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Seanad Éireann debate -
Tuesday, 10 Nov 2009

Vol. 198 No. 1

National Asset Management Agency Bill 2009: Committee Stage (Resumed).

NEW SECTIONS.
Debate resumed on amendment No. 1:
In page 16, before section 2, to insert the following new section:
2.—(1) For the purposes of this Act, "the Oversight Committee" shall mean a committee of the Houses of the Oireachtas, or a sub-committee thereof so enjoined and appointed by a Resolution of the Houses, consisting of specified persons not being members of the Houses of the Oireachtas to report to the Houses of the Oireachtas every 30 days on the operation of this Act and the activities of NAMA.
(2) The Minister, NAMA, and any other body or person having functions under this Act shall be required to co-operate with the Oversight Committee in the performance of its functions.
— (Senator Alex White).

Before we were helpfully interrupted before lunch, I was responding to a reasonable point Senator Norris had made about scrutiny and oversight. He was so impressed by the Minister's performance last night that he found it reassuring, although I am not suggesting he thought that satisfied the point. That is fair enough but oversight and scrutiny are not a sign of a Minister's performance. No matter how dedicated and well briefed a Minister is that does not avoid the need for proper public scrutiny and, in particular, information to be made available in order that the people can understand, appreciate and, as appropriate, support what is being done in their name. That is the basis on which we brought forward this amendment which would provide for an oversight committee.

The Minister has said the NAMA board is charged with oversight of the NAMA process. That rather spectacularly misses the point of the amendment because the NAMA board runs NAMA. Of course, that includes an element of oversight, as would be the case in any board, whether in the public or private sector. However, the people who engage in this are not necessarily the best ones to explain or answer the complex questions that might be asked about their actions.

There is always a sense of ownership of a decision. We must all accept this, no matter what walk of life we are in. While one may have a disagreement with colleagues about a decision, such as happens in the Cabinet or on the board of a company or school, once a decision is made, people rightly pull in behind it. We do not want to be told about a decision and the bald facts underlying it. This is particularly true of NAMA, in respect of which there is so much at stake. We want more information in order that the public can make its own judgment on the decisions being made on its behalf.

Senator O'Toole and the Minister have invoked sections 58 and 59 and stated they deal with this query but they do not adequately deal with the oversight that the Labour Party wants to see. The content of these sections does not represent an innovative approach to the dissemination of information and the possibility of real Oireachtas scrutiny. It is the tried and tested method which is useful in many cases but NAMA, the use of the people's money and the binding of future generations constitute a new ball game. We want the maximum possible level of transparency, oversight, scrutiny and information. There is not much in the Bill that creates an innovative or new level of scrutiny.

Part of this debate may be for another day, although it is relevant to this discussion, being about the level at which the Oireachtas can engage in meaningful scrutiny and examination of what is happening. It is important for politicians to equip themselves with expertise as best they can. They have a responsibility to research issues and ensure they increase their knowledge and expertise. However, their backgrounds and knowledge will not always be such that they can ferret out the information. Saving the presence of my Fine Gael colleagues, it will also get past the concern of being met with the answer "You did not ask me the correct question." The former Taoiseach, Mr. John Bruton, was not the only one who approached issues in such a way, as all Governments have tended to take that approach. The longer a party finds itself in government, the less enthusiastic it is to part with detailed information. Will the Minister reconsider his position on these amendments?

The Minister believes there should be an inquiry into developments in the banking system over past years but now is not the right time. I sighed when I heard that. Why not now? When does the Minister have one in mind? The notion that this is not the correct time is wrong. As the Minister pointed out, some of the major players are no longer active in banking and are, therefore available and could be made amenable to an inquiry. As Members will appreciate the longer one leaves complex issues to inquire into, the harder it is to get to the truth. Documentary evidence does not necessarily go missing but becomes less available. People's recall is less clear as the months and years pass by. I do not see any reason there should not be a full inquiry along the lines many, including Colm McCarthy, have suggested.

I remind Senators that we have spent more than two hours on this group of amendments.

I welcome the Minister's response to my point about the French model of a credit mediator, saying he would examine it and review it under the relevant heading. The French Minister for the Economy, Industry and Employment, Christine Lagarde, described in January's Newsweek the credit mediator as:

. . . a sort of ombudsman, who receives complaints and investigates them. He can go to a bank and say, "Here's a situation you should really re-examine." He can finger-point publicly if necessary. And it's working.

Last weekend's The Guardian pointed out that in France up to “10,000 firms have been helped and banks that fail to extend credit lines to viable businesses are ‘named and shamed’”.

I am grateful the Minister will review the French model as a way of ensuring the flow of credit. I hope he will re-examine these Labour Party amendments to ensure greater scrutiny and oversight of the way the banks operate after the establishment of NAMA to ensure credit flows in the public interest.

We spoke about an Oireachtas oversight committee for NAMA on Second Stage yesterday. There is a sense that what has gone wrong with the banking system is due to a lack of regulation and governance. Subsequently, with NAMA we want to ensure oversight, transparency and accountability in its workings.

Bypassing the Houses of the Oireachtas on matters such as social partnership talks happens all the time. We do not get proper democratic accountability and scrutiny in the Houses. Setting up an Oireachtas committee would be an important oversight mechanism. The amounts of money involved, the large taxpayers' interest that needs to be protected and the Minister's powers in the legislation must be balanced by having an Oireachtas committee with particular responsibility for the agency.

The Minister said such a committee could be established at any time by the Houses of the Oireachtas. I would think it is more appropriate to set it up in the legislation. We have already said we can do without some of the committees in the House but this is one we should have. If NAMA has a particular timeframe around it, the Minister could bring an amendment to the Dáil on Thursday.

I accept there would be limitations to such a committee's oversight powers given the critical and confidential banking issues involved. However, within that I cannot see any other reason there should not be a specific committee to address the issues as outlined in the amendment.

This is also in line with Fine Gael's policy on the filling of vacancies on State boards. Fine Gael's public appointments Bill states that there should be an objective and transparent procedure in place for making appointments to key State boards, while nominees should appear before Dáil committees. If ever there was a time to establish such a committee, an agency such as NAMA with the amounts of money involved, the taxpayers' interest and it powers, provides the perfect opportunity.

Once again it is a pleasure to join Members in the Upper House. I do not know if I can match what I heard was a virtuoso performance by the Minister for Finance last night.

Like Senator Alex White said, it has more to do with the detailed substance of the amendments rather than one's performance. That said, the Minister dealt in his first reply with quite a number of the points raised about these amendments.

When oversight, transparency and scrutiny are bundled together as one separate issue, they must be balanced against the real and important issue of ensuring the agency is allowed to work in an effective manner to achieve its aim and objective, which we as policy makers set out. Getting the balance right between these often competing objectives is where the skill lies in drafting this legislation.

I acknowledge Senator Alex White's point that no Member, not even Senator Ross I would venture to say, has experience or expertise at the cutting edge of banking, finance and the intricate detail that will be dealt with by the NAMA board. Our expertise is in policy making. We must ensure the board is fully equipped from a policy perspective to be able to carry out its aims and objectives. That is why in this endeavour we have to choose the correct people to do the job.

In this House, the Minister reiterated his offer to the Lower House that he will inform Opposition Members about his thinking about appointments to the board. The board will be charged with carrying out the executive functions of the agency and implementing the provisions of this legislation. It must ensure it protects the interests of the taxpayer and secures a proper return. As we are delegating these powers and functions, we must have trust in the people in question and accept their bona fides that they will do the job to the best of their ability commensurate with their skills and experience. That is the other side of the equation.

The question for this discussion is: when did we stray from one side into the other? When did the legislators become the Executive? While it is important to have oversight — I suggest the more correct word is "scrutiny" — to scrutinise the operation of the board, it is ultimately the function of the Oireachtas committee which will be set up under the Bill. The question, therefore, is whether that committee of the Houses will be properly equipped to make an informed and proper judgment and critique on whether the board is operating in a manner that it carries out its aims and functions and, more importantly, follows the policies and principles set out in the earlier part of the legislation. That is the key question and, in fairness, Senator White addressed the specific point.

I draw Senator White's attention to the relevant section on the production of quarterly reports. I think it was Senator Donohoe who asked whether the level of oversight would be more extensive than in the case of other agencies. I do not know of any other State agency which is required to report on a quarterly basis. I make the point to Labour Party Members that an amendment was tabled in the Lower House to the effect that the NAMA board would issue monthly reports to the Oireachtas committee. We strongly suggest that would stray across the boundary to which I referred. Is it the case that Oireachtas Members will be sitting in on board meetings? That is the line being taken. Quarterly reports containing important information is the key issue.

Let us examine the information that will be provided for Members. The first piece of information which will be granted is on the number of loans outstanding, their conditions and, most importantly, the way they are categorised as between performing and non-performing loans. That is an important issue in terms of confidentiality, about which we will speak later. The second piece of information is on non-performing loans, categorised as to the degree of default, distinguishing between capital and interest payments. This was a significant issue on Committee Stage in the Lower House. We must remember that this is a new amendment brought forward by the Minister in response, in fairness, to the concerns expressed and suggestions made in the Lower House. The third piece of information is on the number of loans being foreclosed and otherwise enforced during the relevant period of 90 days, another important issue. The fourth piece of information is on the number of cases in which liquidators and receivers have been appointed in the relevant quarter, while the fifth is on the list of all legal proceedings, except any proceedings to which a rule of law applies, which prohibit publication for whatever reason under the relevant provision of the Constitution — Article 34.1, if memory serves me correctly — and a list of all proceedings commenced by NAMA and each NAMA group entity in regard to bank assets during the quarter setting out the title of the proceedings, the parties and the reliefs sought by NAMA or the NAMA group entity concerned. The sixth piece of information is on a schedule of any finance raised by NAMA and each NAMA group entity in the relevant quarter, the sums recovered in regard to property sales, other income from interest bearing loans owned by NAMA and a bridged balance sheet of the assets and liabilities or any NAMA group entity, a complete schedule of the income and expenditure of NAMA and an updated schedule of all information subscribed to in sections and 2 and 3.

I am setting out in detail the nature and quality of the information which will be provided in the quarterly reports because short of giving the actual names of the relevant individuals or corporate entities covered by NAMA, it is virtually all of the qualitative information that would be available to the board. Senator White made the crucial point that the advice available to the board would be of the highest quality but that is the qualitative information necessary to make an informed judgment as to whether NAMA is carrying out its functions or otherwise. This is a new section introduced to the Bill arising from suggestions and proposals made primarily on Second Stage in the Lower House. It is a real addition to the Bill but whether we talk about oversight or scrutiny, it is the quality of the information provided that is the key issue.

I believe I have dealt with the issues raised since I arrived in the House. Senator Bacik welcomed the Minister's comments. I reiterate that the Minister is open to the suggestion made and has taken it on board. I believe the Senator was satisfied with this.

Senator Fitzgerald raised the question of whether there ought to be a statutory committee or a committee of the Houses. There should not be a huge difference between the two but the Government makes the point that to be consistent, it ought to be a normal committee of the Houses. This is extraordinary legislation but that does not mean a committee formed by the Houses, given appropriate powers and provisions, including the power of compellability, and the advice available to it, should not be able to perform the function in a lesser way than a statutory committee. We make that point strongly.

In addition, I suggest a statutory committee would be enshrined in the legislation and not capable of amendment unless further legislation was brought forward, whereas a committee of the Houses allows real flexibility to deal with issues of oversight or scrutiny which may emerge over time in what we all agree is an unfolding situation where circumstances are changing all the time. We should all anticipate that, particularly in regard to credit flow, an issue of real concern to Members of the House, it will change in terms of different classes of borrowers and sectors of society. The Government submits that a serious degree of flexibility must be built into the legislation to allow the Houses of the Oireachtas and the Minister to bring forward whatever mechanisms are necessary to deal with issues as they arise.

Amendment put.
The Committee divided: Tá, 23; Níl, 28.

  • 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.
  • O’Reilly, Joe.
  • Phelan, John Paul.
  • Prendergast, Phil.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Norris, David.
  • 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.
Tellers: Tá, Senators Phil Prendergast and Alex White; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.

I move amendment No. 2:

In page 16, before section 2, to insert the following new section:

"2.—(1) For the purposes of this Act, the "Oireachtas Committee on NAMA" shall mean a Select Committee of each House, or a sub-committee thereof so enjoined and appointed by Resolutions of each such House, established with the purpose of monitoring the implementation of this Act, including all acts done in furtherance of this Act.

(2) The Committee shall be chaired by a member of Dáil Éireann who is not a member of a political party whose members form part of the government for the time being.

(3) The functions of the Committee shall include:

(a) to approve or decline the persons to be appointed by the Minister to the Board of NAMA (“the Board”) in accordance with section 19,

(b) to approve the appointment of casual vacancies to the Board under section 24,

(c) to approve the person nominated by the Chairperson of the Oireachtas Committee on NAMA to the position of Chairperson of NAMA in accordance with section 25,

(d) to approve codes of practice under section 35,

(e) to approve any guarantee issued by the Minister for debts and/or securities raised under section 50,

(f) to approve the form of accounts to be kept under section 54,

(g) to approve the appointment and remuneration of an expert reviewer under section 111,

(h) to, at the absolute discretion of the Committee, make an appeal under section 121 in the public interest where the Committee sees fit,

(i) to approve codes of practice under section 151,

(j) to review the operation of NAMA, and develop and publish recommendations for the amendment of this Act,

(k) to approve the form, of reports on credit flows and hear evidence on them,

(l) to review the shareholders agreement undertaken by the Master Special Purpose Vehicle

(m) to approve the membership of the Valuation Panel, and

(n) to investigate any matter of concern to the Committee pertaining to NAMA or to the operation of this Act.

(4) The Committee shall have such powers that are reasonably ancillary to the discharge of its functions, which shall include, but are not limited to:

(a) to require the attendance of an officer or staff member of NAMA or a participating institution to attend before the Committee and give evidence on such matters connected to the operation of this Act as the Committee may direct, and

(b) to require production of any documentation from any person attending the Committee to give evidence under paragraph (a), which is material to such evidence.”.

Amendment put.
The Committee divided: Tá, 24; Níl, 28.

  • 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.
  • Mullen, Rónán.
  • O’Reilly, Joe.
  • Phelan, John Paul.
  • Prendergast, Phil.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Norris, David.
  • 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.
Tellers: Tá, Senators Maurice Cummins and Liam Twomey; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.

On a point of order, we have received an amended grouping list that includes amendments Nos. 24, 35a, 35b, 35c and 42a, but I do not have those additional amendments. Have they been circulated?

They will be circulated to the Senator.

I move amendment No. 3:

In page 16, before section 2, to insert the following new section:

"2.—Where NAMA proposes to establish a Special Purpose Vehicle to purchase, manage or dispose of assets , it shall do so only in accordance with regulations published by the Minister and approved by the Oireachtas which shall include, but are not limited to:

(a) the suitability of investors,

(b) the suitability and behaviours of members of the Board,

(c) the finance, planning accountability and reporting,

(d) the manner in which the Special Purpose Vehicle shall discharge its functions under this Act,

(e) the method of determine the appropriateness of paying a dividend or bonus to investors, and

(f) its consistency with the statutory objectives of NAMA under this Act.”.

There has been much debate in this House and in the lower House on the role of the SPV and how it will function. However, there is not much information on it in the Bill. We would like this section to be inserted into the Bill to ensure there is as much information as possible on how the SPV is set up and what it can do. Last night, I spoke about the idea of making the people the shareholders of the SPV. The Minister acknowledged that it would have been a good idea, but he has not advanced it any further than that. During the debate on this amendment, I hope the Minister has a little more to add.

This amendment refers to the special purpose vehicles and it seeks to control the type of person who is permitted to invest and the suitability and behaviour of members of the board. It is admirable and is to be welcomed. It is highly unusual and I cannot think of many other investment opportunities in which the rights of citizens to invest would be limited. Perhaps the Minister of State can give some examples. It certainly would not occur on the Stock Exchange. Any investor can put money into any company that is floated. However, I would like to think that this amendment means that the people who have been involved in the discredited activities that led to this financial crisis would not be in a position to invest. The Government appears to think there may be at some stage a profit out of this. I would hate to think that the people who brought about this catastrophe would be placed in a position where they could profit from investing in the SPV.

I would like to hear from the Fine Gael Members who tabled this amendment if it is their intention to limit such people. I presume that is what the amendment intends to do. If it is not covered satisfactorily, perhaps the Minister of State can have a look at this. If that is the intention of the amendment, I would happily support it. However, it is an unusual mechanism, unless I am misinterpreting it. I wonder if there are legal or even constitutional implications. Even criminals are not disbarred from investing in anything. The Constitution has provisions on the protection of property, which presumably involves shares, as these can be deemed to be property under the law. I would like to get some clarification both from the proposers of the amendment and from the ministerial response.

Can the Minister of State inform the House of any legal advice the Government has received on the setting up and the construct of the SPV? Has the Attorney General given any advice on it?

I support this amendment. I understand what Senator Norris is saying in respect of its detail. However, before we go into the detail of the amendment, there is the question of the principle. There is an unanswerable argument that the setting up of the special purpose vehicle should be done by way of statute. We have had the extraordinary experience last week whereby this body just emerged late in a debate we had been having for months on businesses plans, draft legislation, published Bills and so on. This special purpose vehicle hoved into town a couple of weeks ago, but nobody explained how it was such an afterthought that came in so late in the process.

The argument is made that the SPV is a device. The Minister is sometimes almost inclined to make light of it, in the sense that we should not be too worried about it because it is only a device to keep these liabilities off the balance sheet. I accept that, but the idea that the international financial markets would not know what was happening in Ireland because this was not on the balance sheet in accordance with EUROSTAT rules is slightly fanciful. Anybody who is inquiring into the state of the Government's finances is perfectly capable of finding out the real position. I find the argument less than convincing, but I have to accept it. If this device is put in place, the undoubted obligations on the taxpayer and the State for many years to come will not be on the balance sheet but they will still be in place.

Some suggestions have been made by some proponents of the Bill that these are not real liabilities at all. This is the sort of argument which claims that all this is euro funny money that never has to be paid back. It certainly does have to be paid back. While I know the Minister of State has not made that argument, others have done so. Others not too far away from him have suggested it, and of course it is not true.

Senator Norris wants clarification on the specifics of the amendment, and the Minister of State might help him, but I think the Senator and everybody else should support the basic principle that this amendment on the SPV should be inserted in the Bill.

I concur with many of the points made and I would like to add a few more to it. An accusation that is frequently levelled at the Government during the banking crisis is that it has been making this up as it goes along. The draft business plan was published and discussed in this House last week, yet there was no mention whatsoever of this special purpose vehicle in the draft plan. This gives credence to that charge of making it up as it goes along because it is obvious that when the Government was making the decision to go with NAMA, a core objective would have been to ensure that the liabilities of NAMA do not end up on the Government balance sheet from a EUROSTAT point of view. If the liabilities of NAMA were included in the Government's formal balance sheet, as seen by the European Commission, then the adjustment programme — a term I hate because we speak gobbledegook when we use terms like that and "bridging arrangements" and so on——-

"Fiscal consolidation" is the latest term.

That is the worst term of all. To tell the people that we are in the middle of a consolidation period——

How was it for you?

Exactly. It clearly runs against the spirit of everything we know is going on. I digress. If this was part of the formal liabilities of the State as viewed by the European Commission, then the cuts and tax increases would have to increase by much more. Obviously we would have to make bigger changes to deliver the 3% Government borrowing as a percentage of national income by 2013, or 2014 as it is now likely to be. With that in mind, the Government would have been aware months ago that it was going to use such a vehicle. If it was not so aware, that is even scarier. The Government has ample experience of this method of dealing with liabilities to the State and up to recently it is the way we accounted for public private partnerships — not having them on balance sheets. The Government would have been aware of the need to ensure the NAMA liabilities do not end up on its balance sheet. In addition, the Government would have been aware that this is the obvious way of doing it.

As Senator Alex White indicated, however, the mists parted a week ago and this matter appeared from nowhere. This is despite the fact that, almost certainly, this was going to be the route established by the Government when it was coming up with the NAMA vehicle, selling it to the public and publishing the draft business plan. I always give people the benefit of the doubt, even when they are in government, but when I saw this appear I felt that maybe the Government really was making it up as it went along. Why was this not announced as part of the entire plan? Why did it appear in this manner? As my colleague, Senator Fitzgerald says, why did the Green Party — Fianna Fail's partners in government — not appear to know anything about it in the discussions on the NAMA legislation?

This is a crucial point at a time when the public is seeking confidence in our public institutions. However, the appearance out of the blue of multi-purpose and special purpose vehicles, when they must have been part of Government planning over the last six months, does not add to that confidence. This amendment is required because of a scenario that could unfold in a number of years' time. It would be fraught with risk or perceived risk in the minds of those we are serving. Senator Norris already mentioned the real possibility that we could end up in a situation whereby the majority shareholders in this SPV could be the banks, their representatives, or members of the financial services industry, which NAMA — the institution on which the SPV is based — is designed to save. This could happen in a few years time if we find ourselves in a position where a wing or subsidiary of one of the banks in question buys a share in the SPV and, if NAMA makes a profit, gets a return from it. That is why we must discuss this crucial matter.

Two vehicles contributed massively to the global financial Armageddon at the end of last year. The first was what happened with the growth of derivatives and the way they were spread across all banks participating in the sale. The second was the large number of assets which banks moved off their balance sheets in order to avoid the capital requirements we mentioned earlier. The people who created and made most use of these vehicles are those who sowed the seeds of their own destruction, namely, the banks. This is the very vehicle the State is proposing to use, although I can understand why it is doing so. I support the use of an SPV because the alternative is far worse, but they have been shown to be fraught with danger. In addition, they are not understood. They have also shown that what appeared straightforward on day one may, 99 days later, have consequences that nobody understands, least of all the banks themselves. It is for that reason that the amendment should be supported, or the Government should table an alternative amendment of its own because it is crucial to the entire NAMA saga.

I confirm what Senator Alex White assumed, which is that I will support this significant amendment. It should be cleaned up a bit first, however. First, in line two, the preposition "of" has been corrupted by the intrusion of the numeral "5". Second, in subsection 2(e) “the method of determine” is incorrect. It should read “the method of determining”.

When the Minister attended the House this morning, I sought some of the legal background because I was concerned about it. I strongly support Senator Fitzgerald in seeking this from the Minister of State, Deputy Peter Power. One of the reasons is that we have a distorted image of the kind of practices that were engaged in by a certain gentleman in Anglo Irish Bank, where substantial sums of money were apparently — in my opinion, at least, fraudulently — kept off the books for a period so that they would not appear. It was a kind of accounting practice in order to deceive. I accept what the Minister for Finance said, that there is a degree of openness, but the public would be concerned that there appears to be a kind of sleight of hand. I assume that this is an accounting mechanism which allows us to pass the bar of certain European tests, albeit merely technically. I do not think anybody is fooled about the nature or extent of the country's indebtedness.

I hope I am not misinterpreting my friends on this side of the House, but there seems to be something lacking in this amendment. I would have anticipated it being linked to a further amendment allowing certain persons to be disbarred. For example, if the gentleman whose name I have concealed, but who will be known to everybody in Anglo Irish Bank, were to apply to invest funds in this bank — which he suddenly discovered he had mislaid under a bed, like the former Taoiseach — it might be taken amiss by the Irish public who are paying for all these high-jinks, if he were allowed to do so. However, the only question raised here is as to the suitability, which I do not think goes far enough. This allows us to say that they are not suitable, but I do not see a mechanism here for saying "Not only are they not suitable, we are bloody well not going to let them profit from it". Is there a mechanism for excluding them? I think there should be, but that needs a further legal determination as to whether it is constitutionally possible to disbar any citizen. I am not a qualified lawyer, but it has never stopped me before. I am known as the lawyers' friend because I am extremely litigious. As far as I know, not even a convicted criminal is disbarred from investing.

There are a number of points to be teased out, but this will be my last intervention unless I am seriously provoked. The same three or four Members will speak, as on every piece of legislation, and we will be here until all hours of the night. We should bang it to a vote as often and as quickly as we can, and get on with the business of the House.

I agree wholeheartedly with Senator Norris about the slow progress, but it is important that people should feel they have had a say. Given the importance of this legislation, more people than usual, including criminal lawyers, will comment on it.

As regards the suitability of people, it is difficult to determine accurately what is suitable. The Senator's version of who is suitable may be completely different from mine and we may never get absolute agreement on who would be best. People could come up with a form of words that would suit them, but that could be potentially totally unmanageable. It would involve trying to achieve a level of political correctness that is neither attainable, viable nor practical. That is what is wrong with society. We need to have some confidence in our institutions, thus laying a template by which moral people will follow the law. Where they do not, we will have the appropriate corporate enforcement to pick up on that, rather than establishing a set of parameters and rules that makes it impossible for something to function.

As with the other Senators, I too am puzzled. Senator Donohoe referred to the late introduction of the master special purpose vehicle. No doubt the Minister of State, Deputy Peter Power, will come clean and tell Members exactly how and why it was introduced. I was led to believe it was a measure the Germans managed to negotiate with EUROSTAT and that we benefited by being pulled along in their slipstream. What are the Minister of State's views on this?

I have more fundamental questions. I addressed them to the Minister for Finance last night but, for some reason, they were overlooked. It is stipulated that 51% of the shareholding of the master special purpose vehicle will be held by private interests and that 49% of the shareholding will be held by NAMA. However, NAMA will have a veto on all decisions. Will the Minister of State elaborate on the potential conflict in this regard? It casts aside normal company law provisions.

As other Senators have stated, there is a possibility that some bankers could be shareholders, either as individuals or collectively through some special purpose vehicle of their own, manufactured to suit the occasion. Obviously pension funds would be interested, as would some high net worth individuals. Will the Minister of State outline whom he envisages will be investing? I am sure the list of potential investors to whom we refer is not exhaustive.

This amendment is important because the legislation gives great power to the Minister without allowing for appropriate accountability.

I agree with Senator Marc MacSharry's comment on the suitability of investors. I support Senator Norris's statement on speeding up the consideration of the amendments. It is important we try to speed up the whole process. I do not want to curtail debate but believe we should make our points more quickly or group the amendments in a better fashion. I have expressed concern over the protracted debate we have had to date.

Will the Minister of State outline the alternative to a special purpose vehicle? What would be the implications of not having one? Who are the likely investors? I do not want the Minister of State to waste time in his responses. One-line answers will do because we all know the answers.

I understand why the special purpose vehicle is being used and why it is essential in terms of national finance, but I want the Minister of State to address the points raised by Senator Donohoe on the disadvantages or potential dangers of such a mechanism. Does the Government share any of our concerns, especially given the background to the setting up of NAMA? Some of the investors being saved by NAMA or who are being bailed out could buy into the 51% shareholding. Is it impossible to establish safeguards to address this general issue? It clearly could happen but perhaps the Minister of State believes it should be left to market forces. What is the Government's view on this?

I spoke to this issue on Second Stage and asked the Minister a number of questions thereon. I am sorry he did not reply. He probably did not have enough time given all the questions asked by the Senators.

The Minister stated on the setting up of the master special purpose vehicle that it will buy from the banks and sell to NAMA. This means it will buy distressed assets from institutions and sell them on to NAMA. The Minister also stated the special purpose 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. It obviously cannot make a profit, other than by charging for its services, unless it buys and sells property. If the vehicle is to buy and sell assets, will it be able to sell an asset to a body other than NAMA? When NAMA wants to get rid of an asset, will it have to sell it through the master special purpose vehicle?

The Minister said he intends to issue a direction to the board of NAMA that not a single decision should be made or allowed to be pursued by the special purpose vehicle that will not be in the best interests and in line with achieving the objectives and purposes of the NAMA legislation. The special purpose vehicle is being set up as a company under company law with a majority of private investors, yet NAMA will have overriding discretion and will be able to put the vehicle in its place, if required. It is stated the Minister will issue guidelines in this regard. Will the Minister of State answer my questions on purchases?

If the master special purpose vehicle is to purchase all the assets from the institutions, it could make a considerable amount of money. As Senator Donohoe stated, there could well be a big dividend. I hope the vehicle can be established in law such that it will have a 2009 vehicle registration rather than a 2010 registration. The master special purpose vehicle has come like a bolt out of the blue. As Senator Donohoe stated, if the Department did not know about it earlier, it should have.

I thank the Senators for some very incisive comments on this much-misunderstood vehicle. With the agreement of the House, I intend to speak to the amendment in the name of Senator Twomey but I want to make one or two preliminary points.

We are discussing the amendment.

The central criticism of the master special purpose vehicle or NAMA group entity is that it is a rabbit pulled out of the hat at the last minute. In this regard, Senator Donohoe stated the Government is making it up as it goes along. Nothing could be further from the truth. The record is very clear, both within and outside the House, that the Minister made it very clear that the assets would always be disposed of in a very structured way through a subsidiary or vehicle specially designed to be in accordance with the aims of the legislation. He always stated this was to be a critical part of the legislation and signalled there would be a substantial proposal in this regard by Committee Stage in the Dáil. There is no mystery about this and the reason for it is well documented. The Department has been involved for some months in detailed and intense negotiations with the European Union, specifically EUROSTAT, to ensure the mechanism used and the provisions in the Bill under which that mechanism will be set up are in accordance with EUROSTAT rules and, more importantly, mirror the provisions in EUROSTAT guidelines laid down for other countries on distressed asset vehicles. There is no mystery about it; we are not making this up as we go along. Important contributions on the special purpose vehicle were made in the Lower House, in particular on the reporting requirements, on which I will touch later. The suggestion this vehicle was pulled out of a hat at the very last minute and that the Government is making it up as it goes along does not stand up to scrutiny. I will set out exactly what is involved in the special purpose vehicle, arising from the detailed discussions with EUROSTAT.

The EUROSTAT position on the balance sheet treatment of NAMA and the special purpose vehicle takes account of the fine balance required between State and private sector engagement in the proposed organisational structure of the master special purpose vehicle. It took a number of months of intense negotiations and discussions to work out that balance because if it was tipped too much in favour of a State controlled entity in terms of share capital — that is the reason there is a 51%:49% mix — the vehicle would fall into the category of state aid and be a non-balance sheet liability of the country. Senator White is correct that, whether it is on or off balance sheet, it remains a potential liability of the State. That is accepted.

The Fine Gael amendment could result in EUROSTAT changing its preliminary decision on the treatment of the NAMA operation in our accounts. A carefully considered case was put before and considered and approved by EUROSTAT. If it were not treated in this manner — this answers the question raised by Senator Callely and others — not alone would it be on our balance sheet but, in practical terms, unlike other countries whose distressed assets are treated off balance sheet, our general Government balance and debt to GDP ratio would not be in line with those of other countries. As a small country, having such assets on balance sheet while others would not, would create significant difficulties for us in capital markets in raising money. That is the reasoning behind this provision and how it came about.

The Minister has repeatedly made the point that we should welcome the fact that as a result of the EUROSTAT preliminary decision — in fairness, Senator Donohoe did acknowledge that this was the correct way to go — the acquisition of assets by NAMA from financial institutions will have no effect on our general Government debt or general budget balance. This puts the Irish protection scheme on an equivalent footing with bank support schemes in other member states. The main advantage is that it minimises the danger of the markets or international investors, upon whom we rely, misinterpreting our headline debt or budget balance ratios in comparison to other countries. There is no real mystery about it; this is the appropriate way of doing it.

Senators Fitzgerald and Callely asked if there were other ways of doing this. I am sure there are. NAMA could enter into direct relationships with investors in whatever way it wanted to. It is the treatment of those transactions, from a balance sheet point of view, that gives rise to this singular difficulty. Once again, whether on or off balance sheet, these transactions are liabilities and potential assets of the country. Obviously, assets and liabilities are sides of the same coin. Potentially there are significant assets to be gained for Ireland if this difficult situation is unwound in a manner that benefits us in the long term.

I will now address the questions in the order in which they were asked. Senator Norris has left the Chamber. However, far be it from me to provoke him. I did so once much to my cost. Although the Senator stated he was not a lawyer, it should be acknowledged that he has contributed in a significant way, much more than many lawyers, to jurisprudence and human rights in this country. He asked for the short answer in regard to whether the special purpose vehicle should be barred from dealing with specific actors. The short answer is that it would be unconstitutional to debar a person, whether he or she had a criminal record, from dealing with the special purpose vehicle. From a policy perspective, without doubt it should not be dealing with people who are in prison or have criminal records for fraud and so on. The most important point is that we are giving powers and functions to an expert board — it is anticipated that it will comprise people of the highest calibre, in respect of whom we will collaborate with the Opposition, given the importance of the issue — which will in its wisdom seek out the actors and investors who will deal directly with NAMA or through the special purpose vehicle to obtain the best return for the country.

It must be remembered that the board members will have a fiduciary duty to the country and will be bound by the policy aims and objectives of the legislation, which are to achieve the maximum return for the country. It will be the board's job to protect the taxpayer and choose investors who will attain the maximum return for the country. That said, it is not anticipated that investors will be banks because they would have a conflict of interest. On the accusation that somehow those involved in creating this situation, on which some valid points were made, will somehow be collaborators in this, that is not what is envisaged. It is a matter for the board, subject to the oversight and scrutiny provisions referred to, to seek out such persons and ensure the maximum possible return for the taxpayer.

Senator Fitzgerald asked whether the Attorney General had given his advice on this matter. If the Attorney General ever writes his memoirs, I am sure he will include a statement to the effect that every line, dot and comma of this legislation consumed his mind for 2009. He was consulted on every aspect of the legislation. The expert advice of Arthur Cox was sought on a number of matters and taken on board. The Attorney General is an eminent and distinguished lawyer whose mark is on the legislation.

Senator Alex White asked if the special purpose vehicle should be established by way of statute, which is a fair point. In a sense, it is because it is not being established as an entity by feat of the Oireachtas. It is envisaged that NAMA will have the power to set up the special purpose vehicle. The answer on why this provision is not being enshrined in the legislation is as stated by Senators Donohoe and Twomey — it is impossible at this stage to foresee the circumstances which would give rise to an investment of the nature anticipated by the master special purpose vehicle. The key aspect of the provision allows NAMA to set up the master special purpose vehicle and attract investors to the special purpose vehicle. The guiding principles of that SPV will be set out in the shareholders' agreement. It is only when one has a transaction on the table that the NAMA board will be able to enter into that shareholders' agreement with the special purpose vehicle to achieve the aims and objectives of the Bill but also to tailor that shareholders' agreement to the circumstances that will prevail at the time. The power to give that sort of flexibility to the board is rightly within the power of the board and not with the Oireachtas because then one is straying into the executive function of the board, which we discussed in the context of one of the earlier amendments.

It is not contemplated in the powers section or in the functions section as an entity in itself. There is not even that minimal recognition in the Bill. Many powers and functions are set out in the appropriate sections but the SPV is not even contemplated in that long list. It does not appear even at that level.

I accept that, but the reference to the special purpose vehicle in the relevant section 12(2)(n) specifies that the aims and objectives of the special purpose vehicle must be in accordance with the aims and objectives of the Bill. In any event, it is the members of the board of NAMA who would devise a shareholders’ agreement, which as Senator Alex White would know is the guiding document of the special purpose vehicle. Irrespective of what the shareholding is, even if it is a 99:1 division of share capital, it is the shareholders’ agreement that dictates the functions of the company and the way in which it will carry out its activities. We would envisage that rather than have it enshrined in legislation in a rather rigid way, the company would have the flexibility to enter into those arrangements. The Oireachtas committee should have a role to play in terms of meeting the directors and the chief executive of NAMA to discuss the principles behind the board entering into a particular shareholders’ agreement or the general provisions of that shareholders’ agreement.

Senator Coghlan made the same point about the 51% to 49% breakdown. That has been dealt with by the fact that the shareholders' agreement covers the issue.

Senator Burke made the point that the SPV can sell any of its assets to NAMA. However, the SPV will not be selling to NAMA. It will hold the assets and sell them on behalf of NAMA. That is the concept behind it. The SPV will not sell the assets back to NAMA. I hope I have dealt with all the individual questions.

In essence, Senator Burke inquired about who will buy the assets. I wish to refer to an extract from a contribution by Deputy Bruton in the debate in the Lower House. The Minister of State, Deputy Peter Power, can correct it if it is wrong. He said that NAMA will delegate the purchase and management of these loans to a separately created SPV that will purchase, manage and dispose of the loan assets, will take the risk and will be the decision-making authority for these loans. Is that correct?

Therefore, NAMA is delegating the power to the SPV.

