking place in Berlin tonight and tomorrow. It would be very helpful if the Taoiseach and the Minister for Finance said they would support this. It is one of those issues where people will say: "Yes, they are listening to us. They are speaking our language."

I am taking the Minister's advice and, rather than dealing with the generality of the Bill, I am picking up on various issues that have come through in my reading of it since it was passed in the other House. Several issues arise. For example, there is an entitlement to employ consultants for dealing with the business of NAMA or its related bodies. One point is worth making, although some might say I would say that and that I am wearing another hat here. We will probably pay those consultants €600 per hour, and even if the 8% reduction is knocked off that, in many cases we will pay in excess of €500 per hour for top quality people. At the same time, those who would claim that this is a terrible amount of money are also the ones who will ask why we have not got such economists working in the Department of Finance. Members will recall the debate last year regarding the number of economists. The point is that the economists are gone to work for €600 per hour for the people we will now be paying to send them into NAMA. There is a case on some occasions for hiring paid specialists in the public sector, and we need to understand that. This is not to make the case for or against anything else that has been said but, sometimes, it might actually be cheaper to pay them €200,000 per year than to pay them €600 per hour, which is what is happening. I am merely suggesting we need to find a balance.

The outline of the Long Title of the Bill is a role model. It is very attractive in terms of the way it is set out in that having the Long Title in sections makes it easy to understand. However, I must raise one question. Section 2(b) of the Bill states that one of the purposes of the Bill is “to address the compelling need ... to facilitate the availability of credit in the economy of the State”. I know why that paragraph is included in the Bill. It is a sop to those who have called for a loosening up of credit, on which we have heard several speeches today. Let us be clear about this point. In 2007, the Basel regulations on tier 1 assets for banks required that they be raised to 7%. At that stage, the Irish regulator, who has taken very little credit over the period, insisted that Irish banks go slightly above that 7% limit, for which he was abused by Seanie Fitzpatrick and others at the time, although the world has changed a lot since then. Now what has happened is that the markets are demanding of banks that they have tier 1 assets, that is, loan to value assets, to a much higher level than is required by regulations. In other words, the market has outpaced the regulator.

What this means is that when banks get money at present, they will only do one thing with it, namely, put it into the black hole of assets. It is a black hole in the sense of loosening up credit. They will not loosen up credit until they have an asset value of close to 10% of what they want to let out. Until they reach that point, there will not be loosening up of credit. There is nothing in the Long Title of the NAMA legislation which will facilitate making credit more available. I make this point because if this is one to be one of the yardsticks it is judged against, it will fail before it starts. The subsection should not be in the Bill. However, I have no doubt the Minister will not remove it because there would be a hoohah if he did.

Similarly, a further purpose of the Bill as stated in section 2 is "to resolve the problems created by the financial crisis in an expeditious and efficient manner". Would that it were so. The problems created by the financial crisis go far beyond what is covered by NAMA. NAMA is very much within the finance area and will facilitate that area. That aspect of the Bill needs to be softened. It should be to facilitate the resolution of some of the problems created. I am sure the Minister of State would agree that the Bill can only address some and not all of the problems which arise.

Let us be absolutely clear on the question of the tier 1 finances. We hear people ask all the time on the radio, in this House, in the other House and elsewhere why the Government cannot insist that the banks release credit. They cannot do so because they would be breaking company law if they were to do it. The banks have to work for the good of their shareholders. Shareholder value is now dependent on the tier 1 value being at a certain level. We should be very clear to people that in order to make NAMA work, we need to face up to these issues, which we are not doing.

Other issues also arise. The Bill at page 25 states that to achieve its purposes NAMA shall perform certain functions, one of which is securitisation. A year ago, when we discussed the whole banking crisis, we talked about securitisation, which is effectively selling on at somewhat of a discount a commitment to pay, for example, so much per month in the next 20 years. The banking crisis began with the selling of securitised instruments where the element of risk was not retained by the first creditor. That is the problem and it should be controlled. While I am not suggesting for one moment that NAMA would deliberately set out down this road, we must remember that we are dealing with pieces of securitised assets throughout the country which in many cases do not have a value attaching to them in terms of rent or other payments coming from them. I would like to know that there is a method of dealing with this which conforms to what we would now require from the highest possible levels of regulation.

There is a further issue with which I would ask the Minister to deal. Section 12(2)(h) states NAMA is entitled to distribute assets in specie to the Minister. I do not fully understand the language, but I think in specie means “as it is”. In other words, the land rather than its value will be handed over to the Minister. When the Bill was first published in July, I wrote to the Minister about the possibility of creating a support to provide land that might be useful for the provision of medical centres, hospitals and schools in order to provide some community value. Is this what the Minister has in mind in section 12(2)(h)? The only reason NAMA would transfer something in specie to the Minister is if the Minister had some use for it. I presume that it would be in the public good. In other words, he would not be getting the land in order to sell it again. That would be NAMA’s business, but I would like the Minister explain the matter to me.

There are elements of the Bill that need to be tightened by the Parliamentary Counsel. Under section 12, NAMA is entitled to make an application to develop minerals on land, which obviously means land that would come into NAMA's possession through the transfer of assets. That should not just deal with minerals; it should also deal with geothermal resources. We have not passed the appropriate legislation to deal with the matter, but we should not be caught afterwards. It is exactly the same as the mineral rights issue and is important when dealing with development.

There needs to be more openness in our explanation of development to the ordinary punter and ourselves. The section refers to carrying on any business that NAMA considers to be convenient in connection with its functions to enhance the value, to facilitate the realisation or to render profitable any of its properties or rights. There is a new section that was not in the original Bill which effectively allows NAMA to become a developer. I do not have any objection to this, but there is a finite number of bankers, builders, developers and financiers in the country. It is certain that NAMA will have to do business with some of these. It is crucial that we make it clear that we will be doing business with them on our terms.

Section 176 will frighten many, as it states "NAMA may enter into an agreement (including an agreement with the person who was the debtor in relation to the bank asset concerned)". Let us say somebody who owns half of Ballsbridge goes bust. NAMA will move in to develop Ballsbridge and go back to do business with the person who took on the debt in the first place. Everybody gulps at this stage and wonders can this be happening but it is written in section 176 that it can. We might as well just face up to it.

Section 177 is one of those bits of gobbledegook for which normal legislators would need an interpreter, but I want to be sure the section is telling me that in the event that we go into partnership with one of these debtors, the first thing that will be done is that he or she will have to pay back all that is owed in respect of any impairment, fines and so on before he or she will be able to get any value out of it.

In one section the Minister tells us he cannot break the law. I am completely opposed to Bills which state one must act within the terms of the Constitution or that the law must not be broken. That is a given; when it is included in a Bill, it raises doubts rather than provide reassurances.

Section 32 provides for the establishment of three committees, namely, an audit committee, a credit committee and a risk management committee. It is very clear what an audit committee does and it is reasonably clear what a credit committee does. It deals with the portfolio or management of credit. A risk management committee is associated with the other two committees. However, there is no provision for a finance committee. That is an appalling gap in the Bill. I can see the official sitting behind the Minister of State writing it down that the board can set up any committee it deems desirable, but that is not the answer I want to hear. There is a big section stating there must be quarterly reports on the financing of NAMA. There must be a finance committee to deal with income, the rental income being brought in, the budget for next year, the cash flow comparison with last year's budget, this year's income and so on. There will be a quarterly report which the board will approve. That is the proper way to deal with the matter if there is to be governance. This is a crucial issue and I do not want the Minister to be defensive on it. It would cost him nothing to add a finance committee to the three committees mentioned. If we have a board which sits down to put together a financial quarterly report, it will not be compiled by the board but by the executive. There is a whole section in the Bill on the devolution of power from the board to the chief executive which I completely support. However, this is something that needs to be done by the board. If we have learned anything from FÁS and elsewhere, the board must take responsibility for governance issues. We need two or three people from the board looking at the finance stream, income and the budget on a quarterly basis and coming back to the whole board with their recommendations. We cannot have governance without a finance committee. There is probably a case to be made for a remuneration committee as also, but we certainly need a finance committee.

I welcome the Minister of State.

I acknowledge the good work done by the Minister for Finance who I think has shown great courage. He has led like a real general, as has the Taoiseach.

There has been much talk about who is to blame, but the public wants to know whether NAMA will be good for us. Senator O'Toole has referred to other options that have been proposed, but none of them has struck a chord with anybody. We must ensure the banks are not shored up at the expense of small businesses trying to survive; they must also release money for first-time buyers and not engage in enhancing their own balance sheets. Small businesses are in decline and being attacked from every angle. The local authorities should be brought into the equation also, as rates are increasing by 35% to 40% in some cases. Local services are also being duplicated. Many things could be done to help small businesses to survive. The Minister has provided the banks with the working capital to ensure these small businesses can survive and grow. The banking community was very grateful to the Minister for the provision of capital, yet they are willing to ignore the country's need to demonstrate to the world of international finance that we have a new, transparent and progressive banking system. We must show that the country is competitive. If we do not, we will not attract foreign investment which is very important to us.

Some say others became rich during the Celtic tiger era while they remained very poor and did not reap any rewards. Economists have demonstrated time and again that this is a fallacy. On the other hand, there are trade union leaders who say they should run the country, that their ideas are much better and that we should make the necessary changes over a longer period. Where would we be if we went along with their ideas? A concession has been made to us by the European Union which does not give us that option.

Trade union leaders talk about people in big houses and the super rich. Let us get real and call a spade a spade. One cannot give what one does not have. Social partnership has served its purpose well. One may say this is not connected to NAMA, but in a roundabout way it is.

We would not doubt the Senator.

We paid a high price for social partnership, the aim of which was to guarantee there would be no industrial unrest. Good trade union leaders ensure there is no such unrest, unless their members are being badly done by. Unless they have a serious grievance, they do not bring their members out on the streets. A social partner does not place a picket on a premises with the words, "You are an awful lot in there. I am your partner, but I am out here with some of your employees and I will ensure we will bring down your business". The message must be sent loud and clear that people should not operate in that way. I have nothing against trade union leaders. They are entitled to do their job and represent their members. However, they are not entitled to use their members for their own aims — to ensure they stay in their jobs and draw huge salaries — and pretend they are doing their best. Let them do the job for which they are paid, rather than using vulnerable people to cause mischief and anger.

Many comments have been made about bankers and the money they were being paid. Some time ago I wrote an article about bankers which was published in the Evening Herald. Before the crash, I said developers had served their purpose in society; they paid tax and employed many. However, young people were cajoled into buying houses through slick marketing and advertising. They were led to believe that if they did not queue up at 6 a.m., they would not get a house. They were led to believe by slick marketeers and auctioneers that the first phase of 1,000 houses would cost €250,000, while next week the same houses would cost €300,000 each.

Representatives of the Construction Industry Federation attended a committee where I asked them why this was happening. They said the reason was fluctuation in bank interest rates. I asked them if they could substantiate this with paperwork but they could not. A member of the delegation said: "Deputy Brady, you are quite right. What we are doing is wrong and we are going to stop it." That is what went on, but there is no point in blaming everyone because everybody got a little out of it. I was a public servant. It may not be popular to say public servants did badly out of all this, but the figures show otherwise. Under the benchmarking system, we got money for nothing, including me. Benchmarking increases or bonuses are generally paid to ensure productivity. We are paying CEOs bonuses on top of salaries of €300,000 a year, which represent an increase in their wages. All of this must stop. There should be a provision in the Bill to prevent bank managers or CEOs from sitting on outside bodies, from taking a directorship in the Dublin Docklands Development Authority or elsewhere, because it is a conflict of interest which is open to abuse. That should be stopped. Bankers should not be allowed to become involved in anything connected with finance or development. In addition, when such individuals retire, there should be a provision to stop them becoming involved in these areas for a number of years.

Ireland is a nation worth fighting for. It is worth fighting for future generations and business. Let us fight together instead of blaming each other and throwing snide remarks about who won or lost. We are where we are and must make the best of it. We are all in the one boat which we must steer together. That is the only way out.

I welcome my fellow county man, the Minister of State, Deputy Pat Carey.

I am delighted to have an opportunity to say a few words on this most important subject. There is no doubt that banks and bankers bear a heavy responsibility, as they are primarily responsible for the State's financial woes. They fuelled the greed but worse than this many at the highest level participated in it. They totally failed to understand and manage the risks inherent in the important business entrusted to their care. They exercised poor judgment, both in lending and investment. As many others have agreed, this was compounded by poor corporate governance. The truth is they destabilised the entire system. Many directors have since resigned, but not all. They should have resigned and shared the culpability of corporate boards. I thought the Minister was insisting on a proper clear-out but they have not all resigned. More importantly, top management in the banks that made the day-to-day decisions and signed off on the credit wrongly issued are practically all still in place. Nothing much has happened in that respect. It reminds me of the Roman empire when slaves manned the boats and masters cracked the whip and got them to row harder, if necessary. That is what happened. The people in question steered the ships onto the rocks and it now appears we are allowing them to man the lifeboats to try to get these ships off the rocks and the economy back in business.

We cannot have a functioning economy without a properly functioning banking system. The culture within banking which was right became totally flawed. Banking policy was totally driven by sales targets and bonuses were determined by such targets being achieved. The targets were issued annually to staff at branch level throughout the system. However, there was no proper assessment of needs or requirements; it was just a case of "Get that result, no matter how you manage it." The same people are still in place. In a sense, therefore, much of what is happening is cosmetic because the culture has not changed. We have not yet returned to proper, prudential banking. Customers must be dealt with on the basis of their needs and a proper assessment. However, those the top who are cracking the whip are still insisting on branch managers increasing mortgage sales, selling credit cards and insurance and getting the deposit numbers right. There are no bonuses, but that is how it happened. The Financial Regulator has an astute role to play because the principles of proper lending must be restored, as must integrity at every level of banking. The one-way traffic from the top must stop.

We are all concerned about credit. It is the lifeblood of the economy. Many of the international economic problems arose because of toxic loans but we did not have the complicated problems that arose in the United States and elsewhere. We just had a huge problem with development land and property loans. We went way over the top. Much of the activity in this regard was totally speculative, as we know.

Of course, the banks are going to protect the capital ratios. Senator O'Toole's contribution was rather good in this regard. The banks are very much concerned with recapitalisation. When the Minister responds on Second Stage, will he refer to his agenda on rationalisation? The levy, which I believed was a great guard to the knave, has been replaced by a surcharge, which I hope will achieve the same objective.

With regard to lending to SMEs, the Minister has said he will take on powers to issue guidelines, but he will not do so in the Bill. With respect, this is total window dressing. The Minister should not expect the banks to make bad loans in the present climate. They will have to assess applications properly. They will address their existing customers before engaging in lending to new customers. As Senator O'Toole stated, they will strengthen their positions and get their ratios right. AIB, for instance, is not thinking, in the short term, of going near its American or Polish interests.

The €54 billion that NAMA is to pay for acquisitions includes €7 billion to reflect long-term economic value. In the present climate there are indications that the values that will obtain will be more conservative than expected, perhaps correctly so. If the overall value is less than €47 billion, will the premium of €7 billion be scaled back to reflect the change in the long-term economic value? I presume it will.

I agree very much with the part payment in respect of subordinated debt. It will be an incentive to the banks to discharge their role in managing the loans more efficiently.

The EUROSTAT statement was a late entry to the field. I gather the Germans are responsible for our good fortune in that respect. It is important for the sake of remaining competitive internationally that the NAMA debt not be part of general Government debt. While the master SPV will be privately owned to the order of 51% and owned by NAMA to the order of 49%, as the Minister explained, there is an in-built veto. The vehicle will be a separate legal entity and this model is sanctioned by EUROSTAT. The NAMA board will have a veto on decisions. The Minister intends to give a direction to the board that not a single decision should be made or allowed to be pursued by the master SPV that shall not be in the best interest or in line with achieving the objectives and purposes of the NAMA legislation. Is there not a conflict in this regard?

Who does the Minister envisage will become a private investor? Will banks be involved or will investors comprise only pension funds and high net worth individuals? It is hard to envisage the banks not being involved. Will the Minister respond to this?

I agree very much with the idea of having an Oireachtas oversight committee. While the Minister is to set this up, he is not doing so through the Bill. Therefore, will he tell us more about it?

While confidentiality is important, and while the Minister has powers in this regard, accountability and transparency are equally important. Will the Minister respond on this subject?

One must consider the key question as to how NAMA can veto the decision of a board of a vehicle 51% of which will be owned privately. Will the Minister address this? Will the investors remain anonymous within a private company?

NAMA is not to act for one year or more on the assets being transferred. This is probably prudent but we understand the banks could be ready to pull the plug on many of the small developers whose assets involving loans of between €1 million and €5 million will not be transferred to NAMA. This could lead to class action on equity grounds by those developers. They will have a strong case. It could raise constitutional issues. Will the Minister comment on this?

Banks not involved with NAMA could be ready to take cases against Anglo Irish Bank for distorting the market. Anglo Irish Bank is now in State ownership.

Credit is the lifeblood of the economy, particularly for SMEs and other properly functioning companies and enterprises. It is important that there be a new code for the banks to treat customers in a fair and measured manner. We must understand the banks have moved totally from a speculative role to a traditional public utility role incorporating prudential banking. Their focus on the property and construction industries brought us to the state we are in.

We must hope, despite our wishes for a different model, that the banks will be renewed under NAMA and that we will return to a well capitalised system with the resources and expertise to support prudently businesses and individuals requiring finance. It is critical that NAMA does what it says on the tin, namely, clean up the balance sheets and ensure a flow of credit to SMEs. This will become even more critical as the world economy begins to pick up and businesses begin to fill their order books again, thereby increasing the demand for credit.

The composition of the board of NAMA and the oversight arrangements are key to securing and maintaining public confidence in the new institution. Will the Minister elaborate on this?

The detailed business plan for NAMA must be finalised quickly once the legislation is passed so we can have more clarity on key elements of its operations. There is much we do not know and which will only become known on the finalisation of the detailed plan.

NAMA must hold developers to account and ensure all loans are paid in full and on schedule. If not, the agency needs to get tough and take over the underlying security. This message needs to be clear from day one if we are to have equity vis-à-vis the developers in the €1 million to €5 million category, in respect of whom the banks could be very heavy handed.

It is important that we co-ordinate our activity, in so far as possible, with the British and Northern Ireland authorities regarding the loans affected by NAMA that relate to their jurisdictions.

The Opposition is interested in improving the Bill if it is to be passed but it needs to hear more on what is intended once it is passed and on the detailed business plan.

I appreciate the opportunity to contribute to this important debate. In recent months it has been crucial that the public, external bodies and other interested parties have had an opportunity for a lengthy debate and consideration of the National Asset Management Agency Bill. In the course of today's debate it was said the Bill bails out developers and banks, but it is actually about rescuing and rehabilitating the economy for the benefit of future generations. This is to be achieved through supporting banks into functioning states and an expert management of assets to realise maximum potential.

As many Senators have contributed, I will endeavour not to repeat their comments, but I wish to state something in the context of the Minister's speech. He outlined how, at the time of the recapitalisation of AIB and Bank of Ireland, a package was put together from which the Government received preference shares with a fixed dividend of 8%. Attached warrants provided an option to purchase up to 25% of the ordinary share capital of each bank. Operational and pay restrictions were also parts of the recapitalisation package, as was a credit package that imposed new obligations on the banks in their dealings with small and medium-sized enterprises, SMEs, and mortgage holders.

I must mention the anger and unease among the public at the recent announcement by AIB that it intends to award its staff a pay increase. As people grapple to come to terms with job losses and pay cuts and are then asked by us to accept that it is necessary for us to provide public backing for banks, for AIB to have made such an announcement demonstrates, at best, a disconnect with reality and, at worst, a contempt for the public and the State.

