SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate

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

Chairman

I welcome the Minister for Finance, Deputy Brian Lenihan. The purpose of the meeting is to consider the National Asset Management Agency Bill 2009. Proceedings will be suspended at 1 p.m. and will reconvene at 2 p.m.

SECTION 4.

Debate resumed on 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;".

- (Deputy Joan Burton).

Deputy Joan Burton

This amendment deals with valuation, which is fundamental to the Bill.

Deputy Joan Burton

The Minister is conspiring against the people.

I never used the word "gabble" regarding any part of the Deputy's contribution in this House. I tried to assist the House on Friday evening by reading a detailed note on this issue into the record. The Deputy has turned that around on the basis of a Sunday newspaper.

Amendment, by leave, withdrawn.

Deputy Brian Lenihan

I move amendment No. 14:

In page 22, subsection (3)(e), line 18, to delete “covenants of it” and substitute “its covenants”.

Amendment put and declared carried.

Question: "That section 4, as amended, stand part of the Bill," put and declared carried.

SECTION 5.

Deputy Brian Lenihan

I move amendment No. 15:

We have already discussed it.

Amendment agreed to.

Deputy Brian Lenihan

I move amendment No. 16:

In page 22, subsection (2)(b), lines 29 and 30, to delete “or NAMA, as the case may be,”.

Amendment agreed to.

Question proposed: "That section 5, as amended, stand part of the Bill."

Deputy Joan Burton

Does the Minister see the description of the Bill as the National Asset Management Agency Bill as still adequate? We are now advised contrary to the popular public understanding, that the mechanism and the draft business plan — and how careful the Minister was to tell us it was a draft business plan — is no more than scenario sketching.

The Bill has been flipped rather like how properties used to be flipped at the height of the property boom, such that the critically important, fundamental and primary role of it is that the bonds to be issued will now be issued by a special purpose vehicle which the Minister has expressly said will be privately controlled and the State in regard to the issuance of the largest amount of debt ever issued by this State will take responsibility. The Minister can laugh all he likes, but the fundamental point, whether the debt is on balance sheet or off balance sheet, it is the responsibility and liability of the State and is seen as such, correctly, by the international bond markets.

The Minister will recall that in the case of Enron, when it collapsed, it collapsed because the structures of off-sheet vehicles were such that they undermined the integrity of the core company and the core balance sheet.

Deputy Brian Lenihan

This is not like Enron. Is the French Republic like Enron?

Deputy Joan Burton

That is fundamentally what happened to Enron. It is the same idea with all badly structured propositions and vehicles. If the debt goes off the balance sheet, as the Minister has contrived to do via EUROSTAT, which is a technical and statistical way of dealing with the debt, it would be entirely different to the information conveyed in yesterday's news article. It specified that once the special purpose vehicle is established, that vehicle will issue the NAMA bonds.

Therefore, the use of the description of this as a NAMA Bill is no longer appropriate because the Bill has been flipped so that the key role of issuing the bonds will rely on private investors, as per a quote attributed to the Department of Finance which indicates that the Minister hopes that private investors will come forward to take a majority stake in the special purpose vehicle. The amounts mentioned in that respect vary between €50 million and €100 million. I see the Minister nodding so that part of the article seems to be correct.

Everybody here believes NAMA is issuing the bonds because NAMA is the subject of the Bill, not the powers to grant a special purpose vehicle. If what is suggested in the article happens, that special purpose vehicle will issue the bonds and be controlled by private interests; the State will have a minority shareholding. The risk to every taxpayer in Ireland arising from this flip of the fundamental design of the Bill structure is so enormous that the Minister must tell us his current conception of NAMA. It seems to be very different to the conception the Minister floated a couple of days ago.

The Minister mentioned France. I noticed that the analyst for Société Générale, who I think is Irish but lives in France, noted that what had happened had been done but noted a very severe warning about the Minister's actions. Who is designing this? Is it designed by legal advisers or by the Minister and his Department? The Minister's honesty and forthcoming nature regarding this debate are fundamental to the taking on by Irish taxpayers of €54 billion, possibly more, of debt through the NAMA vehicle. The Minister has just changed the vehicle. It is as if he has taken the wheels off it and transferred them to another vehicle. NAMA is now up on blocks in a garage and Mr. McDonagh, the managing director designate of the NAMA, will have to ask the majority private investors in the special purpose vehicle whether he can carry on according to the schedule as described.

Equally, and this is the important point, the private investors in that SPV will be in it for the money. They will decide when to issue the debt. Mr. McDonagh has told people in various briefings that the NAMA board and he and his staff will control the process very tightly. How can they do that if control of the key factor regarding the banks and their getting money is transferred to a special purpose vehicle which will be controlled in a majority way by private investors? This is such a fundamental change that the Minister must intervene at this stage. He pulled a trick the week before last in that he offered us the draft NAMA business plan just before we voted, with the result there was no opportunity to discuss it. The draft business plan refers to the existence of SPVs, as does the Bill. However, as far as I am aware, nowhere has it been suggested that the SPV majority interest will be private and therefore that this private interest would ultimately control the issuance of €54 billion of public debt.

The Minister may tell me this is a convenience of some kind for EUROSTAT and that there will be a gentlemen's agreement. We already have one set of gentlemen's agreements stating that developers will be pursued for their debts. We have another set of gentlemen's agreements, namely, that the Minister will exhort banks to issue credit——

Deputy Brian Lenihan

The Deputy is misrepresenting everything. She has been at it all year.

Deputy Joan Burton

——to small and medium-sized businesses. I want the Minister to explain why he has flipped the strategy and why he is now giving control of the issuance of bonds to the majority private stakeholders in the SPV.

Deputy Richard Bruton

I am not sure this relates to the section but it is an important question. The Minister will be very much aware that special purpose vehicles came into very serious disrepute in the course of the very banking crisis that has brought us to this sorry pass. Many banks were putting risks off balance sheet which consequently were not properly exposed to the kind of risk management supervision banks should have applied. I accept there is a desire to manage this in an off balance sheet way but there would be a great deal of disquiet if there were to be any suggestion that private interests which had a majority share holding in the special purpose vehicle could benefit from the taxpayers' support for the banking structure. The Minister needs to be more forthcoming in explaining whether he is using special purpose vehicles, how the taxpayer will be protected, and whether this will in any way undermine the supervision of the NAMA exercise we are trying to get right. I hope the Minister is capable of dealing with this because if there were any hint of private sector involvement and private benefit accruing from this, it would really drive people wild.

We are dealing with the question that section 5, as amended, stand part of the Bill.

(Interruptions).

Chairman

We will not discuss the detail of the SPVs, special purpose vehicles, until we come to section 12.

Deputy Richard Bruton

The Minister ought to circulate a document setting out for the House the French precedent if he wants us to take it. The notion that in dealing with problems of 250 amendments and 250 sections the Opposition would have access to a French precedent and ought to be able cite it with confidence, which the Minister is suggesting, is just bizarre. If this is going to be a central part — as it appears to be — the Minister has a duty to those elected here to lay a document before us so that we can view it and have the same confidence as he appears to have in the robustness of this approach.

Deputy Brian Lenihan

I undertook to circulate a document earlier when we agreed when this subject could be discussed. The Chairman says we cannot discuss it at this point.

Deputy Joan Burton

I refer to section 5 which I will quote for the benefit of the Minister:

5---(1) The Minister may make regulations to do anything that appears necessary or expedient for bringing this Act into operation.

(2) Where a provision of this Act requires or authorises the Minister or NAMA to make regulations, such regulations-

Will the Minister provide a detailed statement, together with briefing notes from his Department and indeed from NAMA, to the Opposition on how this is to proceed? Are we being asked to buy a €54 billion pig in a poke?

Deputy Arthur Morgan

I apologise to the Minister for being a little late. I assure the committee I was neither in bed nor napping but at the Select Committee on Enterprise, Trade and Employment at which I tabled amendments on the Labour Services (Amendment) Bill 2009.

Section 5 sets a very dangerous precedent because it would enable any Minister to come before the House with a skeleton Bill and get it through the House on the basis that it may appear rather innocent. However, if it contained a section similar to section 5 then it would be wide open afterwards. I hope the Minister will revert on Report Stage with some changes. He is nodding affirmatively and on that basis I will sit down.

Yes, I will try to assist the Deputy. First, section 5, to which, as I pointed out, the Deputy had no objection by way of amendment, provides powers for the Minister to deal with unforeseen circumstances, and at this point no such circumstances are foreseen. Consequently, to reply directly to the Deputy, my Department has no proposals in hand at this point to adopt a regulation under section 5. Were it to have such a proposal, the matter could be dealt with at that stage. However, at present I have no proposal in respect of section 5. Were the Deputy to seek further assistance regarding section 5 as to the statutory precedents for this type of operation, I would be glad to make available that information to her.

As for the wider question that members are anxious to discuss, I accept it is an important matter which should be discussed and I do not question members' right to raise it. However, it arises directly under section 12 of the legislation and later under section 46. As I understand it, section 12 deals with the powers of NAMA. I refer in particular to section 12(2)(n), which allows NAMA to “form a NAMA group entity for the purpose of performing any of its functions”. That is the appropriate statutory peg and that is the power given to NAMA. It does not require a fresh regulation to set up this vehicle. I am anxious to make the following points clear. This vehicle is being established from the point of view of Ireland’s national accounts and Ireland’s good standing in the European Union. It conforms to the European precedent and I will provide any information I have to Opposition Deputies in advance of any discussion on that section.

Deputy Kieran O’Donnell

The Minister should circulate it.

Deputy Brian Lenihan

To assist Deputies, the Chairman could postpone that section or a take it out of sequence if Opposition spokespersons want to look at the note in some detail over a break period. I appreciate that we will sit until 8.30 p.m. but I hope to have such a note ready by lunchtime. It will outline in detail what is intended in the proposed vehicle. It is most important to understand that acceptance by EUROSTAT of this arrangement means NAMA is off the balance sheet from the national debt point of view. Other matters have been raised about the vehicle, in a pejorative sense, but I do not want to deal with them at this stage as I am in the hands of the Chair.

Deputy Emmet Stagg

Section 5 gives the Minister power to do anything. I have never seen that word used in legislation. Words used to be prescriptive and to describe action that it might be necessary for the Minister to take but to say that the Minister——

Chairman

We can address this on Report Stage if Deputy Stagg wishes to change that. There are no amendments on it at this stage.

Deputy Emmet Stagg

I am talking about the section and I am entitled to talk about it. I do not interrupt the Chairman very often on these proceedings. The Minister says there are no proposals for this at the moment but that makes matters worse because we do not know how the Minister will use this wide, sweeping power to do anything he wishes. That is the provision the Act will include and that is what the law will be when this section and the Bill are passed. What is required is a form of words to indicate that the Minister does not have the power to do anything he wishes. At the moment it is wide open although there are no proposals by this Minister for Finance or any future Minister for Finance, given that the current Minister might not be in office for very long——

Chairman

Just a second, Deputy.

Deputy Emmet Stagg

Why does the Chairman keep interrupting me?

——that we want to get through as much of this Bill as possible but we have been here for 50 minutes wasting time and, as a member of the committee, I appeal to members to move on. The Minister is giving himself many powers and I wish to question him on this instead of listening to what we read in the newspapers yesterday.

Deputy Kieran O’Donnell

Is Deputy Fahey not interested in SPVs?

Deputy Joan Burton

In view of what the Minister said, why is section 5 necessary?

Question put.

The Committee divided: Tá, 7; Níl 5.

Tá

Ahern, Michael.
Andrews, Chris.
Brady, Cyprian.
Conlon, Margaret.
Fahey, Frank.
Lenihan, Brian.
O’Connor, Charlie.

Níl

Bruton, Richard.
Burton, Joan.
Flanagan, Terence.
O’Donnell, Kieran.
Stanton, David.

Question declared carried.

I move amendment No. 17:

In page 22, after line 39, to insert the following subsection:

"(4) The expenses referred to in this section shall be submitted to the Oireachtas Committee on NAMA.".

Amendment put and declared lost.

Question proposed: "That section 6 stand part of the Bill."

Deputy Richard Bruton

I refer to the issue of expenses and the transparency of same. The reason the amendment was tabled is that there needs to be much greater scrutiny of the likely expenses of NAMA. The NAMA draft business plan sets out expenses of €240 million per year every year for 11 years. It does not offers any explanation of any great detail for this except in respect of the first three years, for which some indication is given on page 12 of the business plan. Again, this is quite remarkable. I presume the due diligence fees are calculated at 0.2% of the whole portfolio. We then move into service fees at €51 million. Thus, less than 0.1% of the value of the portfolio is to be a service fee. Then there will be liquidation expenses which appear to be of the order of 0.3% of the total portfolio. That is all we are told.

The likelihood is that we will consider appointing receivers to much of this property and at that stage the management and maintenance of the property will come within the remit of NAMA as it tries to protect its security. The idea that it can do all of that for 0.1% of the asset value seems extremely optimistic. That is why I would like to have seen this tabled to the Oireachtas for consideration at some point. There are mixed views on the extent to which this will be litigated in the first place. I accept the notion that securitisation is pretty established and one would imagine it would be fairly secure against litigation. However, in view of the consequences of receivership and the issue of management and protection of property, it seems an extraordinarily low fee to expect.

I do not want to get into the whole NAMA business plan, but it is clear that if we marginally changed some of the assumptions in respect of the fees to be charged, the discount rate to be applied to highly risky forecasts of asset recovery, the level of asset recovery or the default on interest — in respect of rolled-up interest and inability to pay — we would get an extraordinarily different result. It comes back to the robustness of the business plan, although I know we cannot debate that here.

The Oireachtas should have some reasonable oversight of the expense projections, and there should be a matrix of expenses which is credible and which has some credibility from people who are experienced in asset management. The levels of costs for receivers, for maintaining property and for paying management companies to secure and manage properties are not credible. We are all beset with constituents who are amazed at the cost of management fees for their little apartments in tiny blocks, but NAMA seems to be able to work miracles in the way it can keep its service fees down. I am concerned that the cost of NAMA is not getting much attention and the business plan has offered us pretty skimpy evidence of what it will cost.

Deputy Brian Lenihan

My officials reminded me this morning to correct something I uttered on Friday afternoon in response to Deputy Burton, who raised the same question. Deputy Burton had raised the possibility that much of this fee income will be a major slice of the fee income enjoyed by the different professional firms in the Dublin area. I must first point out that the business plan, which is a draft plan, can be evaluated by the Oireachtas, through the chief executive, when NAMA commences. On the point I wanted to correct, I neglected to mention one thing. I said that the payments to the banks in respect of management of the loans will be part of the fees. However, in addition, liquidation and receivership expenses are a substantial part of the allowance we have had to make here. I did not mention that on Friday afternoon, although I should have.

The fee levels are estimates. Anything after three years is almost impossible to predict with any certainty, as the performance of the assets and the economies in which they are located will determine how much work NAMA will have to put into working out the assets to achieve the optimal outcome. At present, tender prices for fees are coming in very low. Of the €240 million estimated fees for 2010, the majority of this will be recovered from institutions as they relate to due diligence costs, which were estimated at €165 million at the time of the draft plan as tenders were ongoing. In fact, the latest estimate of costs will probably be closer to €100 million as a result of the outcome of EU competitive tendering, which is under way and is currently being evaluated. To ensure that assets purchased on behalf of the taxpayer are properly valued, there is no alternative to a comprehensive due diligence process and the cost that occasions. It is especially important that the documentation on which the loans were originally advanced and any subsequent amendments to legal documentation or security are assessed to ensure they are legally adequate so that NAMA can manage and, as necessary, enforce or restructure loans.

From 2011 onwards the interim chief executive has included in the draft NAMA plan €160 million per annum for liquidation expenses. These may be more or less depending on how many borrowers NAMA will enforce on, but it shows NAMA will be serious about dealing with those who cannot meet their obligations. It is expected to pay the NAMA banks for administering the assets on a cost-recovery basis.

EU rules prohibit the inclusion of any profit margin in fees payable to banks for administering impaired assets as part of an asset relief scheme. The fees equate, as was outlined by Deputy Bruton, to between 0.5% and 0.2% of the €77 billion loan portfolio. It will be only after the first year that the annual costs of NAMA can be identified with complete certainty. NAMA acquires all service providers subject to EU public procurement procedures, and the most economically advantageous tenders are chosen.

Deputy Richard Bruton

My question was whether these figures are credible. Are they backed by any credible assessment of service charges that are likely to arise?

Deputy Brian Lenihan

They are, of course. There is a great deal of work being done by the people involved, and naturally they are basing their estimates on their experience to date and their analysis of tendering patterns.

Deputy Richard Bruton

Could the Minister arrange for members to get a more detailed breakdown of the expected service charges, where they arise, and the fee sources? It is important that we try to get a handle on what the operating costs are likely to be.

Deputy Brian Lenihan

I will try to give a larger indicative outcome, but it is a draft plan. NAMA does not exist yet.

Deputy Joan Burton

The main valuer is the person who was advising the developers until recently. The firm of solicitors that have drawn this spent their time advising the developers over recent years. They plead Chinese walls. Some of them have so many Chinese walls that one can see the rickshaws lined up at a distance.

Chairman

The Deputy is travelling a bit, but I will let him go on.

Deputy Pat Rabbitte

I will not detain you long, Chairman, but the point about a conflict of interest is important if we are going to be shovelling out this kind of money in fees. We need to know what kind of supervision exists for all of this. What proportion did the Minister say will go to the banks as fees? When he talks about the tenders being low, does he mean at 2000, 2002 or 2004 values? The business correspondent of The Irish Times stated yesterday that anybody who comes in with a tender above 2000 prices ought to get the bum’s rush. What is the Minister’s view of that?

The issues here are very big. Deputy Burton made a point about this kind of money being given to professional companies in the Dublin region. We need to take great care with how such money is dispensed.

Deputy Kieran O’Donnell

People have grave misgivings at the amount of expenses that will be incurred. Under section 6(3), can the Minister tell us the amount of expenses incurred by the NTMA on NAMA since 7 April? On Second Stage, he said that a final business plan would be completed by the NAMA board. When will that final business plan be completed? I note that in the draft business plan, the Minister gave ten years of cash flow projections, but he only gave three years of profit and loss budget projections. For reasons of consistency, we should see ten years of profit and loss projections as well. It might lead to proper, detailed information and I would like the Minister to make commitments in those areas.

Deputy Lucinda Creighton

I thank the Chair for allowing me to speak on this amendment. There is a genuine concern that professional fees will grow out of control over the lifetime of NAMA and might become a gravy train for certain professions. Most of these professions are experiencing a lot of difficulty and this is well documented in the media and elsewhere. I know the figures are generally set out in the draft business plan and that the sum total over the ten year period is expected to amount to about €2.64 billion. However, can the Minister give a breakdown of the proportion of that money which will be allocated to lawyers' fees, valuations, accountancy fees and so on? In order to instill some level of public confidence in this Bill, I ask the Minister to give serious consideration to accepting the Fine Gael amendment to set out such expenditures before the Oireachtas committee.