It is up to the board of the SPV to make those decisions but it can only do so guided by the provisions of the shareholders' agreement. That is why it is a matter for the board of NAMA to craft that shareholders' agreement, which protects the taxpayer, and also to ensure the agreement is fully in compliance with the aims, objectives and policies set out in the Bill.

The SPV is a purely private entity, with 51% of it being owned by private investors. In a further section it is stated that NAMA is not liable to income tax, corporation tax or capital gains tax. Can one have a private entity operating in the financial sector that is not liable for those taxes? Is the SPV liable for capital gains tax, income tax and corporation tax even though the legislation states that NAMA is not liable for any of those taxes? How does that transfer over to a private equity company? Is it liable or not? How will the system operate?

The point I made in my earlier contribution is not so much that there was an air of mystery about the decision the Government made on the SPV but that it managed to create an air of mystery about it in the first place. The Minister inquired whether there was any other way of handling the issue. I am not an expert in the area but I am not sure there is. Given how other countries have handled such situations and how we have handled them in the past it seems to me that some such approach would be the route we would go down. My concern is that we managed to create an air of mystery in the first place. The amendment of Senator Twomey and the Fine Gael group is worthy.

In his response the Minister of State, Deputy Peter Power, indicated that it is not envisaged that the banks will invest in the SPV, but how can they be excluded? In response to Senator Norris the Minister of State said it is unconstitutional to exclude anybody from doing anything. I am wary of the phrase "it is not envisaged". Part of the purpose of legislation is to try to deal with all eventualities, in so far as that is possible. Can we go so far as to exclude banks from investing in the SPV? It might not make sense in that we are trying to shore up the banks at this stage but I refer to a time when the situation will improve. Is it possible to exclude the banks or will the Minister of State give me the same response that he made to Senator Norris's point about individuals being excluded as investors in SPVs?

I indicated on Second Stage that I do not understand the SPV. To be honest, I still do not understand it. Will the SPV have any autonomy when NAMA is set up? We have been speaking for the past hour and I still do not understand what it is about or how it operates. If I was asked to go on a radio or television programme to explain how the SPV will operate and what powers it has, I would make a right fool of myself.

Senator Burke would not.

Is it the case that the board of NAMA will buy and sell the properties, but it is going to set up an SPV to do that on its behalf and that it will not have any autonomy? If that is the case, surely the same members should be on both boards? I cannot see why there should be different boards. I accept the Minister's intention is to get the debt off the balance sheet but it seems a complicated way to do it. It is difficult to understand the process, which appears to have come out of the blue. I do not believe the SPV has any autonomy. However, from what the Minister of State said, this company, which will have 51% of a shareholding and €100 million of share capital that will probably never be used could make a considerable profit but yet will not have any autonomy. The SPV will be at the discretion of the board of NAMA. It will have a separate board but at the same time will be governed by the board of NAMA. It is all gobbledegook. I would prefer if the Minister had a simpler explanation. The Minister said the SPV buys the property and sells it to NAMA. I do not understand who holds these distressed assets after that. Is it NAMA or the SPV?

The SPV. Senator Twomey's question about the tax treatment is important. Ultimately any profits accruing to the SPV or NAMA accrue to the Exchequer.

No, the SPV is a private entity.

Yes, but any dividend that the SPV would distribute to its parent, that is, NAMA, is ultimately a matter for the Exchequer. Any private equity involvement in the SPV would be subject to the tax laws in the normal way. Anybody who derives a benefit, assuming it makes a profit which I am sure it intends to do, will be entitled to receive a dividend in the normal way from this country. The equity investors will be entitled to receive an annual dividend linked to the performance and profitability, taking account of all direct and indirect costs of the master SPV, capped at ten year Irish Government bond yields at the time the dividend is declared. On winding up of the master SPV equity investors will only be repaid their capital if the master SPV has the resources. They will receive a further equity bonus of 10% of the capital, up to a maximum of €5 million, if the master SPV makes a profit. This is an equity return for tying up money for up to ten years in——

The Minister is not dealing with the issue I raised. I am not referring to the equity investors of the SPV. It is a private company. It is as if the Minister contracted me to do work for the Government and I am a private company under the law of this country and in the eyes of the European Union. I pay no income tax or corporation tax. There is capital gains tax. It is an unusual scenario in which I would be working for the Government as a private company and paying no taxes. Am I paying taxes on what I do? When I send the money back to NAMA, it does not pay taxes. Is it not an unusual scenario?

It is an unusual scenario. I will address the issue raised by Senator Burke and then deal with the taxation treatment of it. Yes, it is unusual but we are in very new territory. It is a very different situation from what we ever envisaged. The concept behind dealing with these matters through an entity separate from NAMA is essentially about the balance sheet treatment of the assets dealt with in the SPV. It is the SPV and any subsidiaries of it that is the actual mechanism for entering into arrangements and selling the assets. Profits that accrue ultimately go to NAMA. With regard to the profits or any profitable income of the SPV, the way in which it, as a company, will distribute its income back to its shareholders is in a dividend either to the parent company, which is NAMA, or to individual investors, be they corporate entities or private individuals. However, should those people derive a benefit from it, it must be taxed in the normal way.

The Minister said earlier it is unlikely a bank or a financial service could end up holding a share in the SPV. I challenge that. It is entirely possible that a bank could end up with a share in one of these SPVs. The purpose of this amendment is to put a mechanism in place to examine the ownership of the SPV. There is no reason that an Irish bank would not be in a position to do that. The Minister's earlier contribution appeared to indicate it would not happen. I contend not only that it could happen but in a situation where our banks returned to financial health it probably would.

It appears that we have got a little confused in the course of this discussion. One of the things I have learned as the discussion has progressed is that the SPVs are a method for disposing of assets but the SPV in this case is also a method for owning NAMA itself, which is my understanding. Is that not correct?

No, it is not correct.

Perhaps the Minister will clarify that. I see Members shaking their heads but if there is no provision here regarding the ownership——

It does not own NAMA; it is a subsidiary of NAMA.

Then why is it getting paid a dividend? How can the subsidiary take an equity shareholding in something it does not own?

There is clearly a misunderstanding here. It is an entity of NAMA and it will have to distribute any profits it makes in accordance with the share capital holding in it. That can be anything from 99% for the private sector to 1% for the State, but it is envisaged to be a 51% to 49% division of the share capital. Any profits are distributed to shareholders in the normal way. Let us say it made a profit of €1 million. A total of €510,000 would be distributed to the investors. That would be profits for those investors and they would be taxed and treated in the normal way. The 49% owned by the State would be distributed by way of dividend to the parent entity, which is NAMA. The SPV does not own NAMA, but is an entity of NAMA. It makes that distribution to NAMA. Essentially NAMA is a State body incorporated by statute and is not taxed in the normal way.

I call Senator Burke. There has been much debate on this amendment.

The Minister said the SPV can make a profit. Can NAMA make a profit?

Both companies, or whatever they are classed as, can make a profit. That seems strange. There will be contracts between the banks and NAMA as NAMA will contract the banks to do much of the work on its behalf. Will those contracts be between the SPV and the banks or between NAMA and the banks or will there be contracts between both? The Minister said earlier that the banks would be contracted to do some of the work and that they would have to be paid for that work. Who will have the contracts? Will there be double contracts? Will there be different contracts with the SPV and the board of NAMA?

The Minister said there is clearly a misunderstanding. There appears to be a huge misunderstanding on the Opposition benches and a clear indication that the Opposition Members are against the legislation. No matter what we talk about, it is against it.

That is a load of rubbish.

We want to find out how it will work.

The Minister said that both can make a profit. Is it not wonderful that both the SPV and NAMA——

We are hoping for that. We just want to see how they will do it.

——can make a profit? This reminds me of last Saturday morning when I listened to Marian Finucane interview the Members' party leader, Deputy Enda Kenny, on radio. Deputy Kenny did not even know it was called a special purpose vehicle; he kept referring to it as a special purchase vehicle. Before the Senators start shouting at me I listened again to the podcast of the interview before coming to the Chamber. He clearly does not know what it is about or what it is even called.

The Green Party did not even know the Government was introducing it.

I am not surprised, therefore, that there has been a misunderstanding.

We are dealing with amendment No. 3.

On a point of order——

I was trying to elicit information on this matter. Now that Senator Feeney has given me the option, however, I will make matters political.

——Fianna Fáil's partners in government did not know about the special purpose vehicle until a few weeks ago when they discussed the establishment of NAMA at their party's special conference. Deputy Feeney's point is nonsensical.

Fine Gael is seeking to——

(Interruptions).

The Green Party renegotiated the programme for Government——

It renegotiated in respect of NAMA without even knowing how it was going to operate.

I call on the Minister of State to reply to the amendment. We are dealing with an extremely important Bill. I ask that Members confine their comments to it or the amendments relating thereto. I intend to put the question when the Minister of State replies to the points made.

Good man, Cathaoirleach. That is what I like to hear.

Senator Burke inquired as to whether both NAMA and the special purpose vehicle could make a profit. The answer is yes.

On the question of whether the banks can have an involvement with the special purpose vehicle, as stated — when Senator Norris had left the House — it would be unconstitutional to restrict any entity, be it an individual or a company, from having an involvement. That is the nature of the advice available to us. A point is being missed in this debate. Ultimately, it will be a matter for the board of NAMA which will comprise people of high reputation and who possess great skills, expertise and experience in the various disciplines from which they will come to enter into arrangements with people. In that context, the board will be guided by the provisions of the legislation. First and foremost, it will be its duty to respect taxpayers to the best of its ability. Its members will be obliged to use their skills and capabilities to enter into arrangements to make profits for NAMA and its SPV.

Senator Burke also inquired about autonomy. NAMA's autonomy will be restricted to the extent that it will be allowed to carry out activities specified in the shareholders' agreement. That agreement clearly states the board of NAMA has an obligation to enter into agreements within the aims and objectives, policies and principles set out in the legislation. If NAMA did not do so, it would be acting ultra vires or outside its own powers. Ultimately, the Minister will have a veto in respect of the banks.

People have tried to conjure up all sorts of mysteries in respect of this matter. The Minister signalled some time ago that what we were discussing would constitute an intrinsic part of the Bill. What we are doing is designed to protect the taxpayer and will allow us to treat these matters off-balance sheet. That will make borrowing cheaper than otherwise would be the case. It is a matter for the board of NAMA and the Minister, by way of veto, to ensure any arrangements in respect of the SPV will be in the best interests of taxpayers.

Section 214 states, "Income and gains arising to NAMA shall be exempt from income tax, corporation tax and capital gains tax". If a profit accrues as a result of the 51% shareholding and investments relating thereto, will it be subject to tax?

Yes, the dividend would be subject to tax.

Would it be subject to tax in all its aspects?

On what the Minister of State said about me, I was obliged to leave the House in order to make an urgent telephone call. I have been present for almost the entire debate today. I returned just in time to hear the Minister of State reply to the question I had posed.

I will withdraw the amendment and reintroduce it on Report Stage. However, I wish to clarify one aspect, namely, how a private company carrying out work on behalf of the Government would not be obliged to pay tax. I am not interested in the 51% and 49% shareholdings. This entity will be buying and selling property and engaging in other transactions over a ten-year period. If it does not pay tax, essentially it will be a charity.

It will be anything but a charity.

In respect of the payment of tax it appears to be a charity.

I make the point for the third or fourth time that it is the distribution of profits — if such are made — from this entity to the private investors in it which will be subject to tax.

I accept that. However, the work done by the entity will not be taxable. The European Union will find that concept strange.

Is the amendment being pressed?

No. I will withdraw it and reintroduce it on Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 4:

In page 16, before section 2, to insert the following new section:

"2.—(1) The Comptroller and Auditor General shall assign a member of his or her office to be the Comptroller and Auditor General Monitor ("the Monitor") in NAMA.

(2) The Monitor shall have access to all documents in possession of NAMA or the participating institution in connection with eligible bank assets.

(3) The Monitor shall be entitled to attend any meeting, electronic or otherwise, held in conjunction with any matter pertaining to an eligible bank asset or acquired bank asset, which, in the opinion of the monitor, is material to the purpose of this Act and the protection of taxpayers in particular.

(4) The Monitor shall attend the meetings of the Oireachtas Committee on NAMA.

(5) The Monitor shall report to the Oireachtas Committee on NAMA on all matters requested by the Committee.

(6) The Monitor shall report to the Oireachtas Committee on NAMA on all matters which, in the opinion of the Monitor, are material to the Committee effectively discharging its functions.

(7) (a) The Monitor shall report to the Oireachtas committee on NAMA prior to each scheduled loan transfer from the participating institutions to NAMA.

(b) The schedule referred to in (a) shall be the loan transfer schedule determined by NAMA.

(c) The Monitor can engage expert consultants in the course of their monitoring role over NAMA.”

This amendment also relates to oversight and suggests an Oireachtas committee should have a much greater role in overseeing the activities of NAMA than most people have, to date, accepted. Fine Gael is of the view that said committee should have a say in respect of the individuals who will be appointed to the boards of the SPV and NAMA. However, the Government does not accept this.

Amendment No. 4 proposes that the Comptroller and Auditor General have a greater say regarding the activities of NAMA. Historically, the role of the Comptroller and Auditor General has been retrospective in nature. His reports focus on areas where or matters in respect of which money is being wasted by the Government. One example in this regard would be PPARS. Some are of the view that this is not that useful. There is not much point looking back when millions have already been wasted. We should try to prevent such waste from occurring in the first instance. The role of the Comptroller and Auditor is changing over time in order that the holder of that office might take a more hands-on approach in preventing millions from being wasted.

The Office of the Comptroller and Auditor General is completely independent and cannot be influenced by the Government or the Opposition. There is an opportunity in respect of allowing the Office of the Comptroller and Auditor General to report on the activities of NAMA in a prospective rather than a retrospective way. The amendment suggests the Office of the Comptroller and Auditor General would have a significant role to play in ensuring NAMA works well from the point of view of taxpayers. The Comptroller and Auditor General reports to both Houses of the Oireachtas and is independent of the Government and the Opposition. Amendment No. 4 is excellent and would protect the interests of the people.

I ask the Minister of State and the officials from the Department of Finance to consider the amendment. The role of the Comptroller and Auditor General is well respected. I would make the same point on this amendment that I made on amendment No. 2. The Minister has significant powers under the Bill and will be in a position to receive extremely important confidential information from NAMA. However, provision has not been made to allow him to act on such information or bring it to the attention of another body, as it were. Conferring a role in this regard on the Comptroller and Auditor General would create a safeguard and also a balance in respect of the executive authority of the Minister. If the amendment were accepted, another independent body — one which the Houses can trust — would have access to information and there would be a further monitoring of the activities of NAMA. That would be an important safeguard, particularly in the light of the enormity of the task faced by NAMA, the amounts of money involved and the nature of the decisions likely to be taken.

I thank Senators Twomey and Fitzgerald for their contributions. However, the basic fact remains that the Comptroller and Auditor General's function is an auditing one which is completely separate from the evaluative function proposed in the amendment. The functions of the Comptroller and Auditor General, here as in most other countries that have one, are to audit and report on the accounts — not on the plans or proposals — of public bodies to establish that their transactions are in accordance with the legal authorities governing them and that funds are applied for the purposes intended. The Comptroller and Auditor General also provides assurance on the system of internal financial control put in place by each body, examines whether each body administers its resources economically and efficiently and whether the body has mechanisms in place to evaluate the effectiveness of its operations. The Comptroller and Auditor General's focus is an ex ante evaluation of these matters and not a concurrent second guessing of the performance of an organisation or of the functions of that organisation. To my knowledge, no Comptroller and Auditor General in any country performs that function.

In addition, there is a more practical reason the Government should not accept this amendment, namely, that there is an inherent danger in the monitor concept. It is important that the board of NAMA is made solely responsible and answerable for the actions of that organisation. That is the position for all companies in the country. A situation whereby this responsibility could be perceived in some way to be shared, on the basis of the involvement of a monitor, could be taken to endorse their actions. Similarly, the existence of a monitor could weaken the Comptroller and Auditor General's capacity to audit and question afterwards the actions of NAMA. This is the crux of the matter and is the reason we cannot accept the amendment.

I accept Fine Gael's approach on this, but if the Comptroller and Auditor General were to be effectively involved on two sides of the same transaction, it would put him in an impossible situation. First, it endorses a particular proposal or course of action and then it must return 12 or 18 months later after the audited accounts and point out that what was done was wrong. The Minister does not feel the suggested amendment is not conducive to the efficient performance by NAMA of its assigned functions, nor does the Government feel that the proposed amendment represents a significant increase in the oversight that already exists in the Bill. I remind Senators there is significant and adequate oversight proposed for the special Oireachtas committee, which we have debated at length.

Section 54 provides that NAMA will produce annual accounts which will be audited by the Comptroller and Auditor General under section 57 and examined by the Committee of Public Accounts under section 58. The Bill also provides for quarterly reports to the Minister under section 55, which the Minister must copy to the Oireachtas to be examined and scrutinised by it. Furthermore, section 56 provides that any other report can be required from NAMA as the Minister may direct. Section 59 provides that NAMA may be required to appear before another Oireachtas committee as well as the Committee of Public Accounts. Section 53 provides that each year NAMA must appraise the Minister of its plans for the coming year. Again, the Minister must pass this information to the Oireachtas.

The Minister for Finance remains answerable to the Oireachtas in his own right in respect of policy in his own area and can be questioned by the appropriate Dáil committee in that respect.

Much of what the Minister says is correct. History tells us something about this. Very few European countries had a NAMA just a few years ago. I agree the role of the Comptroller and Auditor General is an overseer role that looks back over what has happened. The Minister of State has said the board of NAMA will have an oversight role. However, the board is not independent. It is running the investments and the company on behalf of the people. Therefore, it is not independent in the way we see the Comptroller and Auditor General as being. The monitor from the Office of the Comptroller and Auditor General would not make any executive decisions for NAMA but would simply monitor what was happening with the €54 billion worth of bonds being sold on behalf of taxpayers.

The scenario put forward by the Minister of State would compare, for example, with a suggestion that there is no need for anybody to monitor what is happening in Irish health care services because we have the Minister and the board of the HSE. Based on the past five years' experience, we could have done with more oversight with regard to what the Minister for Health and Children and the HSE have done in that time, because they have not fulfilled their remit. It seems the Minister feels she is not even responsible for the HSE any longer or for how it reports back to this House. The HSE board has been excessively secretive and has made things much worse for patients. The Minister of State suggests the oversight is there already, but we only have to step next door and see it does not work so well in the Department of Health and Children. In that area, we are only talking about €16 billion of taxpayers' money every year.

NAMA is a big, new organisation. Many aspects of NAMA are quite complex and they have been made even more complex because we are trying to keep this €54 billion off the balance sheet. Therefore, there is a significant role for someone from the Comptroller and Auditor General's office to play, an independent person with a good track record who will not make executive decisions but will simply monitor what happens in NAMA on an ongoing basis on behalf of the people. This is such a simple, straightforward proposal in comparison with everything else we are doing that I would think the Government would readily accept it.

I do not agree the HSE is a comparable example, although I agree with Senator Twomey's view in terms of the type of control we should have over its budget and would like to see control of it brought back into the Department. However, the comparison between the HSE and NAMA is not an appropriate comparison. I understand the type of oversight the Deputy would like. We had a long debate about oversight earlier and the Minister made his views clear that the board will provide the oversight. To have a member of the Comptroller and Auditor General's office involved on a full time basis with NAMA would compromise the objectivity of doing an audit after the fact. Therefore, I do not agree with the amendment.

I do not find the Minister of State's argument very convincing. The issue of conflict he raises with regard to the Comptroller and Auditor General could be resolved if there was the political will. The mechanisms in place to date with regard to NAMA are quite in-house and quite tight. Therefore, I support giving a role to somebody outside. An organisation with a reputation such as that of the Comptroller and Auditor General is the one that could take on that role. It would show good intent on the part of the Minister, in terms of supervision and transparency, were this amendment to be accepted.

The Minister of State and Senator MacSharry have pointed out the difficulties with regard to the role, but they could be overcome and that this could be an important mechanism in terms of the oversight of NAMA and its business.

This comes back to the question of balance. We must consider the appropriate balance for the executive function of the board of NAMA. We will consult the Opposition on the appointment of that board and it will be a board comprising the most eminent people we can find with expertise in different areas. Our job in this House is to set out the broad principles, aims and objectives which should guide that board and to agree on the details as set out in the section.

The suggestion seems to be that we should in some way transpose ourselves into the board of NAMA or that legislators should almost carry out the day to day executive functions. That is where this proposal leads.

That is not suggested.

The function of the Comptroller and Auditor General is to audit after the event, just like any other auditor. If the Fine Gael amendment was to be accepted here, it would put the Comptroller and Auditor General in the impossible situation of having, on one hand, approved a course of action of the board ——

The Minister of State does not understand the proposal. The monitor would have no executive function.

Please allow the Minister of State to make his contribution, without interruption.

All I am saying is that the proposal would put the Comptroller and Auditor General in an impossible position if he was asked to approve of the actions of the board on the one hand and on the other to come around 12 months later and say he does not approve them. It just does not make sense. There is significant oversight and scrutiny by the Houses, more so than in the case of any other State company.

Amendment put.
The Committee divided: Tá, 22; Níl, 28.

  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coffey, Paudie.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • Doherty, Pearse.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • Healy Eames, Fidelma.
  • McCarthy, Michael.
  • McFadden, Nicky.
  • Mullen, Rónán.
  • O’Reilly, Joe.
  • Prendergast, Phil.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Norris, David.
  • 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.
Tellers: Tá, Senators Maurice Cummins and Liam Twomey; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.

I move amendment No. 5:

In page 16, before section 2, to insert the following new section:

"2.—(1) There shall be established a "Register of NAMA Assets" which shall be established within 30 days after the service of the acquisition schedule in accordance with this Chapter.

(2) The Register shall include:

(a) the name of the participating institution from which the bank asset has been acquired by NAMA,

(b) the name of the person or body corporate who has the loan agreement with the participating institution,

(c) the quantum of the acquired bank asset and the amount which is outstanding and owing on the bank asset,

(d) the value of the bank asset which has been determined in accordance with Part 5 of this Act,

(e) the security for the bank assets, and

(f) such other matters as the Oireachtas Committee on NAMA may from time to time direct.

(3) The Register shall be maintained in electronic format and shall be accessible by the monitor of the Comptroller and Auditor General.

(4) The Register shall be updated on the first day of each month.

(5) The provisions of the Data Protection Acts 1988 and 2003 shall not apply to acts done under this section and information may be published under this section notwithstanding any confidentiality provisions which may otherwise apply.

(6) There shall be a sub-register of the Register of NAMA Assets established which shall contain details of any credit facilities which are in arrears or in default at the time of the establishment of the Register under subsection (1) or at the time of the updating of the Register under subsection (4).

(7) For the purposes of subsection (6) a credit facility is in default if a debtor, associated debtor, guarantor or surety in relation to the credit facility concerned is in breach of any terms or conditions to which the credit facility is subject.

(8) The sub-register established under subsection (6) shall be maintained in electronic format and shall be publicly accessible.

(9) For the purposes of this section "default" shall mean the position where an asset is in excess of three months in arrears on the original loan repayment scheme."

In the interests of moving business along Senators should keep contributions brief and relevant. We are only on amendment No. 5 and we have a long way to go. We need to prove that the Seanad needs to do its business well.

It needs to do it thoroughly too.

I will do my best to be short and sweet as long as the Acting Chairman remains calm with us.

This amendment is straightforward. It proposes that all NAMA assets should be listed in a register and the name of any person who defaults on these assets should be published. This is massive. There will be €54 billion worth of assets in a State organisation. A detailed register of all these assets should be available. If there is a significant default, that should be published so people know where it is going.

We are not that happy with the oversight process in this Bill. We have all been long enough in politics to know what was happening during the good times when there was poor oversight of millions of euro of taxpayers' money. By nature there are close connections between business people, whether developers or bankers, and Government and local authority officials. We are consolidating those connections in NAMA. While we might like to think that everybody would act with utmost scruples in dealing with these issues that is not how life works.

The Government should fully support any single thing that will improve the transparency and accountability of this organisation. I regret the Government is rejecting all of our proposals. They are not there to make things difficult politically but to give a sense of transparency. That applies to all the proposals we have put. I realise the Acting Chairman is anxious that we——

The Senator should stick to the point. We have discussed the previous amendments.

We are on a new amendment.

That is right but it is no harm to outline what has been rejected so far.

We are all quite aware of what has been rejected so far. We will stick to this amendment.

I should have brought my Mammy in.

Everything we have talked about, whether an oversight committee, an Oireachtas committee or bringing in the Comptroller and Auditor General has been rejected. I would like to hear the Minister of State's views on a register of the NAMA assets.

Although I voted against the previous amendment this one seems to have merit because we are entitled to know what assets are involved in this area. There is no definition of asset among all the definitions in the Bill. Asset appears to have been stretched to include liabilities as well which is a very odd use of the word. It is reasonable to keep a register and to have this kind of information about value and security available to us parliamentarians. I presume that this information may be available for commentators too. It is not quite clear how public this is to be. Is it to be an in-house Oireachtas document? This kind of information can only be valuable in so far as it may be argued that it might involve commercial sensitivity of some kind. That is the only argument I can see against it. Until I have heard a strong contradictory argument from the Minister of State I will be happy to support the amendment.

I too am inclined to think this is reasonable because it concerns only those who will be in default and the sums are large. If citizens default on their taxes their names are published. Equally, even in civil actions if someone registers a judgment against someone in default that is published in Stubbs or wherever, following registration. I would like to hear the Minister of State say what we are guarding against. I am all for protecting confidentiality. However, this amendment only provides for defaulting cases and it will be after a good length of time because NAMA will not move on anything for at least 12 months. I would like to hear the rationale behind the Government's opposition to this amendment.

I am in the same boat as Senator Norris on this. The amendment's policy objective is reasonably acceptable but I can envisage some of the issues the Minister of State might raise about it. It is not quite the same as having a judgment registered against one as one may be in default for a period but may come out if it. I take Senator Coghlan's point on this but the distinction must be drawn. There may be a fluid situation, so to speak, for some of these parties who may be in default and may aspire to come out of it.

I am a little bit of an extremist when it comes to measures for imparting information that will touch on freedom of information and data protection. I have to be always persuaded by a compelling argument why they should be relaxed. If one is to have a measure as proposed in this amendment, it would go too far in the opposite direction if data protection were applied. I am always nervous about making exceptions to any of the provisions of the information legislation.

It is envisaged the register itself would be accessible by the monitor of the Comptroller and Auditor General. There would also be a sub-register with details of credit facilities in arrears which would be publicly accessible. This draws a distinction between the main register and sub-register which seems sensible enough.

I support the Acting Chairman's ruling that we move on quickly and dispense with every interjection coming with the type of in-depth background such as, first the Earth's crust cooled and then the dinosaurs came.

I oppose the amendment. Several assets will perform and if I were the owner of one, paying my dues of, say, more than €6 million, I would not want information on that asset in the public domain. If it were a default asset, I can see it would be in the public interest to see where the problems are. However, those details will be published in the quarterly report anyway.

I disagree with Senator MacSharry as we must have transparency and a register that can be monitored by the Comptroller and Auditor General. The sub-register would protect the sensitivities to which Senator MacSharry referred.

This is not unlike an amendment proposed by the Labour Party on Report Stage in the Lower House which the Government did not accept because it sought an exception to the duty of confidentiality that a bank owes to its customers. In respect of these individuals, NAMA stands in the position of a bank and has all the rights of one, as well as added duties set out in the legislation. The Bill already provides for a detailed role for the Comptroller and Auditor General who will have access to all relevant information needed to discharge his functions under the legislation, including the type of information referred to in the proposed amendment.

The proposed publication of details of individuals' and banks' assets would lead to significant legal difficulties. It would be difficult to justify the publication of details relating to the financial affairs of a set of debtors who happened to be indebted to institutions which participate in NAMA, while those with non-participatory institutions would face no such publication. In the event the amendment were accepted, it would give rise to a real risk that debtors would become entitled to challenge the transfer of banks assets on the basis of the implications of the transfer to them.

The basic principle at stake is that anyone with a performing loan with a bank is entitled to a traditional banking confidentiality relationship, as well as a contractual relationship set out and agreed to by both institutions. That is the valid reason Senator Norris seeks to oppose this amendment. If the amendment were accepted, the taxpayer could also be exposed to an avalanche of legal claims based on this issue.

I accept there is an issue with transparency. However, transparency ought to relate to qualitative information such as the classes of loans, the extent to which they are impaired, the extent to which they are being collected or not, and if they relate to rolled-up interest or capital and other matters. This is set out in section 53 and is the real information. Do we want a list of all the debtors of banks or the quality information which will allow legislators to make an effective and informed judgment as to whether NAMA is working? I hope that answers Senator Norris's question and he will be able to support the Government on this matter.

Yes, it very largely does. I have noted there are two sections where the names of the individuals or corporate entities are specified. It might be better if that provision were removed. However, in some general way people should be entitled to know what is going on in the bank. It could be helpful to know in some general sense what level of assets are performing or have been written off.

This afternoon the Minister of State referred several times to amendments put forward in the other House and which the Government strenuously resisted and refused to accept. I accept the right of any Member of this House to take amendments tabled in the other House and place them before this House. However, on a matter of principle it is important that we introduce variations to these amendments in light of the debate in the other House or we adduce new arguments that may be persuasive. It is not profitable if we just take amendments which have been put forward in the other House and regurgitate the same arguments that have been already countered by the Government. That is not a sensible employment of our time. I appeal to my colleagues that if this is the case, perhaps we could ensure a more efficient business of the House by not endlessly regurgitating arguments that have been rejected in the other House.

On a point of order, many of these amendments were not ventilated in the other House.

The argument in favour of this amendment has been based on the question of bad debt. NAMA takes over all the operating loan agreements of a bank. Some of these are viable and substantial with people who are trading profitably. It is outrageous to propose that we give public access to the name of a person with a private agreement with a bank who may be fulfilling all the obligations of their agreement. I may be misunderstanding it, but it states that the register shall include the name of the person or body corporate who has the loan agreement with the participating institution. That is very clear to me. That would be outrageous——

——with or without legal threats. I do not know who would do that to anybody.

The media. They would be delighted with it.

I do not know anybody who would welcome people's credit ratings, never mind the details of their credit agreements. It is a question of civil rights. That proposal represents an extraordinary intrusion.

Senator Norris proposed the possibility of deleting certain aspects of the amendment which would allow him to support it. I appeal for Senator Norris's support on this matter but I suggest that if we were to delete the points he suggested in his proposal, what we would be left with is something similar to what the Senator will find in section 55. In fact, there is possibly significantly more information available to Oireachtas Members under section 55 than that set out in this amendment.

Amendment put and declared lost.

Amendment No. 6 is in the name of Senator Twomey. Amendments Nos. 6, 30 and 54 are related and may be discussed together, with the agreement of the House. Is that agreed? Agreed.

I move amendment No. 6:

In page 16, before section 2, to insert the following new section:

"2.—(1) The First Schedule to the Freedom of Information Act 1997 is amended by inserting at the end of Part 2 "National Asset Management Agency".

(2) The Third Schedule to the Freedom of Information Act 1997 is amended by inserting at the end of Part 1:

(a) in column (2), “National Asset Management Agency Act 2009”, and

(b) in column (3), “Section 199”.

(3) Section 27 (1) of the Freedom of Information Act 1997 shall not apply to any disposition of an asset under Part 9, Chapter 2 of this Act for a period of 2 years following the completion date of any such disposition.

(4) In this section "completion date" shall mean the date on which an acquired bank asset was transferred, assigned, conveyed, sold on or otherwise disposed of to another person or body corporate.".

I accept that some people would have concerns about information that is put in the public domain but it is equally important that we try to be as transparent as possible in regard to NAMA because of the size of it and the connections between many of the people involved. There is a role for the general public knowing what is being purchased, how much it is being purchased for, whether assets were disposed of and for how much they were disposed of and what people got for them. A good deal of information is protected under the freedom of information legislation but in the interest of transparency and knowing there is good corporate governance in place, some of this information should be made available to the general public, although not immediately. We do not want to go after people who are doing good business with banks, and I accept that good loans are being taken over, but there is need for transparency and accountability when it comes to NAMA purely because of its size and the people involved in it. We are pushing these type of amendments to get as much transparency and accountability as possible. If the Government or other Members of the House wish to alter it, I am more than happy to accept those changes.

On the Fine Gael amendment on freedom of information, a two year period would be enough time for a transaction to be sorted and checks and balances put in place if further scrutiny was needed. It might make the people who are engaging in deals dot their i's and cross their t's and do actions according to good practice. We must not forget the reason NAMA is being set up. This is to bale out the banks and the developers. If we had scrutiny such as proposed under the freedom of information legislation people might think twice about the way they are carrying out their business.

What we are seeking to achieve is similar to that sought in the Fine Gael amendment. I come back to the point I made earlier on transparency generally and imparting the maximum amount of information as is consistent with the commercial realities and any other limitations that might be in place. As we are aware, the terms of the freedom of information legislation allows quite a number of exceptions, savers and so on in regard to information. It is not the case that once an institution is listed in the Act a person can obtain any and all information on their activities. We should remind ourselves of that. There are quite a number of restrictions in that Act, as many people find when they go to make freedom of information requests. It is not the case to say that once the request arrives in it is open season, as it were, in regard to everything.

We are the ones who must table the amendments here and make the argument for them. In respect of freedom of information I tend to take the view that the default position is that all public institutions should be in the freedom of information regime and that it should fall to those who want to exclude a particular institution to make the case as to why it should not be included.

Because in the nature of the Act and what it is seeking to achieve, namely, the widest possible information, I would want to hear why it should be excluded rather than us having to make the strong and arguably unanswerable case that a body with such a momentous task that will involve such an extraordinary amount of money, exposure and liabilities should be included within the remit of the Freedom of Information Acts. I await the Minister's argument on why it ought to be excluded.

I agree with Senator White. I would like to hear the Government's reasons it should not be included in the freedom of information legislation. As we know from the many requests that have been put in under that, quite an amount of information is excluded. If it is felt, for example, that the information would undermine the entire NAMA structure or whatever, that can be dealt with.

If we take the issue dealt with in amendment No. 54, namely, the valuation panel, and given the contentious discussions we have had on valuations and current market value versus long-term economic value and so on, it would be in the public interest if the decisions of the valuation panel were transparent to allow people understand how those decisions were being made. The Minister might comment on the valuation panel and whether its operations will be available to the public. Will the decisions it makes and how it makes them be in the public arena? I would be interested to know that.

For the reason I opposed the previous amendment I oppose to this one. In a performing asset it would be prudent of NAMA to have assets valuations carried out. If I am living up to my obligations under a performing asset that is now under the control of NAMA I might not like my assets valuations to be published in that way. We cannot say that all the valuations will be published in the quarterly reports. We will have the opportunity to see who is in default and presumably valuation information but not on performing assets and therefore I do not understand how we could achieve that. I agree we should publish the information on who will be on the valuation panel and carrying them out but I do not believe that valuations should be published. That would cause difficulties in terms of privacy and civil rights, as Senator O'Toole mentioned earlier in regard to other issues.

I am taking the three amendments together, namely, Fine Gael amendment No. 6 and Labour Party amendments Nos. 30 and 54.

The intention of the amendments suggested by the Senators is to extend the application of the Freedom of Information Act 1997 to NAMA with the exception of the disposal of assets which would not be subject to the FOI Act until two years after the date of the disposal.

Much of the information which NAMA will process in its day-to-day operations will be confidential commercial information attaching to the loan assets it requires. The commercial and financial risks that would arise in connection with the disclosure of such information pursuant to the Freedom of Information Act 1997 would not be in the interests of NAMA, the State or the public. Such confidential third party information would not be released under the Freedom of Information Act and applying the FOI Act to it simply introduces extra bureaucracy with no additional transparency. There are already a range of other provisions in the Act which will ensure appropriate transparency and accountability of NAMA. It is likely that if the FOI Act applied to NAMA, developers would inundate NAMA with requests so as to elicit NAMA's strategy and-or tie-up NAMA in procedures. The public would not get more information as section 55 of the Bill provides for the information. Accordingly, I regard the proposed amendments as inappropriate and cannot accept them.

If I could make one other comment, no matter how often we hear the mantra that the purpose of NAMA is to bail out bankers and developers, it does not make it any more true. It is pure political propaganda. The purpose of the NAMA legislation, and we will know it, is in the public interest to give us a functioning banking system without which this economy and this society will not be able to properly operate.

The taxpayer is liable.

Senator MacSharry speaks about the valuations and then the Minister of State speaks about confidential commercial information and this tired old response about extra bureaucracy. There is not a Minister who thinks freedom of information is a good idea because it involves extra bureaucracy. They are always complaining about extra bureaucracy and the annoyance of having to respond to requests from the public under the Freedom of Information Act.