Regarding the credit package which imposed new obligations on the banks in their dealings with SMEs and mortgage holders, I previously raised in the House my concern that what was actually occurring was different from what we were being told. Like all of my colleagues in the Chamber, I have heard disturbing accounts of the experiences of business owners struggling to keep their businesses afloat and of their dealings with banks. Recently, a family member of a business owner approached me. The businessman in question had an overdraft and a relatively small loan from a bank. He had received a telephone call from the bank to tell him that the overdraft was being withdrawn and that his loan was being called in. The following day, he had received three telephone calls from the same person asking him where the money was. Three times every day for three weeks, that person would call him to ask where the bank's money was. This approach was taken by one of the more prominent banks.

To my mind, such behaviour borders on bullying, harassment and intimidation and placed unnecessary pressure on people who were already struggling. After one gets the first call, one knows that the money is owed and that the bank is looking for it. This approach is not consistent with the message of support and flexibility in respect of SMEs conveyed by the banks to the Government. Therefore, I welcome the amendment to the Bill to provide the Minister for Finance with the power to issue guidelines to the participating institutions on lending practices and procedures to improve the flow of credit to SMEs and, if necessary, other sectors. Improving the flow of credit to SMEs is an essential ingredient in rehabilitating the economy and I urge the Minister to take every step he can to ensure this occurs. I appreciate the difficulty he outlined in finding the correct balance in assessing risk and I welcome his proposal on the development of an appeals mechanism.

I was struck by Senator O'Toole's comments. He eloquently made the point that, in discharging banks' responsibilities to shareholders, they may not be in a position to provide such credit to businesses upon weighing the risks. This is a valid point. As he spoke, the thought crossed my mind that had the banks had the same sense of responsibility in recent years, we might not be facing our current difficulties.

In addition to the amendment to the Bill, it may be necessary to consider other mechanisms to free up credit to SMEs. Will the Minister for Finance consider the establishment of a State mechanism of providing credit that could be utilised via agencies such as the county enterprise boards?

A critical aspect of the survival of SMEs is how banks treat existing loans and overdrafts, not just the provision of new credit. Given some of my contacts, a contributing factor to people's struggles with loans and overdrafts is the failure of debtors to pay invoices. While I appreciate that some degree of this reflects a difficulty on the debtors' part in accessing credit and may be alleviated by measures to improve credit flow, strong anecdotal evidence demonstrates that another significant factor may be opportunism. Some companies may be taking advantage of the crisis to hold off on the payments of invoices and bills. I have heard stories of shelf companies being established through which refurbishments or jobs are contracted out. When the jobs are completed and the invoices presented, the shelf companies do not pay. They do not have any assets and go into liquidation with nothing to pay the people who put the materials and labour into the jobs. Prior to going into liquidation, the shelf companies hand the property or asset back to the overall board which then continues to operate the asset in a successful manner, benefiting every day from the materials and labour invested in the unpaid for building.

To my mind, this is tantamount to thievery. It is an action that is not illegal, but it should be outlawed, given its serious consequences for businesses that are trying to stay afloat but are told they must register their claims for payment with receivers or liquidators. This is not acceptable and we must take some measure to protect them. Failing this, a number of SMEs will go out of business, which will have an impact on their employees' jobs, those employees' families and any other businesses to which those SMEs owed money. Thus begins a spiral of disaster.

In addition to taking legislative steps to prohibit such practices, the State has a moral responsibility to ensure none of the agencies within its remit is benefitting from them. In particular, I am thinking of organisations such as Anglo Irish Bank which has been nationalised. I have been approached by an individual whose company acted in good faith and completed a job for another company. The individual's company then faced financial difficulties and the operation of its asset was taken over by Anglo Irish Bank. Anglo Irish Bank is now overseeing the operation of that asset, which is doing extraordinarily well, but it is doing well on the back of the labour and materials that have already been paid for by that individual and his business. He will not survive much longer than the next few weeks. As we have nationalised Anglo Irish Bank there is a moral responsibility on us to ensure that neither it nor any organisation nor agency under our remit should benefit from such practices.

I was very taken with the point made by Senator Quinn. While they do not come directly within the remit of the NAMA legislation, one cannot have a debate on the economy without referring to the pressures faced by individual mortgage holders. I noticed that some newspapers yesterday had reports indicating that 1% of Bank of Ireland's mortgage holders are in arrears for more than 12 months, which amounts to approximately €750 million. That is a significant debt in one bank alone, and that is just a snapshot of the situation. There are difficult times ahead and it is imperative to get people through the next 12 to 18 months. Constituents have contacted me in despair reporting that they have received seven-day demands preceding the commencement of repossession orders for the family home for arrears of less than €6,000. It is not in the interests of society or the State for any family home to be repossessed in such circumstances. I urge the Minister to consider what practical supports can be put in place to address that issue.

The Minister has set out the case for supporting NAMA and he has outlined its importance. I accept that, but I make the point that NAMA alone will not rehabilitate the economy. It is a core ingredient, but it must be accompanied by additional measures to address, for example, how we can support SMEs with credit flow and individual mortgage holders. I wish the Minister well. The country is depending on the success of NAMA.

I welcome the Minister of State, Deputy Pat Carey. We have never had such important legislation in the House in my short time here.

One can ask whether there is any reason to be suspicious of the term "long-term economic value". Why do we not refer to long-term market value, which would be a more appropriate term? Does "economic" imply some other value is involved in assessing the value of property? The reason I am being so particular about this point is that there is a fundamental lack of trust in the Government's sensibility. I refer to both parties, the Green Party and Fianna Fáil. We recently saw the Green Party's leadership jump through hoops to deceive its own members over NAMA. It is plain not just to outside observers but to many of those in the party too that the goal of this highly choreographed exercise was to stick rigidly to the position the party adopted in the middle of the 2007 general election campaign, namely, to get into government. It did not matter at the time that this meant supporting a party whose interests have always been umbilically tied to the interests of developers and land owners.

No party has a history like Fianna Fáil when it comes to bad planning. Be it at county council level or Government level, the willingness of Fianna Fáil to ignore good practice in planning has been the party's outstanding characteristic in the past 30 years. I realise that is a strong statement. The Green Party was willing to enter into government with Fianna Fáil despite the fact that its very raison d’être is to oppose such appalling environmental policy. I was amazed at that, given that the Green Party’s policies were to promote good, sustainable, long-term planning for the good of the country. That led the Green Party to support a party whose addiction to developer-led planning can only be described as pathological. Whether it is the tribunals, or as we have seen not so long ago in County Kerry, in the courts, it is invariably Fianna Fáil members who are guilty of disregarding the public interest and instead favouring developers and landowners who have bankrolled the party’s election campaigns. Those are facts, not opinions or conjecture. The court records and tribunal reports are there to prove it. That has been at an enormous financial cost to this country.

The gross inefficiency and high cost of public transport, policing, health and education were caused by Fianna Fáil's preference for allowing development anywhere that could turn a buck for the wealthy interests that caused our economic meltdown. Therefore, when the Minister uses such a nebulous term as "long-term economic value", one cannot help but be suspicious that this is just another deception being played upon the people because that term looks like a get-out clause for the Government, which can move the goalposts yet again at some future date. The Green Party has joined that team. I ask the Minister to state clearly that the monetary value of loans will be based exclusively on their market value, albeit one that will be massaged upwards for the benefit of the banks and not some other, as yet unstated criteria.

The late introduction of the special purpose vehicle, the majority of which will be owned by private interests, is just the latest example of the deceit that lies behind NAMA. It is inconceivable that the Government, which got the go-ahead for NAMA from the EU authorities in the summer, could only have decided on this particular SPV model a few weeks ago. The Government's actions have given even the most open-minded person reasons for deep suspicion. If we consider the communication tactics of the Government, we will find further reason for suspicion. We were told that the setting up of NAMA is similar to what happened in Sweden in the early 1990s. The Swedish Minister, Bo Lundgren, whom the Government cited, did not agree that NAMA is the right approach for us. He is not the only one who does not agree with the Government. The two leading economists in the world, Joseph Stiglitz and Paul Krugman, also disagree with the Government. Recently, Peter Mathews added his concerns on the Bill.

NAMA will assume the loans from the banks and pay a value premium. That process is confidential so the premium is likely to be in the form of a cash gift to banks, that is, non-repayable, unlike recapitalisation, which means one has the influence and the profit when one sells the bank shares back to the market. Will the Minister indicate whether NAMA is precluded from loan forgiveness? Could that be extended by way of passing on the discount on the loan value from banks to developers in whole, or in part? NAMA will want the loans honoured or else liquidation will be sought, which means a sell-off of the company's assets. Who will lend the money to buy these assets? Will it be the banks with free money from the taxpayer? Who will buy those assets? Will it be people experienced in development, namely, developers? Will that mean developers could buy back their own assets with borrowed money at a cheaper rate than the original payment due on the loan? Could they engage in information exchange and buy back each others assets? Those are legitimate questions on which the Minister needs to provide clarity, as there is much confusion on those matters. There has been such an amount of debate that sometimes the finer detail gets lost. There is no clarity on the issues that arise. There is confusion even among members of the Fianna Fáil Party on NAMA.

The Minister only ever talks in terms of a higher value of the assets, but if NAMA sells off all the property and assets onto the market that could create a glut. According to the law of supply and demand that could mean lower prices would prevail. In that case, the long-term economic value could be lower than the current value. That is what I expect would happen as it would make sense. However, I do not know because I am not an economist. Will the Minister point to any provisions in the legislation that would prevent developers from picking off the best assets under the control of NAMA? What is likely to happen is that many developers who should be bankrupt by now are not going to go bankrupt and they will be fully within their rights to purchase assets at market rates having sold them with the future economic value premium being paid for by the taxpayer.

I accept I have raised contentious issues. I do so advisedly. Those issues have not been satisfactorily addressed. I thank the Minister of State for listening. I thank those involved in preparing the briefing information made available to us. I await the Minister's replies with interest.

I welcome the opportunity to speak on the National Asset Management Agency Bill. It is an historic debate with significant implications for every man, woman and child in this country. No doubt it will have a huge impact on our children and our children's children. Whether they can stay in this country, are forced to emigrate or whether there will be jobs for them depends on getting this right. It is critical for the future of the economy.

I acknowledge the work done by the Minister for Finance, Deputy Brian Lenihan, on this legislation. I seek equal acknowledgement for the work of Fine Gael, Deputy Richard Bruton, Deputy Enda Kenny, the economics team and all Members on this side of the House who are taking this legislation extremely serious. It is vital that we examine it critically. We would not be doing our job if we did not do this effectively in the House today and on Committee Stage. We are not coming from the position of criticising the legislation simply for the sake of doing so. It deserves critical examination and we have key points to make which I hope the Minister will listen to and consider on Committee Stage.

We have concerns about the legislation in a range of areas. They focus on the business plan, its viability and how well grounded it is; the long-term economic value and governance issues. These are very important and must be seriously addressed. We have seen what a lack of governance and regulation has done in the banking sector. NAMA is a vehicle that will deal with billions of euro of taxpayers' money; therefore, we must ensure the governance issues are addressed comprehensively in the legislation. Fine Gael believes there is much room for improvement in the legislation in that regard. We will bring forward a number of amendments relating to governance.

We are concerned about liquidity issues. We are not convinced this vehicle will produce liquidity. Many other Senators and I received a letter from a man who has been making a great number of comments about NAMA, Mr. Peter Mathews. He makes the point that, given the situation in the Irish banks and the huge increase in the number of inter-bank loans they have received in recent months, their tendency will be to repay these loans as opposed to making the cash available to the businesses we have been discussing today. That is another matter of concern for us regarding NAMA.

Insider or golden circles inside NAMA are also a concern. It is up to the Minister to tell us why we need not be concerned about it. This has been a key issue in Irish economic and social life and we have no desire to have the same thing happen again. There must be mechanisms for transparency, proper reporting and objective information being made available on what is happening in the vehicle being established. A book I read recently, The Black Swan, is about how change, as opposed to certainty, is the essence of life. We sometimes operate on the assumption that life is about certainty and believe we can plan ahead. The thesis of this extremely well written book is that it is all about coping with uncertainty and change. Never was that more brilliantly illustrated than by what has happened in the economy and world markets in the past few years. The NAMA legislation and the structures it will establish will see many twists and turns in the years to come. I believe it will end up being quite a different operation from what is outlined in the legislation today.

My colleague, Senator Regan, has made the point that the European Commission has had a good deal to say about the information it has required from the Government in recent months and will require in the future. Perhaps the Minister will address this issue. The information the Commission seeks before it will be satisfied that everything is working well in NAMA is outlined clearly in the communication from the Commission on the treatment of impaired assets in the Community banking sector. There is much work to be done in providing information for the Commission and other international bodies. Unquestionably, the Government does not have carte blanche at this stage with regard to NAMA.

This legislation will place a huge burden on the shoulders of every man, woman and child in the country. These are people who rightly say they did not contribute to the banking crisis, but they are now being asked to take the risk for those who engaged in reckless and what often appeared to be unregulated banking. Mr. Peter Mathews refers to the banks in the communication he sent us today and says they need capital, integrity, competence and trust. When one considers the awe with which banks were viewed in past decades throughout Ireland, it is appalling to see the change that has occurred. All these qualities — trust, integrity and competence — are questioned in the banking sector. The ordinary person has lost faith in bankers and how they manage their affairs.

Legislation cannot be considered in a vacuum. Context is vital. One of the key issues with banking in recent years concerned huge speculation. That speculation was not grounded in any element of logic regarding land valuation. As a result of this speculation and recklessness, the country is two years into a financial crisis that has left Irish businesses and families struggling to gain access to often essential credit. We also see families trying to cope with unemployment and negative equity. These are the challenges.

Fine Gael's concerns about the legislation focus on three areas which some of my colleagues have outlined. We are deeply concerned about the huge private sector risk being transferred to the taxpayer. We are concerned about the lack of transparency and secrecy with which NAMA might well operate. There are various sections in the legislation where that is a particular concern. Section 56, for example, refers to when the Minister is given confidential information. Can he bring this into the public domain if it is deemed to be in the public interest? That is a key question. The Minister is given onerous powers and responsibilities in section 56, but what about the public interest and the disclosure of information, if it is deemed necessary, which it may well be in this context, given the amounts of money we are discussing? The third concern is one I have mentioned, liquidity issues and the lack of a guarantee that credit will go to businesses.

I am very concerned about the issue of long-term economic value and that the valuations will be far too high. I can offer the Minister an example that has been quoted a great deal but is worth quoting, the recent assessment of the Irish Glass Bottle site in Ringsend in Dublin. It is now valued at €60 million rather than the €412 million paid for it initially. That is a write-down of 85%. In fact, some argue that it is worth €25 million. There are certain conditions relating to this in terms of the contamination of the site and various other facts. However, the site exposes the starkness of the situation with regard to changing valuations. What is the impact of such write-downs of valuations on the NAMA business plan? What impact will such a write-down have on the future capital requirements of the banks? If rosy valuations continue, will the taxpayer end up having to bridge the growing gap between fantasy figure valuations and the reality of the banks' balance sheets? That is a key question. The lower the valuations, the less money the banks will have, in which case issues arise about their balance sheets.

The Minister has said we cannot do nothing. Obviously, nobody is suggesting we do nothing. Clearly, we must progress this issue and Fine Gael has made solid proposals.

In accordance with the order of the House of this morning, we must suspend proceedings until 8 p.m.

Sitting suspended at 7 p.m. and resumed at 8 p.m.

Senator Fitzgerald was in possession before the sos and has three minutes remaining.

I was discussing the changes in valuations and referred to the Irish Glass Bottle Company site in Ringsend as an example. It is widely acknowledged that careless, inflated valuations contributed to the banking crisis. In the context of NAMA, many questions are left unanswered in this regard. I ask that the Minister expand on the issue.

International precedent and experience clearly show that a State body does not have the same degree of effectiveness as the private sector when it comes to recovering bad debts. I am interested in hearing the Minister's response in respect of this matter. Only last November the International Monetary Fund, IMF, concluded a study of banking and property busts in seven other countries where the NAMA approach had been adopted. The study found that government owned asset management companies appeared largely ineffective in resolving distressed assets and that this was mainly due to political and legal constraints. It also found that the use of asset management companies was positively correlated with peak non-performing loans and fiscal costs.

A number of speakers referred to the potential cost of consultancies. As a result, the Minister must reassure Members that these costs will be controlled and managed in a way that is beneficial to the taxpayer. The IMF believes NAMA-type bank rescues can, in layman's terms, cost the taxpayer an arm and a leg. The latter is primarily caused by the politically motivated decisions that can be taken as opposed to the making of more objectively based decisions which would be in the interests of the taxpayer. I hope the Minister will address this matter.

I referred to the need to ensure credit flows. Section 210 of the Bill refers to the Minister issuing guidelines on lending to financial institutions. Has he published these guidelines as yet or does he intend to publish them? Will he indicate what will happen to financial institutions which avail of NAMA but which do not adhere to the guidelines? Are penalties laid down in the legislation in respect of such institutions, or what powers are available to the Minister in the event that the guidelines are not implemented in the way he envisages?

The Minister has stated doing nothing is not an option. No one in the House is proposing that action should not be taken. Fine Gael published a detailed alternative banking strategy. The Minister has been keen to criticise that alternative and did so again earlier. However, I must make the point that the NAMA model has also been heavily criticised by Professor Joseph Stiglitz, Professor Willem Buiter and others. There are questions relating to NAMA which the Minister must answer. One of the key questions revolves around credit flow. How can the flow of credit be guaranteed? What is to stop the scheme being turned into an inter-bank bailout? If the latter happens, we will have failed in what we are trying to do in the context of establishing NAMA.

The Minister referred to the views of the international community and its response to NAMA. People tend to quote the parts of statements issued by the ECB, the IMF and the OECD which appeal to them in respect their proposals. Was it not the view of the ECB and the IMF that NAMA should not pay above market value for bad loans and assets? The ECB appears to be particularly adamant in respect of that matter. Perhaps the Minister might address it.

Some €5 billion is set aside in the Bill for what is termed a "working out" strategy. I understand why this money is being allocated, particularly in the context of, for example, half-finished housing estates. Such estates constitute a major problem. There are apartment complexes in which only a couple of dwellings are occupied, while all the others remain empty. It is envisaged that the working out strategy will be available to developers who were involved in building such estates and complexes.

There are questions to be posed about oversight and decision making. We are aware of the unhealthy relationship between banking and property developers and where it has led us. Will the Minister indicate how matters in this regard will be managed? How transparent will be the decision-making process? Sometimes when people are attempting to solve a problem, one ends up with a reflection of rather than a solving of that problem. There is a failure to ensure different attitudes are adopted and different processes put in place. The property loans and toxic debts for which NAMA will assume responsibility were managed in a certain way and we must ensure new governance mechanisms are put in place in order to ensure they will be managed differently in the future. As we are aware, some of the same players will be in place and we must ensure the relevant issues in that regard are dealt with under NAMA.

The Minister is probably conscious of the extensive media contributions made by Mr. Peter Matthews in recent times. Mr. Matthews maintains that there is a perceived error in the business plan which will turn NAMA's projected profit of €5.48 billion into a loss of €12.6 billion. I know the Minister is interested in what Mr. Mathews has to say and would like him to respond to some of the figures the latter has been quoting in public with regard to some of the assumptions made in the business plan. There are a number of serious concerns about the plan and Mr. Mathews's observations, if correct, could have major implications. I would like to hear the Minister's comments on this matter because, with the passage of the legislation before us, the taxpayer will be asked to shoulder a massive burden. Therefore, it behoves us to address the serious issues raised in the public arena during the course of the debate on the Bill.

I wish to share time with Senator McDonald.

Is that agreed? Agreed.

I welcome the Bill and thank the Minister for introducing it in the House. As many speakers stated, it is one of the most important Bills ever to have come before Seanad Éireann. I have no wish to reiterate some of the excellent points made. However, I do want to refer to one or two matters, particularly in the context of the funds that will be made available to the banks and the sacrifices that will be made by the Government and the taxpayer.

