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SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Thursday, 22 Oct 2009

National Asset Management Agency Bill 2009: Committee Stage.

This meeting has been convened for the purpose of the consideration by this select committee of the National Asset Management Agency Bill 2009. I propose that there will be a sos from 1 p.m. to 2 p.m. Is that agreed? Agreed.

SECTION 1.

I welcome the Minister for Finance, Deputy Brian Lenihan. Amendments Nos. 11,14 to 16, inclusive, are related to amendment No. 1. Therefore, amendments Nos. 1, 11 and 14 to 16, inclusive, will be discussed together by agreement.

I move amendment No. 1:

In page 16, between lines 28 and 29, to insert the following subsection:

"(4) The Central Bank Acts 1942 to 2001, the Central Bank and Financial Services Authority of Ireland Act 2003, the Central Bank and Financial Services Authority of Ireland Act 2004, this subsection, section 222, and Part 1 of Schedule 2 may be cited together as the Central Bank and Financial Services Authority of Ireland Acts 1942 to 2009.”.

The purpose of this amendment is to provide for the collective citation of the Central Bank Acts 1942 to 2001 and the Central Bank and Financial Services Authority of Ireland Acts 2003 and 2004. It is a standard provision and it is a recognised collective citation of the stated Acts.

We hope today to deal with the first 17 sections. These are important sections that set out the broad purposes and functions to be addressed by NAMA. The profound question that needs to be addressed, which is the subject of many of our amendments, is whether this legislation will successfully get credit flowing and whether it will be a strategy that is fair, effective and of minimum cost to the taxpayer.

The framing of this legislation fails to meet those fundamental requirements of an initiative of bank resolution. The debate has moved on from an alternative system of bank resolution, but what I fail to see in any amendment yet tabled by the Minister is how he sees the central purpose of the Bill, namely, to get credit going, as being delivered. He is very much reliant on the hope that banks, which are rationing their capital, which are constrained in their capital and which are seeking to slim down their loan books simply to survive and keep independent of the State, will start lending, even with the provision of this money.

It is notable that, despite assurances every day that this will happen, we have yet to see in the legislation any attempt by the Minister to create a vehicle for assuring us that this will happen. There is no evidence of the Minister taking powers to enter into binding agreements that lending would happen. There is no indication of the type of lending that the Minister envisages.

In our grouping of amendments, we have set forward the alternative, namely, the national recovery bank. Many on the Minister's side of the House have not bothered to study this and have used trite comments like "magic bank", which really just conceals their ignorance of the issues involved. There are good precedents. In France, for example, there was such a bank established within weeks. It has now already got lending going to the tune of €100 billion, and they are facing a much lesser crisis than we are in the collapse of lending from other banking institutions.

We have set forward in our amendments not only how the national recovery bank would work but how the national recovery bank, as an institution, would be accountable to the Oireachtas. The latter is equally valid in our consideration of the NAMA Bill. How will NAMA be accountable to the Oireachtas?

We have set out clear criteria requiring Oireachtas approval of members, of the chairperson and of the chief executive of the group, and requiring the Comptroller and Auditor General to ride shotgun to a large degree on the day-to-day operations, having access to the files and being able to assure the Oireachtas committee that decisions are robust, there are no sweetheart deals and the approach being taken will give long-term stability to the property market and to the banking sector and will not reward those who were reckless in the way money was being used in the past. It is vital in a decision involving €54 billion of taxpayers' resources that we have such oversight. I welcome the amendment tabled by Deputy Burton on an Oireachtas oversight committee. It reflects similar amendments that have been tabled for later in the Bill.

It is vitally important as we approach this legislation that we focus on how we get this to be fair, effective and least cost. There are many principles in the Bill which are disturbing people against those criteria, such as the principle of paying more than the market value, the principle of not having oversight, and the principle of refusing, by paying more than the market value, the opportunity to have greater shareholding for the taxpayer in the banks and in return having better risk-sharing mechanisms for the financial institutions.

Even on the purposes of this Bill, our amendments seek to copperfasten changes which need to be made in NAMA but which also need to be made in the wider banking sector if this is never to happen again. We have not yet broken the cosy relationships that are established, with banks wanting their own way. We continue to see the Minister frustrated in his desire to have an outside appointment to senior bank positions. We continue to see, on the broader international front as well as here at home, banks paying pay increases that are not available to anyone else in the economy. One wonders whether the penny has dropped, that now with the taxpayer supporting these institutions, as if on life support, there is a recognition that everything must change, that the structure of and the oversight by the boards was inadequate and that the approach of chief executives becoming chairmen can never happen again. I do not see the radical change in the behaviour or the ethic of the banking system that is required.

We are going out on a limb with this legislation and asking the taxpayer to shoulder a huge gamble, to take all this on their shoulders, and we are not seeing commensurate change. The Minister will rightly say there are other Bills coming up the tracks, which I accept, but equally the Minister must accept there needs to be a change of attitude within the banking sector, and we have not seen that. This goes to the core of the problems I foresee with NAMA. Banks will view this as a mechanism to maximise shareholder advantage. This will not increase credit flow into what is a high risk economy, which is the fatal flaw. This is the reason Fine Gael believes the national recovery bank, which would be certain of getting revenue flowing, is so important.

I do not want to dwell too long on an introductory statement. I believe that as we develop this legislation we will need to ensure an entirely new approach to how the Oireachtas does its business. The Minister has indicated that he is willing to take a different view to Oireachtas oversight. We have not yet seen an amendment from the Minister that reflects this. I look forward to the Minister's response to some of the amendments tabled by Fine Gael and the Labour Party. It will be interesting to see whether the Comptroller and Auditor General will be given a much more up-front role than reviewing mistakes once made or whether we will see the Oireachtas approving key elements such as business plans, codes of practice, appointment of board members and chief executives. This level of oversight will ensure these bodies are accountable.

People outside this House, and the Minister for Finance, in trying to find savings, reflect on the fact that there are 800 agencies which are largely unaccountable to this House, whose mandate is vague, which do not respond to parliamentary questions——

——and which have had mission drift and are no longer cost effective in terms of delivering their role. We cannot allow this to happen in respect of NAMA.

We must accept that from now on NAMA will be the property market in Ireland. There will be no other property market for a long time. NAMA will be the market maker. What is remarkably absent from this Bill is an assessment of or sections dealing with NAMA's new role. Will it seek to keep prices high so that it can justify what it pays for the assets? If so, our property market could be dead for years to come. Will it seek to take a consistent policy approach over a decade? Will it be open to, say, a Minister for Finance who, when stuck for money, to request NAMA to slim down its borrowings and reduce its debt levels, resulting in there being, after two or three years, a sudden flooding of the market with properties for sale, leading to a fall in prices? If NAMA does not have clear instructions and a code of practice in terms of how to handle the market, we will be in difficulty.

The business plan is remarkable. If Diageo were putting together a business plan on selling Guinness into the Dublin market, it would research issues such as the state of the marketplace and the likely level of transactions. The NAMA business plan does not address any area of the property market, which, I am sure Members will agree, is remarkable.

There is no market.

All this is based on assumptions that we can get our money back. There is no assessment of the market into which this business plan will arrive, which is an extraordinary flaw. Will the Minister agree to allow the Comptroller and Auditor General, on behalf of the Oireachtas, to assess that business plan, the assumptions in regard to the marketplace and what percentage of loans will default — the assumption of only 20% surprised many given that 60% are non-performing — and the assumptions in regard to the discount rate that will be applied? I learned yesterday that the commercial purchaser of loans who is entering the market will apply a 15% to 20% discount rate to these types of risky assets. NAMA is to apply a 5% rate. Is that robust? The Comptroller and Auditor General, on behalf of the taxpayer, must assess all of these issues.

This opening section will set the tone of what is to come, although most of the meat is probably later on. We will find out whether the Minister is willing to broaden the purpose of the Act, stitch in obligations to get credit going and recognise that this animal must be supervised by the Oireachtas in a way our Ministers have never been willing to envisage Oireachtas supervision in the past.

It is customary in committees to welcome a visiting Minister. Thus, I welcome the Minister for Finance and his colleagues to the Select Committee on Finance and the Public Service.

Technically, we are moving the Minister's amendment, No. 1, which refers to the Central Bank and Financial Services Authority of Ireland Acts 1942 to 2009. We are here today because the Minister and his predecessors, notably the current Taoiseach, Deputy Cowen, and the former Minister for Finance, Mr. Charlie McCreevy, decided as the Celtic tiger started to grow that we should have light-touch regulation all the way. Light-touch regulation helped to endorse the feel-good atmosphere that existed in both the financial and property markets. In as much as the Minister's first amendment provides for what he will bring in later as a complete overhaul of financial regulation in Ireland, I welcome the amendment. However, the most important amendment is amendment No. 2, in the name of the Labour Party. What the Minister must respond to on this amendment will set the tone of how he proposes to deal with the House in terms of the NAMA legislation.

We all have different and strongly held views on what caused the crash. The Minister's party, the Taoiseach and the Minister indicated many times that they believe it was primarily due to international factors. That is delusional. The Irish crash and its severity are due not only to international factors, for which undoubtedly Fianna Fáil is not exclusively responsible, but to the overheating of the property market, which was due to that party's stimulation of the market through tax breaks and its decision to have light-touch financial regulation as the centrepiece of financial regulatory reform, as presented by the Minister's predecessor from about 2002.

Amendment No. 2 seeks the establishment of an oversight committee for NAMA. We have already had five or six months' experience of the approach to NAMA and to information. We do not live in Russia, but the bankers and developers are the Irish oligarchs, and when they speak to the Department of Finance, it trembles. The Department is only too pleased to have the managing directors and chairmen of the board of Bank of Ireland and AIB pop in twice a year and tell it how things are economically. Because of the pusillanimity and cowardice of the Department and its cowering approach in the face of the big beasts of Irish finance, the regulatory role was lost sight of. It clearly became impossible for the various authorities — the Department of Finance, which, with hundreds of officials, is not an under-staffed Department, the Central Bank of Ireland, which, again, employs hundreds of people, and the regulator — to stop what was going on. The people at the top of these authorities are earning figures of €300,000 and above. These were the people at the top of our public service and they did not have the courage to shout "Stop" to the Minister and Fianna Fáil or to the bankers when it became clear that the banking model was going to go bust. The profiteering and speculation in land prices which fed the property market was unsustainable.

The purpose of amendment No. 2 is to appoint an oversight commission modelled on the type of commission which exists in many other jurisdictions, notably in the United States. It would not nor should not consist of Members of either the Dáil or Seanad because it would be wrong to compromise any Member with regard to individual issues in their constituencies where property developments have gone bust and have led to unemployment locally and significant economic misfortune. However, it would report to the Dáil every 30 days and, more importantly, would report in the public media the key financial information relating to the progress of NAMA.

In our modern democracy journalists, citizen journalists, bloggers, and people on the Irish Economy website are an enormous addition to the people sitting in the Press Gallery who report in the mainstream media. I see the Minister shake his head, but modern communications are dominated by approximately 70%, including among professional journalists, by the Internet, blogging, websites and tweeting. Unless the information is available on a regular basis in summary form in the public domain, the confidence of citizens in our democracy will diminish. They will say it is like what happened when Russia collapsed. We will have a situation where a number of small but very powerful vested interests end up dictating the course not just of finance but of politics.

People will have heard this morning that in the United States, President Obama, on foot of the information which has been made available about the behaviour of the US banking system post the various measures and mechanisms introduced, has decided that where banking institutions are still in receipt of federal funds, there will be a significant reduction in the remuneration of key employees of those banks.

The Minister for Finance must stand by the citizens of this country. The notion exists that in a democracy freedom of information is the cornerstone. It is just as important as the debates in the House. We all know that dealing with freedom of information is traumatic and difficult. It is not easy. There will be many things that neither I nor the Minister will like in this regard, but freedom of information is the cornerstone of having an informed public and citizens who can then decide whether the policies their Government is pursuing are correct on their behalf.

There are two key areas on which we want information. Nothing about this Bill will be successful. We know it will be very expensive, because in his business plan and in the various statements he has made the Minister has proposed providing at least €7 billion extra above the cost of the distressed loans to the banks to improve their capital positions. As his business plan shows, he probably plans to spend a lot extra. I reckon he plans on spending from €10 billion to €12 billion. In addition, I understand the Minister is putting at least €1 billion into Irish Nationwide and possibly half that amount into the EBS as part of the late amendment he produced the day before yesterday to give him powers in the Bill to take a share in building societies.

That is nationalisation, which Deputy Burton has been advocating all along. It costs money.

I said the Minister had put in a late amendment, which he did not discuss on the floor of this House, to allow him to take a share. He can confirm that or not, because this is about information. If he supplies the information we can make an assessment as to what the Minister is doing. I am taken aback by the negativity of his response and his body language. We want to know if lending is resuming to businesses and good credit prospects throughout this country. In the United States much of the asset relief money was used to enable banks to buy other banks and investments that would get, as Deputy Bruton said, their stock exchange rating and value up again. What we want and what Fianna Fáil has said it wants is for actual credit to flow to good credit prospects in the economy.

The Labour Party has tabled a later amendment to the Bill to the effect that we want a clear agreement and direction by the Minister to the banks on a framework to deal with house repossessions, so that nobody who has lost his or her job or otherwise comes into difficulty because of the financial crisis will be evicted. There are two essential aspects to getting credit and some type of economic return in this country. One is to get credit flowing and the second is to give people a sense of framework security so that they will not face house repossessions unless they are delinquent in payment.

The purpose of amendment No. 2 is to provide a framework of vital public information that will allow the progress of this process to be monitored on a monthly basis by both the Houses of the Oireachtas and also by the other estate, the media.

I thank the Chairman and the committee for the opportunity to deal with a technical matter, namely, to address a number of items within the Bill which will allow me to move amendments on Report Stage.

I shall just give the committee an overview of the purpose of my amendments. The initial purpose will be to give voice to the opposition and anger among the public which sees this Bill as fundamentally flawed and believe it is simply not going to work. The Bill does nothing for low to middle income families, or families on welfare. Those people believe they are being thrown overboard from the lifeboat to make room for the golden circle members, the speculators, bankers and their cronies.

My amendments will seek to extend the benefits of NAMA to that category of people because currently the only beneficiaries are those in the golden circle. I will also seek to move an amendment to write off the difference between the purchase price of a home and its current market value for those householders with mortgages on their primary residence since 2004, up to a value of €500,000. If we are going to write off loans for speculators across the board, it is important that ordinary households should share the benefits as well. We need to stop repossessions because we believe that the slowdown on foreclosures by the banks at the moment is simply a delay until the NAMA legislation is enacted, and then off they will go again. I will also seek to make provision to facilitate those who are financially excluded at present from the banking sector, by providing for the setting up of a no-frills bank account facility for people in this category.

I shall seek to amend the Title of the Bill, and will be opposing sections 2 and 3. I shall try to introduce a new amendment which will restrict certain actions by the Irish Credit Bureau. I shall oppose section 4 dealing with the market value versus the long-term economic value. I appreciate that both Fine Gael and Labour have tabled several amendments in that regard. I shall oppose section 5 which gives the Minister — and NAMA — sweeping powers. These are contained on page 22 if people want to read them. It is completely unacceptable that the Minister would have that level of power. I shall oppose section 6 which provides NAMA with limitless expenses to do what it wishes with them while at the same time not giving pensioners a bonus at Christmas. I shall oppose sections 7, 8, 9 and 10. I propose to introduce a new section at this point seeking to establish a State development and building agency section in NAMA, the purpose of which will be to build schools, hospitals, social housing and other necessary infrastructure on some of the lands and assets taken over by NAMA.

I shall oppose section 11. I shall oppose section 12 because it refers to providing "equity capital and credit facilities on such terms and conditions as NAMA thinks fit". As we have not yet seen NAMA function we do not know how it will think fit. That is a major concern to us all. I shall oppose sections 13, 14, 15, 17, 18 and 19. I shall seek to amend the criteria for the appointment of board members. At the moment section 19 refers to expertise in the areas of, for example, public administration, law, finance and economics. It is important for the board to have someone who deals with social policy and perhaps someone with experience of working with impoverished people. I shall move those amendments in due course. Having referred to them in this regard, I trust I will be able to do so. We have a very extensive list of amendments to get through and I anticipate some healthy debating.

Our objective today is to find ways in which NAMA can satisfy the requirements of a realistic price for the assets, risk sharing and credit flowing. The NAMA business plan, on the basis of which NAMA was sold to the general public, is pie in the sky. Ironically if this business plan were presented to a bank by an ordinary punter, the bank manager would throw it back stating that it was rubbish and would ask the person to come back with a proper plan. On the basis of this plan, we are expected to support the banks. Many of the figures relate to incomplete records. It assumes that NAMA will get interest income from borrowers of €12 billion, that it will pay out €16 billion to the banks in interest and the €4 billion hole will be plugged by asset recovery.

Page 30 states that of the €77 billion, 40% or €31 billion is performing. Of that €31 billion, €3 billion relates to land and development loans that are performing. Land and development loans come to €49 billion in total. This means that 6% of land and development loans are performing. The Minister expects us to believe that 80% of all loans will perform. The banks would not accept it and the taxpayer will not accept it either. It is critical for the Minister to take on board Deputy Bruton's practical and reasonable request that the business plan be reviewed by the Comptroller and Auditor General. It does not add up. Before the last general election Fianna Fáil told the people who are under pressure——

The Deputy is moving away from amendments Nos. 1, 11 and 14 to 16, inclusive.

It is very relevant it relates to the business plan.

Come on. It is democracy.

It has no relationship to the amendments. I ask the Deputy to speak to the amendments.

I am linking it into a section within this grouping.

The Deputy has moved way outside the scope of these amendments.

Before the last general election Fianna Fáil stated that the economy was going well. The Government is now telling people who are under pressure that NAMA will make money. NAMA cannot make money because it will buy assets at 15% above their value in a market that is declining. We will only get one chance to ensure funds flow to banks.

The oversight committee is very important. It should be based within the Oireachtas and chaired by someone not in government. We also need to know what discounts, in percentage terms, will be applied to the assets of the banks. We need to know how much in funds will be going into each bank. Of the €54 billion, how much is going into Anglo Irish Bank? That money will never see the light of day. How much is going into Irish Nationwide? The devil is in the detail. The Minister has set NAMA up as something that stands alone but if we do not get this right who will pay for it? It will be the taxpayer. There is no guarantee that credit will flow and I see nothing in the legislation that will compel the banks to lend the money to get the economy going and provide a fiscal stimulus.

There is no oversight of the process and we want the Office of the Comptroller and Auditor General to look at all the loans before they are transferred into NAMA to guarantee that the taxpayer gets some value for money. Of the €7 billion being paid over the market value, €2.7 billion is in subordinated loans which means a difference of almost €5 billion. Taxpayers are entitled to expect that their money pays the market value for loans. If the balance sheets of the banks are to be cleaned, taxpayers should share in the upside and small businesses are entitled to expect that funds will flow to them as a result.

People around the country are under severe pressure with their mortgages. They see €54 billion going into the banks and feel that very little of it will come out again. We have put forward a home support scheme for these people at much lower cost than what is going into the banks to buy their development loans. I ask the Minister to take that on board. If the Minister wants NAMA to work he should take our amendments on board. He should allow a national recovery bank to be set up to ensure funds flow and he should put in place proper oversight to ensure that, in ten years' time, taxpayers do not lose over half their money, such as happened in Sweden and in contrast to the €5.4 billion in profit the Minister expects to make.

As somebody who is not a member of the Select Committee on Finance and the Public Service, I thank the Chairman for the opportunity to speak to this legislation. I come to this Bill, particularly amendment No. 1, with an open mind and I urge all Deputies to listen and debate. I urge the Minister to accept the sensible amendments which have been tabled.

This is a very important debate and because it relates to the development of the economy it is above party politics. I urge the Minister to accept progressive amendments because they are part of the solution to our present economic situation. At the end of Committee Stage I hope we arrive at a sensible solution.

In the context of amendment No. 1, we need to focus on the purpose of the Bill because people have been distracted in the course of the debate. We need to address the serious systemic threat to the stability of the economy posed by credit institutions. I urge the Minister and everybody present to support the amendments that lead in this direction. I believe strongly that the NAMA legislation should include a section that debars any former owners, directors or executives of development companies, financial institutions or banks connected with toxic debts from owning, buying or having any beneficial interest whatsoever in the assets being sold by NAMA.

The legislation must contain a provision for the protection of those defaulting mortgage holders who, through no fault of their own, find themselves unable to meet their repayments to the financial institutions we are undertaking to support. This will be a key factor in my decision on whether to support the legislation. If mortgage holders, small businesses and the unemployed are protected, I will be prepared to look at the Bill in a positive way.

While the entire thrust of NAMA and its spending of taxpayers' money is to kick-start the banking system, the legislation must clearly state that the protection of existing bank shareholders and bondholders is not a consideration. The Bill must be cleansed of all those sections which give the Minister for Finance the power to intervene and meddle in the agency's operations. In thus removing it from political control, NAMA should come under democratic control and be answerable and accountable on a regular basis to the Oireachtas. These proposals are included in the amendments we will discuss in due course.

The objective of the legislation should include a social dimension. In this regard, the landbank assets which will come under the control and ownership of NAMA should be used to facilitate the provision of sites for social infrastructure such as schools, health centres, leisure centres and so on. I urge the Minister to give careful consideration to these sensible proposals which will help to resolve our current difficulties.

It is difficult to know what to say after Master McGrath has outlined how we should all behave and what the Minister should do.

I am sure Deputy Costello will adopt the same brevity in his contribution.

We are at the outset of a debate that will continue through all of next week. The Minister's amendment No. 1 is not controversial and should have been included in the original legislation. It would be desirable at this stage, considering that many of us in the Chamber are not members of the select committee, to have an outline of how the Minister proposes to deal with all the amendments. Some 250 amendments have been tabled to this lengthy Bill and there is no way we will get to discuss them all. I assume there are certain Opposition amendments which are amenable to the Minister to accept and others, such as amendment No. 1, which are not controversial and are sure to enjoy the support of the entire House. Both types of amendments should be dealt with briefly so that we can focus on those which require teasing out.

Those of us who are not members of the committee have other political engagements and it would be desirable at this point to have some idea of which proposals the Minister is likely to take on board. I am sure he and his staff have already more or less made up their minds in this regard. Were the Minister to provide some broad parameters as to how he intends to proceed, we would have a better chance of ensuring sufficient time is available to focus on the issues identified by Deputies Burton and Bruton as of most importance. This will also give Members a better idea of when the key discussions are likely to take place in the Chamber.

The Deputy's party spokesperson, Deputy Burton, should be able to provide him with that information.

It would be useful at the outset of the debate, when we are all here in the Chamber, to establish some certainty in this regard.

That was all decided yesterday.

Does any other member wish to speak on this group of amendments?

On a point of order, it would not be unreasonable for the Minister to offer some indication of his intentions. The committee discussed this issue and agreed an approach whereby debate on the Bill would focus around eight broad blocks. The Minister has been agreeable to this approach and we have tried to treat each block as if it were a separate Bill. That is the simplest way of describing the approach we are taking, the objective of which is to ensure that no section will be left undiscussed. It would be worthwhile for the House to have access to the blocking off of sections we have agreed so that Members can time their contributions and so on. Our intention is to organise the debate as much as possible within the time available to ensure there is engagement with the major issues in as meaningful a fashion as possible. It is only fair to other members that this be circulated to them.

The information will be given to all members of the committee, and I am sure they will furnish their colleagues in the House with that information.

Am I right in saying that the information will be distributed now?

The point made by Deputy Costello was not discussed at the committee yesterday. The Minister was not minded to advise the committee on Opposition amendments that he was prepared to accept. Instead, there was an agreement at the committee that where the Minister and his officials identified the Opposition amendments that he considered to be purely technical, then we would encourage the passage of those amendments as quickly as possible. This was agreed in order to allow the bulk of the time to be spent on the important, substantive amendments. Everybody agrees that there are about ten such amendments or types of amendments in the Bill, and we agreed to allocate the time elsewhere. After that, Chairman, we are in your good hands, because it was agreed that certain committee members would make a short oversight statement of the first block, followed by the contributions of other committee members and, finally, other Members of the House. We were hoping that time guidelines would be adopted to allow us to debate everything. That was the sense of the agreement at the two committee meetings.