I am sorry. I reject that irritation over bureaucracy as an argument from any Minister. We live in a democracy and sometimes information flow requires civil servants and others to engage in what he calls extra bureaucracy in order to make it available.

Unfortunately, I do not have a copy of the Freedom of Information Act with me in the Chamber and I hope we will get an opportunity to return to this on Report Stage for the following reason. I very much doubt — I will correct myself on Report Stage if I am wrong — that the terms of the Freedom of Information Act would permit the transmission of valuations such as referred to by Senator MacSharry or that there would not be a restriction in the Freedom of Information Act that would exclude that. I will check that and return to the matter on Report Stage.

I would make the same assertion on the Minister of State's point about confidential and commercial information. I do not have a copy of the Act here and I cannot remember the specific provisions. The Freedom of Information Act is replete with restrictions, constraints and exceptions, and I am sure they would apply in this case as well.

The operation of NAMA involves more than individual valuations. There is a great deal of activity involved in the policy in respect of these matters and it is legitimate for the public to know about it. It is not merely a question of reducing it to individual valuations.

For those of us who support freedom of information, it is in some respects almost merely an ideal that we would like to see. The Minister of State would know well that the Freedom of Information Act was altered in 2003 because the initial legislation allowed for much information to be made public. It was not because it was exposing commercially sensitive information; it was exposing commercially sensitive political information and Ministers were being embarrassed wholesale by the sort of information that was coming out from the first Freedom of Information Act. The former Minister, Commissioner Charlie McCreevy, with due haste came into the House after the——

I ask the Senator to stick to the amendment rather than give us a history. Please just keep the show on the road.

It is no harm, when the Minister of State goes into a history lesson about what happens with the Freedom of Information Act——

——that we also could go into the background.

It is not necessary.

Maybe not for you, Acting Chairman. You were part of that Government that introduced that law that alters the Freedom of Information Act 1997. You very much supported the closing down of freedom of information, as we now know it. That has had a significant effect. One would often wonder whether that sort of information, if it was still available, might have highlighted activities going on in government for the past number of years and we might not have found ourselves in the position where we are trying to apply freedom of information to a situation where this country has almost been bankrupted by the misdemeanours of a few with the Government's complicity.

With the greatest respect, Senators should not impugn the impartiality of the Chair.

On the amendment, I am of the opinion that the Government has already got sufficient strong blocking mechanisms where there may be sensitive information. Perhaps I am wrong on this, but that is my view. That is my first point. I have a second point and then I will shut up.

The second point is that I am a little confused by the fact — perhaps Senator Twomey can explain this to me — that the amendment provides that the only place where the Freedom of Information Act shall not apply is to a disposition of an asset for a period of two years following the completion date. The horse has bolted by that time. I would have thought that was the least sensitive information. There may well be something I do not understand, but I do not see how that could be sensitive in any way. It is sold and the money is paid over, and that seems to me to be the very kind of stuff that will not do any significant damage to reveal. I repeat that there may well be something I do not see in that regard.

Has the Minister of State more to add given that Senator Alex White will bring it back on Report Stage?

I have very little to add to my original reply. I suppose there is always a balance between scrutiny and freedom of information, and actually effective operation. I will not enter into detailed discussion of this because it is not relevant.

I would certainly stand over the changes made in 2003. There have not been further changes since then. Some freedom of information requests require a great deal of time, money and resources to respond to and it is legitimate to have some fee attached to them. Far from freedom of information being destroyed, we have a good and effective freedom of information system which is still considerably more liberal than that which obtains in many other jurisdictions.

Amendment put.
The Committee divided: Tá, 23; Níl, 27.

  • Bacik, Ivana.
  • 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.
  • Mullen, Rónán.
  • Norris, David.
  • O’Reilly, Joe.
  • Prendergast, Phil.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • 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.
Tellers: Tá, Senators Maurice Cummins and Liam Twomey; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.

Amendments Nos. 7 to 22, inclusive, are out of order as there is a potential charge on Revenue. Amendments Nos. 23 and 46 are related and may be discussed together.

On a point of order, we specifically withdrew any elements to our amendments that might be considered a charge on Revenue.

There is nothing I can do about that. They have been ruled out of order because they might incur a potential charge on Revenue. That is the way it is.

Amendments Nos. 7 to 22, inclusive, not moved.

On a point of order, why are amendments Nos. 23 and 46 grouped together?

The subject matter is related, but if the Senator so wishes, they can be discussed separately.

They are not related. Our amendment No. 23 refers to small and medium-sized enterprises, but we also have a point about orderly property management strategy and getting the best possible value for the taxpayer. It would appear that these should be discussed separately.

Is the Senator opposed to discussing them together?

Then we will discuss amendment No. 23 on its own.

SECTION 2.

I move amendment No. 23:

In page 17, paragraph (b), between lines 17 and 18, to insert the following:

"(viii) to ensure that the measures taken in this Act restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprise in particular,

(ix) to ensure an orderly property management strategy over a ten year period following the enactment of this Act,

(x) to recover the maximum funds for taxpayers by ensuring that the principal and exclusive purpose of NAMA is to recover the maximum funds possible for the assets acquired by NAMA under this Act, and

(xi) to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis.".

Having just looked at amendment No. 46, I see that it incurs a charge on the State, but that is beside the point at this stage. Amendment No. 23 tries to ensure that there is an orderly property management strategy over the next ten years. This is very important because one of the things about NAMA is its size. NAMA is massive and when it is up and running, it will probably be the largest land owner in this State and a significant land owner in other jurisdictions, but they do not really matter to us. What matters is how this strategy will affect the market here and how it will affect people investing in business in the future.

We have socialised the property and development market here with NAMA and we need a very clear strategy from the Government over the next ten years as to what it will do and how it will manage this land bank. I do not think this has been as fully thought out by the Government as it likes us to think. The structure may have been thought out, even though that was done at the last minute. However, we have seen no plan from the Government for the next decade. It is not good enough for the Government to claim that business and strategy plans will be published in due course. We need to know these plans as soon as possible. Even if there is only a draft strategy for the next ten years, people will need to know the potential plan for NAMA over the next decade.

The last part of the amendment demands that we "take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis." It is important that we look back and figure out how we ended up in this situation. Too often we have heard the phrase "we are where we are" and that we must look forward. History is one of the best places to learn what we should not do, because we are all too often inclined to repeat our mistakes. We should have a proper debate and possibly put into the Bill some indication as to how ended up with this mess in the first place. It was not all about global issues and global events. We did some very crazy things here in the past four to five years that landed us in this mess. This section should go into the Bill so that we can have a plan for NAMA in the next decade and that the Bill can contain elements that recognise why we ended up in this mess in the first place.

I support the amendment. The language of what is proposed constitutes a far more mandatory instruction to NAMA than much of what is contained within the balance of the section. I made this point before in respect of the purposes of the Act. It is interesting to note, particularly in relation to credit — we have had this discussion and will come back to it when our amendments arise for discussion — that the words used by the Minister of State on a number of occasions have been about the principle purpose of NAMA being to bring about a situation whereby the banks and financial institutions resume lending to small business, families or otherwise. The Minister and the Minister of State in speeches here used slightly more vague language such as "to facilitate the availability of credit" in the economy and to "facilitate" the restructuring of credit institutions and so on. While I understand why they might have chosen a word such as "facilitate", it is not all that encouraging to be told that NAMA will take such actions as it sees fit to facilitate the banks to resume lending. We are all looking for something more than simply a state of affairs where they will be facilitated in doing so.

The Minister makes the point over and over again — one has to agree to some extent — that we cannot mandate the banks to lend to this person and not to that person. I accept that, but we have to work out a position between those two extremes. The word "facilitate" and the concept of facilitating are not strong enough to persuade people that the NAMA project will achieve the predicted outcome. Subparagraph (viii) in Fine Gael's amendment No. 23 reads: "to ensure that the measures taken in this Act restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprise in particular". It is an acceptable formulation and stronger than the slightly more arm's length "facilitating" of the banking sector When one reads the new section 210, one gets the sense that the Government knew it was under pressure to have something about this issue in the Bill; therefore, it has gone as far as it feels it possibly can in section 210 in stating that down the line Minister will issue guidelines. However, anytime NAMA is criticised or queried, we are always told the financial institutions are not working, that the economy is in dire straits in terms of credit flow and that this measure will deliver it. That is the principal argument made in favour of NAMA. We are told that if we do this, lending will resume in the real economy, or on "main street", as the Americans say. What more can we be offered rather than this arm's length language of facilitating? The Fine Gael amendment is reasonable and I am happy to support it.

I am not absolutely sure what is intended by subparagraph (ix) which reads: "to ensure an orderly property management strategy over a ten year period following the enactment of this Act". I know what the words mean, but in terms of NAMA operating "an orderly property management strategy over a ten year period", I am not 100% sure.

Subparagraph (xi) reads: "to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis". We all want all necessary steps to be taken, but that subparagraph should read: "to take all necessary steps, within the statutory remit of NAMA...", otherwise one would be trying to mandate NAMA to do things that were not within its power to do.

The argument that has been made consistently by the Government side is that the establishment of this body will create the preconditions for lending to start flowing in the economy. We are also told that lending and credit flow are the lifeblood of the economy and that this body needs to be put in place to facilitate them. However, the purposes of NAMA, as outlined in the legislation, make no explicit reference to that objective. Ample reference is made to NAMA's role in acquiring bank assets and how they will be dealt with, as well as the financial return the State shall require from the assets it will then own. The whole purpose in acquiring these assets is to facilitate lending but that is not explicitly included in the purposes of the Bill, which appears to be a grave omission. The new section 210 gives the Minister power to issue guidelines on lending. In the light of this proposed provision, surely the new section would make more sense to NAMA's primary purposes. It takes a process such as this to make one realise that the glaringly obvious is being omitted. If the whole purpose of NAMA is to get lending flowing again, it beggars belief it is not laid out as a purpose of the body. It is barely laid out as one of its functions.

Nobody could object to what the amendment tries to achieve, but I would like to pose a simple question. Banks are in business to lend, which is how they make their profits, but why are they not lending? Is it because they do not want to give money out? As I explained to the Minister yesterday, I think section 210 is flawed. This amendment which seeks to do the right thing is not implementable, neither is section 210. The Minister can issue all the guidelines he wants, but the banks must still meet regulatory and other requirements. They will not stay in business otherwise. Regulatory requirements in Ireland are slightly more demanding than those in respect of the tier one asset requirements for international banking. When the Irish regulator increased the demands two years ago, there was an outcry led, as I recall, by Seánie Fitzpatrick who talked about interfering with banks doing business.

How can we tell the banks to do something which is against their best interests if we want them to stay within the law of regulation? The law of regulation is that they must have an asset base of 7% or 8%. That is the figure, although the international markets demand a like more — something like 8% or 9%. What will happen is this: the State will issue State paper to the banks in return for the transfer of assets. The banks will go to the European Central Bank with that paper and get money instead. That money will go into the banks and as soon as it takes them over the asset base requirement, they will start lending. They will not start lending before then, but they will have to start lending afterwards because they will have nothing else to do with the money. We need to be very clear in that regard.

They do not have anything else to do with the money.

No, but they lend and invest. It is lending in one form or another. Perhaps I did not use the correct terminology. They have to use the money for various financial instruments one way or another.

They do not sit on money, which is what they are doing. It is not like they are giving it to some and not to others. They are building an asset base and as soon as they have done so they will get rid of the money in whatever way they want in order to make a profit. Intuitively, I do not have any time for the banks, but I do in terms of what we are trying to achieve in this instance.

Subparagraph (xi) reads: "to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis". The last thing we should be doing is interfering with the regulatory regime. Although that is not what is intended by this proposal, we are interfering. The Minister is only issuing guidelines as a sop to us. It would be more honest if he did not do so and said straight up that he could ask the banks to do things. He can put moral pressure on them to do so, but they may say that under the Companies Acts, they are required to be answerable to their audit committee, internal audit structure — we have been demanding these measures for a while — and at the annual general meeting. The Minister cannot override these provisions. One of the arguments in favour of partial nationalisation is that one could represent more than half the shareholders and demand that these steps should be taken. However, that would bring about a set of accompanying problems.

There is an issue which we have not talked through. We want money to flow, but we did this previously with ACC Bank and ICC Bank. These State banks were established to lend to small and medium enterprises and they did a fantastic job, but we let them go. The Minister said yesterday that he would like to see new banks being established; these are the kinds of banks we need. We need to bring back respectability to sub-prime lending. Special purpose vehicles got a bad name because of Enron, while sub-prime lending got a bad name because of the US banking system. In fact, sub-prime lending is most effective in this country. Credit unions throughout the country have for many years been giving loans to people who would not have got them from other institutions. This is classic sub-prime lending. The credit union maintains and manages the risk and ensures there is constant contact with the recipients of the loans. These are all matters that could be addressed in the future.

There is nothing in the amendment with which one could disagree but I cannot understand how anybody could make it work, even with the best will in the world. I do not want to be pedagogical about it; suffice it to say there is conflict in the terminology. Section 2 refers to "the purposes of this Act" and it lists those purposes one after the other. Section 2(x), which it is proposed to insert, refers to the "principal and exclusive purpose". There is a contradiction here. It is but a matter of wording and I acknowledge it was suggested that it be put that way.

The amendment is a case of motherhood and apple pie in that we all want to see its objectives realised but I cannot see how we can bell the cat on this. If somebody could explain how it can be done, I would appreciate it. We can put moral pressure on the banks. Senator Twomey stated last night and Senator Alex White said on a number of occasions that we can offer the money to the banks on certain conditions, by way of a Checkpoint Charlie hand-over, but that is as far as one can take it. There is a difficulty in making this amendment work, even with the best will in the world and in spite of its being well intentioned in all sorts of ways.

What Senator O'Toole said is interesting. One view of what he said is that the principal objective of the NAMA project cannot be delivered. That is not an unreasonable view based on the argument he makes.

I stated it could not be delivered until the banks——

I am not arguing with the Senator at all because I believe he made very solid points. We are all aware of them and it is no harm to be reminded of them. One view of what he stated is that the principal objective, if not the sole objective, of NAMA, namely, to get credit flowing in the economy again, cannot be realised. That is the proposition and he may be correct. However, the point is that the speeches of the Minister of State, Deputy Mansergh, and the Minister, Deputy Brian Lenihan, are structured in such a way as to say we must take certain action, "thereby" ensuring credit will be made available to the economy again. The word "thereby" turns up quite a lot. They state we will take the assets from the balance sheets of the institutions in the way proposed, thereby facilitating the flow of credit. I have heard the Minister use the word "thereby" time and again and we know what it means.

There is a real conceptual problem at the heart of the NAMA debate and project in that the agency's very objective cannot be realised. This is one intelligent view on what Senator O'Toole says. We are not alone in that other countries are struggling with this question also. It is not an issue that is just preoccupying the Irish. Many countries are struggling with the question as to how to make credit available short of giving instructions to financial institutions.

The reason I interrupted Senator O'Toole, for which I apologise, is that he said that once the banks get the money and achieve the ratios they are required to reach, they will start lending again. That is not a certainty. How do we stop the banks returning to the casino and engaging in the sorts of practices in which they engaged heretofore? How do we stop them having at the heart of their profit-seeking activities something other than the basic job we all believed banks existed to do?

At the weekend I was listening to an interview with an English businessman, Mr. Harvey Jacobson, a retail magnate in England whom I believe has shoe shops. He was asked what he would do if he were setting up a bank. He stated, slightly tongue in cheek, that he would set one up, invite people to deposit in it and spend some time at this. He said he would pay the depositors a modest interest rate for their deposits and, after a while, when he would have a sufficient sum in the bank, he would begin lending some of it to people who required loans and charge them an interest rate slightly above that being given to the depositors, thus making a modest profit. What is wrong with that? I always believed this was what banks were for. This is what small businesses and families want. They want a banking system that will serve their needs.

I am conscious that we are straying from the amendment from time to time. The function of NAMA is to rehabilitate the banking system. Doing so involves taking the toxic assets from the banks. It is impossible for us to instruct banks to lend to certain individuals or companies and not to others. I hope that when the Minister issues guidelines under section 210, the real section under which we should be discussing this issue, they will be in line with robust, appropriate underwriting standards and procedures and with the tier one capital requirements under the Basel regulations, as mentioned by Senator O'Toole.

At best, all we can do is encourage, through the regulator and ministerial guidelines, the flow of credit to viable businesses and the families who need it. To legislate for this in a rigid fashion would get us into the mess we are in all over again. While we would welcome new banks that want to enter the market, the reality is that banks are not lending at present. Apart from the fact that they are choked with the toxic assets we are trying to sort out with this Bill, they have no money to lend. When the money becomes available through the bonds issued by NAMA, the banks may not necessarily begin to lend then either.

I am glad somebody said section 210 is flawed. It is in its current form but it will be amended by amendment No. 66 to state the Minister "shall issue guidelines" rather than "may issue guidelines". Banks do not lend from their capital base but from their deposit base. At least that is what they should be doing. It is a question of increasing confidence in our banking system so that the banks can attract more depositors and get credit flowing again. NAMA's function is to take the toxic assets away from banks, not to instruct them who they should lend to and how they should lend. It would be better to have this debate in more detail when discussing section 210. I ask that we proceed.

It is important to discuss this.

Yes, but we should do so when discussing section 210.

It is linked to this because, I hope, we are in the middle of emerging from the greatest crisis we have ever seen in banking and international markets. They have failed completely and economies have been damaged totally. Many have been destroyed by the excesses of bankers in the United States and other countries. We have witnessed a total crisis in banking. One does not want to go overboard but undoubtedly the issues of regulation, authority and direction are very relevant for discussion. This is what Fine Gael is suggesting in its amendment. It is the failure of regulation and good authority and of the banks to take reasonable action in their lending that has got us into this crisis. We clearly need to talk about this, especially given that €54 billion in taxpayers' money is at stake. One must consider some direction to the banks, some authority and some control.

The proposed purposes of the legislation, as listed, are very general and obviously need to be included. We seem to be debating their impact but if they are not included and if there is no vision as to what the Government expects from NAMA in section 2, there will certainly be none. The purposes that should be included in the Bill according to our amendment lay the groundwork for what the Government expects to happen. Paragraph (viii) of the Fine Gael amendment No. 23 states:

to ensure that the measures taken in this Act to restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprises in particular.

We must get credit flowing to business which is the life blood of the economy. To include such provision as a purpose of the Bill seems eminently reasonable. Much of the Second Stage debate in the Dáil and Seanad was spent on what needs to happen if the economy is to function again. It makes sense to provide for a proper property management strategy. That is reasonably self explanatory. I cannot understand why the Government is rejecting what we are suggesting should be included as a purpose of the Bill.

This is an interesting point. It is perhaps a point that often makes debate on this legislation tedious for the officials involved but interesting for us.

The question Senator O'Toole asked is what will happen if NAMA has no effect on lending? What will happen if the banks take the bonds, sell them and, rather than lending the money, swap their expensive interbank loans for cheaper ECB funding? What will happen is that the banks will concentrate on shrinking the loans on their balance sheets. Perhaps the Minister of State will explain what will happen if the banks do not start lending again. How long will the Minister wait for the banks to begin lending again? What else, if the Government rejects our proposal, will it do? What other structure can it set up?

A number of months ago I informed the Minister of State, Deputy Mansergh, that there existed a special purpose vehicle as part of the EBS group which had expertise in mortgage lending, the staff of which group were surplus to the requirements of the EBS which is willing to sell that vehicle to Government. Anglo Irish Bank is in State ownership and has expertise in business lending. While it made mistakes and got a little exuberant, there remains within that bank people who understand loans. If we take the business unit in Anglo Irish Bank, which can deal with business loans, the special purpose vehicle which EBS wishes to sell to Government, the available senior management personnel of ACC Bank and others being disposed of by foreign banks wishing to get out of Ireland, and to that add equity from Government which it could obtain from the European Central Bank, we could create a good bank. This could be a wholesale bank in the sense that the regular banks, about which the Minister of State is speaking, can issue loans.

The reason Allied Irish Banks and Bank of Ireland are currently not issuing loans is that they are fearful those loans will fail and end up on their balance sheets. Allied Irish Banks and Bank of Ireland could continue to manage loans. The Minister for Finance stated in this House last night that it would take too long to establish the concept of Fine Gael's good bank, which is not true. The special purpose vehicle in EBS is still available. We own Anglo Irish Bank which has a business unit which manages the bank's loans. There are senior managers in this city who would be willing to work for the Government and the Government has access to the funding. One cannot say that Allied Irish Banks or Bank of Ireland could just as easily get their hands on money from the European Central Bank. They do not want it. They do not want to take the risk of lending. If there is a contradictory opinion to what we are saying, if there are people who say this cannot work, what then are the solutions? That is the question continually asked of us.

The Fine Gael good bank concept was rubbished by too many people. I have just explained to the Minister of State how a functioning good bank could be set up. However, I may be wrong. If the French can set up a good bank in a couple of weeks, I am sure, given we are no less intelligent, that we can do so too. If the Government does not agree with what we are saying, if it believes lending cannot be forced on the banks, then we are spending €54 billion just to make the banks look good. I am giving the Minister of State another solution. The Government can if it wants tear it apart and say it will not work and, as it has done previously, say that all this is more Fine Gael good bank proposals. I heard the Minister in his contribution dismiss Fine Gael's solutions completely although he has never actually read them. I do not believe he ever paid them any attention.

Senators O'Toole and Norris, who are constructive in terms of their criticism of NAMA, may have views on this issue. If this proposal does not work, let us have a debate on whether we can make Fine Gael's concept of a good bank work.

I never said that NAMA will not work. I said that the proposal in the amendment could not work and I will explain why in simple terms. The amendment is asking that we "ensure" something happens. Not even the Minister can do this, which is the reason I say section 210 is suspect. The manner in which we ensure banks take appropriate risk is by way of regulation, which is what everybody in this House has been saying for the past couple of months. We have been bemoaning the fact that we did not have an effective regulatory structure. What we need to do is make it effective. We cannot buy the dog and bark ourselves. We cannot set up a regulatory system on the one hand and then tell the Minister he or she must ensure the banks do business in a different way. We cannot do that.

I may not have explained clearly my point in regard to the argument made by Senator Alex White. I asked when the banks will start lending again. This is back of an envelope stuff. The figures are big and the thinking and theory is simple. We are putting €54 billion into the banks. The most they will use as an asset base is less than 10% or approximately €5 billion. They already have some money. Effectively, €50 billion will be available for banking. This is the business model. NAMA will take over the assets, give the State paper to the banks who will bring it to Europe and return with money. In the meantime, NAMA will set up a special purpose vehicle, the intention of which is to keep the risk away from it, to take on aspects of the assets, for example, those creating an income through interest or rent, and to set up a securitised vehicle with income attaching to it. That will be sold off through the special purpose vehicle which will then pay that money to NAMA. NAMA will then use that money to recoup the money that has gone to Europe via the banks, thus trying to recoup the €54 billion. I am not suggesting it will work but that is the business model.

When and how will the banks start lending? When they receive the €54 billion they will need to hold back approximately less than 10% of it and the remainder will be used for banking purposes. Senator Alex White is correct. We need to ensure the banks do not return to the casino with that money. That is the important point. We do this by having regulation that works, regulation the like of which has never before been introduced by either House. We must ensure we return to old fashion banking principles where people were dealt with and the banks retained exposure to the risk and liabilities they took over and could not simply sell them on, except under the most stringent of regulatory means.

I do not disagree with what Senator Twomey is trying to achieve. All I am saying is that in terms of how this might work, one cannot ensure without overriding the regulatory function. The regulatory function is not covered by this legislation, nor should it be. The regulatory function will monitor how the banks operate to ensure they do so properly. Also, the State will appoint people to the boards of banks, will have an input into the appointment of the chief executives of banks and we will be receiving regular reports on the principles of banking and how they are applied. That is how it is going to work. The sooner the process starts, the sooner the banks will have money to lend.

I agree with Senator Alex White that we have to ensure the money is loaned under the proper rules and regulations. We cannot tell the banks what to do because we do not own them. That is the other argument in favour of owning more than 50% of a bank, but even if one owns more than a 50% share, one could not override the other shareholders. Let us recall what happened with ACC and ICC. I said in the House last year in September, October and November that is what we needed to do with them but we did not do it, we let it go. This can work if there is good faith, proper regulation and an insistence that NAMA fulfils what it was set up to do. In that way the banks can get back to doing what they always did in the old days, namely, support their local area, maintain the risk in their local area and know the people to whom they are lending money. We need to be clear about that.

I strongly agree with the principles enunciated by Senator Twomey, albeit that there are technical difficulties with the amendment. Senator O'Toole indicated that the paragraphs are to be inserted after a section that defines the purposes, so I am not sure whether the amendment can be inserted at the specified point in its current form. Technically speaking, the amendment should be inserted earlier. However, I am all in favour of what the Fine Gael Party is trying to do.

Senator O'Toole said one cannot buy a dog and bark oneself, but one can.

I knew that would happen when I said it.

If for one reason or another the dog turns out to be defective in the vocal chords, or due to an awkward temperament or shyness it refuses to bark, one would be a bloody fool not to bark oneself if a burglar was approaching the house. That is not a perfect analogy.

The dog may function well in other respects.

There was almost an echo of Senator O'Toole's wonderful series of metaphors about ATM machines when he referred to the banks being able to go off and cash their pieces of paper in the European Central Bank——

Once one builds up one's credit.

Once one has built up credit. It does seem to me that to a certain extent we are issuing a credit card. I am not sure that is entirely unrelated to the fact we do not have the capacity for quantitative easing that the British, for example, have because of their dogged refusal to join the eurozone.

There goes that dog again.

Yes, we are plagued by dogs. Without the technical expertise of various people, including Senator O'Toole who is most persuasive, most people would certainly be in favour of this approach because it enunciates the principles, even if it is just an exhortation. This is what we all want; we want credit freed up. We know the banks are a bit constipated. We know they are not shelling the money out. We know that it is exactly like what always happens in big bureaucratic institutions.

One of my principal interests throughout my life has been to try to protect the 18th century core of the city of Dublin. One of the difficulties we had was with the collapse in the 1960s of a row of tenement houses in Fenian Street. The city authorities, which had done absolutely nothing whatever for decades to protect the unfortunate inhabitants of those buildings, suddenly got scared and it pulled everything in sight down. It was a gross over-reaction. The same may be true of the banks. They have been caught out at the roulette table and now they seem to be almost traumatised.

It is clear from people who appear on the radio and television that small businesses, including viable businesses, are being starved of cash. No one in his or her right mind could object to the proposed section 3(b)(ix) which outlines, "to ensure an orderly property management strategy over a ten year period". How could anyone possibly disagree with that? To disagree with it would suggest that one wants a disorderly strategy. Likewise, how could anyone disagree with the proposed section 3(b)(x) "to recover the maximum funds for taxpayers by ensuring that the principal and exclusive purpose"? That is the part of the amendment that gives rise to the principal difficulty for the technical reason that has already been explained by Senator O'Toole. Section 3(b)(xi) specifies "to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis". Is that not what we all fervently pray for? I am very much in favour of this amendment, although there may be a technical glitch. Perhaps the amendment could be considered again and reintroduced on Report Stage at an earlier point in the Bill. Apart from that, I am not persuaded by the arguments against it.

As my colleague Senator Fitzgerald has pointed out to me, in the purposes of the Bill there is a reference in section 2(b)(i), (ii) and (viii) to facilitating the availability of credit in the economy of the State, to resolving the problems created by the financial crisis in an expeditious and efficient manner and to contributing to the social and economic development of the State. They are some of the purposes of the Bill. If that is the case, why are they not the purposes of the organisation that has been set up to deal with the financial crisis?

The Government has continually said that if NAMA is set up it will facilitate the flow of credit again in the economy. That is why it is being pushed so strongly. Regardless of our view on NAMA, that is the result we want to see. Why is that not mentioned in the purposes of NAMA? That is what people seek and that is what the body is meant to do. However, it is not mentioned anywhere among the purposes, functions or powers of NAMA. We are getting to the difficulty that is at the heart of the concept behind NAMA, which is that all of this work can be done by taking the toxic assets off the banks but it still does not give the ability to deliver the objective that the Government has said it will.

This amendment, my amendment No. 24 and later amendments touch on the same issue, which goes to the core of what the Government hopes the legislation will bring about. Senator O'Toole put it very eloquently, wisely and clearly in terms of what will happen when NAMA kicks in and frees up finance to the banks to allow them to lend. As other Senators have outlined, the principle of the Bill is to free up finance for the economy. What this amendment and my amendment do is stipulate where the funding should go, namely, to first-time buyers and to fund SMEs because that is where the funding needs to be directed.

As Senator O'Toole indicated, banks will lend, as that is where they make their profit. We know they will lend. They have loaned in the past. The reason we are dealing with NAMA in the first place is because there has been reckless lending in the economy and NAMA has to deal with that. How many assets of small and medium enterprises will NAMA take over? How many home loans of first-time buyers will it take over? The answer is none. It is the assets of the big property developers that we are taking over. It is a few in society who have given in to such complete greed and have taken the State to the position it is in today. The amendments aim to ensure that money flows into the economy in the direction in which it needs to go. We need money to flow so we can create a stimulus package that will get businesses back up and running and get small and medium enterprises going again in order to create jobs and take people off the unemployment register.

Senator O'Toole might regret some of what he said. He may be right that one cannot direct institutions to lend to certain individuals but that is what our amendments seek. That is the reason my party has called for the scrapping of the NAMA proposal and the establishment of a State bank, in which we would have complete control and which would not be subject to the whims of shareholders. The first priority of that bank would be to serve the needs of the State.

I support the amendment. The subject is also dealt with in my amendment, amendment No. 24, which I will press when the time comes.

There is a technical flaw in the Fine Gael amendment. It does not take account of the fact that a subparagraph (viii) was added on Report Stage in the Dáil. The party is not proposing to remove the existing subparagraph (viii); therefore, strictly speaking, the subparagraphs in the amendment should be numbered (ix) to (xii). It is a minor technical point.

Without necessarily agreeing with everything he said, I thank Senator O'Toole for bringing a note realism to the debate. We do not live in a command economy in which the Legislature is able to lay down what commercial institutions can do beyond a certain point. It is a question of balance. The purpose of the legislation is to deal with the toxic assets by removing them from the banks and allowing the banks to lend. The purpose of NAMA is to deal with these toxic assets. I do not accept that the extensive additions to the purposes of the legislation proposed in the amendment are necessary or appropriate and do not intend to accept them. Following the numbering in the amendment, as it stands, the new subparagraph (viii) is already covered in subparagraphs (i) and (ii) and, to ensure the purposes are fulfilled, the Bill was amended on Report Stage in the Dáil to allow the Minister to issue guidelines on lending to SMEs and other classes of borrowers with which the participating institutions must comply. I am not aware that the Minister said he would substitute the word "will" for "may". The matter was discussed and he did not intend to do it. However, Senator MacSharry might have had amendment No. 63 in mind, as it provides that the Minister shall issue the guidelines to theDáil.

With regard to subparagraph (ix) in the amendment, this is not a purpose of the legislation but something NAMA might adopt to achieve its functions. Obviously, NAMA by itself cannot ensure an orderly property management strategy because although it will be a very large player in the market, it is still only one player. There will be many others. I draw Senators' attention to section 11(2) of the Bill which addresses the property market and states: "In the exercise of its functions NAMA shall have regard to the need to avoid undue concentrations or distortions in the market for development land". The Minister took a particular interest in that subsection because it is important that the property market develops on a sustainable basis. Section 11 deals with NAMA's functions, not the functions of the legislation.

The proposed new subparagraph (x) is already covered to a degree by subparagraph (iv) which is then translated into NAMA's purposes in section 10(2). This clearly sets out the objective of NAMA to achieve "the best achievable financial return for the State...". The proposed subparagraph in the amendment is clearly unnecessary. Subparagraph (xi) in the amendment is clearly beyond the scope of the legislation. The Government is and will be taking all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis. The Minister's recent appointments of a Governor of the Central Bank and Financial Regulator and his proposed restructuring of the Central Bank and the Office of the Financial Regulator will be critical to the new banking regime. NAMA will have no role in regulating the banks.

The Minister said this morning that the regulatory capital of the banks would have to be reassessed once they had realised the losses on the transfer of assets to NAMA. He also said that if the banks could not raise that capital privately, the State would provide it. NAMA will force the banks to realise losses. The problem is that the banks fear these losses, are hoarding capital and not lending. To enable them to start lending as we would like, we must realise losses through NAMA, address capital needs and ensure, through section 10, fair treatment of all customers.

Senator Alex White said the word "facilitate" was too weak. However, the beginning of section 2 states: "The purposes of this Act are . . . (b) to address the compelling need . . .to facilitate . . . ” restructuring.

It is the compelling need to facilitate, not the compelling need to provide credit.

Yes, it is the compelling need to facilitate. In the last analysis, it is a balance.

I understand the Minister of State.

A large number of amendments relating to a national recovery bank were ruled out of order. I do not intend to discuss them, as they have been fully discussed by the Minister in other places.

Senator Doherty spoke about a State bank. I recall the ACC and the ICC which were State banks established for particular purposes. It was not the case that the Minister could ring the ACC and the ICC and tell them what to do. Even State banks must operate on commercial criteria with regard to the rest of the market. They must operate at arm's length. A Minister cannot dictate that they shall lend to this, that or the other person. It does not work that way. The idea seems to be that a State bank is a panacea and can do many things private banks cannot do. State banks exist in a marketplace with private banks; therefore, they are not essentially a stronger instrument to achieve State objectives. That is a mirage and experience shows that to be so.

The foundation of the Fianna Fáil-Labour Party Government of happy or not so happy memory, as the case may be, from 1992 to 1994 — personally, I regretted that it ended the way it did — was the so-called third banking force which was to be a State bank. I was directly involved in producing a paper, the centrepiece of which was Fianna Fáil accepting the Labour Party idea of a third banking force. The only trouble is that when we were in government for a year or two, the Labour Party no longer appeared to be particularly interested in the third banking force.

Senator O'Toole mentioned old-fashioned conservative bankers. I met one recently who described himself as such. He is partly based in Ireland and partly based across the water. He told me he was a conservative banker and, therefore, doing reasonably well.

Senator Alex White asked how we might stop the banks from returning to the casino. It is a pity Senator Hanafin, who is from north Tipperary, is not present. Senator Alex White's question rather assumes that a casino will be built and that the legislation will allow for such a development to take place. All I will say on the matter is that the Government has considered matters of this nature in the past and no doubt it will do so again in the future. I cannot say that I am personally enamoured of casinos.

As the Minister of State will appreciate, the casino to which I referred is much more metaphorical in nature.

I would be extremely happy about developments involving racecourses etc., but I am not sure we need a replica of the White House. I am sure experience has taught us that some of these projects should be somewhat less ambitious in nature.

Senator Norris referred to how people who for health and safety reasons had pulled down Georgian Dublin. Happily, however, they did not pull down the buildings on North Great George's Street. I am aware that what remains of Georgian Dublin, which is quite a lot, is to be submitted for consideration as a world heritage site.

Senator Twomey made a good case in respect of this amendment. The Minister of State indicated that there would be a strong input from outside the banks in cases where small businesses and individuals were refused credit. How far has the thinking in this regard progressed to date?

There is an ongoing problem in this regard, which is sometimes outlined in terms that are too black and white. Banks certainly are lending money. It has been stated that cattle prices are far from wonderful at present and that part of the reason for this is that the banks are not lending in the way they would have done in previous years. We are working on an appeal mechanism that will incorporate an outside element. Full details in respect of that mechanism are not yet available. The Tánaiste and Minister for Enterprise, Trade and Employment has also established a monitoring group to which systemic problems relating to lending to particular sectors can be brought.

Is the amendment being pressed?

I will withdraw the amendment and reintroduce it on Report Stage.

Amendment, by leave, withdrawn.

Amendments Nos. 24, 42a and 45 are related and may be discussed together by agreement. Is that agreed?

On a point of order, amendment No. 46 was previously grouped with amendment No. 23 and that probably should have remained the case. However, would it be possible to group it with amendments Nos. 24, 42a and 45? Taking this course of action would make some sense because it does not really belong anywhere else.

It will be discussed on its own.

We have already ventilated many of the issues relating to it and it would seem sensible to include it in this group. I propose, therefore, that it be grouped with amendments Nos. 24, 42a and 45.

Is there agreement on that matter from the Government side?