Chairman

There is amendment to that section.

Deputy Brian Lenihan

Deputies are essentially asking me to provide more detailed information on a draft business plan about an entity that has not yet come into existence. I will try to assist them and I agree with Deputy Creighton. While the appetite for competitive tenders is overwhelming, that may not remain the case in a few years' time. Deputy Rabbitte asked about our knowledge of the competitive character of tenders with respect to the work of the NTMA in recruiting the services of banks, valuers and the like. The experience to date has been that it is a highly competitive market, where many are anxious to be of assistance at relatively low rates. Deputy O'Donnell also asked for the amount the NTMA has spent to date, but that is not a matter that arises under this section at all. However, I will arrange for the NTMA to forward that information to him.

Deputy Kieran O’Donnell

It is within section 6(3).

Deputy Terence Flanagan

The taxpayer is entitled to know.

Deputy Brian Lenihan

The taxpayer is entitled to know, and I will arrange for the information to be furnished to the Deputy.

Question put and agreed to.

SECTION 7.

Deputy Joan Burton

I move amendment No. 18:

In page 23, subsection (1), line 2, to delete “section 199(2)” and substitute ”this Act”.

Why has section 7 been drawn up in the way that it has been? It deals with offences where a person provides false or inaccurate information and where a person fails to comply with certain of his or her obligations under the Act. Our view is that the penalty regime is very light. I would like to hear the Minister's thoughts on this section. The Bill deals with more money than any previous legislation in the history of this State. It seems to me that the penalties ought to be commensurate with the amounts involved and the risks being taken by the State and its citizens.

Deputy Brian Lenihan

In addition to moving her amendment, Deputy Burton commented on the general philosophy of section 7. This section deals with instances where an offence is committed under the Bill. Given the potential scale of NAMA, it is essential that it is a criminal offence to deliberately mislead the agency or commit gross negligence. Such offences include providing false or inaccurate information to the agency or failing to comply with one's obligations under the legislation, including the intention of withholding information in breach of an obligation to provide it. Offences are triable summarily or on indictment.

The punishment for credit institutions is more severe than that for a person because the former have signed up to the agency on a voluntary basis. As it was their choice to apply for inclusion, the punishment for committing an offence should be more severe. Credit institutions also have greater capacity to pay.

Amendment No. 18 would make it an offence to breach any obligation under the Bill. That is a far-reaching provision and an adequate definition is needed of "any offence." The proposed amendment appears to provide that any breach of an obligation under the Bill once enacted would constitute an offence. It would not have any regard for the consideration of proportionality or the definition of the offence. Constitutional difficulties could arise if offences were framed in such broad and vague terms and the result could be to criminalise behaviour in inappropriate and unanticipated circumstances. If, for example, the NAMA board held a meeting without a chairperson or failed to provide NAMA with a seal at the earliest opportunity after its establishment, a criminal offence would be committed.

Deputy Burton appeared to express concern that the general criminal regime provided in the Bill is not rigorous enough. The Bill as it stands offers the option of trial on indictment as well as a summary trial. A trial on indictment carries heavier penalties. If the Deputy has further ideas for improving the Bill in this regard, I will examine them on Report Stage.

Deputy Joan Burton

I thank the Minister for his response. Many of the obligations set out in the Bill, such as those requiring lending institutions to share information about their assets, carry no sanctions for breaches. The NAMA process is intended to replace banks' toxic debt with Government-backed bonds. If NAMA is to work as envisaged by the Minister, it will require a huge amount of honesty from all participants. While they may seek to take advantage of the Bill, they should not do so in an unfair manner. We have just discussed the advisers who will be employed in the context of the €240 million but at the end of the day, if sanctions are not strengthened against those who consciously mislead or give inadequate or wrong information, the deterrents available to the taxpayer are limited. My amendment would create a sanction against breaches of the Bill because many of its provisions, including in particular those relating to banks, do not carry sanctions at present.

We do not know if Anglo Irish Bank informed the regulator, the Department of Finance or the Minister about the severe difficulties it was facing but it and other entities continued to claim in public that everything was fine until the point, one minute after midnight, when everything collapsed.

Chairman

We are not discussing Anglo Irish Bank.

Deputy Joan Burton

Why is the Minister so hesitant in introducing realistic sanctions? The approach of the American authorities to the people at the top of their banks is much more robust than ours. No one wants to see someone in handcuffs and an orange jumpsuit but given the costs which bankers have inflicted on ordinary Irish taxpayers and the extraordinary powers which the Minister seeks elsewhere in the Bill, would he not like to put a little of the fear of God into people so that if they trick or treat him they are repaid with criminal sanctions?

Deputy Brian Lenihan

The €20 million fine provided for in section 7(3)(b) and the five-year jail term provided elsewhere are not light penalties. Section 7 seeks to address the points raised by Deputy Burton. It is fundamental to the valuation process that the banks behave honestly and the section provides for criminal penalties in the event of dishonesty in the valuation process. It also provides for an offence of withholding information from NAMA with the intention of having a material impact on how it reaches a decision on acquiring or valuing a bank asset. The intentional withholding of information is in itself an offence under these subsections. Equally, a person who intentionally withholds information from NAMA in breach of an obligation to provide it commits an offence. In respect of how the agency deals with banks’ assets so that they cannot be concealed off its balance sheet, the value at which the asset is determined is important.

Where a bank commits an offence, the fine will not exceed €20 million on indictment or €5,000 on summary conviction. If a person other than a credit institution commits the offence the fine will be €5 million on indictment or €5,000 for a summary conviction. These are significant penalties and periods of imprisonment are also prescribed for offenders. If Deputy Burton wants to strengthen the section further, I will consider her suggestions. The section is fundamental to the Bill and it is important we protect the taxpayer with the full rigour of the law against any person who intentionally withholds information from the agency.

I understand why the Deputy tabled her amendment but it will have the effect of introducing further uncertainty in regard to the obligations that must be enforced under the legislation. Truth is the fundamental obligation in respect of the dealings of credit institutions and the agency. The section provides for that.

Deputy Joan Burton

In respect of information given by a bank or a person described as committing an offence, who in the Minister's view is likely to be held responsible? Will it be the official who deals with the file or his or her board of directors? The section does a poor job of setting out for banks the extent of their obligations.

I am reminded of the cases of fraud which occurred in the meat industry. Ultimately, it was line managers rather than directors who were held responsible. Will the Minister examine this matter to ensure responsibilities are placed at senior management and board level in the organisation? In the many tribunals dating as far back as the tribunal on the meat industry, it has always been the little people who get caught rather than the decision makers at the top management level, namely, the owners and investors. This provision needs to be drawn wider, particularly given what has happened in Anglo Irish Bank and Irish Nationwide.

Deputy Brian Lenihan

I will examine Deputy Burton's suggestion. The section, as drafted, covers "any person", which includes a director, chief executive officer, senior officer, line manager or bank clerk. The term can cover anybody. The point Deputy Burton is seeking to establish is that it should be made clear in the legislation that, for example, if the proceedings were against the bank itself, there would be a high level of participation. I will examine the question of whether the normal provision relating to directors should be inserted in that context.

Amendment, by leave, withdrawn.

Section 7 agreed to.

SECTION 8.

Chairman

Amendments Nos. 19 to 34, inclusive, have been ruled out of order as they have the potential to impose a charge on the Exchequer.

Amendments Nos. 19 to 34 not moved.

Deputy Richard Bruton

I move amendment No. 35:

In page 24, between lines 6 and 7, to insert the following subsection:

"(2) The establishment day referred to in subsection (1) shall not precede the submission of expenses under section 6(4).”.

Amendment put and declared lost.

Question proposed: "That section 8 stand part of the Bill."

Deputy Richard Bruton

Section 8 deals with the establishment day for the National Asset Management Agency. In the group of amendments that was ruled out of order the Fine Gael Party sought to set out a way in which we would get credit flowing for beleaguered businesses and families. When we debated the Bill last week I was stunned that the Minister did not offer a concrete indication of his thinking as to how we would get credit flowing as the result of the establishment of NAMA. This is the core issue given that the purpose of NAMA is to restore stability and get bank lending going.

Many commentators, including the Governor of the Central Bank prior to his appointment, have openly stated that the establishment of the National Asset Management Agency will not get credit flowing and the instinct of banks will continue to be to ration capital and shrink their balance sheets. The Minister indicated last week that he would be open to suggestions on how to get credit flowing. While I welcome his openness on the issue, it must be accompanied by some indication as to his thinking on how this objective can be secured. We need to know what mechanisms offer this opportunity.

The Minister has been fulsome in his praise of the French authorities for establishing special purpose vehicles to take loans off balance sheet. He does not appear to have read further into the French solution because France lost 60% of the money used when it established a version of NAMA. This time around, confronted with the issue of how one gets credit going, the French opted for the national recovery bank approach. Within weeks, they had established a mechanism which was getting credit flowing. We are expending €54 billion without any mechanisms in place. A core issue the Minister needs to address and has so for chinked, weaved and avoided addressing is how he intends to secure reciprocation from the banks to ensure credit flows. All of the banks' instincts will be to do the opposite.

We are having repetition of this issue.

Deputy Joan Burton

The Minster has asked me how to get credit flowing. He has put up a challenge to the Opposition.

The Minister referred last week to Ireland being in a wartime situation. In wartime the key thing one has are people, often described as tsars, who direct what happens. I gave the Minister an alternative last week, when I seriously put forward the notion of oversight because there are two ways one can influence things in a small country. One could have somebody who is a tsar and makes a direction that lines of credit be made available under different headings to reliable business risks. That emanates from the business side. The other, complementary, way of doing it is to have information available on a continuous basis about credit flows and whether credit is flowing. We need a combination of the two.

It is quite likely, with the structures the Minister has established, that once establishment day comes — even more because of the earlier discussion about the SPV — that the banks will take the money and run. If I were the managing director of a bank, my duty would be to shareholders and maximising their return. Even the public interest directors have no protection in law for deviating from the interests of the shareholders, who have one interest and one interest only, that is, maximising share price. Short-term share price maximisation may be very much against the medium and longer-terms interests of the Irish economy, workers and businesses. This is the conundrum the Minister has to solve.

There are two ways of doing it. He can direct lines of investment and credit. He has extraordinary powers in this Bill. He can then require the banks to report on it regularly and can use an oversight commission of the kind I suggested. That is what is happening in the United States. If one reads the debates there about the troubled asset relief programme, whatever mistakes it makes are in the public domain relatively quickly. People in the public domain can say, "That is good, that is not so good, that is not really delivering what we want".

The Minister has not accepted any amendments so far. In challenging the Opposition he said we have not come up with a mechanism. We have come up with a mechanism. There is a limitation on the Fine Gael proposal because of the guarantee. After that, it has a great deal of merit because it is a standard way of doing things.

The two countries closest to us in size regarding bank crashes are Sweden and Finland, both of whom used a particular mechanism we in the Labour Party advocated because it sidestepped the valuation issue. In discussing France, the UK, Germany and the United States one can be mesmerised because we are a fraction of their economic size. Rhode Island may be recovering while California is going down the tubes. It is very unlikely that Dublin will be booming while Cork is in decline.

Chairman

I am sure the Deputy will allow Deputy O'Donnell to say a few words.

Deputy Kieran O’Donnell

I wish to speak to amendment No. 35 and the point raised——

Chairman

Amendment No. 35 has already been discussed with amendment No. 2.

Deputy Kieran O’Donnell

I apologise. I wish to speak to amendment No. 36. On the establishment of NAMA, it is critical for us to get details of the expenses that will be incurred. The Minister made a number of interesting points on finding a position where credit may flow. It is critical for there to be a six-monthly or yearly review with the banks dealing with exactly how funding is being lent.

It is extremely important that any reports being produced are transparent. The Mazars report was presented based on terms of reference but there was a complete lack of transparency within it. We had no indication of overdraft facilities withdrawn, new loans that were extended, credit facilities or rolled up interest on loans. All we were told was that there was no difference between new and existing loans, and we were given the amount of funding for SMEs at the start and end of the report period. There was no proper level of detail and we could put protocols in place to ensure this happens in future.

We discussed how important it is for certainty to exist in order to give confidence to the general public and the House. An obligation relating to credit flow must be written into the legislation in this respect. I note the Minister's undertaking to consider the matter for Report Stage. Any question of this being part of a binding agreement outside the legislation will not be sufficient, as the evidence is inconclusive. We have provided €7 billion to the two main banks and the Mazars report gave no indication that there was any new lending of any description. It is critical for the matter to be addressed.

The taxpayer is underwriting everything to do with NAMA and to say that this is not taxpayers' money does not give the true impression of what is at stake. If NAMA does not make money, the taxpayer will end up picking up the tab, and that point must be taken on board. The Minister might refer to that.

Deputy Pat Rabbitte

This is the core purpose of the legislation. I was very puzzled last Thursday when the Minister refused to take on board the amendment which would have required some kind of reciprocation. I do not see why he considered that it would not have assisted him in his negotiations with the banks.

I will briefly refer to a letter I received while in here last week. It states:

We are a small joinery business with eight employees. Last year we had to write off over €88,000 in bad debts and as a result we owe money to our suppliers, which we are reducing each month while continuing to buy materials and pay wages, rent, electricity etc. We have been experiencing cash flow difficulties which we were working through. Our suppliers were satisfied with the way we have been operating in that we are still buying materials and reducing the balance on our accounts also. As of yesterday our situation worsened when the bank withdrew our overdraft facility of €10,000.

The bank withdrew their overdraft facility.

Deputy Kieran O’Donnell

That is nowhere in the Mazars report.

Deputy Pat Rabbitte

The letter continues:

We now find ourselves in an impossible position. We receive deposits from customers but once lodged, they only reduce the overdraft, leaving us with no funds to purchase materials or pay wages. We do not want to give up as all of us have worked very hard and made sacrifices in order to keep our jobs. We have had a huge increase in orders over the past few months and currently have several jobs in progress, and over 15 large jobs for which deposits are to be taken in the coming weeks.

It is amazing that this company has work on hand and the prospect of getting major work contracts, yet the bank has withdrawn the overdraft facility of €10,000.

Perhaps we have not been prescriptive in the precise mechanism that should apply but unless some protocol is put in place before this legislation is enacted, I do not have any confidence that the banks will volunteer it thereafter, and neither do those people outside. While the legislation is going through the Oireachtas is the time to conclude a protocol that fixes targets——

Deputy Kieran O’Donnell

In the legislation.

Deputy Pat Rabbitte

——or whatever else it can in order to unfreeze the flow of credit to the small sound companies out there. Nobody is advocating imprudent lending or anything like it. If this type of company is forced to wind up, we are really wasting our time with this legislation.

Deputy Seán Barrett

As Deputy Rabbitte has just said, this is the kernel of the issue and the reason the legislation has been proposed. Unless there is some legal obligation imposed in this legislation whereby the banks would be forced to lend money to sound businesses, the whole exercise is pointless.

One suggestion that the Minister could consider is that instead of handing money over to the banks without conditions for the property being received, there should be a condition that part of the money could go into a fund — it could be called a national recovery bank if it is so wished — to be available for lending. There would be a guarantee that a percentage of the money would be given to the purposes about which all of us are anxious. I do not see any reason this cannot be done in law.

If that is not the case, directors with a legal obligation to look after their companies are being asked not to do their job. Whether the Minister likes it or not, that is their fundamental responsibility. Directors cannot direct an organisation to act in a way that could, in law, jeopardise the company. That is a dilemma. It is vital that we are guaranteed that some of the money we will hand over to the banks will go to a fund designated for lending. In other words, it would be something along the lines of what has been advocated by Deputy Bruton, with a wholesale bank able to lend money to retail banks to pass to companies urgently in need of finance.

It should be possible to allocate a portion of the money into a fund for that purpose and such a responsibility should be built into the legislation. I would like to hear the objections of the Minister, if he has any, to this proposal.

Deputy George Lee

I am very struck by the fact that the Minister has ruled out all of the suggestions on the national recovery bank on the basis that it would——

Deputy Brian Lenihan

I did not rule any amendments out of order.

Chairman

It was not the Minister; it was the Bills Office.

Reverting to the Bill, Deputies O'Donnell and Rabbitte and others referred to another matter. The Minister knows as well as I do — he need not have been the Minister for Finance for long — that once the banks get rolling on this, even those with public interest directors will immediately start claiming that it is a sensitive issue, in that many aspects should not be known by the public or the House.

This situation was acute for years. I am a long time in the Dáil. In years gone by, if one so much as sighed about the bankers, one would be ruled out of order on the basis of confidentiality and the trouble that could be brought down on top of the country. We now know that trouble because we did not ask enough questions and those we did ask were never answered.

I know well that, when credit flows into the banks as a result of this Bill, they will feather their own nests first. They will ensure their loans will be given at expensive rates and they will build up their reserves. It could be years before people such as those mentioned by Deputy Rabbitte will get access to the type of lending to which they are entitled. In a world in which all types of amendment can be tabled and the Minister has at his disposal people who should be at the highest level where framing amendments is concerned, there should at least be a mechanism whereby part of the funding provided by the Bill will go to loans to increase productivity and jobs specifically, as Deputy Barrett mentioned. I do not care what the Minister will have to say about this at the heel of the reel.

There is not a single man, woman or child who genuinely believes in the concept being argued for by the Minister. He and the rest of the Cabinet appear to be on their own in a bubble of their creation and in which they know best. However, they do not know best and they have no idea as to how this will finish.

Recently, the economists who were partly the cause of the banks' and building societies' situation are beginning to come out from under cover to offer their views on the economy. Their views were not worth tuppence five years ago. They colluded with the Government to assert that there would never be a poor day again. The Lord help us if people believe the economists a second time around, but I do not believe it will occur this time.

Deputy Chris Andrews

There is no doubt that everyone agrees we need to get credit flowing into small and medium-sized enterprises and that a mechanism needs to be in place. However, we discussed all of this last Thursday. We seem to be going around in circles. I am not sure that Opposition parties desire to deal with the amendments.

Deputy Paul Connaughton

What does the Deputy believe we are present for?

Deputy Chris Andrews

We need to get on with the business instead of repeating what was discussed last Thursday. While the Opposition would prefer to have the Bill guillotined in the Dáil, we should try to stick to the amendments where we can to get through them.

Deputy Frank Feighan

We are present to deal with this legislation because the country has demanded that its elected representatives discuss a serious situation. Deputy Chris Andrews stated that we want the Bill guillotined, but we could be down home were that the case. The situation is an important one.

For the past two years, we have talked the talk, but businesses have been going to the wall and jobs are at risk because of a lack of credit. We can discuss credit all we want. The banks have gone on a PR campaign stating that they are open for business, but it is quite clear they are not. Just ask any small or medium-sized business. There is money for start-up companies but existing enterprises are starved of cash.