I accept that the members are speaking very sensibly and in reasonable time as well. However, I cannot order the Minister to give his views on any particular section or any particular amendment. The agreement that we made this morning on the different blocks will be made public and can be distributed among all Members of the House.

The decision was made that Committee Stage would take place in this Chamber, following a request to the Government. This does not normally happen, and there is an entire week being devoted to the Bill in here. However, the rest of us are not members of this committee, so any deliberation——

The Deputy has colleagues on that committee.

That is not the point I am making.

Members cannot all fit into the committee room.

A request was made at the time that Committee Stage would take place in the Chamber, so that all of us could participate. We wish to participate to the maximum, so it is vital to know the manner in which the business is disposed and whether or not the Minister will give the nod to those amendments that are broadly acceptable, so that all of us can get involved. Otherwise, there is not a hope in hell that we will get an opportunity to speak. The first people to speak are members of the select committee, while the rest of us are only to speak afterwards. Therefore, there is a need to tease out how we are going to conduct our business. There is no sense in the rest of us staying in the House if we are not going to get an opportunity to speak.

The select committee had a meeting on how we would proceed and we came to an agreement. That information will be made available to everybody.

I do not intend to delay proceedings, but a strategy has been laid out which will ensure that amendments are taken in blocks, that major amendments will get some time, that spokespersons will get priority in providing their point of view and that members of the committee will have an opportunity to make general statements, following which there will be an opportunity to speak for non-members of the committee. That was an issue of principle for us.

I entirely disagree with Deputy Finian McGrath who came in here to suggest that it was a kind of a family matter. It is not. The point is that if there is to be an attempt to exclude non-members of the finance committee, I can assure the Chairman that it will be resisted.

There was no such proposal and there is no such intention.

Perhaps I misunderstood him, but I heard Deputy Andrews say that we have a representative on the committee. Yes, we do, but the point about it is that I am only saying——

I have made it clear that what was agreed at the committee——

As it was proposed——

Just one second, Deputy.

I did not say that.

I have made it quite clear that the agreement among all members of the committee on how to proceed will be made available to everybody.

Nobody is being excluded.

Deputy Andrews, please.

Why does the Chairman not tell us what the agreement is? It is not the third secret of Fatima.

Yes. It would have saved a lot of time if the interruption had not been so vague and unhelpful.

When are we going to find out——

We are not going to find out anything. I am going to tell you what we have done.

The debate has started.

We decided yesterday that the debate will include everybody.

I understand. That is the work——

You will be allowed to speak——

On a point of order, Deputy Andrews is continuing to develop this point.

I am deaf in one ear. I cannot hear him.

The committee decides its committee business. Those elected representatives who spoke on Second Stage will speak on specified amendments with courtesy and in acceptance of what the Chairman has laid out. There should be no suggestion that a Deputy's representative on the committee has spoken for him or her, and that he or she is merely rehashing the same argument. If there had been more scrutiny, we would not be here.

Deputy, I have no intention of allowing that to happen.

I appreciate that.

It will not happen. Everybody will be given an opportunity.

Will you say that to Deputies on the other side of the House as well?

I cannot talk to them.

You can, if you twist your head that way.

I am deaf in the other ear at times as well.

There is a valid point to be made about the need to give Opposition Deputies enough time to propose and discuss amendments. Those of us who are not members of this committee need to be given time to indicate our intention to table amendments on Report Stage. Now that the Chief Whip has indicated that the Report Stage debate, during which amendments can be moved by Deputies who are not members of this committee, will be limited to two days, there is a danger that such Deputies, including myself, will not have enough time to make the points we want to make. The point I have raised with the Government about the proposed groupings for the Committee Stage debate might seem minor. I have suggested that we should revert to the custom whereby any new agency or body that is being established should be known by its Irish-language name in the first instance. The custom in question is not reflected in this case. This is not a major issue. I see that the Minister is laughing.

No, I am not. I will examine it.

At this stage, I am indicating that I intend to propose amendments on Report Stage.

Is amendment No. 1 agreed? Would the Minister like to respond to what has been said on it?

I have moved the amendment. I thank Deputies for their contributions. I will outline my response to particular amendments when they arise. We are considering a technical amendment to the collective citation of the legislation. While I appreciate that Deputies are keen to outline their general views on these matters, as a Minister I am obliged to deal with the specific matters that arise in the context of a Committee Stage debate.

On a point of order, if the Minister fails to offer any view until we reach the section or amendment concerned, we will not have a debate. If he decides to refrain from expressing any view on any amendment until it is reached, he will frustrate the intention of the committee. The purpose of our agreement was to allow some flexibility in debating sections and amendments——

The Minister's adviser is advising him badly.

——without having to wait for every amendment to be reached. The Minister's view could undermine the sense of the agreement we have developed.

I would have to make a Second Stage reply to every point that has been made. I do not necessarily accept all of them. For example, Deputy Bruton suggested that the discount rate is stated to be 5% in the business plan. That discount rate reflects the cost of funding to NAMA which, because of the structure of NAMA's bonds, will be lower than the cost to private investors. The 5% discount rate in the business plan is based on the current cost of funding to the Government, over ten years. Private investors have higher discounts that are linked to returns over shorter periods. I would like to place that simple matter of fact on the record of the House, rather than allowing what Deputy Bruton said to go uncorrected. I could engage in up to ten more issues of fact, but I do not want to delay the committee. I want to deal with the substantive Committee Stage amendments.

What is before the House at present is a minor technical amendment which states that the collective citation of the Central Bank legislation will be dealt with. That is the procedural position. Other matters of fact were alluded to by Deputy Morgan about lifeboats and the like, which were completely wide of the mark in terms of the current economic position. We all have a duty in this House to address collectively the problems we face, and the banking crisis is clearly entirely distinct from the crisis in the public finances. That is a very important point on which we should reflect leading up to the budget. There is absolutely no connection between them. The crisis in the public finances is because we have a big gap between our receipts and expenditure.

That has nothing to do with the cost of funding the banking system or the necessary operations the Government has had to conduct in this regard.

What about the property bubble?

I could engage in a detailed Second Stage debate. Deputy Burton asked the correct question, namely, a question on oversight and corporate governance in NAMA. The next amendment deals with that matter and I will be delighted to deal with it in that context.

Amendment agreed to.
Section 1, as amended, agreed to.
NEW SECTION.

Amendments Nos. 2, 8, 17, 35 and 36 are related and may be discussed together.

I move amendment No. 2:

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

2.—(1) Dáil Éireann shall appoint an Oversight Committee consisting of specified persons not being members of the Houses of the Oireachtas to report to Dáil Éireann 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.".

My understanding, which I believe is shared by Deputy Richard Bruton, is that we agreed to a ten minute general statement at the beginning of each of the blocs to save on time. That is why I spoke to amendments other than that of the Minister. I understood that to be the agreement of the committee. I do not recall Deputy Chris Andrews being at the committee discussions and, therefore, I am not quite sure why he is so opinionated in respect of them.

The Deputy was too busy talking.

Deputy Andrews should not interrupt.

The Chairman was present and so was the Minister.

The Deputy should check the proceedings.

If Deputy Burton is going to continue talking and not look around——

I ask Deputy Chris Andrews to stop interrupting please.

How could Deputy Burton have missed Deputy Chris Andrews?

Let us proceed with business.

I might have seen the Deputy at the beginning but do not recall him taking part in the discussions.

Perhaps the Deputy spoke to her colleagues——

I ask Deputy Chris Andrews to stop interrupting please.

Somebody should give that man something.

He already got something.

Amendment No. 2, in the name of the Labour Party, proposes to appoint an Oireachtas oversight committee consisting of specified persons not being Members of the Houses of the Oireachtas to report to Dáil Éireann every 30 days on the operation of this Act and the activities of NAMA. It would require persons who are in a position to do so to co-operate with the oversight committee in the performance of its functions. The purpose is to make information on NAMA, which represents the most significant financial decision and undertaking in the history of the State, available on a timely basis.

The Minister was slightly irritated this morning by questions about the NAMA business plan. He presented the plan just before the vote at the end of Second Stage. The plan, which is a standard kind of business plan guesstimate——

It is very much a draft guesstimate. It was presented just before we voted on Second Stage so there was no opportunity at all in the House to discuss its good or dreadful points. This is one of the fundamentally flawed aspects of how the Government has handled this crisis. It has a deep desire to keep as much information as possible secluded not only from the Dáil and Seanad, but also from citizens. The Minister allows himself to make ridiculous statements, such as the one he just made, to the effect that no part of the deficit between receipts and expenditure in the national accounts has anything to do with NAMA. Either that is a statement of profound absence of knowledge of the national accounts, and I do not believe the Minister lacks knowledge, or he has decided not to factor in or admit to people that he has decided to leave our expenditure problems out of the current economic difficulties with the banking crisis.

The cost of Ireland's borrowing has risen significantly compared with other European countries. It bears heavily on the creation of the national debt and on the requirement to allocate more and more of people's taxes to pay for borrowing.

May I make a Keynesian point? If we can get the economy into recovery, the problem with the national debt will decelerate almost as rapidly as it built up. I told the Minister on previous occasions that nationalisation would be cheaper and better and would allow the valuation issue to be parked. However, this is the legislation that is here. If we had a NAMA-type operation which brought the cost of our borrowing down, was cheaper and resulted in international respect and in a cheaper cost of finance, our general deficit would start to fall. More important, if credit and confidence came back into the economy by credit being available to businesses and if the people, estimated by the ESRI to be 35,000 next year, who are facing repossessions had that fear parked so that they could resume spending, we would deal relatively rapidly with the deficit over a number of years. That is a Keynesian approach which would bring us out of our financial difficulties much more rapidly if it was accompanied by appropriate stimulus in the form of targeted spending on investment projects, whether in the green area that creates jobs or on projects such as roads and schools.

I profoundly disagree with the Minister's contention that NAMA has nothing to do with our overall economic performance and how we get out of our deficit difficulties. It is not the entire difficulty but it is a very significant element of it. How it works will have a profound effect on our overall economic recovery. The purpose of amendment No. 2 is to have oversight and reporting. That is fundamental in a modern democracy.

Every weekend, the Minister for Finance, his Department or an agency under its aegis feeds information to various media, such as The Sunday Business Post, The Irish Times or others. Stories are regularly broken in those newspapers although this House and the citizens have no idea whether these rumours are true or not. The object of an oversight committee would be to get information to the Dáil so that Deputies, on behalf of citizens, could assess it. People such as Professors Lucey, Whelan, Gurdgiev and others have done great service to Ireland. They have commented on the Irish Economy website and come to this committee at various times during the crisis, along with Professor Honohan who I am now glad is Governor of the Central Bank, and given their views as those stories emerged. In recent days, we heard of the creation of special purpose vehicles with a special structure of ownership between the State and private investors. A special purpose vehicle is simply a vehicle. It is neither good nor bad. However, it is important that we get the information about this.

The Minister and his party may have difficulty with amendment No. 8. It proposes that NAMA should report to Dáil Éireann every 30 days, 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 over €100,000. That is a disclosure requirement of the underlying assets, companies, interests, properties, associated investments and so on, set out in the NAMA business plan.

The Minister's party, like Pavlov's dog, says, "This is not a bailout for the bankers and this is not a bailout for the developers". I do not agree. The Minister is attempting, with minimum public information, to rescue the banks. He has said as much. He is also hoping NAMA will rescue many of the developers. There is an overriding public information interest in the disclosure of the identity of the companies, firms and individuals involved. If the Minister feels he cannot disclose individual identities I would be happy with pseudonyms such as Mr. A or Mr. X. I am not interested in individuals but it is important that we know the extent of who holds these debts. In his business plan, the Minister proposes that the first major group of ten developers will be dealt with by Christmas to a value of €16 billion, in terms of the "NAMAfied" valuation of assets. That represents €1.6 billion per developer or developer group. In anyone's language, that is an enormous amount of publicly committed funding to buy assets. If, for example, the Department of Finance bought two acres of land from the Castleknock hurling and football club, the transaction would be a matter of public record. The Minister is proposing that, before Christmas, a group of at least ten developers will have €16 billion of public funds sent to their bankers in respect of underlying properties, land, investments and so on. The purpose of amendment No. 8 is that there should be public——

We will become their bankers.

I know we become their bankers.

The Deputy's language is pejorative

In his business plan, the Minister lays great emphasis on the fact that the first ten developers will be dealt with at an estimated cost of €16 billion of coverage on their loans in the various banks. We were also told yesterday about the creation of special purpose vehicles, SPVs, which I understand may be intended to deal with bankers or themed groups of assets. I do not know because this was just a statement.

The purpose of amendment No. 8 is that this information goes into the public domain on a timely basis. People on all sides of the House know of relatively small enterprises in their constituencies, whether family enterprise or resource centres or local partnerships or GAA clubs, whose financial transactions with the State are the subject of public information.

The Minister's response to these amendments is critical. I draw his attention to Anglo Irish Bank, as an example of how not to do things. When Anglo Irish Bank was nationalised some months ago, it should have been nationalised on the night of the guarantee — it was not — the Minister dithered and dawdled and instead he wrongly made Anglo Irish Bank and Irish Nationwide the centrepiece of the guarantee. Since Anglo Irish Bank was nationalised and under the control of the Department, hardly a word has been heard from it. Just a few weeks ago the Department and the bank changed its year-end date from September because, as we know, the guarantee was given on the night before the bank's year end and that was the most significant thing about why the guarantee came into play at that moment. Thereafter, the bank has disappeared from view.

What do we know about the bank? We know that the Quinn shareholding and the shares that were acquired through contract for difference were off-loaded at some stage to a group of ten developers. We do not know anything else. No committee of this House has information on the most important deal in the history of the finances of the State and the terrible consequences of that deal. We know that a series of senior managers are conflicted in regard to loans they took out. There has been no other public information. We know that a series of inquiries is being undertaken by the Office of the Director of Corporate Enforcement and by the Garda but we have very little information.

I suggest that in terms of moving to a new model of an economy in this country, namely, a mixed economy with a good state sector and a good private sector, it is essential that we would have a culture of publicly reporting information. That is what these two amendments are about. I appeal to the Minister in the interests of this country to accept that he has to switch to a culture of routine and regular public information, even though I acknowledge that at times it can be difficult for people when one is in the public eye dealing with public information and freedom of information. That is one of the things that makes the United States great. When there is a disaster it can publish the information and having published it it can move on and start again. In the Bill the Minister could set a framework for moving on and starting again. We would then know what the Government is doing in detail in respect of the bankers and the developers. If we got to the bottom we could then start to move up and regenerate our economy.

Oireachtas oversight is crucial in the Bill. In the agreement that was circulated, the Minister was to engage in a general discussion of all the amendments in a section so that we would have some idea of his mindset before we proceeded to the amendment by amendment discussion. That is what I was seeking a moment ago when the Minister declined. It would be helpful to the committee if the Minister——

That was not my understanding. I will do it with each of the other groupings.

I believe that is what was agreed. That is all I seek. Oversight is crucial. The Minister's comment about the business plan shows how crucial it is. Why will the Minister not allow a monitor on behalf of the Comptroller and Auditor General to assess the business plan? When I did a cost-benefit analysis, which I admit is a long time ago, one applied the 5% discount to the cost of funds, as the Minister has correctly done. However, when looking at risky flows that one is predicting in the future from green fields that are currently 3% performing, and one is predicting that they will be 80% performing over an 11–year period, when one is assessing the present value of those one should apply a much higher risk premium to them because they are risky predictions. They are not accurate forecasts in the way one can say what one will have to pay on one's debt. They are risky predictions for the future and one applies a heavier discount. It does not matter whether one is the State or a private investor; these are risky investments that have high probabilities of being inaccurate.

That is why we need oversight to advise the Oireachtas on whether it is a good business plan, whether it makes sense and stacks up. The Minister needs to respond to the issue of oversight in a more meaningful way. We have proposed that a monitor would be appointed by the Comptroller and Auditor General who would report to an Oireachtas committee. That monitor would have the forensic powers to advise the committee on key issues such as valuation approaches, how one deals with properties, how one extends new loans, which we are now giving——

To which amendment does the Deputy refer?

This relates to oversight.

Which amendment are we discussing now?

It relates to amendments Nos. 100 and 102. The type of oversight we envisage is slightly different from the Labour Party's proposal, but it goes to the heart of how we as Oireachtas Members oversee this body. It is crucial that the Minister, on behalf of the Government, offers something that is meaningful. The Comptroller and Auditor General reporting to a committee is a model that has been tried and tested. If we could have a monitor on behalf of the Comptroller and Auditor General to oversee critical features of the operation, and have access to the books, that would generate a great deal more confidence.

Contrary to the Labour Party's view, the role of oversight should be conducted by Members of the Oireachtas not by outside individuals. It should have responsibility for such matters as vetting the appointment to the board, the chief executive and the chairman of the board, and vetting the codes of practice that NAMA will adopt on critical features of its work. We, in the Oireachtas, must have some level of accountability over those matters. We cannot delegate that to the chairman and chief executive and say "Bye, bye, we will see you in ten years' time, and you can tell us if you make the €5 billion profit." That will not be good enough.

If we needed to be told that, let us look at what happened with the Central Bank and the Financial Regulator. That, in effect, was the way we oversaw them. We said "Bye, bye" and they turned up perhaps once a year and gave us a lot of cotton wool. They became defenders of what was going wrong in the banks as if they, like Lord Denning, were too scared to face up to the appalling vista that perhaps the banking system was wrong. Those people who were supposed to be the watchdogs became so sucked into the system that they were defending it and offering the committee blather about the true state of banking. Up to recently they were still offering that blather. We know now that oversight of those agencies by the Oireachtas must be much more serious, as they are playing such a vital role, NAMA among them.

The issue of oversight commenced with a Labour Party motion and there will be further amendments on it. It is vital that we at least give the Oireachtas a fighting chance of riding shotgun on this agency, which is one of immense, scale, power and implications for our economy. We do need to have Oireachtas oversight, not in a way that will prevent NAMA doing its work but in a way that is reasonable and proportionate so that those doing the work will know that there will be objective assessment and that nothing will be under the carpet. That is crucial. I look forward to hearing how the Minister hopes to achieve that and whether he will accept some of the amendments, develop alternatives or what way he will handle it. If we do not do that we will have failed as an Oireachtas.

I call Deputy O'Donnell.

I wonder whether I could intervene at this stage.

Yes. If the Minister wishes.

I will come back in at a later stage also but because of the views of the two spokespersons I am anxious to comment on Oireachtas oversight and to provide some focus to the discussion. I have detailed comments on various amendments and we can go through those later in the debate if Deputies wish, but both Deputy Burton and Deputy Bruton have raised a fundamental question of corporate governance in regard to NAMA. That is the direction of their contributions. As structured in the legislation, NAMA will operate as other bodies set up by the State through legislation have operated. It will have a board. We will be very careful about the board. I appreciate we will deal with the issue later in the debate but as Deputy Bruton has raised the matter, we have been careful to ensure that there are specific qualifications for every person who is on that board.

The question that is being raised by both Deputies is what super-added element can be put into the equation in regard to the Oireachtas. Deputy Bruton mentioned the Comptroller and Auditor General and the business plan but the business plan is a draft business plan. The Comptroller and Auditor General's function is to review performance and audit expenditure; it is not to deal with an envisaged business plan. The wider question is how the Oireachtas can be slotted into that procedure. Deputy Bruton expressed frustration, and I am sure Deputy Burton would have expressed the same sentiment, at the difficulties he encountered when the chief executive, regulator or Governor of the Central Bank or other senior officials appeared before him in regard to the banking crisis.

We have a finance committee, a public accounts committee and an auditor general. All of those structures apply to this legislation, but I would like to hear from the Opposition Deputies the precise additional element they want to insert into the NAMA structure in regard to the Oireachtas, or not the Oireachtas because Deputy Burton suggested in her contribution that she did not want the Oireachtas involved in this because she believed it would compromise the position of Deputies. I would like to hear from the Opposition the precise super-added element that can be put into the equation where we would have a board, which would be appointed precisely to hold an organisation to account——

I draw the Minister's attention to amendments Nos. 100 to 102, inclusive.

——whether it is on the Oireachtas side, an advisory audit or on the inspector's side, which I believe is what Deputy Burton is suggesting——

I suggested an oversight model similar to that which exists in a number of other countries.

——or an oversight model. We are talking about a different model of corporate governance. I am open to suggestion on this but I need it to be clearly spelled out what is the precise alternative model of corporate governance. Two distinct issues arise. One relates to the model of corporate governance and the other relates to the issue of Oireachtas participation. They are both important issues that must be addressed in this debate. I would like greater precision about what exactly is envisaged or proposed and I will then consider that proposal.

I thank the Minister for that comment. The Labour Party amendment is specific. It does not propose amending existing Oireachtas committees, to which the Minister has referred, or the Office of the Comptroller and Auditor General. Instead it proposes, as has happened in other jurisdictions, that, working alongside this structure and for which there would be provision in this Bill, an oversight committee would be appointed. It would be composed of independent persons with capacity, expertise and knowledge of this area. The critical function they would perform is to report the information on the progress of the NAMA venture on a 30-day basis. Professor Elizabeth Warren from Harvard is in charge of the US oversight commission. The Minister told me recently that he had followed very closely what has happened in the United States. If he examined the work Professor Warren and her committee have done, the key element has been to report regularly basic data and information on the progress of the various elements of its equivalent of NAMA. Essentially, NAMA is a bad bank, whose function will be to seek to sell, hold or in some other way deal with the bad assets underlying the distressed loans. As the Minister said, NAMA will buy distressed loans from a bank, the collateral for which is the various pot of property and other investments of the developers who took out the distressed loans.

The first part of NAMA's operation will be to value the loans. In regard to the comments made by colleagues about the business plan, it is my view, as it also seems to the view of other people, that the valuation attached to the loans in the business plan is too high. We want a progress report on NAMA every 30 days because in its business plan the timelines are extremely tight. The ten people with the biggest loans are to be processed by Christmas and by the end of February——

The Deputy is straying from the question we are discussing.

The Minister asked me why I want an oversight committee in place and such information made available. I want the information in the public domain because then it will be possible to evaluate and make sense of it. An underlying factor is that we want to get credit flowing. A key information and oversight committee, as well as advising us on the functioning of NAMA, would be able to advise whether credit is flowing into the economy and whether the issue of mortgage repossessions is being dealt with in an appropriate way by the banks who are part of the NAMA process.

The second amendment I wish to address is amendment No. 8. It proposes the timely publication of information concerning persons such as developers who are the subject of the NAMA process. Where the amounts involved are more than €100,000, such details should be disclosed.

That is not the question we are discussing. The Deputy is covering ground that has already been covered.

The reason such an oversight committee should be independent is that inevitably it would be privy to considerable detailed information about individual portfolios.

The Minister asked about the set up of such a committee and the number of people who would be on it. It is not necessary to make the case for it, as he agrees with it. He asked about its structure.

Dáil Éireann should appoint an oversight committee consisting of a specified number of persons. The size of such committees, as in the case of the Minister's various proposals about valuation boards and so on, is normally in the region of eight to 12 members. It would be in that region and it would be composed of independent persons with a capacity and an expertise in regard to these functions, but the critical factor is that it would provide a mechanism for a flow of regular information to this House and to our citizens.

The Minister referred to two points, oversight and corporate governance. The sheer scale of NAMA, which will deal with a debt of €54 billion, warrants the establishment of a specific Oireachtas committee to review NAMA at the start of the process. There is no provision within the legislation for an independent oversight of the valuation of assets being acquired by NAMA. A major concern is the valuation of assets being acquired. The Minister has referred to the valuation of individual assets. An independent oversight of the process is required. An official from the Comptroller and Auditor General's office needs to examine the schedule of assets before they are acquired by NAMA. The schedule of assets should be examined before bonds are exchanged. Second, it is important that the committee would have the capacity to bring in experts as the need arises. I believe we all, including the Minister, agree that an oversight role of the process is required. With regard to the corporate governance of the process, having regard to the sheer scale of debt with which NAMA will deal, in terms of public credibility, the establishment of a separate committee is warranted, which would be chaired by a member who is not in government.

The Minister made a point that has gone unchecked. He said that there is no interrelationship between NAMA and the public finances.

I did not say that.

He did. He said the banking crisis is not related to the public finances crisis, but they are completely interrelated.

I said they are not related to the gap between receipts and expenditure.

That is related to the collapse in property market.