What level of accountability will apply to the banks with regard to the percentage of funds that will be made available to the SME sector? I am concerned about small family-run SMEs which have a good track record, provided employment and run their financial affairs in an orderly manner. What guarantee will they have, particularly those involved in export businesses, or what guarantee will the Minister provide that the banks will lend a percentage of the funds they will receive through the ECB bonds to SMEs straightaway? It is not good enough that they will lend for a three or six-month period and then review the situation because SMEs are under siege. Anybody involved in an SME will tell the Minister the banks are not playing their part.

The retail sector is on its knees. A retailer with a good track record over five, seven or ten years is entitled to assistance. Retailers provide employment but will not be able to stay in business if the credit line available from the banks during the bad months of the year does not continue. I understand some banks are not playing their part in this regard.

Entrepreneurs, innovators and investors who created the Celtic tiger and took risks to create wealth for the country have paid millions into the Exchequer in the past ten or 12 years, whether through PAYE, PRSI, income tax or VAT. When NAMA takes over their holdings and investments in property, will they be given an opportunity to present their business plans for the next three, four or five years? It is crucial that these innovators, creators and investors are retained, recognised and acknowledged for what they have done and achieved and contributed to the economy in the past ten to 15 years. I know of many family businesses which will go to the wall and of some whose investments will be taken over by NAMA. These owners may have put up 20% to 25% of the funding for these projects in hard cash. We need to assure them that their business plans will be considered by those involved in NAMA. Approximately 50% of the time it is the individuals who started these projects who will be able to make them work when the global economy picks up again.

Senator Martin Brady asked about involving the Office of Public Works in valuations. Why is it not being used as its expertise in the valuation area is second to none?

Most of the other issues involved have been raised. I want to see us emerging from this difficulty and taking the opportunity to invest and create jobs again. Given half a chance, Irish investors are as good as anyone anywhere else in the world. If the Government and NAMA can create an opportunity, they will not be found wanting.

Thirteen or 14 months ago we passed the legislation on the bank guarantees. I suppose we would have taken the NAMA option then if we could have done so, rather than go through the year we have just gone through. The Minister should be commended on the speed and clarity with which he is dealing with the issue. His position is not an easy one. He cannot just come into the House and say, "I support the legislation because I think it is great." We are in a very serious position and the last thing we need is uncertainty. NAMA is the only workable solution available. It is vital that this stimulus package is presented with speed. A few weeks ago we saw the flux in the markets; there is, therefore, an urgent need to see NAMA through to deal with such a situation. This package is the vital cog in getting the economy back on track.

Senator Cassidy mentioned SMEs. I want to raise a number of issues in that regard. Some of those who may be part of NAMA need clarification, as there are many rumours and much speculation about how it will work, whether some people will manage themselves or whether staff will be drafted in from other areas. AIB announced recently that it intended to give a 3.5% pay rise to its staff. Some of those in the banks involved in putting property valuations together in-house are already on huge salaries. We need to deal with this issue. It has been announced also that there will be 250 job losses in Anglo Irish Bank. The entire banking sector gives off a bad vibe.

To return to the question of SMEs, the dilemma for the banks is that we need to get credit flowing again in the economy, but they are scared to take a chance on any business or lend to anybody. In an international recession no bank will throw money at the SME sector, but it is suffering. I am glad to see an amendment is being made to the Bill to enable the Minister to intervene and force the banks to lend to SMEs. Obviously, the banks need to consider which are viable, but the appeal mechanism being built into the Bill is an improvement and will mean we can consider options such as trade insurance. It is important the Minister will have this power in order that we can force the banks to reach our percentage targets. That is the only way to deal with the matter, as in a market economy there is no other way to intervene. At the same time, it is important to ensure the banks are not starved of oxygen, as some of the so-called experts suggest might happen. We must consider some Government scheme to support SMEs in the future. The social welfare system should also be considered when dealing with this issue. Some employers have work available and could take on employees, but they cannot do so because they cannot get credit and have problems getting money in with which they could pay salaries. In the past that money would have been available through an overdraft or loan.

It would, as the Minister said, have been unimaginable for us to try to cap bankers' salaries or to dig deep into the banking sector a year ago. However, the financial crisis has presented us with an opportunity to make imaginative legislative changes. We can become the referee because the banks and the regulator have failed to maintain control. The era of keeping politicians off boards and trying to make up another State body to deal with something when politicians paid to do the job is over. We need to stand up and be counted. We must get involved in the banking sector and make sure credit controls are put in place, that we never again over-rely on the banking sector and that new regulatory regimes will be put in place.

One aspect that must be examined is mortgage brokering. Mortgage brokers helped to cause this problem and should be regulated. We need to regulate the professions that fuelled the crisis. Not much mention has been made of them, but they helped unfortunate people who should never have been given a mortgage to get one. Such issues must be given serious thought.

After the fall comes reform. NAMA is the first part of what I hope will be a fundamental reform package for the financial markets. We have had a variety of solutions presented today and in the wider debate, including Fine Gael's suggestion of a good bank and a bad bank. The Labour Party has proposed nationalisation for consideration. These options are diametrically opposite. If we wanted to select the middle ground, we would probably come up with the NAMA solution. It is the logical compromise and suits where we are at.

The age of soft touch regulation is over. As politicians, we can now decide the rules, not the banks or those who thought of the idea of derivatives which contributed to the problem. We must see reform in the financial sector worldwide to the same extent we are seeing it in Ireland. We have an opportunity that we never thought possible to reform the sector once and for all for the betterment of all, including taxpayers. Unfortunately, somebody must take the hit, but we are all in this together. We must grasp the nettle and reform the sector.

Ba mhaith liom fáilte a chur roimh an Aire. Tréaslaím leis mar is léir go bhfuilimid i sáinn. Is léir go bhfuilimid i sáinn sa tír seo ó thóg sé faoin obair sa Roinn Airgeadais measaim. Fiú na daoine nach n-aontaíonn leis amanna, go mbeadh daoine faoin tuairim go bhfuil an-obair ar siúl ag an Aire, agus gur mhór an tuiscint atá aige ar na rudaí a bhaineann le cúrsaí na géarchéime seo agus bealach réalaíoch tuisceanach á thaispeáint aige agus é ag tabhairt faoin ábhar seo i gcónaí sna meáncumarsáide ach go háirithe. Nuair a thugaimid faoi deara, is dócha, an fhadhb a bhaineann le muinín ag am mar seo, tá sé an-tabhachtach go dtuigfeadh daoine amuigh sa phobail go bhfuil tuiscint ag na gceannairí sa sochaí agus ag na polaiteoirí ach go háirithe agus measaim go bhfuil moladh ar leith tuillte ag an Aire ag an am seo.

In welcoming the Minister to the Seanad he deserves a particular tribute because of the approach he takes in dealing with these issues. Confidence is extremely important at a time such as this. While there is still great fear and people have grave doubts about Ireland's future, it is fair to say the Minister has taken to his brief with particular enthusiasm and also with a measure of ability. I do not mean to flatter him unduly in saying this and know he is so modest he can hardly bear to listen to it. Nonetheless, he is deserving of credit and praise because he is dealing with an unprecedented crisis and brings undoubted skills to the task.

It is not for me to provide an in-depth analysis of how exactly the economy developed financial gout, or precisely why further debate was needed before the blueprint for NAMA was devised. Such tasks are outside my area of expertise and of limited value, as the debate on Second Stage of the Bill is well under way. I propose, however, to offer in passing a general and, I hope, fair-minded critique of the NAMA project and perhaps point to a more specific problem in the Bill's provisions, before supporting a more radical interpretation of the agency's task which, if practically undertaken, would confer a benefit on a society to which the banks are indebted in more ways than one.

I take issue with an attitude that is pervasive in some quarters which supposes NAMA is the necessary response to the financial crisis. It should not be forgotten that Britain and Germany offer two alternative responses which differ significantly from the NAMA proposal. According to the British multi-track approach, the state takes shares in banks. For instance, the British state owns 83% of Royal Bank of Scotland and has put in place an insurance scheme, whereby the banks will take the first hit in relation to bad losses. At a point where such losses exceed a certain threshold the state will intervene to insure the banks.

The scale of the task facing NAMA was not remotely envisaged at the time of its inception. While it was a sign of real intellectual integrity on the part of the Minister to set out the assumptions underpinning the NAMA philosophy, unfortunately, the weight of evidence suggests the NAMA initiative will be a drag on the economy well beyond the project period. The three core assumptions, each with its attendant risks, are: property prices will recover by 10% in the run-up to 2020 — an optimistic assumption considering that the value of commercial property, in particular, is downtrodden; some 40% of NAMA properties will still produce cash — I wonder whether this is not contentious when one looks, for example, at the near term projections made in Bank of Ireland's recent six-monthly report; and that there will be a 20% write-down — it could conceivably be even more than this.

In effect, we are paying over the odds for skills which are supposedly at the heart of banking. I understand we are paying €2.5 billion in consultancy fees. As Professor Ray Kinsella has pointed out, that is one fifth of what it takes to run the HSE in a year. The lack of core skills in delinquent banks was not universal, but tragically sincere and reasonable voices of concern were not listened to and, as we all know, the price has been enormous. Banks have not changed their business model; therefore, it makes no sense to me why something with such a malign business model should, in effect, be resuscitated at enormous cost to the taxpayer. However, we are where we are and there is no point in pining for an alternative reality. I accept the arguments that have led the Government to this point.

Turning to the proposed legislation, like others, I am not entirely clear why the mechanism of special purpose vehicles, SPVs, which are highly specialised, problematic and have a difficult history — they were widely used by Enron, for example — is being adopted. Apparently, it is because of the requirements of EUROSTAT. What is at issue, however, is not the statistical niceties but the transparency of the balance sheet of Ireland. Our reputation for transparency could, perhaps, stand to lose more ground by the dichotomy in the public finances through the creation of an esoteric vehicle just to satisfy demands as regards the appearance of the balance sheet. Many do not understand why this approach is being taken.

There is a good deal of talk about regulation, justifiably so. However, more than regulation is needed if we are to address the social cost of rampant corporate greed and short-sightedness. What is required is a more radical deconstruction of the modus operandi of the NAMA project, perhaps a different model favouring all stakeholders. NAMA has an economic mandate, yet on another level it should have a social mandate also. It is perhaps the necessary response to delinquency in the financial and banking system and could leave us with an enormous financial cost. We must also see it as something which has a profound social mandate because the financial and economic delinquency that led to the necessity of establishing NAMA was born of a society that had become wounded by avarice and individualism. NAMA should seek in some way tor respond to this reality also.

I offer vocal support to the idea that we, as legislators, are obliged to look for a social, not just a commercial, dividend from NAMA. The allocation of land for the provision of amenities and sheltered housing should perhaps be specifically included as part of NAMA's remit. NAMA is to buy loans, land and property, etc. at a discount. Its mandate is to maximise returns by selling these assets for as much money as possible. However, this crisis provides an opportunity perhaps to obtain desperately needed low-cost housing for those worst affected by the economic crisis. Specified service providers could offer important social uses for a portion of NAMA's assets. Preferential treatment could be given to bidders with a proven track record in providing social and charitable services. I am suggesting there is a chance to bequeath to the next generation a social legacy, instead of the risk of a social and financial millstone. The community dividend could incorporate sheltered housing, playing fields, amenities, community centres and so on.

Is it naive or excessively idealistic to talk in such terms? Surely an honest appraisal of how we got ourselves into this position is needed, as well as of the irresponsibility that led us to this crisis which some may have foreseen but which the entire apparatus of the State, politicians and civil servants alike, was unable or unwilling to prevent. We cannot be overly confident in the light of the events that have led us to this point about the capacity of civilised societies to avoid remarkable errors and injustices, for which the taxpayer now has to suffer. With that in mind, it is all the more incumbent on us to give fair consideration to imagining ways in which matters might be different. If, in response to the consequences of irresponsible banking, we take an approach to NAMA that is driven excessively by purely financial and profit-making considerations, speculation about the likely increase in property values and even the creation of special purpose vehicles to hide certain realities from the balance sheet, it will look to many worryingly reminiscent of the evils that brought us to this point. I recognise, however, that practicality is needed in dealing with the challenges we face but perhaps we should learn the lesson that our response needs to be tempered and informed by an approach that is not just scientific, fact-minded, positivistic, devoid of values and conscience and marked by a profit-at-all-costs mentality. Rather, we should seek to inform NAMA through an approach that seeks to rectify some of the social ills to which this delinquency in the world of banking and finance has contributed. Our response, therefore, needs to avoid the intellectual and cultural pitfalls of the past and set new directions in social responsibility and community-mindedness.

I commend the Minister on his great talents and the ability and sincerity he brings to his role. I defer to his wisdom and that of the Government in their approach but I remain convinced that there is a need to approach this issue with a profound social concern that seeks to maximise the potential of NAMA, not just for economic recovery but also for social recovery by facilitating organisations and initiatives in the way I have described.

Ba mhaith liom am a thabhairt don Seanadóir Carty. I wish to share time with Senator Carty.

Is that agreed? Agreed.

Tá lúcháir orm go bhfuil deis agam trathnóna cúpla focal a rá faoin mBille seo, Bille a bhfuil cuid mhór oibre agus saothair curtha isteach ann ón Roinn Airgeadais agus, go háirithe, ón Aire. Ba mhaith liom buíochas a ghabháil leis an Aire as an obair atá déanta aige le níos mó ná bliain anuas anois chun airgead a chur ar fáil arís do ghnóthaí, tithe, agus daoine uilig an Stáit.

We are here to discuss a Bill which will bring about unprecedented change in banking practices here. I note the work of the Minister in the past 14 or 15 months, from the bank recapitalisation scheme last year through to the work done over the summer on the NAMA legislation. We all hope this legislation will facilitate the flow of credit to SMEs, protect homeowners and allow ordinary Irish people to obtain credit again from financial institutions, the international reputation of which is damaged. The heads of these institutions should hang their heads in shame. Without question, there was malpractice and unethical behaviour and the corporate governance of these institutions was questionable. The Financial Regulator was certainly asleep at times at the wheel. As a result, in recent years people were able to get 120%, 130% and 140% mortgages which also perhaps paid for one or two cars and several holidays abroad without question from financial institutions which existed to protect the consumer as well as to provide credit. While they provided credit, they did not lend protection to the consumer. There was an onus on them to do so but they failed miserably in that regard. As a result, we must bring forward this legislation to protect the people whom the Government must govern, to work with citizens and to ensure credit flows again through every townland in the country. We are in a stagnant position. As a board member of Údarás na Gaeltachta, I deal with many companies every week which want to create employment in Gaeltacht areas. They cannot obtain credit from financial institutions because the banks maintain that their balance sheets are damaged. The Minister and the Department have recognised that they are damaged, which is why we are proceeding with the Bill which will reform the way in which credit can be made available again.

The banks assisted by the bank guarantee scheme, AIB and Bank of Ireland, were obliged to provide 10% additional lending over 2008 figures and lend an additional 30% to SMEs. While national figures may show they are doing so, I do not believe them. They are producing figures that are not wholly correct. I have spoken to many managers of SMEs in County Donegal who have gone to their local bank branches or regional managers. I am not sure whether their cases have been presented to head office in Dublin or whether they have been filtered out. The banks may say they are funding 80% or 90% of credible businesses but they are accepting only a few of these applications. That is a matter for the Financial Regulator who has a responsibility in that regard, particularly in the light of this Bill which is being brought forward to protect and improve the banks' balance sheets and ensure credit flows again.

I am heartened by the fact that the IMF, the ECB and the OECD support this legislation. We all must take comfort from this and realise that if it receives such widespread support, it is a path that will ensure Ireland will receive a stimulus again and that ordinary businesses and homes can receive the credit they once had. There is a small enterprise in my constituency which exports products to the United States and has a reasonable turnover. It is supported by a grant agency in the county which suggests the business plan is attractive. Last week, however, Bank of Ireland refused it an overdraft facility of €1,500. That is a disgrace. The local bank manager maintained that the bank had very little comfort and was not in a position to approve the facility but that the application had to be processed centrally. That is why I support NAMA because it will allow the flow of credit to filter through to those SMEs which are trying to create employment, manufacture and export products. We must allow these businesses the opportunity to go to the banks with clean balance sheets and which can borrow at a lower rate. That is why I am signing up to NAMA and backing the Minister. I thank him for the work he has done.

I could not speak this evening without referring to the pay increase in one of the institutions Senator McDonald mentioned. If that is occurring, it is unacceptable and the Minister needs to inquire into the matter. People in senior positions in the banking sector must never again be given the latitude that they received in the past decade. The expertise on the new boards will play a significant role in scrutinising what is happening within these institutions. With the Financial Regulator, they have a responsibility to ensure corporate governance is a central element in their future development. The taxpayer has supported their recapitalisation and will support NAMA through the bonds that will be made available. The banks, therefore, have an onus and a responsibility to ensure credit flows to small businesses. The objective of the Bill is to assist in that flow of credit. Will the Minister monitor this to ensure we can regain international competitiveness and again export products to America and elsewhere in Europe, including the United Kingdom, economies with stimulus packages? It will mean jobs, particularly for future generations, will not only be protected but also that new ones will be created.

I welcome the Minister for Finance to the House and commend him on the wonderful work he has done over the past 15 months. He has worked hard on this issue and the establishment of an agency such as NAMA is the only way to resolve it.

I welcome the proposed amendment on a windfall tax on rezoning. Lending to small and medium-sized enterprises, SMEs, is also important. The Minister introduced an amendment on Report Stage in the Lower House to give powers to issue guidelines to participating institutions on lending practices and procedures to improve the flow of credit to SMEs. This is vital because many SMEs are under tremendous pressure but are not getting any support from the banking institutions.

However, I do not agree with the Minister's claim that the banks are in the best position to make commercial decisions in this regard. Had they been, we would not be in the trouble we are today. Many of these decisions were taken away from the local bank managers. Businesses looking for bank loans were referred up the line to plush offices in Galway, Dublin and Cork. They went in with plans prepared, sometimes by someone outside of the country, and projections. While these may have looked great on paper, they were not what they should have been. The local bank manager had no input into deciding loans for these plans but he or she would have known what the small town could take. For example, the local bank manager would have known a town could not take a development of 3,000 houses. I have no great faith in the higher echelons of banking anyway.

When I was a Member in the Lower House, I recall two gentlemen visiting my office who were buying a property to build 1,400 houses and had another project with which they thought I could help. I refused to do so point blank which they did not appreciate. When they were leaving my office, I asked them where was the common sense when Ireland was building as many housing units as they were in Britain with 15 times our population. They looked at me as if I had two heads. I know they did not vote for me in the last general election but every time I meet them now they salute me with a smile. That is because they did not get what they wanted and were lucky they did not.

Will the Minister examine and monitor the issue of negative equity for young home owners? Interest rates will go up as sure as night follows day. Many of these young people will be in extreme trouble then. Some have lost or may lose their jobs. Some measures will have to be introduced for them or we will be introducing legislation to save them because the banks will repossess them.

I compliment the Minister on the amount of work and time he has devoted to this legislation.

It is nice to welcome the Minister for Finance, an Athlone man, to the Seanad. I know he is very proud of his Athlone roots.

Not being an economist, my priorities with this legislation are for the people I represent. NAMA's purposes are to recover as much money as possible for the taxpayer and to get credit flowing to small businesses. I do not believe, however, NAMA is the best vehicle for this. The Consortium de Réalisation, CDR, the French equivalent of NAMA established in the 1990s to purchase €28 billion of toxic assets from Crédit Lyonnais, incurred losses of €15 billion.