Is it agreed, therefore, that amendments Nos. 24, 42a, 45 and 46 are related and may be discussed together by agreement? Agreed.

I move amendment No. 24:

In page 17, paragraph (b), between lines 19 and 20, to insert the following:

"(ix) to oblige all participating institutions to increase lending to SMEs and first time buyers and to report on lending activity in these areas bi-monthly to the Houses of the Oireachtas,

(x) to oblige all participating institutions to cease mortgage repossession for a period of two years, in cases of genuine hardship, following commencement of this Act.".

Amendments Nos. 24 and 42a are tabled in my name. On Second Stage I indicated that I would table a number of amendments to try to support those who are suffering and who cannot obtain access to credit. I refer here to first-time buyers, SMEs and also those who were caught up in the casino culture in which, as Senator Alex White stated, the banks were involved. Within that culture, property prices were pushed up and people now find themselves in negative equity.

Amendment No. 24 involves a simple proposal and I do not expect to speak at length in respect of it. Other Senators, in their contributions on previous amendments, eloquently outlined the matter to which it relates, namely, the freeing up of credit to viable SMEs and first-time house buyers. The debate on amendment No. 23 led to my concerns in respect of the legislation being amplified. If we cannot direct funding to SMEs and first-time house buyers, then there is a serious flaw in the legislation and it is evident the country is being sold a pup. There is nothing in the legislation to prevent banks from returning to the casino culture in which they were previously involved.

On Second Stage, the Minister for Finance referred to advice he received to the effect that there will be an increase of 20% in property prices during the next ten years and that a 10% increase has been factored into the NAMA business plan. If that is the type of information on which banks are relying, why then would they then not proceed to fuel another property bubble by lending to speculators and developers, leaving first-time house buyers and SMEs to go without?

Amendment No. 42a deals with house repossessions, a matter which has been well debated in this House and in the Dáil during Private Members’ time. The position in this regard must be addressed. The issue of house repossessions goes to the core of the Irish psyche and relates to our history of being dispossessed. When the country was under British rule, people were evicted from their houses by their landlords by means of the thatch roofs being set on fire. It was as a result of such events that the Land League was established.

The notion that modern banks might replicate the behaviour of the landlords to whom I refer is anathema to the people. The latter cannot understand why such behaviour is being facilitated or is at least not being prevented by the Government. What makes matters worse is the fact that we are lending billions to the institutions that are involved in this practice. Ordinary people who are trying to get by on a week-to-week basis just cannot understand what is happening.

When contributing on similar amendments in the Dáil, Deputy Morgan referred to trying to quantify what constitutes 1 billion as opposed to 1 million, particularly in the context that there has been much reference to billions of euro during the past 12 months. Deputy Morgan indicated that someone explained to him that it takes 12 days for 1 million seconds to pass but that it takes 32 years for a billion seconds to pass. The type of investment we are making in the banks at a time when we are not assisting those who were caught out as a result of the activities of developers and bankers which pushed house prices up to an all-time high and who are paying out well above the average just does not make sense. The people to whom I refer have lost their jobs or their incomes have been reduced and they cannot meet their mortgage repayments and are being taken before the courts.

If the Minister of State were to indicate that only one house repossession occurred last year, it would not alter the fact that amendment No. 42a should be accepted. One person being dispossessed by a financial institution the ordinary taxpayer of the State is bailing out because of its corrupt practices is one too many. It is one family and broken heart too many. We all know that, unfortunately, it is not the case that it is only one family that has been dispossessed. We have seen a large increase in the number of applications for repossessions through the courts. Between 2007 and 2008, the number of applications increased by 100%. There is every likelihood that these applications are being progressed in the High Court in anticipation of the NAMA legislation going through when they will be processed further.

I ask the Minister to take my amendment on board and if he feels the wording is wrong, he should come back with his own terminology. However, he should agree to what is intended in spirit by the amendment. I understand the Minister will not accept the first part of the amendment because of the amendment put forward by Senator Twomey and his colleagues in the Fine Gael Party. However, mortgage repossession is an issue that must be dealt with.

The second amendment in this grouping is No. 42a. This again deals with the issue of mortgage repossession and allows for those who took out mortgages post-2004 and were forced into a situation of paying way over the odds to have their mortgages written down by the financial institutions, as long as those mortgages do not exceed a limit of €500,000 and the maximum write-off will not exceed 30%. Applications for this would only be accepted within one year of the commencement of the repossession process.

The second part of this amendment allows customers of these institutions with mortgages on primary residences to move from fixed interest rates to variable rates without incurring a financial penalty. I have raised this issue previously in the Seanad and in the context of the local authorities. I am aware we could deal directly with local authorities without dealing with the financial institutions. Some local authorities throughout the State have tenants in local authority houses who have been provided with mortgages by the local authority. Some of these tenants are paying over 10% fixed interest rates. It is scandalous this continues in this day and age. Some hundreds of these mortgages are in existence in my county of Donegal and I know this situation is replicated throughout the State. The issue should be dealt with.

The third part of the amendment seeks to ensure the services provided to disadvantaged urban areas and rural towns by these banks continue to remain in place. Where there are gaps, a basic, limited banking service should be provided for those who are financially excluded so that they have right of access to the same types of services as other communities. I ask the Minister to consider these amendments. I intend to press amendment No. 24.

I wish to address the second part of amendment No. 24 which concerns the proposed moratorium. The Minister and Members are aware that I have pursued this issue and have sought to prevent every repossession of family homes over many months. With another group of individuals, I have drawn up a set of proposals which was presented to every Member. Some of those proposals have been debated here. The Minister received those proposals in August.

I know the Irish Banking Federation, IBF, in conjunction with the Money Advice and Budgeting Service, MABS, issued a statement of intent with regard to working with people and announced the establishment of its own oversight committee to monitor the application of that statement of intent. I recommended on the Order of Business today that the Leader of the House should contact the IBF to see if Members could sit on that committee and contribute to that oversight.

Notwithstanding the stated intentions of those banking institutions affiliated to the IBF, we need to provide some legislative basis to protect family homes against repossession. Not all the institutions are covered by the statement of intent. Start Mortgages, GE Capital and, perhaps, Springboard are not covered. I am not too sure about Springboard as it may be affiliated to the IBF, but the first two are not. If we did an analysis of repossessions or of the applications for court orders for repossessions, we would probably find that the increase in numbers is largely included in those institutions.

It does not appear that any amendment in this regard will be included in this legislation, but perhaps an amendment could be included in the Enforcement of Court Orders (Amendment) Act 2009. We should look at giving the public some element of further security and this should be enshrined in legislation. I accept we have the regulator's code of conduct for mortgage arrears and that we have had the IBF protocol heretofore and that we had a further IBF commitment today. However, much of the language uses terms such as "in the event that" or "where appropriate" which scares me somewhat.

I am not trying to score any political points in this area and fully accept the aspirations of all Members in trying to cater for families faced with difficulty in the current economic circumstances. Something must be done to acknowledge that what we see is but a ripple in what could build to be a tsunami. The ESRI's predictions of 35,000 may well be conservative. These figures are not cited to scaremonger in any way but to encourage us to take the appropriate steps to prepare for what could be a very difficult situation in the coming years. I think we will face these difficulties and do not think anyone would blame us for being prudent. While I do not support the entire amendment, I ask the Minister to take these points on board.

I have tabled amendments Nos. 45 and 46 which are included in this grouping and I note the first two paragraphs of Senator Doherty's amendment No. 24 reflect the same issues. I recognise the work Senator MacSharry has done on his paper, a copy of which I received. I thank him for that work and have had an opportunity to consider it. He makes the points many of us have made in the House with regard to the danger and risk for people of looking down the line at repossession of their family homes. This is a real and present danger for many people. It is no answer to this concern to say the statistics show that this year there were only 20 actual repossessions, as the Minister pointed out when he was here. This is a developing situation for many people and there is the sense of a lull before what many fear will be a storm for them and their families.

Senator Doherty made a good point that had not occurred to me when he spoke about the figures, even if only a small number of people are concerned currently. We could be wrong. Let us hope the predicted figures are too pessimistic and things do not turn out as badly as the ESRI and others have predicted. Even if we take an optimistic view and say that fewer people will be affected by the situation, the measures being proposed here are valid. Just because they will not have to be invoked in a large number of cases does not mean they should not be put in place and enacted.

One could make the case for these proposals on the basis that one was confident they would not have to be invoked in too many cases and there would be less of a burden on the financial institutions. We should not overplay the numbers or statistics games in this regard. I am not saying the figures are not relevant, but at this point the question of how many people have been turned out of their homes is not decisive.

The initiative today of the Irish Banking Federation is welcome and has been welcomed by all sides. However, it is not sufficient and does not go far enough. The Labour Party can take some credit for the IBF response following its initiative in the other House last week. I hope that in time the IBF initiative will be extended and we will find some way of ensuring that some of the institutions not covered by the IBF will be brought into the net.

Sitting suspended at 7 p.m. and resumed at 7.30 p.m.

I welcome the Minister for Defence,Deputy Willie O'Dea. We are discussing amendment No. 24 and Senator Alex White was in possession.

I welcome the Minister. I believe we had also moved on to discuss amendments Nos. 42a, 45 and 46, the latter two having been tabled by the Labour Party. As regards the issues involved, some of which we covered in the earlier debate on lending to SMEs, we have had an interesting discussion on the extent to which the Government believes it can or should intervene to bring about the outcome Ministers have constantly invoked as the raison d’être for the NAMA legislation, namely, to get credit flowing again in the economy. We were making the point that there was some irony associated with the fact that, on the one hand, this was being trumpeted as being the key, if not the only objective of NAMA, while, on the other, it was being argued that this could not be delivered, since it was not something a Government was in a position to achieve. We had that discussion in tandem with the debate on an earlier tranche of motions and as this discussion includes amendment No. 46, I am just touching on that point again.

When the Minister of State, Deputy Mansergh, was here, he made a point to which I want to hark back on lending policy and the extent to which the Government could, in fact, bring about a resumption of lending in the real economy. When he was talking about a State banking system, the ACC and the ICC, he said, in effect, "A State bank is not the answer because no Government can direct a State bank." A State bank cannot be told to whom it should lend and to whom it should not lend. I understood the Minister of State to say, in the context of the State banks in existence in the 1990s, that such an institution must operate with a commercial mandate. That is an interesting argument and seems to demolish in one fell swoop one of the Government's key jeremiads against nationalisation, namely, that it would risk the prospect of politically inspired lending. This is one of the three or four key arguments made by the Government against nationalisation, the risk of politically directed lending. On the other hand, the Minister of State made what I believe to be a correct point that State banks can, in fact, operate — although they have a public interest mandate, since the State owns the shares — with a commercial mandate.

We are familiar with many commercial semi-State companies. It has been possible for Governments of all persuasions to have commercial semi-State companies under particular Departments operating with a commercial mandate. I do not assume that if we had a nationalised bank, the Minister for Defence or anybody else would be tempted to tell that bank to whom it should or should not lend. I imagine he would resist that temptation just as any Minister would. That argument never held much water. The comments of the Minister of State at the Department of Finance, Deputy Mansergh, about state banking generally seem to undermine it further. Nobody is suggesting that intervening to ensure what Senator Doherty seeks in his amendment, and we and Fine Gael seek in ours, requires telling a bank to whom it should lend. There are other ways in which to deal with this such as deciding the proportion of lending that a bank dedicates to the SME sector as opposed to the proportion it might give to property developers. We all accept that a bank, whether public or private, must operate to a commercial and banking mandate.

We have argued forcibly for a moratorium in this and the other House. There ought to be a substantial period during which the banks would not be permitted to move against somebody in possession of his or her principal private residence. That ought not to happen unless the arrears on any mortgage were in excess of 24 months or two years. I am aware of the code of conduct and we have welcomed the initiative that the Irish Banking Federation, IBF, announced this morning but that has not gone far enough. The Government needs seriously to take on board what Senator MacSharry said earlier about the real risk that so many thousands of people face of being put out of their homes. Now is the time to take these initiatives, not when that occurs.

I welcome the Minister for Defence. Our party tabled amendments similar to these in the Dáil and supports the proposals that my colleagues have put forward. They have referred to today's statement from the IBF. I commented on this on the Order of Business. It is right to acknowledge such a statement but given the massive investment by the State in the banking system and the underpinning guarantee that is provided by the Irish taxpayer, such statements are the very least to which we are entitled and the offer is the least that should be made.

There are two additional reasons the Government should consider and adopt these amendments, or a version of them. Senator Doherty touched on the first but it has to be repeated because it is so important. It should be unacceptable for institutions largely kept afloat by taxpayers to evict or repossess the homes of those taxpayers who are in difficulty through little fault of their own. When this issue is raised the point is made that it refers to a small number of homes. For it to happen to one home is one too many. It is particularly important, not just because of what is happening now but what is likely to come. It is essential to have in place the foundations to deal with the crisis that could hit homeowners and their ability to repay their mortgages. That is a social and ethical reason to support this amendment, which should be enough.

A further reason, however, is economic self-interest. The last thing that Irish banks or NAMA should want is for the quantity of the "distressed assets" they want to manage to increase significantly because home ownership is called into doubt and many homes might be repossessed. That would exacerbate the situation the banks are in and the pressure on the taxpayer, making it more difficult to get what we want out of the banks. Several statistics released in recent weeks show that the savings rates by Irish consumers have risen significantly. That is happening in part because people are uncertain about whether they can pay their mortgages next year and what their earnings will be. A framework like that proposed in the amendment would play a small but important role in restoring the kind of confidence people need to ensure that they spend their money, in the expectation that they will have a similar income next year and the year after.

These amendments are justified on economic grounds and it is important to stress that justification. Even without it we need a more social and ethical dimension to banking here and these amendments provide an excellent example of how to do that.

I thank the Senators for their kind welcome. The issues in the first part of the amendments were debated at length in the Dáil. The Minister brought forward Report Stage amendments to deal with lending to SMEs. The section this amendment proposes to amend clearly outlines the purpose of the Bill, "to facilitate the availability of credit in the economy of the State".

Section 210 deals with the specifics of this purpose and reflects the Government amendment to provide the Minister 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, to other sectors. These guidelines will be mandatory and will be designed to deal with exactly the types of situation Senator Alex White described.

The provisions of the second part of the amendment were discussed extensively in the Dáil where the Minister set out his opposition to the proposed amendment. I do not wish to cover all the material again but to make some points. Including such a provision would have a detrimental funding and ratings impact on participating institutions. There is no evidence that an avalanche of repossessions is happening or is expected soon and there were only 20 legal repossessions by covered institutions for the period to the end of September 2009. I accept that what has happened is not necessarily a guideline to what will happen in the future. I am aware that there is a backlog of summonses in the High Court but we are taking steps to deal with that. We have already undertaken significant work in this area with the introduction of a code on mortgage arrears and an agreement with the Bank of Ireland and AIB to extend to 12 months the period before which they will apply to the courts to commence an enforcement of legal action for repossession. I also acknowledge this morning's statement from the Irish Banking Federation.

I have read Senator MacSharry's very useful paper and have passed it on, and spoken, to the Minister about it. It will certainly be part of what we propose to do, to implement the commitment in the programme for Government to introduce new measures to protect families having difficulties with their home mortgage repayments. In view of the fact that the Government is working on that code I do not see the need to accept the amendment.

I am very disappointed by the Minister's response, particularly to the second part of the amendment because we debated fully a previous Fine Gael amendment when the Minister outlined his reasons for not accepting it. That amendment was replicated at the beginning of my amendment and in the Labour Party amendments. I welcome Senator MacSharry's comments on the amendment. The legislation is the perfect vehicle to give a guarantee to those suffering genuine hardship that their homes will not be repossessed by financial institutions kept afloat by NAMA. Not including this amendment is reason enough to reject the Bill for anyone with a social conscience. It clearly shows the Government's priority is not for those with genuine hardship cases. I am disappointed in the Minister's response.

I too am disappointed at the Minister's response. The Labour Party's amendments Nos. 45 and 46 propose a moratorium on repossessions which have much support across the political board. It is also a genuine initiative that could be taken properly in the context of this legislation, particularly when we are attempting to have so many people buy into the Government's proposals. The same applies to the configuration of lending that the banks would engage in for small businesses. Accepting these amendments would put legislative form on what the Government has been saying in defence of this legislation. I am disappointed at the Minister's response in that regard.

I accept the Minister's response in which he has made it clear such proposals are part of the programme for Government and that they will be examined on an ongoing basis. In addition to the Irish Banking Federation's statement this morning and working with MABS, we will probably need a legislative basis for this commitment. It will probably be similar to the Enforcement of Court Orders (Amendment) Act passed earlier in the summer. There are some institutions not affiliated to the federation such as Start Mortgages which are seeing most of the activity in orders for repossession. While we are only feeling a ripple at the moment, no one could accuse us of being too prudent in planning for anticipating a tsunami, even if it did not arrive.

I agree with much of what has been said, particularly by Senator MacSharry. We should not be relying on the voluntary response of the financial institutions or the code of practice that is in place. Obviously, a stronger mechanism is needed which was recognised in the programme for Government.

The one commitment I can make to the public is that the Government will implement that particular section of the programme. It is examining ways of doing so. Dealing with this matter in a more flexible way is better than enshrining it into legislation which must be debated in the House every time a change needs to be made to it.

The Government is aware of the situation concerning mortgage arrears and those facing actions for repossession. We are determined to deal with this and have started work on it already.

I agree with Senator MacSharry that there is a need for a legislative basis to deal with this issue. I also accept that many of those institutions with orders before the courts are not covered by this legislation. Some are, however, covered by the NAMA legislation and that is why it should be dealt with now even if it is just a stopgap before legislation to cover all can be introduced.

I want to give the Minister a bit of advice. Regardless of the numbers, if one family is affected, it is one family too many. Some speakers have said there have only been 20 repossessions to date. However, I am glad the Minister acknowledges there is a backlog. The fear is that as soon as this legislation goes through, that backlog or ripple will become a tsunami.

It is no ripple but a tsunami for the one family whose house is being taken off them, however. Their world is being turned upside down. As I said to the Minister for Finance yesterday on Second Stage, he will never fear having his home repossessed. Those in the political class will not have these concerns; it is the working class and middle-income earners. It is not just about gimmicks and perceptions. This amendment could fundamentally alter people's lives, whether it is one, 20 or 100 families. A two-year moratorium could help in dealing with the tsunami that may come in the future, as Senator MacSharry and various reports on negative equity have said. It would be the bailout for those who find themselves in arrears with their mortgages. I am disappointed the Minister will not accept the amendment or even give a firm commitment with a date for legislation to be introduced to involve all financial institutions, not just those covered by the NAMA Bill.

Amendment put.
The Committee divided: Tá, 22; Níl, 27.

  • 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.
  • Prendergast, Phil.
  • Regan, Eugene.
  • Ross, Shane.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • 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.
Tellers: Tá, Senators Pearse Doherty and Alex White; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.
Section 2 agreed to.
NEW SECTIONS.

I move amendment No. 25:

In page 17, before section 3, to insert the following new section:

"3.—Every 30 days NAMA shall report to the Houses of the Oireachtas setting out details of its operation including the identities of the owners of, and particulars (including value) of, any assets acquired by it during the period in question valued at over €100,000.".

We had a discussion earlier on some of the issues that arise in this amendment, in particular, on the time period involved, etc. I want to reflect on these issues and that discussion. Therefore, I will not proceed with the amendment at this time. I will withdraw it and reserve my position on whether to reintroduce it on Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 26:

In page 17, before section 3, to insert the following new section:

"3.—Notwithstanding any provision of this Act, no person may participate in acquiring any benefit or advantage under this Act unless such person is tax resident within the State and has complied with his or her tax liabilities to the State.".

I do not propose to proceed with this amendment at this time either.

Amendment, by leave, withdrawn.
Section 3 agreed to.
SECTION 4.

Amendments Nos. 27 and 28 are related and may be discussed together, by agreement. Is that agreed? Agreed.

Government amendment No. 27:
In page 19, line 30, to delete "(wherever situated and regardless" and substitute "wherever situated (regardless".

These are minor technical amendments introduced to clarify the definition of "development" and remove any doubt — there was a little doubt — that land and development loans given by participating institutions in respect of developments situated outside the State are eligible for transfer to NAMA.

Amendment agreed to.
Government amendment No. 28:
In page 19, line 32, after "enactment" to insert "or applicable law".
Amendment agreed to.

I move amendment No. 29:

In page 20, line 32, after "Act" to insert the following:

"regardless as to whether NAMA has a majority or minority holding or interest in the entity concerned".

I am interested to know what the Minister's response will be to this amendment, on which perhaps he can reflect. It is to add to the definition of "NAMA group entity" the words "regardless as to whether NAMA has a majority or minority holding or interest in the entity concerned". I would like to hear the Minister's response first to see whether we will proceed with the amendment.

The proposed amendment to the definition of "NAMA group entity" appears to be unnecessary because it is explicit in the definition that a subsidiary, body corporate, trust, partnership arrangement, joint venture, association, syndicate or other arrangements formed, registered, incorporated or established by NAMA for the purpose of performing any functions under this Bill is a NAMA group entity, regardless of the size of the holding NAMA has in that entity.

I accept what the Minister has stated and withdraw the amendment.

Amendment, by leave, withdrawn.
Section 4, as amended, agreed to.
Sections 5 to 7, inclusive, agreed to.
SECTION 8.
Amendment No. 30 not moved.

I move amendment No. 31:

In page 24, between lines 24 and 25, to insert the following subsection:

"(2) The establishment day referred to in subsection (1) shall not precede the submission of an updated business plan and an analysis of the assumptions underpinning it to the Oireachtas Committee on NAMA.”.

Amendment put and declared lost.
Section 8 agreed to.
Section 9 agreed to.
SECTION 10.

Amendment No. 32 is out of order as it involves a potential charge on Revenue.

Amendment No. 32 not moved.

Amendments Nos. 33, 35 and 35a are related and may be discussed together, by agreement. Is that agreed? Agreed.

I move amendment No. 33:

In page 25, subsection (1), between lines 2 and 3, to insert the following:

"(d) facilitating specified service providers in the fields of the provision of emergency housing, transitional housing and related areas to have preferential purchasing rights in relation to the purchasing of such housing units, particularly where there are housing problems as defined by the local authorities.”.

I welcome the Minister for Defence, Deputy O'Dea, and wish him well in dealing with the legislation. I am proposing my own amendment, amendment No. 35a, and will also speak to Senator Mullen’s amendment.

Page 26 contains the words "distribute assets in specie to the Minister“. It is my understanding that the words “in specie” mean that something will be transferred as is, more or less, that it will not be developed land and that it will not be land that will be transferred to the Minister for Finance in order for him or her to liquidate or sell. I tabled amendment No. 35a to gain an understanding of the Minister’s intentions. This is something I raised with him during the course of the summer, that there should be some community input, community gain or added value for ordinary people and communities.

The only reason I can see that these words are included is that the Minister will use something for the common good or the implementation of public policy. Therefore, if, for instance, NAMA has a field that is now worth nothing more than agricultural value, it might be made available for the building of a hospital, a school, houses for local authorities or a sports or other local facility. In other words, the Minister could pass it on. I presume — I want to be assured on this point — this will not be a cash transaction at any stage and that the term "in specie” means that it will involve a transfer of deeds for one property to another.

The other issue that struck me was that if, for instance, NAMA found itself with 50 houses in an area, in which their value had certainly not met the cost of building them but where they were appropriately situated for use by a local authority, the local authority might get them from the Minister, displace the cost of building alternative housing and thereby save money through a transfer of property deeds, etc.

I have given only a few examples of what I am talking about. I have proposed the insertion of the words "to facilitate, inter alia, the development of infrastructure and public services for communities recovering from the financial crisis”, but it is necessary to gain an understanding. It is not that I consider the words I am proposing are crucially important, but I want to hear the reason the Minister would want some NAMA deeds, property or assets transferred into his or her ownership.

I know from where Senator O'Toole is coming. While it would be great if, ultimately, there could be a community gain if NAMA were to make a profit and get credit flowing again, I have a concern that when assets ultimately come into the ownership of NAMA, as a result of default or otherwise, it will undermine its ability to make a profit if we do sweet deals for the certain local authorities or otherwise. I am interested in hearing what the Minister has to say in that regard. I agree that infrastructural projects such as community facilities and social housing need to be undertaken, but not if it is the case that Senator O'Toole wants the State to rape NAMA for these assets without having to pay for them because that would undermine effectively the functions of NAMA. Like Senator O'Toole, I am interested in hearing what points can be made in that regard.

I support Senator O'Toole's amendment which is an important one and I agree completely with my colleague. I do not share Senator MacSharry's reservations, although I am sure they are well meant. I accept what Senator O'Toole stated. It is almost like the phrase "in kind" and it refers to material assets. One of the reasons I am particularly keen on this is that I have since January been suggesting that there should be a kind of land pool. Since much of this distressed land is around the major areas of population, it should be possible and would be a laudable objective of Government to take control of some of that land, divide it into allotments and issue it to every unemployed person in that area. To have a small parcel of land, a kit of tools, seeds, plants, instruction booklets and so on would get them out of the house, be a cure for depression, give a bit of exercise and supplement both their budgets and their diets. I would include that with all the other objectives to which Senator O'Toole referred.

Why should the State not have access to these things if infrastructure projects can be aided? That is exactly what we want. We want to get infrastructural projects moving. I strongly support what Senator O'Toole has said and I look forward to the Minister's reply.

There is scope to have a good debate on this issue at a later date. A lot of land and property is being taken over by NAMA. There will be groups of houses, property and land for which NAMA will have no function. When NAMA is managing this type of property, it might not get around to making contact with the relevant authorities in regard to what it might be able to do with it. It would be good to see a proactive approach between the different State agencies. For example, if the NRA is planning to build motorways or roads, it could contact NAMA to see whether the infrastructure is there for it to access. The same goes for housing and other property.

However, this could also go the opposite way. NAMA will be left with thousands of half-built houses, which will possibly not be in the best areas or zones, and there might be a desire to offload these to NAMA for social housing, which would be inappropriate because they might be socially isolated or not close to infrastructure. Nonetheless, while it can go both ways, this is certainly something that should be considered across Departments and agencies. It is not just a housing issue as there is also an infrastructural aspect, which could be very useful. We should consider this matter again when we have finished dealing with the Bill.

I support amendment No. 35a in the names of Senators O’Toole and Ross. Earlier I moved Senator Ronan Mullen’s amendment No. 33 in his absence. I also wish to deal with my amendment No. 35, which seeks to make appropriate assets available for public, community or social use either free or at a non-commercial cost, or transfer assets to appropriate statutory agencies to facilitate such use. The motivation for this is to try to make up for the lack of facilities for young people across the country, particularly in the commuter belt around Dublin.

I carried out a survey during the last year of several hundred young people across the commuter belt, asking them what they thought they most needed in their area and what facilities were lacking. I can make the report available to the Minister. From the responses we received, we found that different age groups felt they could not go to youth clubs because none existed. Over 60% of 10-year old and 11-year old children had nowhere to go in their locality. When we asked them in focus groups what the result of the lack of facilities was, one comment we received was that it lead to a lack of integration with their peers and anti-social behaviour with everyone else. The feeling we got from talking to them was that all teens would use a youth café-type facility.

We also carried out interviews with individuals involved in providing facilities for young people. Mr. Tommy Lavelle, programme manager at Kildare Youth Services, said:

One of the main obstacles to providing services for young people locally in Kildare is the lack of community-owned facilities. Unfortunately a lot of our work currently is carried out in commercially owned properties, which means paying commercial rent.

Geraldine Hogarty, regional director of Meath Youth Federation, said:

Like most voluntary organisations, the main challenge is funding, particularly this year because our budget has been cut dramatically, which means we've had to close our facility in Ashbourne. We are hoping to save the youth club by using St. Declan's school but the drop-in centre we operated three nights a week for older teenagers is gone.

This is the type of reaction we are getting across the commuter belt. To try to provide facilities, particularly for young people, is very difficult because those involved must pay commercial rents and, with the cutbacks, they are finding it very difficult to find the money.

The amendment calls on the Government to recognise this and to put a process in place to enable NAMA-type properties to be made available to youth groups. We recognise that this would be on a short-term basis, perhaps for a short number of years, and we would like it to be for a peppercorn rent. What we suggest is a process whereby the Government can put this into action. The first step would be the identification of the need for these facilities, which would probably initially involve some sort of analysis carried out in some 50 towns and villages around the commuter belt, and then throughout the rest of the country, to find the gaps. Some towns and villages already have facilities available for young people but many do not, say, 60%.

The second step is the analysis of the supply. One of the aspects the €240 million annual cost of running NAMA will cover is the assessment of what properties are available in town and village centres in terms of empty office blocks and empty retail shops. NAMA will carry out an assessment of how likely it is for these properties to be rented out or sold in the short term and medium term. No doubt, because of the amount of oversupply — anybody can walk down the streets of any of our towns and villages and see the amount of oversupply — one of the points that will come out of such a study by NAMA is the number of properties that are likely to remain vacant for a considerable time in the future.

What we are then asking is for NAMA to direct the owners of the properties to enter into arrangements with those identified groups which lack facilities, on a peppercorn rent-type basis, for a short number of years. We recognise and hope that in years to come these properties will become more desirable as the economy picks up and, as it does so, the Government will no doubt have more resources available to provide additional funds to these youth groups so they can expect in a number of years perhaps to pay higher rents or purchase their own properties. In the short term, when that funding is not available and when the properties are available, we suggest they should be made available at a peppercorn rent for a short number of years. I ask the Minister to consider this amendment.

I support Senator O'Toole's amendment, which makes sense. If I understand it properly, we are referring to assets that have already been transferred from NAMA to the Minister; therefore it is not a case of raping NAMA to provide for infrastructure such as schools and other facilities. My amendment No. 32 was ruled out of order, rightly so, and perhaps it showed lack of experience on my part in terms of the levy. However, the core of my amendment had the same idea behind it, namely, that we should be using some of the assets of NAMA to provide for the future infrastructure of the State.

I understand the point made by Senator MacSharry, which was that we cannot just open the asset trunk and take whatever we want, and that we need to manage these assets and ensure the State recoups the billions of euro we will pay for them. However, where it makes financial sense, where resources are needed and where greenfield sites are required for infrastructural projects such as railways, new schools or housing estates in areas where it is proper that there should be housing development with all the access and amenities delivered, then it does make sense. The contrary to this is where a local authority will take out a loan from a financial institution, perhaps the same institution covered by this legislation, pay a high interest rate for it, then go to building developers and probably pay over the price for a housing estate to provide social housing, when there is a similar asset in NAMA that we already own but do not decide to use for that purpose. It makes sense that this proposal has been made. It is not a case of opening up everything and asking where we will locate these assets throughout the country but rather a case of where there is a need for society and where it makes financial sense, it should be followed.

The proposal by Senator O'Toole is different from mine because it deals with assets already transferred to the Minister, whereas I and others have spoken about assets with NAMA that should be at the disposal of the Oireachtas for building the type of infrastructure that is needed, such as schools, hospitals and community services, if it is financially prudent to follow that course of action.

I do not see the difficulties with Senator O'Toole's amendment, which I fully support. It is an enabling provision, not an obligation on NAMA, to transfer assets in specie. It is not limiting, as it specifically states “to facilitate, inter alia, the development of infrastructure and public services“. It seems it can be in the interests of both parties. Since it is not an obligation, there will have to be consideration for the transfer of these assets. In all the circumstances it is not a question of the Minister appropriating property, but it does provide some guidance on what these assets may be used for. As it states “inter alia”, it does not constrain the Minister unduly on what use can be made of the assets. If the assets cannot be used for these purposes, what is the purpose of the provision itself?

Senator MacSharry spoke about sweet deals and so on. There has to be consideration. It must be a sort of arm's length transaction between NAMA and the Minister. Why not have deals of this nature in the public interest? It is a good amendment and if we are to have any reasonable dialogue on the Bill in this House, it is the type of amendment that should be accepted by the Minister. What is the intention of this particular provision? What would be the uses of such property when transferred in specie?

I support the points Senator Hannigan made on our own amendment. It states:

In page 26, subsection (2), between lines 10 and 11, to insert the following:

"(a) make appropriate assets available for public, community or social use either free or at a non-commercial cost, or transfer assets to appropriate statutory agencies to facilitate such use,”.

There is a huge economic challenge now more than ever, but there is also a political dilemma facing a generation of politicians of a magnitude that has never occurred in the history of the State. We will all make cases for the retention of funding for various resources and services, but one of the poor relations in the community and voluntary sector is that of youth work. Senator Hannigan quite rightly points out that there is a poverty of resources in respect of youth facilities. There are a few very successful youth cafés in my area, such as those in Skibbereen, Bandon and most recently in Dunmanway. As I was involved in the creation of the Dunmanway youth café, I know how difficult it is to source funding.

There are infrastructural problems with projects such as youth cafés, for example, locating a suitable premises, that can make or break the projects. We see so many housing estates, apartments and other assets that are lying idle owing to the economic conditions. We are now in a situation where we can do something about it and I think this motion is worthy of consideration and adoption.

The former Minister of State with responsibility for youth affairs, Ms Síle de Valera, published a youth strategy in 2003. It was the first co-ordinated approach to youth work in this country and it dealt with the period 2003 to 2007. We are now in 2009 and there has been no successor to that strategy. That is indicative of the failure of the Government to look in a co-ordinated way at providing facilities and developing a new strategy.

Family resource centres could also benefit from this amendment. We all have been lobbied extensively by people in family resource centres to retain funding and to meet head on the McCarthy report which seeks to merge, reduce in number or abolish these centres. Many of them do not have suitable premises, yet they are paying for leases and rents with effectively dead money because they will never realise the assets involved, even though there is a short-term return. We should look at this motion in the spirit in which it is attended and do something about providing resources in these critical areas. The results of Senator Hannigan's survey on youth attitudes in the commuter belts is available on the Labour Party website, www.labour.ie.

As explained, NAMA must have a commercial remit and generating a return for taxpayers is its overriding objective. The purposes and powers of the agency have been carefully drawn up to ensure it can operate effectively and generate a return on the State's investment.

That being said, the Minister is not opposed to giving Ministers and State agencies a first opportunity to purchase NAMA assets where this is important to social developments in their areas, so long as the purchases are at a commercial rate. For example, NAMA may be in a position to facilitate the Department of Education and Science or the Department of the Environment, Heritage and Local Government where these bodies have requirements such as schools, parks and so on. These requirements facilitate the creation of desirable developments and encourage vibrant and sustainable communities. Such bodies could be given a first option on disposals for a limited period and they would have to pay the reasonable market price.

It is unnecessary to include Senator O'Toole's amendment under section 12(2)(h) because that is explicit from the purpose of the Bill which was amended by the Minister in the Dáil to include a phrase “to contribute to the social and economic development of the State” in section 2(b)(viii). The needs of the community and the economy will change over the ten-year life of NAMA and it has sufficient powers to address the various issues. The inclusion of that amendment by the Minister on Report Stage in the Dáil gives NAMA sufficient powers to do the very desirable things that are being discussed in this House. It also enables NAMA to give guidelines, directions and so forth. That is a much better way to proceed than enshrining the thing in law because the needs of the community and the economy will change over the projected ten-year lifespan of NAMA. The Bill, with its purposes amended by the Minister in response to the debate in the Dáil, provides a much more flexible way to achieve what we all collectively want to achieve.

I hear what the Minister is saying and do not disagree with the points he has made, but there is something wrong here. What is the Minister doing in the middle of an arrangement where a local authority has first option on an asset put up for sale by NAMA? There is no place in the business plan for the Minister to be acting as an agent between NAMA and a buyer, whoever that buyer happens to be. That is the reason I have asked this question. There could only be one reason for transferring it in specie to the Minister. As Senator Regan pointed out, I have been careful with the words. It leaves all sorts of options open and does not require the Minister to do anything. It could sit there for ever more and never be utilised. The language jumped off the page when I read the Bill, to “distribute assets in specie to the Minister”. It does not say to sell or to move, but it clearly indicates a transfer of value. I tried to interpret its purpose or intention. All I can think of is that if the Minister or Senator MacSharry were driving home tonight they would see villages with perfectly finished houses for sale for €100,000. There are no takers for them, yet they cost more than that to build. They are effectively white elephants which are way below the long-term market value; therefore, what does one do with them? One Minister told me: “Sure we might have to bulldoze some of these houses and turn them into football pitches”. I understand the thinking behind it, although I am not saying that in a snide manner.

Mr. Tom Parlon said it on radio.