One of the main reasons for the gap between receipts and expenditure is the collapse of the property market. That was due to banks lending recklessly and the lack of regulation of the banking sector by Government. If NAMA does not provide for the flow of funds to business — bearing in mind that €34 billion of the €54 billion to be provided is probably available because €16 billion plus will be put into Anglo Irish Bank — the success of NAMA will depend on property prices rising and that will bring us back into the same old cycle again. The Minister need to address that point, as these factors are very much interrelated.

The Deputy should speak to the amendment.

I was simply referring to that point.

I call Deputy McGrath. I wish to make a number of brief points.

Since NAMA was introduced our bond spreads have narrowed because of international confidence in it.

If funds do not flow, the success of NAMA will be based upon property prices rising. The Minister should deal with that point as it is relevant.

Deputy McGrath is in possession.

I wish to make a few brief points about the amendments we are discussing. First, the Minister raised the key issues of corporate governance and Oireachtas oversight, which are quite separate. My analysis of the corporate governance provisions in the legislation indicate to me that they are adequate, they are quite robust and the outside expertise will be on the board of NAMA.

The issue of Oireachtas supervision is quite a different matter. I am a member of the Committee of Public Accounts and the Joint Committee on Finance and the Public Service. At a practical level, both of those committees are already exceptionally busy. There may be a need for more robust Oireachtas supervision. Of the two separate proposals before us, there is greater merit in the Fine Gael one, that a dedicated Oireachtas committee comprising members of the House would be established with the sole purpose of supervising the implementation of the legislation, which is critically important.

The Labour Party proposal involves an oversight committee consisting of persons not being Members of the Houses of the Oireachtas. My thinking on that is that the outside expertise will already be on the board of NAMA. That is where the corporate governance will be in place.

But it will be privileged. It will not be able to put the information in the public domain.

There is sufficient expertise and integrity in this House that the Members can form a committee to have rigorous oversight through the Oireachtas procedures. To be fair, there are already a number of supervisory and oversight provisions in the legislation, with the Committee of Public Accounts and the Joint Committee on Finance and the Public Service, but there is merit in examining how that can be strengthened. Both of those committees are exceptionally busy already and given the scale, complexity and importance of what is involved, perhaps the issue of a separate committee dedicated exclusively to this purpose should be considered.

On amendment No. 8, in the name of the Labour Party, on NAMA submitting a report to the Dáil every 30 days setting out details of the operation including the identities of the owners of assets acquired, confidentiality is a fundamental tenet of the banking system. Entering into the arena of disclosing details of individual transactions — Deputy Burton stated she does not necessarily want to know if it is Mr. A or Mr. B. but the amendment states "including the identities of the owners" involved — is not a road we should go down. It is not necessary to have such a provision in place. It would damage the banking system,——

How would it damage the banking system?

——which is contrary to the purpose of setting up this legislation.

We, on this side of the House, are looking to strengthen the legislation. There needs to be proper checks and balances in place and at a minimum NAMA should report on a monthly basis to Dáil Éireann. As colleagues stated already, there is €54 billion of taxpayers' money at stake. The public also needs to have confidence that there is proper accountability and transparency in the workings of NAMA. For those reasons, the Minister should either accept this amendment on the oversight committee or look towards Fine Gael's amendment which sets up a committee specifically to deal with NAMA.

I have no difficulty in sticking entirely to the purpose of amendment No. 2. The issue arises straightforwardly like this across the two heads of corporate governance and Oireachtas oversight. I appreciate the Deputies are seeking to be positive about this, but we must begin with an acceptance of an unpleasant fact, that while Oireachtas oversight has become ever sharper, it is dealing with events after they have happened. That is certainly the work of the Committee of Public Accounts, which is excellent work, and the work of the reports of the Comptroller and Auditor General, which are even more valuable. However, this is, if you like, after the event.

There then arises the issue of the proposal which I support which is set out in amendments Nos. 2 and 8 in the name of my colleague, Deputy Burton. One must accept something else, namely, that one needs to change not only the form of the oversight but the ethos and culture which led us into this position.

I will put this simply. As I went through the draft business plan, I read of expenditure of €250 million a year on forms of consultancy in expert opinion. As somebody standing outside those professions, one would have to say that those professions are severely damaged by what has happened in the absence of accountability, in the absence of governability and, indeed, above all else, in the absence of regulation.

The other side of it is that such €250 million, which across a ten year period amounts to €2.5 billion, will go out to purchase opinion and the Minister will assume that the crisis in which we find ourselves can be managed by having the same people, the same ethos and the same culture in place. As a long-time Member, I suggest that the evidence is not with the Minister on this.

Frankly, looked at even internationally, people who for a long time operated — people who were different from me and very conservative — knew what it was to put an auditor's signature on a balance sheet, etc. They knew what assets had to appear on the balance sheet. They knew the horrific significance of off-balance sheet assets and debts, etc. They know this internationally.

The Minister has no guarantee other than that the people who will come in for the €250 million, or €2.5 billion over ten years, have committed themselves to some concept of either a return to an old conservative rigour or a new forensics that would be able to create transparency for a public that is entitled to it.

The Minister asked a reasonable question as to why, and then how, one would do this. There is considerable merit for the reasons I have stated in having a form of arm's length distance between those who have statutory obligations within NAMA and those who are, in fact, servicing NAMA. I suggest that requires really good consideration. Deputy Burton referred to Professor Elizabeth Warren's points. In the interview Professor Warren has given since she started her vigilance, what surfaces repeatedly is the difficulty of entirely new circumstances that required forensic examination, for example, the multiple complex forms of ownership and benefit that exist between different investors and property owners which were not envisaged by the legislation. The advantage of having an arm's length independent body is entirely that one would be able to deal quickly with such gaps as exist in the legislation in those early years when one is taking care of €16 billion in a short space of time. It would be better to have that forensic information fed back by way of necessary amendment to the legislation.

I accept that the Second Stage has passed. We are now dealing with how the legislation might operate with some guarantee of trust and transparency to the public, but we are dealing with something else too, namely, another reality that cannot be avoided. There are those who know of the assets involved. We can leave over to another stage of debating the legislation the issue of what is toxic and what is non-toxic, but in many cases one is dealing with the assertion that the proportion put up by those who borrowed from the banks, for example, might have been as high as 25% or 30%. There is considerable evidence around the place that the same 30% was like those cows which were coming over and going back across the Border years ago in that they travelled through several packages of indebtedness. Then what does the Minister find in this regard? Surely if Minister wants the public to have a scintilla of trust in this, he needs to have a mechanism of pinning down ownership and responsibilities associated with the particular borrowings.

Another unsavoury fact of all of this is that the Minister will eventually — we will leave that for another day — become a majority shareholder in one of the two major banks, along with the dud bank we, as a people, now own. What he will find in many cases is that members of the banks themselves have participated in some of the property packages. They are well known. The Minister said he will be able to deal with €16 billion between now and Christmas. While I wish him well, he still does not know what the public is exposed to in terms of Anglo Irish Bank, now in State ownership, because the report is not yet available. Perhaps the Minister knows the figure. However, it is not available to the public.

The Deputy is moving away from the point.

My final point relates to confidentiality.

The Chairman appeared before the Oireachtas Joint Committee on Finance and the Public Service.

That was a long time ago. May is almost a generation ago in terms of the banking crisis.

I am not confused about this. As I understand it — I am open to correction on this — the Department of Finance replied to a question stating it was at an advanced stage of preparation in terms of sending inspectors into Anglo Irish Bank. If the inspectors have been in and have produced a report it could be put before the——

The Deputy is moving away from the point.

I would like to finish my point on confidentiality. An interesting point is what the Minister has to do in terms of transparent banking; it is a legal and near constitutional point. It is interesting for example that public interest directors have gone into the banks, bound by company law that has not been amended and as such is fairly useless. We must balance confidentiality and transparency if this legislation is to work. I am being positive in the suggestions I am putting forward. It must have some modicum of trust. It will not have that modicum of trust if we are to continue the old culture in terms of confidentiality which provided not one jot of public interest in terms of the behaviour of the banks.

I would like in the most positive sense that I can to address amendment No. 2 proposed by the Labour Party.

I agree with Deputy Bruton and other speakers that strong oversight is needed because we are dealing with a large amount of public money. Also, that oversight should be thorough and appropriate. The suggestion that the Comptroller and Auditor General should be involved in this is misguided. As I understand it, the role of the Comptroller and Auditor General is to review and report on past expenditure and not to monitor current expenditure. As such it would not be appropriate to involve him or her in this process.

That is not an argument.

The amendment states at subsection (2) that Dáil Éireann shall appoint an oversight committee. However, the functions of the proposed oversight committee are not set out in the amendment nor are the qualifications in terms of membership of the committee.

While I agree on the need for an oversight committee — Deputy Higgins' comments in this regard were interesting — the question of whether it should be external or internal to the Dáil is an interesting one. It would be interesting to see how this would be structured. I will not comment on amendments Nos. 100 and 102 except to say I have noted the Fine Gael proposal that a committee of the Houses of the Oireachtas be established, which is interesting.

I am a member of the Houses of the Oireachtas Commission which recently proposed a reduction in the number of committees, a proposal with which all members of the House agreed. Perhaps the Houses of the Oireachtas Commission could, if properly resourced and provided with proper professional expertise to probe the NAMA process, act as the oversight committee in this regard? I agree with those who say there must be rigorous oversight of the activities of NAMA. The requirement that such committee would report to the Dáil every 30 days is too onerous and I suggest that a quarterly report would be sufficient.

Amendment No. 8 provides that every 30 days NAMA shall report to Dáil Éireann 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. I wonder if Deputy Burton would be prepared to withdraw the clause "including the identities of the owners of,."

I will respond to the Deputy on that question.

It is entirely inappropriate to include that clause. It may show a slight misunderstanding of the operation or function of NAMA.

I think I understand that.

The reality is that NAMA will acquire the entire property book of the guaranteed banks, including good and bad loans. This means that the loan of an investor or developer which is fully up to date in terms of repayments will be transferred to NAMA. Under existing banking law that person has a contractual right to confidentiality vis-à-vis his bank.

I am aware of that.

Deputy Burton proposes that such person who, let us presume is a law abiding person, is paying his debt, is meeting his contractual obligations——

Most of them are not paying their debts, that is why they are in NAMA.

——should suddenly lose his right to confidentiality. Deputy Burton would have to make a compelling case to the Oireachtas——

We are putting in €54 million.

Perhaps Deputy Burton would allow me to finish. I know the truth hurts but one sometimes has to hear it.

I think I can cope; I am strong.

The Deputy would have to make a compelling case as to why such person should lose his contractual right to bank confidentiality.

Amendment No. 17 in the names of Deputies Bruton and O'Donnell states: "(4) The expenses referred to in this section shall be submitted to the Oireachtas Committee on NAMA.". This may be a good idea. I am not suggesting that there should be a special committee on NAMA. The relevant committee could be the Joint Committee on Finance and the Public Service. I see no reason the expenses should be not laid before the House.

I align myself with those who seek strong oversight of NAMA. I am not against an external panel; there is certain merit in that suggestion. However, it would be better if oversight was undertaken by a properly resourced committee of this House. Many of our committees are not properly resourced. For example, the Joint Committee on European Scrutiny, an extremely important committee, is not properly or adequately resourced.

We have to understand what oversight means. NAMA is a commercial organisation with a commercial mandate. It has a mandate to manage assets and must make commercial decisions. It is not feasible to put in place a structure that would peer over the shoulder of NAMA in terms of every commercial decision it makes. As in the case of any other commercial organisation, NAMA must have latitude to act and think commercially. We do not have in place a structure that peers over the shoulder of the ESB in terms of its decision-making. There must be total accountability and flexibility in the system to allow NAMA to make prudent and proper commercial decisions.

I do not know the answer to the question posed by the Minister for Finance in terms of the preference of the House in regard to amendment No. 2 or, an alternative arrangement, as envisaged in amendment No. 102 proposed by Deputy Bruton. What I am certain of is that the Irish people expect us to have oversight of the enterprise we are establishing. That much is clear. Even people who early on became attached to the NAMA proposal as "the only proposal in town" would want rigorous informed oversight.

Many others who are sceptical about the route on which we are embarking certainly want such oversight. Therefore, it is a matter for this committee and ultimately for the Minister to choose which is the better way of doing it. As I understand the Minister, although he has not said this, he is in favour of democratic oversight of what is encompassed in this Act. Deputies Burton and Higgins have explained the rationale for amendment No. 2, which is in the name of Deputy Burton on behalf of the Labour Party. I do not want to go over that ground, but I am not entirely clear on why the amendments are grouped this way. It seems the next batch cover similar territory, although I know they are wider in scope.

If the Minister intends to endorse amendment No. 2, so be it, but if he intends to refuse it, I will have no difficulty in supporting amendment No. 102. I take a similar view to that expressed by Deputy Michael McGrath in his contribution. This is new territory of such extraordinary magnitude that I wonder whether an existing committee, which would be the Joint Committee on Finance and the Public Service if it were decided to go down that road, could do the other work that is required to be done by committees. If a new and separate committee were established to do this job, it would have to have expertise available to enable it to ride shotgun.

Deputy Burton's amendment envisages that those involved in the oversight committee would be outside people with specific qualifications and expertise. However, taxpayers would probably expect this House to have the ultimate say. If we consider the way in which the proposal has evolved since it was first mentioned, we can see changes have been made all along up to the point at which the Bill entered the House. If NAMA is established, we are likely to learn a great deal and change direction a number of times on important issues. The House would ultimately like to have a say in this regard.

The Bill is remarkable and unprecedented in the extraordinary power it concentrates in the hands of the Minister for Finance. There must be circumstances in which the Minister is required to make available to the House as much information as is consistent with the commercial mandate of NAMA. In addition, whatever route we go, the Minister should be expected to be more frank with the House than was the experience in the lead-up to the crash, in terms of the way the Committee of Public Accounts and this committee were treated not just by senior bankers, but also by the regulatory system.

As a non-member of the committee, I welcome the opportunity to contribute to the debate in the Chamber. There are two principles which I hope the Minister will accept, in view of the fact that there was such a fundamental failure of oversight in the past and that we need a total change of culture in the future with regard to oversight of NAMA and financial matters in general. Does the Minister accept that this Bill, as it stands, is not strong enough in terms of extra oversight — particularly by the Oireachtas — of the activities of NAMA? If he accepts that we need to strengthen the legislation in this regard, he should accept either Deputy Burton's amendment or the Fine Gael amendment, or come forward with his own amendment.

The second principle is that of maximum disclosure of information. Does the Minster accept this? If so, people's right to confidentiality on banking matters, as mentioned by Deputy Mulcahy, and also the commercial mandate of NAMA must be tempered by the right of the public, whose money is going into this, to know the maximum amount about what is going on. I ask the Minister to accept both of those principles, and then we can go on to decide collectively, although the Government will have the ultimate decision because it has the numbers, on the appropriate mechanism for what is encompassed in these amendments and needs to be dealt with in the legislation.

My difficulty with the Fine Gael proposal is how the members of the proposed committee would interact with the members of this committee. Inevitably, the spokespersons on finance would be represented on the proposed committee. How would that overlap with their work on this committee? In general, how would the two committees interact? This is a question more for Fine Gael than for the Minister.

Deputy Burton's proposal introduces a useful dynamic with independent members, although they are appointed by the Dáil, reporting to the Dáil, and the Dáil in turn interacting with NAMA. This would be helpful in terms of the public's right to know exactly what is going on. That is the fundamental principle: the public must have the maximum amount of information. I do not understand why there cannot be more information — maybe not the names, but certainly a great deal more information about the bodies involved in this enormous amount of public spending. The €16 billion that will be involved in the first ten bodies to be dealt with is the equivalent of the public health budget for the year.

We will not go into health now.

It is a large amount of money. I welcome the fact that we all have an opportunity to contribute to the debate.

The issue of scrutiny is critical. Public confidence has been at least partially shattered — that is probably too gentle a term — by a whole series of scandals recently, not least of which was FÁS, with a budget of €1 billion, which is small in the context of NAMA. Solid Oireachtas oversight is critical. However, the difficulty is that, according to this Bill, many of the officers of NAMA are quite restricted in how they can report to the Oireachtas. Amendments would be required to deal with this if we were to get a reasonable oversight function.

The functions of committees are important. If we are thinking about reforming how the Oireachtas operates, giving committees a greater role would be both efficient and effective because there is much less politicking, and more work done, at meetings of many of the committees. I hope the Minister will give us an indication of his thoughts on this area.

I refer to the issue raised by Deputy Burton with regard to her amendment and to the reference by Deputy Mulcahy about bank confidentiality. I will raise a point central to some of this discussion, namely, that there is legal precedent. There has been a legal decision on the issue of bank confidentiality. This decision was made by the Supreme Court in a case in which I was involved that went to the heart of banking and whether people's details should be revealed. The case in question related to National Irish Bank and RTE. The issue concerned whether a person's right to confidentiality included his or her banking details. The bank argued the case that there was a constitutional right to bank confidentiality, which there is. However, the Supreme Court made a decision that where there is a case of wrongdoing, the public's right to know with regard to that wrongdoing trumps the right to bank confidentiality.

I completely understand why Deputy Burton has proposed in her amendments that people be given the information on the assets NAMA will take over, where the value is more than €100,000. In the case of wrongdoing, no limit is required, but her amendment goes to the heart of the issue. As far as the public is concerned, enormous wrongdoing has taken place. The difficulty now appears to concern who is responsible and what constitutes the wrongdoing. It is a difficult situation and it would be unfair to assume that if somebody's assets are taken over by NAMA — good and bad — that individual, or the bank, had engaged in wrongdoing. However, we all know that enormous wrong has been done throughout the system.

The issue now concerns what to do about that. The debate about governance versus oversight is critical in this regard. I am struck by the amount of governance that exists. Banks issue quarterly reports and announce all sorts of things to the stock market, many of which did not alert us to the difficulties building up. The reports certainly ran away from them. The issue of governance will not be enough to ensure the public has trust in what is going on with regard to NAMA. Therefore, oversight is critical.

Greed and human nature were at the heart of many of the banking and developing practices and loans which have brought us to the current situation. It will take an enormous amount for trust to become re-established over the period of the draft business plan for NAMA, which extends to 2020. It is a reasonable assumption that by then, many Members here may no longer be here. However, whatever we put in place must take account of all the risks. When we start off with NAMA, people will not go in on day one and say they want a particular plot of land for their builder pal at a low price, or for their pal who used to be a banker who knows it is up for sale cheaply. We must ensure that between now and 2020, knowing human nature is what it is and having learned the lessons of weak regulation, governance and oversight, we put in place what the public wants. We must restore trust and credibility with regard to what goes on. I accept the intent and direction of the amendment proposed by Deputy Burton, but I see it as somewhat unfair to assume that everybody whose loans will be taken over has been engaged in wrongdoing.

It is critical that we set up a new Oireachtas committee on NAMA. NAMA will make all sorts of decisions over the period until 2020, at the least. Some of these decisions may relate to the disposal of assets and some to loans. Currently, there is a limit of €5 million on the type of assets being taken on board. In time, we may find there is a requirement to change that or that it is necessary to refund or reissue bonds. Perhaps amendments can be made to NAMA over a period, in which case we will return to whatever has been provided for as oversight. That oversight is fundamentally important to the public, because of the suspicion that exists as evidenced in the reasoned proposal put forward by Deputy Burton. We must establish something that will copperfasten the need for consistent and continual oversight of NAMA.

The oversight committee would not be the same as the Committee of Public Accounts because, as has been pointed out, that committee deals with data that is well out of date. We need to be over NAMA like a rash in terms of oversight. The spend is €54 billion to begin with and the risks are enormous. Fantastic debate is taking place on sharing the risk and there is significant concern about the price we are paying for the assets. Nobody really knows the full extent because we do not know the future. The public is uncertain about NAMA and we must establish some kind of mechanism that will deal with that uncertainty.

The breakdown of trust has been fundamental to the breakdown of the economy. The breakdown in trust in banking was the core reason banks began not to lend to each other. Trust is essential. It is up to us to develop a system of oversight, difficult and all as it may be to design the new committee and decide who will be members of it and what skills will be required, but that should not put us off. An oversight committee is critical and its work is such a big task that it should not be mixed in with the work of any other committee. It is about more than oversight. It is about public trust and what we do. It is about putting it in place while recognising that human nature is what it is. It is essential we have oversight over the period until 2020. There will be €54 billion of assets in NAMA and all sorts of decisions with regard to zoning will have to be made. There may even in some cases be lobbying for zoning or other similar actions that may have an influence on the assets. There is such scope for cynicism and scepticism that many of us do not want to be at the receiving end of it. We must put this oversight in place because it is critical, but currently, no Oireachtas committee is equipped to carry it out.

I have sympathy with the proposals put forward by Deputy Burton. However, because of the issue of confidentiality and the thin line between that and the public's right to know I would favour amendments Nos. 101 and 102. The public has the right to know if there is wrongdoing. The public thinks there is wrongdoing, but it needs knowledge of it. It cannot rely on getting the knowledge once a year from annual reports from NAMA or anything like that. They need information on an ongoing basis. Therefore, I would push for acceptance of amendments Nos. 101 and 102 in this regard.

I agree with my colleague, Deputy Lee, and other speakers on the issue of oversight and monitoring NAMA. Deputy Mulcahy pointed out correctly that reviews from the Committee of Public Accounts are retrospective. In such cases the deed is already done and we are too late to haul back. I wish to raise another important point. The public is hurt because its trust has been broken. People are worried now that they have to carry a burden that is being hurled on to their backs through NAMA, having already accepted the burden of the levies to rescue the banks. They will now have an extra burden because they will pay further taxes.

The problem now concerns how the public can be reassured they will not face another boomerang somewhere along the track or that something else will not go wrong. I remind the House about the DIRT inquiry. Colleagues who served on that committee will remember that the committee initially carried out a review of the report of the Comptroller and Auditor General. Subsequent to that an article in a newspaper revealed other material that was not brought to the attention of the committee. The presumption was that the committee did not act effectively, but that presumption was wrong. The committee members went back and looked at the questions that were asked and found they were correct, including closing questions such as "Is there anything else that we should know about of which you would like to inform us?"

The committee members asked the questions, but they were not given the answers because there was a lack of compellability and no compulsion on anybody to give the committee any answers. It was treated with contempt. However, when the committee took on a quasi-judicial format, it was a different story. All of a sudden information became available. The questions which were asked before were again asked and the answers emerged in a different light. I strongly support the concept of oversight in whatever form. Given the magnitude of the billions of euro involved in this Bill it is very important that the oversight committee is not distracted from its raison d’être , as indicated in the Fine Gael amendments Nos. 101 and 102.

Having learned such a harsh lesson and seen what has happened over a number of years and apparently been unable to stop it, it is time for us to reflect. It is not true that people did not try to stop it. Questions were raised both inside and outside this House, but people were just ignored or told they did not know what they were talking about. They were ridiculous, they were told, not living in the real world and all that type of nonsense. I will not delay the proceedings further, except to say that there should be oversight to monitor on a regular basis what is happening, and there should be compellability. There must be compulsion on people to answer the questions because otherwise nothing will happen.

I thank the Chairman for affording me the opportunity to speak. Nobody doubts the need for an oversight body to monitor and control the way NAMA will operate. One of the contradictions in the way that NAMA is set up is that the Minister for Finance, as an asset manager, is in effect the biggest landowner in the country. In order to make a profit or break even, the contradiction lies in whether he has to keep the price of property and rentals up and at what point he can affect how the economy may restore itself to competitiveness. That is the paradox of NAMA. In order to make a profit it has to keep up its performance, so we must be able to summon people before the Oireachtas to see how they are managing those aspects.

We should have learned something about the need for oversight from the State agency, FÁS, which had a €1 billion budget, not €54 billion, as with NAMA. FÁS came before the relevant Oireachtas committee three or four times. We did not have a tailor-made committee to forensically go through its activities and performances. If we have learned anything, it is that in the case of this €54 billion State agency, which will be in effect the biggest landlord in the world, a committee is needed with proper power to summon people to answer for the way the assets are being managed and performing. In the absence of such a committee we shall be trying to lock the door when the horse is bolted. It is important, therefore, that we do not shirk from such a course. We should have nothing to fear and neither should the competent people appointed to take charge of NAMA. They should have no misgivings about coming before a relevant committee for questioning. There are people on all sides of the House, former economists, accountants, bankers and business people who have the competence to investigate them.