I wish to place one or two issues on the record. Anglo Irish Bank, which was bailed out by the taxpayer, is providing a rate of 5% on deposit loans. Clearly, the other two banks cannot match this rate. It poses a difficulty. Two banks that were not included in the guarantee scheme — National Irish Bank and Ulster Bank — are providing deposit interest, but they are clearly not open for business. The Minister is licensing these banks. Every penny that will go into them will go out of the country to their headquarters. What can the Minister do about this situation? If nothing, then it will be a serious situation.

Deputy Brian Lenihan

It is a serious issue. Perhaps we should all reflect on it.

Deputy Frank Feighan

I raised it in the Dáil last week and I am raising it again. If we want to wear the green jersey, businesses and institutions from this country must put their money into the banks. This will get money flowing to the economy. The Minister and the Department of Finance should be highlighting this situation. If it is not politically correct, then it must be made politically correct because we are handling the future of businesses. I am glad that the Minister has accepted some of this. One bank in my area has not given out a penny in eight months. It is repairing its own balance sheet. We must be parochial on this occasion.

Hundreds of businesses are on the verge of collapse. The banks under the Minister's control take five working days to clear cheques whereas it used to take three. I raise this situation again because it is starving business of credit. The banks are using the five days to stifle credit. It is a considerable problem. One business had 20 cheques returned in the past week. At €10.15 each, that amounts to more than €200 per week. When the cheques are issued, there is a knock-on effect because of the five working days. The banks are creaming it and causing businesses unnecessary problems.

I do not want to go on, but if we do not get over this situation, there will be a black economy. Whenever a business gets a cheque for €1,000, €2,000 or €3,000 and goes to the bank, the bank takes everything it can to get what it is owed. I am afraid that many businesses will start dealing in cash. If so, taxes will not be paid. People will hold on to their cash and pay their staff in cash.

Deputy Joan Burton

It is occurring already.

Deputy Frank Feighan

It is imperative that the banks stop setting obstacles in front of small businesses.

Deputy Arthur Morgan

The stated purpose of NAMA is to fix the banking sector and to get that part of the economy working again. However, it is being done in isolation. Through NAMA, there is an opportunity to ensure that banks lend to SMEs. If they do not, there is no prospect of the economy being fixed. Where this issue is concerned, there is no daylight between those of us on this side of the House.

We all know examples of the case read out by Deputy Rabbitte. Some businesses are no longer being supplied by their suppliers because they are unable to make their payments. In turn, their customers are not paying them. This is due to a lack of cash flow in the system. There is an opportunity in the Bill to do something about the matter. Will the Minister recognise its significant impact on job retention, job creation and maintaining viable businesses that, without a credit flow, are in serious trouble?

Deputy Terence Flanagan

Section 8 refers to an establishment day from which the NAMA legislation will be effective, but there does not appear to be a date of cessation. If NAMA is to last for ten years, could the date on which NAMA is to conclude be included in the legislation?

Deputy David Stanton

I refer to section 8 which states: "The Minister shall by order appoint a day as the establishment day for the purposes of this Act". NAMA's success will depend on a future rise in the value of property. Confidence in the economy is not apparent. A man told me he wished to invest €2 million in a business but he said he was holding off on the investment because he is worried. There does not seem to be anything in NAMA — it may not be its role — to encourage cash into the economy. Some bankers tell me that they will lend to what they consider viable businesses but the problem is that many businesses are not viable because the economy is in trouble and is in a downward spiral.

The Minister needs to start stimulating the economy in some way. The success of NAMA will depend on property prices rising at some stage and this will not happen unless the economy is moving.

Deputy Richard Bruton

While we will be dealing with the SPVs, at a later time, the very establishment of NAMA raises profound questions as to the committee's work today. These SPVs will have their own board, including private sector equity investors who will purchase, manage and dispose of loan assets, who will finance the asset purchase by issuing debt securities. All the infrastructure being proposed to oversee NAMA, all the work we are supposed to oversee, has been franchised out, contracted out to this body. It is an entirely different vehicle. I refer to the appointment of boards and the requirement to present accounts. It is very clear this SPV will have its own accounts which will be separate from NAMA and we will not be supervising it at all. It will be free in its own decision-making capability. The oversight we put on NAMA is being outsourced. I know there is a veto so we will control some of the decision making. However, this is a very different animal to what we are debating and which we will be debating for 24 hours this week. These are quite profound issues.

The Bill does not explicitly refer to these SPVs with the private equity. There is talk about taking joint ventures but in the way it is framed the joint ventures sound like joint ventures with regard to a site being managed but this is joint venture with regard to the whole enterprise of NAMA. This surely raises more profound issues than simply an explanatory note, or perhaps I am missing something. We need oversight of this body and we need to understand the role of the private sector. There is no section in the Bill dealing with the private sector's role in these SPVs for us to oversee. This raises such profound issues that I am at a loss to know how our work gels with this new arrangement.

Deputy Brian Lenihan

The debate has ranged far and wide with regard to the establishment day. In reply to Deputy Terence Flanagan's question arising from the section, there will be a review after ten years of the operation of NAMA. The debate ranged over the whole question of credit supply which we visited the last day and which I do not propose to revisit at this stage. I have indicated I intend to revisit it on Report Stage. As some of my remarks seem to have been misconstrued opposite, I make the point that NAMA is the mechanism and that is what the debate has been about since last August. NAMA is the preferred mechanism of the Government to restore credit to the banking system. Intrinsic to the design of NAMA, as I pointed out last week, is a very low rate of interest which is half a percent above the Euribor rate, which gives the banks every incentive to make money out of the money that is advanced to them in the event they present the bonds for payment. The bonds of themselves will improve the balance sheets of the banks and will make them much more possible as entities which can be loaned to compared with how they are at present. We can all scream for credit supply all day long here in the House. The whole reason Deputy Rabbitte was able to tell the story he told — I have no doubt about the veracity of it as it is an accurate story of what is happening to small and medium-sized Irish businesses in certain cases — and the reason I agreed with Deputy Feighan regarding the serious position, is because it is clear the banks are not in an ideal funding position and therefore do not have the money to lend. The whole purpose of NAMA is to effect a structural change in the banking system, to put the banks in a position to lend. If one does not get to that starting block, one does not understand why the proposal is before the House in the first place.

I do not wish to re-enter the Second Stage debate on the Fine Gael measure which really did not attract any interest, not just in the marketplace but among any serious economic commentators. As I said at the time, the Labour Party proposal had more to recommend it but it carried its own risks for the country. The position is that we are here now so when I refer to a mechanism I am referring to what further additional mechanism, beyond improving the balance sheets of the banks, beyond giving them access to cash, can be put in place.

Reference was made in this context by a number of speakers to the public interest directors and their circumscribed position. So far as Bank of Ireland and Allied Irish Banks are concerned, the State, through the Minister for Finance, is now a substantial shareholder in both these banks so there is no ambiguity about the public interest directors' positions. By virtue of the recapitalisation the State will be represented by four directors in these banks and I have yet to appoint two to each. The position with regard to these banks is that the directors will represent and in fact do represent a real shareholder who is the most substantial shareholder in each of the entities. These are not people who are wandering into boardrooms with some shadowy mandate; they are people with a shareholding behind them, the most substantial shareholding in the relevant two institutions. This is relevant to the whole subject of public control which has been raised in this debate. When I refer to a mechanism I am not talking about that either but rather whether there is some additional statutory mechanism. It must be very difficult to frame an amendment proposing the banks should lend a designated amount to a financial institution because amounts vary. With regard to the figures for lending to small and medium-sized enterprises, it is clear these figures will disclose how much is loaned at present and how much additional funds do we as legislators wish to see loaned to small and medium-sized enterprises. The problem is that some of the institutions are clearly cash-starved and that position has to be repaired and this is fundamental. If banks have cash to lend and if banks have obtained cash on a presentation of bonds and they want to make money of that cash, the one danger that has to be guarded against is that it is not used to deleverage them further and that it is used to support the economy. Given that the two largest banks are systemically involved with the economy, it would seem they have no incentive whatsoever to simply deleverage themselves further beyond what NAMA expressly envisages in terms of the loan book. This is the position with regard to credit supply.

I am certainly willing to bring forward proposals and I am examining proposals to strengthen the position. In my view, Deputy Barrett made one of the most constructive contributions when he made the point that one cannot have directors putting their fiduciary duties to the bank ahead of the wider economic interest and there is a question there as to how credit supply can be tied into this. I accept that argument and I will have that suggestion examined. We had this debate on Friday evening and we will have this debate again. It is the most important issue in NAMA and I did not object to having the debate.

On the question of the special purpose vehicle, by virtue of the shareholder agreement, the State will have a veto over any decision by this body or rather the board of NAMA will have a veto. The NAMA board will have effective carriage in governance terms and that is the part of the Bill we are about to discuss. The NAMA board will have effective governance of this particular arrangement being proposed. The profound importance of what is proposed in European terms means that our debt and whatever we are advancing in terms of NAMA will not go towards any public indebtedness under the Stability and Growth Pact. I would have thought this is of far more profound significance for the country than arguments about the technicalities of what the arrangement means because under the terms of the shareholder agreement for this vehicle, an effective veto is retained by the NAMA board.

Deputy Richard Bruton

It is not a question of one or the other, it is both.

Deputy Joan Burton

Deputy Joan Burton

The Minister has not answered my question. At issue is paying dividends on an annual basis and this cuts to the heart of the Bill.

Question put and declared carried.

Sections 9 and 10 agreed to.

SECTION 11.

Deputy Richard Bruton

I move amendment No. 36:

In page 25, subsection (5), lines 22 to 27, to delete all words from and including "laid" in line 22 down to and including "thereunder." in line 27 and substitute "approved by each House of the Oireachtas.".

Chairman

This amendment was discussed with amendment No. 2.

Amendment put and declared lost.

Question proposed: "That section 11 stand part of the Bill."

Deputy Richard Bruton

I refer to the fact that NAMA will now work through this special purpose vehicle or master SPV. Should we not recognise in legislation that there will now be private sector participation in the body performing these functions? It seems to be a very different animal to that which we understand we were controlling and assigning functions. These functions, including the purchasing and disposing of assets, are being delegated to a body distinct from NAMA. While I understand what the Minister is doing and the value of having this off balance sheet, the House is entitled to clear sight of the rules, the statutory basis and status of these private investors and the role of privately-appointed members relative to those we would appoint and oversee. There should be a separate section setting out the interplay between NAMA, on which we will spend a vast amount of time overseeing, and the master SPV and various subsidiary SPVs. It would appear there will be a separate SPV for each bank. This is profoundly different to what we understood we would oversee.

I cannot understand why there is no amendment from the Minister setting out the structure and oversight and which outlines how this will be robust from the point of view of taxpayers' interests, even though private sector money will apparently carry the risk. If it does not carry the risk it cannot be off balance sheet. The interplay of these bodies must be thoroughly explained to us. I do not deny the importance from the Minister's point of view of establishing this in such a way that it does not become part of our borrowing requirement. We deserve a better delineation of the relationship and the protections in place for the taxpayer. We are told there will be a power of veto for matters that could affect the interests of NAMA or the Government. Are we expected to rely on the good judgment of NAMA as to what might affect the interests of the Government? Should we not offer guidelines in legislation outlining the interests which we believe should be protected? I am surprised at the extent to which this is changing the legislation and I am surprised the Minister takes the view that everyone should know about this. It seems to be an innovation not adequately explained. More important, this is not a question of explanation as from the taxpayers' perspective. It has not been properly and robustly protected.

Deputy Joan Burton

Section 11 deals with the functions of NAMA but, as the previous speaker noted, there has been a series of disclosures today about the special purpose vehicle that are completely at odds with what members were given to understand whereby in general, the SPVs were to be vehicles for the working out of the loans. It seems that the four sheets of information the Minister has just circulated to members fundamentally change the nature of NAMA in respect of how it is to operate. In particular, it seems that what has happened regarding the SPV is incompatible with the provisions of the Bill. Under the Bill, the function of any NAMA group entity is to perform NAMA functions on NAMA's behalf. However, this is not consistent with the concept of a majority private sector SPV as set out by the Minister. Moreover, with regard to dividends and payouts, at a minimum, section 58 envisages that on NAMA's winding up, the surplus, if any, will revert to the Minister and the Exchequer in order that taxpayers will recover some of the money they have paid out. Although the notes provided for members on SPVs are summary in nature and members will not be certain until they see the details, the Minister's SPV arrangements envisage a payment of approximately 5% to 6%, depending on the going rate on Irish Government bonds, to be the dividend to be paid to the private investors in NAMA.

One should remember that a private NAMA vehicle was established last week with much publicity. Why will that private vehicle not come in as the investor in the SPV? Why will it not jump at that opportunity because it stated it was hoping for institutional investors such as those mentioned by the Minister, including pension funds and so on? As it could get a guaranteed return on its investment of €100 million for the first eight or nine years of approximately 5%, why would it not go for it? At present, it is hard to get returns at that level within the financial sector unless, as was noted, one is investing in Anglo Irish Bank. Everyone has agreed that banks are trying to claw back their profitability and, while interest rates remain low, the general interest rate available to most depositors is very low. However, the Minister suggests that this particular vehicle will get an automatic rate of 5% to 6%, depending on the rate of Government bonds.

The Minister's commentary on the NAMA special purpose vehicle will require a fundamental amendment to the Bill that will fully recognise the existence of this juncture. Moreover, how will one provide for the transference over of the powers and responsibilities of the NAMA board into a minority position on an SPV? Should one call it "spiv"? I do not know how to pronounce SPV as an acronym.

Deputy Pat Rabbitte

I suggest that, whatever chance members have, they do not call it "spiv".

Deputy Joan Burton

These are fundamental questions that must be spelled out in the legislation. Section 11, which again is drawn in incredibly wide terms, gives the Minister tremendous scope for leverage and it is obvious his advisers have suggested that his scope and leverage extends to the SPV. However, in constitutional terms this is a step too far because, effectively, the Minister has extraordinary powers in the legislation but now also he will have extraordinary powers to withhold information. He is dribbling out the information at the last minute. On the Second Stage debate, Members received the business plan at the last minute. In this case I am glad the media were able to receive this information before the Dáil in order that they at least could write about it over the bank holiday weekend. However, this requires a fundamental rethink.

Deputy Pat Rabbitte

The Minister should state when he knew the SPV would operate in this fashion. I understand the entire proposal has evolved over a period and has been informed by developments outside the country and so on. However, when did the change in the role of the special purpose vehicle come about? As Deputy Burton noted, the understanding on this side of the House was that it simply existed as a technical measure to work out the loans. However, given what the Minister has set out, that is not its role. Nevertheless members are stuck with the original Bill in discussing the original functions of NAMA that have not been tempered as a result of this proposal emerging late in the day. I certainly am unclear as to how the two interact and how it is possible that the Bill's original functions do not require tempering on foot of the emergence in this way of the SPV.

I will return to Deputy Burton's comments on the annual dividends and the Minister's rebuttal. Again, I am unsure whether I understand how this provision is in place for the annual dividends. Overleaf, it states that if the master SPV makes a loss in its lifetime or is wound up, the equity investors in the majority private sector owned master SPV and any associated dividends will be lost. I am unsure how one can be in receipt of dividends over four to nine years but how one will forfeit everything if there is a loss at the end of the period. The Minister should explain this point. Members understand the significance the Minister attaches to the growth and stability pact and all that is connected to it. Does the Minister suggest that a requirement that emerged from his discussions with Europe was that, to enable him to secure this facility of off-balance sheet accounting, he was obliged to come up with a vehicle that was predominantly or majority-wise private? In other words, to take it out of the Government accounts it was necessary to create a private vehicle. If this was the injunction placed on the Minister, I certainly would like to hear it better explained how this proposal interacts with the Bill.

Deputy Kieran O’Donnell

Did the Minister first envisage this before the legislation was drafted? A number of points have been raised regarding the SPV. Will the majority of the board members represent the private investors rather than NAMA? Over what decisions will they have a veto? What effects will the SPV have on NAMA as constituted under the existing legislation? I refer to the €100 million that is being raised in respect of the SPV. What exactly will this money be used for because it boils down to €51 million of taxpayers' money? Moreover, on the question of further subsidiary SPVs, it appears as though we have gone from having a single vehicle to having an entire fleet, which could be difficult to control. It appears the Minister is changing the entire basis on which the loans will be dealt with and that this will require a major amendment to the legislation. Can the Minister deal with this under a separate section? The Minister has provided us with three pages. One of the reasons proposed for the use of the master SPV is that it will permit the full recoupment by the NTMA of any staff or other costs incurred throughout the life of NAMA. Without the SPV structure these costs would be charged and become expenses on the Central Fund like the NAMA current administration costs. An amendment to existing legislation could bring about the position that NAMA should have to incur the cost. We need major discussion on this point. Did the Minister envisage this prior to drafting the legislation?

Deputy Arthur Morgan

Can the Minister clarify an issue on page 28 of the draft NAMA business plan? Regarding the largest 100 to 150 borrowers the plan states: "It is proposed that these large exposures will be managed directly by NAMA." Is today's document a contradiction of this? It suggests an SPV will be established for that purpose and perhaps the Minister can clarify which is correct.

Deputy Michael D. Higgins

I ask for clarification on what is being proposed. In the Minister's document, it is suggested that the SPV will be a separate legal entity. If one was asked to make the decisions on whether to do this by amendments to legislation published or by separate legislation, can the Minister indicate how he proposes to proceed?

The Minister spoke earlier on the parallel issue of the conflict that arises between the public interest director and statutory duties to the company, the entity and the shareholders. We spoke about this at great length on Second Stage and I will not go into it again. The Minister is dealing with a related issue. The question concerns the process for establishing a master SPV as a separate legal entity. The second page of the Minister's brief suggests that a number of subsidiary SPVs may be created and will be composed entirely of members of the NAMA board. If the master SPV is a separate legal entity with a particular structure, what arrangements will the Minister make for the subsidiary groups?

A certain amount of public concern has been expressed about the recent publicity surrounding the Asset Resolution Corporation, ARC. The question of whether the NAMA SPV will be in competition with pension funds and the private ARC has already been asked. A considerable number of funds have been established internationally and are poised to intervene in the vehicle that is being created. In a fit of what his opponents called hubris but what he believes to be good judgment, the Minister suggests that at the end of this process there will be a benefit for the Irish public. How does that square with a transfer to the State in such a manner as may be indicated by the Minister for Finance of the day while at the same time one is paying dividends to the private component of the vehicle? Which is it?