My other priority is that a home owner support scheme would be incorporated into NAMA. As my brief concerns social and family affairs, I am concerned about families facing repossession of their homes. NAMA represents a €15 billion gamble for the taxpayer. We will never know how it will pan out, yet every household in the country will be liable for €30,000 for this venture. It is outrageous that people through no fault of their own are now responsible for NAMA and its outcome.

The banks are having their bad loan books transferred to NAMA. The agency then, in turn, accepts this responsibility on behalf of the taxpayer. I am opposed to exposing generations of taxpayers to this sort of a risk. NAMA property values should be based on current market value rather than the long-term economic value. The sale of the Irish Glass Bottle Company site in Ringsend, Dublin, is a case in point. It is outrageous to believe we can see the future through a crystal ball and how all of these moneys will be recouped. The Nobel economic laureate, Professor Joseph E. Stiglitz, said the principle of overpaying banks for loans is criminal.

NAMA has been established not just to bail out the banks but also the reckless developers. Unfortunate home owners will not benefit from the agency, however. Fine Gael has tabled an amendment to section 207 to incorporate a home owner support scheme to protect families facing repossession of their homes, a proposal supported by the housing charity Respond. It aims to protect 35,000 families in mortgage arrears. The ESRI has forecast that by this time next year 200,000 families will face negative equity, whereby the value of their mortgage exceeds the value of their home. Fine Gael believes it must restore stability to the financial system and provide a mechanism to protect the tens of thousands of families facing repossession. I hope the Minister will be open to the amendment. When I raised the matter during Private Members' business last week, it was scoffed at.

Fine Gael believes people who own their homes to the market value of less than €750,000 should qualify for the support. The property would be their main home and residence. The mortgagor would be at least three months in arrears, be unable to agree a repayment schedule, therefore being subject to repossession, be able to prove loss of income and be able to show they have investigated repayment methods and used all facilities such as MABS. We propose that NAMA would buy the entire mortgage loan from the bank at the current market value and write down the mortgage loan to the benefit of the home owner. The home owner then would receive the remainder of the mortgage loan and pay a rental fee to NAMA set in line with market rents. A rent subsidy may also be available under the local authority shared equity scheme. The objective is to provide people who have shown a commitment to repaying their mortgages — we all know honest individuals who have never missed a mortgage repayment — with an opportunity to have a new arrangement with reduced payments that would be affordable and sustainable. We have baled out developers and the bankers. Why not bale out those who are in trouble and facing repossession of their homes?

The taxpayer has lost faith and trust in us as politicians and trust is the big issue surrounding NAMA. We are here to represent the taxpayer. To that end we must put in place strict codes of practice to protect the taxpayer against abuses.

Fine Gael has called for the establishment of a specific Oireachtas committee to oversee the operation of NAMA. The sum of €54 billion is the figure to which the taxpayer is exposed. The taxpayer must be protected and this special committee would oversee the operation of NAMA and ensure taxpayers' questions would be answered. In that regard, there would be accountability.

I understand the reason for having the special purpose vehicle, namely, that the debt would be off balance sheet but I do not understand why it is being set up without providing for any scrutiny and the reason it will not be subject to monitoring. The taxpayer's interest is paramount. That is all I am concerned about. The SPV should be regulated and the necessary legislation should be put in place to regulate it before NAMA is established. We need independent advisers to the committee. This legislation is all about trust and transparency.

Fine Gael has stated the Comptroller and Auditor General should be given powers to appoint somebody to monitor the private meetings of NAMA in the public interest. We cannot have a situation where the private conversations between NAMA and the Minister of the day are not subject to oversight by an independent person acting in the public interest.

NAMA will not work. It is not in the interests of the taxpayer but the legislation will be passed. I am not a fool. I know we do not have the numbers but I ask the Minister to accept the proposed section 207 which deals with support for homeowners and put in place strict corporate governance procedures to ensure we will not have sleepy regulation as was the case previously. We must move away from this and restore trust in politics.

The National Asset Management Agency Bill is critical legislation at this time. The economic and financial policies we apply in the next period will have far-reaching implications for all of us and the generations to follow. The country is in a deep state of economic depression and the outlook is bleak but there is an opportunity to turn matters around, despite all attempts by certain groups to create the opposite impression. The Taoiseach has set out his stall on the Government's plan to address our current difficulties. He has fully disclosed the seriousness of our difficulties and the challenges ahead and highlighted our ability to meet and overcome these challenges.

There has been much debate on where we find ourselves and how it all seemed to come tumbling down so quickly. As the Government — especially the Minister for Finance, my good friend, Deputy Brian Lenihan — takes measures to address the rapidly changing financial position, there has been dishonest scaremongering by certain members of the Opposition. Good government is about identifying the challenges, grasping them and having a creative and effective vision in response. I welcome the Government's decision to date which with the passage of time will prove to be the correct one in the national interest.

As I stated in previous debates on this issue, it is not possible to overstate the importance of getting credit and cash flowing again in the economy. I have also stated the vast majority of members of the general public are not interested in the national finances, especially when one talks in telephone numbers of billions of euro as regards what we are doing with NAMA. On the issue of credit and cash flow, the overwhelming majority at this stage want to see action and delivery. It is important to send a clear message that the Minister for Finance, his departmental officials and other informed authorities have carefully assessed the position and identified the obstacles and that the recommended solution is NAMA.

I listened with interest to the many Members who have contributed to the debate. As I said, the majority outside this House are tired and fed up. They do not want to know whether it is a special purpose vehicle, a model of this or that. What they recognise is that their family, friends and the wider circle with whom they socialise are being affected and hurt and they want the position to be corrected quickly.

The objective of NAMA is clear, that is, to strengthen the banks' balance sheets. This will reduce uncertainty about possible toxic loans and, as a consequence, facilitate the flow of cash and credit, while also protecting the interests of taxpayers.

That might sound like a correct political line but people do not want to hear political jargon. They want to hear that their bank manager will now give them the money they require, whether for a small purchase or to meet a bill that they are not currently able to manage. It does not matter whether it involves the individual or a small or medium-sized business.

The Minister is a good friend of mine and I have said this to him previously. If there is one criticism I have of him, it is the extent to which he has accommodated debate on the NAMA issue.

What does the Senator want him to do? Railroad the Bill through the House?

Does he want him to guillotine the debate?

The Senator should show some respect.

I should not respond to that ball bouncing but I would love to see some Members being subject to an acid test on private business. A serious national challenge was identified by the Minister and his officials in 2007——

What is the Senator talking about?

——and I understand in the first quarter of 2008 the solution was placed on the desk by the informed authorities. In the last quarter of 2009 we are talking about putting the solution in place. The Senators who heckled me on that point should put the matter in a private business context and see how long they would last.

In fairness to the Minister, the draft business plan is a substantial body of work. It recognises the duty of the agency to obtain the best return for the taxpayer. Based on the difficult and provisional estimates available, we all know the loan book of NAMA will be €77 billion purchased, at a 30% discount, for €54 billion. As I have stated previously, how NAMA manages its portfolio, especially the Irish part which makes up approximately 70%, will have a significant impact on our economy.

The NAMA Bill includes detailed accountability and reporting requirements, and I am also surprised that there has been much discussion here in the House in this regard. It includes, I understand, quarterly and annual reporting, audit by the Comptroller and Auditor General, a role also for the Committee of Public Accounts and a commitment to establish an Oireachtas committee on NAMA.

We can go a little over the top on what we can provide, for instance, some of the amendments tabled provide that every 30 days NAMA shall report to the Houses of the Oireachtas. Of course, I will listen with interest to the discussion on these amendments and I look forward to the Minister's reply. As I stated, I am concerned at the extent of the protracted debate on NAMA and the impact this debate has had on individuals and on the economy. I am equally concerned that NAMA may become the camel rather than the horse that is required. We need to get on with it. I can pick holes in and cherry-pick the NAMA business plan, for example, issues such as a default assumption of what is referred to as 20%, issues such as the real value of the assets and an indication of the ability of borrowers to repay. Those are all critical issues with significant implications. If my figures are correct, every 1% movement on the default rate represents approximately €770 million. These are telephone number sums about which people are sick and tired of hearing. Recognising that we are talking of significant figures and we are dependent on expert advice in this regard, I note from the Minister's comment earlier that it was after careful assessment and informed authorities advising the Government that it went with the NAMA model. If NAMA is recommended as the model, let us get on with it. Cash is king. Get cash and credit flowing, protect jobs and create the new opportunities. Let us learn from our past mistakes, but let us move on.

In case anyone thinks I am being flaithiúlach about the position, I acknowledge the concerns voiced by a number of Senators in the Chamber today. They teased out the business plan and asked about the liquidity issue and how banks will ensure the flow of additional credit once we correct the current situation. On the criticism, however, with the crystal ball now available to us, let us give a little credit to the Minister, Deputy Brian Lenihan, and his officials for what they have achieved to date. The recapitalisation of the two main banks, AIB and Bank of Ireland, was necessary and it was not unconditional. We have done well out of it — I will say no more than that. We have the fixed dividend of 8%, the preference shares and a significant value gain since that has happened. Let us not lose sight of the fact that we have come from a very difficult situation. We have made the correct decisions and, hopefully, when we put this to bed we will be able to move on with one of the most important ingredients currently necessary in our economy and for most individuals, namely, credit and cash.

I stated that the public is not interested in politically correct talk of billions of euro, SPVs, etc. However, some time ago I took the opportunity to write to the Minister expressing my concern about what happened in the past and asking him to refer to matters relating to ongoing investigations. In particular, I mentioned Allied Irish Banks and matters relating to large financial transactions between certain financial institutions, and I asked what was happening in that regard.

This is the type of information the public wants to know. They want to know what we are doing to get the credit flowing, what we are doing to get cash back into the system, that the taxpayer is being protected and that the investment to date has paid handsomely. We have introduced many correct measures. Equally, they want to know what we are doing about those who have been responsible for what has gone wrong.

I am pleased to note the Minister, in his response, confirmed that in terms of investigations being conducted by State authorities, a number of investigations into the matters I raised are being examined. With regard to company law, the Garda Síochána is involved with certain aspects of the investigations, the investigations have yet to be concluded and the Government has made clear that any breaches of regulatory or legal requirements will be fully pursued in accordance with the law. That is an equally important aspect.

I welcome the opportunity to participate in this debate and I look forward to hearing the contributions on Committee Stage tomorrow.

Go raibh maith agat, a Chathaoirligh. Táim buíoch as an deis a bheith agam labhairt anseo anocht ar an reachtaíocht is tábhachtaí a chuaigh tríd na Tithe seo le tamall fada agus b'fhéidir an reachtaíocht is tábhachtaí a chuaigh tríd an Teach seo riamh. Níl dabht ar bith ach go mbeidh impleachtaí móra ar na cinnithe atá polaiteoirí ag dul ag glacadh sa Teach seo agus sa Teach thíos staighre anocht, amárach, lá arna mhárach agus Déardaoin. Taobh istigh de na ceithre lá sin beidh orainn cinnithe a dhéanamh a rachaidh go mór i ndonas do shochaí na tíre seo, do thodhchaí eacnamaíochta agus do mhaitheas na tíre seo. Ag rá sin, tá fhios ag an Aire cá háit a sheasann ár bpáirtí ó thaobh na reachtaíochta seo, an Bille a thabharfaidh isteach NAMA, go bhfuilimid go huile is go hiomlán ina éadan.

Tuigim, nuair atá duine tofa mar pholaiteoir agus go háirithe nuair atá duine sa Rialtas go gcaithfidh sé nó sí cinnithe a ghlacadh agus ag glacadh na cinnithe sin, níl sé nó sí chun gach duine a shásamh an t-am ar fad. Beidh grúpaí, scaifte, daoine aonaracha, comhlachtaí agus a leithéid nach mbeidh sásta leis na cinnithe sin a ghlacadh. Tá cinnithe le glacadh ag an Rialtas seo ach is iad na cinnithe míchearta. Tá mé ag rá sin gan fhios agam cad a bheidh ag tarlú an bhliain seo chugainn nó an bhliain ina dhiaidh sin ná i 2010 nó 2020, ach mo bharúil agus barúil an pháirtí gurb iad sin na cinnithe míchearta agus go bhfuil príomhachtaí an Rialtais seo mícheart. Sin í an fhadhb mhór atá ar chúl Bille NAMA, gurb é na príomhachtaí atá ag an Rialtas ó thaobh na reachtaíochta seo ná tacaíocht agus cosaint a thabhairt do na bainc agus na fir tógála agus, ar an lámh eile, ag iarraidh ar an gnáth dhuine, ar an phobal, an tacaíocht sin agus an cosaint sin a thabhairt dóibh. Sin an fáth go ndiúltaímid an Bille.

Tá go leor ráite ag Seanadóirí eile mar gheall ar na fadhbanna atá sa Bhille seo, nach bhfuil an cosaint ann don gnáth dhuine go bhfuil morgáiste aige nó aici ná don bhfear atá amuigh i mbun gnó agus nach bhfuil ábalta airgead a fháil ó na bainc, ach go bhfuil an cosaint á thabhairt do na daoine a chur an tír seo san áit a bhfuil sí ag an bpointe seo. Ceann de na fadhbanna atá againn, agus tá sé ráite agam go mion is go minic agus ní rud pearsanta é, ná ní thuigeann an Rialtas na fadhbanna atá ag gnáth dhaoine. Ní thuigeann baill an Rialtais na fadhbanna sin mar ní chaillfidh siad uair chodlata ag smaoineamh cén dóigh a íocfaidh said as a morgáistí, cén dóigh a íocfaidh siad a mbillí nó cén dóigh a chuirfidh siad bia ar an mbord. Ní chaillfidh said an uair chodlata sin, ach tá fhios agamsa, cé nach bhfuilim tofa sa chomhairle contae agus sa Seanad ach le cúig bliana, go bhfuil an cúpla mí anuas an cúpla mí is deacra, agus is duine óg mé féin. Feicim daoine ag teacht isteach go dtí m'oifig ata ina 50aidí agus ina 60aidí agus iad ag caoineadh arís agus arís eile toisc nach bhfuil an t-airgead acu lena mbillí a íoc. Ní thuigeann siad cén dóigh go bhfuil an Rialtas seo ar an bpointe, taobh istigh de chúpla seachtain, ag dul ag ionsaí orthu arís sa cháinaisnéis atá ag teacht aníos agus, ag an am chéanna, ag caitheamh €54 billiúin ag tabhairt an chosaint sin do na fir tógála agus na bainc. Ní hamháin iad sin nach dtuigeann é, ní thuigim é ach oiread.

I am completely opposed to the Bill. I was thinking earlier that if we were to rewind the clock to a time two years ago and narrate quickly in a couple of minutes what would happen here tonight and in the coming days, we would say it was not possible. It would not have been believed possible that the banks would take us into this situation, with greedy developers and Government politicians, or that we were on the verge of bailing out — perhaps that is not the best term — or on the verge of putting €54 billion of taxpayers' money into a system to fix what the banks and the developers would break. At the same time, we have Minister after Minister addressing us on the public airwaves, talking about the need to tighten our belts, suggesting we need to widen the tax base and that those who are not on a huge amount of money, even social welfare recipients, may have to take some of the pain in the forthcoming budget. It is amazing that this is the situation into which we have been led.

We need to get the economy back on track but the decisions the Government has taken are the wrong ones. NAMA will see workers on low wages, the unemployed and those dependent on social welfare thrown overboard to make room in the lifeboat for the elite of bankers and developers, whose greed has brought the Twenty-six Counties to the brink of bankruptcy. My party and I will not stand for this recklessness — public opinion will not stand for it either — but this is a democracy. The Cabinet is elected to office and can make decisions and there are the numbers in the Chamber to pass the legislation. As has been said by others, NAMA is legalised theft — the robbery of €54 billion through it equates to approximately €12,000 for every man, woman and child in the State. The Minister believes this is necessary and that it is necessary to impose this burden on taxpayers.

We are not able to sponge off Her Majesty, like the Senator's compatriots in Northern Ireland.

We have to pay our own way in this country.

Is the Minister suggesting I do not pay my taxes?

No, I am saying the Senator's compatriots in Northern Ireland have the British Exchequer to sponge off. We do not have that option.

I do not understand the Minister's point.

Then the Senator does not know much about economics.

I do not understand the Minister's point.

I will explain later.

It is very unfortunate——

The Senator used the expression "legalised theft".

It is my opinion that NAMA is legalised theft. We have had Fine Gael representatives refer to other economists who have talked about the same situation in terms of legalised theft but there were not the same jibes across the House. Obviously, I have touched a raw nerve.

That is my opinion. Obviously, the Minister is the one in power and in charge. Perhaps his conscience is starting to get to him in the final hours as he brings forwards this legislation.

Come on now, Senator.

It is only in gestation.

We should focus on the Bill, not personal matters.

I agreed with much of what Senator Ó Domhnaill had to say about the banks. I agree that those heading up the banks and the Financial Regulator should hang their heads in shame. However, the Government should also hang its head in shame because it fuelled the property bubble. Even Senator Ó Domhnaill, when he shared the chamber with me in Donegal County Council, called for tax incentives for developers in County Donegal at a time when 8,000 planning applications were being dealt with through the planning system in that county every year. That was the mentality of Fianna Fáil, the builders' friend — feed the property bubble, give tax breaks, the bankers will provide the money and the ordinary person will be left with massive mortgages and have to scrimp and save for the rest of his or her life to pay the money back owing to the greed fostered by that tripartite agreement.

An bhfuil aon ghnáth fir tógála i dTír Chonaill?

Will the Cathaoirleach direct the Minister to have some respect for the Senator who is speaking?

Members should deal with the Bill. I do not want personal comments across the floor from anyone.

The real damage of NAMA will not be evident until it is too late. It is the politics of postponement and the true damage will not be seen until the Government is long gone. As I said, as I do not have a crystal ball, I do not know whether NAMA will work. I hope it will because the Bill will be passed but it is my judgment that we are taking the wrong course of action.

I have read the autobiographies of two former Taoisigh. From his autobiography we get a sense that Albert Reynolds was the risk taker, whereas Deputy Bertie Ahern was a more cautious man. It is clear that the Taoiseach is the gambler. The gamble being taken at this point is far too severe. If we look at the budget deficit of over €22 billion, while it needs to be reduced, the money being spent is being used to pay for operations, teachers to teach our children and to provide public services. The €54 billion that will be invested in NAMA will not be seen by ordinary people. Unless the legislation is amended, it will not, unfortunately, be seen by the business community, in particular the SMEs which need credit quickly in order that they can continue to provide jobs and get this country back to work, the single most important thing the State needs to do and on which it needs to focus attention in the coming weeks and months.

In the course of this debate and on Committee Stage tomorrow my party will attempt to amend the legislation to make it better. The Minister and the House understands our position which is that we will oppose the legislation but that we will try to ensure the benefits of NAMA will be extended to homeowners on low and average incomes, particularly those facing negative equity who, unlike the bankers and developers, are the ones who really need to be bailed out. Over a year ago, following a late night debate on the introduction of the guarantee scheme, I said to the Minister, as he sat in the same chair, that we had sat through the night to rescue and bail out the bankers; let us now sit through the night and bail out ordinary people. Let us bail out the children in dilapidated buildings, as well as the health service. We have not shown the same energy or placed the focus on job creation, public services and making necessary adjustments.

I look forward to debating the Bill with the Minister on Committee and Report Stages.

I welcome the Minister and the opportunity to contribute to the debate. It is very important that views are expressed here and opinions heard. This is probably the most important legislation that most of us will have an opportunity to discuss, particularly with regard to the future solvency of the economy and the country.

I am one of those who tries to be optimistic, despite all of the depressing news we hear in these recessionary times. However, I also believe we must learn from the mistakes of the past. Like many others, I repeat that our bankers are responsible for the most despicable actions of wanton and reckless lending and that the interbank transactions taking place were highly dubious and questionable. Is it any wonder that ordinary people are very angry at this behaviour of the banks? I must also mention the soft touch regulation of the banking sector and banking chiefs who acted without regard to the principles of proper or reasonable lending. The Government is ultimately accountable, and where there is soft regulation and where agencies of the State are not doing their job, the Government must act in those instances. Unfortunately, we failed to do so in this instance.