It is agreed by everyone that there is a great need for oversight. It is the form of oversight and the method of governance that has to be agreed. There is a great opportunity to establish a NAMA-dedicated committee. Deputy Mulcahy made reference to the fact that the Committee of Public Accounts deals with historical information. I believe there is an enormous need for a committee to deal with information in real time. I am concerned to ensure that the valuations in terms of the assets taken over by NAMA are realistic. Once the valuations are determined, to a certain extent the horse has bolted. That is why it is critical that in terms of the NAMA-dedicated committee that is established, the Office of the Comptroller and Auditor General works with it, to look at the schedule of assets prior to their being taken over by the agency, from an independent viewpoint. It should be given the resources to employ expert groups——

That point comes under a different section.

I want to finish on this point because I believe it is relevant in terms of oversight. The key point I want to get across to the Minister is extremely important in addition to establishing a committee. The way we do business in terms of oversight of expenditure is to monitor it before it takes place. Hitherto, the emphasis in committees has been on historical events but in this case, it will be too late if that approach is taken. We see details emerging in the Comptroller and Auditor General's report, and they make no sense. We must be accountable for spending.

I gave this matter much thought before opting for this system of oversight. In my professional life I was involved in the auditing of many of the largest banking companies in Ireland and I also worked in some overseas concerns. That was a long time ago, but the principles of banking remain the same.

Trust is the banker's bond. If there is not trust in banking, there is nothing. If we are to restore the Irish banking system we have to find a way to restore trust within banking as a business, where people carry out reasonable activities for which they get an appropriate profit. As Deputy George Lee said, we have to restore a covenant of trust between citizens, the institutions of the State and the banks. Finding a way to deal with this is difficult.

The amendments have been put in a simple format so as not to prejudice the possibility that they may be improved on. The core issue, however, is trust. Potentially the country has a significant economic future in banking services and in jobs in that area. I have previously been involved in educating thousands of students who work in the IFSC. During the period of the crisis I have had the opportunity to talk to many people who work in different levels in banking, from the most senior to relatively junior people who have MBAs or obtained other degrees in recent years. If we want to achieve an economic recovery that allows Ireland to become a respected player — we do not want this to be a fly-by-night jurisdiction — with good jobs in financial services we have to find a way forward. Ireland is a small country which has, in effect, been ruled for the last 12 years by one party. While this is a political point, it is not partisan.

This is the second time that Deputy is moving away from the question.

In a small country we all know each other or we know each other's second cousins and so on. We have to find a mechanism of governance, which the Minister says he has addressed. However, the governance I refer to is that of the operation of NAMA as an entity. Governance in this country amounts to appointing a decent board, which will take its responsibility seriously and do the job right. Such a board will be appointed by the Minister. However, oversight is different.

We need a mechanism that provides the House and, through the House, the citizens with regular reporting. Page 25 of the draft plan contains a schedule indicating that the vast bulk of the €54 billion is to be dealt with in monthly tranches out to July 2010, which is only eight or nine months away. I did not come up with the figure of 30 days lightly. It follows the Minister's business plan which is grouped, roughly, in 30-day tranches. Assuming the legislation is passed in November and the NTMA and NAMA close on 20 December, the 30-day period is the appropriate period. That is when the large tranches of distressed loans move over.

All loans will have moved over by next June.

Absolutely. That is why I say the 30 days relates to the Minister's draft plan. The country will be in tremendous difficulty if we cannot get trust and credibility into this operation regardless of the political hats we wear.

There is a problem with the general public. I do not disagree with the Fine Gael proposal for a specific Oireachtas committee to deal with the processing of the information from an Oireachtas point of view. However, speaking as an auditor who has been involved in banking, I believe it would be awfully foolish to burden the various Members of this House or the Seanad with the detailed intricate operations of individual businesses, developers, etc., in distress. That is a burden that would be quite difficult for Members of the Dáil to deal with on a real-time basis. I say that out of concern.

The NAMA plan has allocated €240 million a year for professional fees. Let me say that again as an accountant. That is a quarter of a billion euro in professional fees per annum going into the Dublin region. I worked for PricewaterhouseCoopers for seven years. It is a tremendous amount of money going into the business houses that deal with auctioneering, valuation, surveying, banking, accounting, auditing and law. It is not beyond the bounds of possibility to allocate a small sum out of that to oversight, which is different from the management of the portfolios, that would then report to the House. To have such independent oversight might cost between €1 million and €2 million. I would take that out of the €240 million and would look for people from abroad, preferably Australia, New Zealand and Canada. Those are countries where the level of the banking difficulties has not been as bad as ours. They share a language and other history with us, and have an Irish diaspora. We have the capacity to make the oversight such that we can restore confidence to the public which as Deputy Lee said, is critical for our democracy. It is also critical for our reputation as we want to have a really solid banking and financial services sector with good employment. There is a dual motivation there.

I have thought at length about the confidentiality issue. I am open to persuasion if the Minister could tell us what he thinks about this. Table 25 indicates the transfer of ten loans with a projected book value of loans transferred of €16 billion and a projected amount of Government securities or sub-debt issued to institutions at 30% discount of €11.2 billion over a one-month period. By July 2010 some 1,500 to 2,000 people will benefit from €77 billion in loans acquired for €54 billion. They are historical amounts where the State is acting to benefit potentially the recipients of the process. Why is public information important? It is important because we are a small country.

Who are the recipients to whom the Deputy refers?

The recipients are the developers whose loans will need to be worked out.

How do they benefit?

While I am happy to explain to the Deputy, it should not be necessary. I am saying this in a non-partisan way because I have thought about it. I have significant experience of working in this field for many years before I became a politician, prior to which I lectured in the field. I ask the Deputies to bear with me. Should any of these developers need to face court procedures over liquidation or examinership, this business plan does not envisage that happening before 2013, as the Minister would agree. It is in the document; I will give the Deputies the reference. As NAMA will be so busy with the first part of its work, the draft business plan does not propose pursuing developers who may unfortunately, in effect, become bankrupt or their companies having to go into liquidation before 2013 — Deputy Terence Flanagan has read it. That is different from the person on a smaller scale whose house might be repossessed. The Labour Party has tabled an amendment suggesting a two-year framework because it is parallel to what NAMA is considering providing regarding developers associated with the lands.

To which page does the Deputy refer?

I will give the reference to the Minister later. We are due to have a break and we can go through it. I will get it for the Minister.

I have tabled these two amendments to try to give some restoration of trust in this House, which is very important for all of us as politicians. Given my professional background I have also considered at great length how this might be done. The Minister might have other suggestions. The Minister might propose as an alternative, to have a High Court judge chair the board of NAMA. That is another possibility regarding the restoration of probity and trust. The Minister might have his own proposals in that area. I have given considerable thought to this. I am perfectly open. I shall be moving the amendments.

While I support the notion of a separate committee, the point Deputy Michael McGrath made is valid. People feel there are too many Oireachtas committees. Deputy Rabbitte has advised the Labour Party of proposals, to which we have agreed, to reduce the number of committees from 22 to 15. That is a separate issue. I believe Deputy McGrath is reflecting what would be a genuine public concern if there were to be further growth in committees. With NAMA's €240 million a year in fees, a very small proportion could be provided for the oversight function. It would go a long way to restoring trust. As is usual with those in opposition, we have only tabled an indicative amendment. As the Minister knows, amendments on Finance Bills are often ruled out of order. If the Minister can offer advice from himself or his officials, I am certainly prepared to listen. In restoring trust there needs to be information about the ownership and collateral underlying the loans.

I sat in the House for the debate on legislation to establish the HSE which was very complicated. That was also a major undertaking by the State. The failure to have oversight in that regard is one of the things that has crippled the structure, formation and performance of that institution. Without going into that, we should really pause to reflect and learn from that.

Sitting suspended at 1 p.m. and resumed at 2.05 p.m.

We were discussing the group of amendments related to the oversight committee. A Deputy on the Government side said we could not oversee commercial operations and rejected the idea that the Comptroller and Auditor General have any functions in that regard. I dispute that. We have regulators in the banks at present because we believe there are issues of such systemic importance as to need them to oversee risk committees and other things. The Minister has encouraged that approach to make sure the banks are run according to strong rules. We need a similar oversight function for NAMA and the Oireachtas committee needs the best independent professional skills. For all the capability of its members, the committee does not have the necessary forensic ability whereas the Comptroller and Auditor General can offer professional advice. We need a twin approach which combines the professionalism of the Comptroller and Auditor General with the accountability of an Oireachtas committee. That is preferable to a committee made up of outside people.

I agree with Deputy Burton that this is a difficult task but I do not envisage burdening the Dáil with the task of looking into individual developers. The Comptroller and Auditor General has access to the files, the register and to individual decisions that are being taken, but the report back would be on issues of principle. It would deal with the way in which oversight was occurring, the codes of conduct, the principles of valuation and the rules on extending new credit to development. As Deputy Doyle said, there is a need to make sure NAMA, in its efforts to show it is washing its face, does not maintain a price level in the marketplace that kills economic activity.

The Oireachtas needs to have a handle on those broad issues of principle. We would rely heavily on the forensic skills of the Comptroller and Auditor General to alert us to inappropriate sweetheart deals and to assess the quality of the business plan and the codes of practice. There is merit in both arguments but my party has come to the view that our proposal is preferable. I accept the point made by Deputy Rabbitte and others that the Committee of Public Accounts works retrospectively. While it may discover, retrospectively, that the project was not working, this would not be good enough. We want to make sure it does work on a scale which justifies departing from the traditional approach. The traditional approach was for the Oireachtas to use the budget process to forensically oversee the activity and annual budget of an agency, but no such annual budget will be presented to the House in respect of NAMA. Indeed, we never forensically investigate spending and Deputy Rabbitte once put together a worthwhile Committee of Public Accounts study on our failure to effectively sanction spending to achieve value.

I prefer our formula but I am willing to support any formula that offers a solution. I agree that we do not want committees to grow excessively, but I do not see any merit in an economic regulatory committee on top of the committees we have. I am sure there are other options we can explore. We might even opt for a sub-committee of a finance committee although a potential difficulty with such an arrangement might be the superior authority and resources of the sub-committee compared with those of the parent committee. Whatever option is chosen, the necessary skills and resources must be made available if the work is to be done effectively. I am open to any practical ways in which we can find common cause in this area. There is a welcome degree of consensus across the House in seeking some type of effective arrangement.

I will conclude by dealing briefly with my amendments Nos. 35 and 36. The first of these seeks to ensure this process is not triggered until we have a clear view of the costs involved. I would like to see some hard and fast projections of cost before signing off on these measures. The Minister seems to take the view that the draft business plan, precisely because it is only a draft, cannot be submitted to the Comptroller and Auditor General for review. It is a question of respect for this House that we have robust information on projected costs before the legislation is enacted. I am not satisfied with the draft business plan.

Amendment No. 36 provides that where the Minister proposes new functions for NAMA, such proposals will require a positive resolution of the Oireachtas rather than the present arrangement where they would come into effect by default. I do not know what the Minister envisages in terms of new functions for NAMA in the future but there should be no mission drift without the approval of the Oireachtas.

We on this side of the House are merely articulating the concerns and fears of the public about the perceived lack of transparency of the proposed assets agency. The public does not trust the banks and their activities — rightly so — and it does not trust us as politicians and public representatives. It is vitally important that we put a structure in place that is not only transparent but seen to be transparent and which can highlight potential problems before they arise. This is preferable, as Deputy Rabbitte observed earlier, to some type of Committee of Public Accounts arrangement whereby issues are examined retrospectively. It should not be a case of closing the door after the horse has bolted.

Under this legislation, the banks will retain responsibility for managing the loans. Given the absolute lack of public trust in the banking system, will the Minister consider putting in place a mechanism to provide the level of transparency that is required not only in regard to the issues that have been articulated by other speakers but down the road if NAMA ends up in financial difficulty and, as a result, various budgetary measures must be taken which may pose serious challenges for people? Under the proposed arrangement, we must take the word of the Minister for Finance of the day, whoever that may be, based on the advice and projections he or she receives from the banks, rather than have the House provided with independent information to evaluate the situation. There could potentially be enormous financial repercussions giving rise to the types of difficulties we currently face with billions of euro having to be raised to supplement NAMA's income.

It is important that we are not reliant entirely on the Minister for Finance of the day for information on this. There is a rather chequered history in terms of the quality of advice given by various Ministers for Finance to the House. I do not include the current Minister in that category but it is important that there be an independent source of information available to the Oireachtas in respect of issues that may arise. That is preferable, in this instance, to the Committee of Public Accounts or the Comptroller and Auditor General looking at the financial implications of decisions already taken. I urge the Minister to consider the proposals put forward by Deputies Bruton and Burton.

I join my colleagues in supporting the establishment of an oversight committee. In view of the general lack of public trust in the NAMA process, such a committee would provide a welcome element of scrutiny. There is great merit in the proposal to compel the board to report back to the Dáil every 30 days. It is incumbent on the Minister to support this proposal.

Several issues were raised in the course of what has been a constructive debate. I will begin with Deputy Burton's amendment No. 8 proposing that the NAMA board be obliged to report back to Dáil Éireann every 30 days. There are several transparency provisions in the Bill, which I do not propose to recite, an example being section 53 which provides for a detailed biannual report to be laid before the Oireachtas. Amendment No. 8 states:

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

3.—Every 30 days NAMA shall report to Dáil Éireann 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.".

In referring to the business plan, Deputy Burton referred to that part of the plan which discloses the substantial sums that will be transferred to the agency in the course of the next nine months. It is important to put the idea of the 30-day reporting limit in that context. A 30-day limit for the duration of the ten-year operation of NAMA would impose a substantial burden on the agency. That said, I accept that section 53, which requires a detailed biannual report, is too summary a reporting obligation to the Oireachtas. I agree that more frequent reporting is desirable and, in that context, I suggest a quarterly report from the agency on the relevant period of the report. I will reflect on this further.

Deputy Burton raised the issue of what information should be contained in the report, particularly the question of the operation of, including the identities of the owners of, and the particulars of, any assets acquired. Clearly, as Deputy Lee pointed out, the creditor of a bank is entitled to confidentiality in regard to his or her bank or customer relationship. That is established in every country in the world. If there is default, public proceedings can be instituted against a defaulter. I am certainly open to the idea that information in regard to default which is in the public domain, where a public act has been taken by the agency, should be included in the information in the report. I do not have difficulty with that or with more general information in a more abstract form regarding the level of default in the agency. That is in regard to the quality of the information and the period within which it would be reported. I am certainly open to amendment in this regard and will reflect on what was said with a view to devising appropriate proposals for Report Stage.

A difficulty I have with the tenor of the debate is the suggestion that the board of NAMA will not be up to the job. The most important issue for us is to ensure we have a board that can exercise its oversight function effectively. That is something we must work for on an all-party basis. It was with this in mind that I wrote to the leaders of the Fine Gael Party and the Labour Party suggesting they propose nominees who meet the statutory criteria. I have no difficulty with those nominees being examined before a parliamentary committee. That is very important in this context. Many Deputies pointed out that building public confidence in this institution is important. It should be pointed out that the NTMA, which is the parent body that has begotten this particular child, has a very good reputation with the public. This is not the same as banks which have seen their reputations sullied.

The next issue raised by Deputy Burton dealt with the internal invigilation of NAMA. The Deputy mentioned a figure in the business plan for the administrative overheads of NAMA, but these are not exclusively related to professional fees. Were they professional fees for professional services, they would have amounted to a very substantial segment of the market, as the Deputy pointed out. Under EU rules, the agency is obliged to pay the banks a management fee for the management of the loans which are transferred——

I mentioned banking fees.

With those fees, one is locked into the institutions themselves.

It is a nice little earner for the banks.

We are trying to structure those arrangements to incentivise the banks to perform with respect to the loans. The Deputy's request was to identify a line of funding within the overall line of funding to see whether an independent, internal invigilation should take within NAMA——

That is external.

It is not part of the Houses as the Deputy proposed it.

I said that——

The Deputy must speak through the Chair.

I understand the Deputy's point. It is not internal to NAMA, but it is not reporting to this House. It is an external invigilation of NAMA itself.

The invigilator reports to the Houses of the Oireachtas as per the amendment.

I was not clear on that because I felt the Deputy had kept this person away from the Houses of the Oireachtas. The Deputy is basically proposing a type of process auditor to monitor the agency. If that is what the Deputy is proposing — she might like to reflect on it — I do not object to it. It is not something that must be done by legislation, but I am happy to give an undertaking in the House on it.

Deputies Rabbitte and Bruton suggested that an Oireachtas committee should deal with the agency. I am open in principle to such a committee, but I do not think it is a good idea to legislate for an Oireachtas committee. We are having a debate in the Oireachtas Commission about how many committees should exist. Legislating a committee into existence will inflate the number of committees in a permanent manner. Having said that, I do not have a particular difficulty with a special committee on NAMA. If the Opposition parties request it and it instils confidence in the Bill, I do not have a problem with it. It would not need to be a very large committee, but I would not in principle be opposed to it.

It would be akin to the Committee of Public Accounts and would have a special position in the Oireachtas framework.

I want to deal with that next and I appreciate the Deputy's intervention. I have a difficulty in principle with the idea that a House committee should have some executive oversight role on NAMA. While the House can ask questions, seek information and elucidate problems, the idea that the House should, in advance of any operational decision by NAMA, have a function on the oversight of such decisions is wrong in principle. I am accountable to this House for the operational decisions of NAMA in the first instance. I will not be consulted by NAMA about its operational decisions. A board is appointed and if the Deputy wants some executive oversight, I would be in charge of NAMA, but I assume the Deputy does not want that — I certainly do not want it. If that is not what the Deputy wants, a good board must be put in position.

What about the relationship between the regulator and the bank?

The regulator is a professional operating under statute with regard to the banking system. The regulator can come in and address the finance committee — I think Deputy Bruton expressed dissatisfaction about how this issue was addressed in the past.

An Oireachtas committee without professional forensic skills is worthless. We will not be able to keep track of NAMA. We need some forensically skilled person equipped with the powers of entry to get access to papers, principals and so on, who can advise the committee on how valuations are being handled and whether it is robust. That is what regulators do in banks. They look at their credit committee, assure themselves of the way in which they handle credit and then approve it. They do not try to second-guess every decision, but they provide an oversight. I am not seeking to dictate the executive decisions, but I am seeking to have the assurance of a regulator that they are working within a framework that is credible, robust, based on sound principles and meet the legislative objectives we have set.

The point of the oversight committee is to meet the gap between what Deputy Bruton has described and what the Minister has described. The suggestion is a first for Ireland. The Department of Finance looked at the provision of process auditors when it was going to be responsible for PPP projects. The former Minister for Finance, Charlie McCreevy, produced the diagrams for a process auditor which was very like the diagram outlined in Our Man in Havana, which turned out to be the inside of a vacuum cleaner. The idea of a process auditor is a valuable suggestion.

We are not asking for an audit on a month by month basis, we are asking for oversight information that compels a qualified, professional board to supply information that comes into the public domain through the Oireachtas. It would act as an information outlet of oversight. That is what happens in other jurisdictions. It is possible that there will be differences of opinion from time to time on this. My opinion might be correct sometimes, the Minister's opinion may be correct at other times and sometimes the experts' opinions may be right. However, it would offer reassurance that this was not a closed case and would lead to a recovery of reputation. I am very aware that since Anglo Irish Bank was nationalised, it has vanished. Mr. Donal O'Connor came in here in May, but that is a long time ago and since then the bank changed its year end so we have not got those figures yet.

What the Minister is saying is very interesting, but I think we are talking about slightly different things. I am not commenting at this stage about governance as represented in the quality of the board the Minister proposes to appoint.

The Deputy raised the issue as to whether a High Court judge would deal with the matter and we can deal with that when we turn to those sections.

That is a separate issue. It is just that there is an awesome task with NAMA.

Deputy Burton is talking about the quantity of information, the analysis that is applied to it and the regular supply of such information. I am open to moving to quarterly reports. If the particular heads of information sought by the Deputy can be identified in statutory terms, that information will be provided. The question of Oireachtas oversight is a separate issue. Our constitutional structure means that the Minister, with the help of his Department, must exercise the oversight and be accountable to this House. That is why there is a look-back system of control by audit in the Committee of Public Accounts. The House does not have executive responsibility. I am responsible to the House for executive functions. In my Department, I have had to establish a position of bank analyst and I received sanction from the Government for that. We were not in a position to fill it from within the ranks of the public service. We will have to appoint an unestablished civil servant to fill that position. I have obtained the necessary Government sanction to do so.

To fill which position?

I made the point, in response to an issue that was raised during the course of the debate, that highly specialised technical analysis is required in the assessment of information. I have had to obtain sanction from the Government to appoint a bank analyst to a position in the Department of Finance to assess the information. I do not mean any disrespect to the general category of the public service when I say I was unable to identify a person I could assign to that position. The suggestion that has been made in respect of Oireachtas oversight seems to be that the Oireachtas should also have the services of such an analyst to assess the information. I am not sure whether in such circumstances, the Oireachtas would be deemed to be performing an executive position in respect of the bank. It is inevitable that when such information is received, the board will be called on to do certain things, or not do certain things. I have to say I see a difficulty with the proposal. That is how I see it at this stage. Perhaps it can be teased out.

Could I just make a brief point? While I passionately believe in the benefit of Oireachtas oversight, I accept that it has limitations, such as those highlighted by Deputy Bruton. Working Deputies and Senators do not always have the time or expertise to assess the various decisions that are made. I would cite the Committee of Public Accounts, which is quite effective in its role, as a prototype in this regard. It has the benefits of the reports and assistance of the Comptroller and Auditor General. In this instance, I envisage the establishment of an Oireachtas committee, to which similar support would be made available. Such a committee would be able to produce an analysis of what takes place and issue recommendations for the future, along the lines of the reports prepared by the Committee of Public Accounts. It would also be a means of providing for transparency and accountability, in the interests of the general public. I hope something along those lines will emerge from these discussions.

With regard to oversight, will the Minister consider one of our amendments, which proposes the appointment of a permanent monitor from the Office of the Comptroller and Auditor General? Such an official would be based in the offices of NAMA and would have access to NAMA's books and records. This permanent representative would report to the new Oireachtas committee on NAMA as an independent person with the interests of taxpayers and everyone else at heart.

I would like to ask a question which may have a very obvious answer. Section 56(2) of the Bill states that "the Chief Executive Officer appears as an accountable person and not as an accounting officer" at meetings of the Committee of Public Accounts. I assume there is an obvious explanation for this unique formulation.

I will respond quickly to Deputy Rabbitte's query before other Deputies ask their questions. An Accounting Officer is responsible for a Vote. In this instance, the official is described as "accountable" because he is accountable for the accounts of NAMA, just like the chief executive of any statutory corporation, presumably. The legislative practice is to describe such a person as "accountable".

This is not voted expenditure in the normal way.

The Minister referred to the possible appointment of a process auditor. Does he envisage that such a person would be in place and examining the valuation process from the outset? Would he or she report back to the Oireachtas committee? Will the Minister elaborate on the methodology that will be used for valuations from the start? I suggest that the Oireachtas committee should have a role in valuations, which will be critical in determining whether NAMA works, from the outset. Will the Minister elaborate on what exactly he has in mind for the timing of the auditor's appearances before the committee and the publication of the auditor's reports?

It is important that there is a clear demarcation between the roles of the oversight committee and the board of NAMA. The function of the oversight committee should not involve seeking to influence the operational decisions of the board of NAMA. The oversight committee should not assume the functions of the board in any respect. There will need to be clear lines of demarcation between the roles of the oversight committee and the board of NAMA. As Deputy Bruton has said, the key function of the oversight committee will be to ensure that NAMA works within a credible and robust framework and in a manner that is in accordance with the legislation. The methodology used by NAMA will have to be fit for purpose and the interests of the taxpayer will have to be protected. The Minister has made a constructive comment about the possibility of accepting the suggestion that a committee, which would be exclusively dedicated to overseeing NAMA in these respects, should be established. I suggest that we should give him the scope to reflect on the suggestion and to bring proposals to the committee in this regard.

I would like to tease out the functions of the proposed Oireachtas committee. I understand the concerns raised by Deputy Burton and I am seeking to address them. While I do not have an objection in principle to the establishment of a committee of this nature, I am concerned that it would, in effect, become the equivalent of the board of the agency.