The circulated document also refers to the dividend. Is this the annual dividend or the termination dividend that is payable if everything is in surplus and additional benefits flow to the private investors? It is worthwhile having total clarity on this point. The public watching this debate on Committee Stage wonders from where those who represent the 51% will come. In this regard, it is interesting to reflect on the report No. 120 of the National Economic and Social Council which refers to a previous document published, No. 118, on the five crises facing Ireland at present. It stresses the importance of those who created the crisis in banking not being seen to participate in the process by which we recover. There is nothing that will act as an impediment for many of these to regroup themselves in any number of vehicles and participate in the major SPV or the subsidiary SPV. These matters are not clarified by the Minister's document. I can summarise what I have been saying by asking from where the membership of the SPV will come.

The Government will enjoy a veto. How will this work and how will it work through the subsidiary SPVs? If there is private investment in its 51%——

Chairman

SPVs can be discussed under section 12.

Deputy Michael D. Higgins

——and if there is any kind of beneficial relationship to the previous loans, there is a major conflict. These are early matters the Minister may wish to clarify.

Deputy Brian Lenihan

In regard to why the shareholder, for example, would have no legal redress — it is an important question in our domestic law — if there is a shareholders' agreement and a statutory provision, any understanding about the basis on which the money is advanced is conditioned by the understanding of what is in the legislation and the shareholders' agreement. The remedy is by way of relief from oppression that I cannot apply to such a shareholder because the shareholder has invested with his or her eyes open.

Deputy Kieran O’Donnell

Unlike the Irish taxpayer.

Deputy Brian Lenihan

On the Deputy's view as to whether a shareholder would invest in such an instrument or a vehicle, Ireland, as an investment vehicle, has not been doing too badly since the NAMA proposal was announced. We do not have difficulties attracting funds at this stage but how much funds we should attract is an entirely different question to which we will have to devote much time between now and 9 December.

Deputy Joan Burton

I do not want to use the word "delusional" but if the Minister believes the statement he just made, I am afraid he has fanciful ideas about the nature of the difficulties the country faces. If, for the past two weeks, the Minister's attention has been focused on the creation of this SPV and piloting it through EUROSTAT, perhaps that is why he and his Department have not focused on the issue of getting credit flowing again.

Chairman

He can answer that question under section 12.

Deputy Joan Burton

Will he table an amendment to the functions of NAMA on Committee Stage which will set out in the section or in different parts of the Bill what exactly the SPV is, what it proposes to do and what its relationships are.

The Deputies are.

Deputy Kieran O’Donnell

Deputy Brian Lenihan
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A remarkable attorney.

Deputy Pat Rabbitte
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I know the present Attorney General is highly regarded.

Deputy Michael D. Higgins
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So was the previous regulator.

Deputy Pat Rabbitte
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However, it is a remarkable achievement that he has produced a Bill so prescient that something that only emerged a week ago could have been in his mind when he was framing the legislation.

Deputy Brian Lenihan
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Absolutely.

Deputy Pat Rabbitte
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The Minister has not explained in a tangible way where that is provided for in the Bill. He points to the occasional subsection and so on, but it really is a different point from that being made here. "Cherchez la femme“ or ”Allez les bleus” is not a sufficient answer.

Deputy Joan Burton
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How about "’Allo ’allo”?

Question put and agreed to.

SECTION 12.

Deputy Joan Burton
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I move amendment No. 37:

In page 25, subsection (2), between lines 35 and 36, to insert the following:

"(a) transfer assets under its control to appropriate Ministers, local housing authorities or agencies for use in achieving their legislative responsibilities paying particular attention to the social benefits of such transfers,”.

This amendment would give NAMA the power to transfer assets under its control. NAMA is, above all else, a business operation, and its management must be approached from a business point of view. We on this side of the House are agreed that it is primarily a matter of getting credit flowing again. However, we already know from the description of distressed assets — from television and other interviews with various developers and people in the property game — that there are significant property assets in various parts of Ireland which are difficult to envisage being sold to prospective house-buyers, developers or anyone else, partly because of where they are.

I was taken with the discussion two weeks ago at the Green Party conference. In that discussion, there were people in the Green Party who were very eager to protect the taxpayer and to have a public interest section in NAMA which would ensure it served a social as well as an economic good. The purpose of this amendment is to give the Minister those powers. He has many powers in section 12 that cover different issues, but the section does not specify anything that we might call economic purposes with social purposes. We are told in the section that the purchase and management of loans by NAMA will be delegated to a separately created special purpose vehicle, SPV. I am slightly unsure how the SPV will affect this, but the purpose of the section is to give the Minister power to do this in conjunction with his fellow Ministers, especially Ministers and agencies with responsibility for housing. This amendment will not seek to override the economic requirements of NAMA, but would effectively allow a socioeconomic function alongside that. I ask the Minister to include this amendment in the Bill.

Deputy Richard Bruton
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We will have to look at the issue of distressed housing. In a later amendment, I see the opportunity for NAMA to take possession of loans in very distressed situations. Just like what is happening in this Bill, there will be a very severe mark-down of the real market value, but there will be no long-term economic concessions to real market value because there will be an acquisition of the loan at that price. It will be a commercial transaction from NAMA's point of view to acquire an impaired loan from the banks and it will be in a position to do certain things. In our view, it should enter into shared ownership with individuals if they were up to it. Deputy Burton's amendment envisages NAMA acquiring the loan at that value and then passing the security to a local authority which might then decide that the acquisition was in the best pursuit of its mandate.

Given that there will be many impaired loans in the housing sector, there needs to be a social dimension on how we manage them. NAMA gives us a very important vehicle in handling the social policy as it will be able to acquire these loans at a mark-down price because they are impaired and it will be in a position to provide other public service entities with an opportunity to apply some of their policies, be they shared ownership, conventional tenancies, rental accommodation schemes and so on. We need to recognise that NAMA will have a role in executing a fair social policy and getting the contribution from the banks by way of the write-down of the impaired loan.

Deputy Michael Mulcahy
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I agree with most of what Deputy Richard Bruton just said. The public would like some facility for obtaining some of the assets of NAMA for socially desirable purposes, be they housing, community facilities or otherwise. However, section 10(2) states that "So far as possible, NAMA shall, expeditiously and consistently with the achievement of the purposes specified in subsection (1), obtain the best achievable financial return for the State having regard to—”. Let us be absolutely clear. We cannot say that Ireland is taking on this big risk and then say that NAMA should not do its best to recoup all of these profits. We cannot simply decide to make holes in that bath wherever it is deemed appropriate. The reality is that NAMA will have a very difficult, exacting, commercial job to do to maximise the value of those assets.

If an asset is being offered to the market at a price that satisfies NAMA, then perhaps the Government and the social agencies should have a first option on those assets at that kind of price. However, I would strongly urge against the woolly thinking that I believe is contained in the proposed amendment which refers to a transfer of assets without specifying the price that NAMA will receive for the transfer of these assets. The amendment does not take account of some of the good loans that will have been transferred to NAMA. Although I agree in general with Deputy Bruton's statement, I do think the proposed amendment is inappropriate in all circumstances.

Deputy Michael D’Arcy
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I also heard the comments made by the Minister for Communications, Marine and Natural Resources. I must urge serious caution because the comments presented a picture in which we could buy really cheap land and build social housing on it. Anybody proposing what happened in the 1960s and 1970s in places such as Ballymun and in some of the estates in Limerick is out of his or her mind. The rental accommodation scheme disperses people throughout the community. It is expensive but it works reasonably well. Building large social housing estates would be crazy. I do not know if that is the thinking behind the amendment but I would urge major caution if that was to happen.

Part V of the Planning and Development Act 2000 was enacted to disperse people throughout the community and throughout private estates. That did not work because of the bureaucracy involved. However, a number of units in private estates could be taken to benefit local authorities or the relevant Department. To build another Moyross or Ballymun would be nuts.

Deputy Michael D. Higgins
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The discussion on this particular amendment is important because it highlights two different versions of the Bill. Amendment No. 37 seeks to "transfer assets under its control to appropriate Ministers, local housing authorities or agencies for use in achieving their legislative responsibilities". There is considerable discipline in legislative responsibilities paying particular attention to the social benefits of such transfers, which is an additional qualification beyond legal responsibilities. This is what we understood to be the statement that flowed from the Green Party Ministers after the most recent reformulation of the Government programme.

Deputy Mulcahy's point about section 10(2) is very interesting and very honest. He is really saying that NAMA and its subsidiary bodies, such as the special purpose vehicle and its satellites, will in fact have to work under purely commercial criteria to give a return. These are not reconcilable, so the logic of what he is saying is the following. There will be circumstances in which the State or the local authority could get involved. For example, the State's rental outgoing through subsidiary bodies such as the HSE is enormous. I will refrain from speaking about clearly identifiable NAMA assets or projects.

Not only has the property bubble brought us to the crisis to which this Bill is responding but it also had a detrimental effect on good urban and social planning. The number of housing units expanded beyond the provision of basic infrastructure. I am trying to be positive by suggesting that if one wants to redress the property boom's impact on infrastructure, the social shortfall or the lack of good urban planning, which is not sufficiently represented in the board of NAMA as currently envisaged, one would want to do precisely what amendment No. 37 proposes.

When I spoke about these issues last week, I suggested that the Minister and Deputy Mulcahy are relying on a kind of moral suasion. They argue it is a practical matter in that if one cannot get a customer anywhere else, one can always turn to the State as a last resort. However, we are discussing legislation which can potentially give the Minister the capacity to use toxic assets in the public interest.

The public will be asking questions about this debate. In consideration of section 11, we have discussed dividend payments and the terminal dividend. The danger will arise that those whose heavy speculation brought us to this point may stand to gain once again. To take a hypothetical example, people may have wanted to build skyscrapers during the speculative era on a site which could have been used for public transport. According to Deputy Mulcahy's honest argument, the site should be sweated for the dividend it can offer to the special purpose vehicle or NAMA. However, this amendment proposes that we take advantage of the position in which we find ourselves to redress the balance in favour of the public. What will the public get in the end? They are now sharing the possibility of an upturn with a group of people who are investing €51 million. I suppose it will be in the public's interest if it all works but now they will lose again in a spatial and planning sense because the SPV and the mini-SPV will work in exactly the same way as the people who brought us to this juncture. The Minister will tell us that he will appoint all sorts of people to the board. They will be philosophers who will lecture the board at every meeting about the importance of the public interest but there will be no basis in law for their capacity to deliver for the public. The public are entitled to ask what has happened to the benefit outlined on Second Stage. It is now being shared with a group of people who could come from anywhere. I anticipate that the Minister will claim that it will, for the most part, comprise pension funds. A footnote to the philosophical lectures will state that we only speak to pension funds. I do not know how that will be achieved because even though I do not practice in this area, I am well aware of the group that has been put together by Goldman Sachs.

Chairman
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We are not discussing pension funds.

Deputy Michael D. Higgins
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The Minister is using moral suasion on the public while offering the unknown group with the €51 billion annual dividends and a proportion of the cracker of a terminal dividend which was originally promised to the public. He cannot have it both ways. At least Deputy Mulcahy argued honestly that commercial criteria will be the basis and that oppressed communities will get nothing unless we think about them charitably at the end of the story. He cited section 10(2) but unless we balance that section with some sort of capacity, we will not be able to offer any return to the public in a spatial or planning sense.

Deputy Seán Barrett
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Was the document on the master SPV cleared by the Cabinet?

Chairman
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We are dealing with amendment No. 37.

Deputy Seán Barrett
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I note that no Green Party members are present.

Chairman
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Deputy Barrett, we are discussing amendment No. 37.

Deputy Seán Barrett
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It is an important issue because I understood the Green Party decided in its convention to support NAMA on the basis of what the Minister told them.

Deputy Joan Burton
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Those were the days.

Deputy Seán Barrett
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What the Minister has told us is entirely different.

Chairman
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Amendment No. 37 concerns the transfer of assets.

Deputy Seán Barrett
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I hate to disappoint his colleagues, but it is impossible to do what he requested.

Chairman
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Is Deputy Barrett dealing with amendment No. 37?

Deputy Seán Barrett
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I am dealing with the amendment. Unfortunately, it is impossible to do.

Deputy Pat Rabbitte
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That is a good point.

Deputy Seán Barrett
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The accounting treatment states: "The Master SPV will be run with the objective of making a profit on the purchase and management of the assets it purchases." The Green Party's support for this legislation is based on constructing playing pitches, schools and local authority housing on lands which were zoned for housing but these plans have gone out the window. Deputy Mulcahy is correct, therefore.

Chairman
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Perhaps we will listen to what the Minister has to say about it.

Deputy Seán Barrett
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It is no wonder he is sitting beside the Minister because the latter needs that sort of support.

Deputy Kieran O’Donnell
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He did the Minister some service.

Chairman
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Give the Minister a chance to respond.

Deputy Seán Barrett
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The Minister has circulated a document which makes it impossible to deal with amendment No. 37. Will the Minister confirm whether my understanding of the document is correct?

Deputy Pat Rabbitte
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It is time for someone to drop to the floor and roll over.

Deputy Brian Lenihan
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I regret to advise Deputy Barrett that his reading of the document is most incorrect.

Deputy Seán Barrett
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No, it is not.

Deputy Brian Lenihan
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I do not accept his interpretation. As I have made clear, the statutory purposes of NAMA remain intact. This is an interesting amendment in that context. I have always made it clear that certain social policies and purposes can be effected through this Bill but, as Opposition speakers have reminded us repeatedly, we also have a duty to safeguard the position of the taxpayer and to assume that social policy is consistent with the commercial mandate which NAMA has been given.

Deputy Michael D. Higgins
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How does one judge?

Deputy Brian Lenihan
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That is a very important question. Notwithstanding the legal boundaries and commercial remit within which NAMA must operate, it certainly should have a role in creating balanced and desirable places to live, with obvious benefits for sustainable social values. It could, for example, facilitate Departments on site acquisitions, be it for schools, parks or health centres.

Deputy Joan Burton
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Deputy Mulcahy says otherwise.

Deputy Brian Lenihan
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One way in which NAMA could facilitate the creation of desirable developments and encourage sustainable communities would be to insist that certain bodies shall be given first option on disposals for a limited period.

Deputy Michael Mulcahy
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That is what I said.

Deputy Brian Lenihan
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While they would have to pay the reasonable market price, at least they would have the first mover advantage. These bodies have often been held to ransom in terms of paying inflated prices for projects. That is possible under NAMA, and the directive powers of the Minister and, I believe, NAMA can facilitate it.

Deputy Pat Rabbitte
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Will the 51% agree to that?

Deputy Brian Lenihan
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The 51% have no function in this matter.

On the question of social and affordable housing, to which Deputy Michael D. Higgins alluded, in disposing of properties NAMA may play a role in the provision of social and affordable housing. For example, a proposal to purchase or take long leases on suitable blocks of unsold apartments or units for social and affordable housing needs can be implemented within this statutory framework, subject to a power of ministerial direction.

One matter which caused me concern in respect of the social purposes of NAMA was raised by Deputy Higgins when he referred to the express section 11(2), which 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." I have been of the view that one of the major advantages of NAMA should be to avoid the repetition of what has occurred in the past decade, with the development of a concentration of building land among a small number of owners.

Policy on sites or affordable housing can be accommodated within the commercial framework set out for NAMA in the legislation, subject to powers of ministerial direction. I do not anticipate exercising such powers and do not believe any successor of mine should have to exercise them.

On the issue of the concentration of ownership, an express statutory mention was required in the legislation. One could take the view that a concentration of ownership of building land would be more profitable for NAMA than a dispersion of ownership. The inclusion of subsection (2) permits the National Asset Management Agency to pursue a policy, for example, in the disposal of development land, of encouraging the use of development land by smaller developers and building contracting firms and assuring a dispersion in that kind of business, thus avoiding the distortions which the concentration of ownership near the larger cities caused in the marketplace. For this reason, the legislation features an express reference to an item of social policy because it is desirable that we facilitate it.

If one examines the history of speculation in land in the Dublin area, one will see in the Kenny report that for many years it was held off by the fact that the city council, or corporation as it was then known, had power to build up a land bank which it disposed of gradually over time, calming the market and preventing the excess growth we saw in recent years. NAMA could perform an important function in that regard in dampening the type of excessive bubble we saw in recent years.

A balance must be struck in these matters. While I presume we will return to this matter in our debate on the valuation methodology, the figure of 10% over ten years is a highly conservative assumption. It is for this reason that the business plan assumes a profit for NAMA. Built into the legislation is the clear social policy objective of the need to avoid undue concentration or distortions in the market for development land. This is one of the most specific functions NAMA is given in the Bill and its purpose is to avoid precisely the kinds of concentrations and distortions we saw in the past decade. I am sure Deputies opposite will be delighted to discuss this matter further.

This legislation can facilitate social purposes. However, to provide sites for nothing would be a devaluation of the social purpose and should be audited. If the State wants to use lands it has taken over as a result of the NAMA process for the provision of a school gratis, that must be accounted for and cannot be dealt with by way of an amendment to the legislation which buries the fact that this element of commerciality has been entirely drained out of NAMA. That is how the Bill is drafted at present. While I welcome this constructive amendment, I do not accept it is needed because the purposes envisaged in it can be facilitated through the Bill as it stands.

Deputy Joan Burton
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I am not aware that the Minister has accepted a single amendment by any of the Opposition parties. Why should we be surprised given that, as far as I can recall, in dealing with other legislation he, unlike other Ministers, has been disinclined to accept Opposition amendments. That is a mistake on his part. He has suggested we should take a bipartisan approach and some of his less couth followers have argued that green jerseys should be worn by everyone in the audience. The green jersey argument cuts both ways.

The amendment is to the section dealing with powers. Its specific purpose is to create a power to give consideration to issues which have a social as well as an economic context. While all the provisions have an economic context, there are also issues which have an important social context and the insertion of the amendment would give express provision to this fact.

Sections 12 and 14 give the Minister extraordinary powers of direction. There is no question, therefore, that a power such as this could be arbitrarily used by the Minister or a Minister in another Department.

Chairman
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Has the Deputy moved on to section 14?

Deputy Joan Burton
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No, I am referring to my amendment. Section 14 provides the Minister with extraordinary powers to decline, veto or change anything he wishes. These powers are unprecedented in legislation.

It seems extraordinary that the Fianna Fáil Party would reject any insertion of an explicit consideration of social impacts in the provisions of the legislation. In recent years in my constituency, €26 million was paid to a series of developers, all of whom are avowed and public supporters of the Fianna Fáil Party and the——

Deputy Brian Lenihan
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That is not the case.

Deputy Joan Burton
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The Minister should listen.

Deputy Brian Lenihan
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The Deputy is wrong on this matter.

Deputy Joan Burton
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I can read out their names. They have all been listed down the years in various publications as being public supporters of and donors to the Fianna Fáil Party and, I understand, its organisation in my constituency.

Chairman
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Is the Deputy discussing the amendment?

Deputy Joan Burton
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I am referring to the fact that the developers to whom this section relates — their land is the subject of the guarantees and collateral of the toxic loans — are the reason we are in this pickle. While the banks were foolish, the developers were greedy. They are the reason the country is facing €54 billion of debt.