I mentioned this the night we debated the bank guarantee last year, but for a few hundred thousand euro, Waterford Crystal could have been saved. Ordinary people cannot understand why the Government can step in and save the banking system, but cannot step in and save traditional manufacturing businesses that have contributed enormously to our economy. That is what ordinary people are thinking and we need to explain to them what we are doing so they can understand.

Anglo Irish Bank was the ringleader in the banking sector collapse, and that is now acknowledged. It was the new kid on the block and was seen to be energetic, ambitious and always available to the developer who could not get the loan in the more reputable banks. It was also the risk taker and it has contributed enormously to the property bubble. Unfortunately, Allied Irish Bank and Bank of Ireland — long established banks with great reputations — were pressurised into following these looser mechanisms and bad practice in banking. The whole banking system was set up on incentivising loans, and chief executives were receiving huge amounts of money at the end of every year in bonuses for encouraging risk taking and loans that could not be paid. That is very shocking and it was shocking to see that Anglo Irish Bank cooked the books with the co-operation of other banks such as Irish Life & Permanent.

All of this needs to come out in the wash. Some of it is being investigated, but it is shocking for ordinary business people who are trying to balance their books on a daily basis when they see chief executives cooking the books and illegal transactions between banks. The journalist David Murphy described them as "banksters", but I would describe them as gangsters. People in here said they should hang their head in shame, but I would say that some of those bankers should hang their head in jail, and I look forward to the day when they do so. Then we will have real credibility in the actions of the Government. It is not before time that this should happen.

I also want to mention Mr. Patrick "Do not rock the boat" Neary and his staff at the Financial Regulator's office, who have completely failed the Irish people. They failed to regulate a banking sector that was running amok. They turned a blind eye and did not take these disgraceful bankers to task. These failures should never happen again. They represent a very costly lesson for future generations and for our people. The Central Bank did signal the alarm, but unfortunately it did not respond. It did not stop what was going on.

I acknowledge the huge commitment and time the Minister has given to his job since the banking collapse. I also want to acknowledge the efforts of the Fine Gael Party and especially Deputy Richard Bruton, who has provided an alternative. We are being consistently told that NAMA is the only show in town. We did not have the numbers to put our show on the road, which was the good bank and bad bank recovery model. That was a realistic proposal and an alternative for the Government to consider. We did that in the best possible light and with the best possible intentions. Deputy Bruton and the Fine Gael Party should be applauded for that.

Unfortunately, the Minister is doing his utmost to correct a system because his current leader failed to keep the banking system in check when he was Minister for Finance. Along with the former Taoiseach, Deputy Ahern, he supported the splurge and spend policies of over ten years. I acknowledge the Minister's efforts to fix this massive failure, but I am not sure that the mechanism of NAMA is the correct response.

The fundamental framework for NAMA is based on two rosy assumptions, namely, the current market value and the long-term economic value. The current market value seems to be set by sticking a pin in the valuation graph that has been declining rapidly. How on Earth can the Minister expect the valuations to be credible? Nobody knows what property will be worth in ten years' time. These assumptions are essentially being made to justify the NAMA solution. If the Minister is adamant in developing NAMA, why can he not be upfront with the people and admit that valuations may or may not realise their full potential?

Fine Gael agreed with the Government's bank guarantee scheme, not out of any love for the banks, but because we understand the essential role that banks play in keeping a financial economy going and that they are the lifeblood of our economy. The banks should note that this support from the taxpayer is not all one way and unconditional. Small and medium enterprises are being choked at the moment. Their overdraft facilities are being cut back and they are not receiving loans from the banks, even though these are viable businesses. It is essential that we have proper support for homeowners that are indebted and that they are treated fairly by the banks, in the same way the taxpayer has treated those same banks.

We are all being told that the NAMA model exists to allow credit to flow in this country, and that it will fix the banking sector. However, it is quite obvious the first thing the banks will do is to fix their balance sheets. The only way they can do that is by hoarding capital. They will hoard capital and they will not lend as easily as some Senators on the opposite side of the House would like to imagine. Bankers are ultimately business people, and they would rather hoard the capital and repay investors than give out loans into the Irish economy. It is a genuine concern on this side of the House that credit will not flow as easily as it might under the Fine Gael model for the banks.

I do not wish to go into all the figures such as the €77 billion book value loans and the purchase price of €54 billion. The long-term economic value is being put at a cost of €7 billion. That needs explanation. The Minister needs to justify the basis of that figure to the Irish people. The Minister claims that NAMA will deliver a 10% uplift over ten years. That is an aspiration to which nobody in the current climate can aspire. This is a big gamble and there is no doubt about that. It may come off, but if it does not come off, the next two or three generations will be paying for this gamble. That is a very sad thought.

Who in NAMA will value the toxic debts and the lands associated with them? Will the very same auctioneers who artificially inflated prices when the property bubble was booming be responsible for valuing these assets? I understand that the Government has advertised for a valuation team and they are probably being shortlisted as we speak. However, it needs confirmation. Even if people are appointed, will they talk to auctioneers and valuers on the ground? These people have a vested interest in keeping property prices inflated. This is the wrong thing to do in the current climate. It is essential that properties are valued properly, and that those people who value them have no vested interest in artificially inflating the value. Full transparency is essential if NAMA is going to work.

The Minister needs to reassure us on how NAMA is protected against political or local interference. We all know that Ireland is a very small country, and national politicians will know councillors and councillors will know auctioneers who will know land owners and so on. For the credibility of this economy, it is important that there is a proper oversight mechanism that will work for NAMA. Given that the NAMA legislation will progress because the Government has the numbers, Fine Gael has proposed that an Oireachtas committee should approve appointments to the NAMA board. We have also said that a staff member of the Comptroller and Auditor General's office should be empowered to attend and monitor all meetings of NAMA. That is a reasonable request. That person should also have the power to see any necessary documents at his or her request and to refer them to an Oireachtas committee if necessary. That would give NAMA full credibility and public confidence in what it is trying to do. There is a suspicion that behind the scenes NAMA is open to political interference. The Minister needs to put that suspicion to bed for the future of our economy.

I welcome the Minister, Deputy Brian Lenihan, to the House. I acknowledge the efforts he has made as Minister for Finance. In fairness, no one could claim that the situation we are in is due to any fault on his part. When appointed as Minister for Finance, he was landed with a poisoned chalice, which is an unenviable position. He has endeavoured to do his best during that period and, by and large, he has delivered, but I do not think NAMA could be considered part of that. We have had a lively discussion and most Senators have spoken on this very important legislation. I wish to refer to a few of the comments that have been made. I have been a Member of this House for seven years. In the last Seanad I was the Fine Gael spokesperson on finance. Senator Twomey holds that position now and he is doing a good job. I remember being in the House when the current Taoiseach was Minister for Finance.

Several Government Senators have said that nobody predicted the economic downturn or the collapse in the property market. In fact, however, many people predicted such a collapse. I recall addressing the former Minister for Finance after another budget in which he had increased public expenditure on the back of short-term tax revenues from an inflated property market, yet I was virtually laughed out of the place, as were other Opposition Senators. Many people pointed out then that the inflationary bubble in property could not continue. A lot of us may not have realised that the collapse would be so sharp and sudden, but we did predict it would happen. Most people on the Government side also knew it would happen at some stage, although they did not like to admit it. Actively or otherwise, the Government colluded to some extent because it benefited its interest to ensure the Revenue's coffers remained strong as the property market was going so well. Many economists, such as Jim Power and others, said it could not continue indefinitely, yet they were ignored. Political decisions were made and those of us who spoke out then were ignored.

I have witnessed seven or eight budgets in my time as a Senator, and on every occasion Deputy Richard Bruton said we could not continue building expenditure on the back of property taxes which would not continue indefinitely. His warnings were ignored and over the years he was accused of many things by Government spokespersons.

Senator O'Malley spoke about crazy banking practices and she is right. A large part of where we are today arises from such practices that emerged during the past ten years. There is very little, if anything, in this legislation that proposes to rectify the crazy banking practices we have seen over the past ten years. I do not believe that top bank executives will mend their ways. We are indebted to our colleague, Senator Ross, for his recent publication in this regard. Over the weekend we found that there was another bankers' federation dinner where the regulator was wined and dined by the country's leading bankers. A journalist from the Independent Newspapers group was not permitted access to what was discussed at that event. That does not engender in me any belief that the bankers will mend their ways. There is nothing in the Bill to suggest they will.

Senator O'Malley criticised the Labour Party's proposal. I have some difficulty with it but I think it is better than NAMA. She asked how we would get out of it were we to go the nationalisation route. We have gone down the route of nationalisation, however, and it is called Anglo Irish Bank. That is the one bank that should have been left to fold its tent. We have spent €4 billion recapitalising a bank that does not work and never will work properly. That €4 billion would go a long way towards solving the other difficulties in banks that have a hope of lending money and dealing with private individuals and businesses in future.

I am heartily sick of banks and bankers, not the clerks who put in hard work for an honest day's pay, but their leading executives. I am also heartily sick of the chant I hear from the Government side and elsewhere about there being no other show in town, apart from NAMA. There are several other shows in town. I met an auctioneer last week who said there was no other show in town. In addition, I heard several Government politicians who said the same thing, as well as a developer. All the bankers think there is no other show in town. Therefore, the people who started the fire and burnt the house down are now the firefighters. They are telling us we have to adopt the NAMA route, which immediately causes me to have grave concerns about the proposal we are discussing. A cosy relationship has existed for too long between the regulator, bankers, the Government and developers. Nothing in this legislation proposes to change that cosy relationship in any shape or form.

I refer specifically to four areas of the NAMA legislation and I hope the Minister will be able to enlighten me in his response. Senator Coffey mentioned most of them in his contribution. There is a danger in the valuation mechanism which is like walking a tightrope. If the properties are undervalued, it will have a detrimental effect on the banks. The whole purpose of NAMA would be defeated if the properties are undervalued, while if they are overvalued the taxpayer will be open to even greater exposure. In his reply, perhaps the Minister will enlighten us as to his thinking on that matter.

The notion of long-term economic value is one of the most puzzling things to have emerged in my ten years in politics. We cannot reliably predict where property values will be in ten years' time. The Government is engaging in a best guess situation, which is effectively a big gamble. I do not think this NAMA gamble is worth taking.

Several Government speakers mentioned the notion that NAMA will get credit flowing in the economy. I am glad Senator O'Toole, as someone who broadly supports the Bill and will be voting in favour of it, completely debunked the notion that this legislation will get credit flowing. There is nothing in NAMA that will get credit flowing. That was the one fundamental reason I was fully in favour of Deputy Richard Bruton's proposal for a good bank-bad bank policy because it was a clear mechanism of ensuring we would get money flowing in the economy. The objective of the Bill is to ensure we will get money and credit, which are effectively the lifeblood of any economy, moving again, yet there is nothing in the Bill that will guarantee that. I am glad an Independent Member like Senator O'Toole has pointed that out. Government speakers should read what he said.

The only criticism I have of the Minister's contribution is that he made an overly optimistic assessment of NAMA's profit. I cannot remember the figure he gave, but it was more than wildly optimistic. There is an absolute guarantee that the European Central Bank's lending rate will increase and it could increase substantially over the next couple of years. I do not believe the Government's projections for NAMA have correctly considered how that interest rate rise would affect NAMA's future viability.

I would like to hear the Minister's view on what the British Prime Minister, Gordon Brown, said over the weekend. I am not a big fan of his but I acknowledge he made a few interesting comments on the banking sector. He spoke about how the taxpayers of Europe and further afield are being asked to bail out banks. NAMA is essentially being established to bail out the banks. Other mechanisms around Europe are also bailing out financial institutions. Shareholders and bankers did very well out of the banking system for ten years and have creamed off profits and the taxpayer is being asked to carry the can. Mr. Brown suggested setting up a contingency fund. The Germans and the authorities in the United States have more or less rubbished his suggestions. I do not know how the contingency fund would work. What are the Minister's views on Mr. Brown's comments? If there is a future shock to our banking system such as the one we have witnessed over the past 18 months, could a system be put in place whereby the banks themselves could contribute to the recovery of the banking sector after the shock?

I do not always disagree with Senator Callely and I was particularly disappointed to hear him speak of the over-the-top nature of one of the Labour Party amendments, which proposed that NAMA report to the Oireachtas every 30 days. I do not necessarily agree with the timeframe but must acknowledge we are talking about a sum of €54 billion.

Senator Coffey spoke about our children and grandchildren having to pay. It is not just they who will be paying as we will be paying ourselves. We cannot be overly analytical in monitoring the expenditure of the €54 billion. As Senator Coffey suggested, it is in the national interest that we analyse it.

A criticism I have of the Government that goes to the nub of our economic circumstances is that it has no viable jobs strategy. The one way we can ensure we get out of our economic mess and save the thousands of people not covered by this Bill, namely, those who have paid extortionate amounts for houses and who are losing their jobs and cannot pay their mortgages, is by putting in place a jobs policy. There is a distinct lack of such a policy on the part of the Government. I feel for those affected.

I was on the verge of buying a house two years ago when my father passed away. The last good turn he did for me was making me feel I could not leave home on his passing away, thus saving me approximately €200,000. I would have bought a house otherwise and would now be in negative equity. I may be out of a job after the next Seanad election if some people are to be believed.

The people to whom I refer are those for whom I carry a candle. They have been completely left out of the Government's thought process and decisions regarding the objectives of NAMA.

I join Senator John Paul Phelan in welcoming the Minister to the House and acknowledging his input into the debate.

There are 423,000 people unemployed, many of whom are young graduates and many of whom have been displaced from employment in recent years. They feel this legislation is unfair. The feel it is unfair they are not being responded to by way of a new and radical job creation programme involving investment by the Government to stimulate the economy and obtain a tax yield from job creation. Such a job creation programme is not taking precedence over the supporting of risk takers who would have made enormous profits had their gamble succeeded, the supporting of our banks and those who lavished and swooned around in a property bubble and the justification of decades of incompetence. The unemployed, many of whom are very discerning and able and who are in their current circumstances through no fault of their own, believe this is a very unfair Bill.

There are 25,000 people at risk of having their houses repossessed or having difficulty making mortgage repayments. They feel it is unfair that their needs are not being prioritised. The Fine Gael amendment to this legislation, which would allow NAMA to take equity in their houses and afford them a means of getting over their difficulties, is not being accepted by the Government as a priority. In other words, the owner of a family home that is in jeopardy tonight looks upon himself as being cast adrift on the rough seas of economic difficulty while the investors, bankers, developers and everyone else get away scot free. The struggling home owners comprise the second category of people who believe what is occurring tonight is very unfair and that what is happening inside these walls is almost reminiscent of historical inequities and injustices.

In addition to the two groups who feel this legislation is unfair, there are many who are very sceptical. Many people outside these gates are sceptical about the valuation of the distressed assets that are to be transferred to NAMA. They are being valued at €47 billion. This assessment contrasts starkly with the assessment of the High Court in respect of Zoe Developments. Many of the assets in question are apartment complexes that have no value. All independent commentators say we now have enough houses for decades to come. What value will the apartments and unfinished housing estates have? What value has zoned land outside towns within which houses are not being sold? There is considerable scepticism over the valuation of properties at €47 billion.

Who can say what future values will be and what present values are? They are not tested in the marketplace as there is no marketplace. The experience of Japan is very instructive in this regard. It endured a long and difficult recession such as ours. As it comes out of recession, its property values have adjusted such that they are far below the values at the height of its boom. All evidence, be it anecdotal, from estate agents or from general observation, suggests that property values will not reach the projected levels. Many economic commentators agree and state the projected levels are mythical. The Japanese experience is very instructive in this regard. There lies the difficulty.

If there is scepticism about market values, there is great cynicism and scepticism over the fact that, in addition to making a payment of €47 billion, €7 billion will be added to the value of the distressed assets to account for perceived long-term economic value. That surely is a very notional concept. It is very vague and makes no practical sense. This is why Fine Gael proposed in the Dáil an amendment that would allow for risk sharing. Why should the bond holders, investors in the banks and people who trade in the marketplace of capitalism be immune from risk, thereby placing all the risk at the foot of the taxpayers?

A premise of the NAMA legislation, defended sincerely by the Minister, is that it will allow for credit to be made available to businesses. He is being naive in this respect because numerous commentators, including professors Honohan and McCarthy, have suggested the banks will concentrate on building up their capital reserves. The Minister is amending the legislation so he will be able to suggest a lending target to the banks. How will he know the banks are stating the facts and that there will be new lending? It is and will be the banks' policy not to lend. They will concentrate on building up capital reserves and will enter a phase of behaving cautiously.

The NAMA apparatus will not solve this difficultly. The Fine Gael proposition, namely, that a national recovery bank be set up and given equity of €2 billion to attract ECB or private investment, would at least ensure the existence of an independent lending body distinct from the existing banking apparatus. It could give moneys to normal retail banks to lend. This has an effectiveness about it.

I spoke of some people earlier, namely, the unemployed, house owners who are in trouble and small retailers who are under attack thanks to Northern shopping among other matters. The retailers need credit. If there is none, they are in serious trouble. While we may aspire to giving credit and while there may be a moral imperative on the banks to do so, there is no sign that they will. They have had a similar moral imperative to give credit since we guaranteed them months ago. As they have not responded to that, how do we know whether they will respond to future moral imperatives? They showed no morality during the property bubble when they gave unrealistic loans without proper securities. How do we know they have developed a new morality? How can we legislate for a morality? Surely pumping them up in this fashion is not the way to do it. The premise is wrong and naive. Some of us in the House have an idealism that is, at times, naive, but the banks will consolidate and hold on to the money given to them and will only opt for extraordinarily safe, gilt-edged lending which will not stimulate the economy. For this reason, the national recovery bank was the right mechanism. These are my difficulties with the legislation.

Our first response should be to the unemployed with a job stimulus package and supports for employment and job creation. Our second response should be to home owners in that we should assist in the way suggested by our amendment. We should respond to people who need credit, which means creating a vehicle by which credit can be assured, not something that is aspirational.

When this mechanism was established in France and elsewhere, it did not deal with distressed assets as well as the ordinary banking system did. It was clogged with bureaucracy and had a dimension of political influence. Our amendments address this matter and the Minister has a wish to prevent that situation, but our country has a culture of cronyism that suggests a high risk of NAMA being subjected to cronyism and lacking proper expertise. We cannot fly in the face of evidence and, to date, all evidence on NAMA-type bodies in other countries — while I have read about them, I would be reassured if the Minister produced alternative examples — suggests that such vehicles do not deal with loans as efficiently as ordinary banks in terms of collection, management and returns for the investor. We will lose out in terms of loan management and investment. In this sense, NAMA is a miscall. One could either state that it is, at worst, a cynical, sinister vehicle to protect those who mucked up the country or, at best, a naive mechanism that will not work in practice.

I am interested in the Minister's response on these issues. Will he take on board our suggestion about board members going through the Oireachtas vetting process? We need to know that board members are vetted in a transparent and public way and that this is seen to happen to reassure a cynical public. If we are to have the types of cuts projected for the budget in a month's time and, in parallel, a cloak and dagger operation that is putting taxpayer's money and the future at risk without Oireachtas vetting or the direct involvement of the Comptroller and Auditor General, we will add to a level of cynicism that could become dangerous. I appeal to the Minister to accept our amendments and to reconsider his amendment in respect of credit in the banks. The latter is aspirational and will not force the banks where we need to force them.

The concept of NAMA is born out of a deeply misguided attempt by an inept Government to kickstart our banking system. I do not subscribe to the theory that the Minister, Deputy Brian Lenihan, is engaged in some sort of underhanded attempt to bail out the members of the golden circle who were complicit in bringing us to where we are today. This has never been the case and I genuinely trust the Minister's motives in this matter. However, I do not trust his judgment or that of those advising him.