That is my concern. The Deputy also raised the issue of valuation. While I clearly do not have a difficulty with providing for an audit of the valuation process, for example, I am not sure where we would go from there. The process audit would have to be submitted to the board in the first instance. I could consider the important issue of whether it should be more generally made available thereafter. I am a little concerned that corporate governance procedures will have to be adhered to — in other words, the board will have to hold its staff to account to it. I repeat that I would have no difficulty with all-party participation in the formation of the board. We can return to this important aspect of the issue later in this debate.

I would like to ask the Minister about the monitoring process that will be adopted in the unique circumstances associated with the establishment of NAMA. He referred to the possibility of a process audit, which would appear to be a good idea. It would depend on to whom the audit would be submitted. The Minister has suggested that it would be submitted to the board of NAMA.

In the first instance.

Right. I expect that it would report to the proposed Oireachtas committee thereafter. Will that be possible?

I will have to reflect on that.

I thank the Minister.

A good example of the work of an official of this nature — the Minister correctly referred to him or her as a "process auditor" — is provided in a diagram on page 35 of the draft NAMA business plan. In the public service, such a person describes processes at length. Anyone who has ever read Our Man in Havana will remember that diagrams showing the inside of vacuum cleaners were assumed to be secret drawings of rockets. This is a similar example. I am not sure that the work of the process auditor will enlighten very many Members of the Oireachtas, or the general public. While such work might be very valuable and interesting for professionals, it is kind of hard for the rest of us to understand. The contents of the diagram in the draft NAMA business plan are also set out in steps, in narrative form.

What page is that on?

It is on the last page of the business plan.

It states that PWC is "available to advise as required".

It is on page 35.

I am not sure it matters.

The Minister's officials will confirm that this diagram is an example of what is produced by a process auditor in the public service. It is challenging to me.

There is no reference to a process auditor in the diagram.

No, but it is an example of the kind of work that is produced by process auditors.

I think we should refer it to the Seanad.

While the Minister is being helpful in offering the assistance of a process auditor, I do not think we need a process auditor who simply produces diagrams or descriptions of processes, or vets whether the process is satisfactory. In the case of a public private partnership, everything down to the last screw or doorknob has to be accounted for and set out in the processes and procedures. We are talking about a higher-level approach such as the one in the United States and other jurisdictions. In Canada, Australia and New Zealand, the bank collapse has not been as severe as it has been here because of better regulation. This is also the case for much of the Spanish banking system because it was more conservative.

Oversight involves understanding the process but it is not confined to the process. The Minister proposes that between now and next June, distressed loans and some loans that are not distressed, or groups of loans, will be transferred on a month-by-month basis to NAMA. Those groups of loans will represent up to 2,000 developers. The top ten will be transferred in the first month, the next batch will be transferred before the end of February, etc., until by the end of June, the first couple of thousand will be transferred.

The public wants information on what happens on a monthly basis. It is not that we are saying the procedure is right or wrong but that the relevant information on the proceedings of NAMA ought to be in the public domain because the amounts involved are so gigantic. We receive information on capital expenditure proposals fairly regularly, but probably not enough.

The point of oversight is to put the information in the public domain so trust can be re-established. One does not want Members of the Oireachtas being in a position to interfere in respect of the activities of NAMA. This is why I suggested an oversight commission should report to the Oireachtas, perhaps to a special committee that would have access to confidential information and then produce summary information that would be made available and put on the record.

What has such a procedure led to in the United States? People like Elizabeth Warren can say to President Obama and the members of the parliamentary committees that——

The Deputy is making a Second Stage speech again.

I just want to explain this. They can say that lending is not resuming although a certain sum of dollars is being put into the banking system and towards distressed loans. These are the key questions to which we need answers.

There is a spectrum between an Oireachtas committee sitting unaided and, as is traditionally the case, having the CEO of the board before us. While the latter approach is not entirely useless, it is close to useless, bearing in mind the complexity of the matter and the question of access to serious evaluations of what is presented. Unfortunately, the Minister has not had enough time on the back benches or in opposition to appreciate the frustration of many of the committees. At the other end of the spectrum, the Dáil could usurp the role of the board of directors, as the Minister implied. We are saying we cannot be at one end of the spectrum and the Minister is saying we cannot be at the other. We agree on that but it is a question of where to meet in-between.

The role of the process auditor, which position the Minister proposes to establish, is very functional. It is a box-ticking exercise. If certain criteria are met, boxes will be ticked and this will be deemed to be grand. However, this is not what we want. A regulator would have a much more forensic approach. There would be box ticking but also consideration of whether the evaluation process is robust, fair and the correct way to proceed. A regulator would ask whether the management of the property market is robust, correct and viable.

There are some critical steps to be considered, including the lending of €5 billion to finish developments. People worry about whether this will be done fairly. The question of having access to a register of each case must also be considered. If there is public disquiet over an alleged sweetheart deal of some sort, it would be beneficial if the regulator could assure the public it is not happening and that all is fair and above board. This is the sort of territory we want to be in rather than second guessing the board. It is a question of having more than box ticking. The Minister's box-ticking auditor sounds very passive. Was there not a cartoonist called Robinson who used to produce funny little fellows appearing out of buckets?

Deputy Burton ingeniously introduced that item, which has no connection with the process auditor at all.

There is ground for agreement somewhere near the centre of the spectrum. A committee, if it is to have any power, should be able to engage in much more than box-ticking exercises. Otherwise, the Central Bank will be telling us after the next crisis that it ran all the stress tests and all was believed to be wonderful and perfect.

The Deputy has made his point.

Oversight must go beyond running stress tests and delivering a cotton-wool answer to the effect that everything is perfect. I cannot define the approach myself today; perhaps by next week we will have thought it through a little further. I want to go to territory a little farther than that to which the Minister is going. We certainly do not want to go as far as the Minister fears.

I fully agree that we need a permanent monitor in NAMA who will be able to report to the committee on NAMA and confirm to the taxpayer that everything is running correctly in the agency and that there are no underhand deals. The monitor should be able to attend the board meetings of the agency and have access to all the relevant documentation, if necessary.

I have examined the transcript of the examination of the stress tests very carefully. The committee as a collective, as opposed to Deputy Bruton, never asked to see the stress tests. I agree with Deputy Bruton in that I do not want a box-ticking process auditor simply checking that all the boxes are ticked. I am concerned about the issue of the proper corporate authority. I will reflect on what the Deputy said.

Deputy Burton suggested rather ingeniously that, in some section of the business plan, it is implied that nobody will have loans collected from him or her until 2013.

I said bankruptcy and liquidation procedures were unlikely to start before that date. I read the process plan and believe this is the case on the basis of the timeframes, unless people offer themselves up before the date in question, which they might do.

It is an incorrect inference from the document because enforcement can take place once NAMA is established. What cannot take place is the immediate realisation of the assets. NAMA will be in a position to initiate bankruptcy or liquidation procedures or appoint receivers from the time of its establishment. What it may not be able to do immediately is sell the property in respect of which the security is realised or enforced.

I will reflect on Deputy Bruton's suggestion that he wants to go farther in some way. If there is independent invigilation of NAMA, those responsible must report in the first instance to the board, even if the information is to be made available to the Oireachtas committee.

To follow up on Deputy Flanagan's intervention, the Comptroller and Auditor General has a certain amount of access to files in Departments. Those of us on the Committee of Public Accounts will be familiar with this. One approach adopted is such that the Comptroller and Auditor General has the power to examine and requisition any file on the understanding that if there are issues of confidentiality he will not reveal the file or its content to the members of the committee. He provides the committee with the assurance that he has examined the file and that everything is in order. Something along those lines might meet the Minister's needs.

Deputy Noonan has made a very constructive suggestion. The difficulty is that if one does not have a process auditor and one asks the Comptroller and Auditor General to do the job he cannot report.

It would be separate. I was simply using an analogy.

Amendment put.
The Committee divided: Tá, 5; Níl, 7.

  • Bruton, Richard.
  • Burton, Joan.
  • Carey, Joe.
  • Flanagan, Terence.
  • O’Donnell, Kieran.

Níl

  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Chris.
  • Dooley, Timmy.
  • Grealish, Noel.
  • Lenihan, Brian.
  • McGrath, Michael.
Amendment declared lost.

I move amendment No. 3:

In page 16, between lines 29 and 30, to insert the following:

"(a) to contribute to the social and economic development of the State,”.

I propose that the purposes of the Act shall include "to contribute to the social and economic development of the State". I presume the Minister would not have great difficulty in accepting the principle of that amendment. The reason for the amendment is that the Minister and others have spoken about the small possibility that some elements of the NAMA work out may result in a social gain to the State. For example, Deputies referred at various times to local authorities perhaps having an opportunity to acquire a significant asset that might be of particular value for housing or social or community purposes. The amendment would strengthen the capacity of the board of NAMA to make that possible.

The Minister has correctly said that NAMA would be commercially driven. On the other hand, in the working out of the NAMA portfolio there will inevitably be assets which have not simply an economic work out significance but have a potentially important social significance. My proposal is that this should be provided for in the legislation.

I will examine the proposal. Any organisation with such a wide remit must have regard to the proper economic and social development of the State. That said, NAMA has a commercial mandate and it must operate within that. There can be no equivocation about that. As I indicated on Second Stage: "Within the legal boundaries that NAMA must operate, and notwithstanding its commercial remit, it could have a role in creating balanced and desirable places to live with obvious benefits for sustainable social values." Where, for example, particular statutory bodies have requirements for schools, parks, health centres, all of this can "facilitate the creation of desirable developments that encourage vibrant sustainable communities." Such bodies could "be given first options on disposals for a limited period and though they would have to pay the reasonable market price required, they would at least be given the first mover advantage." As we both know, "These bodies have sometimes been held to ransom and have had to pay inflated prices for projects" such as schools, school extensions and playgrounds.

I am aware of that section of the Minister's speech. The amendment would include specific objectives. This is about addressing a grave threat to the economy and to the systemic stability of credit within the State. The purposes of the Act are very specific and almost exclusively commercial. It would be wise to include the capacity to contribute to the social and economic development of the State. The amendment retains the reference to economic development but it counterbalances it with social development. Therefore, I recommend it to the Minister.

I will return to the amendment on Report Stage. I will produce a suitable form of words.

Amendment put and declared lost.

I move amendment No. 4:

In page 16, paragraph (a), line 30, after “economy” to insert the following:

"created by excessive and improvident lending by credit institutions and the inflation of the Irish property market".

The amendment is self explanatory. Its purpose is not to change the operation of the Bill but to ensure that this sort of thing never happens again. We have to be aware of what it was that created the problems we now face and the threat to the economy. I hope the corollary of it will be seen in other legislation where there are implications in terms of better regulation of the banking sector given that there were catastrophic failures, and that we see lessons learned by the banks in terms of the ethos that informs their work.

We are seeing huge shifts in the attitude of people to the banking sector. Yesterday, the Governor of the Bank of England said that never has so much been owed by so few to so many. That was his assessment of the way in which the banking system has, in effect, pulled the taxpayer into its remit to carry the burden.

Is that in the United Kingdom?

It was a comment made by the Governor of the Bank of England in respect of the UK but about the wider process of what is happening here. It is important to be aware that there has to be a huge change in the way in which banks are run. We are hearing talk of banks having to have living wills so that the taxpayer would only be sucked into protecting the systemically important part, unlike the situation in which we find ourselves of being sucked into supporting the toxic elements. A genuine shift in attitude is occurring, which we need to endorse because there are forces equally powerful and influential lobbying to push the whole thing back and to have things revert to business as usual, as we have seen in the case of some banks in the United States. It is important to keep in mind what has gone wrong and why we are in the current position. This is not a matter of huge principle but it is worth reflecting on.

I agree with the reflections of the Deputy but as a matter of legislative judgment I am not convinced that acts of contrition are required in legislation. There is a provision in a related area but it is not precisely the same in section 11(2) which states: "In the exercise of its functions NAMA shall have regard to the need to avoid undue concentration or distortions in the market for development land." That is one aspect of the problem that arose, namely, the size of the borrowers, which is a specific issue to which the Deputy referred in moving the amendment. We have already inserted that reference in the legislation. That is an important provision.

What we want in terms of development land for the future is sustainable development and a sustainable system of taxation that ensures that the community gains are realised and recouped by the taxpayer. I have not tabled the amendment on the windfall levy yet but that is part of that aspect of the problem. I do not accept the amendment in the sense that while I agree there was excessive and improvident lending I do not see how it adds to the functions of NAMA to refer to that.

The wider point is that one of the reasons the property bubble occurred was a lack of proper capital ratio requirements by the banks in terms of 100% mortgages. The Minister might update us on what measures, apart from NAMA, he has in mind to further regulate the banks to ensure that they do not engage in the form of imprudent lending that took place in the property sector and to ensure that we learn from our mistakes.

I fully support this amendment, which records that the banks engaged in reckless lending such as the granting of 100% mortgages. That is the reason NAMA has been set up and that should be put on record.

In response to Deputy O'Donnell's point, a new regulator has now been appointed. In this Bill we are providing for the unification of the boards of the Central Bank and the financial regulatory authority although, under this amendment, the boards in respect of each organisation will still operate independently. There will simply be a common board membership. That is the first step towards the establishment of a Central Bank commission under legislation, which is under preparation in the Department and which I anticipate will be ready early in the new year.

I would prefer to go with the time indicated by the Minister's official, that it will be ready in late December.

They have had enough to do this year without producing that Christmas present.

Is the amendment being pressed?

Amendment put and declared lost.

I move amendment No. 5:

In page 17, paragraph (b)(iv), line 1, to delete “taxpayers” and substitute “the State and to limit the exposure of taxpayers”.

The principle underpinning this amendment will be at the heart of much of the debate when we come to deal with the issue of valuation. I am not satisfied that what is proposed will minimise the exposure to taxpayers. I am particularly dissatisfied with paying over the market value for assets. Any banking resolution must be fair, effective and involve the least cost. This procedure, under which we will pay more than the value of these assets, will expose the taxpayer. Even at this early stage in the Bill, we should stitch into it a provision to limit the exposure of the taxpayer as a core principle. It will need to be reflected in the long-term economic value but also in other areas.

I agree with the Minister that while NAMA must be used in a way that facilitates good social purposes, we still have to get the fair market price for those assets to ensure that NAMA can have a clear mandate. I accept the qualification that while we will use the acquisition of assets at discount, particularly for people who are under pressure in terms of their homes and to set up fair solutions to their problems, it is important to ensure that NAMA is not expected to provide discount property to set up some museum for the protection of some rarefied fossils. That is not what NAMA is about. Such a purpose might be a social attraction, but it is not the one with which we are dealing in this legislation. It is vital that we concentrate on limiting the exposure of taxpayers. That principle must inform every facet of the way this legislation develops.

A critical point is that we must get funds flowing. When the Minister announced the bank guarantee scheme on 29 September 2008, the key issue was to maintain a banking system and to protect deposits but also to ensure that credit continued to flow to small businesses. That has not happened. It is critical that we get a proper balance between ensuring that funds flow to businesses and that the interests of taxpayers are protected. I hope the Minister will take on board amendments we have tabled in respect of risk-sharing. Of the €54 billion involved, the risk-sharing being undertaken by the banks is €2.7 billion, which is well short of the €7 billion over the market value being paid for the assets. We have put forward a Honohan-type model in terms of proper risk-sharing. The taxpayer is taking on an enormous burden in terms of NAMA but he or she should be able to share in the upside, but that is not the case under what is proposed in respect of NAMA.

The Minister referred to a process auditor. He should also consider when such a process auditor would report to an Oireachtas committee. The valuation of the assets is critical. Controls in terms of an oversight committee and an Oireachtas committee are extremely important, but a correct valuation of the assets is fundamental to the putting in place of a strong foundation for NAMA. I strongly believe that we must ensure that whatever process or methodology is adopted, when the valuation is struck, proper monitoring and overview has taken place before NAMA takes over the assets.

I support the amendment. I suggest to the members in whose names the amendment is tabled and to the Minister that the expression about protecting the interests and limiting the exposure of the taxpayer should refer to the citizen, because NAMA represents the transfer of €54 billion of loan liability from the banks to citizens, some of whom may or may not be taxpayers. A person who has lost his or her job and perhaps business would no longer be a taxpayer. Children are usually not taxpayers. When the children of today come to be adults, NAMA will be coming to the end of its life. I agree with the proposed substitution of the words "the State and to limit the exposure of taxpayers" in the amendment, but on Report Stage I propose that the word "taxpayer" should be replaced by, or provision should be made to also include, the word "citizen". We are a republic and the primary person in a republic is the citizen. At times citizens pay taxes and at other times they may not be in a position to pay them.

I support this amendment, the previous amendment and earlier ones tabled by the Opposition. I have tabled similar amendments to later sections that I intend to address in order that I may move similar amendments on Report Stage.

The Bill already states that one of the objectives is to protect the interests of taxpayers and the preceding paragraph states it is an objective to protect the State interest in respect of the guarantees issued by the State under the 2008 Act and measures taken by the Government thereunder. That comprehends the entire purpose made explicit in this amendment. To use the phrase "to limit the exposure of taxpayers" implies that NAMA will necessarily make a loss; that is not envisaged in this legislation or in the business plan.

I thought it was only a draft plan.

I advise Deputy O'Donnell that there is an upside. We will have an opportunity when we discuss valuation methodology to return to this issue.

When will we see the final plan?

Clearly, if there is an upswing, NAMA will take the profit. Under the original proposal advanced by Professor Honohan in good faith——

We will have a discussion on valuations later.

——he wanted to give the bank shareholders the upside. The taxpayer will have the upside in this particular operation. That is how it is worded.

The assets have been overvalued by €7 billion.

That is why there is a subordinated debt element. We will have a good chance to return to that subject in due course.

In regard to Deputy Burton's suggestion that we should replace term "taxpayer" with the term "citizen", citizenship is implicit and explicit in the Constitution under which we operate. We are elected by citizens. Any Act must be construed in the context of the Constitution, which provides for the concept of citizenship, to which the Deputy rightly drew attention in this context. It is not customary in Acts to refer constantly to the interests of citizens because it is presumed that we act in this House in the best interests of citizens. That is our function. That is provided in the Constitution. I do not believe we should be writing citizenship into this legislation. Deputy Bruton is correct. The decisions we take here are important for future generations. Equally, the decisions we take in the budget this year will be of great importance to children and persons who are out of work in the future.

I suppose we will see during the course of the Bill the extent to which the Minister seeks to limit the exposure of taxpayers. I suspect that if he sticks to the guns that he has been defending up to now, he will still pay this long-term economic value of €7 billion over and above the value of those assets. That will not be limiting the exposure of taxpayers. That is why this is so important.

While I take Deputy Burton's point that the purpose of this Bill must be to protect every citizen born and yet to be born, the message of protecting the taxpayer has a precise meaning to do with the exposure of taxpayers to pay for underperformance of NAMA whereas protecting the rights of citizens is a much more vague direction to the board of NAMA as to what it is intended to achieve. This is a mandate to protect the taxpayers, €54 billion of whose money it is handling — "taxpayers" is the correct term. I will watch with interest the extent to which the Minister accepts amendments later in the Bill that reduce the exposure of taxpayers and then I will be able to say at the end of the Bill whether he fulfilled what he stated he would do.

I will examine those amendments with great care.

Amendment put and declared lost.

I move amendment No. 6:

In page 17, line 9, after "sector" to insert the following:

"and

(c) to achieve such purposes as are set out in paragraphs (a) and (b) in compliance with the law of the State and of the European Communities relating to competition and with the law of the European Communities governing State aid and any relevant guidances issued by the Commission of the European Communities”.

This amendment deals with the references to European law and the European Communities. Later in the Bill there are references in sections 77 and 205 to the European Union, laws of the European Union, etc. However, the proposal behind inserting this amendment is the avoidance of doubt to make explicit reference to the EU context in this part of the Bill because if it is not there, there are circumstances in which the State might be taken to the European Court of Justice.

I am advised that the proposed amendment is unnecessary. EC competition and state aid laws apply in any event and one need not provide expressly for that in the Act. I assure the Deputy that I am well aware of these matters and my officers are in constant consultation with the authorities in the Commission about them.

There has been extensive consultation with the Commission in the preparation of the NAMA Bill to ensure the entire legislation is consistent with EU competition and state aid rules, and throughout the Bill reference is made to matters being subject to consultation with the Commission, where appropriate. Where an express requirement of consultation must be written in, that has been done. We must operate under EU legislation and that applies in this case also.

My advice is slightly different, that it would be appropriate to include this at this point. Bear in mind that the banks, notwithstanding NAMA and the direct State injections, are heavily dependent on ECB support and, as the Minister stated, he has received much support from various personalities and institutions within the EU.

I do not see that there ought to be a difficulty in inserting this at this point. As I stated, it is for the purposes of making the references explicit and certain. I accept what the Minister stated, and I stated that in various other sections there are references to the EU, elements of EU law etc. However, my advice is that there should also be a reference at this point for certainty.

My advice from the Attorney General is to the contrary.

Amendment put and declared lost.

I move amendment No. 7:

In page 17, paragraph (b), between lines 9 and 10, 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.".

This amendment is fairly important from the point of view of what we will achieve with NAMA in terms of getting credit flowing again. I understood from Government spokesmen — admittedly, not the Minister but others — that there would be clear mechanisms in the legislation to see that credit got through to small business, families and so on. I expected to see amendments or sections dealing with this but no such sections have yet arisen.

The Minister is saying that what he is seeking in the purpose of the Act is to get credit flowing but he has not indicated how that ambition is tied in to the policy tool that he is now laying before us. It seems we need to have reciprocal arrangements with the lending institutions to give the assurance that all this effort and spending will deliver results. It seems that we need to have some form of quota to indicate how this will be done, if the Minister does not accept my party's amendment to provide for a national recovery bank, which is a way of doing it that does not involve trying to develop quotas. We favoured that bank because it was clean. There will be problems with quotas in that how does one create a quota. We heard previously that AIB and Bank of Ireland were to increase the capacity to lend, but that also is not something that one can monitor because increasing the capacity to lend does not tell one the outcome. The other difficulty with a quota, I suppose, is that one cannot force banks to take on credit risks that they believe are not prudent.

However, we have heard from Government spokesmen time and again that this was guaranteed to get credit flowing and we were given to expect that criteria would be applied, which we have yet to see. I want to know the Minister's thinking on how we can guarantee that all this effort ensures a block of lending is available to small and medium enterprises. Are we to have some declined cases agreement of the nature that we had in the insurance industry in the area of motor and, indeed, other forms of insurance in earlier years, where in the case of a person who was turned down for insurance, even in areas where insurance was not compulsory, he or she had a right to bring that to a declined cases forum and, eventually, someone was forced to provide the person with the insurance if it was a reasonable and wise case? There was a system for dealing with declined cases. Is the Minister considering having similarly an adjudication panel with some statutory or non-statutory power to insist that something will happen as a result of the taxpayers' huge effort, that where there is reasonable risk, such would be undertaken?

I am at a loss to know what are the Minister's instruments to get the credit going. I can see what he will do about all these lousy loans that were made in the past, but what about good loans for the future? That was the merit of my party's proposal for a recovery bank, which has been disallowed and I will not encroach upon the committee, but it would use scarce taxpayers' money to get credit going. Instead of buying lousy loans, we proposed to put up money to buy good loans and to create the opportunity to fuel the good bank element. That was very much part of our thinking. I acknowledge, however, it never gained currency with the Minister's party and I will not try to rehash that debate.

The reason I put forward this proposal is that I have yet to see the Minister's instruments to get the credit going. The Minister states that this will facilitate credit, but "facilitate" is an elastic word and it will not butter the parsnips for many families and businesses that are struggling for survival unless there are tools and instruments to back it up.

The second element is to ensure there is a property management strategy over the ten-year period. As Deputy Doyle, who has left the Chamber, succinctly put it, paying too much for these assets and then trying to recoup the high costs involved could kill the property market. NAMA will be the monopoly provider of property. Given the 80% tax on new zonings, there will not be many of them or competition in this area. NAMA, which will take on €46 billion of green and half developed sites, will be the property market for the foreseeable future. The statistics in terms of property moving through the market, even in good years, is in single figures. We are speaking in this regard of ten years of property transactions trapped in NAMA. There is a need to include in this legislation principles in regard to how the property market is to be managed by NAMA. There is no section that I can see wherein the Minister is providing that NAMA will set out codes of practice in this regard. This must be a consideration. As Deputy Doyle said, the economy could be damaged if one insists on excessive prices. Many people, including Mr. David McWilliams, have argued that what is needed is a good bounce down on prices to allow activity to commence again.