Deputy Brian Lenihan
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This is the simple economics of Ladybird books.

Chairman
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Deputy Burton has strayed beyond the amendment.

Deputy Joan Burton
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Many people would love to return to the land of Peter and Jane when mummy was at home and daddy had a job——

Chairman
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She should speak to the amendment.

Deputy Joan Burton
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——because in this country the dad of the current Ladybird Peter and Jane no longer has a job or a business.

Chairman
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The Deputy is not speaking to her amendment.

Deputy Joan Burton
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The Minister should not lecture me about Ladybird books. Peter and Jane would love if their mum and dad had a business or a job.

(Interruptions).

Chairman
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I ask the Minister to refrain from interrupting. Deputy Burton should speak to the amendment.

Deputy Joan Burton
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I will do so if the Minister ceases making comments of this nature.

Chairman
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I have asked him to do so.

Deputy Joan Burton
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He raised the interesting issue of Ladybird economics and I pointed out that from my extensive reading of Ladybird books, which the Minister who has young children will probably have read——

Deputy Brian Lenihan
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I was reared on them.

Deputy Joan Burton
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——the mum and dad of Peter and Jane have incomes, businesses and jobs, which is no longer true of many of Ireland's Peters and Janes. Ladybird economics, therefore, has a point.

In my constituency, €26 million was paid for school sites. Now that the position has been reversed, as it were, and land values have collapsed——

Chairman
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We will suspend for a sos, as agreed.

Deputy Joan Burton
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Perhaps Mummy has made tea and Spot the dog is outside.

Sitting suspended at 4 p.m. and resumed at 4.20 p.m.

Chairman
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We will recommence on amendment No. 37. Deputies Michael D'Arcy, Arthur Morgan and Joe McHugh have offered.

Deputy Joan Burton
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I wish to finish a point.

Chairman
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I thought the Deputy had finished.

Deputy Joan Burton
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The Minister has now given an extraordinary responsibility, as evidenced in the information he released today, to the SPV, 51% of which will be made up of private interests. It makes it all the more important to have a clause such as this in the Bill because when the private directors come in — never mind the board of NAMA — they will not be required to have any reference to any kind of social interest.

The social interest in this case may turn out to be a very strong economic interest because, for example, in the vicinity of many towns there is much overzoning of land. It may well be that this land would be required for hospital, community, school or public park purposes. There is a well-established principle that the Minister is familiar with where a Minister would indicate an interest in acquiring land from another Department. We also have a long-established Valuation Office.

Deputy Michael Mulcahy seems to be under the impression that when there is a suggestion that something be transferred from one element of the State — such as NAMA — to another element, it is done for free. Since independence, Deputy Mulcahy, we have had a Valuation Office.

Chairman
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The Deputy should make her address through the Chair.

Deputy Joan Burton
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I am speaking to my amendment.

Deputy Michael Mulcahy
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There is no price in the amendment.

Chairman
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Deputy Mulcahy should also speak through the Chair.

Deputy Joan Burton
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Deputy Mulcahy, the point is there is a long-established principle——

Chairman
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Deputy Burton should not interact directly with Deputy Mulcahy.

Deputy Joan Burton
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I apologise. I will comment on Deputy Mulcahy's comments about assets being taken over for knock-down values. Where a Minister expresses an interest in acquiring assets from another Department or via another Minister, there is a long-established mechanism for establishing and safeguarding valuation. In Dublin West there have been many such transfers and the valuation in those cases is generally the open market value based on valuations by experts. Whether that is land being acquired in various areas for GAA or other purposes, I am not aware of a general practice where land is given for free, except where there is another concomitant service. The only recent example I can think of in Dublin West is land being made available for a hospice in the grounds of Abbottstown.

There are well established rules within the public service relating to transfers between Departments or from State bodies to other State bodies. All that is suggested in this amendment is that we recognise that there may be social purposes, particularly as the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, spoke about Ennis, which has enough rezoned land around it for 120 years. He made a similar reference to Dundalk.

Chairman
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In fairness, the Minister agrees with the Deputy.

Deputy Joan Burton
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In such a position it seems extraordinary for a major role to be played by a private group of directors with regard to the NAMA SPV. There is nothing in the Bill that refers specifically to an economic or social purpose, which is a lacking in the Bill. The Minister will regret not making this explicit provision.

I have due regard for the public purse and I am not suggesting that such a transaction would be free. I suggest that the normal protection relating to valuations and State transfer procedures should be put in place, unless this Bill would suspend all that. My understanding is that it does not. The normal State transfer procedures recognise market value by one mechanism or another.

Deputy Michael D’Arcy
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I will comment on Deputy Mulcahy's contribution.

Chairman
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The Deputy should be dealing with the Minister.

Deputy Michael D’Arcy
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The Minister shared Deputy Mulcahy's view.

Chairman
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The Deputy can talk to Deputy Mulcahy outside the House.

Deputy Michael D’Arcy
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It was said there must be a commercial reality and that figures must be commercial to be achieved. This is important. The Minister said they would get the first bite of it. That was his phrase. The first bite, at full market value, is irrelevant. If pitches are to be made available, or perhaps some other social gain, getting the first bite is nothing. It is important to put that on the record.

NAMA is to last for ten years and the loan book is to transfer from the banks to NAMA. I would like to hear the Minister's view regarding the following important issue. As Deputy Burton noted, quite a few local area and town plans will come up for review in that ten year period. Some will probably do so this year. What is the Minister's view regarding the possibility of the banks transferring to NAMA the assets of the lands in question? If there is to be a social gain, it is possible that members of local authorities around the country could change zonings as they are allowed to do in the proper statutory period as a plan becomes available.

Chairman
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That has a very tenuous connection with the amendment.

Deputy Michael D’Arcy
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If the Chairman hears me out, it will be very relevant. Lands may change. If members of local authorities see hundreds, perhaps even thousands, of houses in an area with no playing fields they may see fit to change land that is zoned for residential housing to open space zoning. This is where the matter becomes relevant to the social aspect. Who will bear the cost of the changed zoning? I am told compensation is not payable if lands are changed within the correct statutory period. Will the cost be borne by the bank, the developer, or the State? It is an important question.

Deputy Bernard J. Durkan
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It is a good question and very important.

Deputy Arthur Morgan
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The Minister told us NAMA can support social purposes but that is only in the same sense that banks can support SMEs with finance streams when they are given the €54 billion. The question is whether they will do so. The case has been made solidly today that there is a requirement for this Bill to ensure this happens. It should not be only that they "may" do it but that they actually do it. I go further and suggest there should be provision in the Bill for a development and building agency that would carry out a substantial number of social gain type infrastructures, whether school or hospital building or any other.

I would like there to be provision in the Bill to deal with negative equity, in other words, NAMA for ordinary people. In order to move an amendment to this effect, I suggest there should be provision in the Bill to deal with negative equity in respect of primary residences from the period 2004 to the present, or to approximately one month after the Bill is enacted — if it is — when the negative equity would be written off in mortgages up to a ceiling of €500,000. In that event one would begin to see NAMA doing some good for people other than for corrupt bankers. Not all bankers are such, but there are corrupt bankers and speculators. I hope the Minister will consider such a proposition.

Deputy Joe McHugh
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In Deputy Burton's second contribution on this amendment, she opened up the analysis to include economic and social aspects, even to the social versus the economic. The special purpose vehicle, SPV, has thrown me today. The Minister might argue it is only a bureaucratic consideration but the entire philosophy of NAMA, as portrayed by the Minister's partners in government, the Green Party, was that there would be a social dividend to the Bill.

The language used today by the Minister reminds me of the time Charlie McCreevy came into the House and began to talk about decentralisation, a matter which at this stage we all know was made up on the back of a matchbox. The Minister states that NAMA "could" do this or that it "might" introduce a social aspect with regard to schools or playgrounds. NAMA "may" do this or that. We should be looking more specifically at the legislation with regard to what it will do.

If it is the case there will be an economic dividend from the commercial element of NAMA, and based on the Minister's conservative assumption of a €4.8 million dividend over a ten year period, should we not be building in a short to medium to long-term contract concerning where those funds will go? Within section 12(u) there is the provision for NAMA to “invest its funds as the Board determines”. At this stage the Minister should be determining this point. There should be a plan but obviously there is none at the moment and it is very much a case of making it up as we go along.

I for one know where we might put some of the funds within the next 12 months. If we get economic consideration built into the legislation obviously we will get social consideration and social outcomes. The one key focus in the minds of every citizen in the State at present relates to jobs. We should tie NAMA into an economic contract. I shall give one example, without being parochial.

Chairman
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The Deputy should stick to the matter of transfer of assets.

Deputy Joe McHugh
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Through the Chair, I shall give the Minister one example. In my county, we have gone through the predesigned and design stage of three major road projects. We paid employees in the national roads design office. Serious investment has gone into the design of these roads or potential roads. Should we not be providing or even sanctioning some element or percentage of funds towards these projects?. At present, what will happen——

Chairman
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Deputy McHugh, that is not——-

Deputy Joe McHugh
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——is that these projects will fall within the next 12 to 18 months——

Chairman
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That does not come under amendment No. 37.

Deputy Joe McHugh
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I shall sum up now with this point. These contracts will fall within the next 12 to 18 months if they do not receive money. We will be back to stage one and will have to redesign the roads.

Chairman
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We are on section 12, amendment No. 37.

Deputy Joe McHugh
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Regarding section 12, economic and social consideration should be brought out.

Chairman
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The Deputy must put a question.

Deputy Joe McHugh
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The key point is there is no plan in the legislation——

Chairman
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The Deputy is not speaking to the amendment. The Minister may reply.

Deputy Joe McHugh
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The language states NAMA may, or could, do such. There is no provision made as to what——

Chairman
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If Deputy McHugh wishes to speak to the Bill, he may do so but he is not to repeat statements that do not relate to it.

Deputy Joe McHugh
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There is no plan and this matter of special purpose vehicle is——

Chairman
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I call on the Minister to reply.

Deputy Bernard J. Durkan
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If I may make a brief comment.

Chairman
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Not on that point. On which issue does the Deputy wish to comment?

Deputy Bernard J. Durkan
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On that one, before the Minister replies.

Chairman
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On which issue?

Deputy Bernard J. Durkan
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The issue that relates to Deputy Burton's amendment.

Chairman
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On amendment No. 37.

(Interruptions).

Deputy Bernard J. Durkan
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That is typical. The Members opposite do not know but will find out in due course.

The concept of social gain should be borne in mind but I ask colleagues to remember there will not be a great deal of social gain if my interpretation of NAMA is correct. The purpose of the NAMA exercise appears to be to keep property prices and values at a reasonably high level.

Chairman
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We are not going into a Second Stage debate.

Deputy Bernard J. Durkan
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This is not Second Stage but relates to the issue of social gain.

Chairman
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It is an attempt to go there.

Deputy Bernard J. Durkan
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If the Chairman continues to interrupt me that makes life very difficult.

Chairman
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I shall do so if the Deputy will not speak to the amendment.

Deputy Bernard J. Durkan
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I began by saying I would speak on Deputy Burton's amendment. I am speaking about social gain. How often must I repeat that?

We must examine that aspect carefully and ask ourselves how realistic it will be. For example, I have heard a notion emanating from the Government that there might be a possibility of dezoning lands that were specifically designed for a particular purpose and that there might be a social gain arising from that. Perhaps there might. However, it is also a fact of life that property prices in this country are about three times higher than those in any other country in the European Union. There is something radically wrong with that. In determining where we are going, what we will achieve and what benefit there will be——

Deputy Brian Lenihan
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That was three years ago.

Deputy Bernard J. Durkan
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No, I am sorry, the situation is the same as it was three years ago.

Chairman
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We are dealing with amendment No. 37 to which the Deputy is not speaking.

Deputy Bernard J. Durkan
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I am speaking through the Chair. I am sorry.

Chairman
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The Deputy is not speaking to it.

Deputy Bernard J. Durkan
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The Chairman does not want to listen. It is the same old story. He wants to tell us all about it. Through the chair, this is not three years ago. It is still the same——

Chairman
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This is amendment No. 37. If the Deputy does not wish to speak to it, I will——

Deputy Bernard J. Durkan
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I am sorry, but I am trying to make a point and——

Chairman
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——ask him to sit down and allow someone else.

Deputy Bernard J. Durkan
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——the Chairman keeps interrupting.

Chairman
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I will while the Deputy keeps speaking off subject.

Deputy Bernard J. Durkan
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In what way am I speaking off subject?

Chairman
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The Deputy is not speaking to the amendment.

Deputy Bernard J. Durkan
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The amendment relates to the possibility of social gain having regard to other factors. That is what I am speaking to.

Chairman
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Social benefits, actually.

Deputy Bernard J. Durkan
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If I need to be clearer than this, I do not know what I will do.

A difficulty could arise. For example, in an effort to create the social gain, we could arrive at a situation whereby we decided to agree to keep property prices artificially high to achieve a particular objective for NAMA. To my mind, this is not in the people's interests or in the interests of those who have suffered and are likely to suffer social deprivation.

Chairman
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It also has no connection with amendment No. 37 to section 12.

Deputy Bernard J. Durkan
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I am sorry, but I read the amendments well. Given the Chairman's first statement when I stood to speak, he clearly——

Chairman
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The amendment is on the transfer of assets under NAMA's control to appropriate Ministers.

Deputy Bernard J. Durkan
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——did not want to hear what I had to say.

Chairman
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The Deputy is not speaking to the amendment.

Deputy Bernard J. Durkan
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The next point I want to make is——

Chairman
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If the Deputy continues not speaking to the amendment, I will ask him to resume his seat.

Deputy Bernard J. Durkan
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The Chairman must have a terrible attitude if he claims that I am not speaking to the amendment. When I rose to speak to it, his only response was "Which amendment?". Surely he does not believe I am stupid enough to be this length of time in the House without knowing to which amendment I would speak. He will be glad to know that I will conclude.

Chairman
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Thank you very much.

Deputy Bernard J. Durkan
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There is no sense in going through this debate as we have done in the past two or three years. It is not true to say, as the Minister has indicated, that property prices were at a certain level three years ago and have fallen dramatically. While they have fallen, the decrease has not been commensurate with property values in other European countries. This is a fact.

Chairman
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The Deputy is not speaking to amendment No. 37, so I will ask him to resume his seat——

Deputy Bernard J. Durkan
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The issue is whether it is possible——

Chairman
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——to allow me to ask the Minister to reply to the points raised by the other speakers.

Deputy Bernard J. Durkan
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——to achieve social gain in those circumstances, as proposed in the course of Deputy Burton's amendment, and something in the interests of the general economy and those people who have not yet bought their first homes and are unlikely to do so, even under the current proposals with the alleged reduction in house prices.

Deputy Brian Lenihan
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I accepted Deputy Burton's amendment on social and economic development. I made it clear that I would progress it on Committee Stage. Were one to relate the amendment to section 14, which gives the Minister powers to give directions in writing to NAMA, it would be possible to encompass all that the Deputy seeks. Between the amended version, which makes clear NAMA's purposes, and——

Deputy Seán Sherlock
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We are opposed to that section.

Deputy Brian Lenihan
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——the written directive powers of the Minister, there is sufficient power to cover the important matters raised. I have already indicated how, even within the current framework of the legislation, many of the objectives she sought could be met. However, acceptance of her amendment for Report Stage purposes to ensure that one of the purposes of NAMA is to secure social and economic development, connected with the powers of the Minister to give written directions in section 14, meets all of her concerns in that regard.

Other speakers, particularly Deputy Durkan, discussed social gains loosely. For weeks, I have had to listen to people tell me that this is a sure loss maker, that we will not make any money out of it and that we must protect the taxpayer. Now we are to turn around and the self same Deputies——

Deputy Bernard J. Durkan
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It is late in the game for that.

Deputy Brian Lenihan
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I do not accuse Deputy Burton of this, as she produced a carefully calibrated amendment to this subject. I will not accept it, but I can address it, partly through accepting an earlier amendment. However, when I examine what is being said on some of the benches opposite about social gains, I wonder what is going on. If there are to be social gains, they must be measured. We must insist that NAMA, in its operation, accounts truly and faithfully to the House and the people as to what its profit and loss is and that we do not have losses masked as social gains, which is what some Opposition speakers are discussing.

Deputy Bernard J. Durkan
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No. That is not what the other Members said.

Deputy Michael D. Higgins
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No one suggested that.

Deputy Brian Lenihan
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It is something about which we must be careful in the drafting of this legislation.

Deputy Michael Mulcahy
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Hear, hear.

Deputy Brian Lenihan
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Deputy D'Arcy raised the question of zonings and how they would interact with NAMA. If it is open to a council to change the use of land — I do not approve of the word "dezoning" because it has never appeared in our planning code, but it involves a change of use to a less favourable use — then——

Deputy Seán Sherlock
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It is provided for. Does the Minister not know that?

Deputy Joan Burton
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It is provided for.

Deputy Brian Lenihan
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If that is possible without compensation being paid to the landowner, then this must be factored into the valuation of an individual bank asset.

Deputy Michael D’Arcy
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Has it been factored into the €54 billion?

Chairman
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I do not think——

Deputy Brian Lenihan
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No valuations have been conducted yet and each loan will be valued independently and separately. Were such a contingency to materialise, it would need to be factored into the loan's valuation. There are other circumstances in which changing the use attracts compensation where councillors would need to consult their auditors concerning the risk of a surcharge before embarking on such a course.

Deputy Morgan reiterated a theme that has been rightfully found in this debate, namely, the questions of the security of the home and home repossession. We have definite commitments under the programme for Government in that regard, but we must be careful about how we relate it to NAMA. If we applied NAMA to home ownership, we would be saying that the borrower still owed the full amount of his or her loan, that NAMA bought the loan from the bank at a discount and that, if the borrower did not pay the full amount of his or her loan, NAMA could enforce and sell the house to someone else. That is the NAMA model.

Inadvertently by mentioning the idea of a write-off, the Deputy exposed one of the ambiguities at the heart of this debate. The suggestion is constantly and casually put out that the State is writing off the liabilities of developers and builders. That is not the case. These borrowers owe their full sums. If we want to apply NAMA to home owners, let us be clear about what we are proposing. Those who borrowed for home loans should owe NAMA the money, NAMA should buy the loans at a discount——

Deputy Seán Sherlock
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In the NAMA model, one must——

Deputy Kieran O’Donnell
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Is the Minister saying that there is no write-off?

Deputy Brian Lenihan
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——from the banks and, if people do not pay the full sums due, repossession should occur. This is what the application of NAMA to home owners would do.

Chairman
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We have gone well off amendment No. 37.

Deputy Michael Mulcahy
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The Minister is replying.

Deputy Brian Lenihan
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I am replying to a point that has been consistently raised.

Chairman
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We must move on.