John Steinbeck once wrote: "No one wants advice, only corroboration." This turns out to be an accurate assessment of the Minister's position to date. Despite his early assertions that he was willing to take advice on the concept of NAMA to achieve some kind of national consensus, it soon became apparent that it was not advice he was seeking. Rather, he was seeking our unquestioning affirmation of NAMA's supposed brilliance. We were told that it was the only game in town and that, rather than costing us money, it would make us money. No advice to the contrary, no matter from whom it emanated, was given any credence. Despite the major concerns mounting daily, our Government persisted in pushing on with an increasingly rickety proposal.

I became concerned about the Government's judgment when I heard a radio interview with the Taoiseach in mid-July. He stated that the Government needed to continue writing whatever cheques were necessary in the interests of maintaining financial stability. What he really meant was that our taxpayers, our people, would need to write that blank cheque to cover the losses of those who engaged in reckless risk taking.

Senator Twomey was correct when he stated that there has been an air of infallibility about the Government's approach. Any criticism is considered unpatriotic. When 46 of our country's finest economists questioned the wisdom of NAMA, they were dismissed. When a Nobel prize-winning economist described NAMA as criminal, he was ignored. When an expert on banking debt recovery heavily criticised NAMA's rather fanciful business plan, he was also ignored.

The real test of any financial legislation is one that assesses its morality first and its economics second and NAMA fails miserably on both assessments. Choosing to burden our people with significant losses that were accumulated by risk takers is immoral. This immorality has been further compounded by the spurious claims by the Government, most noticeably by our new economics expert, Deputy Fahey, that NAMA will cost us nothing.

One need not work in RTE to know something about economics.

I would prefer to trust the words of the Nobel prize-winning Professor Joseph Stiglitz when he dismissed as nonsense the ideas that governments must act when banks run into difficulty. He went on to say that what we were actually doing was proposing to rob the taxpayers by socialising the losses while privatising the gains associated with the banking crisis. We are asking people to compensate gamblers for their losses because the gamblers might be reluctant to gamble with us again if we do not.

Has the Senator another solution?

Perhaps the Government did not study it.

Senator Cannon without interruption, please.

Professor Stiglitz went on to confirm the Fine Gael view that protecting the taxpayer from losses——

He said the same about President Obama.

It is the truth. Just listen.

It has been a long night. Could we please have order?

——is the best route to restoring Ireland's economic reputation and creditworthiness. Why would anyone want to lend to or invest in a country that caves in so easily to powerful financial interests?

We were also promised that there would be a genuine sharing of the risk associated with NAMA but, despite the assurances given to the Green Party, the risk-sharing commitments now contained in the legislation are an embarrassment. They are in particular an embarrassment to senior Ministers who supported 50% risk sharing. The amendment on subordinated debt also seems to suggest that the Government will make the 5% risk-sharing commitment a maximum rather than a minimum. This is further humiliation for those same Ministers who initially supported a risk-sharing agreement of more than 50%.

I firmly believe the legislation fails the morality test. Perhaps one might argue that, despite its immorality, NAMA could provide a sound economic basis for our national recovery. Sadly once again, there seems to be almost no evidence of such sound economic thinking behind this legislation. The decision to pay over and above market value for the impaired loans was a misguided one. If the Government had any hope for a public buy-in to the NAMA process it surely vanished into thin air with the announcement that a special premium would be paid to the banks. While such a proposal would be good for the banks' investors, it could have devastating consequences for the public finances over the next decade, and result in greater tax hikes and service cuts. Senator O'Malley said earlier that there are major faults with this Bill, one of which is the predication and measure of the growth of the economy on the growth of property prices. I share her concerns that the success of NAMA is somehow predicated on the creation of yet another property bubble. The property crashes in Japan and Finland are a cautionary tale for those who believe that prices will inevitably rebound from current prices in the short-to-medium term.

Many proponents of NAMA have described it as being similar to the successful Swedish model, but there are fundamental differences between the two. In the Swedish model there was much more temporary nationalisation, or pre-privatisation, as Professor Stiglitz describes it. The legislation there contained many more punitive measures. There was a wholesale clear-out of its banking executives, but most importantly of all, there was no payment of a long-term economic value to the banks. In this country one eminent economist warned last year that buying the toxic loans at inflated prices would amount to a back-door recapitalisation of the banks. He went on to say that best practice is for the banks to recognise the losses on those loans up front and to sell the assets at fair market value. That economist was Dr. Alan Ahearne, the Minister's chief financial adviser.

Now that we have seen the business plan for NAMA, our worst fears about its economic basis have been confirmed. It is a plan based on what Senator Ross described earlier as fantasy figures, ones conjured up to produce a positive bottom line that have no basis in reality. There is the completely mistaken notion that NAMA will make a profit. Senator Fitzgerald mentioned earlier that we have had some credible commentary in recent days from Peter Mathews which suggests quite the opposite. NAMA's assumption that there will be 100% recovery on the €30 billion performing loans is wishful, bordering on fanciful, thinking. NAMA's assumption that there will be 50% recovery on the €46.2 billion of non-performing loans is completely fanciful. To assume that both those things will happen is doubly fanciful.

If every Member of the Oireachtas who voted for NAMA was also asked to give a personal financial guarantee to off-set any potential losses, how long would it take for this confidence in NAMA to dissipate?

I suggest it would not be very long. That is the question that should be asked of every proponent of NAMA. Would he or she bet his or her house on it? Would he or she bet his or her family's livelihood on it? Would he or she bet his or her children's future on it? If he or she would not, he or she has no moral authority to take this gamble on behalf of the people of this nation.

Senators

Hear, hear.

We would all have hoped that some sort of credible provision would have been made in the NAMA legislation to ensure that once the banks are bailed out, they would once again begin lending to indigenous businesses. That provision should have been at the very heart of this legislation and we should have seen a significant shift in the balance of power from the bankers to the Government. However, despite recent amendments, that shift of power has not taken place. In recent days AIB has chosen to defiantly ignore the wishes of the Government to appoint someone from outside the banking world to the position of chief executive, which shows once again how that change in the balance of power is not going to happen and never will happen, despite our best wishes.

I agree with Senator Harris's earlier assertion that we now have only one car to make the journey to recovery, but he is mistaken in believing that the Government was willing at any point to allow others to help to fine-tune the vehicle. It simply was not. It is that defiant, "We know best" approach that will ultimately lead to the Government's downfall. NAMA will not work. It represents a criminal plundering of the pockets of our people simply because our leaders do not have the courage to challenge those who brought us to this place nor the humility to accept the advice of those to whom we should listen. NAMA fails on the question of morality——

I am not a criminal.

I did not say the Minister is a criminal.

The Senator referred to "criminal plundering".

Senator Cannon should be allowed to speak without interruption.

Senator Cannon should not lecture me on morality.

NAMA fails on the question of morality, on the question of sound economic thinking and, most sadly of all, it will fail the people who look to us to guide them safely through the toughest economic challenge this country has ever faced. I am deeply saddened that our country is going down this route. It is small consolation to me that I can look my son in the eye in ten years' time and tell him that I had no hand, act nor part in this folly.

I welcome the Minister. When he comes to the House he gives us plenty of his time. That was the case when he came in September and he is doing so again on this occasion. It is right that he would do so because this is important legislation, probably the most important that has ever come before the Oireachtas.

I take issue with the Minister's very good friend, Senator Callely, who suggested the Bill is being held up. This is the first time the legislation has come before the House and it is only right that we would have a good debate. In all the financial matters that have come before the House in the past, every Minister for Finance has said, "This is what happened in 1997". The reason for this is that was the last time Fine Gael was in Government. It is important that we look back to see what has happened and why we are in the current position. Nobody has answered that question satisfactorily. Everyone has blamed everyone else but no one has taken any blame. When the Taoiseach was asked about it on "The Late Late Show" he said he apologised if he did something wrong. The former Taoiseach said that if he was still in office things would be better now than they are.

In his report, Mr. McCarthy has two graphs, one for expenditure and one for receipts. Our expenditure was getting out of control from 2003 onwards. That is the reality. The Department of Finance and the former Minister for Finance, now Taoiseach, did not spot that. They should have spotted it because all of the people in that Department are still there and, if they are not, they have been promoted. While in some of the years between 2004 and 2009 we made a small surplus, by and large, our spending was getting out of control. It went from €31.6 billion in 2004 to €55 billion this year. It was obvious that spending was getting way out of hand.

As we all know, the building boom was bringing in the money. We must consider what happened in that regard. In the 1980s the one thing that flourished was the black market. We cannot allow that to happen again. When the Minister is preparing the budget for next year I urge him to take that into consideration. High VAT rates were one of the reasons the black market flourished during the 1980s. To return to the housing boom, what happened is that the Government introduced section 23 relief. On 31 December 2004 the Minister's predecessor granted section 23 relief for anyone who had planning permission in place by 31 December 2004. As we know, planning permission lasts for five years. Therefore, many of the planning applications would have lasted up to 2009, but for some unknown reason some time after that the Minister for Finance announced that anyone who had not completed their projects by 31 December 2006 would not qualify for section 23 relief. That is what caused the bubble. It was a race to the finish. Every developer went to his or her bank manager to say the planning permission was in place for the project and he or she required credit to complete it. The projects that qualified for section 23 relief included houses in Longford and Westmeath or along the Shannon, hotels and car parks. That race to the finish caused the property bubble because it put enormous pressure on building work in those areas. That, in turn, put pressure on blocklayers, roofers and so forth in every other city in the country. It was a race to the finish. The developers did not mind whether they were sold, as long as they were built before 31 December 2006.

According to the McCarthy report, the downward trend started in 2003. The effect of closing section 23 was to increase the coffers and boost the building industry in order that the money could be brought in during 2006, just before the 2007 general election. That is what happened with the bubble. The Minister should examine this and ascertain whether the section 23 reliefs caused this race to the finish and created an enormous building boom that burst at an awful rate. It certainly was not just foreign financial problems that caused our financial problems.

A report in the Irish Independent of Saturday, 10 October showed where the Minister would encounter a problem. It dealt with rezoning throughout the country. Enough land has been rezoned to house 3 million people. If that amount of land is available for building, I cannot see how the Minister will get a 10% premium with NAMA. Wages in the private sector are decreasing, while they have already been reduced in the public sector and might decrease further. There will also be increases in taxation. Therefore, the amount of money people have available on which to borrow will not be sufficient to increase the price of property. A Department of Finance spokesman quoted in the report said NAMA would only take on loans it believed it could realise over ten years. He said that if there was that amount of land rezoned, it did not mean NAMA would take it on and that there was a discretionary part to the scheme. That means NAMA will not take on all loans. I assumed that all building land or loans over a value of €5 million would be taken on by NAMA but the Irish Independent report indicates that is not the case.

I have a number of further questions for the Minister. NAMA will be a legal minefield and the Bill's provisions will be a legal mess. They relate to legislation such as the Landlord and Tenant Acts. Many parts of the Bill will require legal opinions and lead to legal battles. It will be unworkable legislation in the long run.

There is also the issue of credit to small businesses. Small businesses are the lifeblood of this country, but consider how they have been treated in recent years and the strains imposed on them through increases in rates, water and sewerage charges and so forth. It is unsustainable. The small business sector must be examined. Small businesses must be given incentives to retain existing jobs and make the environment more competitive for them. However, as various speakers said, including Senator Cassidy, the credit flow to these businesses is drying up. The Minister has said credit will flow to small businesses, but take the example of a person who goes to a bank to seek an overdraft or a loan from the manager. The bank manager examines the person's business plan. The Minister, too, has a business plan, but it is about as useful as a business plan for a start-up business because what is in the plan has been made up by accountants, planners and so forth. The usual response of the bank manager is to look at the person and tell him or her that he or she will examine the plan. Nowadays, nine times out of ten the bank manager will not grant an increase or extension of an overdraft and, in some cases, will not give the person any money. How will the Minister compel them to take the risk? Every person who has bought a house or started a business took a risk and the bank manager took a risk with him or her. When I bought my first house, I scraped the few pounds together for the deposit. I believe I went to the credit union for it. That has happened in numerous cases. I do not know how the Minister will compel the banks to lend money, which is the kernel of the matter. The taxpayer is footing the bill and when the business person or the house purchaser approaches the bank for a loan, the Minister says he can compel it to lend that money. I certainly hope he can.

I do not fully understand the master SPV. There are many who do not understand it. As I understood him, the Minister said the SPV would buy from the banks and sell to NAMA. Is that the case? If it is, I have a different interpretation of it from most other people. That means it will sell to NAMA. Does that mean it must buy it back from NAMA? Can it sell to others aside from NAMA? Legality will also be an issue with regard to company law, as will the fact that the 49% shareholder will have more power under the legislation.

I am grateful for the opportunity to speak on the Bill. I will have further questions on Committee Stage.

It is nice to have the Minister in attendance on such an important topic. As other speakers said, this is perhaps the most important legislation to have come before the Houses of the Oireachtas. When I try to comprehend NAMA, I am guided by the question: "What is in NAMA for the taxpayer?" To answer this question I must consider the most important issues facing the people and whether these issues are being addressed by NAMA.

Most people, perhaps even the Minister, agree that the most important issues are jobs and unemployment. There are 425,000 people currently on the live register. There are no opportunities for young people. We have one of the highest levels of youth unemployment in our history for people under 25 years. The second important issue is the fear of losing one's home. According to the ESRI, 35,000 people are at risk of losing their home next year and 350,000 are likely to be faced by negative equity. How will NAMA help them?

The third issue which is related to jobs is credit for business in order that it can thrive. We need business to thrive because we rely on the private sector to pay the taxes that fund public services. The public sector cannot grow further. The Government has come to realise this, although that is how successive elections were bought. Since 2001 the nation has become uncompetitive. In 1997, when Fine Gael handed over power to the Government, it was creating 1,000 jobs a week. Mr. Peter Bacon reported in 2002 to take the heat out of the property market. He did a good job but it all started again, for the reasons Senator Paddy Burke mentioned.

The fourth issue on which I will judge NAMA is trust, transparency and accountability. How will NAMA restore trust? How will it be accountable to the people? How can we be sure it is a transparent vehicle? Trust has broken down owing to, for example, the way Anglo Irish Bank became so corrupt. Has anyone been punished? The answer is "No". Those in America who engaged in such corruption and wrongdoing were punished and are currently in prison. There are already reports of 3.5% economic growth in that country. Might the two be related?

What does NAMA offer the taxpayer? The most important question we must answer is whether putting all our eggs in the one basket represents the correct way forward. Senator Cannon put his finger on it when he inquired whether each of those who intend to vote in favour of NAMA would give a personal guarantee in respect of its success. That is what they are asking the Irish people to do.

I cannot even get my head around the amount of money — €54 billion — that is due to be paid out. Reference has been made to long-term economic value. I accept that the Minister achieved a write-down from €77 billion to €54 billion. I have not calculated the percentage involved in this regard.

I thank the Minister. Near to where I live in Oranmore, there is an estate called Bramley where only 15 months ago the houses were selling for between €2.2 million to €2.4 million. Some of those houses were sold in the past six months for between €600,000 to €800,000. That is not a 30% write-down, it is closer to a 60% or 70% write-down. Deputy Varadkar wrote to the head of the NTMA and, based on the Minister's projections for long-term economic value, asked that individual to purchase his apartment. The Minister should see the reply the Deputy received. Basically, the man in question — his name escapes me — stated that he would be interested in buying the apartment himself.

The Minister is not providing us with any certainty whatsoever. I would not expect that he would be in a position to do so. However, I also would not have expected him to place all our eggs in one basket. In that context, he has displayed poor judgment. He is risking too much. He is risking our future and that of the country and he is doing so for the sake of the banks. What have the banks received to date? The State guarantee was extended to them, which was important and which was the correct route to take. They were also recapitalised. The money in this regard was a mere drop in the ocean. In addition, Anglo Irish Bank was nationalised. To what end? As Fine Gael suggested, that institution should have been wound down over time.

I would not establish NAMA and provide it with €54 billion without legal guarantees being given to the State in return. I would demand exactly what we obtained in respect of the Lisbon treaty. If the people were allowed to vote in a referendum on NAMA, it would be rejected. It would then be necessary for legal guarantees to be provided in respect of threats to home ownership, jobs and businesses and the provision of credit to businesses, which is critical in the context of providing a stimulus towards job creation. Assurances in respect of trust, transparency and accountability would also have to be provided.

The Minister is bestowing strong powers upon himself in the Bill. He might not be the worst person upon whom such powers should be bestowed. I was quite impressed regarding recent reports on his concern to the effect that Department of Finance officials were not aware of the serious state into which the nation had fallen.

Those reports were inaccurate.

If they were inaccurate, I hope it was not in the context of the concerns expressed by the Minister because I was impressed by the latter. I am not, however, impressed by the fact that the Minister is prepared to overpay to the tune of €7 billion in respect of bad loans from banks or that he is not prepared to provide €1 billion of a jobs stimulus or a further €1 billion to assist people who are at risk of losing their homes. After all, those to whom I refer are underwriting the €54 billion that is being provided to NAMA.

Fine Gael tabled 99 amendments on Committee Stage in the Dáil. Among these was an amendment in respect of the establishment of a home owners support scheme. Such a scheme would provide a means to protect the thousands who are facing repossession of their family homes. Some 35,000 people could be affected in this regard next year. Respond! housing association has indicated that 25,000 people have already been affected. The Minister ruled the amendment to which I refer out of order on the basis that it represented a charge on the Exchequer.

I did not rule it out of order.

The Ceann Comhairle.

That is fair enough. Gabh mo leithscéal. What is NAMA only a charge on the Exchequer?

The Government has the authority to impose charges on the Exchequer.

That is correct. Equally, however, we would expect that the Government would display authority by providing good leadership.

That is also being provided.

If the Minister accepted Fine Gael's amendment in respect of a home owners' support scheme, NAMA would be allowed to take an equity share in a property when it had negotiated a write-down in respect of the outstanding debt with the relevant financial institution. The property owner would then be in a position to service his or her remaining share of the debt and pay a rental fee to NAMA in respect of its equity share. He or she would, in time, also have the option to buy back that equity share. If the property were sold, NAMA would receive a share of the sale price.

Why does the Minister not make NAMA work for ordinary people and families and not just the banks? The banks are offering us nothing, least of all certainty. Why is the Minister not in a position to require them to provide certainty in respect of, for example, home ownership? Those who paid stamp duty in recent years now find themselves in negative equity and at risk of losing their homes. These people paid Celtic tiger prices and I am obliged to ask what the Minister is going to do for them. If he takes away their homes, he will also take away their dignity. I have never experienced anger similar to that which I have witnessed recently. I fear that there may be social unrest, particularly when the budget is introduced. Unless the Minister provides people with something in return for what they are giving, then why would there not be social unrest? He is ruining these people's futures.

The Government also rejected the amendment Fine Gael tabled on Committee Stage in the Dáil in respect of the establishment of a national recovery bank. On Report Stage, the Minister then introduced an amendment relating to the provision of credit to businesses. Under this he will be given the power to set down guidelines. I understand the banks will be obliged to accept such guidelines, which is good. However, the position is unclear with regard to how these guidelines would operate or how adherence to them would be audited or measured. We just do not know whether such guidelines will provide a workable solution. Why is the Minister so keen to allow the banks to have the upper hand? Why is he not considering the needs of citizens? Ultimately, it is citizens who pay the piper.

Has adequate research been carried out in respect of the viability of the business plan? There are concerns with regard to whether adequate time has been devoted to testing this plan. I am not stating that we should delay matters. However, I am of the view that there has not been enough time to test the plan in the context of the model that has been put forward.