There needs to be some concept of the mandate of NAMA in managing the property market. I have yet to hear that discussion. The business plan is totally silent in this regard and does not even mention the scale of disposals in the property market. The Government is convinced that NAMA can get rid of all of the assets within 11 years and recover 80% of what is required to be paid back, although there has been no research of the property market that it is believed will absorb this or of the capacity of those who might be buying in the property market to raise the finance to do so. These are important issues. As I said earlier, if one were trying to sell Guinness in a particular market, one would be asking about the disposable income of the potential buyers and what the market has been like in the past. None of these issues is addressed in the business plan. One wonders if consideration has been given to this important dimension. The banks are not particularly interested in the business plan. All they are interested in is kicking this over to us but we have to be interested in it because it is a long-term critical element of how NAMA will work.

I have dealt with the issue of recovery of maximum funds to the taxpayer. Also included in the amendment is the provision that all necessary steps be taken to prevent a recurrence of the conditions that brought about the financial crisis. There have been many cosy relationships in this whole set up, including on the boards and in terms of their proximity to the Central Bank. People who were regulators are now on the boards of many of the institutions they regulated. The Minister will be aware the former regulator is now on the board of one of the institutions under scrutiny here. The Governor of the Central Bank has always come from within the Department of Finance school, which in itself prevented the type of vigilance, toughness and probing scrutiny needed in this area. I fully acknowledge that the Minister has broken that tradition. I take my hat off to him; what he did was right.

While NAMA will not be able to answer all of the questions posed, it is important we in this House understand that if it goes ahead without one leg of the stool, the taxpayer will again fall flat on his face because the culture, oversight or attitude will not have changed. I am not stating this as the Minister's view. It is important that this provision is stitched into the legislation. There must be an understanding that this is a stool with several legs that must be put in place if it is to stand in the longer term.

What controls does the Minister intend putting in place to ensure the banks lend the funds they receive from NAMA and do not effectively sit on the deposit to increase their deposit to loan ratios, pay off international debt at higher rates of interest, use it to deal on the interbank market to obtain higher rates of return or to renegotiate their bond holders? The sum involved is €54 billion, of which a little more than €51 billion will go to the banks in the form of bonds and €2.7 billion will go on subordinated debt. Anglo Irish Bank is to receive €28 billion. A 30% discount in respect of Anglo Irish Bank, which I suspect will not be the case, means it will receive €20 billion, leaving €35 billion for the functioning banks. The devil is always in the detail. Perhaps the Minister will state how he intends to ensure that funds will be loaned out.

In terms of obtaining the maximum return for the taxpayer, what type of interest write-offs will be given by NAMA in terms of loans? Having read the draft business plan — the Minister might say when we can expect to receive a copy of the final plan — it strikes me there will be large interest write-offs. Perhaps the Minister will indicate the figure involved. Taxpayers are entitled to know the level of write-offs that are to be given to the people whose loans are being taken over by NAMA.

Amendment No. 7(xi) states: "to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis.". This has much to do with regulation in terms of personnel and boards. I would like to make a particular point about NAMA. It is going in at 15% above market value. I wonder if the Minister would buy a house which cost 15% above the market value, which is what we are asking the taxpayer to do. That does not make sense. I am concerned that we will end up buying above market value and that the market will slump because NAMA will be required to get a return of, taking the draft projection, €5.48 billion. I would like to see a functioning market, one that the market economy takes over and results in a gradual rise in prices. Based on the Minister's projections, this is what is anticipated because there is to be no movement on the loans in terms of repayment until 2013.

The business plan makes reference to contractual arrangements and roll-up of interest. I would like to know, in terms of the loans taken over by NAMA, whether any of those loans are interest roll-up loans renegotiated prior to their transfer? This means the taxpayer would be taking on loans for three years during which time little or no principal would be repaid and trebles the figure involved from €2.5 billion to €7.5 billion. What is important is that we get funds flowing. At the very most there is €35 billion that will be available to business. How does the Minister intend to ensure this will be made available? The property management strategy is critical. Perhaps the Minister will address the points I have raised.

The main reason for the establishment of NAMA is to remove bad loans from the banks' balance sheets and to ensure normal lending and confidence in the market. This will happen only if the banks engage in proper lending. It is imperative that this requirement is written into the legislation and that we set targets, in terms of lending, that are measurable and ensure proper functioning of the market. Thousands of small and medium-sized enterprises are cash starved and going under due to a lack of lending. We need to learn from this most expensive exercise to ensure it does not happen again and this can only be done through the introduction of much tighter regulation.

This is an opportunity for the Minister to answer some fundamental questions about the interaction of NAMA and the market. If the object is to get the economy moving again, there is a problem in that the Minister's model overpays for bank assets in order to prevent the Minister from taking shares in the banks. This is to avoid the issue of the Minister acquiring the banks, because Fianna Fáil seems ideologically fixated against having shares in the banks even though it is more than paying for those shares. The Labour Party's preferred model is nationalisation followed by re-privatisation when the banks, or whichever of them recover, are in an appropriate position. The reason is that this side-steps the issue of valuation, in which the Minister's NAMA model is mired. If the banks were isolated, that might be fine, but as previous contributors have said, the problem with NAMA is that it is so vast in a small economy, and the amounts involved are so large, that it dominates the property market and provides for overpayment against the value of land. At the moment people letting commercial properties will not publicly allow for the downward review of rents because if rents go down, the yields change. As the Minister said in his speech of 16 September, his advice on yields was one factor justifying the over-valuation of the €7 billion.

Rents are reducing by 16% this year.

I assure the Minister they are not worked into his yields. I had a look at the yields figures and he actually held back from allowing rents to fall.

I ask the Deputy to stick to the amendment.

I am just saying there are competing issues.

I support the amendment because it would be helpful if the Minister could explain his approach to these contradictions. He wants to save and re-float the banks, and possibly the developers afterwards. That is fair enough. However, much of the structure is at odds with the aim of getting the real economy back on the road because it allows for over-valuation of asset prices. Because of this and the over-rating of rents, we will not reach what one might call true bottom, with the result that the economy might experience a so-called double-dip or, like Japan, slug along at the bottom. For those reasons, I support the amendment. The overhang of property issues into the Irish economy is simply enormous. In addition, the Department has let it be known — although the Minister has not had an opportunity to explain this to the House — that much of the property management arrangements will be through special purpose vehicles and the holdings and construction of those vehicles will be structured between the State as an investor and other investors unspecified. We have no information about that and the impact it has on the plan. Like the business plan, it arrived just after we had voted on Second Stage. I wish the Minister would take the opportunity offered by this amendment to spell things out in detail. He should accept the amendment, which I support.

The table on page 10 of the draft business plan shows asset recoveries happening after 2014 and NAMA debt repayment happening after 2013. Given that asset recovery is to take place only from 2014, several people in banking have advised me that nothing much will happen to the developers. Inevitably, it will not be possible to do work-outs on them for some period of time, going by the processes the Minister himself has set out.

I too support the amendment, and give notice that I will be moving a number of amendments on Report Stage. I will seek to insert a new subsection which will read: "All participating institutions shall be obliged to increase lending to SMEs and first-time buyers and shall be obliged to report on lending activity in these areas bi-monthly to the Houses of the Oireachtas", and a new section which will read: "The Minister shall after the passing of this Act impose a general levy on all participating institutions under the auspices of NAMA, at a sufficient level to recoup at least all of the taxpayers' liability." That speaks for itself. Finally, I will seek to insert a new subsection to read as follows: "All participating institutions shall be obliged to cease mortgage repossession for a period of two years in cases of genuine hardship following commencement of this Act." Again, this speaks for itself. I have covered these sufficiently to move them on Report Stage.

The first expectation of SMEs from this debate and the enactment of the NAMA legislation is that it will unfreeze credit. One could rank the reasons we are in the position of establishing NAMA, but at the top of that ranking, in the minds of SMEs in any event, is the issue of credit. One need only talk to any of them or their organisations; that is what they will say.

The amendment refers also to individuals. I do not know what is in the minds of individual people — different things, I suspect, in the case of different individuals. However, business expects that as a result of the establishment of NAMA there will be an unfreezing of credit lines. As the Bill stands, what is in it that will vindicate that expectation? We have already seen the practices in Wall Street, one year after the crash, returning in many respects to what caused the crash in the first place, and the frustration of the Obama Administration in trying to deal with that. Why do we expect things to be any different here? As soon as we get NAMA up and running, the banks will do what they will do, and there is nothing stitched into this legislation to require them to do otherwise. I am not talking about requiring them to make imprudent loans or anything of the sort, but surely there should be a code of practice that is more precise in terms of targets, assessment and so on.

Let us consider the Minister's own wording of the Bill, which states that one of the purposes of the Act is to "facilitate the availability of credit". This is carefully worded and might seem at a glance, to the layperson, to be a good thing. However, what does it mean in practice? There are banks and finance houses at the moment which are advertising credit. That is an entirely different matter from actually obtaining the credit. Some of the banks seem to be engaged in a policy of advertising to demonstrate business as usual, but this has little real meaning for people who are seeking continuation of their overdraft facilities or similar.

I was contacted recently by a car sales company which wanted to draw my attention to the fact that it had sold three top of the range cars the previous week but the loans for all three were refused. We know all the other reasons we are having this debate and for the setting up of NAMA, but the resumption of a normal flow of credit is the top expectation of businesses. Section 2(b)(i ) is not adequate to meet that situation. If we do not use the opportunity provided by this Bill to impose some strictures on the lending institutions covered by the legislation with regard to freeing up credit to business, we will be reduced to the Minister lecturing them afterwards. I see nothing in the section currently that compels them to deal with the issue.

The second part of Deputy Bruton's amendment deals with the question of an orderly property management strategy. This is hugely important for obvious reasons. The alternative is to resort to the High Court, receivership and the receiver putting a couple of thousand apartments on the market the following week. That is hardly desirable. It is important after NAMA is established that we have an orderly property management strategy. Otherwise, we will have similar distorting effects on the economy. The establishment of this strategy should be enshrined in the legislation as a purpose of the Act.

Deputy Bruton referred to the windfall tax. Fianna Fáil must have had great fun conceding that to the Green Party. Of all the cruel deceptions to inflict on a more naive and innocent partner in Government, the proposition that we will have significant windfalls as a result of property rezonings in the next four or five years is fantastic. We do not need to pursue that issue because it is unlikely to happen. NAMA will be the monopoly provider and there ought to be some provision in the main Act that will guide the practice in that regard.

I support the amendment proposed by our Fine Gael colleagues. The experience of citizens and small businesses since September 2008 has shown the necessity for this type of amendment. Clearly, the Government saved a bankrupt financial system and the House has made huge commitments to the financial system that will haunt us for a generation.

The Deputy should speak on the amendment.

That commitment will expire. It is past experience.

What I am asking is what has changed with regard to the behaviour of the banks towards citizens and small businesses? Nothing has changed. We still have a niggardly and conservative approach towards small businesses and still have the same kind of outrageous pressures and charges on ordinary citizens. Nothing has changed. What the Minister is doing is shoring up the edifice, and more. Yesterday, we heard from EUROSTAT that the €54 billion will be outside the national accounts. The problem is that it will be a huge burden on citizens and families for the next decade, perhaps even the next 15 to 20 years. I commend Fine Gael colleagues on the amendment. We need to provide in the legislation for an active power for the Minister to ensure that we get better management of the financial institutions than we have had so far. Otherwise, the Minister is leading us on the road to disaster, but he will probably not be around when others will have to pick up the pieces.

I am around now when there are already many pieces to be picked up.

The importance of restoring lending to the economy is at the heart of the NAMA approach to fixing the banks. I am struck by the warnings we have been given in this regard, most recently by the former head of economics at the Central Bank, Dr. Michael Casey. In a piece he wrote in The Irish Times he described NAMA as a “stroke” in the “political stroke” sense. He warned that traditionally, banks are always conservative with their own money. The only time they became less than conservative was when they were able to borrow money on wholesale international markets and lend it on in the manner in which they did. He pointed out that banks — the Government knows this — traditionally invest their money in Irish Government bonds.

The point Dr. Casey made, which is different from the point I have made when discussing the issue, was that if the banks have any money available after they get the estimated €54 billion NAMA proposes, they will invest conservatively in Irish Government bonds. He said this is because this is a way for the Government to fund, in effect, the Exchequer borrowing requirement. The Government cannot borrow directly from the European Central Bank, but in this manner €54 billion could be made available, some of which would be used to fund the Government's deficit. He said this was a roundabout way of doing it, but that it was the core reason the Government was not interested in any other approach to the bank crisis. That is one man's opinion and that is fair enough. I do not endorse it or otherwise, but I will take the lesson from it because it comes from a man with enormous international experience with international bank settlements in Basle, Washington and in the Central Bank and European Central Bank systems. Therefore, there is a big risk our banks will not lend this money into the economy.

We also received a warning from the current Governor of the Central Bank, Dr. Patrick Honohan, at the summer school in Glenties in July. He made the point that the problem with NAMA is that there is no guarantee the banks will lend the money. We got a warning also from the European Central Bank in its initial assessment in September when it said the banks have a self-interest in holding on to the money.

The core reason for trying to fix the banks is to try to ensure lending in the economy, not rescue any particular bank. I have no doubt that is what the Minister is trying to do, but there is a significant risk. The risk has been highlighted again and again by many well-qualified people and institutions, not to mind the instinct of the public. The public instinct is that the banks will not lend the money. The core aspect of what we want from the legislation is that it will ensure credit flows in the economy again. Given that is the purpose of trying to fix the banks, this amendment requiring that the measures taken are reciprocated through ensuring the banks lend the money to the general public and the enterprise sector should be a core element of the legislation.

We cannot ignore all the warnings and insights we have received from people who know the tradition of banking and the psychology behind what banking institutions do. There is a significant risk. I have no doubt the Minister does not want the banks to hoard the money. It is not his intention to have a system that enables them to hoard it. However, these are institutions and in five, six, seven, eight, nine or ten years, when the spotlight is off them, they will return to their old ways, because that is the nature of institutions. They are profit driven and conservative and have learned the lessons of their excesses for the moment, but there is a great risk they will go back to being what they traditionally have been — conservative. This is what a man with a lifetime experience in the area of central banking has warned. It is important therefore to ensure we insert into the legislation the intention behind the reason we are enacting this Bill, namely that we want the banks to lend the money. We must make this explicit in the legislation.

The amendment also refers to an orderly property management strategy. The great difficulty I perceive is an overhang of all types of property and land assets throughout the economy for several years. That creates a further difficulty as to how the overhang will interact with the property, land and development market as, when and if it recovers. Because of the importance of having an orderly interaction between the operations of NAMA and these markets, this is critical. We should clearly drive home the fact that an orderly property management strategy over a ten-year period must be ensured by this legislation.

The next part of it has to do with the maximum amount of taxpayers' funds to be recovered. This is a really important aspect of the fears many people have about NAMA and how it might operate — given that it will only have a skeleton staff of perhaps 50 to 70 people while it has to operate a portfolio of at least €54 billion in what it would term, "assets". There are massive amounts of loans to be pursued and developers and holders of those loans to be negotiated with. Sometimes they will have to be coached in an attempt to get more money out of them by advising them on how their businesses might be developed and the assets NAMA will have in reserve on them. It is crucially important to recognise that there is a changed relationship. If someone is employed by a bank or lending institution to manage a client in arrears, he or she will have a particular focus, namely, to get the money back and he or she is measured on that basis. There is an incentive, therefore, to pursue the debtor for as much money as possible. I have no doubt this is the Minister's intention and he has made it clear on numerous occasions that he wants people pursued for the money.

However, NAMA will in effect operate by getting other institutions, particularly those banks which lent the money in the first place, to act as agents for it in the pursuit of the money. That changes fundamentally the relationship between the person whose loan is being pursued and the one pursuing it. If one day I pursue this loan to get recovery for the employer, the banking institution, it will want me to get as much as possible — and that is how I will be measured. If tomorrow I am suddenly the agent for NAMA, I will get a fee. Deputies referred this morning to the €250 million per year in various fees that are in the draft business plan. Now my incentive is to qualify and get the fee. To get the fee, I have a completely different relationship, suddenly, and all I have to do is close down the loan. I shall get my money on the basis that I have dealt with the man or woman in arrears and ultimately recovered the debt.

Has the Deputy a question?

My point is that there is an enormous difference in terms of my incentive and behaviour. We have been warned by the IMF and others as well as in international research that asset management agencies working on behalf of the state tend to get less back in terms of recovery. Because of the changed relationship element, where the institutions operate as agents as opposed to working for themselves, there is a great risk that the taxpayer will not get the same recovery from these people in arrears as the banks would get if they were operating in their own right. Therefore, it is very important to make it explicit in the legislation for future negotiations with some of these institutions over the long period of time this organisation will be operational, that maximising those funds is really important. It is not a question of just operating as an agent, but we want the maximum possible return. Such institutions should be encouraged to operate as if it were their own banks they are recovering the money for, rather than acting as agents.

There are strong reasons for supporting and inserting amendment No. 7 in the legislation.

It is difficult not to agree with the sentiments in this amendment, to some extent. Whether the particular wording is all necessary, one has to agree with many of the speakers that the public perception is that the whole purpose of NAMA is to get the banks lending again. While we might ask what else they might do since that is how they make their profits, it makes sense to have that tied down. Whether this is the section of the Bill in which to tie it down is another issue.

That they should lend is more than just a general principle, it must be recognised. It is arguable that no sector should be excluded, not even the construction business that got us into the mess and there could be specific targets laid down for small business, say, and other sectors. It is a question of how much detail is needed.

Credit may never flow again as it did before. It is all right to say they should be eternally grateful to the taxpayer and the Government for bailing them out, although we know this is not a bail-out of banks per se. It is not enough just to believe that the banks should be grateful and respond, accordingly. The fundamental objective is to get credit moving again, and it is reasonable that this should be tied down, not just dealt with in a general manner but rather by focusing on particular targets overall, if not individual sectors.

On the point made by Deputy Rabbitte about the windfall tax being proposed by the Green Party, could the Minister clarify the position later, if not now, as to whether that tax would have retrospective effect? Presumably it would not be possible for the Government to impose a windfall tax on land, say, that has been rezoned residential.

I note that the Minister for the Environment, Heritage and Local Government, Deputy Gormley, told a group of architects some weeks ago that there is enough land rezoned in some parts of Ireland to provide housing for another 60 years. This would imply that perhaps there are no opportunities for a windfall tax in the future. At some stage will the Minister provide information on how much of the land being managed by NAMA will be rezoned for housing, and how much will be zoned agricultural? Will there be pressure under NAMA to have some of the land on its books, not zoned for housing or development for example, actually zoned for housing and in the event, what will that mean for the need for sustainable planning for the future?

I support this very important amendment. It is of crucial importance in terms of putting cash back into the economy and business. There is now enough retailing space in Ireland to service a population of 42 million, the result of all those massive shopping centres built by development companies. There are more than 900 hotels and much of this debt will end up in NAMA. There is an underlying fallacy about rental income where in cases where property valuations should yield a 5% return, instead the true figure is -5%. It is quite clear that many of the tenants in shopping centres around the country are unable to pay their rental income. This is a major difficulty facing businesses.

In recent years banks took over individuals' credit card debt, adding it to mortgages and re-financing loans. Therefore, the sub-prime debt for property at the moment is quite unprecedented. The Minister must realise that we have a retail area to accommodate 42 million people in Ireland. One does not have to go too far from Leinster House to see the difficulties retailers are facing for instance, with regard to rents. The rent review mechanism is not downward but upward. The inability of many tenants to pay rent is clearly established. I do not know how the Minister can quantify his assertion that NAMA will make billions of euro in profit over ten years, because that projection does not stack up. There are in excess of 900 hotels in the country. I heard the chief executive of the Irish Hotels Federation, John Power, say last week that half of them are losing money. They have been built by development companies and franchised out to hotel groups that are operating for nothing just to keep the doors open. This is the backbone of NAMA. Is there any provision in the Bill to get balanced regional banking? Banks take money in and give it out on the east coast. There should be a policy obliging banks to redistribute funding in the regions.

The Deputy is straying from the Bill.

It is all about lending. This is the backbone of the Bill. We are bailing out the banks and getting no commitments. There is no commitment from any bank whatsoever. The only commitment we got was this week when the banks gave their staff a 3% wage increase. When everybody else was going for a wage reduction they have paid their staff a 3% wage increase. I am very unimpressed. The Government has given €28 billion to one bank based not far from here, which would never lend €1 to any business. Coming from the business world myself, I know banks are giving ten reasons for not lending money. They now want two years' audited accounts. Two years ago they wanted nothing at all; they were dishing money out.

One used to get the cheque in the post.

They give ten reasons for not lending the money. The number of jobs being lost at the moment is unprecedented. Did any bank CEO come out to say what the banks would do for small businesses? They are doing nothing. Small companies represent the backbone of this economy. The Government is putting €54 billion into financial institutions without any commitment. The Government talks about creating a stimulus in the economy and helping small companies to create jobs in retail, trade, service and manufacturing companies and yet there is no money from any State entity either. The lifeblood of any business is cashflow. The cashflow has completely dried up. The banks should give a commitment to ring-fence a stimulus fund for small companies that would be benchmarked effectively.

This amendment is the most important amendment. People will not be convinced in any way unless the Minister can clearly establish in legislation an obligation on the banks. The banks are refinancing people and calling that new loans.

The Deputy has asked a question of the Minister.

He is only getting warmed up.

I know what I am speaking about and have worn the tee shirt. I know exactly the difficulties in small companies. We are not going to be fooled by this big bailout for banks when in effect they are literally doing nothing. I spoke to a bank director whom the Minister appointed. He said the banks have no commitment to lend money and have no intention to do so.

If the Minister is given time, he might have an answer for the Deputy.

The Minister may smile if he likes, but this is very important. Employers whom I know do not want sympathy; they want meaningful support not lip service. The Government is looking after the bankers — the fat cats. What about the guys on the ground who are working 40-hour weekends — not the 40-hour week? These are the people providing the services, maintaining family businesses employing up to ten people. They are getting nothing from anybody. They are the masochists who are suffering every day of the week.

We all agree with the Deputy and he has got his message across.

This amendment is the backbone of NAMA. Will we get money flowing in the economy again? There is no point giving a glib comment about what the banks will do. Once this Bill is passed the banks will give their staff another 3% increase. We want clarity. The Minister should support the amendment. It is the backbone of our proposals. I would be very disappointed if he does not accept the amendment and incorporate it into the Bill. It would ensure balanced regional lending. Likewise if there is money——

The Deputy is repeating himself.

I am not repeating myself.

His points are very valid.

It is worth repeating.

They are slow learners.

I agree with his points. Deputy Higgins wants to support them.

It is worth repeating.

The Deputy also wants the Minister to give him an answer and he must give him time to do so. We risk running out of time.

Those of us from a business point of view know only too well and we are not talking about bailing out fat cats. Some 50 people got €40 billion. For every man, woman and child it is €13,500 indebtedness.

The Deputy has moved into a Second Stage speech.

I shall finish on this point.

There are other contributors and we are due to finish at 4.45 p.m.

I spoke to the Minister privately about this. Can he give any guarantee that there will be some support and some meaningful stimulus for business? This is critical for small companies that are on their knees and the banks are ignoring all of them.

Section 2(b) states — I appreciate that it is not a rhetorical flourish — that the purpose of the legislation is to restore the flow of credit to the economy. This is precisely the issue. Given that that is a stated aim of the legislation, the assumption is that the banks share that stated aim. There is no evidence that they have been guided up to now by any public interest consideration. No appreciable change in credit policy has been observable since the Minister’s appointment of public interest directors. Indeed these public interest directors, as the Minister knows better than I do, have a responsibility under the Companies Act to the shareholders. Those Acts have not been changed in such a way as to enable them to state publicly they are concerned about the absence of credit to a number of small businesses.

I am now a shareholder in the two largest institutions.

The Minister might find himself in a dominant position very soon. We can turn to that later in the debate if he wishes. I am sure he is looking forward to his new responsibilities. Let us hope he has greater success in that circumstance than he has had with the moral suasion he has been enjoying so far. It would appear that the only observable change that one would note since the Minister's appointment of such eminent people is that some have ceased to be politicians and have become bankers to a degree that would have recommended itself to the ancien régime in banking that brought us to this position.