Deputy James Bannon
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Driving the price would——

Deputy Joan Burton
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Will the Chairman allow me to reply briefly on the amendment?

Chairman
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Yes. I must put the question.

Deputy Joan Burton
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The Minister referred to section 14 on giving directions, which allows the Minister to give a 50 or 100-page direction on anything he feels like to NAMA. However, there is a view——

Deputy Brian Lenihan
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Not on anything I think of.

Chairman
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We will deal with section 14 when we get there. We are on section 12.

Deputy Joan Burton
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——that the powers in that section are so extraordinary that they would likely be subject to challenge. I accept the Minister's comments on section 14 to the effect that his intentions——

Chairman
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Is Deputy Burton pressing section 12?

Deputy Joan Burton
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I am trying to reply to the Minister's comments.

Chairman
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We will speak to section 14 when we get to it.

Deputy Joan Burton
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I want to revert to my amendment. I accept that the Minister——

Chairman
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Is the Deputy pressing her amendment?

Deputy Joan Burton
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May I finish my sentence? I accept that the Minister is seeking an avenue to address the issue of social considerations in respect of NAMA alongside economic considerations, but his proposal does not do this, particularly given the creation of the special purpose vehicle, SPV, which is to be dominated by a private sector board. Its members will take the Minister's Bill and do what is in it and not a whit more. Where the Minister seeks to exercise extraordinary powers of direction, my guess is that they will successfully challenge him.

Deputy Pat Rabbitte
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Before we vote——

Deputy Brian Lenihan
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Just to make one point of reply, Deputy Burton is making assumptions about the board's composition. I have also made it clear that the statute on my power to give directions subsists. It is taken together with the exceptions discussed previously.

Deputy Pat Rabbitte
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Before we vote, the Minister acknowledged that this was a well-calibrated amendment, as he put it, from Deputy Burton. If we are not to pass it, how does the Government propose to meet its commitments to the minor party in government? Deputy Barrett raised some important questions that were not dealt with.

Deputy James Bannon
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I had another point to make.

Amendment put and declared lost.

Deputy Joan Burton
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I move amendment No. 38:

In page 26, subsection (2)(l), line 21, after “claim” to insert “where it is commercially reasonable to do so”.

Under subsection (2)(l) one of the powers of NAMA is that it may “compromise any claim”. There is an add-on, namely, where it is commercially reasonable to do so. In NAMA the Minister has taken truly extraordinary powers at every single step. There should be a requirement on the part of NAMA, and on the part of the Minister, to act reasonably. We have had a discussion on the previous section about the social interests of the State.

I am pleased to see that a member of the Green Party has finally appeared today.

Deputy Pat Rabbitte
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It is too late.

Deputy Joan Burton
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Should we have a minute's silence?

Deputy Brian Lenihan
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It is collective authority.

Deputy Joan Burton
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Has the Minister collective authority over the Greens?

Deputy Brian Lenihan
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The Government has collective authority.

Deputy Seán Sherlock
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You have made small boys of them.

Deputy Joan Burton
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It was great to see the Greens, if only for a moment.

Chairman
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Is the Deputy speaking to the amendment?

Deputy Joan Burton
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Yes I am.

Deputy James Bannon
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A Green across the table.

Deputy Richard Bruton
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The section is about compromise.

Deputy Joan Burton
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The purpose of this amendment is to make section 12 more reasonable. It is important that the Minister should be required to show reasonableness in a social, economic and commercial sense.

Deputy Brian Lenihan
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The essential problem is that NAMA is obliged to act commercially as we have discussed already. It is not clear to me how the amendment would add to that. The principle of the proposed amendment is adequately covered throughout the NAMA Bill. In particular, section 10 provides that one of NAMA's purposes is to protect or enhance the value of bank assets and to obtain the best achievable financial return for the State. With regard to the detailed power to make claims, it is subject to that overall obligation on NAMA which is that it must protect or enhance the value of bank assets and obtain the best achievable financial return for the State. The words are surplusage in the sense that the power to compromise claims is clearly subject to that objective set out in section 10.

Deputy Michael D. Higgins
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The important word here is "reasonable". In the case of seeking a return on a particular asset by, say, lease or potential future gain, people will know the significant difference between foreclosure as a strategy and operating the norms of commercial reasonableness. Many existing businesses know this very well where they have enjoyed a norm of credit and this has been changed relatively arbitrarily by the banking system in a way which is outside of the understood norms of commercial reasonableness. In that case it is not a matter only of NAMA being able, as it were, or being required statutorily to sweat the asset. There is a difference between sweating the asset and operating with commercial reasonableness and this is widely understood. It is understood in most of the corporate literature.

In this situation, the definition being given to "commercial operation" is very narrow and there are implications for the interpretation of the legislation. If this is not worthy of a reply, I will draw my own conclusion from it with regard to the legislation.

Deputy Brian Lenihan
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The reference to "commercial" was in the overall purposes. I was making the point that it coloured the interpretation of this section and rendered the amendment tabled unnecessary in the circumstances.

Deputy Michael D. Higgins
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"Reasonableness" is the word in question.

Amendment put and declared lost.

Deputy Brian Lenihan
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I move amendment No. 39:

In page 27, subsection (2), lines 13 to 16, to delete paragraph (ac).

This amendment to section 12 proposes the deletion of paragraph (ac). This section 12(2)(ac) provides NAMA with a power, without prejudice to the power of any court, to determine whether information is confidential within the meaning of section 199(1) of the Act and which deals with the disclosure or use of confidential information. On further consideration, I have decided it is not appropriate to give the agency such a power. Whether information will be confidential is a factual issue which should be determined by reference to the legislation and independent of any determination by the agency. The agency should not have a power to conclusively determine this issue of the confidentiality of information.

Deputy Joan Burton
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It is obvious the Minister has been advised his powers were excessive and we have been making that point. Was he given advice to exclude any other sections, such as subsection 12(8) which is the subject of an amendment that it be deleted? That subsection states:

(8) Except where otherwise provided by this Act, NAMA may exercise its powers or carry out its functions without the consent of any other person or authority notwithstanding any other enactment.

This seems an extraordinary amount of powers. In my view, our amendment No. 42 relates to excessive powers if the Minister has been advised to curtail that power as well.

Deputy Brian Lenihan
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In answer to the Deputy, I do not think so. Has the Deputy tabled an amendment?

Deputy Joan Burton
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Amendment No. 42 proposes to delete subsection 12(8). It is an extraordinary power to disregard all other powers.

Deputy Brian Lenihan
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I have a note on the matter and I will deal with it when we are dealing with the amendment. I understand it is a technical amendment but we can discuss it.

Amendment put and declared carried.

Deputy Joan Burton
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I move amendment No. 40:

In page 27, between lines 25 and 26, to insert the following subsection:

"(3) NAMA shall undertake proper and sustainable planning for all properties under development by or in association with NAMA or of properties to which NAMA has legal title.".

The purpose of this amendment is self-evident. The Minister may say he will do this by direction or in writing. We have had descriptions by the Greens, for instance, of vast over-zoning of land. The two examples given by Green Party Ministers were Dundalk and Ennis but they also referred to other areas. The issue is whether the Minister exercises powers in a way as to provide for sustainable planning and development. If the Minister has a better wording, we would be ready to accept his advice. It appears, particularly in the context of the SPV, where control over the properties and developments has moved off balance sheet from NAMA, having a general social good clause would be protective of the public interest.

I refer to comments by Deputy Mulcahy. While micro economic decisions are made on purely economic grounds, when one acts in the Dáil one must do so within a social economic framework. Given the level of distress of some of the lands and properties, the Minister would be wise to include reference to sustainable planning. It should certainly be in place as an advice to the directors of NAMA and the SPV which, it appears, will now run the operation.

Deputy Eamon Scanlon
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Recently, the new Planning and Development (Amendment) Bill was initiated in the Seanad. It will be very relevant for NAMA for two reasons. Property values will be affected significantly by planning. That Bill proposes to extend the planning time from five to ten years, which is relevant. The Bill should be brought to this House as quickly as possible. Also, it will keep in business small builders who have sites and who are not in difficulty at present, but who need time to develop those sites. The Bill could keep those people out of NAMA and the quicker it is dealt with and the quicker we introduce it to the House, the better.

Deputy Brian Lenihan
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I refer to section 11(2) again. To some extent it addresses the concerns raised by Deputy Burton. The subsection 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 concentration of ownership or lending is clearly implicit in the subsection. Earlier, I stated that I take a particular interest in the subsection because I agree the basic objective must be set out as a Statutory purpose for the purposes of anyone exercising decisions under the Bill.

The ministerial powers in the next section are conditioned by the four corners of the Bill. They must remain within the Bill and in the absence of that section I could not use my powers to promote the objectives to which I referred earlier. This is an unnecessary amendment because the agency is subject to the same laws of planning permission as any other entity. To put the matter more positively, there would be a danger if we were to try to rewrite this legislation as a planning and development Bill. It is not a planning and development Bill.

Deputy Michael Mulcahy
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Hear, hear.

Deputy Brian Lenihan
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It is important to avoid the concentrations and distortions which have brought us to this pass. They should be specifically dealt with in the functions of the legislation such that the agency, the board and the Minister giving directions can have full regard to these in the implementation of the legislation. I maintain section 11(2) addresses the concerns raised by the Deputy, which are legitimate concerns in the context of the legislation.

Deputy Michael D. Higgins
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The Minister quotes from section 11(2) which refers to undue concentration of ownership. I seek to understand the legislation in a practical sense. Let us consider the case of property or bundles of property which come into the ownership of one company or group of companies. One may have a property management company with a number of subsidiary companies created for the purpose of the ownership of different sites. One could maintain section 11(2) would enable the Minister to address such a situation but such a bundle of sites may be affected by the proposed new planning legislation, the strategic infrastructure arrangements and An Bord Pleanála.

In the discussion of the previous amendment on social purposes and so forth the Minister stated that he would have sufficient powers. Let us suppose a choice is to be made in a practical sense to achieve the largest short-term commercial value of a site which may be needed for public transport. There may be an argument for public transport needs which arises in the case of urban planning issues. Which view would prevail? I have followed the legislation thus far. I refer to the special purpose vehicle and the 51% and 49% division. Is the Minister saying he would be able to use his 49% representation to achieve a physical planning outcome that would be better than the commercial outcome?

The Minister may be under a certain impression or may attribute to me a position which I do not argue or hold. I do not refer to reducing the commercial yield in the public interest to something nonsensical. Far from it. I refer to the value of a particular site. I have a particular place in mind which I am deliberately being very careful not to identity. There are many cases in which a number of sites have been brought together by a particular property vehicle. The yield from a narrow commercial position might suggest one particular strategy. That may well be in the public interest. It may be possible to take advantage of the recession and the collapse of the property bubble in the public interest, in a spatial sense, to provide good public transport. There may be another opportunity to return to good urban planning and this is what I have in mind.

For several days we have heard that the Minister will be virtuous in all of this and that somewhere in the legislation there is an opportunity to refer matters back to the Minister. My bother is that everything commercial is explicit but everything normative which relates to sustainable planning is to be the outcome of what I referred to earlier as a form of moral suasion. I am certain we will encounter this.

Let us consider a practical example. Next week, Deputy Fahey will chair a committee before which representatives of CIE will attend. We will discuss several matters which have arisen already. The property committee of the board of CIE has a particular mandate which proposes the sweating of sites for a particular yield. However there are other areas relevant to the Transport Acts and many of us involved in the argument maintain it is necessary to improve public transport. These competing ends are not easily reconcilable. I hold concerns in this regard and I refer to a specific example. I seek a revised opinion according to which the public interest would prevail over a narrow commercial decision. I accept it is possible to do both in many ways. However, the legislation is loaded and specific regarding the commercial outcome but vague regarding the capacity of the revised opinion to prevail in the public interest and this is of concern to me.

I am not being tedious because this arises in the matter of urban planning. Most county and city development plans are being revised at present. These plans will be changed by the legislation that may facilitate many small builders. I appreciate that many small builders did not create this problem. However, one is still stuck with the narrow view of attaining a yield from the asset for a group comprising 51% which would have the benefit of an annual dividend. The Minister is trying to tell me he could ensure the outcome to which I refer through an SPV major or SPV minor but I cannot envisage it as easily as he can. Perhaps the Minister is optimistic where I am unduly pessimistic.

Deputy Terence Flanagan
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The Bill states that one of the powers of NAMA would enable it to enter into derivative contracts which would hedge against currency and interest rate risk. I seek more information from the Minister on this matter. What volume of contracts does he anticipate NAMA will become involved with? What will the volume and value of the transactions amount to?

Chairman
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The Deputy has strayed a little from planning.

Deputy Terence Flanagan
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I am speaking to the section.

Chairman
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We will discuss the section later.

Deputy Joan Burton
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I wish to return to this issue by providing the Minister with another example because Deputy Scanlon's point about small builders is quite important. Much of the distressed land is around towns and villages. Was I the owner of a chain of supermarkets who decided to develop outside many of the aforementioned small towns and villages, that would be a commercial decision. If I offer top dollar to NAMA, an issue regarding proper planning and consideration ought to be a factor. While it is not necessarily the overriding factor, it ought to be a factor. If I understand Deputy Scanlon's point correctly, he has suggested that in the case of a town surrounded by 1,000 surplus acres, perhaps the 100 acres owned by small developers working locally might be the ones on which development should proceed. From the perspective of employment and so on, there is a point to this suggestion because we also are trying to get local stimulus going. While I acknowledge that nothing like this could be directed, I suggest it would be wise of the Minister to include such a reference in the Bill.

It should be remembered that after its conference, the Green Party, which is absent today, spoke of having secured Fianna Fáil's essential agreement to a social dimension involving proper planning consideration. While I do not doubt the Minister's commitment, if the Bill passes into law without reference to such issues, the investors in the SPV may not be of a mind to bear in mind socioeconomic issues and may refer only to economic issues. It should be noted that when interpreted in a narrow and short-term manner, economic issues can be extremely destructive. By such an argument, the entire point behind Shannon Development or the Western Development Commission would go out the window because one could state that a bigger buck is to be made on the east coast of Ireland. This soil is replete with examples and Ministries the job of which is to balance social and economic considerations. The Labour Party simply asks the Minister to refer to this issue in this Bill. These amendments are not deterministic and merely are guidelines regarding additional factors that a Minister must take into account. The absence of reference to them means that such issues may be entirely ignored.

Deputy James Reilly
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I support Deputy Burton in respect of the doughnutting effect that has arisen in many towns nationwide, whereby people have built large supermarkets and virtually new towns outside the existing town, thus causing the death-knell of the town. Moreover, I also can see this happening in places around north Dublin. Once land has been sold by NAMA, I presume there would be absolutely no need for this. The agency clearly would no longer be responsible once the land had passed into the ownership of another developer or had been resold and such land therefore would not require any further input from NAMA. Moreover, I presume that all proper planning regulations will apply and that NAMA will not see itself above the law or using its influence to try to attach greater value to the lands it owns beyond that which applies to other developers or property owners.

Deputy Seán Sherlock
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A question has occurred to me in respect of amendment No. 40, which is that if NAMA has legal title to land, is there a provision whereby NAMA can make a submission under a county development plan regarding a particular piece of land?

Deputy Joan Burton
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Of course it can.

Deputy Brian Lenihan
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In response to Deputy Sherlock, I understand that NAMA can make such applications. As for the general point, I have some sympathy with the amendment and have reflected on Deputy Burton's comments in this regard. An amendment was moved previously in respect of social and economic development and it may be more appropriate to tackle this issue by including the concept of sustainability with social and economic development. My concern regarding the inclusion in the Bill of a more detailed type of amendment is that one would be confusing the purposes of NAMA legislation and planning legislation. If I can get various Deputies opposite out of the special purpose vehicle that appears to be flying in political outer space at present and down to ground Earth here in Ireland——

Deputy Seán Sherlock
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With all due respect, they are inextricably linked.

Deputy Brian Lenihan
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Ground Earth here in Ireland is that the planning and development legislation defines the uses to which lands can be put and this system clearly must have its own integrity apart from this legislation. I do not believe one can legislate in this Bill for planning matters, which must be separate from the Bill. The consequence of those planning decisions indirectly defines the value of the bank assets that NAMA is acquiring. However, I agree with the point made by Deputy Burton and on which she was supported by Deputy Reilly that the Minister's exercising of powers or NAMA's exercising of its functions in authority or its functions as a group NAMA authority or its functions as a shareholder, while keeping a definite rope on this vehicle on which members opposite like to travel in outer political space, must all take place within a clear statutory intendment from this House.

Deputy Bernard J. Durkan
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The Government has been in outer space for the past 12 years.

Deputy Brian Lenihan
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May I have a second before the Deputy gets into the vehicle? He will have plenty of chances to do so.

Deputy Bernard J. Durkan
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The Minister should not worry. They are coming.

Deputy Brian Lenihan
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No better man to get into a vehicle and move it into outer space than the Deputy.

Deputy Bernard J. Durkan
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The Minister should not worry about that.

Deputy Terence Flanagan
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Masters of the universe.

Deputy Brian Lenihan
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There is merit in including "sustainable", which is the key word in the Deputy's amendment, with the social and economic reference I already have agreed to include in the purposes of the legislation.

Deputy Joan Burton
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I seek clarification from the Minister. Does this mean he now is minded to accept amendment No. 3, "to contribute to the social and economic development of the State"——

Deputy Brian Lenihan
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Yes.

Deputy Joan Burton
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—— and to include a reference to sustainability?

Deputy Brian Lenihan
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I thought I had made it clear last Thursday that I was minded to accept that amendment. I simply was not committing myself to the precise wording.

Deputy Joan Burton
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I will accept that.

Deputy Brian Lenihan
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On the last day, I committed myself to accept the principle of that amendment. Obviously however, I could not give a commitment on the precise wording in the format tabled by the Deputy.

Deputy Joan Burton
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Very well.

Deputy Brian Lenihan
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I suggest the concept of sustainability should be included there because I am concerned that as it reads, the Deputy's amendment almost implies that NAMA is an alternative planning authority.

Deputy Frank Fahey
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A little wind for the planning and development position of the Labour Party.

Deputy Seán Sherlock
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I also seek clarification in respect of a provision whereby NAMA may make a submission to a local area plan or county development plan. Will a specific rule be laid down in that regard? Will a specific designated person make such a submission? Will there be a commercial bent on it or otherwise? I seek further clarification on this issue.

Deputy Brian Lenihan
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This issue is dealt with in section 12(2)(z), where it is provided that it may “make any planning application in relation to land, and intervene in any planning application made by another person”. Consequently, such power is physically given to NAMA in the legislation and obviously is essential to protect its interests.