Professor Ray Adams, a world-leading expert who works with the Australian Council of Educational Research, ACER, has stated that the nature of economics is that it is not static and that trends change all the time in light of emerging information. Is NAMA flexible enough and capable of adapting to changing circumstances? As Senator Fitzgerald stated, it is unlikely that the vehicle with which we are being presented in this legislation will be quite the same in a few years' time. When the Minister announced the details of NAMA in September, his figures were based on property having bottomed out. Since then, property has fallen by 1% each month and there is no sign of a slowdown. How, therefore, can the people trust the Government and put all their eggs in one basket behind NAMA? I look forward to hearing the Minister's response.

I thank Senators for their wide-ranging and informative contributions on this debate. It has been a very interesting debate and I was glad to follow closely a number of contributors and have had a full report of what others said.

Senator O'Reilly suggested we were acting in the face of all evidence. I would like to eliminate certain countries from our debate before I deal with the merits of NAMA. First, I am concerned that there was much talk within the Fine Gael interest about Japan. Let us be clear about what happened in Japan. It spent 19 years in an economic decline. The reason it spent that length of time in economic decline was that it refused to establish an asset management agency. Instead, the Japanese trusted the banks and gave them the upper hand and every time the banks reported a loss, they put more public money into the banks. That is the policy of capitalisation only and it was the policy followed in Japan, followed because the authorities there consistently refused to accept there was a drop in the value of the properties. Therefore, let us leave Japan out of this debate because it does not prove anything other than the Government is right. The reason we cite the IMF so often is that it has been saying all year that the correct way to deal with a troubled distressed bank position is to set up an asset relief agency. We can all argue about the details in this and the other House, and that is only right, but let us leave Japan out of the debate.

Several Fine Gael Senators brought a second country into the debate, namely, France and one of its banks, Crédit Lyonnais, which makes them sound impressive. However, let us examine what the French Government did in that case. It decided to buy the book debts of Crédit Lyonnais at 100% and paid the full face value of the loans. We are not doing that. The French Government paid 100%. Therefore, it is not surprising that the French asset relief scheme did not work out very well having decided the state should pay the face value of the loans. Let us, therefore, leave France out of the debate also. Whatever other arguments we have, let us leave Japan and France out of them.

The introduction of these issues by the Fine Gael Senators gives rise to one of the difficulties in this debate, one of which I am well aware as Minister for Finance over the past year, namely, that this subject is capable of endless misrepresentation, something which does not assist the public confidence in what is being done. Senator Healy Eames made this point well on the conclusion of her contribution when she asked how people could have confidence in all of this. People cannot have confidence in NAMA if bogus analogies with foreign countries are introduced into the debate.

Reference has also been made to an American professor, Professor Stiglitz. This man has engaged in a crusade against President Obama in the United States.

Both Nobel prize winners.

He may be a Nobel prize winner, but he does not agree with a single step the US Government has taken with regard to the banking crisis, despite the fact the US Government has succeeded in repairing its crisis.

(Interruptions).

The Minister, without interruption, please.

Let us leave Professor Stiglitz out of this debate as well. He accused us of being criminals. Perhaps I was a little unfair on Senator Cannon and, earlier, on Senator Doherty when he said it was a criminal act to introduce NAMA, because it was Professor Stiglitz who started that particular line of debate here. It is an ill-founded line of debate.

Having got rid of Japan, France, Professor Stiglitz, legalised theft and criminal plunder, let us deal with why the Government is introducing the National Asset Management Agency. As Senator Healy Eames so rightly said in her conclusion, we have very serious problems in this country. We have an increase in joblessness, but it was good to see the jobless figures stabilise in October.

Many of them went back to school.

The Minister, without interruption.

We do not want a general debate on the economy. I want to address the issues. However, the live register trend in October showed a decrease in unemployment. Perhaps one swallow does not make a summer, but it is encouraging that we see it.

(Interruptions).

The Minister, without interruption, please.

Since last April, the trend in mortgage arrears has shown consistent improvement. This does not mean we do not have the important issue of home repossessions to address, but we have put measures in place to deal with the issue and have applied the regulator's guidelines to all financial institutions. We are committed to improvements in the programme for Government. We have a new regulator who is an excellent appointment and whose appointment has been welcomed all over the world.

If Opposition Members try to bring down institutions all the time, they will not solve problems. I know they want to bring down this institution, but bringing down institutions will not solve all our problems.

On a point of order, the Members of this institution cannot close it.

That is not a point of order. The Minister, without interruption, please.

Coming back to where we are at as an economy, I have referred to home repossessions and joblessness, and Senator Healy Eames referred in her concluding remarks to the need for credit for businesses. These are fundamental matters, but to address them we need a plan. Every economist of any repute in this country has made it clear that the plan must address our competitiveness, which deteriorated during the period of unrivalled prosperity, the defective condition of our banks and the public finances.

The reason I took such exception to Senator Doherty's intervention was that he was one of the only Senators who suggested NAMA was a bailout for developers and builders. In fairness to the Seanad, no other Senator made that suggestion. Others made strong comments but none suggested that. The crisis in our public finances is far more profound than any crisis NAMA could possibly give rise to. Since last August, Senators and public commentators have talked about the dangers posed by NAMA for the taxpayer and the danger of their children being saddled with the burden of a potential exposure of several billion in ten years' time. However, all of these economic commentators and Opposition representatives are very reluctant to discuss the burden of the €22 billion of borrowing we must engage in this year.

(Interruptions).

The Minister, without interruption.

The continuance of that state of affairs poses a far greater threat to our children than any NAMA proposal.

Who got us into that state?

We will have an opportunity in the budget to address that issue and make the necessary decisions.

The Minister was on the backbenches when it happened. We will not blame him for it.

Senator Coffey, please allow the Minister, without interruption.

I am addressing the issues raised in the debate. Speaker after speaker spoke of the threat to the taxpayer posed by NAMA.

We would appreciate a pre-budget speech.

The Minister, without interruption.

There is far more serious danger for the taxpayer and future generations, namely, their exposure from the amount of borrowing in which we are now engaging. That borrowing is not being engaged in to fund the banks. It is being engaged in because the gap between our current receipts and expenditure is so wide, and that is nothing to do with the banking system.

It is because the Government got it so wrong.

Let us have the Minister, without interruption.

If we got it wrong, and I am happy to accept responsibility for a mistake as a Government representative in that regard, we all got it wrong, because Fine Gael advocated even higher expenditure and lower taxes throughout that period.

(Interruptions).

Senator Harris, on a point of order.

It is not a point of order. I appeal to Senators. We had a rational and civilised debate all day. I appeal to them to stop descending to the level of a child's kindergarten party. We need order.

Let us have the Minister, without interruption.

We are all agreed, I take it, having dealt with the wider economic issues in the debate. I have to give the viewpoint of the Government there. For many years all of the parties advocated higher expenditures and lower taxation. We now have a very serious public financial problem, which poses a far greater threat to this country than the matter we have been discussing this evening, and at length in recent weeks. However, we all agree that credit supply is fundamental and that the essential and most important aspect of NAMA for all of us is to ensure that credit is available to support the economy. As long as the banking system is dysfunctional, that credit supply will not be present. All Senators accept that, I believe, and the issue then becomes what is the practical way to address that problem.

Again, if we look at the points of principle advanced here, the argument is that some new bank should be established, which will not be in a position to advance credit for a considerable period of time. It is not just a matter of giving a billion to a person and then he or she will set up a bank. It is not the case that if someone gets a billion, he or she will automatically get €10 billion or €15 billion from the European Central Bank to fund that bank. Such a bank has to obtain loans and deposits before it can even deal with the European Central Bank, so the idea that a new recovery bank can be set up by a magic wand in a few months time and establish credit in this economy is entirely fallacious.

That is why no serious commentator has even entertained the national recovery bank proposal. I would welcome the establishment of new banks in Ireland, but the difficulty Ireland is faced with is that many of the banks that came in here and contributed to the growth in credit, which were owned by overseas interests, have now withdrawn from this country and are not effectively providing credit in it. Senators have to be aware of the real position this country faces, and some have acknowledged it. Unless we have a sustainable banking system we will not have credit. It is not a matter of simply enacting laws, setting quotas and ordering the banks to lend money. One cannot jump out of one's coach like a highwayman and arrive across the bank counter to say, "Hand over the money", if the banks do not have the cash. Any person on the street can see the banks have run low on cash. That is why they required a guarantee and why the main banks, and Anglo Irish Bank, required capitalisation. That is why at this stage we have to follow best international practice and set up an asset relief agency.

I am making the case in principle for the asset relief agency because no valid alternative was advanced in this debate. In fairness, Senator Regan made the case, and I accept the point, that he would prefer to see the insurance based model which has been adopted in the United Kingdom. However, that model would mean we would collect insurance premiums from banks now to ensure their losses in the future. Given the scale of the losses in the Irish system, I respectfully suggest that this would expose the taxpayer to a far more indeterminate contingent risk and would fail to convince investors either at home or abroad that our banks were in a proper condition because the liabilities caused by excess lending and the losses on the banks' balance sheets would remain unquantified and indeterminate. The taxpayer would have the recompense of a small contribution for the bank in return for an extraordinary contingent liability in the future, having to insure every developer's loan on the materialisation of a loss. The taxpayer would fully indemnify the bank for that loss.

That was what the risk insurance proposal meant. It was the only alternative entertained by the economic consultant retained by the Government.

It is not 100% in the United Kingdom.

That is a fair point and we can argue it in greater detail, but on balance the Government and I have formed the view that insuring the loans would not reduce the uncertainty we need to eliminate in the banking system.

The argument will be made about nationalisation. Senator Ross gave the most elegant exposition of that argument in the course of the debate, although Senator Bacik and the Labour Party contributors also made that case. I believe, however, nationalisation does not address the credit supply issue. It only addresses the issue of who owns the banks. On the question of nationalisation and in regard to these five institutions and the bad books we are buying from them, we already own five eighths of those institutions and as such, have gone a long way in the direction of public ownership.

Is the Minister five eighths in favour of nationalisation?

It is not only a matter of owning Anglo Irish Bank. It is not only a matter of having an effective 25% stake in Bank of Ireland and Allied Irish Banks. It is not only a matter of having a provision in this legislation whereby the two building societies come under effective Government control. There is already a 55% stake in these institutions and the Government has made clear since last April that if further capital was required, it would be by way of ordering re-equity. In other words, any further State investment would inevitably increase the extent of that nationalisation. Therefore the only issue about public ownership is whether, in terms of the so-called temporary nationalisation, as described, we want 100% ownership now. As Senator Ross rightly pointed out, it would make the valuation a great deal easier, as well as the degree of Government control over these institutions.

Side by side with that and ultimately looking at the viewpoint of credit supply, these institutions have to attract funds as well. They have to be convincing on world markets to the effect that there is some element of market discipline on them and that they are not just Government controlled entities such as the HSE or CIE. In my view the only way to do that is to ensure that what banks emerge from this have some residual market presence. That is the policy of the Government in regard to this matter and I have made that clear at all stages.

It is very important that a residual market presence is kept because this will sustain confidence in the institutions on world markets. There are quite a number of funders who do not fund totally nationalised entities and it is difficult for me to see how a nationalisation would be temporary if there is no exit route. At least if some presence is retained on the stock markets, there is an exit route for the State in disposing of a shareholding.

Of course there is an exit route.

There is a fundamental difference between nationalising Anglo Irish Bank, which by virtue of its size posed a systemic threat to the banking system and the finances of the State, and fully nationalising a bank such as Bank of Ireland or AIB, with their extensive branch networks. Does any Member of the House believe that were such an institution to be fully nationalised there would not be enormous political pressures on the Government with regard to matters as incidental as closing a branch or arranging credit for a customer? Serious doubts would arise in other countries about the independence of these institutions and the desirability of funding them in those instances. I do not underestimate the difficulties the Government faces in implementing the policy before the Seanad, in NAMA. I have always said there was a choice to be made on that issue, but the Government and I believed that the balance of the argument was in favour of the approach we have taken.

The issue of credit supply is fundamental, however. It has been raised by all the speakers, who asked, in effect: "Why does the agency not guarantee credit to the institutions?" The first point is that the institutions are incapable of generating the funds at present because of the degree of impairments on the assets in their balance sheets. Unless those assets are cleared, there is not going to be a sudden international recovery of confidence in them. The first step is to remove those assets and make the balance sheets of the banks look more attractive so that investors will lend to them. The National Asset Management Agency does just that.

Taking the most difficult bank we have had to handle, Anglo Irish Bank, the current size of its loan book is €72 billion, and the book value being advanced is €28 billion. The introduction of this operation will reduce the size of that loan book to €44 billion, which is an extraordinary large derisking of that institution. What replaces the loans will, of course, be bonds issued by NAMA or the Government which can be used, in the first instance by the particular institution to clear the emergency funding it has acquired from the European Central Bank and then have a presence of bonds on the balance sheet which are reliable and akin to cash, with a very small rate of interest. In terms of the taxpayer's interest, there is then in place an institution, which at present is of considerable risk and concern, substantially derisked. We can ensure the institution can attract funds in its own right and we can then make a strategic decision about its future, having stabilised it.

With regard to Bank of Ireland, AIB and any building society that emerges from this, the issuing of these bonds will put these institutions in a far better position to lend money into the economy. By removing the risky assets the balance sheet is made more attractive. Also, when these institutions present the bonds they obtain cash for them. They can present these bonds at the European Central Bank. The bonds are pitched at a very low interest which is a matter of deliberate choice in the policy because of course they have every incentive then to try to make money on the bonds by effective lending. That is why the rate of interest is pitched at half a per cent above the EURIBOR rate. It is not just a matter of repairing the shape of a balance sheet, it is a case of putting those banks in possession of an instrument that can be exchanged for cash and creating the capacity for a fiscal stimulus in this economy. That is precisely what has been done in the United States and in Great Britain. We can do that only through the European system of which we are a part.

That is the opportunity that NAMA, if well regulated and well run, affords us. It is important that we avail of that opportunity. That is why the Commissioner for Economic and Monetary Affairs, Joaquin Almunia, suggested, when he visited Dublin some weeks ago, that we proceed with NAMA with all haste. I do not suggest that the Seanad has not proceeded in all haste. In opening this debate I thanked Senators for the time they have given and the despatch with which they were prepared to attend to this legislation so I am not suggesting that Senators are not attending to this matter with despatch.

All the Senators raised the question of credit supply and it is important to understand that intrinsic to the concept is the idea of enhancing credit supply. Apart from that, and in order to provide further reassurance, the Government accepted on Committee Stage the views expressed by all the Deputies in the other House and worked on an amendment that would provide for some measure of ministerial power in this area. We have to be very careful about this. It has to be a ministerial power to support different sectors of the economy, not a ministerial power to interfere in individual lending and borrowing. It is a power that provides that the Minister can give directions on codes of practice and ensure there is an effective mechanism for policing them, and that an appeals structure, involving a pool of lending to which the banks contribute, or whatever structure is arrived at, can make a determination separate from the banking system about the validity of a particular credit decision.

That is written into the legislation because, understandably, Senators expressed the impatience which Deputies expressed, and which I share, about restoring the flow of credit to the economy. This is what this is all about. It is easy for us in every debate to talk about people being under great pressure. We know they are under great pressure but they will be under worse pressure if we do not sort out the banking system. We must understand that collectively and communicate it to the people. We all know what happened when governments decided in the past not to rescue the banking system. A deliberate decision was taken after the 1929 crisis not to rescue the banking system in the United States. We know what happened in the Great Depression and how unemployment rose to 33% as a result.

A subsequent generation of economists made up of men such as Galbraith and Keynes warned against the world ever taking that course again. I am amazed at how much time is given to those such as Professor Stiglitz and others who say that letting the banks collapse is the solution to this problem. It is not the solution. If we go down the road of that solution we will create not just the degree of distrust and lack of confidence we have already seen but a tsunami-like extension of that distrust and lack of confidence. The people who suffer from that banking collapse will not be the bankers in their boardrooms who have secreted their money elsewhere but the ordinary man and woman in the street who will have no job, shop or credit.

That is what will happen if we let the banks collapse, yet all the time we hear this rancorous argument that we are not looking after the ordinary people when the primary concern is to get credit flowing in the economy and ensure the banking system survives. All the time we have this rancorous debate even though the governments in the United States, Great Britain, Germany and France, and in every other country, are taking precisely the same steps as us.

We hear the criticism although we are acting in accordance with Commission guidelines which have stated that long-term economic value is not just desirable but essential and is an inescapable aspect of any asset relief scheme. That is what the Commission has told us. That is not something we invented. There is an argument that we have somehow conjured up this mad, harebrained scheme to rescue bankers and that it has been designed not just by me but by those who advise me in the NTMA, the Central Bank, the European Commission, and the ECB. We are back to the country of the protocol of the Elders of Zion where the whole world is seen as a conspiracy against the ordinary man. It is not. This scheme has been drawn up on best advice, not just at home but abroad. The purpose of the scheme is to restore credit supply.

Quite a few Senators sought clarification on how the risk-sharing mechanisms in the Bill will work. The first involves the part payment for assets in subordinated debt of up to 5% of the total purchase price. The interest on those bonds will be payable only if NAMA makes a profit, and on winding up if NAMA makes a loss those bonds will not be redeemed. That will account for a third of the allowance for long-term economic value and is a material protection for taxpayers. The second risk-sharing measure is the inclusion in the Bill of a power to apply a surcharge to participating institutions should NAMA make a loss on winding up. If one considers that 55% of the banks are already in public ownership or control it is difficult to see how 55% of the €7 billion is in any way affected by the operation of the long-term economic value. If one accepts that the bonds cover approximately another €2 billion one is left with a figure of €1.6 billion at risk in the long-term economic value. That is far short of the €22 billion we must borrow this year, yet we decided to have a major national debate on this for the past three months.

Senators Burke and Reilly asked whether we can rely on the market value and why do we have such confidence that the market value is as stated in the estimate. The estimate is a top-down evaluation based on information supplied by the banks but that is not the valuation that takes place under the Bill. That is a bottom-up valuation in which each loan is separately and individually valued. Naturally, in going before the Oireachtas in this matter I had to give an estimate of what I believed this would cost but it is only an estimate and is subject to due diligence and that due diligence will happen. We took a particular view of the property market in the estimate because first we have to consider where the assets are located. It is difficult to believe when reading the Official Report that it is still accepted that one third of these assets are not in the State but in Great Britain, north America and other countries, in some of which the property market is already in recovery. Happily, many of the assets in north America and Britain are very close to capital cities, as one would expect with foreign-owned assets which do not tend to be in the outback.

As far as the two thirds of the assets that are in Ireland are concerned, the conventional way to measure when a property market is at the bottom is to look at the yield on rents. They have never been higher in this country. They stand at 8%, way above the long-term average. That is a clear economic signal that we are at or near the bottom of the property market. Many commentators have said that as well.

That is a serious assumption.

If Senators want to believe this country is like Japan and is going to go into further decline and that it is bankrupt, they had better formulate their policies accordingly for the next general election. I do not believe that and I am acting on sound economic advice that tells me the yield from the rental market, for example, here in Dublin is at 8% which is extraordinarily high, the highest ever in the history of the State.

That is bad for retail. It is choking business.

I know the argument is made that rents are adjusting and going down but even the impact of that rent adjustment is factored into our calculations. We are already allowing for the 16% decline in rents which we have witnessed in the past year and our plans anticipate a further decline in rents. That is factored into the business plan. If at the end of the day Senators cannot believe that the property market will increase by 10% over the next ten years from a base which is now at the bottom they have very little faith in the future or the history of property valuation of this country. That is what this legislation does. It makes cautious assumptions.