He was reacting as any of us here would do. The suggestion was that if somebody built 30 houses in the middle of nowhere, the location was all wrong and nobody would ever live in them. I understand what the Minister has explained and the change on Report Stage in the Dáil makes sense, but he did not answer the question posed by myself and Senator Regan, namely, what exactly was the purpose of that line in the Bill. Section 12(2)(h) states: “distribute assets in specie to the Minister”. I spoke earlier on the business plan and I understand how NAMA works, but I do not understand that line. Can the Minister explain why NAMA would be transferring anything to a Minister? I could understand it if it was being transferred to an auctioneer or somebody else, but not a Minister. Will the Minister be accepting bids? What exactly will happen? It does not fit with everything else that is there. I am not disagreeing with one word the Minister said, but there is a lack of clarity. The Minister and I have argued for many years, but I think he does not know what that line is there for.

I would like to hear what the line is there for.

The Minister mentioned that the needs of the community will change over time and that, as a result, he did not want to direct NAMA on what it should do with its land. It is clear that needs will change. If one looks at the demographics of the commuter belt one will see that at the moment we are going through a baby boom. In the past decade, thousands of families have moved into the commuter belt and many of them have eight, nine or ten-year-old children who will soon be teenagers. Needs will change in that there will be a greater demand for youth cafés and other facilities than at present. We already have a problem in towns and villages due to the lack of facilities leading in some instances to anti-social behaviour. The long-term development of teenagers is suffering as a result. I agree with the Minister that the needs of the community will change but what will not change is the supply of facilities. It is clear that in the short to medium term there will be less funding from local and central Government to fund new facilities. Therefore we need to examine this imbalance between a growing demand for facilities and a supply that, at best, will stay the same. Given the proposed cutbacks, however, the supply may actually be reduced.

We need to do something, but I disagree with the Minister on the way to handle this matter. I do not think we can leave it to the market to sort it out. As a former member of a local authority it is clear to me that developers and landowners will not make such facilities available unless they are directed to do so, or they see a commercial return. There will not be a commercial return from the provision of youth facilities in the short to medium-term; therefore, we need to see a direction in this regard.

I would like to hear the Green Party's view on the issue. Six weeks ago, before the Green Party conference, I thought I heard Green Party Ministers claim they had got a social dividend within NAMA, which would be included in the revised programme for Government. That seems to have disappeared completely, however. I know it is late in the day, but I would be interested to hear the views of a Green Party Senator on the issue. I fail to see why one cannot make some such provision. Direction is best, rather than leaving it to individual owners to decide on their course of action.

I would be glad to hear the Minister's response on that matter. I would be uncomfortable if we just go to line up the chest and say "Everybody take their pick". Is it being suggested that we should provide free social housing through the NAMA process? I agree we need facilities such as social housing and youth cafés. This country has had a catastrophe. We no longer have a sports capital programme, for example, whereby these kind of facilities were being provided. That is due to the fall in revenues, so we cannot afford it. NAMA will help us to get back on the road to recovery and get the economy operating properly; perhaps therefore we can have the sports capital programme and youth cafés. Social housing is needed and I agree with the Minister that it is appropriate that various State institutions or subsidiaries should take first place in the queue to purchase such things at their market value.

It is important to have the provision to "distribute assets in specie to the Minister” because at some stage, we hope, this downturn will come to an end and NAMA will make a profit. It is conceivable that there will be some assets left over and so it will be appropriate that they be handed over to the Minister as the representative of the State.

What is the purpose of this provision? It is either for the type of purposes which were the subject of Senator O'Toole's amendment, or for facilitating developer friends of the Government.

I do not want to load my argument but it has to be for a purpose; therefore, that point needs to be clarified. When the Minister is explaining things such as first options, he is going down the road which Senator O'Toole is endeavouring to outline in his amendment. NAMA's commercial remit is accepted, although one would have serious reservations as to its commerciality, but that is beside the point in this regard. It is loading the argument to suggest that it cuts across that remit because it does not. The amendment simply gives some guidance for and purpose to the transfer of assets in specie to the Minister. If it is not for this purpose, I would be concerned about what other purpose it may be for because that is not outlined. The Minister says it is covered in section 2(b)(viii), but that is a general provision.

Section 12(1) states that "NAMA has all powers necessary or expedient for, or incidental to, the achievement of its purposes and performance of its functions". The board would have the power to exercise those functions, yet section 12(2)(ae) states exactly the same thing — that NAMA may “do all such other things as the Board considers incidental to, or conducive to the achievement of, any of NAMA’s purposes under this Act”. One can say that is overkill in terms of being specific. This is a detailed Bill and is specific on many issues, so I do not see why it cannot be as specific on this point. The reality is that this is a very detailed Bill that is very specific on many issues. I do not understand, therefore, why we cannot be specific on this point.

What is the Minister's opinion on the homeowners' support scheme, about which I tried to speak to the Minister for Finance yesterday. This scheme could work in the area under discussion. NAMA could have an equity share in the property of the poor, unfortunate homeowners facing repossession. After the negotiation of a write-down agreement with the mortgage provider and homeowner, the latter would then be able to pay rent or some of the equity share in the house. At a later stage he or she might be in a position to buy back the equity in his or her house. Today the Irish Banking Federation made grandiose suggestions but it was really just inviting people to negotiate on their mortgage repayments. That is well and good but the banks are not offering any extensions of the terms of mortgages or security. There are so many in negative equity that I support Senator Mullen's amendment fully. Will the Minister comment on it?

I will be very brief because we all want to proceed as quickly as we can. Senator O'Toole carefully crafted his amendment "to facilitate, inter alia, the development of infrastructure and public services for communities recovering from the financial crisis”. That would not be restrictive. The provision would be sufficiently flexible to take into account any changes in the community. I do not see a problem with it. Senator Regan has put his finger on the difficulty, namely, that we do not know the purpose of the provision allowing for the distribution of assets in specie to the Minister. We need to know the purpose. It chimes perfectly with the small phrase “social and economic development” in the introductory part of the Bill, which phrase the Green Party managed to include. That will be my last contribution. Perhaps we will move on.

I am sorry to hear that was Senator Norris's last contribution.

The Minister should not hold his breath.

I could change my mind, even on that one.

On the various points made by Senators, contrary to what Senator Hannigan might believe, I am not an unthinking——

I am not a monster. I am not an unthinking adherent of the philosophy that the market will solve the problem. If it could do so, we would not be here discussing this legislation.

Consider the points of Senators O'Toole and Regan on the in specie distribution of assets, or the power to transfer property, as it stands, to the Minister. If one reads the legislation, one will find NAMA is to be reviewed periodically to determine whether it should be wound up. At one such review the Minister may decide it is time to close the agency. If it still has some assets, it will have the power to transfer them to the Minister as they stand. I am advised that where the State, a local authority or community group, for example, would benefit from these assets, they could, in fact, be transferred in whole or in part to the relevant body, or made available by way of lease. It may be necessary for the holding body to transfer the asset back to the Minister for Finance to pass it on to the Minister for Education and Science, for example. That may be the proper way to proceed in certain cases.

It sounds like a job for a special purpose vehicle.

No. My experience of dealing with other Departments indicates that properties had to be transferred between Departments in order to transfer them again.

The power for NAMA to provide property and land for community facilities, green areas and social housing is provided for adequately in the Bill. NAMA knows the Minister's sentiments in this regard, which sentiments have been expressed sufficiently clearly in both Houses. Under the legislation, the Minister can give directions to NAMA. It has always been our intention that at least some of the property in question will be used for community purposes. Having said that, it must be borne in mind that NAMA has a commercial remit and a very important job to give money back to the State.

On Senator McFadden's point on home repossessions, we discussed the topic when dealing with the previous amendment. I made the point that there was a very firm commitment in the programme for Government to strengthen protections for homeowners whose homes had been put in peril through no fault of their own, on foot of losing their jobs as a result of the recession, for example. While we recognise and appreciate what the financial institutions have done in this regard, we do not regard it as sufficient. The Government has a function in this area and will meet its obligations in that regard. We have already started this work.

I have listened to the Minister for Defence who has sharpened up since discussing the first amendment. He has certainly tightened up a few corners. I will read very carefully the facts of this matter. I will withdraw my amendment and try to corner the Minister on Report Stage on the basis of the points he has just made. In his last statement he cleverly saved the Minister for Finance from taking on the job of auctioneer. I will have to examine the details and suspect I will be talking to the Minister for Defence again on Report Stage.

If what the Minister described is the purpose of the provision, it probably should state "distribute assets in specie to the Minister in the event of the termination of NAMA”.

I will look into that.

Amendment, by leave, withdrawn.
Section 10 agreed to.
SECTION 11.

I move amendment No. 34:

In page 25, subsection (5), to delete all words from and including "laid" in line 42 down to and including "thereunder." in line 2, page 26 and substitute "approved by each House of the Oireachtas.".

On reading the legislation to which the amendment pertains, one will find it is self-explanatory.

Section 11(5) provides that an order made under this section to expand the functions of NAMA will be laid before each House of the Oireachtas. If a resolution annulling the order is passed by either of the Houses within 21 days after it has been laid before it, it shall be annulled. Subsection (5) provides for appropriate Oireachtas oversight. Therefore, I cannot accept the amendment.

The amendment would require that the legislation simply state "approved by each House of the Oireachtas". If an order is to be annulled by the Oireachtas, we must bear in mind that we would hardly get an order so wrong that we would be annulling it within 21 days of issuing it.

Amendment, by leave, withdrawn.
Section 11 agreed to.
SECTION 12.

I move amendment No. 35:

In page 26, subsection (2), between lines 10 and 11, to insert the following:

"(a) make appropriate assets available for public, community or social use either free or at a non-commercial cost, or transfer assets to appropriate statutory agencies to facilitate such use,”.

Amendment put.
The Committee divided: Tá, 22; Níl, 27.

  • 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.
  • Twomey, Liam.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • 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.
Tellers: Tá, Senators Dominic Hannigan and Phil Prendergast; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.
Amendment No. 35a not moved.
Government amendment No. 36:
In page 28, between lines 12 and 13, to insert the following subsection:
"(8) In exercise of its powers underparagraphs (s), (z), (ab) and (ac) of subsection (2), NAMA shall have regard to proper planning and sustainable development as expressed in Government policy and in any relevant regional planning guidelines (within the meaning of the Planning and Development Act 2000) and development plans (within the meaning of that Act).”.

NAMA will have regard to proper planning and sustainable development in the exercise of its powers that are relevant to those concerns. It was always intended that NAMA would do so, and it is appropriate to include an explicit provision to that effect in the legislation.

Amendment agreed to.
Section 12, as amended, agreed to.
Section 13 agreed to.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill."

This section deals with the power of the Minister to give directions to NAMA. Issues arose in that regard on Second Stage. Will the Minister clarify whether they are covered indirectly in the section, in that the Minister could give directions to NAMA, which in turn could give directions to the institution?

I note that further on, lending policy is one of the areas on which the Minister can give some direction. That involves credit to SMEs for example. The crisis occurred because of the bonus structure in the banks. Can the Minister give directions to the institutions on their structure of remuneration and any bonus systems they might have, especially regarding the short-term approach taken by banks? The crisis also has its genesis in the interbank borrowing that took place. Instead of the banks dealing with loans on the basis of them being a proportion of their deposits, they were able to borrow on an interbank basis which gave rise to them lending well in excess of the assets they had. That was fine in the good times but when the tide turned they were left without clothes. I am concerned about this.

I am also concerned about the remuneration of senior executives and directors. Again, that issue arose on Second Stage. Such people were paying themselves astronomical amounts often for short-term targets. Various suggestions were made in that regard on Second Stage. One of the suggestions I made was that they should get a significant proportion of that remuneration in shares, which they would have to hold for a specified period. I suggested five years. In that way their interests and remuneration would be aligned fully with the prudential well-being of the banks themselves in the medium-to-long term.

Under section 14, which we are discussing, the answer to the Senator's question is in the negative. Section 14(1) states, "The Minister may give a direction in writing to NAMA concerning" various things. That does not imply that the Minister has the right to direct the institutions. That is being dealt with separately in regulations which the Minister gave himself the power to prepare on Report Stage in the Dáil. That is where that will come into play.

Regarding the matters to which Senator Walsh referred in connection with remuneration and bonuses, first, that issue is covered in the subscription agreements we have made with the three banks. Further control over the activities of the banks in that regard will be dealt with in the amendments to the Central Bank legislation which is on the way.

Question put and agreed to.
Sections 15 to 18, inclusive, agreed to.
SECTION 19.
Amendment No. 37 not moved.

I move amendment No. 38:

In page 31, subsection (2), line 6, after "if" to insert the following:

"the nomination of the person is approved by a committee nominated for the purpose by the Houses of the Oireachtas and if".

Amendment put and declared lost.
Section 19 agreed to.
Sections 20 to 31, inclusive, agreed to.
SECTION 32.

Amendments Nos. 38a, 38b and 38c will be discussed together, by agreement. Is that agreed? Agreed.

Government amendment No. 38a:

In page 37, subsection (1), line 25, to delete "3" and substitute "4".

This is an issue I raised on Second Stage. The amendment relates to the internal workings of the NAMA board. The Bill, as drafted, requires it to establish an audit committee, a credit committee and a risk management committee. It is very clear what those functions are.

Since the Bill was first drafted the Minister has introduced significant and welcome developments in terms of NAMA's accountability. There is, for instance, a requirement for a quarterly report to be made every three months. That is outlined in detail in section 55. Generally speaking, what happens in an enterprise is that if there is a requirement to produce a quarterly report of such detail, it would either take up the full time of the board, which should be dealing with strategic and high-level policy issues, or else it is delegated to the executive, which is the most likely scenario. The problem then arises that came up in other semi-State institutions, where the executive was producing all the financial reports, which were being whipped through the board because the board did not have the time to go through them in detail with a significant loss in terms of input. What we need is a committee that will consider the various areas, typically issues relating to overseeing and reviewing the financial performance, profitability, dealing with issues of income, budget, cashflow, policy, investments and share issues. The establishment of special purpose vehicles will require detailed consideration. One cannot have a board agenda trying to deal with the detail of this. In the same way as the audit committee will deal for an hour or two every couple of months with the internal audit committee and run a stress test through the procurement, cash value, credit and debtor systems and so forth, we need somebody at the finance committee who will take the overview.

I googled some of the larger corporations in the world a few days ago to check what they do. Microsoft Corporation, for example, has a finance committee charter and its responsibility is to review and provide guidance to the full board and management about working capital, debt issues and much more. Similarly, in Accenture, which is a huge international company, the finance committee has responsibilities and duties to review and recommend to the board matters of capital structure, equity, debt, securities, finance plans generally, debt ratings, share repurchase — in our case it would be bond repurchase — and so forth. There is a wide variety of functions. Intel, too, has a solid outline of the work it would do, such as banking and treasury arrangements. Treasury and how to deal with it will be a huge issue for NAMA. That will have to be considered. The same applies to the finance committee of a group such as McDonalds. It is interesting to look at what these corporations do. Given the amounts of money NAMA will be dealing with, for the efficient operation of the board there must be a finance committee to watch what is happening, what is the cashflow, what are the objectives and how close the board is to them. Every quarter the board will see where it is going, whether it is working within target, if it is meeting objectives, whether its cashflow is up or down from the budget and much more.

There is another issue. No remuneration committee is provided for in the legislation. In response to the point that has just been raised about remuneration, the Minister correctly said it is something the Government has already dealt with in the banks. However, it has dealt with it in a non-statutory basis. The Minister said it will be dealt with in the Central Bank legislation, which is very welcome, but that will only deal with the top level people. There will be remuneration for people at all levels in NAMA. Some salaries will be related to other wage determination systems but the obvious solution, and this is done very regularly, is that the finance committee would also have the role of a remuneration committee. Rather than a board deciding what should be paid to a person, it is dealt with at a subcommittee of the finance committee, which brings it to the board and the board decides.

I have served on finance committees of various groups in various places and I know they work very efficiently. The full board does not need to rehearse but it must be aware, have access to all the papers and be in a position to ask questions where necessary. What one does not want is a situation such as happened in a famous semi-State body recently, where the executive was doing all this work and the board was either not clear, not told or the matter was not explained. We need people on the finance committee who are intelligent and confident enough to say: "Sorry, I do not understand that. Can you explain it to me again?" It is the most important quality in any efficient and effective board member.

I have raised this issue on many occasions in the past couple of months with the Minister for Finance, and he also believes there is a case for this within NAMA. It adds to the structure and deals with many of the issues we have been discussing in this debate.

I support Senator O'Toole's amendment. It is extremely valuable and he has given a number of illustrations from excellent corporate practice in some of the largest and most successful businesses in the world. I have a little experience with this because I was, for a while, managing director of a company called Hirschfeld Enterprises. It established a finance committee for precisely the purposes mentioned by Senator O'Toole. We wanted it to provide the best possible advice for the board about good governance and cashflow, to alert us to difficulties and to assist us in the best possible management. Senator O'Toole has made an inarguable case and I hope the Government will accept it.

That is all I wish to say. As I have been urging brevity on other Members, I should practise some of what I preach.

In my experience in business I have served on a few finance committees. I believe there is merit in the proposal. As there is a need for a finance committee, NAMA can undertake its functions effectively. I welcome the proposal from Senator O'Toole, with Senator Norris's support, and ask the Minister to give it favourable consideration.

Does it not appear that the amendment is already accepted? There is an asterisk beside it on the list and the same asterisk denotes a Government amendment. I assume we do not need to delay further on this.

For the Senator's information, the Government has also tabled a similar amendment.

It is a good amendment and we should support it.

As I have no wish to be the odd man out in the room, I can only support it.

I can anticipate how the Minister will respond to this amendment but I wish to make two points about it. It is a little odd that the legislation must give such detailed guidance to the board about the need to create committees in this area and be so specific in guiding what they do. Earlier, the Minister, Deputy Brian Lenihan, argued that we should not give statutory guidance to the Oireachtas about the committee structure but allow the Oireachtas to determine that itself. It is odd that we feel the need to give such detailed guidance to the board of NAMA on the number of committees and who should sit on them.

Senator O'Toole has commented well on the use of these types of sub-groups by the boards of other organisations. One lesson from their operation is that it is critical that the operation of these committees be fully integrated at all times into the operation of the board and that whatever decisions and, more importantly, information flow through these committees be available to the full board. That is particularly true in the case of the finance committee. Many an investment bank is no longer in existence, such as Bear Stearns, because the decisions that were made by a subset of the board were not understood by the rest of the board. The board ended up in a situation where, in a matter of days, it was being confronted with calamitous decisions it was supposed to be aware of and to have made but it had not been part of it. If we give such minute guidance as to the number of these committees and their composition, equal thought must be put into ensuring that we have an effective board, above all, and not just an effective structure below it.

I accept the thrust of the amendments but the point made by Senator Donohoe is correct. There can be an incestuous air within these bodies, and we have seen it in this country in our plcs where people who are serving on these committees also have a vested interest. They look after the chief executive who in turn looks after them. We must be aware that this has led, not just in Ireland but globally, to situations that were unsustainable, unfair and bordered on corrupt. We must build into these systems some type of health measures to prevent that happening.

I propose to discuss amendments Nos. 38a, 38b and 38c together. Amendment No. 38b proposes that the board of NAMA should establish a fourth committee, a finance committee, along with the three committees already provided for in the Bill, the audit, credit and risk management committees. Amendments Nos. 38a and 38c are consequential. They must be made to give effect to amendment No. 38b if it is accepted by the Seanad. The Minister listened to the arguments made yesterday that the finance committee should be put on a statutory basis and believes they were convincing.

The role of a finance committee is to oversee the financial affairs of a company and review and make recommendations to the board of the company on its financial affairs and policies. The finance committee should assist the board in focusing on fiduciary duties, recommend financial policies, help to develop and review the budget and be the first to consider financial statements, etc. In the light of the responsibility that will rest with the board of NAMA and also the scale of the assets being transferred to the agency, the Government is of the view that such a committee should be established by the board. I thank Senator O'Toole for tabling amendment No. 38a and the research he has carried out in respect of it. It will certainly add to the Bill.

I thank the Minister of State for his intervention. I wish to allay the fears of the two Senators who raised particular issues in respect of these amendments. The legislation is advanced in nature and sections 37 and 38 specify the powers that will be delegated by the board to the chief executive. I make this point because Senators will not find any delegation of powers by the board to the committees being established. The committees will be established with terms of reference but the authority to make decisions will not be delegated to them. They will be obliged to return to the board with matters in respect of which decisions are required. It is precisely for this reason I suggested the amendments. Without them, matters would have been referred to the executive which would have done exactly that about which Senators are concerned. Under the amendments, matters will be referred to a sub-committee of the board, namely, the finance committee, which, like the audit, credit and risk committees, is not empowered to take decisions on its own. It must carry out the work required of it and then return to the board with its proposals and reports. It will be the board which will make all the decisions. That is why section 38 outlines the powers that can be delegated to the chief executive or his or her deputy. Decisions made by various corporations are regularly challenged in the courts. What I have proposed meets the concerns expressed by other Senators. With the inclusion of these amendments in the legislation, power cannot now be taken away from the board. In addition, matters will be placed on a more sound footing and the governance provisions will be strengthened.

Amendment agreed to.
Government amendment No. 38b:
In page 37, between lines 29 and 30 to insert the following:
"(c) a finance committee;”.
Amendment agreed to.
Government amendment No. 38c:
In page 37, subsection (4), line 39, after "committee" to insert ", the finance committee".
Amendment agreed to.
Section 32, as amended, agreed to.
Sections 33 and 34 agreed to.
SECTION 35.

I move amendment No. 39:

In page 39, subsection (1), between lines 32 and 33, to insert the following:

"(f) the avoidance of conflict of interest by any expert adviser or service providers to NAMA and the participating institutions,

(g) the orderly property management strategy over a ten year period,

(h) for issuing loans, or for allowing security over which it has a charge be used as collateral for loans by other institutions by persons whose loans with NAMA are functional and not in arrears”.

Section 35 relates to the preparation of codes of practice for approval by the Minister. A number of aspects of NAMA are covered in this regard. Amendment No. 39 proposes that these codes of practice be extended to cover any conflicts of interest on the part of expert advisers or those who provide services for NAMA. It also suggests there be a proper management strategy over the ten-year period in which NAMA will be in existence. It further suggests there be a code of practice in respect of the issuing of loans and matters relating to the security of such loans. In view of the potential for conflicts of interest and problems to arise in respect of NAMA, I am surprised that codes of practice have not been laid down with regard to the matters to which I refer.

I support the general thrust behind the amendment. I am particularly in favour of the suggested new paragraph (f) which relates to the avoidance of a conflict of interest by any expert adviser or service providers to NAMA and the participating institutions. It is important to note that the matter of conflicts of interest is not sufficiently understood or recognised by those involved in business. I am a member of a number of boards which are non-profit making but which generate money that is distributed for other purposes. In that context, on numerous occasions I have been obliged to draw the attention of fellow board members to clear conflicts of interest. I was horrified that people at quite an elevated level of Irish life had no apparent understanding whatsoever of that which constituted a conflict of interest. I am of the opinion that serious conflicts of interest contributed in part to creating the predicament in which the country now finds itself. It is important, therefore, to make specific provision in respect of conflicts of interest in codes of conduct. This is the element of the amendment which is particularly important, which is why I am supporting it.

I underscore the point on conflicts of interest. This matter is extremely important, particularly in the context of the companies which will be bidding for contracts relating to the €240 million or €250 million that will be on offer, in the form of professional fees and services, for each of the ten years in which NAMA will be in existence. Many of the services NAMA will be interested in acquiring will be so specialised in nature that it is likely one company will provide three or four of them.

We previously debated at length the conflicts of interest in respect of ratings agencies, the banking sector and what had happened with regard to shares.

That is a classic example of a conflict of interest and there are many others during the lifetime of this agency. If guidance is to be given to the board on the kind of sub-committees it should establish, it should be given very pointed guidance on the need for it to be aware of the potential for conflicts of interest to arise in the context of the work it will do. Let us be clear that the boards of numerous existing financial institutions have failed to meet their responsibilities in this regard. If we are going to learn from what happened in the past, an amendment of this nature is extremely appropriate.

I support the amendment. We must be extremely careful with regard to conflicts of interest on the part of expert advisers or service providers to NAMA. I have always been strongly of the view that we have suffered as a result of relationships that were too close. At local government level, for example, architects or engineers who worked for county councils often took up positions in private practice. It was always my contention that these individuals were way too close to the decision-making processes relating to their previous jobs and should have been obliged to wait for a specified period before moving into the private sector. Equally, I am aware of instances where auctioneers who were local councillors voted on zoning matters. This behaviour was inappropriate and the individuals in question should never have had a say on any matter which related so closely, in financial terms, to their own interests. There is a need for a clear code of conduct to be established in this regard. Anyone who is offering advice or a service to NAMA must make a clear declaration of interests. If a question arises with regard to there being a conflict of interest, the individuals concerned should absent themselves from proceedings at that point.

I also support the amendment. As it stands, section 35 contains a list of the matters in respect of which codes of practice shall be prepared. There is then a provision in which the phrase "any other matter in relation to which the Minister directs NAMA to prepare a code of practice" is used. On the basis of past experience and the matters to which other Senators referred, I would have thought a code of practice relating to the avoidance of conflicts of interest would have to be included in the legislation.

Section 35 provides that NAMA, within three months of establishment day, is to prepare codes of practice for approval by the Minister for Finance. It is normal practice for codes of practice at a State agency to be approved by the Minister with responsibility for that agency. Section 35(1)(f) allows the Minister to make a code of practice with regard to any other matter in respect of which he deems such a code to be necessary. This general power of direction to make codes of practice is sufficient and it is unnecessary to include the codes of practice enumerated in the amendment.

Senators should consider the tenor of section 35. The codes of practice specifically referred to in the section cover the conduct of officers of NAMA, risk management and the disposal of bank assets. In other words, they refer to how NAMA behaves. With regard to how service providers should behave and possible conflicts of interest, that matter is best dealt with in the contract in engaging the services of the people concerned.

The NAMA project must be approved by the European Commission, but I am not aware it has been notified to the Commission as yet. Therefore, when we have finished our work and the Minister has slapped down the various amendments suggested, recommending that general provisions be made to deal with the specific suggestions made therein – this is the second time he has done this with regard to the few amendments on which I have commented – we will still have to gain the approval of the Commission. In accordance with the communication from the Commission on the treatment of impaired assets in the Community banking sector, with which the NAMA Bill must comply, detailed information must be provided for the Commission before it signs off and approves this entire enterprise.

One of the specific provisions stated by the European Commission — the guidance on the application of state aid rules — is based on a number of principles, one of which concerns the management of assets subject to relief so as to avoid conflicts of interest. However, we do not deal with that issue. The Minister may not accept the amendment proposed, but when the Bill and the project are vetted by the Commission, he may find it has a difficulty because this is a specific requirement of the guidelines.

I commend the amendment to the Minister. If he does not accept it on Committee Stage, perhaps he will reflect on it before Report Stage. In avoiding the issue now and leaving it covered by vague general terms, he may find the Bill is outside the terms of the guidelines.

I will mention the Senator's arguments to my colleague, the Minister for Finance. As far as the European Commission is concerned, I am aware of its requirements. I am also aware of the fact that in our discussions with it, it expressed the view that there should be a certain degree of flexibility in the legislation because it must deal with an evolving situation. Therefore, everything should not be tied down rigidly, a point on which the Commission was specific. I hear what the Senator is saying and will communicate his comments to my colleague.

I support Senator Regan that we should withdraw the amendment now and raise the issue again on Report Stage. That will give the Minister for Finance time to reflect on the amendment and perhaps he might wish to insert an amendment tomorrow.

Amendment, by leave, withdrawn.
Section 35 agreed to.
Sections 36 to 42, inclusive, agreed to.
SECTION 43.
Question proposed: "That section 43 stand part of the Bill."

This section relates to the ability of the chief executive of NAMA to suspend an officer of NAMA from his or her duties and sets out the conditions for this to be done. It provides that "after consultation with the Chief Executive of the NTMA" the chief executive of NAMA may make a decision to suspend an officer. Why is the consultation with the NTMA necessary?

That is a valid question. I am advised that the reason is the NTMA is the actual employer of NAMA staff.

Question put and agreed to.
Section 44 agreed to.
SECTION 45.
Question proposed: "That section 45 stand part of the Bill."

Will the Minister give consideration to an addition? I am not sure whether this relates to section 45 which deals with the requirements NAMA will make of the people from whom it will receive a service — the service providers — or whether it relates to section 46 and the incurring of expenses by NAMA. I would like to see some reference made and some obligation imposed to ensure adherence to good corporate governance practices with regard to cost effectiveness and in securing value for money. I want to see this because of the manner in which, for example, money was paid out at the tribunals, one of the great scandals of our time. I would hate to think that the €2.5 billion, or whatever sum is involved in the next ten years, will not be spent as tightly as possible. I appreciate this could be taken to be understood, as it should be being part of normal corporate governance procedures. However, there are so many examples across all services which show that has not been happening that we should ensure there is a statutory obligation in this regard. I ask the Minister to reflect on the matter and consider whether there would be merit in bringing forward an appropriate amendment on Report Stage.

I agree with Senator Walsh. We must ensure this done. The issue must be explored. We have often heard, whether with regard to auctioneers — I am one — or solicitors that there is one price for Joe Public and a different one for the State agency. The attitude seems to be that we should milk the State. We must provide for whatever safeguards we can to ensure we get value for money, while at the same time ensuring we have the right expertise available.

Senator Walsh has made a very important point and pointed to something that is missing. In the context of €240 million being spent each year on professional fees and services, it is vital some reference be made in the Bill to the need to seek value for money. I hope the Government will find a way to address this issue in the context of the further changes it may make to the Bill on Report Stage.

Section 45(c) refers to the need to avoid conflicts of interests, a point touched on by Senator Regan. The section gives credence to the point made that the need to avoid such conflicts should be met in the guidance to be given to the board.

I offer Fine Gael's support to Senator Walsh on this issue which involves the cost of professional fees. A substantial number of professionals will be taken on to deal with NAMA. From the point of view of transparency and accountability, it would be useful to include such a provision. Senator Walsh has raised the issue of costs on a number of occasions, particularly the cost of tribunals and the excessive fees paid to those involved. We have an opportunity before the legislation is enacted to provide for this. This side of the House would be prepared to give the matter strong consideration.

I too support Senator Walsh who has found an important loophole. The Minister referred to this issue on Second Stage. A number of us mentioned that the provision for the payment of fees was such an enormous sum and he made the point that it was to provide for a period of ten years. He also said that to obtain the best advice one had to go into the marketplace and that the best advice sometimes came at a very high charge. I will make two points in that regard. First, professional fees in a number of areas now show signs of a slide. That slide should be encouraged. Second, ordinary people looking in would be aghast if they thought that once again professional groups in the financial or legal areas were making considerable profits from the desperate attempts of the State to rescue the financial situation. For that reason I very much hope the Minister will take this important point back to the advisers and the Minister for Finance to see whether something cannot be put in place. One assumes it is good practice that this be done. It is important that it be put in place and clearly spelled out in the legislation.

I, too, see a good deal of merit in what Senator Walsh said. Value for money is critical, given that the whole Bill has come about as the result of financial mismanagement and a lack of vision. We certainly do not want to see an industry developing around NAMA, as we have seen in the case of the tribunals. Let us be wise for the sake of the people.

There will be a €2.4 billion industry developing around NAMA, reflecting the fees to be paid over the ten-year period. NAMA has already appointed legal advisers and auditors, but the question is whether there is a tender provision for services. There is no provision to ensure value for money is obtained. There should be a standard procedure to ensure value for money is achieved in the case of these services.

I support Senator Walsh who is quite right. He has mentioned this aspect on many occasions. We have seen millionaires being created on a regular basis at the tribunals. We do not want this to occur with NAMA. This is a good opportunity for us to ensure we set a trend in professional fees which should be looked at, given that everyone else's wages are going down. I have said at parliamentary party level that wages cannot be driven down without the cost of services being decreased also. Professional fees are one aspect of the matter.

On Senator Regan's point, I must clarify that NAMA will tender for all contracts on the Government website, as required under EU legislation. As regards the specific suggestion made by Senator Walsh, section 45 imposes clear and onerous obligations on those taken on by NAMA, either as advisers or service providers. For example, they must "operate to the highest standards of honesty and fairness" and "with due skill, care, prudence and diligence" and must always act "so as to promote the best interests of NAMA". That is sufficient to cover the point the Senator is making, but I will certainly communicate his views to the Minister. As it happens, he is just arriving; therefore, the Senator can repeat his suggestion to him, or I shall pass it on to him, if he so wishes.

I accept absolutely what the Minister says. On the other hand, people can behave in an extremely professional manner with due diligence, honesty and all the qualities the Minister listed. That does not mean, however, that they will not charge a great deal of money. I know, because I am very litigious and frequently have cause to employ lawyers. They sometimes do not see any conflict between all the requirements for honesty, probity, good governance and all the rest. They still see one as a bloody good fee. There is an opportunity here, therefore, to try to bring fees down, if possible.

Had I spoken immediately after Senator Regan, I would have said, as the Minister did, that there was a requirement in European Union law for open tendering, so on and so forth. I am very grateful to the European Union for this. I recall when the Competition Authority was being set up that one notable absentee was the requirement for an open competition for the executive posts. I managed to persuade the Government to include it. That was one small favour to which I contributed, but I make the point that there can be all these wonderful qualities and nobody says they are dishonest. It is not dishonest; in certain professions it is a particularly notable human trait to try to get the highest price possible. That does not conflict with any of the admirable qualities the Minister adumbrated, but it does not address the point made by my colleague on the other side of the House.

Senator Norris should be aware that the words "prudence", "honesty" and "fairness" are also included.

Any lawyer worth his or her salt could deal with that matter. I realise that the Minister and various others in this room could very well argue that it was honest and prudent. It would certainly be prudent from their viewpoint.

And in the best interests of NAMA.

I do not want to delay on this point. All I am asking is that the Minister for Finance is reflect on it. I appreciate what the Minister is saying and it should be understood in any private or well run operation but experience shows differently. I thought Senator MacSharry made a good point about the tendering process. I know from my many years of experience on local authorities, for example, that the official in charge of the tendering process was very happy once he or she had the required number of tenders. I also would have known that in real business operations he or she had one tender, with somebody else giving a cover price. The result was that the taxpayer was not getting value for money. I have been a consistent critic in this House of the waste of money at tribunals. The last thing we want to see is something like that happen with NAMA. It is part of good corporate governance to have cost-effectiveness and achieve value for money. Ideally, it should be a statutory obligation. I am not being prescriptive as to how it should be done, but it would mean that if subsequently a Minister found that someone had not performed to the required standard, he or she would have the power to fire him or her. To be quite honest, we must achieve such norms within the public service.

When the Minister says there is an obligation under EU law to tender, in fact, some of the services to be obtained by NAMA will not be subject to the full rigours of EU tendering procedures as laid down in the services directive. Therefore, it is important that there be an effective tendering procedure for all the services to be acquired by NAMA, including legal services.

We thank the Minister for Defence, Deputy Willie O'Dea, and welcome back the Minister for Finance, Deputy Brian Lenihan.

Question put and agreed to.
Sections 46 to 48, inclusive, agreed to.
Amendment No. 40 not moved.
Section 49 agreed to.
Sections 50 to 57, inclusive, agreed to.
SECTION 58

Amendment No. 41 is in the name of Senators Alex White, McCarthy, Ryan, Prendergast, Bacik and Hannigan. Amendments Nos. 41 and 42 are related and may be discussed together, by agreement. Is that agreed? Agreed.

I move amendment No. 41:

In page 50, lines 34 to 37, to delete subsection (3).

My amendment seeks to delete section 58(3) and section 59(2) for the same reasons, challenge the reason it is considered necessary to embed in legislation a restriction that looks, on the face of it, to be very considerable and draconian on an official such as the chairperson or chief executive of the agency. One could have an argument on one level about why it is necessary to restrict people at all in what they say. That is somewhat controversial because an employee at any level but particularly at the level of chief executive or chairperson would be expected to observe a duty of confidence and fidelity towards his or her employer. That would be no less of a requirement for the chairperson and chief executive of NAMA. I do not seek to argue — it would be hard to do so — that people should be invited to express their own views or debate issues on a frolic of their own outside their duties as chairperson or chief executive. Everybody expects, when coming before the Committee of Public Accounts, he or she is acting on behalf of the organisation he or she represents and leads. The expectation is that a person will conduct his or her submissions and questioning in a manner that is entirely consistent with his or her duty of fidelity to the organisation.

I cannot understand why it is considered necessary to place this considerably restrictive provision in the legislation. From what does it arises and does it reflect a particular concern of the Minister about particular recent events? I will be interested to hear his response before I come back to the amendment.