Deputy Terence Flanagan asked a question on derivatives. The agency can enter into derivatives to cover off assets in foreign currencies, primarily sterling and US dollars, while at the same time the NAMA liabilities were expressed in euro. Consequently, there is an exchange rate risk to be covered between the euro and sterling and the US dollar. NAMA may also wish to enter into derivatives to cover off interest rate changes, which can be linked to either Bank of England or ECB rates. This is a normal power to protect the financial position of the agency. However, it is not intended that the agency will specialise in derivatives or engage in derivatives above and beyond the normal market practices.

Deputy Michael D. Higgins
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It would be hard to know what had changed.

Chairman
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Does Deputy Burton intend to withdraw amendment No. 40?

Deputy Joan Burton
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I will withdraw the amendment in the context of the Minister's comments.

Amendment, by leave, withdrawn.

Deputy Joan Burton
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I move amendment No. 41:

In page 27, between lines 25 and 26, to insert the following subsection:

"(3) NAMA shall ensure that all properties under development by or in association with NAMA or of properties to which NAMA has legal title have erected on them a durable 2m by 2m sign indicating that they are owned or being developed by NAMA.".

I am sure the Minister will agree to this proposal, which is that property which is under development by or in association with NAMA or properties to which NAMA has legal title should have erected on them a sign. We are familiar with these kinds of signs——

Deputy Seán Sherlock
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Unclean, unclean.

Deputy Joan Burton
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——in connection with the European Union, various Departments and Ministers on advertisements on the radio for the protection of bird life in Dublin Bay. Why should the general population not know what and where the NAMA assets are? Public information and oversight are important.

Some of these lands may be rather derelict and is important that people know. It may be a valuable advertising mechanism. Entrepreneurs, lost in translation——

Deputy Frank Fahey
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Is this the construction wing of the Labour Party?

Deputy Joan Burton
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——travelling through various parts of the country would see these signs——

Deputy Pat Rabbitte
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NAMA from heaven.

Deputy Joan Burton
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——and might be encouraged to consider an opportunity of which they had not been aware.

Deputy Kieran O’Donnell
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For further inquiries contact the Minister for Finance.

Deputy Joan Burton
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It is part of a public information approach and the public is entitled to know where the NAMA gold is. The Minister keeps telling us we will make a profit and, as we are all underwriting this, we ought to know where the assets are. I am sure the Minister will have no difficulty with my amendment.

Deputy Brian Lenihan
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It will go straight into outer space.

Deputy Bernard J. Durkan
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This is a great amendment that the Minister should take on board. How will the prospective investor manage to find the location of the proposed investment, which may be lucrative under NAMA, unless there is some indication? The taxpayers' interests are involved, as are the budgetary interests of the Minister for Finance. We should try to protect the interests of everyone and ensure that every possible help is given to those who wish to rescue this sector of the economy at this time. It is a useful amendment. For example, how will someone who may seek to acquire the property through NAMA know that a particular property is owned by NAMA? Is it not in the public interest that it be generally known that the title of a property is held by NAMA? Is it not beneficial that the information that this property was part and parcel of a rescue package is available to the general public and the potential investor?

Deputy Brian Lenihan
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It is an interesting amendment with a reference to a durable 2 m x 2 m sign, a new legal concept that might be analogous to a poster in political and electoral legislation.

Deputy Joan Burton
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It is a modest sign.

Deputy Brian Lenihan
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It is a modest sign. I do not see why NAMA should be put on a different footing from anyone else in this position or why one should be obliged to advertise this.

Deputy James Reilly
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It is to ensure a square deal.

Deputy Brian Lenihan
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If NAMA develops a site, or does so with another interest, I assume that this will appear and that one will read that 40 new houses are being built here by NAMA in conjunction with X. This is a commercial matter and should not be specified in legislation.

Regarding legal title, NAMA must dispose of land and I am not comfortable with the idea that there must be 1,000 signs around Ireland definitively stating that this is NAMA land. I am concerned about the market implications of this for the agency.

Deputy Bernard J. Durkan
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Upward or downward implications?

Deputy Pat Rabbitte
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Can we settle on a logo?

Deputy Brian Lenihan
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The Labour Party can design it.

Deputy Michael D. Higgins
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Something sinking under the water.

Amendment put and declared lost.

Deputy Joan Burton
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I move amendment No. 42:

In page 27, lines 42 to 44, to delete subsection (8).

I referred to this previously. This is an extraordinary expression of power by the Minister. Section 12(8) states: "Except where otherwise provided by this Act, NAMA may exercise its powers or carry out its functions without the consent of any other person or authority notwithstanding any other enactment." These are extraordinary powers that are not in line with the spirit of our Constitution, where Ministers are required to exercise their powers in accordance with law but not in such a way that they consciously ignore consent or authority in respect of any other party. This measure should be deleted.

The Minister referred earlier to receiving advice on deleting paragraph (ac) because it refers to the powers of the courts. The Minister wanted to disregard the power of the courts. A balance must be drawn between the extensive powers that the Minister has under NAMA and the extraordinary and dictatorial powers the Minister is acquiring in this Bill. I have no doubt that some of these excessive powers will be the subject of court challenges. Taking excessive powers in a Bill is always ill-advised because those who have the money to pursue the issue legally will do so. As there is so much money riding on this, it is quite likely that excessive powers will be subject to challenge. I do not understand the reasons for granting excessive powers. Sections 13 and 14 are in the same vein and represent extraordinary powers in a situation where, in banking legislation, the Minister took extraordinary powers. He did not particularly exercise these powers as we are not much better off in terms of the crisis. It would be better to drop this provision from the Act.

Deputy Brian Lenihan
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I am prepared to examine the section. I amended the earlier section——

Deputy Joan Burton
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Because of the courts.

Deputy Brian Lenihan
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——but I am prepared to examine this section again. The intention is to ensure that the powers conferred on the agency by the Act are not inadvertently undermined by other enactments. The Schedules demonstrate the sheer scale of the impact of the agency on other enactments. At the same time, it is an undesirable principle of statutory interpretation to repeal an Act by implication rather than in express terms. On that basis, if the intention behind this subsection is to repeal other Acts by implication rather than in express terms, I would prefer the matter to be put in express terms.

Deputy Joan Burton
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Will the Minister return to this on Report Stage?

Deputy Brian Lenihan
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I will. I take it the Deputy took legal advice on this matter.

Deputy Joan Burton
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Absolutely, and I took legal advice on the tenor of the powers of the Minister in this Bill. I am well advised that the powers of the Minister are excessive. If one was to be technically minded, the Minister has made great play of the appeal by the CSO to EUROSTAT for off balance sheet status. The decision to have this off the balance sheet is a technical matter that the EU is moving towards because it is trying to deal with bank debt for all countries in this situation in a particular way. It is very difficult to show how the SPV has these excessive powers.

Deputy Brian Lenihan
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Deputy Burton is trying to save the spaceship.

Deputy Joan Burton
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I am making the technical point that one needs a balance of powers. The Minister cannot be all things to all men and that is what he is trying to be in his various approaches to the Bill.

Deputy Brian Lenihan
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I am prepared to re-examine the section for the reason I stated.

Deputy Richard Bruton
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I will wait to speak on the section. The Financial Regulator, the planning authority and licensing bodies should not be ignored or overridden by NAMA and neither should Revenue, which requires approval for certain activities. I presume the establishment and registration of special purpose vehicles should not override the Company Registrar. They are five examples of where it would be bizarre to take on this power.

Chairman
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Does Deputy Rabbitte wish to speak to the amendment or will he wait to speak on the section?

Deputy Pat Rabbitte
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On the amendment, what crossed my mind was the prospect of the entire regulatory system being rethought given how lamentably badly it has failed us. Legislation on the new regulatory architecture is likely to come before the House. Would this enactment be excluded by this subsection? We cannot make a decision to state that the Bill will exclude such an authority.

Deputy Brian Lenihan
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I agree with the points made by Deputies Bruton and Rabbitte. The problem is repeal by implication and occasionally one must resort to it. However, in this context it could have very far-reaching significance so I would prefer anything put forward under this heading to be more precise in its scope.

Deputy Joan Burton
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Was the section on excessive powers drafted by the office of the Attorney General or by a legal firm? It seems to me that it may have been drafted by people who lacked experience of actual legislation and the legislative process.

Deputy Brian Lenihan
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No, I cannot divulge the entire relationship as a client with my lawyer but I can state that the Attorney General has combed every provision of the Bill——

Deputy Joan Burton
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I wonder who drafted them.

Deputy Brian Lenihan
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——and was assisted in that regard by a legal advisory committee which worked on this from June until August and continued to work after the publication of the draft Bill. The Attorney General has put an enormous amount of work into this and stands over every subsection. We have a separate function to exercise here.

Amendment, by leave, withdrawn.

Question proposed: "That section 12, as amended, stand part of the Bill."

Deputy Richard Bruton
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I do not want re-open the debate on the SPVs but I would like reassurance from the Minister that he will consider on Report Stage a statutory framework to be presented to us either in the Bill or by regulation so we can see exactly what we are buying into. The Minister indicated that there will be a number of subsidiary SPVs possibly — he did not absolutely commit to it — one for each of the loan books of individual financial institutions. I understood that the Minister's approach to NAMA was that once these assets were acquired they would pursue them in the best overall interest and that there would not be consideration of the assets of one institution's assets versus another because if one was trying to maximise the value of one institution's assets one might have a different order of sale of assets.

Issues would be raised if, having acquired assets, NAMA sought to calculate the loss in each institution. I understood this was the Department view on why bank levies should not be specifically related to an individual bank which might have made appalling loan decisions. One would imagine that a bank levy would be linked to those appalling decisions but I understood the Minister and the Department resisted that. However, quite surprisingly we now find that the Minister is discussing individual SPVs for the loan books of individual banks. If this is the direction in which we are going, it seems that we could have bank levies related to the individual losses incurred because separate companies will operate them. It is surprising given what we had before.

I would buy into some of what the Minister stated on SPVs if I thought he would agree to some of the later amendments on the role of the Comptroller and Auditor General or an equivalent authoritative body being able to investigate the establishment of bodies and the operation of NAMA and report back to a strong Oireachtas committee that could bring public attention to it. My willingness to buy into what the Minister states is a great deal that he has swung, would be conditional on his attitude to subsequent amendments. If this will all be under the carpet and we will not be able to see exactly what is going on, this is not adequate legislation and this is not a proper approach to what is a very important issue. I put down this marker on later amendments because the Minister's broadening of his concept of what the SPV will do creates the need for far stronger Oireachtas oversight because the action will be at one remove from the body that we are overseeing.

Deputy Joan Burton
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As we are now discussing the section and the Minister suggested that we could return to the issue of SPVs at this point, I have a number of questions to ask the Minister. Will the Minister and his officials provide us with an outline of the French Republic's SFEF to which he referred in his earlier contribution? Correct me if I am wrong because I do not have much personal knowledge of the organisation of the French Republic's financial affairs but I understand that vehicle was for the sum of only €25 billion, which is half of the NAMA figure, in an economy ten times the size of the Irish economy. I also understood that it was for a limited duration and that it was a buy in by the banking consortia who were themselves the subject of the rescue. That is why the analyst from Société Générale struck a rather sceptical note in his comments on the event.

I am quite sure that the Minister's officials gave him very detailed background on the French model. It would be helpful to us if we could get a copy of the note on the French model. France is an interesting example because it has had bank failures and serious bank problems over the years. A variety of approaches to its bank structure has been tried, as was mentioned. Will the Minister supply us with the information on the particular aspect of the French example to which he referred when he spoke earlier?

In the Minister's original superstructure he made a provision to acquire not just distressed assets but what he described as good performing assets producing a stream of income. NAMA will delegate the purchase and management of these loans to a separately created SPV. This implies that the SPV will take the performing as well as non-performing loans. Is this correct? The purpose of this is to get the non-performing loans and liabilities off the State's balance sheet. Will the Minister give us more information on this? His master SPV seems to create a single derivative out of the NAMA structure and I would like a comment on this. Derivatives, by their nature, are very risky. In this case, the purpose of this structure is to leave the risk with the Irish citizen while passing whatever prospects there may be for a recovery to the canny investors who commit €51 million to the SPV.

The Minister spoke about the €51 million in the SPV being likely to be invested by insurance funds and so on. He shook his head when I spoke about the canny investors. Why would investors invest €51 million unless they believed there would be a very high return?

As this entity is not specifically provided for in the legislation, will the Minister state whether his is minded at this stage to make specific provision for it? He has vast powers in regard to written directions, guidance and so on. However, written directions and guidance are of no value to the Dáil because they may well be secret and never disclosed. It will be very difficult for the public interest, whether Members of the Dáil or others, including journalists, to penetrate the mystery of the SPV once the Bill is enacted. Is the Minister minded to refer specifically to the SPV in the legislation, or to spell it out, by tabling an amendment on Report Stage or on Committee Stage, because we still have time to table Committee Stage amendments?

Deputy Pat Rabbitte
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I do not want to repeat what Deputy Burton said but in respect of the SPV, is there anything preventing the two big banks putting up the €51 million?

Deputy Brian Lenihan
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Who?

Deputy Pat Rabbitte
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The two big banks.

Deputy Joan Burton
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AIB and Bank of Ireland.

Deputy Pat Rabbitte
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We would have a situation where they could unload the toxic assets on to the taxpayer and make a profit by doing so. Can we have clarity on that because we would be in danger of ridicule outside this House if that situation arose? Deputy Burton spoke about risky derivatives but this is——

Deputy Joan Burton
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I wish to add briefly to that. Both Allied Irish Banks and Bank of Ireland have well-established investment banks which are part of their structures, although they have a separate corporate structure. Irish Life & Permanent has a large life side and while it is not subject to the NAMA process at the moment, it is one of the banks guaranteed by the State. That is why I would like the officials to give us a copy of the guidance they gave to the Minister on the French Republic's example. It would be helpful to us because in the case of the French Republic, the banks being rescued were involved.

Deputy Kieran O’Donnell
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I am glad Deputy Rabbitte raised that point which I made earlier, namely, whether the €51 million could be put up by the two banks. I assume this special purpose vehicle will be ordinary shares, unlike NAMA. Will they be tradeable shares, or shares which the investor could sell on?

The Minister has changed the whole set up in terms of NAMA and how we deal with these assets. He has brought on board a special purpose vehicle which is different in design from NAMA. He spoke about the control mechanisms but he has still not said whether the majority of directors on the board of the SPV will be private investors. Who will appoint the chief executive officer? In terms of determining the profits and the paying of dividends, will the SPV be required to write down the value of assets on a yearly basis if they decline in value? How will the SPV work?

The Minister was very blasé, said there was no problem and that he would take care of it. Unfortunately, €54 billion of taxpayers' money is at stake. If we did not ask these questions, we would not be doing our job. The Minister has not answered the questions and has been vague and elusive on the issue. This is about hard and fast figures.

NAMA is one vehicle but we do not know whether the Minister will create a master SPV, a daddy SPV and a load of baby SPVs. We do not know who will drive the SPVs. We know the structure of NAMA but there is a myriad of unanswered questions about SPVs which the taxpayer is entitled to have answered.

Deputy Bernard J. Durkan
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This could be very interesting. The points raised by Deputies Rabbitte, Burton and O'Donnell are ones to which some of us have given some thought before now. It would be helpful if the Minister could indicate why this scenario will not unfold and why it would not be possible for a banking institution, or an amalgamation of banking interests, to get involved for their own purposes and to salvage some of their previous exposure? What would prevent them from getting involved at this stage and from making a killing out of all this misery which is about to befall the Irish taxpayer?

Deputy Brian Lenihan
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I will take Deputy Durkan's point first because I do not know if he was present for the earlier part of the debate.

Deputy Bernard J. Durkan
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I listened to it.

Deputy Brian Lenihan
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Good. I hope he took on board the essential point that the investment being spoken about here is of the order of €51 million which is approximately 0.1% of the total of what the taxpayer is issuing in terms of bonds. That puts the whole discussion into some sense of perspective. The dividend which can be earned on foot of this particular investment by the concern, whoever it may be, is carefully limited to dividend payments or a termination payment and limited by reference to Government bonds.

Attempts have been made to characterise the nature of the interest enjoyed by such a shareholder. It is a share with carefully defined terms. I do not accept Deputy Burton's characterisation of it as a derivative which she infers from the fact that she describes the transaction as a bet. It is none of those things. It is a share in which a person can invest or make a commercial decision about.

One of the crucial questions asked by Deputy Rabbitte was about who will make that particular investment. Clearly, NAMA has complete control over who will make the investment in the first place. That is a fundamental point. There is no question of, for example, the two main banks deciding to make the investment and then materialising as the shareholders in this entity. That would be undesirable having regard to the nature and scope of the NAMA operation.

Deputy Michael D. Higgins
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But not impossible.

Deputy Brian Lenihan
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It is impossible because NAMA can decide who is appropriate in terms of the appropriate investor.

Deputy Burton asked for information about the French scheme and I would be delighted to arrange to have it furnished to her. Deputy Burton also raised the question of performing assets. Of course, performing assets are part of the bank assets being acquired by NAMA. In fact, much of the public debate has suggested that there are these assets which do not perform. There is a variety of arrangements in between the two.

Deputies Bruton and Burton returned to the question of the proper statutory framework. The Attorney General has drafted the statutory framework here and there is one in this legislation. On the question of disclosure of information——

(Interruptions).

Deputy Brian Lenihan
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On the question of disclosure of information in regard to this transaction, the Bill can be strengthened in this regard and we can look at proposals.

In regard to the statutory framework to create such an entity, that is already in the legislation and it does not require supplementation in that regard, although I accept the point about oversight——

Deputy Richard Bruton
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Oversight and protection are at stake.

Deputy Brian Lenihan
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If further information is required, that can be locked into the legislation. As I have said already, I do not accept the assumption that these are derivative transactions. It is a shareholding in an operation in which the sovereign is involved and an investor can obtain a definite return. The method of calculating the dividend does make the share seem more in the nature of a preference share of a bond than a dividend, but it is structured in this way for reasons I have already explained to the House.

Deputy Richard Bruton
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Why is the Minister having different SPVs for different banks?

Deputy Brian Lenihan
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I am sorry; the Deputy did ask that question. The master SPV may create a number of subsidiaries, each of which will be responsible for the loan book of an individual financial institution. However, this will not necessarily be the case. Again, it is indicative. The main point is that any such subsidiary will be 100% owned by the master SPV. We are operating within the €100 million overall limitation and the €51 million limitation that applies to the private investor.

As to whether it will be suitable, from the point of view of effective management, to divide it into institutions or categories of lending, that is a matter which the use of these subsidiaries will permit.

Deputy Richard Bruton
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Everyone else has insisted there will not be a separation.

Deputy Brian Lenihan
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We are still operating under one.

Deputy Andrew Doyle
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This is so fundamentally important to the working of NAMA that I would have thought it would be dealt with in a more substantial way rather than being vaguely referred to in paragraph (r) of section 12(2). It has come to light that there is a three-page briefing document on it. Surely this is fundamental to the way NAMA will operate.