I support amendment No. 7. I am simply being consistent with the point I made on Second Stage when I said that given the scale of the adjustment being made in the funding of the banks, largely guaranteed by a taxpayer commitment, one really cannot rely on a cultural change. Speech after speech is asking the Minister the same question. If he does not agree with the principles as laid out in amendment No. 7 with its four sections, what is his own formula? Is he to fall back and say that section 2(b) states that the purpose of the legislation is to achieve a flow of credit to the economy? The answer to the question is obviously that this never made a difference in the past. When the normal credit flows to the real economy — a phrase we should use more — were being attested in the past, the banks in pursuit of shareholder dividend effectively went gambling abroad as opposed to serving the real economy. I am not naïve about this and in turn it justified a bonus and so forth. Therefore, how is one to manage and guarantee, if there is no evidence of such a change? Another kind of evidence is available. They may also advertise a change but not deliver it. They may take out large advertisements in newspapers on the credit they are offering but it may never turn into anything real. This is not abstract speculation on my part. All the evidence shows that we are losing significant jobs in twos and threes in small establishments because of a lack of credit. We are not only losing jobs in businesses which are in deficit — we are also losing them in businesses which had normal banking relationships as regards their payrolls.

I am not from the business sector but I have met many people in my own advice centre who had made deposits to facilitate cashflow but these deposits were illegally transferred to the relief of bank debts. As Deputy Noel Ahern said, we need to be able to demonstrate the mechanism by which we will get credit flowing. The existing section 2(b), as a statement of purpose or something which will provide moral suasion, is insufficient. The Minister may feel he has taken a further step towards Armageddon if he finds he owns more than 50% of the shareholding of one of the leading banks and will be able to do anything he likes. However, this is like cheering a horse once it has gone. We need to address the issue in this legislation.

My next point is on the orderly property management strategy. This arises not only because NAMA will be a significant property management company. The company would not be acceptable if it did not operate in an appropriate context, such as within an urban planning framework. Speculative borrowing is reflected in the huge oversupply of retail square footage and in singularly inappropriate residential property. As one drives north, as I do occasionally, through the delightful wetlands of Leitrim and Roscommon, one encounters swathe after swathe of townhouses in villages that have two pubs and no parish hall. An orderly property management strategy requires the Minister to include the role of the urban planner. General planning issues are also important and include such things as the balanced relationships of villages, towns and rural areas. The list of professional qualifications for those in the agency do not include physical planning nor urban planners.

My third point relates to the aspiration to recover maximum funds for the taxpayer, which will also be relevant to the discussion on the management of the organisation. I have already raised the issue of the €250 million — €2.5 billion over ten years — for consultants. These moneys will all be approved, one way or another, by some agency of the Department of Finance. There will be a plethora of land valuers, solicitors, accountants and tax advisers. The reason for the overseeing agency being at arm's length was to ensure independent advice. I have seen advice from consultants and they know how to pitch their services to fit the Department. The Department knows that and will say the company does not need to put anything in writing but it knows what it wants. The people involved get used to each other and the culture continues as before.

My final point relates to the part of the amendment which refers to the need "to take all necessary steps to prevent a recurrence of the conditions that brought about this financial crisis." When Committee Stage is completed and the legislation is passed, does the Minister not feel there should be a fast, thorough, unrestricted examination by the Oireachtas of the banking system which brought us to this point?

I support the amendment. I support Deputy Noel Ahern's point and ask the Minister to tell us how he will address the issues raised in the amendment if he does not accept it at this juncture.

My fellow county man has addressed some of the issues I was intending to raise. We all see the need to get credit flowing into the economy again. This Bill would not be before the House and NAMA would not come into existence were it not for a desire on the part of the Government and all the politicians in this House to address that critical issue which affects the lives of so many people, whether in employment or in business. There is also a necessity to change the culture that has emerged in banking in the past number of years. We need a greater level of prudence and to manage business on a day-to-day basis rather than on the never-never basis which characterised the banking system in recent years, in which interest was rolled up and other unsustainable practices were carried out.

Other issues need to be addressed in the banking system. Banks are currently engaged to some extent in the gouging of viable businesses. When a business seeks a new loan to give it headroom for cashflow, the bank is demanding that its loan be renegotiated. The margin is then increased by at least 2% and I have heard of up to 8% being demanded. It is reprehensible that, at a time like this, banks gouge viable businesses who are repaying their interest and capital. There is no risk in such cases but banks claim they are increasing margins because of greater risks. We want banks to be commercial entities but can the Minister cap the margin they can apply? There is no effective competition within the banking sector in Ireland and banks are gouging businesses simply because they can. I do not think there will be effective competition for some time so we need to look at ways not only of ensuring the flow of credit but of preventing the banks from stressing viable companies to breaking point.

I agree with the sentiments of Deputy Dooley. A cultural change in banks is under way and the Government appointments have helped bring that about. However, I am not sure that is enough and some mechanism has to be put in place. This may not be the appropriate section but experience has shown we cannot trust the banks and I am not convinced we will be able to trust them in the future. The mechanism should ensure the Minister can see to it that businesses get the cashflow and credit they need.

I worry about a mindset change. The €2.64 billion spent on expenses will be paid out in cash rather than by issuing bonds. We must guard against a mindset which identifies, now that we are coming to the end of the tribunal era, that this is the new gravy train. That is why there must be oversight in the appointment of the board and the various experts, valuers, lawyers and so on, who will be attached to NAMA. No matter what is said about goodwill and wearing the green jersey, we must be vigilant in that regard.

The Minister's draft plan states that it is "expected" that the injection of cash into the banks from the NAMA process will enable them to facilitate lending into the economy. "Expected" is not good enough, which is why this amendment has been tabled. It is critical that the Government uses its new leverage with the banks to ensure they provide credit to the economy. Their duty of obligation heretofore has been to their shareholders and bondholders, but their new duty of obligation is to the public that has bailed them out. It is vital that this is seen to be done and that it is not merely a case of the banks paying lip service to that obligation.

Amendment No. 7 proposes a requirement to "ensure an orderly property management strategy" for the coming decade. This could well be amended to include the word "responsible". I referred earlier to the fact that NAMA will manage its own assets. It is critical it does so in a responsible manner. I ask the Minister to accept the amendment. This legislation must be enacted as soon as possible and we will only get one shot at it.

I too support this amendment. It is clear that money is not circulating in the economy and there is nothing in this legislation to address that problem. Our proposal for a national recovery bank is the only one that will get credit flowing again. In his reply to a recent query of mine, Mr. Denis Brosnan, chairman of the mid-west task force, predicted that unemployment could reach 20% in the mid west unless the recommendations of his committee are implemented. There is nothing in the legislation that will increase access to credit. I appeal to the Minister to take on board this amendment in order to ensure credit is available to those who need it.

We are all agreed on the need to restore a normal level of lending to the economy, but we must not forget how important it is that lending be appropriate. A major cause of the crisis we are currently experiencing was inappropriate lending by banks not only to the property and development sector but also to individuals, as evidenced by the increasing levels of default on residential mortgages, car loans, credit card debt and so on. In seeking to facilitate the banks to resume lending, we must also ensure all such lending is prudent, that credit committees are functioning properly and that decisions on individual loan applications are properly and thoroughly assessed. Putting a gush of funding into the banking system and compelling institutions to give that money out into the economy will only sow the seeds of a recurrence of current problems in the future.

None of which is to detract from the importance of restoring credit flow in the economy. As Deputy Chris Andrews said, it is essential that a mechanism is found which compels banks to engage in appropriate lending throughout every sector. I am not sure whether this legislation is the appropriate means by which to bring forward such a mechanism but a way must be found to institute a binding agreement to compel the banks to engage in appropriate lending in order to re-stimulate activity in the economy.

Although it has been in the nature of a Second Stage debate, I welcome Members' contributions because they have pointed up important aspects of this legislation. On the narrow statutory point, section 2, which sets out the purposes of the Bill, refers to the "compelling need" to facilitate the availability of credit in the economy. There is no weakness or equivocation in that formula. Were we to delete the reference to "facilitating" and NAMA were itself obliged to make credit available, then it would be a bank rather than a bank repair operation.

Deputy Bruton opened the debate by raising the vital question of credit supply. I listened very carefully to what he said and his words were echoed by Deputies O'Donnell and Lee. Deputy Bruton was the one person in this debate who outlined various mechanisms that could be implemented in regard to this matter. I will examine all his suggestions. Following the decision of this House to adopt the Bill on Second Stage, I entered negotiations with the institutions intending to participate in this agency with a view to establishing what mechanisms can be put in place to facilitate credit supply in the economy. I agree with all the speakers who called for such a mechanism but it was only Deputies Bruton and Dooley who specifically mentioned types of mechanisms we can consider. I will take any such suggestions on board in the context of these discussions with the financial institutions and will report back to this committee or to the House as appropriate. I am not in a position at this stage to disclose to the House where the discussions are at but I assure Members that I am anxious to ensure that such a mechanism is in place before the commencement of the operation of NAMA. That is an essential precondition. I agree with Deputy Michael McGrath that statute may not necessarily be the appropriate vehicle in which to specify a particular mechanism. What is not in question is that whatever vehicle is found must be of a binding character.

I agree with Deputy McGrath that there must be appropriate lending. We are all aware, from our work as public representatives, of the nature of the problem. Deputy Perry spoke at length on this, as did Deputies Chris Andrews and Dooley. The reality is that there can be no lending in a cash-starved banking system. To suggest that NAMA does nothing to increase lending is a little disingenuous; it is an essential first step to the restoration of lending. The reason the IMF recommends asset management solutions is simply that without repairing the balance sheets of the banks they will not be in a position to attract funds which they must do in order to lend.

In regard to the design of NAMA, I have gone through that before and do not want to turn this into a Second Stage reply. Setting the rate at half a percentage point above EURIBOR is designed to ensure banks have every incentive to make money. They will get a poor rate of return in terms of the bonds but will get access to cash at the European Central Bank or on world markets. That was a deliberate design issue in NAMA but, as many Deputies have pointed out, the next step clearly is the mechanism that will translate that design into a practical flow of credit for businesses and consumers.

Deputy Rabbitte gave the example of a person who cannot secure a motor car loan. As well as the many small and medium-sized businesses of whose difficulties I am aware, I have also encountered individuals who are solvent and perfectly capable of discharging a loan but whose applications for finance for an elementary purchase such as a motor loan have been rejected. That issue must be addressed prior to the commencement of NAMA. The issue of credit supply rightly took up most of the debate because it is the focus of the legislation.

Numerous assertions were made about the property market in the course of the debate. However, before dealing with that I will address Fine Gael's proposal for a national recovery bank as a means of increasing credit supply in the economy. It is important to realise that setting up a bank is not an overnight business. Were I to provide €1 billion of core tier 1 capital tomorrow morning, it would take some time to establish a branch network and recruit staff who would be in a position to lend that money. If an entity is funded by me it is simply another nationalised bank that is lending, which is not to say it is not an option. When Anglo Irish Bank is stabilised in the future, we might have to do that if current distressed credit conditions persisted. It is far more attractive for an individual to come in here and put a billion euro into tier one capital to establish a bank. There is no doubt in my mind that with the establishment of NAMA and the growing confidence in the Irish financial sector, Ireland will be in a position to attract external interest in setting up a new bank, because NAMA creates a marketplace in which such an operation becomes possible. That is all I wanted to say on the credit supply issue.

Many different points were raised about the property market, but I would like to make one point clear to Deputy Burton. The yield assumptions in the draft business plan assume a fall of 40% in commercial rents. The yield figures already assume a 20% fall in rents, and a 50% fall in property values. The business plan proceeds on the assumption that this fall will continue. We have heard much talk about tooth fairies, but this draft business plan has been prepared with great care and on very conservative assumptions. It is easy for the Deputy to laugh, but people are working day and night on this.

The assumptions do not stack up.

I did not have any hand in the preparation of the business plan, but I am glad to stand over it due to the quality of the people involved in its preparation. The business plan is just a draft. There will be no business plan until NAMA is in operation. If we do not have a board in existence, how can we have a business plan? It is a draft indicative business plan, and the reason I published it was because the issue was raised by Deputy Burton in her Second Stage contribution. I undertook to have such a plan made available before the conclusion of the Second Stage debate in the Dáil. It is a draft plan, and criticism is welcome, because it gives us the opportunity of teasing out the implications of the plan and what it means.

There is a section already in the Bill which addresses the property market. Section 11(2) 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". Undue distortions or concentrations of ownership or of lending clearly is implicit in that particular section. I took a particular interest in that subsection because it is important that the property market for the future develops on a sustainable basis. That is why such conservative assumptions were taken on long-term economic value. Deputy O'Donnell stated that it was a 15% assumption, but the top 5% of that slice is paid for through subordinated debt and is at the risk of the participating institution.

It is nearly €4 billion short.

In fact, 10% is the assumption with respect to the exposure of the taxpayer.

The yields are falling based on rising value.

The rental assumptions are based on a 50% drop in values from the peak in late 2006.

Going forward, the yields are falling——

Do not interrupt.

If we want to wipe out all the value of property in Ireland and decide that this country, its banking system and its housing market are all worthless, then we can go down that road. That was the road advocated by some professors a few months ago.

(Interruptions).

If the Deputy wishes to speak, I will give him time in due course.

We have been through the debate on the property market on Second Stage. It is clear that conservative assumptions have been made on the future of the property market. When one looks at the trajectory of the property market in the last 20 years, and one looks at what is envisaged for the next ten years, one would have to accept that these are incredibly cautious assumptions. That is why the business plan envisages the prospect of an actual gain to the taxpayer through the operation of NAMA.

Deputy Perry spoke about the amount of bonds being issued to Anglo Irish Bank. The bank has had to avail of emergency liquidity from the European Central Bank, and that was disclosed in its annual report this year. I am happy to report that its dependence on that liquidity has actually lessened in recent weeks, but there is still a substantial amount. The effect of issuing the bonds to Anglo Irish Bank is to stabilise that institution, discharge the emergency liquidity and ensure that the loan book of the institution is substantially downsized and eliminated as a risk to the taxpayer and the banking system. When that is done, we will be in a position to make a strategic decision about the future of the bank. We have not been in a position to do that to date, because the first task since last February has been to stabilise this institution. As well as having the advantage of providing funds in the economy through credit supply measures, which I will announce following discussions with the banks, NAMA also has the great merit of ensuring that Anglo Irish Bank is downsized and lessened as a risk. That was the policy the Deputy's party advocated last January when we nationalised the bank. Fine Gael claimed that we should wind it down.

We demanded an orderly wind down.

This is an orderly reduction in the size of Anglo Irish Bank.

According to the Dáil schedule, this meeting was due to adjourn at 4.45 p.m. If any Member wishes to extend the sitting, he or she can move a motion giving us time to conclude.

I move that we extend the sitting.

If that is agreed by members of the committee, we can do it.

We discussed this possibility yesterday at the committee and we agreed informally to go on, if necessary, until 7.30 p.m. at the latest.

It cannot go on that long. We did not agree any time.

No, we did not agree any time.

What about 6 p.m.?

Is it agreed to continue until 6 p.m. at the latest? Agreed.

Was there not a target of getting to the end of section 17?

We must get section 2 completed first.

There is a range of other issues that have been raised. I would detain the House for a long time if I went into them all, but I do not wish to avoid any issue either. Deputy Burton spoke about the special purpose vehicle. I welcomed the decision yesterday by EUROSTAT — the statistical authority of the European Commission — that the operations of NAMA should be recorded outside the general Government sector in the Irish national accounts. The preliminary decision of EUROSTAT means that the acquisition of the assets from the financial institutions by NAMA may be treated as off-balance sheet in the budgetary arithmetic under European national accounting rules. In other words, it will not increase the general Government debt ratio, and neither will our budget balance be directly affected by the NAMA initiative. That is the ruling of EUROSTAT.

Congratulations.

This has the very important effect of putting the treatment of the Irish asset protection scheme on an equal footing with bank support schemes in some other member states which are also being recorded off balance sheet. The operations of NAMA will be treated in a similar way to the French scheme, which also uses a special purpose vehicle with majority private ownership. The board of NAMA will hold a veto on the operations of the special purpose vehicle through the shareholding agreement. The statistical treatment is dependant on the establishment of certain entities which will be the legal holders of the NAMA assets, while NAMA will retain effective control and veto on decision taking. However, the statistical treatment does not change the fact that the operations of the agency will lead to an increase in the amount of the State's potential liabilities. This basic fact should not be overlooked. However, neither should it be overlooked that these liabilities will be matched by a countervailing asset holding.

Officials from the CSO, the interim National Asset Management Agency and my Department have been in regular contact with EUROSTAT in the last few months regarding the appropriate treatment of NAMA. At this stage, the EUROSTAT decision is preliminary as this Bill has not yet been enacted. However, we expect that the final decision of EUROSTAT will not differ from the organisation's preliminary view.

Deputy Tuffy asked about the windfall tax proposal. I am still working with my officials on that with a view either to making an amendment or a statement on Report Stage.

I wish the Minister luck in his hard work.

It is important——

I would not give it priority.

——that we develop a consistent means of treating the taxation of realised gains from development. There are a number of unsatisfactory inconsistencies in the current arrangements. Deputy O'Donnell raised the question of interest roll-up. We have already used powers under the guarantee to issue directives to the banks in that regard. In any event, if such an arrangement were to be put in place, it would have a direct impact on the valuation of the loan in the valuation process because each loan must be valued individually.

I was talking about cashflow.

That is a cornerstone of the acquisition process. Clearly, the amount of interest roll-up at the time of valuation is a relevant consideration.

I asked about cashflow.

I appreciate that the Deputy raised the issue in the context of credit supply, about which I am concerned. I addressed that issue in an earlier contribution. I have dealt with most of the issues that were raised by the various Deputies. The ideological fixations of my party, which were mentioned earlier in this debate, are shared by Deputy Quinn, who thinks it is essential to have some residual private shareholding in the two main banks. That is the policy of my party and the Government as a whole. If one were to withdraw those institutions entirely from the markets, even on a temporary basis, one would raise the issues of how the markets view the institutions and the institutions' capacity to fund themselves. Those issues are important for any Government.

The Minister has given us an emollient reply, as usual. The whole purpose of the amendment was to place a statutory imposition on the banks to reciprocate. The Minister has said he will do his best during the direct negotiations to put in place a protocol that would allow appropriate lending. However, this legislation does not impose a statutory requirement — one on which we could fall back — on the banks to reciprocate the detail of the mechanism that will be put in place.

I will examine whether the concept of reciprocation can be developed on Report Stage. The Deputies may have missed my use of the word "binding", which seems to be more fundamental. Any arrangement that is entered into must be binding in character.

I would like to ask the Minister a brief question in response to his references to Anglo Irish Bank. The more we know about Anglo Irish Bank, the better. Neil Callanan and Emmett Oliver recently wrote in The Sunday Tribune about an issue that has been mentioned around Dublin for some time now.

Is this relevant to amendment No. 7?

Yes. It is also relevant to the matters the Minister raised. It is understood that a prominent property company is arranging to buy €1 billion of distressed assets with the support of Anglo Irish Bank. The properties in question had been earmarked for syndication from the bank. This is being done through the London market, by means of a form of financing known as "stapling". It is implied that Anglo Irish Bank will do this. Last March, a prominent property company acquired a portfolio of UK properties from a Greek businessman who was in trouble with the fraud office in London. The amounts involved there——

I do not understand how this is relevant to amendment No. 7.

In his reply, the Minister spoke about how the money the State has provided to Anglo Irish Bank is being used. Can he tell us how that description ties in with the proposed €1 billion deal I have mentioned? It seems that €1 billion is being used in this way. This appears to be a guaranteed line of credit for Anglo Irish Bank. In a previous parallel deal, some €750 million was provided by AIB. How is that proceeding? Deputies on all sides of the House have expressed concern that no reference is being made to how credit will proceed to small and medium-sized enterprises. I would like the Minister to comment in some detail on this story now or at a later stage. It is obvious that he has access to the lending patterns and commitments of Anglo Irish Bank and AIB, which has made a significant commitment of €750 million in respect of property in London.

The Deputy has asked her question.

I would like to put the Minister's answer back to him. If a borrower went into a bank and said "I will not put any repayment arrangements into a contract, but I will enter into negotiations after the contract has been signed——

That is not what I said.

From the point of view of the Legislature, we get one shot at this.

It is the other way around.

When this legislation has been passed, we will have lost our handle on it.

One either provides for tests or one does not.

My colleague, Deputy Perry, has given the Minister some concrete examples of what is happening. Banks are presenting old, recycled loans as if they were new loans. The banks will agree to a 10% increase in capacity and then use such loans as proof of the delivery of such an increase. That is not good enough and people know it is not good enough.

It is a question of public perception.

The Minister cannot expect this side of the House to accept his word when he says he is working on mechanisms which he will not reveal to us, but he can assure us they will be strong and binding. That is not good enough. As we are being asked to sign a cheque for €54 billion, we need to ensure the mechanisms are watertight and can withstand scrutiny. Deputies Perry and Dooley need to be able to tell business people of their acquaintance that something has been secured. People with viable businesses should to be able to go to their banks in the confident expectation of getting an acceptable hearing. If they do not get such a hearing, a system of scrutinising declined cases should be open to them. We need to know what will happen after that. Such an agreement is required.

The Minister cannot expect us to let this matter pass from Committee Stage into Report Stage, in the hope that he will come up with something binding and acceptable. Given that we are putting hard cash on the table on behalf of taxpayers, we need to include a hard and fast provision in this Bill. I accept the Minister's reference to 11.2% in the context of the markets. He spoke about undue concentrations and distortions. That is not the same as having a coherent strategy for the marketplace. A dead market can be manipulated by people who are trying to make sure prices are too high, without falling foul of the Minister's provisions for undue concentrations or distortions. That is a very weak and a low hurdle to set when trying to come up with a credible strategy for the property market over the course of 11 years, or however long the Minister intends it to operate.

If one is relying on that, one is leaning on a reed. It offers no vision. It does not require them to draw up a code of practice governing what would be an acceptable way to manage the property market over the course of a decade. We know a lot about the capabilities and needs of the property market. We need a credible strategy because the property market will be important to our recovery. Deputy Rabbitte put it well when he said the Minister is fobbing us off with sympathy, but that is not good enough in the dire straits we are in. We need to be able to tell our constituents that we have managed to get the banks to sign up to a hard agreement in return for what we are doing in this Bill. We need to have confidence in NAMA's strategy for handling the market. We need to have a sense of how it will work. While I accept the Minister's goodwill, I do not think his soft words are good enough for us.

Of course they are not good enough for the Deputy and his colleagues — I would not expect them to be. When the House finally adopted this Bill last week, I went straight into these negotiations. I do not intend to pre-empt my position. I was not in a strong enough position to deal with them, even with the guarantee, until this House gave me its support.

We will give the Minister a little strength, or legal backbone, to help him.

I am delighted to get the support of the House. I certainly intend to report back to the House in this regard in advance of Report Stage. If Deputies want a timeline for it, I am prepared to impose that timeline on myself. It is essential that we do this. There is no argument about it. It is not a matter of soft words. I do not dispute that there has to be a binding arrangement in relation to credit supply. It is important to remember that NAMA cannot operate as a property tsar interfering with the entire market. It must operate commercially and respect other players in the market. As one can see from the business plan, many of the loans are performing loans. Those assets will not be realised by NAMA. The bank assets will be held by NAMA but the underlying collateral, if it is land, will not be recovered by it. I accept NAMA will be a significant player in the land market but it will not be the only one. It is not my function to produce a blueprint for the entire property sector in Ireland for the next ten years beyond avoiding undue concentrations and distortions of the type evidenced recently and ensuring growth in the sector is sustainable at a realistic level. The valuations envisage that expressly.

Will the Minister be tabling amendments on Report Stage to ensure protocols are put in place so funding will be made available? Why is the Minister reluctant to include such provision in legislation? He should be playing with all his cards. We are providing €54 billion to the banks.

The Deputy has stated that time and again.

The Deputy did not want us to provide it.

I want to make this point because it is valid. Why is the Minister reluctant to put in legislation what I propose? The Mazars report on banks relending to businesses did not receive enough attention. It gives no breakdown differentiating between new lending and existing lending in terms of pullback with regard to overdraft facilities, the writing off of loans and the roll-up of interest. There was no detail at this level; there was only a reference to having the same amount of lending at the beginning and end. Is the Minister satisfied with that?