This is an interesting amendment. As I said earlier in the debate on the Bill, when I think the Minister was present, I recall his dealing with this issue in the other House. His response was to give precedents. The members of the Opposition claimed it was a unique provision. The Minister, however, had done his research or was supplied with information and stated this provision was contained in other statutes. I presume that this is the case and that the Minister will be able to rehearse these statutes for us tonight. However, this is such serious legislation that it is not appropriate for the Minister to rely on precedent alone. This is his nominee and suggests a curious lack of trust on his part in advance of the appointment; therefore, it is not related to the supposed defects of a particular individual. It is a generic matter. There is in government a suspicion of any person of goodwill within the apparatus who will give critical views of government. That is rather unhealthy. Government is improved by critical views. I do not mean critical in the sense of destructive but in the sense of being able to hold up the matter in hand to a reasoned critique. Government should not in any sense be afraid of a reasoned critique.

Whether it is contained in previous statutes, the phrase is a quite extraordinary form of words: "The Chairperson and the Chief Executive Officer, in giving evidence under subsection (1), shall not question or express an opinion on the merits of any policy of the Government or a Minister of the Government or on the merits of the objectives of such a policy”. That is a limitation on the giving of evidence which limits the material the committee can examine. For example, an opinion “on the merits” of a policy could be not just on the demerits but could indicate, “This is a very good idea because of (a), (b), (c) and (d)”. In other words, the language prevents the chief executive or chairperson from giving any useful opinion because he or she can talk neither about the demerits nor the merits or positive aspects of a policy. I do not know whether this interpretation would stand up in law but it is certainly how it seems and would have the effect, if strictly legally applied, of spancelling the most significant member of the committee in giving vital evidence. I am still concerned, despite the Minister’s valiant defence of the provision in the other House. Can he find a way to consider the matter again?

This is an interesting provision because it means the chief executive of NAMA will have the same obligations as a civil servant because he or she will not be able to comment on Government policy or state a personal opinion on policy that might criticise the Minister. I have never heard the CEO of any semi-State organisation, or any other organisation, who is employed by the Government and has come before a committee of the Houses criticise Government policy. If the Governor of the Central Bank was before the Joint Committee on Finance and the Public Service and was asked for his views on the structure of NAMA, they would contradict the public statement he made before getting the job because he would be forced to say nothing but to go along with the Government line.

There is no contradiction. I had a long consultation with him today.

The public comments he made before the Minister offered him the job were different.

There is no contradiction.

They were different. It does not allow these well——

He said there was a false dichotomy between nationalisation and NAMA.

The opinions of these individuals are not going to be so critical that they will bring down the Government or seriously embarrass a Minister. It shows a lack of self-confidence that such a provision would find its way into legislation because I have never heard an individual at this level say anything extremely critical of a Minister or the Government. They may sometimes couch their comments in such a way that one might not be happy with them but they certainly would not give offence.

This choice of words is extraordinary. It sounds as if the Minister wishes to hire a zombie instead of a competent individual. By spancelling the chairperson and chief executive in this manner the Minister does not allow for the benefit of their experience over time. NAMA will change and Ministers will come and go. The Minister does not allow for the judgment of the people concerned which may be critical in informing the Minister of the day. In this choice of words the Government is acting like a dictatorship. I said yesterday that the Minister had given himself extraordinary powers. They might belong to another Minister for Finance on another day. We would not want to see another disaster in the state of the public finances and the lack of bank regulation such as that which the Minister's predecessor allowed to emerge and develop. I strongly urge the Minister to reconsider this provision and, if he does not delete it completely, to find another way to state it because it is extraordinary.

I support the amendment which I presume arises from section 37(4) which reads: "The Chief Executive Officer is not a civil servant within the meaning of the Civil Service Regulation Act 1956". The provisions indicate the chief executive officer "shall perform any other functions conferred on him or her by or under this Act or by the Board" and that the "Chief Executive Officer is responsible to the Board for the performance of his or her functions and the implementation of NAMA's strategic targets and objectives". For example, the chief executive officer will report to an Oireachtas committee but may discover the Government has adopted policies which cut across his or her ability to carry out the functions designated to him or her by the board. The provision is very limiting. One's evidence might have to be so constrained to ensure one would not touch on the Government's policy, even if it has had the gentlest impact. This is an unnecessary provision, particularly for a body to which we are conferring so much responsibility and trust with the banks' liabilities. Not to be able speak freely on how these functions are being carried out and being constrained in this manner is over the top.

Section 38(5) states, "The Chief Executive Officer is the person who is accountable for the purposes of the Comptroller and Auditor General (Amendment) Act 1993." Again, there is a link with this constraint and the officer's responsibility in this regard. What is the Minister's rationale behind these provisions? There must be a good reason to justify these draconian provisions.

I welcome the Minister for Finance back to the House. It is worthwhile examining the birth of these of sections. Every Member has asked why the Minister is doing this and what was he thinking. I will wager with him that he never saw those words, never asked for them to be inserted but only saw them when the Bill was finally drafted. I will wager further that the officials sitting behind him tonight who put together the heads and contents of the Bill never recommended this section be inserted. I would like the Minister to confirm this to the House as I know how the process happens. The Department works hard at putting together all the important aspects of the legislation. It then sends it to the Office of the Attorney General and the Parliamentary Counsel. They are the people who control the country; they are the permanent Government.

That is a chilling thought.

They press a button that ensures a section stating no councillors, Deputies or Senators and various other clauses concerning the powers of chief executives are inserted in legislation. This happens mindlessly without discussion with the Minister. If the did not ask for it to be inserted, he should take it out. He should assert himself.

(Interruptions).

There is no legal or practical reason for this section to be included in the legislation. If the chief executive were to rubbish the Minister of the day at an Oireachtas committee, he or she would be sacked the following morning for breach of trust and confidence. There is no protection whatsoever provided in this provision.

We could have a nice discussion about the constitutional issues that could arise. I am waiting for someone to test these provisions in the courts. One Member has said these words are normally included all the time. They are, in fact, relatively new and only have been inserted in legislation for the past 15 years. To make life easier for the Minister when he responds, I recall having such a clause removed from legislation before. In a moment of passion here one night we addressed the appointment of a chief executive to a semi-State body and the then Minister of State, Joe Jacob, conceded the point. It would be interesting for the Minister to listen to the rational and reasoned argument of the Upper House and remove this provision, as it adds nothing to the Bill. Would the Minister hide behind that provision? There is no way that he would. This is a piece of work and has no business being included in the legislation. I will just say, "There are only a couple of us here. Let us take it out."

I support my colleagues on this amendment. I cannot imagine why anybody with the serenity and judgment for the post of chief executive officer of the agency would attend an Oireachtas committee and perform in a negative manner. Will the only person from NAMA who will be able to attend an Oireachtas committee be the chief executive? Section 58(2) states, "the Chief Executive Officer appears as an accountable person and not as an Accounting Officer" before the Committee of Public Accounts. I can imagine many circumstances in which the Committee of Public Accounts would want to engage with the Accounting Officer of NAMA, particularly given that one of the main areas in which it can engage with the agency covers its economy and efficiency and the use it makes of the resources at its disposal. What about other officers such as the finance officer attending a committee?

Section 59 deals with the chief executive officer going in front of other Oireachtas committees. If he or she cannot respond to issues of policy, it beggars the question: will they go in front of any of them in the first place?

I invite the Minister to outline for us the precedents, if he still has them. Senator O'Toole has jogged my memory concerning the battle in which engaged as an awful duo in having one of these provisions removed from legislation.

Let us suppose the chief executive or the chairman of the agency comes to discover evidence that suggests a certain element of policy could be dangerous to the country's interests. He or she will be inhibited by this section in giving this in evidence to the Committee of Public Accounts. Does the Minister consider that to be a good provision because I believe many Members on both sides of the House would not? What will be the penalty if he or she does not observe this provision? As Senator O'Toole correctly said, if the chief executive went out to, say, hold up to ridicule the Minister, one could not have this treasonous behaviour undermining the Minister's standing. In a case where in good conscience the chief executive wishes to alert the committee to a danger, however, what course of action would the Minister recommend? Would the chief executive have to resign or would the Minister fire him or her? Is there a penalty included in the legislation for such a transgression? There appears to be no penalty, which seems very strange. This is beginning to sound very much like the Minister's colleague, the Minister for Justice, Equality and Law Reform, in introducing the blasphemy Bill, when he said it was being done to salve the old backwoods people round the joint and that it could never under any circumstances be operated.

There would still be a penalty in that case. There is no penalty in this instance.

That is even better.

I will explain why.

I am delighted. I have actually unearthed something. It is complete nonsense.

Of course, it is. If there is no penalty, he or she can happily whistle away like a canary down a mine, warn everybody about it and the Minister can say, "Tut, tut, next business." It is wonderful. This is Ireland. I am glad I live here.

This is not Ireland. This is the United Kingdom of William Ewart Gladstone.

I knew the Minister would go back to the empire sooner or later.

Senator O'Toole sought the precedent for this.

Obviously, the details of the legislative process in the Department are internal to it and the Minister but it is the case, in regard to the amendment, that it is standard procedure to include a provision in legislation dealing with State agencies on the giving of evidence by officials.

The problem is it is not the Minister's Department. That is the point.

It is a standard provision, for which there is precedent which I will outline before dealing with the merits of the section. In the Standing Orders applicable to the Committee of Public Accounts Standing Order 158(7)(b) provides that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a member of the Government or the merits of the objectives of such policy or policies. There is a provision applicable to all Secretaries General in one of the Oireachtas enactments but apart from that, it is being extended to chief executives, for example, in the context of section 16(2) of the Consumer Protection Act 2007, section 43 of the Garda Síochána Act 2005 — Senators will recall that was the section which made the Commissioner available to appear before parliamentary committees, section 21(9) of the Health Act 2004 and section 50(2) of the Employment Equality Act 1998. In terms of the scheme of the two sections at which we are looking, sections 50 and 58, section 58 deals with the position before the Committee of Public Accounts, while section 59 deals with any other committee.

Senator Donohoe has asked why the chief executive is described as an accountable person. In our financial procedures the Accounting Officer is responsible for a Vote. If a person is responsible for expenditure from the Central Fund, he or she is designated as Accounting Officer. That practice is also followed in regard to agencies. Staff for NAMA are being seconded by the National Treasury Management Agency; hence the chief executive, where advised, should be described as an accountable person. That is a pure matter of nomenclature. I understand that in the United Kingdom all such persons are designated as Accounting Officers but in Ireland the tradition has been the Accounting Officer is only the officer responsible for a Vote.

What section 58 reflects is the traditional practice of the Committee of Public Accounts dating back to the time of Gladstone. I assume the basis upon which civil servants agreed to engage with the committee and appear before it was that they would not be placed in a position where they would have to criticise Government policy or evaluate the merits of Government or ministerial decisions. They appear as Accounting Officers; that is the origin of section 58(3). In fact, the section is not inserted to protect the Minister against some revelation. Neither is it inserted to protect the disclosure of any fact nor for the purpose of ensuring the person cannot communicate freely on matters of public importance. No criminal sanction is provided for in the section, the purpose of which is to protect the chief executive against the activities of Deputies and Senators.

That is the problem.

It does not just rest on Standing Orders. It rests on the principle of the public servant appearing before the committee; the Chairman can then refer to an express provision in the statute which states that, when questions are asked about general Government policy, the person is not obliged to answer them. That is the purpose of the provision.

The chief executive of NAMA, when appearing before the Committee of Public Accounts, can be questioned on the accounts of the agency. It has always been the practice at the Committee of Public Accounts that the Accounting Officer does not comment on the merits or demerits of a Government decision or Government policy. The purpose is to audit the moneys spent.

The principle is extended in section 59 to any other Oireachtas committee. The practice of chief executives appearing before Oireachtas committees has grown in recent years and it is a good one. I am not disagreeing with it. It is not a practice in which Secretaries General have engaged to any great extent. In general, the Minister takes full responsibility before any other Oireachtas committee because the division between the Secretary General and the Minister in the management of the Department is an unusual administrative arrangement, different from that which obtains, say, in a company. I am always quite shocked at the number of experts on corporate governance who suggest a Minister is like a chairman of a company and the Secretary General is like a managing director. That is not the position in a Department of State. In effect, in a Department of State the Minister is the chairman and managing director and the Secretary General is the head of personnel, the head of finance and the secretary of the organisation.

He or she is the Accounting Officer.

He or she is the financial controller. In that capacity he or she can say no to the Minister and tell him or her to back off. That is a different management relationship.

It happens more frequently than the Senator might believe. That is the practice of departmental administration and the Committee of Public Accounts has fitted into that tradition for a century and many decades beyond. That is the origin of the provision in section 58.

The Oireachtas and the Government of the day have agreed that executives of these companies should appear before Oireachtas committees but, again, the executive is in the same position. If the executive is being questioned on the policy of NAMA, for example, the obvious question which would suggest itself to Opposition Senators and Senators generally is whether the executive can be questioned about the policy of NAMA. The answer is that the executive can be questioned because that is something that stems from the policy and the purposes of the Bill. There is nothing in this subsection which prevents Deputies or Senators in a parliamentary committee questioning the chief executive on a matter relating to the implementation of the policy of the legislation. What is prohibited is comment on decisions of the Government or policies of the Minister.

One might ask: what are they? The Government is the collective body established under the Constitution which makes administrative decisions and no executive whose responsibility is limited to a particular Act will want to be dragged into a political controversy about an issue relating to a Government decision. Equally, the policy of the Minister is made clear in the relevant Finance Act and in this legislation only through written directions which have to be disclosed. If we take the position of the Finance Act and say, for example, I introduced a tax measure which impinged on the commercial efficacy of NAMA, and Deputies or Senators wanted to question the chief executive about this particular tax amendment, the chief executive would be free to say that as a result of section 44 of the Finance Act 2011, NAMA had lost €500 million in the value of its assets, but he or she would not be free to say the Minister was wrong to enact that provision. That is the distinction made in the section. Equally, if the chief executive was questioned on a ministerial direction to NAMA and he or she recited the ministerial direction and said the consequence of that ministerial direction was that we had to sell 20 properties under value — that is a more plausible scenario under the legislation — he or she would not be prevented from disclosing to the committee that property had been sold under value as a result of a ministerial directive. What he or she would be prevented from saying is that the Minister was wrong in giving the directive.

The purpose of this type of section is to set the correct constitutional relationship between the Oireachtas, the person appearing before the Oireachtas committee and the Minister who is accountable to the Oireachtas for that body. That is the thinking behind the section. It is primarily of value to the Chairman of the committee and the witness appearing before it who, as I said, can be protected, not against the Minister or a public disclosure, but against the committee.

Will the Minister to respond to my question?

About the accountable officer.

No, I asked the Minister if it is just the chief executive who he would envisage.

Sorry. The chairman and the chief executive are referred to in both sections. It is an interesting point. In appearing before the Committee of Public Accounts, I would have said the chief executive is the accountable person and the appropriate witness. It is not clear to me what the chairman would do before the Committee of Public Accounts, but there are occasions when the chief executive might want to have the chairman with him for his own protection.

In the case of all other committees, it is commonly the practice for chairmen to appear with chief executives and if they want other members of the organisation to assist them, that is open to them as a matter of course. As a matter of general practice with agencies, however, as I understand it, the chairman and the chief executive appear before an Oireachtas committee.

Incidentally, Senator Donohoe rejigged my memory on another point. There is no comparison between the Governor of the Central Bank and the chief executive of the agency. The Governor of the Central Bank is an independent statutory authority who is not subject to any ministerial direction of substance in the performance of his functions. The chief executive of NAMA is in quite a different position.

The Minister has not really explained why something which he says is a protection for the chief executive and the chairperson is expressed in terms of a prohibition on them. An honest expression of what the Minister is doing is that he is seeking to protect the chief executive from himself or herself. That is what flows naturally from what the Minister is saying. Why would it have to be expressed by way of a prohibition on the individual if, as the Minister correctly states, that person would not want to be drawn into this or that expression of a view on the merits or objectives of a policy. The Minister is correct in stating that the person probably would not want to be drawn into that, but why is it being done in legislation by way of a prohibition on the individual? That does not make sense.

The Standing Orders point makes sense. The question of Standing Orders of the committee and what is appropriate and correct to be put to the chief executive or the chairperson is one I can understand, but I am not at all persuaded that the policy objective needs to be fulfilled, as Senator Norris pointed out, in this quite extreme and draconian fashion in the legislation.

I am not at all persuaded by the Minister's argument. I am not prepared to let the Minister off on the basis that it is somebody else who is doing it and the poor man really must go along with it. That will not wash with me. Clearly, it is in the Bill on the Minister's watch and he stood up and defended it. It is his call to put it in or to take it out, and he should take it out. There is no point in saying that it is Mr. Paul Gallagher's staff or somebody else's staff who are putting it in over the Minister's head.

I did not suggest that.

I know the Minister did not suggest that. I am just stating the case.

The other problem about it is that the Minister is able to make distinctions now between what constitutes a policy of the Government, and what does not necessarily constitute a policy of the Government and would, in fact, be amenable to discussion but this legislation will be in place for quite a long period. While I cannot think of examples off the top of my head, and, certainly, not at this hour of the night, the future is not clear. Other issues may emerge which may or may not constitute policy questions of the Government on which somebody expresses a view. If I had time, I could contemplate different areas of discussion which trespass on the Government policy area which might well become a problem in the context of this provision.

The Americans use this phrase "chilling effect", where a person is so concerned not to cross the line in the case of a provision that he or she is too careful and restricts himself or herself unduly in terms of what he or she says or does. That is a real concern. It is a heightened concern in the context of the sort of legislation with which we are dealing where there should be the maximum amount of frankness and clarity, not only on the part of the Government but on the part of public officials who appear before these committees.

If, as Senator O'Toole states, it has reared its head and been seen off in other legislation, I cannot see why that cannot be done here. I cannot see why there is this absolute necessity to include it in such draconian terms in the legislation. I maintain my position that it ought to be deleted.

I agree that this is a valid amendment, notwithstanding the observations and comments of the Minister. In fact, these are contradictory and I will suggest how they are.

The distinction being made is really not what is or is not a policy of a Government; it is between opinion and facts with regard to a policy of the Government or the effects of a policy, which is a subtle enough distinction. To say the Minister took a decision and that cost us €500 million is very close to expressing an opinion that such was a bad decision, at least as concerns this organisation.

The Minister mentioned certain precedents and statutes — the Garda Commissioner and the HSE — but there is a distinction. The Minister mentioned the Governor of the Central Bank being independent, and that is all very different, but he is overlooking section 9(3) which states that "NAMA is independent in the performance of its functions under this Act." Is that not the fundamental distinction to be made, that NAMA is independent of the Government and, therefore, how can the Minister put such a restriction on the chairman and the chief executive officer? I accept that the Bill states "Except where otherwise provided".

"Except where otherwise provided".

However, the point is that the principle is there that NAMA is independent and that is where the contradiction in the Minister's statement comes in. It cannot be independent if it cannot express an opinion on decisions or policies that may cut across the ability to carry out its functions. I rest my case.

Matters are getting a little more interesting because the Minister is hedging it round now with further qualifications all the time. We now have "Except where otherwise provided".

Senator Norris is elucidating the meaning of the section.

We are, which is what this House is for. The Minister has previously been very complimentary about it——

——and it would be useful if he were able to accept this having been persuaded by the arguments, including from my eminent legal colleagues.

It is beginning to sound to me rather like a situation that occurred in the Dáil a few years ago where information was concealed and a Minister — not of Fianna Fáil — stated delightedly that the right question was not asked. We are saying that he can put out facts but he cannot give opinions, in other words, one is given the facts, one must draw the deductions from them and one must ask the right questions, and, presumably, he cannot volunteer anything.

Suppose, for example, to take up the kind of examples the Minister gave, the policy of the Government was to make a profit and the chief executive or chairperson stated that in taking this action it is almost certain to make a loss, surely that would be a clear criticism of the Government. Would he or she be inhibited in so doing because it might be interpreted as a criticism?

The Minister spoke of the wish to protect these people, whether it is from themselves or from a kind of garrulousness that may come late at night at one of these sessions. Suppose they want to say something to alert people. I still believe they may be inhibited. The Minister might be kind enough to take that away and consider for Report Stage not the complete deletion of this section but rather a new form of words because, as has been echoed very trenchantly by Senator White, this is a draconian measure. The Minister himself indicated that this came from the era of the late William Ewart Gladstone.

He was a liberal, not draconian.

He was a Victorian. Being a liberal in the reign of Her late and glorious Majesty, the Queen Empress, is quite different from being a liberal nowadays.

He left a lot of furniture around the Constitution.

We must address the relevant sections of the Bill.

Yes, and it is time we had an auction or a clearance sale for some of it. We have, for example, something we did not have, namely, a whole series of liberal measures such as freedom of information and all the rest of it. It is a completely different age.

The Minister might take away a form of words that I would suggest and see if they would meet the situation. I am not at all proprietorial about this and perhaps my suggestion could be tweaked by his excellent advisers. Perhaps it could read that the chairperson or chief executive in giving evidence under subsection (1) may decline to question or express an opinion on the merits of any policy of the Government. That is the protection the Minister has been talking about but it is given in a way that is not absurdly defensive or restrictive.

I would like the Minister to take this back to his advisers. I will certainly consider putting that down for Report Stage. I hope the Minister would entertain this as a positive and constructive idea which does not go as far as deleting the entire section and retains the protection while allowing the person involved, in the light of our modern democracy, to make statements that are in the interests of the country.

I am very stimulated by the various interventions. First, in regard to the issue raised by Senator Norris, suppose information came into the possession of the chief executive which reflected discredit on the Government of the day, what course of action should he take?

Tell the Minister.

No, the first course of action a wise chief executive would take is to tell his board. NAMA is independent in the exercise of its functions, as Senator Regan pointed out, and the board then has a duty to raise the matter with the Minister. The board can resign and put the correspondence in the public domain or the board can choose to disagree with the chief executive. If the board chooses to discipline the chief executive, he will no doubt then take the opportunity to put the matter in the public domain himself. That is how corporate standards should operate in this country.

I accept it is very difficult to convince either Deputies or Senators of the merits of this particular section because, of course, they come from an entirely different perspective from the person who was summoned as a witness to an Oireachtas committee. The Deputies and Senators generally as a profession, we can all fairly say, are very fond of opinions about matters and very quick to draw inferences from facts. Public servants in general tend to concentrate on the factual side and are rather reluctant to draw and make an inference as to an opinion. All that the subsection prohibits is the giving of an opinion; it does not prohibit the disclosure of any facts. An opinion is an inference from a set of facts, so the chief executive can lay all the facts he or she pleases before the committee but cannot draw that ultimate influence.

We know in our system of parliamentary democracy, which has a necessarily confrontational aspect to it, that chief executives of State companies have no wish to be part of that confrontation, irrespective of what their private opinion might be on the merits or demerits of a particular issue. Therefore, I cannot really put the matter beyond where I left it earlier, which is to say it is a provision to guide the chairman of a committee, and it does not have any criminal consequences.

Senator Norris raised an interesting alternative wording. Although Senator O'Toole has vanished, he would be interested to learn that the original formulation was more extensive, as was noted in the Lower House, because the more extensive formulation departed from the traditional precedent and contained a prohibition on the disclosure of documents as well. I agreed to delete that in the Lower House and it is deleted, but the provision there is the canonical provision. Whether there is some better way of addressing this through a standard provision in Standing Orders or through a formulation of the type which Senator Norris suggested, to which I am quite attracted because, instead of containing the negative prohibition, it puts it beyond doubt that it is for the protection of the committee——

Will the Minister consider it before Report Stage?

I will ask the Parliamentary Counsel to examine the Senator's formula, although in the short time available, I am not overly optimistic of success. However, I will have the matter examined before Report Stage.

When we were discussing this amendment, we focused on the chief executive officer. In the Minister's example, if the chief executive reports some issue to the board and the chairman goes to the Minister and is not happy with the answer, as the Minister has suggested, because it is an independent body, if the chairman finds himself before the committee, he is constrained in the way the Minister has provided for in this Bill. That is inconsistent with the notion that NAMA is an independent body. It cuts across that completely.

Section 58(1)(d) states that the chairman or chief executive can be questioned on any matter affecting NAMA. Again, this cuts across this notion because it does constrain them in how they can report and answer questions. The easiest solution, given there is very limited time to redraft, is to delete the provision.

The chairman is perfectly free to comment on behalf of NAMA about any matter outside the context of a parliamentary committee. The chairman is quite free to issue a statement, for example, criticising Government policy. Again, that has happened, and boards have resigned in the past.

Things get worse. Now we can have somebody inhibited from giving an opinion to a committee of Parliament but he or she can go bleating all over the bloody media. It is daft.

The Senator is far more dangerous than the general public.

Is the amendment being pressed?

In view of what the Minister has said, I will try to come up with something for Report Stage. As he has given us some hope for a different approach tomorrow, I will not press the amendment at this point.

Amendment, by leave, withdrawn.
Section 58 agreed to.
Amendment No. 42 not moved.
Section 59 agreed to.
Sections 60 and 61 agreed to.
SECTION 62.
Amendment No. 42a not moved.
Government amendment No. 43:
In page 52, subsection (6), line 20, after "consents," to insert "in accordance with any applicable law".

This is a technical amendment to clarify that the undertaking required of the applicant bank or building society is to obtain consents in accordance with any applicable law that may have relevance to any subsidiaries incorporated in foreign jurisdictions.

It is appropriate at this stage that we should acknowledge that this section, at a time when the bankers of this country have become socialists, has made the rest of us feel the cold chills of the 1980s back in our bones again on the 20th anniversary of the Berlin Wall coming down and with socialism disappeared from Germany.

Amendment agreed to.
Section 62, as amended, agreed to.
SECTION 63.
Government amendment No. 44:
In page 52, subsection (1), line 31, after "undertake" to insert the following:
", subject to any prohibition in any applicable law,".
Amendment agreed to.
Section 63, as amended, agreed to.
Sections 64 to 67, inclusive, agreed to.
Amendments No. 45 and 46 not moved.
Section 68 agreed.
SECTION 69.
Question proposed: "That section 69 stand part of the Bill".

Section 69 deals with eligible bank assets. It states that the "Minister may, after consultation with NAMA, the Governor and the Regulatory Authority, and considering the purposes of NAMA and the resources available to the Minister, prescribe, by regulation, classes of bank asset as classes of eligible bank asset". Does this consultation have to take place on every asset? It seems from this section that there must be consultation on every single asset that is being taken in by the special vehicle.

It is done by regulation; therefore, it relates to the classes of bank asset referred to in the first subsection. The consultation only takes place in drawing up the regulations that define the classes of the assets. It does not apply to each asset.

Question put and agreed to.
Sections 70 and 71 agreed to.
NEW SECTION.

Amendments Nos. 47 and 48 are related and may be discussed together.

I move amendment No. 47:

In page 60, before section 72, but in Part 5, to insert the following new section:

72.—In this Part, "market value" means current market value and includes such element of the current market value as is commercially attributable to the anticipated long term value of the asset.

There was some discussion on this area on Second Stage and it has given rise to a certain amount of exasperation on the part of the Minister, as it has become such a recurring preoccupation of critics of the legislation. It goes to the very heart of what is intended in the Bill. The question of long-term economic value requires a distinction to be drawn between that concept and market value.

I recall asking the Minister on Second Stage how and on what basis the 15% uplift figure was arrived at. The Minister did not ignore my question, but I have never had an answer that goes beyond saying that this is the best advice the Government has. I have heard the answers given time and again by the Minister on the components of the decision, such as historical trends and so on, but these are a reference to the method by which the figure was arrived at. I understand that and the hoops he had to jump through to arrive at that figure. However, why is it that figure? Why is it 15%? I know that Mr. Hurley and Mr. Honohan agreed with that figure, so I understand that people are prepared to agree with the Minister that it is fair enough. However, I feel the House is entitled to have a little bit more information than that.

The Minister made a comment to the Oireachtas committee in September and I would like to ask him about it. He was pressed on this issue by colleagues who were asking why this was the amount and whether it was related to his policy to ensure that the shareholder value in the banks would not be undermined. In other words, they were asking whether he had one eye on that and one eye on the inherent question of how the assets should be valued. The Minister stated: "Why would I outline the fact that there may be a residual or substantial shareholder interest left in these institutions if valuations establish that their entire shareholder value was wiped out?" The value to me inheres in the asset. It has a particular value or it is accorded a value. Surely that process of assigning a value to an asset ought not to be influenced by attempting to make something else work out properly, such as enacting a policy to keep the shareholder value of the institutions afloat. I always thought that the value inheres in the asset itself and that the Minister should not have regard to any other imperatives.

Those comments were made following a suggestion that there was no shareholder in the bank. I was making the point that the valuations clearly imply that there was shareholder value in the bank, represented by the valuations at my disposal, calculated in accordance with the Act. There was no further significance in the comment.

Perhaps the Minister can come back to this. I understand from what he is saying that this plays no part in the decision on the long-term economic value. The market value must first be identified, and then we arrive at the appropriate figure for long-term economic value.

The rationale of our amendment is to change the Bill in order to reflect the true position of what market value means. I do not accept and I do not believe that established economic opinion, academic or otherwise, believes that a market value of an asset does not include a component of risk as to that value rising or falling in the future. If somebody buys a house, the price is not a static thing. There is always a speculation that the price could go up or down in the future. The market takes account of that, and the person with his eyes wide open when buying the property makes a calculation that is not just based on a point in time, but also based on the future. Market value includes that component of predictive value into the future. Therefore, it is a fiction to seek to redefine market value in the limited way it is being defined in the Bill. It is being stripped of the predictive element that is always there in market value, right down to something much more limited. That is being done for a purpose, which is to line it up more comfortably with this notion of long-term economic value. The entire strategy of the NAMA project is based on the notion of long-term economic value. That is the basis of this amendment in respect of market value.

This concept of market value is just a whizz.

It is the long-term economic value.

It hardly makes much difference. Some €47 billion of toxic loans are being purchased at this proverbial market value, and another €7 billion is being paid for this long-term market value. In reality, however, NAMA will pay €54 billion to the banks for assets. If they are not given enough, the Minister will have to make up for it with the recapitalisation which will come next year. Is that not essentially what is going on? We should get rid of the long-term market value nonsense from the debate because this is about bailing out the banks and trying to get something working in the Irish financial sector again. The Minister is muddying the waters. He should tell the people: "Look lads, I am going to pay €54 billion for these toxic assets. I hope it works because if it doesn't we will have to come up with another solution. On top of all that, I will still have to recapitalise these banks next year." That would be straighter and more realistic than what is going on here. The Minister does not know the market value. One can use complex formulas if one takes on enough valuers, auctioneers and solicitors to do the job, but it is difficult to value this amount of assets in the current Irish market because things are so depressed. Bringing the concept of long-term market value into the equation is confusing things and may affect the recovery of the market.

If the crisis was smaller, as we saw in the UK and other countries previously, the values would fall through the floor. A number of operators then come in to buy up property cheaply, turning it around so that growth restarts. We were not allowed to let that happen here because the problem is too big. All this talk of long-term market value can contribute to the problem by avoiding a sense of reality. The Minister is bailing out the banks by paying €54 billion in bonds to try to do the job. I hope it works because it is a serious crisis. Maybe we should then move on to see what we need to capitalise the banks with next year, if we are to stick with this NAMA project. We would have done it differently, but this is what the Minister is going with so we should use language that people understand.

On the amendment there is a question of how language is used in terms of the method of valuation. I presume the method proposed by the Minister is based on the European Commission guidelines on the treatment of impaired assets in the Community banking sector. Section 55 of the Commission's communication deals with the valuation of assets for relief on pricing. Paragraph 39 states: "At first stage, assets should be valued on the basis of their current market value wherever possible. In general, any transfer of assets covered by a scheme at a valuation in excess of the market price will constitute State aid." I presume that brings this whole project within the valuation by the Commission in accordance with its State aid rules.

To which paragraph of the guidelines is the Senator referring?

Paragraph 39. It also states: "At second stage of the value attributed to impaired assets in the context of an asset relief programme, the transfer value will inevitably be above current market prices to achieve the relief effect. To ensure consistency in the assessment of the compatibility of aid, the Commission will consider a transfer value [I presume we are talking about €54 billion in the present case] reflecting the underlying long-term economic value, the real economic value of the assets on the basis of underlying cash flows and broader time horizons, and an acceptable benchmark indicating the compatibility of the aid amount as to the minimum necessary".

The paragraph goes on: "Uniform haircuts applicable to certain asset categories will have to be considered to approximate the real economic value of assets that are so complex that a reliable forecast of developments——

That sentence does not apply to us.

Yes. In a sense, the wording of Senator Alex White's amendment is more reflective of the real economic value than the market value.

Paragraph 41 of the guidelines read: "Adequate remuneration for the State must be secured". Paragraph 42 states: "The valuation process, both with regard to the market value and the real economic value, as well as the remuneration of the State, should follow the same guiding principles and processes listed in annex 4". I will not go through that annex. The paragraph also states: "The Commission will consult panels of valuation experts. The Commission will also build on the expertise of existing bodies organised at community level in order to ensure the consistency of valuation methodologies." On the issue of market value and long-term economic value, and the process we are following, am I right in thinking that all of this scheme must be notified and formally approved by the European Commission? I refer not only to the Bill when it is enacted, but to the transfer prices and valuation methods. Does the valuation methodology, including the figures, calculations and assumptions, have to be verified by the European Commission before this project can go ahead? Is that the case?

Yes, absolutely.

I agree with the points my colleagues have made. I would appreciate an answer to one particular question. Section 76(1) states:

NAMA shall determine the long-term economic value of a bank asset having regard to the following:

(a) the market value of the property;

(b) the market value of the bank asset;

(c) the long-term economic value of the property.

Section 77 (1) states that "in determining the market value of property, NAMA may take into account" three factors, and (2) "in determining the market value of a bank asset NAMA may take into account" five factors. According to two of the main factors, however, the market value will be determined by NAMA. Am I correct in this? Will the long-term economic value be predicated on two other valuations that NAMA will make?

The Senator is right.

I thank the Minister. This comes back to the point that Senator Alex White made at the start of his contribution. It appears that we are building supposition on top of supposition. Section 77 refers to the market value of the property and the bank asset. Surely the market will factor in some anticipation of the asset's future worth. That is one of the ways in which the value of shares and property is determined. The Minister's clarification makes me doubt the credibility of this approach. It appears that it is judgment on top of judgment. In an earlier contribution, Senator Harris pointed out the essential frailty of human beings in projecting into the future. That seems to be embedded in this section.

I thank Senators for the very rational way in which this very interesting debate has been structured. Until Senator Regan spoke, I did not realise how carefully drafted Senator White's amendment was. In his amendment he implies that inherent in the concept of market value is an element of long-term economic value. That is one way of approaching the issue. Another way is to consider the reality of conditions in the marketplace today. In a distressed market, as we have, it is difficult to ascribe any long-term economic value.

Senator White, like a good cross-examiner, asked me my state of mind at various stages in deciding on this matter. When the legislation was being prepared and it was drawn to my attention that the guidelines of the Commission envisaged this concept, my inclination was to consider it in some detail. I am glad Senator Regan opened the key paragraph of the opinion. In the other House I opened it three times without any comment from the Opposition. The Commission does suggest it is an inevitable feature of an asset relief scheme.

My initial reaction to the question of valuation was to assume it was impossible to assign a market value to the assets in question given the very limited character of the market. A valuer will tell one that every asset has a value and that the value of an asset is what a willing buyer will pay a willing seller in a marketplace. There is always a market. Many of those who commented on the debate suggested it was impossible to value the assets but it is always possible to value an asset.

Everything has a value.

Current market value in this legislation means the aforedescribed value. Under the legislation, as I am sure Members are aware, the Minister will fix a date for valuation purposes. It could be 1 September last or 1 October. It would be prudent to fix a date after the presentation of the initiation of the Bill in the Oireachtas. Were the Minister to designate 30 September as the date, the market value would be fixed as of that date. Any valuer could tell one what a given purchaser would have paid for ten acres of land five miles from Naas on the date in question. That is the current market value and there is no speculation. Senator White tried to read into the valuation speculation about long-term economic value. Long-term economic value is a distinct concept because it——

That is missing the point.

It does not refer to the value on the date the asset would have entered the marketplace. One must ask whether it is reasonable in the context of the asset to state if the agency held the asset to maturity, it would acquire a greater economic value. This is what long-term economic value means in the context of this legislation.

There are many assets which under the regulations, and we are not debating the regulations, will not acquire any further value. The Commission guideline has been touched upon by Senator Regan and it is very clear.