Senator Ross rightly asked how I arrived at these assumptions. I consulted the Governor and Governor-designate of the Central Bank which did its own modelling exercises on the property market and took the view that 30% would be a reasonable allowance for where it should be in ten years' time. However, both governors warned me that might be an optimistic assumption because there will be tighter credit conditions after what we have seen in the past 20 years. Regulation will be stricter in most countries. On that basis I took the view that 15% was a far safer assessment of the long-term economic value of these assets. In addition to that, we built in the subordinated debt element which eliminates the risk from 5% of that 15%. That is apart from the amount of State ownership we have and the ultimate imposition of a levy. I would not like to rely exclusively on the ultimate imposition of a levy to protect the taxpayer in this area.

Regarding the suggestion that the concept of long-term economic value is absurd or unique, it is the system recognised by the European Commission in its guidance note on this subject. It is now the system for valuing bank assets in the United States. As the assets are so distressed at present and as several Opposition Members said there is no effective market for them, it has been decided to establish an agency to hold the assets to maturity.

I will illustrate how that will work out in the context of valuations and address an important point raised by many speakers. Senators referred to land in rural areas which has been rezoned in excess of the immediate requirements of an area for the next ten years. Where there is land of that character established under this system, that land will not have any value beyond its agricultural value. One cannot give a valuation to an asset under the valuation process which will not realise the value after the ten years. The long-term economic value for the purposes of this exercise has to be the long-term economic value from which NAMA will break even.

Criticism was expressed that the NAMA business plan envisaged a profit. I have always made clear that it is my intention that NAMA should break even. It is not a good approach if one sets the ambition that it is only going to break even in the first place. It is far better for the agency to set itself the objective of making a reasonable profit if it wants to protect the taxpayer and break even. That is why a decision was taken that NAMA should plan for a profit. It must be remembered that this is an interim business plan and that later the board will have to set a proper one.

It is important to remember that in this financial crisis the only country that has attempted total nationalisation of its banks is Iceland. That was the last step taken by the Icelandic Government before the Icelandic state and its economic system became insolvent. It is a serious step for a small country to decide to engage in a 100% nationalisation of the banking sector. It would be noted in the wider world. In a previous banking crisis, the Norwegian authorities nationalised the country's entire banking system. None of the other Scandinavian countries effected a wholesale nationalisation during their respective crises. It must be remembered, however, that Norway rested on the security of very substantial oil reserves. It is a country that it so resource rich that it is in a position to refuse membership of the European Union. Ireland is not in the same position.

The Irish banking system is critically dependent on external funding, even leaving aside the bubble related mad lending of the recent decade. We will put the banking system on a sustainable basis but it will require funds from other countries. Ireland will not generate enough in the form of deposits and other liabilities to the banking system to enable the banking system to fund in an effective way those in the Irish economy who require to be supported. The reason for that is that we are a small country. A small country that announces to the great wide world that it will be the second country after Iceland to nationalise its entire banking system is not taking a wise step in the current financial crisis. I accept we are walking on ice and there are difficult balances to draw which does not make the implementation of the legislation any easier. Governments must, however, make those decisions and stand over them.

Senator Alex White, along with others, claimed that NAMA does not enjoy academic or international support. That is not correct. In the first instance both the IMF and the OECD have commented positively in the actions being taken by the Government in resolving the problems in the financial sector. Both of those institutions mentioned that temporary nationalisation should not be ruled out and neither have they advocated the type of temporary nationalisation that many in the Labour Party seem to favour. Deputy Quinn in the Lower House has not argued for 100% nationalisation but that we should preserve some shareholding presence in the banking system, with which I agree.

Senator Bacik claimed I ignored the downgrading by the rating agency Fitch. I did not. Fitch said Ireland has a stable position although it is downgraded.

I said the Minister had dismissed it.

I did not dismiss it. The point is that despite the disappointing downgrading by Fitch last week, that particular agency believed that NAMA would be successful in rehabilitating the banking sector.

What about the credit rating agencies that are totally discredited and are up to their hocks in foul toxic loans?

I do not believe we should be run by rating agencies.

There should be no interruptions.

Many of these institutions are primarily responsible for what happened in the United States and yet they are still allowed to get away with it.

I was about to agree with Senator Norris that the conduct of the rating agencies was reprehensible throughout this crisis. Small countries like Ireland, however, are vulnerable to the activities of these agencies. There is not as big a focus on us as there is on the larger countries. Negative commentary about Ireland can be very dangerous in the hands of rating agencies. For better or worse, we have to engage them. I have had to meet them as the Senator's Minister for Finance and explain the positive, as well as the negative, features of the economy.

There are many positive features of our economy, not least the fact that we are moving to a balance of payments surplus next year. Most of the countries with serious debt or banking problems in Europe in recent times also have serious balance of payments problems as well. They are not paying their way in the world; we are. Part of this surplus will be due to a reduction in consumer demand which inevitably affects imports but part of it is due to the robustness of our exports which have been steady throughout the crisis, unlike those of many other European countries.

Senator Bacik suggested NAMA is too optimistic in its projections and will not be aggressive enough in enforcing security. Senator Alex White also suggested there will be no enforcement against developers for three years. The figures in the business plan relate to when lands will be sold off, not when enforcement action will be taken in respect of debtors. That is an important distinction. There has been a misreading of the NAMA business plan. I am not suggesting Senators are guilty of it because I heard it in the other House where it originated. However, the suggestion has emerged that there is an amnesty for developers and builders for two years. That is not the case.

Enforcement action will be taken as soon as it is required. If no viable business plan is forthcoming from a developer or a plan by the borrower to extract the company from its liabilities, NAMA can clearly take enforcement action. One difficulty with the banking system is that the banks were reluctant to take these actions because of the effects it had on their capital and balance sheets. NAMA has no incentive to do that. Instead it has every incentive to look after the taxpayer and take whatever enforcement action is required.

Some Senators inquired why NAMA will not administer all the loans of borrowers. It is intended to introduce a minimum threshold of €5 million for some of the loans being transferred to the agency. The limit will not apply to the smaller building societies because of the relatively small number of loans involved and for administrative reasons they could not be left with them. In the three larger institutions there will be a minimum in which the banks will be left to deal with matters themselves.

Senator Donohoe referred to the property cycle where prices return to peak after seven years. He wants to avoid bubble economics; so do I. The assumptions in regard to the long-term economic value envisage a modest growth in property prices in the next ten years. That is what we want in this country. We want a sustainable construction industry based on a sustainable level of growth. If Opposition speakers are right and the valuation should be far lower and the crisis is far more serious, we are like Japan in that we will not have a construction industry for a very long time to come.

However, that is not the case because I can tell Members that here in this city demand has already resumed for houses of a detached variety for first-time buyers. That demand is evident. I represent a Dublin constituency. I see it and I am being advised about it. That is the case already. It is not something we want to ramp up or stimulate in the way that happened in the past but we need to put the construction industry back on a sustainable footing, and everyone can recognise that the number of house completions and units being completed this year and next year are not sustainable to meet our long-term needs. In the course of the debate everyone recognised that the scale of house building that took place in recent years was unsustainable and was far in excess of our needs.

Senator Twomey suggested, and it was an attractive suggestion, that private investors who are individuals should be allowed invest in the special purpose vehicle so that there could be popular participation. I know that popular participation for some Senators involved all of us investing in it. I am not sure that would not put us in a conflict of interest position very quickly but it is a good suggestion. The one difficulty with it is that we want to get the agency up and running as quickly as possible and the formality surrounding a public participation would take months to execute. However, perhaps within the overall framework of a pension fund investing in the vehicle some sub-investment could be arranged for within that framework because I thought it was a worthwhile suggestion and one that was worth exploring.

Individual Senators made a great number of contributions and I will try to deal with them in so far as I can. I do not agree with Senator Twomey that I can refer the Bill to the Supreme Court. It is a matter for the President but I do not believe there is any legal defect in the Bill. The Attorney General and his team worked very hard on it throughout last summer. I believe I have addressed the points raised by Senator Alex White.

Senator Bacik rightly raised the question of the ethical framework for banks. In France, a credit mediator is appointed and banks which deny credit should be named and shamed. We intend to institute an independent appeals mechanism on the question of credit. That is very important. On the ethical framework for banks, I have established and concluded a relationship framework with Anglo Irish Bank, which the taxpayer now owns, which ensures that any settlement or compromise with directors or former directors must be approved by the Minister.

The question of corporate governance arose in the debate. The Minister is given major powers of direction, and that is clear in the legislation. We will have an opportunity of discussing that in committee but it is important that the Minister is accountable for this particular entity. We all know what happens when some entities are established Sputnik like and disappear into outer space. The fact that the Minister is given power to direct is an important power because it allows the Minister——

Members, please.

I will deal with that shortly. It allows the Minister to give definite directions on credit supply and other matters. If an investment vehicle is established, and it will require to be established to comply with European statistical rules, the investment vehicle will require to be integrated with the NAMA group entity and we will be examining in committee the various provisions that ensure that full transparency and directors duties apply to that.

Senator Donohoe dealt with the property bubble and I believe I replied to that. Some of his points related to sections and we can discuss them in that context.

Senator Norris referred to Japan and the dangers in the long-term economic value. Questions were raised on the European Central Bank's view on this issue. Our Governor participates in the European Central Bank. Its view on it was not to criticise the concept but to say it should be applied with caution, and that is exactly what we have done.

Senator O'Malley raised the cost of the advisers. This is a difficulty. This kind of professional advice has never been cheap and if one generalises it over a ten-year period it looks very expensive but we have been having many political debates. A huge political controversy arose in recent months about the cost of certain compensation payments that were put in place for retiring chief executives of State bodies. Figures were given in the newspapers but if one were to tell a contributory old age pensioner, for example, the cost of his or her pension one would say it is €400,000, which is very substantial money.

Figures can be played around with, as we all know, in the current debate. There is a substantial cost involved in the professional advice over a ten-year period but we must do the valuations correctly. We must get a proper bottom-up valuation. Senator Coffey made a very good point under that heading when he asked how we can be sure that the auctioneers and valuers give a true and fair valuation. They will have to assure themselves in respect of the valuation, and various other protections must be inserted there.

Regarding Senator O'Malley's concerns about the cost of advisers, we must do a proper valuation. We also have to pay the banks to manage these loans. That is a European Union requirement. We own the loans but we have to pay them as our agency to manage them. One of the advantages of the subordinated arrangement is that it gives the banks an incentive to make the best out of their loans.

I agree with Senator Buttimer that Ireland Inc. needs a make-over. I would hope he was not referring to a political make-over but to an economic make-over.

That is coming. The people will decide that, Minister.

Members, please. The Minister without interruption.

Not just Senator Buttimer but a number of Senators, including Senator Cannon and Senator Healy Eames, referred to the Madoff case. There is a fundamental distinction between the system in the United States and the practice in all European countries. It is not just in Ireland. It is the case in the United Kingdom, France, Belgium and the smaller European countries that criminal investigations are protracted. We do not have the United States system of criminal justice in operation here and it is regrettable in a crisis like this one but I know NAMA will proceed with great dispatch against those in default. That has to happen first. I have advised the public that an extensive Garda investigation is under way in regard to various incidents which took place. That is a huge investigation being conducted in two jurisdictions, with several hundred witness statements being taken. All of that is under way but our legal system does not provide for that, neither does any other European legal system.

Senator Leyden wants parliamentarians to be permitted to sit on the board of the agency. While Senator Leyden would be a very fine appointee, there would be a conflict of interest between——

I do not want to exclude it.

There is a conflict of interest in being entrusted with this and holding the Minister to account in debates in Dáil Éireann and Seanad Éireann. An inevitable conflict of interest would arise in that regard.

That would be in keeping with Fianna Fáil.

Members, please.

In regard to the ban on lobbying the agency being amended to allow Deputies and Senators make representations, I assume they can make representations to the Minister in any event. I am anxious to ensure that a protocol on parliamentary questions is agreed with the agency to ensure that prompt, comprehensive replies are given to all questions.

Senator Quinn raised the question of how values can be assessed when the market is dead. That is precisely the point and that is the reason we have adopted the concept of long-term economic value.

On the question of the 80% development land levy hindering recovery, that levy only applies on future rezonings. The consensus among Senators seems to be that we have a sufficient supply of zoned land for present purposes. The reason the Anglo Irish Bank accounts are being released in December is that it has changed its year to an annual calendar year basis for accounting purposes.

I thank Senator Ormonde, who wanted more detail on the special purpose vehicle, as did many other Senators. The special purpose vehicle is a device which ensures that the agency and its borrowings are off-balance sheet for Stability and Growth Pact purposes. It involves an investment of €100 million. The return to the investor is capped at a very defined limit. In no sense does the investor, either private or public, participate in any wider profit which NAMA might have. There is a return level set on the basis of the return to Government bonds.

Senator Regan already mentioned the Bacon plan insurance approach. Like many other Senators, he raised the question of the various cases that came before the courts. Those cases were welcome because the courts upheld the principle that bank debt could not be compromised in the context of an examinership application. Indeed, had the courts decided that there could be substantial inroads into the bank debt in the course of examinership applications, it would have been difficult to introduce the NAMA proposal at all because it would have meant that what the taxpayer is purchasing here could be put at substantial risk in the courts. I think all of us were happy to note that the courts engaged in a rigorous examination of the various business plans submitted in the course of that litigation.

It must be said that any comments made by the courts in the course of those applications must be viewed in the context of the facts disclosed before them and one cannot read through implications for the wider property market by comments made by judges in commenting on a particular expert report which was submitted by a particular party in the context of a winding-up application. As I stated, the implications of those decisions were welcome in terms of the establishment of NAMA.

Senator Mary White referred to the need for credit growth. Senator Bradford was concerned about secretive NAMA decision-making. There is a need for a scrutiny committee and I made that clear in the other House. It did not arise as much here but it was mentioned by some Senators.

Senator Hannigan advocated the route of temporary nationalisation. He stated that I do not like it because I did not think of it. I thought of it many times. It would cost the Government more to borrow if we went down that road because we would have to compensate the shareholders and we would also have to capitalise the banks even more while borrowing on world markets. Undoubtedly one of the great advantages of NAMA is the support which the European Central Bank has given the project by permitting the bonds to be presented there at the 1.5% rate.

Senator Walsh made the point that ordinary shareholders, not bank chiefs, should profit from any bank profits. Dividends have not been good in the banks of late and I believe it will be some time before we see them again.

Senator O'Toole welcomed the French discussion on legislation to control levels of top bank official pay. Of course in the case of the guaranteed banks, we are ahead of the posse on this in that we have abolished bonuses and we have also set the monetary limit of €500,000. The consultants are paid very well. We do need specialist grades in the public service to eliminate the need for them. Specifically, my Department has recruited a bank analyst for that reason. We recruited him outside the service.

Senator O'Toole was sceptical about the talk about loosening of credit. It is true that banks will make commercial decisions, but there is a danger at present because of the sheer condition of the institutions, or at least some of them, that they are incapable of making decisions that are in their own rational interest.

It was as an objective of NAMA about which I said was sceptical.

It is an objective of NAMA in the sense that it provides the balance sheet with a condition that allows them to raise and advance funds to customers.

It was a consequence as opposed to an objective.

Senator Fitzgerald made the case for the various critics and also the Fine Gael alternative banking strategy. It would be good to be able to establish a new bank but we should not be deluded into thinking that just by establishing a new bank we would have a sudden explosion of credit in the economy. If anyone showed an interest in establishing a bank in Ireland at present, I would certainly contact the Governor of the Central Bank and urge him to do all he could to speed up the formalities. The reality is that every externally owned bank that came into this country in recent years has had to capitalise its banks — as we have had to with Anglo Irish Bank — in a country external to the external bank's main theatre of operations, and has engaged in substantial de-leveraging of its Irish operations. That is the reality with which we are faced, and it is important we understand that.

Senator Cassidy was concerned that funds would be made available to the banks and that there should be a percentage for small and medium-sized enterprises, and that the OPW should be involved. I will examine that.

Senator McDonald referred to the 3% pay rise in the Allied Irish Bank. I agree with the Senator in that we are facing into a very difficult period in pay determination. Our public servants have already made substantial sacrifices — on average approximately 6.9% in pay reductions. In the private sector, even wider sacrifices have been made by those who trade on the British market or engage in professional services connected with construction and in certain other sectors. Then, side-by-side with that, there are sheltered sectors in Irish life, in both the private sector and the commercial State sector, which are immune from pay restraint, and that poses substantial difficulties. I have raised this issue with IBEC recently.

Senator McFadden referred to a large number of the issues that have been raised and was a strong advocate of the Fine Gael position, as I understand it, that another NAMA should be established for those who have mortgage arrears. The NAMA model does not suit them. NAMA will pursue the developer for the full value of whatever are the developer's obligations. It would not be of much use to a homeowner to be told NAMA has bought his or her loan but will turf him or her out on the road if he or she does not pay the full face value of his or her loan. NAMA is dealing with commercial loans and it must act with a commercial mandate. As I understand it, what is being advocated by Fine Gael is that the taxpayer should directly subsidise the write-off to the borrower and that the borrower should be released from the obligation to repay the loan.

Like we are doing for the banks.

The point is we are not doing that with the developers. Despite constant misrepresentation on this front, in fairness not in this House, we are not doing that with the developers. The banks are in a different position altogether.

Like for the banks.

The banks are the persons who advanced the loans, not the persons who own the loans. The person who owes the money is the developer, the builder or the borrower, and he or she is being held to account for his or her full liabilities. I do not accept that the homeowner can be administered by NAMA, which has a commercial mandate and which is there to make money for the taxpayer, and that the——

Has the Minister an alternative?

We have alternatives and we are exploring them because a solution must be found.

We would like to hear some of those.

I do not deny the good faith of the Opposition in putting forward this idea.

The Labour Party put forward a different idea in the other House where there would be a 24-month ban on repossessions. As part of the recapitalisation, we agreed a 12-month ban on repossessions in Allied Irish Banks and Bank of Ireland, and Senator Norris will be disappointed to hear a deluge of rating agencies suggested we had abolished the fundamentals of a safe banking system. We must proceed with care in this area, but we also must ensure that in a time when this adjustment must take place to make ourselves competitive, we keep the roof over everyone's head. We all must address that problem, and I am not taking from that in any respect.

Senator John Paul Phelan made a number of points, most of which I have addressed. He raised the point that British Prime Minister, Gordon Brown, echoed the Taoiseach's words that the taxpayer is left to carry the can in this matter. Unfortunately, that is the position we are in because, as I stated already, if we do not have a viable banking system, we will not have a viable economy. We are not bailing out the banks, we are bailing out the economy. I dealt with most of Senator O'Reilly's points already.

I thank Senators for their contributions. I hope I managed to deal with most of the points made in the debate. I will attend the Committee Stage in the morning and I hope we can have a constructive debate on the amendments that have been tabled.

Remember the last budget.

There is a Fine Gael amendment. Is it being pressed?

Question put: "That the words proposed to be deleted stand."
The Seanad divided: Tá, 29; Níl, 24.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Harris, Eoghan.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Mullen, Rónán.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O’Brien, Francis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • O’Toole, Joe.
  • Ormonde, Ann.
  • Phelan, Kieran.
  • Walsh, Jim.
  • White, Mary M.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coffey, Paudie.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • Doherty, Pearse.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • Healy Eames, Fidelma.
  • McCarthy, Michael.
  • McFadden, Nicky.
  • Norris, David.
  • O’Reilly, Joe.
  • Phelan, John Paul.
  • Prendergast, Phil.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Maurice Cummins and Liam Twomey.
Question declared carried.
Amendment declared lost.

I declare the Bill to be read a Second Time in accordance with Standing Order 114(2). When is it proposed to take Committee Stage?

Ar 10.30 maidin amárach.

Committee Stage ordered for Tuesday, 10 November 2009.

When is it proposed to sit again?

At 10.30 a.m. tomorrow.

I want to clarify that the Order of Business will be taken at 10.30 a.m. tomorrow for one hour.

Yes, it will be taken at 10.30 a.m. tomorrow.