Why is the Minister reluctant to negotiate with the banks on behalf of the taxpayer to include in the legislation protocols making reference to lending——

That is the Deputy's fourth time to make that point.

Why is the Minister reluctant?

I will have no reluctance if that is the best course of action to take at the conclusion of the negotiations.

Will the Minister be making the amendment I propose?

I will determine that when I am in a position to do so. That is how I shall do my job.

I have one or two points. I would have believed the amendments under discussion would have strengthened the Minister's hand in seeking a binding agreement with the banks. Would it not be worthwhile to include in the legislation a reference to reciprocation such that lending will take place to individuals, and small and medium enterprises in particular? Would it not be worthwhile to say that is what the Houses of the Oireachtas have agreed and that they regard it as one of the most important matters to be dealt with? I do not know why the Minister cannot accept the amendment on those terms.

I am concerned that although the Government gave the €500 million guarantee to the banks and €7 billion in recapitalisation, there has not been one whit of improvement in the lending practices of the banks during the period in question.

Has the Deputy a question?

This is the anniversary of when the European Investment Bank made €30 billion available to the banks to borrow for the express purpose of lending to small and medium enterprises. As far as I can gather, only €300 million of this has been drawn down.

That is because it is a new lending facility. It is for new businesses.

The money was made available 12 months ago. It is not a new lending facility. It crosses the board for new operations and small and medium enterprises such that they can develop.

Has the Deputy a specific question?

There are existing small and medium-sized businesses that cannot obtain the funding.

At the heart of this matter is the unwillingness of the banks to lend to businesses because they do not believe they will get their money back. Is that correct?

That point was made time and again by Members on every side of the House.

My point is not made and I have only been speaking for two minutes, at most. When all the money has been made available from NAMA and the banks are flush with cash they get from the European Central Bank after cashing the bonds, they will still not lend. Although there is considerable potential for damage to the taxpayer and the economy, the banks are not reciprocating the taxpayers' generosity to ensure the economy will tick over by way of making credit facilities available. There is no sense in having banks if they are not lending — that is their sole purpose. There is no guarantee they will lend. If the Minister passes a Bill that does not require the banks to do what they are set up to do, there is not much point in bothering our heads to do our job.

This amendment and the one tabled by Deputy Burton on oversight are the two key amendments that require to be dealt with. If the Minister needs to strengthen his hand with the banks, he can do so by accepting this amendment.

Does the Minister accept the purpose of this Bill is to get the banks functioning again? A consequence of achieving this would be a credit stream for small and medium enterprises. This, in turn, would assist economic recovery. On the basis of the proclamations made by the banks on occasion, nobody believes a word they say. We could not even establish the exact state of their toxic loan books and we are still estimating it. We are told NAMA must examine the loan books because nobody believes what the banks are telling us.

If the purpose of the Bill is to make the system work again, given the lack of trust in the banking system the Minister should surely include a clause to oblige banks to do what he and they claim they will do, namely, provide a credit stream. This should be achieved for the sake of the entire Oireachtas. A ready-made solution exists in the form of amendment No. 7 and it will facilitate the Minister in doing what I propose.

I echo other speakers in saying that if the Minister is really serious about making loans available again to small and medium enterprises, he will table an amendment next week——

The Minister has answered that already.

It should happen sooner rather than later.

What does the Deputy want me to consider?

Another amendment.

He should table an amendment on lending next week.

To which amendment is the Deputy referring?

I refer to an amendment such as No. 7.

I have not indicated I am making an amendment on that subject. I said I have entered discussions since the completion of Second Stage. The purpose of the discussions is to ensure there is a binding arrangement associated with the provision of credit. That is where we stand. If legal change is necessary to underpin that agreement, it will take place. I indicated I will report to the House on this matter on Report Stage.

That has not worked to date.

I have not outlined the nature of the mechanism. Deputy O'Donnell did not suggest any and very few did, other than Deputy Bruton. I indicated to Deputy Bruton that his ideas would be taken on board in the context of the discussions. That is where we stand.

Will it be in legislation?

I have answered that already.

Is the amendment being pressed?

It most certainly is being pressed. Ultimately we need to have a firm legal provision. The Oireachtas is seeking to strengthen the Minister's hand in the negotiations in which he is engaged by setting out, in the principal stage of the Bill, that there must be reciprocation. I will be tabling legally-binding amendments on Report Stage. I do not do so at this stage but I want to establish this principle. The Minister says he rejects our principle. That is profoundly wrong. He should grab this with two arms, go to the banks and say, "I have the Oireachtas behind me insisting that I come back with a solid deal, and if I do not come back with a solid deal the Oireachtas will put into statute much tougher terms than you might negotiate with me." The Minister should accept this amendment as giving backbone to his negotiations and giving him a credible chance to get the best out of them. That is why I move that the amendment be made.

Amendment put.
The Committee divided: Tá, 5; Níl, 7.

  • Bruton, Richard.
  • Burton, Joan.
  • Carey, Joe.
  • Flanagan, Terence.
  • O’Donnell, Kieran.

Níl

  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Chris.
  • Dooley, Timmy.
  • Grealish, Noel.
  • Lenihan, Brian.
  • McGrath, Michael.
Amendment declared lost.
Section 2 agreed to.
NEW SECTION.

I move amendment No. 8:

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

3.—Every 30 days NAMA shall report to Dáil Éireann 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.".

Amendment put and declared lost.
Section 3 agreed to.
NEW SECTION.

I move amendment No. 9:

In page 17, before section 4, to insert the following new section:

4.—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.".

This amendment on behalf of the Labour Party is self evident. If the Minister has advice on how better to frame the amendment in terms of the legal advice available to him from the Department, the Revenue Commissioners and the Attorney General, I am more than happy to accept that. It is difficult for us to get technical amendments right.

The purpose of the amendment is important in terms of the general taxpayer, in particular the PAYE taxpayer who is paying a lot more tax this year. As the Minister indicated, the marginal rate including PRSI and levies is now 53% for a high rate payer. In the main, the people who will be beneficiaries of the NAMA process and those involved in it in the long run will be those in the banking community and developers. The purpose is to ensure that they are resident in Ireland for tax purposes. I accept the Minister makes reference to tax clearance certificates in other parts of the Bill. However, a tax clearance certificate is a pretty weak document, as we have discovered in regard to a number of different events that gave rise to concern. All sorts of people about whom one would be very surprised have no difficulty in getting tax clearance. Perhaps the Minister will comment on the point.

What I am concerned about is the ongoing feverish activity in regard to developers and people involved in the likely "namafication" process. I am reliably told that involves changing ownership of assets and interest in assets, especially to spouses or other family members. There has also been considerable interest in transferring assets abroad and out of the reach of the jurisdiction — for tax purposes that includes across the Border. The transfers are not necessarily always to a sun-baked island in the Pacific.

A phenomenon is also evident among developers. We have seen in a number of court cases, in particular the recent court cases involving the Zoe Group and Mr. Carroll, that a lot of strategising is taking place on the part of developers and firms involved in the NAMA process to give themselves best advantage. I would not expect them to do any less. That is their constitutional right, but it appears that some of those people are going to take themselves out of the jurisdiction. Many articles and books have been published on it over the summer. Many people are enjoying much nicer weather in various parts of southern Spain and France, among other places. Many developers and people in the property business have very nice homes in Villefranche-sur-Mer and various other nice parts of the French Riviera and they seem to be getting more and more attached to those locations. They seem to be rediscovering the joys of their foreign holiday homes.

The next amendment deals with the issue of personal guarantees.

Amendment No. 10 has not been moved.

Its intention is to strengthen the Minister's hand to require compliance from developers who go into the NAMA process.

Is Deputy Burton speaking to amendment No. 10?

If the Chairman permits me it might be more convenient to take the two amendments together?

No. We will wait until we reach it.

Is it in order to move amendment No. 10 as well?

I am quite happy to take amendment No. 10 at this stage.

No. Deputy Burton should just speak to amendment No. 9.

The main purpose is to have an assurance that the people involved in the "namafication" process are tax resident in this country. If the Minister wishes to offer advice through his officials and the Attorney General as to how the amendment might be better worded, I would be pleased to take it.

This is a fundamental problem. I previously referred to the story in The Sunday Tribune at the weekend about an ordinary transaction by a big property company in Ireland buying up a block of assets for €1 billion via Anglo Irish Bank. The point is that we are not in ordinary times in terms of property transaction. What we are trying to do in this exercise is to get credit flowing again. The Minister’s hand needs to be as strong as possible by ensuring that the parties with whom NAMA will be concerned and who will be potential beneficiaries of NAMA are fully tax compliant. That starts with being tax resident in this State. Many of them are putting assets and family members offshore. In the McCaughey case that was disclosed two years ago, the wives of three people involved in a company went to Italy to learn Italian for a period while tax arrangements were being made.

I do not wish to curtail the Deputy but she has made her point very strongly.

It beats the wet lands of Leitrim and Roscommon.

Deputy Burton seems to be introducing a lot of new nouns and verbs into the language. My favourite new one is "NAMAland". It is generally in the north west of Ireland.

It is extraordinary to suggest on the one hand that the purpose of the legislation is to benefit developers and then to say on the other hand that they are all fleeing the country in terror and hiding their assets, given the prospect of the introduction of the legislation.

Some of them are.

The Deputy cannot have it both ways on this issue. She cannot come to the Chamber day in and day out and insinuate that this is some class of beneficial arrangement for developers and simultaneously advise me that the developers are now all fleeing the country and hiding their assets because I am going to pursue them with far more vigour than it is clear their friends in the banks have been doing. That is the clear contradiction in what Deputy Burton is saying.

On the use of spouses and the removal of assets offshore, those are serious matters that deserve serious assessment. If Deputy Burton has any evidence of such practices I should be very much obliged if she would put it at my disposal. Apart from that, it is important to note that there is specific provision in the legislation in regard to spouses. Section 207 addresses the particular matter of the improper disposal of assets and the avoidance of certain transactions. That supplements measures that already exist in law to address the issue.

In regard to assets offshore, we have a reciprocal judgment and enforcement arrangements with other EU member states and I take it these will be used in any enforcement proceedings. We have analogous but not identical reciprocal arrangements with certain countries outside the EU as well.

The difficulty I have with this amendment is that it seems to envisage that the only persons who will deal with NAMA are persons who reside in Ireland. Any EU national will be free to deal with NAMA. A UK national or a national of any of the other member states is free to enter into contracts with NAMA in regard to the bank assets. The use of the word "benefit" or "advantage" in the section is imprecise and I am not clear to what it refers because NAMA, as a commercial entity, will operate and execute concluding contractual arrangements which are of mutual benefit for NAMA and whoever enters into a contract with it. The advantage and the benefit, therefore, is mutual between NAMA and any person acquiring an asset or coming to an arrangement in regard to an asset with NAMA. That phrase is difficult to translate into law.

The amendment contains the phrase "unless such person is tax resident within the State and had complied with his or her tax liabilities to the State". Plainly it is an infringement of Article 12 of the European Union treaties to say that the only person who can deal with NAMA is a person who falls within that definition because that excludes all other EU nationals. That is a further difficulty with the amendment.

In regard to compliance with tax liabilities, the Deputy appears to be dissatisfied with the tax clearance arrangements. I do not know what further super-added form of compliance the Revenue Commissioners can produce at present which would address her difficulty because that is how Revenue certifies the compliance of a taxpayer, by introducing a tax clearance certificate. I do not know what additional document the Deputy is seeking to generate under this section. For all those reasons I cannot accept the amendment.

If the Minister has advice, I must agree with him. He is the person with hundreds of civil servants, the Office of the Attorney General and the Revenue Commissioners at his disposal. What is happening is a scandal. Significant numbers of people avail of the potential for favourable tax positions in respect of their relative position to NAMA and the Minister should have general powers that seek to limit that.

We can deal with that at a later stage in the Bill.

Yes. Given that it is a Revenue issue it is difficult to draft this from the Opposition side. I talk to people in business and, no more than the people on the Minister's side of the House, one hears of great efforts being made to establish advantageous structures which will benefit some of the individuals in the context of the loans and the lending side. The Minister must bear in mind another point, which I raised previously, of which I am sure he is aware, and which must be painful for him because he is the Minister for Finance, as I foretold in the budget debate, banks are putting in applications for extremely extensive refunds in regard to their tax losses. I do not have a figure for it yet. The Minister may have a figure but I believe it will probably run to approximately €1 billion, offsetting tax paid in the period 2007 to 2008 against losses incurred in the current period.

That is not relevant to this amendment.

I am disappointed that the Minister is not prepared to accept the spirit of this amendment. What it seeks to address may be amendable by reference to other sections that deal with tax certificates. I do not have to go over the history of tax certificates in regard to this House alone to point out that they are an extremely imperfect and limited instrument. They do not mean that a person is tax compliant. In the case of some of the developers there are more than 300 companies involved. The more compliant is the structure we have in place — this relates to the earlier point about process auditing — the more we will get out of it. This proposal would support the work of the Minister.

Could this issue be examined in the context of tax avoidance schemes? That might cover the issue raised by the Deputy.

The issue Deputy Burton has raised is more serious than that. This is not just a matter of tax avoidance, it is a matter of debtor avoidance. The Deputy is referring to a person who envisages that NAMA is not a bailout for developers and is planning his or her affairs accordingly to ensure that no execution can take place against his or her assets. In plain language, this is to prevent fraud.

It is a combination——

In the context of this Bill, the question must be, what further measures can we include to prevent that phenomenon. I drew attention to one that we have inserted in the legislation already. That is the issue in this context.

Is Deputy Burton pressing the amendment?

No, I will table a further amendment on Report Stage and perhaps talk to the Minister's officials about this issue.

Amendment, by leave, withdrawn.

I move amendment No. 10:

In page 18, line 13, after "includes" to insert "a personal guarantee and".

Before the Deputy speaks to her amendment, I know it is unorthodox to reply to it but there is a technical answer to the issue she has raised which covers it.

Is the Minister referring to the previous amendment?

No, this amendment relating to the guarantee.

Before the Minister replies I wish to mention a point which may be of assistance. It follows on from the previous point. Some of the people who will be involved in the NAMA process have literally hundreds of companies. Some of those are in difficulty and others are not, as we understand it. I gather that the Minister is taking an approach both per bank and per developer, and perhaps per region. That is what the draft business plan indicates. If a developer has, say, 80 companies or vehicles, which are the subject of distressed loans and within that group of 80 companies the developer has assets which are yielding income, the good assets as well as the distressed assets or loans will go into the NAMA portfolio and will be paid for. However, the developer may have offshore, in other vehicles or in other jurisdictions, significant volumes of companies and assets which are performing well and which are not in the group that are subject to the NAMA process.

My view, and the view of many taxpayers, is that a developer and bank group, the holders of the loans — the banks — should not allow a situation to develop where, say, 70% of a developer's good and bad loans in a group of companies with a particular bank would go into the NAMA process while leaving large volumes to one side either here or in other jurisdictions. We have seen examples of people prominently taking up residence in other countries — it has been announced in the newspaper. It appears, however, from another part of the newspaper that deals in which they were heavily involved will be the subject of the NAMA process. I will give the names to the Minister in private. Why do the personal guarantees not extend to the totality of the borrowers' portfolios either in this or other jurisdictions? It is somewhat galling to see people heading to Switzerland and other countries. Potentially, assets and loans will go into the NAMA process but we do not know that because the process has not started. By all accounts there may be volumes of assets, either within or outside the jurisdiction, offshore for tax purposes. It must be remembered that some of the developers at the height of the boom were beginning to exercise a non-resident tax status, which I will not talk about in detail, but there is a need to protect ourselves. The horse may have already bolted and we may just get Christmas cards from places such as Villefranche-sur-Mer. Some of these people were giving advice two years ago about the kind of Government we would have, but now are offshore.

The Deputy has made her point.

What about the personal guarantees being extended to cover their entire portfolio of assets subject only to the Family Home Protection Act 1976, which is a requirement?

I want to clarify one issue to help the debate. First, on the technical amendment, guarantee is included in the definition of security but it is not included in the definition of charge. That is a legal matter because a charge, in legal parlance, does not include a personal guarantee. It is the distinction between real and personal collateral, if you like. The lawyer's way of expressing that is that a charge is a security on an asset whereas a guarantee is a security against a person. In terms of the amendment, it is unnecessary because that is all covered in the legislation.

All guarantees in the case of the guaranteed banks clearly fall within the legislation. I am not sure whether the difficulty to which the Deputy refers relates to a bank that is not guaranteed.

I accept what the Minister is saying, but in that situation will somebody who has other extensive assets which were not the subject of the guarantee or groups of companies be asked, if he or she goes into the NAMA process, whether or not his or her guarantees extend to his or her other assets? That is one way of seeking a higher level of recovery in the NAMA process.

This is a difficult point. Various developers have stated that NAMA is the only game in town and they want it. I understand that the Minister got a fantastic ovation at the chamber of commerce the other night, just as the Taoiseach got a standing ovation. Not since the days of the Galway tent have we heard such a positive reception for Fianna Fáil Ministers and officeholders.

I was never there. I never heard them.

Can I just ask the Minister?

Deputy Costello was there. He maintained I made a very good speech.

Good.

What is the story with somebody who, according to reports, is eager to enter the NAMA process? Is what such persons bring to the process simply that group of net assets identified by reference to their relationship with banks involved in the NAMA or are they required to make a wider disclosure and give a wider level of guarantee? In the latter case, where persons have significant other assets, it may be a significant way of encouraging their co-operation with the process.

What measures does the Minister have in place to protect the security that the bank got originally? For example, does NAMA have access to the original letters of approval and see the absolute detail of the securities given, or is there any way in which those securities can be somehow diluted now without NAMA being alerted to some rewriting of arrangements? Does the Minister have rights of access to these documents? Is he in the process of seizing, or insisting as a preliminary that these documents be furnished, secured, and so on? I refer to protection at a time when persons could seek to rewrite arrangements or create ransom plots, and so on. I seek to understand what the Minister has done to protect that.

First, we have the right to see them at present and we have been seeing them on a sample basis to assist us in compiling information. The key point here is under the Bill each loan must be separately valued and, therefore, all of the documentation must be examined at that stage, and the perfection of the security is a crucial issue in the valuation. If the perfection of the security is defective, the value of the loan falls with the imperfection. That is one of the most important reasons the loans require separate valuation, that is, one must be certain that the necessary perfection has taken place from a legal and technical point of view. Clearly, we must inspect all of the documentation to establish that.

On Deputy Burton's point, first, the assets we are taking are bank assets. Some of them are developers'. Some of them are associated commercial loans. However, all of these bank assets must be from participating institutions. We are not taking over bank assets that lie with other institutions, but if they are in the institutions, then we take over the entire portfolio of that borrower, both performing and non-performing.

Our position on security depends on the loan transaction. NAMA will stand into the shoes of the bank in whatever rights the bank had in respect of a transaction. If the loan was secured solely by a personal guarantee, then that is the only security NAMA has in respect of that loan. If it was further secured by the deposit of title documentation or the execution of a legal charge, then NAMA has that security in its possession in respect of that loan. Therefore, the loan can be unsecured, personally secured, secured by way of charge or a combination of both. That is the position on NAMA. It will stand into the shoes of the bank. It will have the same rights as the bank had as against that creditor in respect of that loan.

We cannot vary that arrangement but what exists in our law is a capacity to pursue a debtor irrespective of the assets. The mere fact that assets are not held as security does not prevent a creditor — in this position, NAMA — from executing a judgment mortgage against the individual who owes the money, obtaining a judgment and then executing a judgment mortgage against other lands which may not be the subject of a charge. That enforcement weapon is available to NAMA. Provision has been made in the legislation — we will deal with this when we come to enforcement — for vesting orders where a summary procedure has been made available specifically to NAMA to realise securities that it has against a particular creditor.

According to the Bill, a charge includes assignments by way of securities, which is the types the Minister referred to at the beginning, but also "an undertaking or agreement by any person (including a solicitor) to give or create a security interest in property". I cannot understand why the Minister would not strengthen his position by including personal guarantees.

A personal guarantee is something that banks looked for, and frequently obtained. In fact, banks look for personal guarantees all of the time from small business persons who are developing their businesses — Deputy Michael McGrath will know this well from his own experience — and from, for example, a young adult buying a house with the support of his or her parents. Personal guarantees are part of the weave and weft of Irish business, particularly with smaller customers. All I am asking is why the Minister will not insert the personal guarantee here. It would increase and strengthen the Minister's powers vis-à-vis the person who gave collateral for the distressed loans.

To explain again to the Deputy, the definition of security includes a charge, a guarantee, a right of set-off, a debenture, a bill of exchange, a promissory note, collateral, any other means of securing the payment of a debt and any other agreement or arrangement having a similar effect. Personal guarantees are fully within the scope of the legislation. If there are personal guarantees in existence, NAMA, by transmission from the bank, has the benefit of that personal guarantee. The guarantee is fully covered in the interpretation section.

The Deputy referred to the section relating to an undertaking or an agreement by any person, including a solicitor. It is interesting that the phrase "including a solicitor" was used because solicitors normally give these undertakings.

It is a solicitor's undertaking.

It is not necessarily limited to solicitors. The undertaking referred to would cover interbank undertakings. The reality of this is that the undertaking relates to a charge, mortgage or deposit as this case may be.

The amendment seeks to add the word "guarantee" to the list in subsection (a) to ensure it is specifically referred to.

It is referred to under "security". I am willing to consider this in further detail before Report Stage. It is well established in law that a charge is a real security; it is a charge over an asset. That is the legal definition of a charge. A personal guarantee is not a charge.

One does not include a personal guarantee in the definition of charge. If the Deputy can point to a place in the Bill where this prejudices the operation of NAMA I will examine it. I cannot see anywhere in the Bill where such prejudice exists.

The Minister will be aware there are reasons to be concerned that many of the undertakings are not fully or properly completed.

The Minister has undertaken to come back to the matter on Report Stage.

If the difficulty is in relation to personal guarantees then that clearly has an enormous impact on the value of the loan from the point of view of our acquiring it. If the question is related to defective undertakings, likewise that has an even greater impact I would suggest on the value of the loan. The valuation process of each loan must examine the perfection of the security interest.

By way of clarification, can a developer whose loans are taken over by NAMA but whose business is relatively healthy notwithstanding the downturn, buy from NAMA assets of which it is disposing?

I do not think the question is relevant to amendment No. 10.

I am merely seeking clarification on how people will be treated.

I am sorry, I do not understand. Perhaps the Deputy will repeat his question.

The question is if a person has a performing asset, is paying his or her bank loan but falls within the land and development category and is transferred to the agency under the legislation, can he or she buy assets from NAMA. The answer is that such people can because they are a performing borrower and there is no stain on their character.

Why then are they going into NAMA?

This issue was explained to the Deputy's party leader when he got it completely wrong several months ago. I have said again and again that performing loans are going into NAMA. That is from where the income stream is coming.

Amendment put and declared lost.

Amendment No. 11 has been already discussed with amendment No. 1.

I move amendment No. 11:

In page 19, subsection (1), line 13, after "indebted" to insert "or obligated".

Amendment agreed to.

I move amendment No. 12:

In page 19, subsection (1), line 27, to delete "at a profit" and substitute "or otherwise exploited".

This is a technical amendment which proposes to amend the definition of development land so as to broaden it.

Amendment agreed to.

I move amendment No. 13:

In page 20, subsection (1), between lines 14 and 15, to insert the following:

" "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;".

This is an important amendment which seeks to define "market value" and to note that current market value includes such element of the current market value as is commercially attributable to the anticipated long-term value of the asset. Given it is almost 6 p.m. we will perhaps debate this issue in greater detail next week.

The fundamental flaw in the NAMA process is the proposal to overpay for the assets by a significant amount, having reference to a long-term economic value which will allow an inflator factor of, the Minister suggests, 15% which will amount to €7 billion or €10 billion to €12 billion.

The European Central Bank and various other bodies whom the Government says totally support the plan have warned——

As debate on this amendment will take considerable time and it is now 5.55 p.m. I propose that we adjourn until 11 a.m. next Tuesday. Is that agreed? Agreed.

Progress reported; Committee to sit again.
The select committee adjourned at 5.55 p.m. until 11 a.m. on Tuesday, 27 October 2009.
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