Senator White referred to residual shareholder value. As I explained, my initial reaction was that one could not assign any value, only to discover that one can. One introduces the concept of long-term economic value precisely because the market is distressed. To sell all the assets and assign the current marketplace value to the assets would be, in effect, to conduct a fire sale of the assets in the banks and to deny any prospect of an uplift. For this reason, the concept of long-term economic value is included in the legislation. It is not included in the legislation, as Senator White sought to suggest, to protect some residual shareholder value.

When I was questioned at the committee on this topic in August, some Deputies had advanced the proposition that the banks were insolvent, as had some commentators. Some of those who participated in the public debate suggested that a 33% discount would wipe out the shareholder capital of Allied Irish Banks. I refer to Professor Whelan in particular. His contention was not correct because banks can make provision against their losses and do not meet all their losses through the acquisition of capital. If one reads a balance sheet, one will understand that. The suggestion had been canvassed in a submission that Professor Whelan made to the Green Party.

I was addressing the point that the provisional estimates that were submitted to me did not wipe out the shareholder value. Clearly, if they had, the Government would have had to take a different course of action in the Bill. It is not the case that the valuations are engineered to produce a certain result in that they cannot be.

With regard to the working out of the estimate, which was introduced on the initiation of the debate in Dáil Éireann, the estimate was calculated on a top-down basis considering the information from the NTMA on the bank loans in question and the draft regulations on valuation and applying them to the top-down information available. The best estimate we were in a position to arrive at on the valuation was approximately €47 billion, with €7 billion assigned to account for long-term economic value. There are ceilings within the regulations pertaining to the extent to which one can employ long-term economic value.

Several Deputies referred to the definition of land in the debate in the Dáil. When the regulations refer to land, they mean land in the lawyer's sense, not the accountant's sense. They mean all the real estate assets being acquired by NAMA. Accountants have a much narrower definition of land that really relates to land with no buildings, fixtures or fittings annexed to it. It is very important to understand the valuation is an estimate and that the individual valuation is required under the EU regulations in the interest of the taxpayer. There is a bottom-up valuation, not just a top-down analysis.

Senator Twomey stated rather bluntly that I am putting €54 billion into the banks and that is it. He should note there is a bottom-up valuation. To this extent, the taxpayer is protected. The figure may not be exactly €54 billion because each asset will be valued individually. Senator Twomey pointed out in a constructive sense that we could discuss long-term economic value for some time to come in this House. The debate is useful because it is shedding light on the matter.

Senator Donohoe referred to section 76. His point was involved.

That does not make me feel any better about it.

All credit to the Senator. He was keen to know that the market value of the property is determined by NAMA, as is the long-term economic value. The latter is defined having regard to the former. This must be the case because there cannot be a disproportion between the two values. In the regulations, there is a ceiling of 25%. It is arbitrary but imposed on the concept of long-term economic value so no one can go beyond 25%. In theory, an asset could appreciate by 50% during the maturity period but its long-term economic value would be halted at the 25% uplift. The general assessment on the basis of the NTMA's estimates was that the long-term economic value would increase the value of the estimate by 15%.

I support the Minister and the concept of long-term economic value. There was much debate over how one could make a valuation in a market where there were no buyers or sellers. I am one of only three valuers in the Chamber, as opposed to the lawyers, who have held the floor quite well in recent times. The Minister stated correctly last night that there is still a substantial rental market with much activity therein. Rents have dropped from their peak but the market is still very active. There are yields on Grafton Street of 8.5%. This activity underpins the value of property over time. In that context, some of the valuations are correct.

I welcome the fact that there will be bottom-up valuations. It is hoped that when that happens, if there are substantial adjustments to be made, they will be made.

This is a serious issue which requires debate. The Minister said there is a fixed figure involved and that following a hair cut the market value of the assets is reached. He then appears to put extensions on the assets and refers to this as long-term economic value, which is an enhancement of the value of the assets and not a hair cut in the sense described by the Minister. References to hair cuts and long-term economic value are confusing the issue and the markets. The Minister can put a value on the assets and bail-out the banks but should say it as it is, namely, that the market value of the assets is €47 billion and he is giving a subsidy of €7 billion to the banks. All this talk about long-term economic value and enhancement of the value of the assets is giving the wrong impression to the market and could stall improvements in the long term.

There needs to be, following the passing of this legislation and a change in our position some time next year, a sense that the bottom of the market has been reached, thus allowing people once again to begin purchasing. The best way to achieve this is for the Government to be straight with the people and say it is valuing the assets at €47 billion and is giving an additional subsidy of €7 billion to the banks because if it does not they are unlikely to recover and that there is a possibility it will need to recapitalise them again at some stage next year. This will make a lot more sense to those people wishing to invest again in the economy.

Senator MacSharry is involved in the auctioneering business and understands property valuation. Many speakers have made valid points in regard to the legal issues that arise in this regard. While I do not have a speciality in either area, I am aware of how people are thinking. People need to believe we will reach the end of this cycle in which we now find ourselves. I do not believe anything in Government legislation or spin or any change in terminology should confuse that issue. We should take this opportunity to say it as it is, namely, the Government is paying €47 billion for the assets, is giving an additional subsidy of €7 billion to the banks because it believes if it does not do so they will not pull through and will consider recapitalisation again next year.

I agree with Senator Twomey. What he said is absolutely correct. I am sure if we had time Senator MacSharry or anybody else who knows about valuation would acknowledge that assessment of the value of a piece of property today must include within it an element of judgment in terms of how it will perform in the future. That is manifest to anyone who has purchased a house. Part of one's judgment is the prospects for that property in the future. Nothing I have heard from the Minister persuades me that is not included in the market value of a property. It manifestly is included within it.

Senator Twomey is correct that the reason for the attempt to define market value in the Bill is to pave the way for the fiction of long-term economic value, which is the second concept. The market value as a concept needs to be paired down in the legislation so that the long-term economic value can then be put on top of it. Senator Twomey is correct that there is an element here of deceit, although I do not suggest that is what is happening. The Minister used the word "engineered", which I believe is a good word for precisely what is happening. I have not yet got an explanation for why the assets are being valued at 15% above market value. Why not 6%, 7%, 10% or 12%? We all know the answer is that if it were set at 6% or 7% the banks would be buried. That is the reason the percentage has not been set that low. This brings me back to my original suspicion that the uplift is being determined by factors other than what inheres in the asset and is related to ensuring the banks stay alive. I challenge anyone to tell me I am wrong. It is clear that is what is happening. Therefore, I believe Senator Twomey is correct in his analysis, namely, that we are basing all of this on a story. We are being told a story with which we must go along and the different elements of which we must buy into. I am not persuaded, conceptually or otherwise, about the notion of market value being what the Minister says it is.

It has been stated that there is no market because the market is distressed. However, as the Minister said, there is always a market. It is possible that the value of an asset could be set at nil, which is still a value. There is a bit of engineering and retrofitting taking place which allows the Minister to jig around with what is believed to be the market value although everybody knows it includes a predictive component and always has. This is then paired out in the Bill thus paving the way for the notion of long-term economic value. This points again to my suspicion that the valuation strategy and the manner in which the assets are to be valued is largely related to keeping at least one eye, if not both, on what needs to be done to keep the banks alive. Why then is this not stated and admitted in this debate?

The Minister said on another occasion that the success of the NAMA project depends on property prices returning to normality. I would like to know what is meant by "normality". When were prices normal? Perhaps the Minister will say what he believes is "normality" so we can consider it. We cannot escape from the further conclusion that we are buying into an approach in which there is a vested interest building up in the State and related institutions in terms of restarting the property boom or a form of property boom. The Minister said the project is dependent on a return to normality of prices. One particular imperative will be that we do whatever can be done to get prices up again. I do not believe that is the basis upon which, as Senator Donohoe said, we should be basing our economic policy into the future.

Valuation is an inexact science. We all accept that what we are speaking about is hugely subjective.

As regards the €54 billion, which includes €7 billion for long-term economic value, is there evidence to suggest the valuers appointed by NAMA are valuing more conservatively and as such the valuations may not total €47 billion? I take it, if the percentage being used is 15%, that the €7 billion will be scaled back. I presume that makes sense. Perhaps the Minister of State will say if that is the position.

The valuation exercise is, as argued by other speakers, fraught with danger. As Senator White said, in terms of prices returning to normality, long term-economic value is a hope value. This process is hugely subjective and will not work out exactly as planned. Also, we do not know how long NAMA will be in operation. Will the Minister confirm that, as is probably being projected now, the values for what will be purchased will not reach €47 billion and that, therefore, the €7 billion will not arise?

Just before the Leas-Chathaoirleach puts the amendment to the House I thought I would refresh the Minister of State, Deputy Mansergh's mind on what I said previously. I am a little puzzled. I understand the Minister wants to get things going to make sure there is not a further collapse. I am not haunted by the spectacle of a further property boom. That is a mirage. Some people would like to see it, but it is impossible. It is something that there is not any point in contemplating.

Values are notional to a certain extent. In the property supplements of the newspapers we read about something called AMV. Very often they are grossly wrong. Mostly, they are grossly under estimated but sometimes they are over estimated. We have the example of Japan where over a long period of approximately 16 years, urban property prices continued to decline. One hopes that will not happen here but it is a possibility. The Minister of State will be well aware of the advertisements on the radio, which are a legal requirement when one is flogging financial goods and services. One has to say the investment may go down as well as up. I accept the incremental amounts are quite small but it is a consistent and inexorable small rise. There is no provision for a downturn, which could be of either a small or large nature. I am concerned by that.

I would not like to see our money — the money of the people — which has been gathered together with great pain to make this investment, invested above the odds unless there is a really clear and cogent reason we should pay above the odds. It appears that we may well pay above the odds because there is this notorious phrase, the haircut, with which I am sure the Minister is very familiar. A distinguished former Member of the other House, Ivan Yates, spoke of a 40% to 50% haircut being a realistic one. The group called Arc consists of property people outside the scope of NAMA and I understand it is talking in terms of approximately 40%. I am not a big advocate of the market, far from it, but if we are looking at market approaches then that is something that must be taken into account as well. I am concerned and, if he can, I would like the Minister to reassure us that there is good reason for this additional premium, which appears to be above the market value as the market is currently telling us. Speakers have referred to the Irish Glass Bottle site and various other sites, which are down considerably more than has been estimated.

I mentioned to the Minister — I am not sure if it was this Minister because there has been a rather bewildering whirligig of Ministers in and out of the House, and I know that the Minister of State, Deputy Mansergh, who is here now, is one of the most competent — but I cannot recall whether it was to him that I made this remark as a very ordinary member of the public with no particular financial expertise. I am in the position of many citizens who would say "if I were to buy a house for let us say €100,000, which is a nice round figure——

Does Senator Norris mean in Azerbaijan?

The Senator would not buy one in North Great George's Street for that amount.

Wherever. It is just a notional figure. I chose €100,000 to make things easy because I am arithmetically challenged. However, very few people would be inclined to say that the price established by the market currently is €100,000 but just in case it goes up he or she would like to give another €25,000. I would feel pretty bloody sore if it went down instead. I would say I should not have paid the €100,000 let alone the extra €25,000 I gave as a little tilly or goodwill bonus. Those are the kind of concerns I hope the Minister of State's sophisticated financial intelligence will be able to assuage because I am a bit of a nincompoop in this House but there are thousands more outside who have very much the same simplistic view of the situation and they view the application of a macro approach in very much the same way that they view a micro approach. That is what the micro approach would be so there must be some super sophisticated reason for the way people deal with their personal finances does not apply to the macro-economic sphere. I would be grateful if the Minister would let me know what that is.

This debate has been well rehearsed in this House and previously in the Dáil and among the general public. It is one of the big flaws in the legislation. Senator Alex White got it exactly right when he said the reason we are paying over the odds for those assets is to keep the banks afloat. The Government should admit that and be clear about what is happening. We should pay the current market price. If the banks need to stay afloat we should recapitalise them but take out shares. The Government does not want that because it is aware that we will probably have to recapitalise the banks even after we spend the €54 billion and we might end up with a number of banks being nationalised, which is something the Government wishes to avoid. What it wants to do instead is to pay over the market price to the tune of €7 billion and get no shares in return that one can either sell or use to influence decision making in the bank.

That is a deeply fundamental flaw in the legislation. We have had various examples of why one should not take that nonsensical approach. Senator Norris has just related another one. People do not understand why one would pay over the market price for anything. I am sure that when State agencies or Departments buy land for social housing they will not pay the projected market value of the land, they will pay the current market value, which makes sense. The fear that the market will not improve in the manner projected by the Minister could be well founded.

This is the same Minister and the same Government that warned there would not be a collapse in the construction sector. It is the same Minister and Taoiseach who told us that we were about to experience a soft landing. I am sure they were advised by the same type of experts who now advise us that we are facing an upward trajectory in the next ten years. I referred last night to the different types of Taoisigh we have witnessed; the risk taker, the cautious one and now we have the gambler. This gamble is far too much of a risk.

Another fundamental flaw is apparent in addition to the fact that we are paying more than the current market value. Individual cases have been cited in the debate yesterday and today about various properties, the example most frequently mentioned is probably the one in Ringsend. Let us take the example of Liam Carroll's Zoe Group and the property portfolio that was before the High Court and the Supreme Court recently when the banks moved against the companies. On studying the documents that were laid before those courts the judgment was that the assets were worth between 20% and 25% of the original market value. If that yardstick was to be applied to the various types of asset that NAMA is about to take on board then we have completely over estimated even the current market value let alone the long-term market value. My amendment's purpose is similar to the Labour Party amendment. I commend it to the House.

I am not sure whether this is the right time to bring it up but Senator Norris referred to the fact that the public is confused on many issues relating to NAMA such as long-term economic value. As the debate has taken place so many times in these Houses over the last six months, we are all familiar with terms, references and processes we were not aware of this time last year, but the public is not. I ask the Minister and his officials to take this on board. Would it be possible to have a type of Ladybird version put into the public domain, be it through the newspapers or otherwise, to provide some basic simple explanations after the Bill is passed? That would be of help. Senator Doherty also mentioned this.

The beauty about the long-term economic value is that it strikes the appropriate balance between rehabilitating and capitalising the banks and paying close to the market value, and the beauty about NAMA is that it can take a longer term view. Another buyer of an asset or house cannot do that. Senator Norris mentioned Japan where prices had fallen for up to 19 years. That is true but, as the Minister pointed out, Japan did not have an asset relief scheme. Japan did nothing and let the banks continue to go downhill. An analysis carried out of peaks to troughs in property booms has shown that, in the case of residential property, within seven years of action being taken, 90% of values were recovered. We are not betting on that unrealistic figure. Furthermore, I read some time ago about an examination of the property market in Ireland over the past 40 or 50 years. If asked what decade saw the biggest increases, most people would reply that it was the last ten years. It was actually 1970 to 1981 when the increase was approximately 600%. The long-term view the Minister is factoring into this is 10% over ten years. I believe that is realistic.

The points that have been made by everybody on all sides of this argument have value, if I can use that word. However, with regard to how one moves forward, there is a leap of faith in this and the Minister should confirm it. I do not trust economists. I did not trust them in the last ten years and I do not trust them at present. They were wrong two years ago when none of them forecast the bottom falling out of the market. When it did fall they were wrong in predicting a soft landing. As I said in the House recently, I have copies of the forecasts from all the economist groups for the last week in October last year, when we were well into the recession, giving their prognoses for 2009. Not one of them was even close to being correct. The same people now have a consensus about what will happen next year and in the following year. I do not trust or believe any of them.

I have a number of problems with this debate. I do not understand the long-term economic value. I do not have the knowledge necessary to reach a conclusion about it because I am not being told the exact percentage the Minister will put in place through regulation to make the connection between the market value and the long-term economic value. However, I know where I stand regarding market value and long-term economic value, and it is exactly where I have stood all my life on the question of value, market and cost. I have stood here countless times in the past 22 years accusing the Department of Finance of knowing the cost of everything and the value of nothing. The argument is turned on its head in this debate but it still applies. If I try to sell a piece of a gold ornament and nobody buys it, it is only worth whatever number of troy ounces it is and one multiplies that without looking at the inherent value. There is an intrinsic value. The fact that there is no market for it does not take from the value. There is a difference.

We must acknowledge that this long-term economic value is a leap of faith. We must also acknowledge that there is a difference between the value and the cost of something. These are realistic matters. What one does about it is the issue, and that is why the Government is taking a decision here. One cannot argue with the points made by Senator Doherty. If I intend to purchase something, I want to buy it at the lowest price. On the other hand, if I want to sell something, I want to sell it at the highest price. These two points are important.

All the discussion is based on the assumption that 100% of the assets are impaired. It is important that the Minister correct that assumption. One third of these assets are overseas, most of them in places where there is already a slight upturn in the market. Another third of the assets are washing their face, and the proposed boss of NAMA, he who cannot criticise his Minister, has said the income stream from that third in rental, interest and repayments will pay the coupon costs of the bonds being issued. From the start there will be no ongoing drain on NAMA other than the obvious long-term €54 billion that we must retrieve in some way or other. These are important points. One third of the assets are overseas, one third are paying their way and another third appear to be totally useless. They comprise half-built or unbuilt property. The Irish Glass Bottle Company site, whose value has plummeted, is probably the best example. However, a third of the properties are built. They might be empty but they exist. It is important to recognise what we are dealing with.

It should be understood also that while there will be a transfer of all these assets and loans into NAMA, the customers at the end of the line or the people who have taken out these loans will, in many cases, be profitable, viable, healthy industries. They will continue their repayments into their own banks. They will probably be made aware somewhere along the line that the money is just being channelled through the bank to NAMA because the deeds, lien or whatever have been transferred to the agency. Therefore, it is not a standing start, although it is not a running start either. Developments continue to be built. The Government will make the judgment call between market value and the long-term economic value. How does one get to that? I do not know. That is what the Government is elected to do. The gap is not as wide as the argument indicates but there is definitely a gap. Only time will answer that question. I cannot see another way of answering it.

It is important to watch what is happening in ARC, the Asset Recovery Corporation, run by Mark Duffy, the former head of Bank of Scotland Ireland. This will be what he describes as a NAMA-type operation for the banks not covered by NAMA, but I believe that what he intends to do is much closer to the special purpose vehicle which will be established by NAMA. The special purpose vehicle will be established to remove from the main NAMA operation the exposure to risk, liability to tax and various other issues. It will allow people to invest in it, people who might not invest in it for the reasons that have been put forward here tonight in terms of people's reservations. That is also what might stop people investing in something put on the market as a securitisation product by NAMA. However, by putting it into a special purpose vehicle, which is a stand alone legal entity which cannot be dragged down or up by NAMA, it will try to avoid that. My understanding is that ARC is setting up a situation very like that.

We can talk about this until the morning but I do not envisage any resolution. There are different views and I am somewhere in the middle of them. Nobody can say with certainty that Senator Doherty is wrong or that the Minister is right. People have come to reasonable and thoughtful views on this. The Government is taking the leap of faith and bringing us with it.

Senator MacSharry, perhaps inadvertently, hit the nail on the head when he requested that a Ladybird version of the legislation be placed in the public domain. When I read Ladybird books in days of yore, they were generally works of fiction. People perceive that there is quite a degree of fiction in the section to which these amendments relate. That said, we must try to come to grips with the issues of current market value and long-term economic value.

I agree with some of the remarks made by Senator O'Toole. We need to consider this matter from a balanced perspective. We recognise that if NAMA is to be successful, it must enjoy some degree of public confidence and acceptance. Section 72 lies at the centre of public doubts and difficulty with the NAMA project. Since the Government's plans in respect of this matter were originally made public, the same question has been posed on numerous occasions, namely, how does one define long-term economic value? Senator O'Toole's referred to the basket of projects that will enter the NAMA kitchen. Some of those projects are performing well and will continue to perform, while others are not performing well. We must accept that it is extremely difficult to place an absolute market value — not to mention a long-term economic or hope value — on something.

Senator Coghlan raised an extremely important question in respect of current market values which I hope the Minister of State will address. It should be possible to make a reasonably accurate guess on such values. In the current economic climate, however, there is not really a market in existence. As a result, current market values are difficult to determine. In such circumstances, attempting to identify a long-term economic value will be extremely problematic.

I wish the Minister of State well in trying to offer Senators some degree of explanation and comfort in respect of this section. To my economically illiterate mind, this section and the matters relating to it lie at the core of the debate. I accept that in the not too distant future a rebound will hopefully occur in the area of economic activity. Since time immemorial, economics have run in cycles. Some of those cycles have been short, while others have been long. Values will inevitably recover but to what level we do not know. They will not, perhaps, rebound to the artificial levels which obtained during the past decade. However, there will definitely be an increase in current market values. We need to try to guess the state of the market in five or ten years time and I recognise how difficult this will prove to be for all those people charged with carrying out the valuation process.

All I can do is ask that the Minister of State, in trying to explain Government thinking on this matter, attempt to outline an equation which would provide some degree of hope and confidence. All Members of this House are realists. We know the numbers and we are aware of what the outcome will be in respect of the legislation 48 hours from now, namely, that Ireland Ltd., will be obliged to come to terms with the NAMA project. However, we need for some degree of public confidence and acceptance in respect of that project.

On Second Stage, I made the point that it is important to try to provide citizens with a basic knowledge of the project. In that context, this section should lie at the core of any explanation provided. It is important that we try to instil some degree of confidence among the taxpayers who are footing the bill in respect of this matter. I apologise for not posing an original question. All the relevant questions have been put a hundred times already. I just wonder if there is some further assurance the Minister of State might offer.

Senator Donohoe has already made a contribution on these amendments. Does he wish to put a further question?

Yes. This is the €7 billion section of the Bill and, as such, it merits discussion. We have spent an hour discussing these amendments. The impact this section will have, in economic terms, on this generation and those that will succeed it will be immense.

Senator O'Toole made several important points. I fundamentally disagree with one of those points, namely, that arguments were put forward by Members on both sides but that there is not much difference between these arguments. There is a massive difference. The contention put forward by most Senators on this side of the House is that the concept of long-term economic value is fiction. It is an artificial value being created by the Government to deliver, by means of this legislation, other policy objectives it does not wish to discuss. The concept of long-term economic value has been retrofitted to the Bill to invest money in the banks now to minimise the amount the Government may be obliged to invest in them at some point in the future.

We contend that long-term economic value is a creation which does not bear any relation to the values the market is assigning in respect of these assets at present. There is a major difference between the contentions being offered by Senators on both sides of the House. It is important to highlight that fact because the difference between those two contentions is approximately €7 billion.

I completely agree with that. I did not express any other view.

We have rehearsed the arguments on this matter at length and it is very unlikely — even if we remained here until 9 a.m. tomorrow — that we might change the Minister of State's mind. However, it is important that there be a full debate on this issue. It is one of the main reasons I oppose the Bill.

Government Senators and Senator O'Toole stated that property prices may rise. There is a leap of faith involved and it may come to pass, as NAMA's interim business plan indicates, that the long-term economic value will be reached or even surpassed. Members on all sides hope this will prove the case because if it does not happen, then the consequences will be dire.

I stated on Second Stage that I do not possess a crystal ball, neither do the Minister or the Government. It is my judgment that this is bad legislation and that NAMA will not pan out in the way the Government envisages. The Government does not know what the level of property prices in the future will be. However, that matter is completely irrelevant in any event. The key issue relating to this matter is why we are paying over the odds to the banks in respect of particular assets. Even if we possessed the crystal ball to which I refer and on looking into it discovered that property prices would increase by 50% over the next ten years, the central question would remain the same.

Why should we pay over the market value in respect of assets we are taking from the banks in order that they might clear their bad debts and function properly? I do not understand why we are taking this course of action. As Senator Alex White stated earlier, the reason we are doing so is to provide the banks with enough capital to allow them to function properly. Why not just pay the market value? If the banks require the additional €7 billion — I suspect they do — then we could recapitalise them to the tune of that amount and take out shares in them. The outcome of that process would be that if the Minister for Finance's projections are proved correct, the State would have an additional €7 billion at its disposal in ten years' time. We will also, I hope, have €7 billion in shares in banks which are well functioning and which can be sold off or nationalised by buying the remaining shares. It is a win-win. The crux of the issue is not whether property prices will increase. If that is our focus, the interim NAMA plan does not state property prices will increase in the next ten years by €7 billion. That is not the projection. What NAMA has projected is that property prices, the value of the assets in the next ten years, up until 2020, will rise by €11.8 billion, providing a net profit of €4.8 billion. Why not just pay the projected market value of €11.8 billion? There is obviously a rationale somewhere deep in the mind of the Government that we need to provide an additional €7 billion and that it needs to find a way of presenting this in the legislation. It is dishonest, to say the least, to pretend it is the done thing to pay over the price for the assets.

After this capital injection by the State, we will need the banks to be on a sound footing in order that they can continue to lend. If the additional capitalisation was required and if that argument could be clearly demonstrated, we could support it at a later stage. However, let us be honest about what we are trying to do. I ask the Minister not to talk about the projected rise in property prices in the next ten years. Regardless of the projections on property prices and predicted trends, why are we deciding to pay over the odds in the first place?

Senator Donohoe anticipated what I wanted to say and given the late hour, I will not repeat the point. The Labour Party amendment, amendment No. 47, brings the issue down to the fundamental question posed by Senator Donohoe. I respect the entitlement of colleagues to speak to the amendment and to give and express their views. People make up their own minds. As Senator O'Toole said, this is a Government proposal, to which we can decide our response. This issue is the sharp edge of what the debate is about and one is either for or against this fabrication. I am against it.

Senator Donohoe is right that this is a creation, as section 79 proves. As has been said, it allows the Minister the authority to retrofit, so to speak. When we talk about hope value, we talk about a value put on something that may be sterilised. Land might be zoned agricultural, but the hope is it will obtain residential or developmental status down the line. This is how we come up with hope value. In the current situation it requires a leap of faith. Senator O'Toole has suggested a practical way to deal with the matter, that it be done in the traditional way of a trader where a fellow would spit on his hand before shaking on an agreement and agreeing to split the difference. This is a Government creation, to which we are giving our response. We must all admit that is what is happening. I hope things will work out.

The Minister has replied to many of the points raised. I am amazed by the market fundamentalism of the debate, particularly in the more left-wing parts of the House.

Nonsense. The Minister of State has not been listening.

When the market was at its height three years ago, would anyone have said the then market value was its long-term economic value? This issue arises from the idea that there is no distinction between long-term economic value and market value. Clearly, there is a distinction when the market is at its top; therefore, why is there no distinction when the market is at its bottom?

They have only just invented it.

The Minister of State to continue without interruption.

I do not accept that the two are to be conflated together and that we should operate on the basis of a fire sale value. What the Government is doing, in its judgment, is in the best interests of the economy and society. Relief of the banks is involved. Do we want to drive them into the ground? Sometimes, listening to the debate, one would think perhaps we did.

(Interruptions).

Nobody said that. Who said it?

Please allow the Minister of State continue, without interruption.

Senator Doherty came close to saying it.

In fairness, I said the banks needed recapitalisation. I have also made it very clear that, if there was a need for an additional €7 billion, the reason we are sitting at midnight is to get the economy and the banks working again. The Minister of State is incorrect and I ask him to withdraw the remark made. He is obviously not listening to the debate.

I call on Senator Doherty to respect the Chair and resume his seat.

I have been listening to the debate for the past hour from 11 p.m.

The Minister of State obviously did not listen to my contribution.

I did listen to the Senator.

Can we please have the Minister of State continue, without interruption?

I think Senator MacSharry used the wrong word when he said we needed "simplistic" explanations. We need simple explanations. Of course, none of us is an infallible prophet, but it is a question of what is considered the best judgment. Senator Norris or somebody else referred to a well known bookmaker who was a Member of the other House. Just before the last election that bookmaker put a rather low long-term political value on me. His opinion is worth the same as those on this issue.

He would not even open a book on the Minister of State now.

The values will be determined by a detailed bottom-up valuation method supervised by the European Union. The figures of €47 billion and €7 billion are the current best estimates and there is no reason to revise them at this point. However, we will not know until the process is finished what the actual figure will be, as the Minister has made clear at all times. He has never said NAMA will definitely make money, but a 10% recovery rate over ten years will allow us to do so. Our top-down estimate is based on an average 50% decline in Irish property prices and 45% in the United Kingdom and the United States.

The Minister of State has just said the Minister has never said NAMA will make a profit. The business plan——

He never said it would "definitely" make a profit.

The figures on page 10 of the business plan suggest there will be a net €4.8 billion profit. Should I believe the Minister of State or the Minister?

There is a distinction to be made between a projection and the word "definitely".

Therefore, the projections mean nothing. That is really what the Minister of State is saying.

That does not follow. That is a ridiculous statement.

What the Minister of State is really saying is that it is a case of "whatever you are having yourself."

Please, Senator. I call Senator Doherty.

The Minister of State is in hot water in this regard. Will he clarify the matter for me? Has the Minister ever said we will "definitely" break even, or is that just a projection also? As I said, the business plan indicates there will be a profit of €4.8 billion. I want to correct a point the Minister of State made. Perhaps he saw me as an easy target.

We are on section 72 and dealing with amendments Nos. 47 and 48, to which the Senator's comments must be relevant.

I am well aware of the section and the amendment we are on, as it is I who tabled it. I have raised a number of questions which the Minister of State did not answer in his response. Obviously he did not hear them because he misrepresented me in his contribution and I want to make those points very clear to him.

First, I said it is crucial to get the economy back working and therefore we need to get the banking sector back working. I asked why — forgetting the projections — we were deciding to pay over the odds for the assets. What is the reason we are deciding to pay over the odds and what is wrong with paying the current market value? If the banks need the additional €7 billion as is being proposed, not the €11.8 billion that the NAMA plan is projecting it will make on these assets over ten years, then let us recapitalise the banks in that way. What is wrong with that and why are we deciding to use the other course of action? I would like to hear from the Minister of State and then I will determine whether to press my amendment.

The very short answer to that question is that a fire sale valuation is self-defeating. Essentially it seems to me that certain parts of the House simply want to force the banks into nationalisation, with the State taking them over, and I do not believe that is in the interests of society and the economy. I would do the main parties here the credit of thinking that if they were on this side of the House, they would be making much the same judgments and decisions as we are.

I do not believe so.

I have great respect for the Minister of State and I know he is telling it as honestly as he believes. However, is there not something of a figment here? We are so over-zoned throughout the country, and we have listened to the Minister, Deputy Gormley, so often on this, that there may not be the scope for creating the hoped-for long-term economic value. It may not be realised, although I hope I am wrong in this. I foresee enormous difficulty with this, and with respect to the Minister of State, he cannot be definitive about it.

I regret that I do not have anything further to say for the very reason the Minister of State made no attempt whatsoever to address any of the issues that were relevant to the amendment I tabled.

Amendment put.
The Committee divided: Tá, 23; Níl, 27.

  • 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.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • 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.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Dominic Hannigan and Alex White; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.
SECTION 72.

I move amendment No. 48:

In page 60, subsection (2)(d), line 33, to delete “long-term economic value” and substitute “market value”.

Question put: "That the words proposed to be deleted stand."
The Committee divided: Tá, 28; Níl, 23.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • 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.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Pearse Doherty and David Norris.
Question declared carried.
Amendment declared lost.
Section 72 agreed to.
Sections 73 and 74 agreed to.
SECTION 75.
Question proposed: "That section 75 stand part of the Bill."

I record the opposition of the Labour Party to section 75 for the reasons that have been clearly outlined.

We also oppose "long-term economic value" as defined. The Minister realises that it is poppycock.

Section 75 sets out that an eligible asset will generally be acquired at its long-term economic value. I explained on a previous amendment the validity of the concept of long-term economic value. The section goes on to provide that NAMA can acquire an asset for a value between its market value and long-term economic value if it considers it appropriate, after consultation with the Minister and subject to any regulations the Minister sets out following an assessment of a number of factors set out in section 75(2), including the type of asset involved, EU state aid rules and any other relevant matter affecting valuation. The section provides that the Minister may make regulations for the application of valuations between market value and long-term economic value in accordance with the factors listed in the section.

Where NAMA acquires an asset from the bank, does the bank have any further involvement with the asset?

No, except to manage the asset on behalf of NAMA.

Therefore, the individual owes the outstanding money to the SPV at that point.

Once NAMA takes over, it has responsibility for it.

Question put and agreed to.
SECTION 76.
Question proposed: "That section 76 stand part of the Bill."

Would it change things if there was a discount on the loans NAMA is purchasing from the banks? If a smaller discount was given, with no long-term value, would that change the way we would be viewed by the European Commission? If we stayed away from the long-term asset value and used a smaller discount, how would the European Commission view the entire NAMA project?

My understanding is that we can only value assets, we cannot apply discounts to them.

The question concerned which discount rate to use. A lower rate would give a higher NPV.

It must be agreed with the European Union; that is the bottom line.

The very guidelines the European Union is applying and which the project will be subjected to mention haircuts. They deal with discounts, market value, long-term economic value and haircuts.

Question put and declared carried.
SECTION 77.
Question proposed: "That section 77 stand part of the Bill."

Market values are ongoing.

Someone will be included in NAMA if the development property value is more than €5 million. My question pertains to performing assets that will be included in NAMA. My understanding is that assets in which collateral has built up cannot be used to acquire another asset. Heretofore, someone with an asset in a bank could use the collateral that built up in that asset to acquire another asset. Will this be the case for someone who is in NAMA? Can he or she use the asset to acquire another asset?

While the Minister of State is gathering the information to respond to this question, I seek clarity in light of the question asked on the equity issue of a performing asset. My understanding in respect of the conditions set out in the original agreement between the financial institution and the client when an asset is transferred to NAMA is that no additional conditions can be placed by the agency. Therefore, activity that would heretofore have been available on the performing asset will continue to remain. I seek clarity in this regard.

Before answering the question, I wish to make some general points on section 77. It deals with the determination of the market value of property and the market value of loan assets. In determining the market value of property, NAMA may take into account any value the participating institution submits as its view on the market value of property, any report prescribed under section 76 and the market value already determined by NAMA of another similar property. In determining the market value of a loan asset, NAMA may take into account any value the participating institution submits as its view on the market value of the loan, the market value of property as already determined, the credit worthiness of the borrower, the performance of that asset and any market value already determined by NAMA for a similar asset.

NAMA can agree with the developer to use performing assets. Actually, it would have to remain exactly the same.

To be clear on section 77, has the Minister of State stated that one can use a performing asset in which equity has built up to acquire another asset that may not be within NAMA? I refer to an external asset or some other business or company the person involved may wish to acquire or in which he or she may wish to become involved. Consequently, this will not inhibit or prohibit someone from acquiring other assets provided he or she can use the equity that has built up or accrued.

NAMA can agree with the developer to use performing assets.

The Minister of State should restate this important point. Surely no Member or anyone in authority would wish to restrict someone who has a performing asset and who has the ability to use its potential to assist further in economic development. This should be encouraged and no cap or restriction should be placed on an individual in that regard. This is an important point that should be made repeatedly.

I agree with Senator Callely. However, before Members leave this section, may I confirm the Minister of State has stated that NAMA will co-operate with other banking institutions? In a case like this, a second charge could be taken by another banking institution on a property owned by NAMA. Does the Minister of State agree that NAMA will get involved with other banking institutions in respect of performing assets in which equity has built up to make credit available?

My reply will be precise. NAMA can agree that a developer can use built-up equity, provided it is commercial.

Question put and agreed to.
Section 78 agreed to.
SECTION 79.
Question proposed: "That section 79 stand part of the Bill."

This is a key provision as it sets out that the Minister may make regulations relating to the determination by NAMA of this fictitious concept of long-term economic value which Members already have spent some hours debating. I am conscious of this, having listened to the debate with great interest. It appears that while this concept simply is fictitious, as other Members have noted it is critical for the entire premise on which NAMA is based. This is the only provision that gives Members an indication of the basis on which long-term economic value of different assets will be determined.

I heard the Minister say something about a discount that I did not quite follow. I believe he stated that discounts were not an issue. However, it is noted on page 7 of the interim business plan of NAMA that the current market value of property loans to be acquired by NAMA is €47 billion and that the consideration to be paid to participating institutions will be €54 billion, which is the estimated long-term economic value of the eligible assets. This will result in an uplift of 15%, which the plan states is "equivalent to a discount of 30% on their loan book value". In other words, the word "discount" is used in the interim business plan. Clearly, an estimated long-term economic value already has been arrived at in formulating the business plan and in developing the legislation. However, section 79 states that regulations may be made by the Minister by reference to a set of criteria. Can the Minister of State inform Members whether these are the criteria by which this mysterious figure of €54 billion in respect of the long-term economic value was arrived at? Are these the only indication of criteria by which the figure of €54 billion, which is €7 billion above the current market value, was arrived at?

I refute completely the contention that the long-term economic value is fictitious. To return to the point, does any Member seriously contend that the value of property three years ago, when it was sky-high, was its long-term economic value?

A Senator

Explain that.

Unless one contends this, one must concede that the concept of long-term economic value is not fictitious.

Very few developers will sell their properties at today's prices.

Members, no interruptions, please.

This section gives the Minister the power to make regulations setting out adjustment factors to be taken into account by NAMA when it is calculating the long-term economic value of a property that is the security for a loan and calculating the long-term economic value of the loan itself. In making regulations, the Minister shall have regard to European Union requirements and the section also lists a number of factors to which the Minister may have regard in drafting these regulations. The regulations can include provisions that reflect the policy set out in section 76 that upper limits be incorporated to the application of long-term economic value. The upper limits will be specified as a fraction of the market value of specific parcels of lands or on a portfolio basis.

This is one of the first sections in which Members have heard a reference to the European Union or the European Commission. Were one to discount completely the issue of long-term economic value by discounting it completely and stating it does not exist——

I do not accept it does not exist.

Let us assume that one decided it is fictitious——

I do not accept it is fictitious.

Let us assume it is. Were one to simply add €7 billion to the value of the properties the Government intends to purchase from the banks, would it encounter difficulties with the European Commission on that issue?

I am not entering into a hypothetical argument on a premise I do not accept.

The Minister of State is not entering into a debate.

Would the Government run into difficulties with the European Commission over the valuations being used?

I have nothing to add to the reply I have just given.

The Minister of State seems to have nothing to add to the debate.

Will the Minister appoint valuers to determine the value of the properties? Who will make the valuations? Will there be a panel and will some jobs be created for the purpose? If so, will the positions be advertised? Will it lead to political cronyism of the worst type?

Come on, Senator.

Is the Minister aware that the names of potential valuers are already circulating in the political field, not just around the Houses but around the country? Is it true that people who bit the political dust last June are now being mooted as possible valuers for NAMA? Can the Minister of State add some flesh to his answer and not avoid the question by using a civil servant's reply?

I will provide some information for those people who have not yet come to grips with NAMA.

We are all ears.

Last night the Minister clearly said the estimated value of the loans at the moment, at €54 billion——

A Senator

That is from the top down.

I did not interrupt anyone.

Let us not be here all day. We are trying to have a debate.

The Senator took just as much time as I am taking. We have spent too much time listening to misinformation from the other side of the House.

We did not get any information.

I read from the Government's own business plan.

The point is very simple. We have estimated the value at €54 billion. Due diligence will be carried out on every loan and the figure may turn out to be much less than €54 billion. Is that the information the Opposition Senators wanted? Have they taken it into consideration? The legislation is going through on the basis of a figure of €54 billion but it might be a lot less.

Is section 79 agreed? Agreed.

No, it is not agreed. I asked the Minister of State approximately six questions.

NAMA will appoint valuers and has already tendered for them. I reject with contempt the Senator's unworthy comments about political cronyism in respect of something whose success is so important for this country.

When were the positions advertised and how many are there? What has the response been?

As I am not involved in the response to the advertisements, I cannot give any information on them. The competition will be run at arm's length from the Minister.

To the best of my knowledge the posts were advertised approximately two months ago. There are 25 in total and the hoops through which applicants have to jump to get onto the panel make being re-elected last June look relatively easy.

Can the Minister of State say clearly and unequivocally that there will not be political appointments to the positions of valuers? Is it safe to assume no former politicians will be among the valuers?

The Minister of State has replied. I call on Senator Twomey.

I am not making political charges against the Minister of State but I am trying to get information as to how this relates to the European Commission. Will it impact on some of the figures the Minister of State is using? Are the figures being manipulated? If we do not agree with using long-term economic value and think there is something suspect about the method, the Minister of State should put my mind at ease. He should say the European Union has nothing to do with it and everything is fine.

I wish to comment on section 79 and make a point on what is before the House.

I only let the Minister of State back in because Senator Twomey said his questions had not been answered. I asked Members whether section 79 stood part of the Bill and they replied "Yes". We will now move onto the next section.

Question put and agreed to.
NEW SECTION.

I move amendment No. 49:

In page 65, before section 80, but in Chapter 1, to insert the following new section:

"80.—A person who is a debtor in relation to an asset acquired by NAMA shall disclose to NAMA the full extent of the person's assets and liabilities whether within or outside the State, whether personal, commercial or related to any associated body or company and whether any such assets are being acquired by NAMA or not.".

This amendment is more clear-cut than some of the other amendments we have debated. It refers directly to the issue of transparency and provides that a debtor, defined in section 4 as a person indebted to one of the participating institutions, shall, in relation to an asset acquired by NAMA, disclose to NAMA the full extent of his or her assets and liabilities. We are seeking to insert a new section to impose a duty of disclosure on debtors. A small number of persons are debtors to some of the institutions involved, especially Anglo Irish Bank which has 37% of the total loan portfolio to be taken over by NAMA, amounting to €28.4 billion of the €77 billion overall. The public is taking on this liability and the risk involved.

On Second Stage the Minister said risk was the key concept and we all agree with that. Given the level of risk, the debtors should have a duty of disclosure and the Minister has already accepted this in principle. A minimal duty of disclosure is provided for in section 83(1) which states that a person who is a debtor shall co-operate and shall furnish to the participating institution such information. Subsection (3) provides that a court may make an order for disclosure where the compliance sought is reasonably necessary. We have an amendment to section 83 but we feel the section is too limited and a broader duty of disclosure is required, not just to participating institutions but to NAMA itself so that the latter can get a fuller picture of the extent of a person's assets and liabilities. One is reminded of the ACC Bank case against Liam Carroll and his Zoe Group and the extent of the information required to be disclosed before the High Court. NAMA is supposed to be about pursuing debtors aggressively and ensuring moneys owed are recouped in the public interest. A stronger duty of disclosure will facilitate NAMA in this task.

This issue was debated at some length in the Dáil where the Minister explained that the role of NAMA was to acquire loan assets and to generate a return on them and the underlying security, where appropriate. The intention is that NAMA is put in the same position as a bank relating to a loan contract, with the same rights and obligations. Requiring a debtor to declare assets and liabilities outside the scope of NAMA and not linked in any way to the loan assets would go well beyond the rights accruing to the bank from which the loan was purchased. Furthermore, the introduction of this additional right would give rise to competition issues, would likely be disproportionate to NAMA's rights and may also impact adversely on third party rights. In this context, I cannot support the amendment.

It is not disproportionate. We have been told that a small number of debtors are understood to be in a large amount of debt to particular institutions. On 2 November, a report in The Irish Times referred to the Quinn Group and stated that Sean Quinn’s family and its businesses are understood to comprise the largest single customer of Anglo Irish Bank. The report focused on a payout of €200 million from the Quinn Group holding company to Sean Quinn’s five children. A spokesman stated that the payment was to “facilitate the development of their independent wealth portfolios”, which was a nice way of putting it. Given the extent of capital washing around among some of the debtors and in respect of whom NAMA is being set up, a fuller duty of disclosure is important. I do not see how the amendment would go too far, particularly given the duty of disclosure, albeit of a more limited type, in section 83.

Unlike the Senator, I will not go into the affairs of particular individuals or companies. I cannot go beyond my statement of principle.

Amendment put and declared lost.
Sections 80 to 82, inclusive, agreed to.
SECTION 83.

Amendments Nos. 50 and 62 are related and may be discussed together by agreement. Is that agreed? Agreed.

I move amendment No. 50:

In page 68, lines 25 to 27, to delete subsection (4).

These amendments essentially refer to the same issue. If the court is satisfied that, for reasons of commercial confidentiality, a hearing under this section should be conducted otherwise than in public, the subsection empowers the court to so order. I await with some interest the Minister of State's explanation, although I can anticipate it to some extent.

I caution my colleagues. In any commercial case, there will almost always be an argument made by one or both parties that it or they would prefer for the matter to be held otherwise than in public. One can hardly conceive of a commercial case in which the parties are happy to have the matter heard in public. The Constitution provides that the law be administered in public, which should be the overarching and continuing principle governing the approach to every aspect. There are clear exceptions with which we are all familiar, such as family law, child protection and a number of others in which matters are heard in camera.

I would be concerned were this provision to lead to a general change in the trend of the law or in parties' expectations to the effect that, when they appear before a court, their applications could be made and quickly granted for cases to be heard in private. It would be a retrograde move, for which reason I have some concerns about the provision appearing in this way in the Bill. Why has it appeared in this way and can the Minister of State justify it beyond simply stating the phrase, "Commercial confidentiality"? We need a better argument than the one that baldly appears in the Bill.

I see no difficulty with the section. There is no implication that an order to hear the matter in private would be automatically granted on application. It is for the court to determine. I have reasonable confidence in the Judiciary. It is able to determine whether something is being done to protect a person's reputation in a manner that is indefensible. This is the current situation and it seems to work reasonably well. There is no suggestion that the mere fact of someone saying that he or she would prefer a matter to be heard in private will make that inevitable. I am happy to leave a court to determine the issue in its own reasonable and judicial way.

I wish to record my agreement with Senator Norris. It is well established that the court may make such an order in some situations and not just in respect of family law matters. Senator Alex White knows that it can be done in terms of company law and so on. We should take comfort from the requirement that the court be satisfied. It is clear that the court, as has often been the case, must make an adjudication on the basis of hearing the circumstances. For this reason, it would be less than sensible of us to oppose the inclusion of this subsection.

I seek the Leas-Chathaoirleach's guidance. Am I to deal with amendment No. 62 at the same time?

Yes. We are dealing with both.

Amendment No. 62 was not really raised in the contributions, but I will deal with it. The Senator proposes to delete a provision that gives the court discretion, where it sees fit, to provide for in camera hearings. As the Minister indicated to the Dáil, he sought the advice of the Office of the Attorney General on this issue. The office indicated that a provision of this type is standard and necessary, as there needs to be express statutory provision for the exception to public court hearings. In this case, the provision is necessary to respect commercial confidence, which inevitably arises in dealing with information on bank assets that are otherwise covered by bank or customer confidentiality.

Providing for in camera hearings is a permissible exception allowed under Article 34.1 of the Constitution. Other examples to protect business secrets include section 205(7) of the Companies Act 1963 and section 902A(7) of the Taxes Consolidation Act 1997, concerted by section 207(d) of the Finance Act 1999. In this context, I cannot accept the Senator’s amendment, but I reassure him that there is no intention of modifying the practice.

I agree broadly with Senators Norris and Mullen. This type of section is included in various areas of commercial law. It is an enabling provision and does not mean that the High Court must do something. We would not expect the High Court to change its practice in these matters as a result of these provisions.

Regarding amendment No. 62 to section 209, the section provides that, where the Financial Regulator is of the opinion that a participating institution has failed to comply with a direction under this Part, he or she may apply to the High Court for an order that the institution comply with the direction. Subsection (6) provides that hearings under this section may be conducted in private if the High Court is satisfied that commercial confidentiality applies to the particular hearing. This provision is included to ensure that, where necessary, the commercial interests of those involved can be protected and, in so far as is possible, that the interests of the taxpayer and the work of NAMA can be protected when it comes to court cases taken under this section.

Having considered the advice of the Office of the Attorney General, the Minister is in a position to confirm that these are standard provisions to provide for in camera hearings and are necessary as a statutory provision for the exception to public court hearings. They are necessary to respect commercial confidence, which inevitably arises in dealing with all information relating to bank assets that are otherwise covered by bank-customer confidentiality. As I stated in respect of amendment No. 50, it is a permissible exception under Article 34.1 recognised by the Supreme Court. I reassure the Senators that there is no intention of softening practice in this regard.

The fact that it gets onto the agenda in legislation is bound to give rise to queries, but not a suspicion that courts would not exercise their discretion properly, as I am sure they will. Once it is off the agenda, as the type of application that can be made in the context of these cases, we can reasonably predict that such applications will be made, perhaps, almost as a matter of course. Whereas I am very happy, as Senators Norris and Mullen will appreciate, to rely on the good sense of the Judiciary in respect of the decisions they make, I still believe there is a risk the culture will change in circumstances where one is putting in this specific statutory provision. I do not say there is not the protection of the Judiciary in respect of a decision as to whether it should be granted but it is a change to which we should draw attention and that it is marked as representing a new power and it is one that I am not particularly comfortable with. I mentioned section 62 at the beginning because the same principle applies to both. I am even less comfortable with the provision in section 62 in circumstances where the regulatory authority makes application to the court. I am not comfortable with this change. I understand what the Minister has said and that there is a need for it in certain circumstances but I am not absolutely certain that it should be put into legislation in the way that it has.

Amendment, by leave, withdrawn.
Section 83 agreed to.
Sections 84 to 110, inclusive, agreed.
SECTION 111.

I move amendment No. 51:

In page 86, lines 1 to 16, to delete subsections (4) and (5) and substitute the following:

"(4) If the Minister considers that an order under subsection (2) contains matter that is commercially sensitive to the extent that it ought not be contained in the order, it shall be lawful for the Minister to set out such matter in a direction signed by the Minister and lodged in the Department of Finance, and to provide in the order that such direction (specifying the date thereof and such particulars of it as are not commercially sensitive) shall have effect.”.

I am interested to hear the Minister's response.

Section 110 ensures that certain clauses in commercial agreements are not triggered by virtue of certain events related to the establishment of NAMA. Following the advice of the Office of the Attorney General and consistent with the principle applied in section 9 of the Anglo Irish Bank Corporation Act 2009, section 111 was included in the Bill to provide that the Minister may, where he thinks it appropriate, reduce the effect of the restriction provided for in section 110 where the effect of the section would be unduly onerous or cause undue unfairness or hardship.

In relation to the Senator's proposed amendment of subsection (4), the Minister consulted the Office of the Attorney General on the issue, during the examination of the Bill by the Dáil. The Minister was advised that the provision is a standard provision to protect commercial sensitivity where other parties to an instrument would be affected by the disclosure of commercially sensitive information concerning the third party. As any order made under the provision will relate directly to certain assets, persons or commercial transactions which will be in areas of commercial competence, it falls under the standard exemption to the Statutory Instruments Act 1947 and in that context the Minister is satisfied with this provision. In any event the Minister is required to publish any decision in Iris Oifigiúil to direct the omission of any commercially sensitive information from an order or not to publish an order in the normal way.

I am not accepting the Senator's amendment.

I will not pursue it at this point.

Amendment, by leave, withdrawn.
Section 111 agreed to.
Sections 112 to 118, inclusive, agreed to.
SECTION 119.

I move amendment No. 52:

In page 88, subsection (3), line 41, after "if" to insert the following:

"the nomination of the person is approved by a committee appointed for the purpose by the Houses of the Oireachtas, and if that committee determines that the person is properly qualified and was not a person whose previous employment in the property or financial services sectors or related sectors was such as to raise issues as to whether the person was involved in activities which contributed to the distortion of the property market and".

Amendment put and declared lost.
Government amendment No. 53:
In page 88, between lines 42 and 43, to insert the following subsection:
"(4) Without prejudice to the generality ofsubsection (3), a person has relevant expertise or specialist knowledge if he or she is qualified, or has experience at a senior level, in any one or more of the following:
(a) finance and economics;
(b) law
(c) accountancy and auditing;
(d) public administration;
(e) project finance;
(f) construction and land development;
(g) property management and sale;
(h) valuation;
(i) urban and land planning;
(j) banking and investment;
(k) insolvency and restructuring.".

This amendment arises out of discussions in the Dáil and a commitment the Minister made to examine whether specific qualifications should be enumerated in this section. As it stands, the section provides that in deciding whether a person is suitable for appointment to the valuation panel the Minister must be satisfied that the person has relevant expertise or specialist knowledge. This amendment proposes to insert a list of appropriate qualifications which the Minister will have regard to when assessing whether a person has relevant expertise or specialist knowledge. The areas listed where a person should be qualified or have experience at a senior level include property management and sale, valuation, and construction and land development.

I would be obliged if the Minister, for the benefit of the record, would read out some parts of section 119. The section concerns the appointment of the valuation panel.

Senator McCarthy, we are not on the section. We are on amendment No. 53.

I have a question for the Minister on amendment No. 53. He points out the areas of expertise in which the Minister is of the opinion that the person or persons to be appointed have relevant experience or specialist knowledge or, according to his own amendment, experience at a senior level in any one or more of the following: finance and economics, law, accountancy and auditing, public administration, project finance, construction and land development, property management and sale, valuation, urban and land planning, banking and investment, and insolvency and restructuring.

My question is if the Minister is an Irish teacher, how he or she will determine if a person they want to appoint to the valuation panel has expertise, knowledge or experience at a senior level in any of those disciplines. For example, what if the Minister was a barrister who specialised in family law? How would he or she make a judgment regarding the person he or she wishes to appoint to the board of the panel of evaluation in regard to, say, urban and land planning? How will the Minister get around that one?

I welcome this amendment. In the draft Bill published for consultation purposes in July the number of competencies listed in the Bill were no more than half a dozen. We now have far more listed in this particular amendment. In particular, the competencies in regard to public administration and urban and land planning are new additions in this amendment. It calls upon the Minister to use the people who are appointed to NAMA and its board to have these well-defined competencies.

The debate we have had since the original publication of the draft consultation Bill in July has been narrow in focus in terms of the wider aspects of the nature of the problem we are facing, not only in respect of the financial loss suffered by the economy but how we can avoid this situation recurring in the future. The whole point of extending these competencies is to make sure that NAMA, as an agency, has within it the competencies that are needed to prevent this type of situation occurring again. There should be a welcome for this amendment. At this stage it is churlish to question this necessary change.

I welcome the amendment and the criteria outlined in it. In earlier debates this is the change Opposition Members were seeking. Senator McCarthy makes a fair point, that people are concerned there could be political bias at senior or ground level. That is why the amendment is so important — it clarifies the criteria upon which someone will be hired to perform a particular task. It lays out clearly the competencies in all these areas. It is viewed as so important that the amendment is putting it on a statutory footing. If someone is working for NAMA, he or she must have qualifications. This is a good amendment.

I agree with Senator Donohoe that it is a good amendment. To Senator Boyle I say those of us who have been here since 11.30 a.m. have had a wide-ranging discussion that has taken in issues other than those raised in the amendments. Some of the Fine Gael amendments refer to what is happening in the wider economy and what will happen in the decade following the establishment of NAMA. We have discussed how we will deal with the European Union and how we ended up in this mess in the first place. There has been a wide-ranging debate and Members have not been restricted to the contents of the amendments. It has been a useful debate.

I take Senator Boyle's points on board but we must avoid the cronyism that is the custom of the major party which has been in power for so many years. I am roguishly tempted to include an amendment to insert the words "cop-on" at the end of the list of qualities necessary for personnel in NAMA.

Is there a degree in cop-on?

If the Green Party had a bit more of it, we might not be in this situation.

That is why we are in it; we had so many purported geniuses who got us into this mess. We did not cop on and there was no regulation. We should not preclude people because they do not have a degree or qualification, that is the rock on which we will perish.

What will remuneration costs amount to? There is already a €2.5 billion cost. How is "specialist knowledge" defined? I could price land; Senator Boyle could do the same and we would disagree. That is what has happened. We can talk about market value all night but no one knows what land is worth.

My land would be cheaper.

I am sure it would. It would probably be biodegradable also.

We could grow vegetables on it.

I would like to hear the Minister's view. Are we going to preclude people? I know people involved in business who are much sharper than academics — one former Member of the House springs to mind. He would buy and sell some of the academics we have in mind here.

One of my concerns about NAMA is the extent of the accommodation the Minister has afforded in this debate. I recognise that in the protracted debate there are benefits but this is a typical example of where we were. There were three lines in section 119(3) that would adequately deal with our purpose in the section but we are now adding paragraphs (a) to (k). Playing devil’s advocate on this, the appointment of a 12 member valuation panel to adjudicate on disputes referred, while not including an expert on dispute resolution in paragraphs (a) to (k)——

That is more of a comment on the section than the amendment.

Sometimes it is not necessary to have an expert but instead someone who could pull the panel together to get the best from those on it. Sometimes we go too far to accommodate everyone when what is in place already is probably sufficient.

The amendment adds significantly to the section and deals with those issues raised by Senator Buttimer. It defines "specialist knowledge" as a person who is either qualified or has experience; therefore, it is not confined to academics.

The point Senator Boyle makes reflects a serious problem with the Government that has arisen time and again. This should be done by open application. This is the third time this has happened lately. The FÁS legislation does not allow for a process of appointment. We have asked repeatedly for an open process. In the last three weeks the Minister for Communications, Energy and Natural Resources allowed for it in the establishment of the new RTE authority, where the committee selecting four or five people is going through an advertising process, as part of which there will be short-listing and interviewing. I would like the Minister of State to say we will do the same here. It has not been excluded in the Bill.

It is fair to say Senator McCarthy sounded churlish but his central point is correct — this is open to abuse. I could explain to Senator Buttimer what happened with his own party in June 1977; Fianna Fáil is not the only party which knows how to fill the gap.

That was a century ago. We would not do that.

It is important we are balanced in these matters. There is, however, a significant issue involved. Ministers will lecture us on how positive the amendment is but they will not take the next step and allow for an appointment process. The people appointed will not have a leg to stand on because the level of cynicism today means that it does not matter what they go through, as they will be accused of being part of the system. In the Joint Committee on Communications, Energy and Natural Resources we have a public section where people come before the committee to show off their expertise, giving them greater confidence while doing so. That might not be appropriate in this instance but everything else I have mentioned would be. The Minister should give a guarantee that it will be done in that way. The Public Appointments Service does not need to be involved; the private sector can do it.

If there are to be trust and confidence every step of the way, as every Minister has said today, this would be a confidence boosting measure, a CBM, for NAMA. I ask the Minister of State to give a commitment in that regard.

I agree with Senator O'Toole. While I welcome the amendment and the improvements to the section, an application process, if possible, would add even further to what already is a good section. I note there was such a process for those who will operate for NAMA, whereby applicants were obliged to make expressions of interest and jump through hoops and so on. Regardless of the academic or other qualifications people may have, this is necessary. However, I am not averse to any former Labour Party councillor who happens to fit the bill in having the appropriate expertise, were such a person to apply. I do not believe anyone should be excluded because they are former political figures or representatives, provided he or she has the appropriate expertise and experience.

I also agree with Senator O'Toole that the more the process can be made open and transparent, the better. A legislative basis for public appointments is needed in any case. There is a commitment in the review of the programme for Government to provide such a legislative basis.

Is that the one the Green Party voted against last week?

Senator Boyle to continue, without interruption.

It was the Green Party's own Bill.

All I can say to Members opposite is tiocfaidh ár lá.

We will get an Easter lily for the Senator.

Senator Boyle to continue, without interruption.

As and when the commitment in the review of the programme for Government in respect of a legislative basis for public appointments becomes a Bill, the Government will be able to fulfil this commitment that bit better. However, as for the current position on the NAMA legislation, it is vitally important that there be full public confidence in those individuals who are appointed at any level in this organisation. I refer to appointees ranging from the master SPV to the board of NAMA to those made at ground level. This is simply framework legislation. If NAMA is to succeed, the real challenge for the Minister and subsequently the Government is to demonstrate that those individuals appointed to it are the very ones who have full public confidence to ensure the job of work that must be done will be done. I have confidence this can be done.

I thank Members in general for their appreciation of the value of the amendment. In answer to the question on how people will be chosen, the judgment will be made on the basis of the curriculum vitae and other information on a possible candidate. Obviously, the Minister can take advice on this, if necessary. I am attracted by Senator Buttimer’s proposed addition. While “cop-on” is not legislative language, it is subsumed under the heading of experience. However, the Senator’s point is well taken and the amendment does not refer to academic qualifications. Obviously, experience can be acquired on the job, people who have formal qualifications or a mixture of both can apply. No remuneration has yet been set out for the valuation panel. The panel will be appointed by the Minister who has not yet decided on the process of appointment. However, I will bring the views expressed by Members on the matter to his attention.

I have a question on section 119(4) which states, "The terms and conditions of appointment——

I will allow Senator McCarthy to speak on the section later.

The Minister of State should set out what the remuneration will be.

Amendment agreed to.
Amendment No. 54 not moved.
Question proposed: "That section 119, as amended, stand part of the Bill."

I thank the Minister of State for his replies. Will he indicate what the remuneration will be?

As I stated, this has not been settled yet.

I will put Senator Boyle's point on the issue of openness and transparency to the Minister of State. Will the positions be advertised and filled through the Public Appointments Service?

I covered this aspect in the last part of my remarks, when I stated the Minister had not yet decided on the process of appointment but that the views expressed by Members on both sides of the House would be brought to his attention.

Question put and agreed to.
Sections 120 to 157, inclusive, agreed to.
Amendments Nos. 55 and 56 not moved.
Section 158 agreed to.
Sections 159 to 170, inclusive, agreed to.
NEW SECTION.

I move amendment No. 57:

In page 110, before section 171, to insert the following new section:

"171.—(1) In exercising its powers under this Part, NAMA shall not dispose of any bank asset, land or other property of any kind to any debtor, associated debtor, guarantor or surety in relation to a bank asset which has been acquired by NAMA where the credit facility concerned is in default.

(2) For the purposes of subsection (1), a credit facility is in default if a debtor, associated debtor, guarantor or surety in relation to the credit facility concerned is in breach of any terms or conditions to which the credit facility is subject.”.

I intend to withdraw this amendment and return to it on Report Stage.

The Minister has already amended section 172 of the legislation to achieve the effect sought by this amendment. The amendment would add nothing to the amendments already made on Report Stage in the Dáil. It appears to be intended to restrict the power of NAMA to sell the land securing a bank asset connected to the persons listed where the bank asset to which they are connected is in default.

This amendment omits to apply the restriction to NAMA group entities and it does not apply to all the categories of connected persons set out in section 71(b) unless the person concerned has a debt or obligation himself. The amendments the Minister has already inserted in section 172(3), (4) and (5) do these things in addition to achieving the apparent intentions of the amendment.

Amendment, by leave, withdrawn.
Sections 171 to 176, inclusive, agreed to.
SECTION 177.
Question proposed: "That section 177 stand part of the Bill."

I read this section ten times last week and I simply cannot understand it. It is the longest sentence in the Bill. Section 176 deals with NAMA entering an agreement with a debtor and this section relates to that. It concerns land developers, with a long, convoluted sentence of the sort that is always used to confuse legislators. What does it mean exactly? It is like "eats, shoots and leaves", there are clauses with different meanings in different places. The side bar states that NAMA has certain contractual rights for land developers. I understand that but does it cover the area of repayments? Is it stating that where NAMA enters an arrangement with someone who was previously a debtor, or who is still a debtor, that he or she must be held to previous contracts and obligations or is it talking about new contracts and obligations? Is this intended to mean the person, by entering a contract with NAMA, is still forced to maintain repayments on previous debts? What does this mean?

In my experience, where a sentence in a Bill is long, with lots of qualifying clauses, it is to protect it from legal challenge or loopholes, I do not think it is done to confuse legislators or courts.

This section provides that where the Chapter applies, NAMA has the same contractual rights as the participating institution, debtor or associated debtors concerned with breach of contract or obligation relating to the development concerned and those rights are taken to have been assigned to NAMA. This means that NAMA will be entitled to bring an action for damages against a company that carried out defective construction of a building acquired pursuant to a vesting order. The section also enables NAMA to transfer such rights to another person. Obligations of the participating institution can be excluded in the acquisition schedule. If NAMA acquires land from a debtor and if a builder built a faulty building, NAMA can sue, even though the builder's contract was with the debtor.

I am not happy with that. The Minister of State and I are of an age where one of the things we did in our leaving certificate was to reduce a passage to a third of its size and break it up into sentences. It could well be done with this section.

Question put and agreed to.
Sections 178 and 179 agreed to.
NEW SECTION.

I move amendment No. 58:

In page 113, before section 180, but in Part 9, to insert the following new section:

"180.—(1) For the purposes of this section, "business" and "lease" shall have the same meanings as they have in the Landlord and Tenant (Amendment ) Act 1980.

(2) This section applies to a lease of land to be used wholly or partly for the purposes of carrying on a business, being a lease which—

(a) is entered into by NAMA or a NAMA group entity as incidental to the achievement of its purposes and performance of its functions, or

(b) was entered into (whether before or after the passing of this Act) in respect of premises in respect of which NAMA or a NAMA group entity exercise functions, prior to NAMA or a NAMA group entity exercising such functions in relation to the premises concerned.

(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of the rent payable immediately prior to the date on which the rent falls to be reviewed.

(4) Subsection (3) shall apply:

(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and

(b) only in respect of that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.

This is a clear proposal that would insert a new section 180 into Part 9 to address the difficulty lessees or tenants are facing with upward only rent reviews. It has been well rehearsed in the media, with a great deal of concern expressed by lessees in the retail sector, particularly in Dublin city centre but generally in small businesses around the country, who are in difficulty because of upward only rent review clauses in their leases.

Given that we have heard a great deal about market value tonight, it seems unjust that when the market value of rents is going down, upward only rent reviews are still in-built in leases. This provision allows for the rent payable following a review to be fixed at an amount less than the amount of rent payable immediately prior to the date. It is a simple amendment. The Minister of State may say this is not the place to do it but given that this part of the Bill deals with powers related to land, with different powers provided for, we see that this would be an important power and it is clearly limited to those leases entered into by NAMA or NAMA group entities.

The amendment is in keeping with the overall purpose of the Bill, to ensure greater scope for the public interest in terms of facilitating the flow of credit to small businesses while ensuring they are not penalised by upward only rent reviews. It is vitally important to allow free negotiation to take place and to allow rent payable to be less than the amount payable before the review.

I am also dealing with upward only rent reviews in my capacity as Minister of State with responsibility for the Office of Public Works.

The amendment is intended to prevent NAMA from entering into leases with upwards only rent reviews in respect of land used for the purposes of carrying on a business. It is not, however, appropriate to differentiate NAMA from other market participants in rental agreements by operation of statute.

The question of upward only rent reviews is a matter for the Minister for Justice, Equality and Law Reform. If problems arose in practice around NAMA's lease arrangements, it would be open to the Minister for Finance to issue guidelines or a direction under sections 13 or 14 directing NAMA not to enter such leases. The amendment is unnecessary and is opposed.

I do not understand why it is not appropriate. The amendment does not provide that leases entered into by NAMA or NAMA group entities may not be upward only, it simply states that these reviews may be fixed at less than the rent payable immediately prior to the date of the review. It gives discretion; it does not preclude the continuance of upward only rent reviews.

The Minister of State has accepted in principle that guidelines should be issued to NAMA under sections 13 and 14 but I ask between now and Report Stage for him to give something more to lessees who are facing difficulties and the prospect of a NAMA group entity being in the position of their lessor. In that instance it is appropriate to distinguish between NAMA and other entities.

While everything said in this debate will be considered before Report Stage, the essence of the Minister's position is that he does not wish to adopt a discriminatory approach that would differentiate NAMA from other market participants. At the same time, he recognises, as does everyone, that there might be an issue in this regard. However, it is an issue that requires a general resolution rather than one that is specific to NAMA.

As the entire purpose of this legislation is to create the new structure of NAMA, inevitably there will be discrimination between entities that are going under NAMA's control and those that are not. Although I do not accept the Minister of State's answer, I propose to reserve my position and renew the argument on Report Stage.

Amendment, by leave, withdrawn.
Sections 180 to 202, inclusive, agreed to.
SECTION 203.
Question proposed: "That section 203 stand part of the Bill."

This section is of crucial importance and pertains to a subject for which Members fought for many years, namely, ensuring a flow of information in order that one arm of the State would know what another arm was doing. This provision fulfils this requirement in all ways but one. There is a slight flaw in this provision which I ask the officials to consider for Report Stage. While I do not propose an amendment and note the section is well written, the last line, "as the case appears to it to require", is highly important. This means NAMA must make a judgment call as to which or to how many of the bodies mentioned should it disclose information.

I completely agree with this but a problem immediately arises in that many of the organisations involved have agreed memorandums of understanding among themselves. However, they require a statutory basis to pass on information they have received in this manner. Therefore, this section needs an enabling phrase in the form of a couple of words at the end to ensure that, for instance, the Revenue Commissioners can pass information they have received in this regard to the Garda Síochána, the regulatory authority or whoever. Although the section will enable information to flow from NAMA to any of the bodies set out therein, no allowance has been made to provide for this. I know what I am talking about as I have been on the receiving end with regard to another item of legislation. In that case, a major part of a body felt it should disclose information to the Office of the Director of Corporate Enforcement but felt it could not because the legal advice was that it lacked the statutory basis on which to so do. It will take a short enabling phrase to allow that when such information is passed on in good faith, it can be passed on to the other specified organisations. This is a tiny matter but it must be done.

Senator O'Toole has made a point that certainly can be considered between now and Report Stage.

Question put and agreed to.
SECTION 204.
Question proposed: "That section 204 stand part of the Bill."

These sections provide for the passing of information to the Garda Síochána, the Revenue Commissioners and the Director of Corporate Enforcement. Perhaps legislative provision should be made for the converse to occur. I refer to a scenario in which the Minister can acquire information from the Revenue Commissioners regarding individuals who are being taken into NAMA in order that he can be absolutely certain he gets full disclosure about all their assets. I made this point on Second Stage and have mentioned it previously when the Minister of State was in the Chamber. He replied that it would not be right for people's tax files to be handed over to NAMA. While I accept this, there may be a role within NAMA of being absolutely certain that full disclosure has taken place. As I pointed out, the Revenue Commissioners have the most detailed files on people with regard to transactions they have completed over the course of their lives and it would be useful.

Section 204 provides that the Revenue Commissioners may request NAMA, for the purposes of their collection and recovery functions under the Taxes Consolidation Act 1997, to provide information of which NAMA has possession or knowledge in respect of a person. This includes providing the Revenue Commissioners with information about any particular developer about whom the Revenue Commissioners request information. This section also provides that the Revenue Commissioners shall disclose to NAMA information regarding a relevant person which, in the opinion of the Revenue Commissioners or NAMA, is required by NAMA for the performance of its functions under this Bill and of which the Revenue Commissioners have possession or knowledge. In other words, a two-way relationship exists in this regard.

Question put and agreed to.
Section 205 agreed to.
NEW SECTIONS.

Amendment No. 59 has been ruled out of order as it is outside the scope of the Bill.

Amendment No. 59 not moved.

I move amendment No. 60:

In page 124, before section 206, to insert the following new section:

"206.—A person who in good faith reports a suspicion of breach of a provision of this Act to a statutory authority having responsibilities in relation to such breach shall be immune from civil or criminal liability in relation to such report.".

I note the Minister has tabled amendment No. 66, which I thought might have been grouped with this amendment as it appears to address similar issues. In fairness to the Minister, his amendment is more comprehensive than that of the Labour Party. It differs in some respects in that it refers to communications to a member of the Garda Síochána or to a member of the board, whereas our amendment refers to any communication made to a statutory authority. Moreover, our amendment refers to the protection of any person whereas the Minister's amendment refers to the protection of persons who are employees of participating institutions or of NAMA. However, in all other respects, the Minister's amendment is good and comprehensive and clearly is a response to the issues raised in the Lower House by the Labour Party and others. I await the Minister of State's response.

I note that Fine Gael also has tabled a similar amendment pertaining to whistleblowing and protecting people who release information into the public domain. It seeks to protect them from prosecution if it is in the public interest. While I await the Minister of State's response to amendment No. 60, I am surprised the amendments were not grouped because they all appear to be similar.

With respect to the Senator, I am unsure whether I or my office had much of a role in grouping amendments.

The National Asset Management Agency Bill 2009, as initiated, contains substantial provisions to facilitate the disclosure of information and to protect those involved. However, taking account of the debate in the Dáil, the Minister undertook to examine the potential to bring forward an amendment specifically to protect those who might come forward to report wrongdoing. The Minister has proposed an amendment to provide for whistleblower protection. I refer to amendments Nos. 66, 68 and 70, to which the House will come shortly.

Amendment, by leave, withdrawn.

Amendment No. 61 has been ruled out of order.

Amendment No. 61 not moved.
Sections 206 and 207 agreed to.
SECTION 208.

I move amendment No. 61a:

In page 126, lines 1 to 4, to delete subsection (11).

I have a serious problem with this issue. It is utterly unacceptable to put into legislation a line that states a Minister shall not approve a plan that does not comply with the law of the State or the European Community.

Progress reported; Committee to sit again.

When is it proposed to sit again?

At 10.30 a.m. this morning.

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