Deputy Brian Lenihan
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It is not.

Deputy Andrew Doyle
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With due respect, I do not know how the Minister can say that.

Deputy Brian Lenihan
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I will explain in a minute.

Deputy Andrew Doyle
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It seems worthy of a section to itself with a clear definition.

Deputy Kieran O’Donnell
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Will the private investors have the majority on the board of directors of the SPV? Who will appoint the CEO? Unlike NAMA, the SPV brings in a private investor. That is a fundamental shift, and the Minister needs to recognise this. It beggars belief that it is not in the legislation. The Minister is saying it is not a significant shift, but it is worthy of a three-page document.

Deputy Brian Lenihan
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The Deputy should read it. It explains what he is asking.

Deputy Kieran O’Donnell
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It is the legislation we are dealing with here. The Minister should recognise that fact and address it.

Deputy Seán Barrett
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I find this absolutely extraordinary. There must be a con-job going on here. It is a smokescreen.

Deputy Terence Flanagan
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Smoke and daggers.

Deputy Seán Barrett
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This is to prevent the Green Party from suddenly realising it has been conned.

Deputy Bernard J. Durkan
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Smoke and mirrors.

Deputy Seán Barrett
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The Minister says it in his own note, which stated that the master SPV would be a separate legal entity and that it would have autonomy of decision in its day-to-day operations. This is an entirely separate body from NAMA or anything else.

Deputy Terence Flanagan
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Baby NAMA.

Deputy Seán Barrett
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It operates on its own. It has powers that are not even mentioned in this legislation. Nowhere in this legislation will there be a mention of a master SPV. This is a con-job. It is morally wrong. The Minister is sending out a message that NAMA will be owned by the State and will protect the State's citizens and borrowings, but hidden behind this is a three-page document which states that 51% of the real body will be owned and operated in private hands. There is no mention of it. We have all been around for a while now——

Deputy Michael Mulcahy
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The Deputy should read paragraph (p).

Deputy Seán Barrett
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——and we do not want to be conned.

Deputy Brian Lenihan
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It is 0.1%.

Deputy Seán Barrett
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Anybody who could read could understand——

Deputy Bernard J. Durkan
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That is the worry — the 1%.

Deputy Brian Lenihan
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It is 0.1%.

Deputy Seán Barrett
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——that this SPV has extensive powers. It operates with its own board. We are not even told who the investors will be, nor are we told who the directors will be and how many there will be on the private investment side. The Minister says in his note that it may be the whole NAMA board of nine. However, in the Bill he lists who can be considered for nomination to the board of NAMA.

Deputy Kieran O’Donnell
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It is made up on the hoof.

Deputy Seán Barrett
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According to this, it could be nine different people, yet the Minister is telling me there is no need to have this specified in legislation. Let us be honest about it. I was absolutely flabbergasted when I came in here to discover that this animal is going to run the whole thing. That is the truth of it. The Minister keeps wagging his head, but it is a fact. He has actually stated it in his note——

Deputy Kieran O’Donnell
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Section 12(2)(r).

Deputy Seán Barrett
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——yet there is no mention of it in any section of this Bill.

Deputy Brian Lenihan
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The Deputies are enjoying themselves. However, there is a core national interest at stake here.

Deputy Seán Barrett
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I know it is a core national interest.

Deputy Brian Lenihan
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It is a fundamental interest which has been carefully safeguarded and protected as a result of the negotiations conducted by my officers at the Department, assisted by the NTMA, with the Commission and, on the CSO side, with EUROSTAT. It is very important for this country that this is effectuated in legislation. Far and away more important than this theoretical debate is how our national debt position will be presented, and misrepresented, by some.

Deputy Seán Barrett
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Nobody is saying——

Deputy Brian Lenihan
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This is a remarkable——

Deputy Seán Barrett
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We are not implying anything. We are saying the Minister should state it in the legislation.

Deputy Brian Lenihan
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This is an important protection in that regard.

Deputy Kieran O’Donnell
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The Minister is deliberately misinterpreting us.

Deputy Brian Lenihan
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It is an important protection.

Deputies Doyle and O'Donnell asked a number of important questions, and Deputy O'Donnell specifically raised the question of investors having a majority on the board. Again, that does not necessarily have to be the case in an arrangement of this kind.

Deputy Kieran O’Donnell
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It is either "Yes" or "No".

Deputy Brian Lenihan
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There is no rule. It is open to us to structure it in such a way that they do not.

Deputy Bernard J. Durkan
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Which will it be?

Deputy Kieran O’Donnell
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The Minister should give a physical number.

Deputy Brian Lenihan
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I do not want to concede ground on the primary point. It has already been suggested in this debate that somehow this vehicle will run the whole of NAMA. It will not.

Deputy Seán Barrett
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That is what it says here.

Deputy Brian Lenihan
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For the reason I explained already, that will not happen——

(Interruptions).

Deputy Brian Lenihan
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——because of the definition of "group" in the Bill. We really have a responsibility, in these highly technical banking issues——

Deputy Michael D. Higgins
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That is rubbish.

Deputy Brian Lenihan
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——not to mislead the public.

Deputy Kieran O’Donnell
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Absolutely.

Deputy Seán Barrett
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I agree with the Minister.

Deputy Kieran O’Donnell
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We all agree with that.

Deputy Brian Lenihan
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That is absolutely fundamental if we are to make progress in this area.

Deputy Terence Flanagan
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The Minister is feeding us the information.

Deputy Brian Lenihan
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With regard to the position of the CEO, this body may not need a CEO. The CEO function can be outsourced to the CEO of NAMA. This is an essential device——

Deputy Kieran O’Donnell
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That goes against what EUROSTAT was saying.

Deputy Brian Lenihan
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——for ensuring that our national debt is not on the balance sheet for European statistical purposes.

Deputy Kieran O’Donnell
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We must have a decision-making economy.

Chairman
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Will members allow the Minister to finish?

Deputy Brian Lenihan
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This is the particular device which is essential to ensure our national debt is off balance sheet in EUROSTAT terms. That is of fundamental importance to this country.

Deputy Kieran O’Donnell
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The Minister missed the fundamental point.

Chairman
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Excuse me, Deputy.

Deputy Kieran O’Donnell
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Can I have a right to reply, just for a minute?

Chairman
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The Minister is finished his reply and Deputy Burton is next. I will then call on the Deputy.

Deputy Kieran O’Donnell
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I refer to the decision-making autonomy in respect of the principal function. The Minister clearly has not read what EUROSTAT is saying. In addition, the Minister has still not answered my question on whether of the people on the board of the SPV, the majority will be from the private investment side. Clearly, based on this, a CEO will need to be appointed. Who will appoint the CEO?

The Minister spoke about the——

Deputy Brian Lenihan
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A CEO does not have to be appointed. It could suffice for the——

Deputy Kieran O’Donnell
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Then how can it have decision-making autonomy?

Deputy Richard Bruton
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How can it make decisions——

Deputy Kieran O’Donnell
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How can it make decisions without a CEO?

Deputy Brian Lenihan
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It is an investment vehicle; a company secretary——

Deputy Kieran O’Donnell
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The Minister is clearly misrepresenting the facts. As an aside, the Minister made reference to the fact that he had been discussing the SPV with the European Commission for the last number of months. Were his Green Party Cabinet colleagues aware of the SPV prior to the Green Party conference?

Deputy Brian Lenihan
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Yes.

Deputy Joan Burton
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I ask the Minister to comment on the analogy he drew this morning with the French Republic's scheme. He praised his scheme because he said it had analogies with the French scheme. However, as I told the Minister, the French scheme is only for €25 billion in a country ten times the size of Ireland.

Deputy Michael D. Higgins
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And it was wound up.

Deputy Joan Burton
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The amount of money we are talking about is double that of the French scheme. In addition, the French scheme is now, as I understand it, almost — if not totally — wound up because it was set up for a limited duration of between three and five years. This is important. The Minister chose the analogy of France himself. He should explain that to us and give us background information on what informed his thinking and that of his officials.

I had an opportunity to spend some time in France over the summer and to speak to some people. What the French scheme aimed to do, above all else, was to get credit flowing again. If memory serves me correctly, the French scheme actually mandated a percentage increase in credit. It was covered in all the French newspapers at the time. Was it not a mandatory part of the French scheme? Can the Minister give a nod?

Deputy Brian Lenihan
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I will not go into further details on the French scheme or the Irish scheme. I will act in the best interests of this country.

Deputy Joan Burton
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I am asking the Minister questions. I want to ask him another question.

Chairman
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As it is after 6 p.m.——

Deputy Joan Burton
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This is really important.

Chairman
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We can come back to it at 6.30 p.m.

Deputy Joan Burton
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The French scheme was to be about rescuing banks that could be rescued. It was not for the likes of Anglo Irish Bank, because Anglo Irish Bank is not capable of being rescued. The Minister held up the French scheme as an example for us, but I want him to explain how it is an example for us. There are interesting aspects to what the French have done. Others have alluded to the French example, and there are good things to be taken out of it, but the French scheme was not used for the likes of Anglo Irish Bank. It was meant for banks that were merging and relaunching themselves.

Deputy Brian Lenihan
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The crucial issue is that the structure of ownership is copied from the French scheme. This structure ensured that the French scheme did not count on the balance sheet of the French public finances for the purposes of stability and growth.

Deputy Joan Burton
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Who were the owners? They were the banks.

Deputy Brian Lenihan
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The owners are immaterial in this context. It was a different ownership structure in the sense that the purpose of the French scheme, as I explained earlier——

Deputy Joan Burton
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No, the Minister praised the French scheme.

Deputy Brian Lenihan
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It is very difficult to have a sensible debate when somebody does not listen. I explained earlier very clearly what the French scheme was about. It was about guaranteeing the banks and raising funds for them. I explained that were we to have executed a similar scheme, it would have involved the NTMA raising all the funds for the banks, including Anglo Irish Bank, because that bank does not exist, for the purposes of this discussion, in the French example.

Deputy Joan Burton
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Precisely.

Deputy Brian Lenihan
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They may or may not have an equivalent institution. The crucial point is that it is the ownership structure of the French model which kept the French model off balance sheet for European purposes. EUROSTAT has issued a similar indication on this model in this context. That is important for the country and we should respect that.

Question put and agreed to.

Chairman
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There has been a proposal to sit until 10 p.m. Is that agreed? Agreed.

Sitting suspended at 6.05 p.m. and resumed at 6.50 p.m.

Chairman
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It is proposed that the committee will commence business at 11.30 a.m. tomorrow. Is that agreed? Agreed.

SECTION 13.

Question proposed: "That section 13 stand part of the Bill".

Deputy Richard Bruton
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There is a lot of disquiet about this section. We can understand the need for guidelines to be issued, but the fact that they will not be published immediately and will only come into public evidence when we see the annual report of NAMA, subsequent to it reporting on the guidelines, is not a satisfactory arrangement. The Minister proposes to issue directions in the following section. The power of these directions and guidelines seem to be much broader than in other legislation where, generally, Ministers are empowered to issue directions on policy. Here the Minister seems to have an open-ended ability to issue guidelines or directions. To what degree is the Minister constrained in this?

An issue which was raised earlier in the debate was whether a commercial mandate should apply. Can the Minister issue directions or guidelines that would require the agency to deviate from a commercial mandate, which seems to be a core principle and, as Deputy Mulcahy articulated, is absolutely fundamental to the way it should work?

Deputy Michael Mulcahy
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Does Deputy Bruton agree with it?

Deputy Richard Bruton
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I agree with it. Surely directions have to be constrained in some way.

Another concern I have about the sections on guidelines and directions is that they interact with the later sections which ban NAMA from expressing views on issues which represent Government policy or confidentiality, which the Minister has the power to define, and thereby closes down all subsequent debate or cross-examination of things he happens to define as confidential. A very overbearing power is being developed for the Minister, which interacts with other sections to go beyond his power to issue these directions, and he can then close down all subsequent discussion on them. I do not think it is healthy to have such powers in this Bill.

I did not check all the other legislation, but my recollection of legislation I have seen over the years is that Ministers issue directions on policy. They are very constrained in the issuing of directions on a specific day-to-day decision or the handling of a specific brief or grant application or whatever, but in these sections such powers do not seem to be so constrained and Ministers can, for example, decide to have a certain plot made available for a social purpose, which might be for a very benign use, or a Minister might decide he or she wanted to provide a sweetheart deal for someone which would be anything but benign in its impact.

Why does the Minister feel he needs to take these extraordinary powers without circumscribing them in some way, other than the fact they are in writing and the agency will have to report on its compliance? That is not sufficient in terms of having checks and balances on ministerial powers. I am very uneasy with these sections and am disposed to oppose both of them, moreso the one concerning directions than that concerning guidelines because of the more compelling power contained in it. Guidelines are less susceptible to deviating from the principles of the Bill because they are only guidelines, whereas directions can deviate from the principle. I have considerable misgivings about these sections and will be interested to hear why the Minister feels they are justified.

Deputy Joan Burton
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On behalf of the Labour Party I oppose this section which seeks to give a direction. The powers of the Minister are outlined in section 14(1) which states, "The Minister may give a direction in writing to NAMA concerning the achievement of the purposes of this Act", and section 14(2) which states, "NAMA shall comply with a direction given by the Minister under this section". This gives power using, as was referred to, a 50-page detailed direction with a ministerial take on the wider purposes of the Bill.

What happens if such a direction were to adversely impact on parties such as the participating banks or the developers? A constitutional challenge would and could follow, on the grounds that the direction was legislation by the Executive. With respect, we have already had, on Committee Stage of this Bill, a series of developments which indicate the Minister's frame of mind in the approach to this Bill. We received information today on the SPV which fundamentally changes the tenor and framework of the Bill and what it sets out to achieve. The Minister has done that, contrary to the normal procedures in this House, whereby such an important change in the fundamental structure of a Bill would be advised to Deputies and be the subject of named specification in the body of the Bill.

I asked the Minister earlier to come into this House and explain in detail what one might call an "off balance sheet" event on Committee Stage of the Bill. His explanations have been very scarce. He is asking for the Department to have such powers, because we never know when there is a request for ministerial powers if an individual Minister is driving the request for ministerial powers or whether a Secretary General of the Department decided the Department of Finance should have pre-eminence regarding all these matters.

The Department of Finance's record to date has not been such that it merits a pre-eminent power to direct anything and everything regarding this Bill. This is more than a departmental desire to keep a grip on major issues. There is also a ministerial prerogative to have a political intervention. I respect the right to ministerial prerogative but if in a couple of years the current Minister is in opposition, he will want to hold the Executive accountable. There is a sweeping nature to the powers taken to the Minister, and we do not know if they are for the Minister to exercise personally or for the Secretary General or advisers to the Department. We have not had enough discussion to find out if these are the Minister's ideas or some put into the mix by the bands of outside advisers.

I asked a Minister last week about the total cost of advisers to the Department of Finance and the agencies associated with it specific to the banking crisis. The total, before NAMA, is running to €20 million if we take into account the various bodies and the Department of Finance.

Deputy Brian Lenihan
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The banks are being billed for the bulk of that, as was also indicated in the reply.

Deputy Joan Burton
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I asked various questions and I did not even get details of all the consultants, advisers and so on. I think it is a good idea that the Minister is employing a banking analyst from one of the stockbrokers, although I do not know if the analyst is working on a salary or consultancy basis.

The Minister is taking on extraordinary powers and yet he took on extraordinary powers with regard to the SPV without telling the House. He did not guide us on what was happening and so far, he has refused to provide an explanation on it. I asked the simple question of whether the Minister could explain the relevance of the French example which he lauded this morning. The €54 billion will be approximately 40% of the Irish GNP this year and probably next year because we do not expect much of a change. The French equivalent, at €25 billion, is less than 1% of the country's GNP.

Deputy Brian Lenihan
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It is 0.1%, or 0.11% to be exact.

Deputy Joan Burton
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The NAMA exposure is €54 billion, which is 40% of our GNP. There is a difference in the scale of exposure in the French example. The Minister is seeking more than twice the bond issues relative to the French, where France has an economy which is at least ten times the size of that in Ireland. The Minister has not come into this House and given any explanations in this regard, and nor has the Minister instructed his officials to do so.

I appreciate the three pages given to us by the Minister but they raise a series of additional questions about the SPV arrangement. Unless we are to abandon the concept of a Committee Stage and recommit this Bill, we must hear the Minister speak frankly and seriously to the points we have raised. It is not good enough for the Minister to come before us with such significant fundamental changes. We are talking about €54 billion in Irish Government debt. As the Minister stated, he is glad to have got it off balance sheet and the European Union is facilitating us in that through EUROSTAT but it is still €54 billion in a liability, contingent or actual, to be taken on behalf of Irish taxpayers. The Minister will have extraordinary powers.

As I have stated in opposing the section, the Minister has not demonstrated why he should have these extraordinary powers. Frankly, such powers are rather dangerous.

Deputy Michael Mulcahy
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For the moment I will address section 13 and come to section 14 later. One issue which people in this House constantly complain about is a lack of accountability in many of our State and, perhaps more so, in our semi-State institutions. They say they have asked a question of this or that institution and cannot get a reply, or this or that institution is running ahead of itself and is not very responsive to the wishes of the Oireachtas.

Section 13 is very carefully drafted and states:

The Minister may issue guidelines in writing to NAMA for the purposes of this Act and, in so far as any such guidelines relate to issues within the Governor's remit, the Minister shall consult with the Governor before doing so.

One of the points made on the benches opposite is that these guidelines may not be subject to scrutiny in advance of their being made. It may never be the case that the Minister will have to issue such guidelines; the section states that he "may" issue guidelines. Are we to say of the Minister that he or she should not have the power, in a general way, to issue guidelines in the event that he or she saw NAMA going in a particular undesirable way?

The section is "for the purposes of this Act", which would constrain the Minister in any guidelines which he or she may publish. The Minister cannot go outside the constraints of "for the purposes of this Act". As an addition to Executive accountability, the Minister should be empowered to make such guidelines. The legislation does not refer to the publication of these guidelines but they should, if made by the Minister, be published as soon as they are made and placed in the report of NAMA or laid, as a matter of law, before the Houses for approval. The Minister should be subject to rigorous scrutiny on those guidelines.

It would be absolutely unfair and unreasonable to say that the Minister, with overall executive responsibility under the Constitution for NAMA, would not be in the position to give a general line of guidelines or directions for NAMA, which is to be perhaps the biggest semi-State organisation under the remit of his Department. I suggest that this section should stay in the Bill but it should be amended with some form of requirement on the Minister to publish and lay before the Houses any such issued guidelines.

Deputy Brian Lenihan
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Deputy Bruton raised the questions regarding the breadth of the power conferred on the Minister under sections 13 and 14. I have always maintained in public life that a Minister should be accountable to this House and I have deplored the tendency with organisations set up at one remove from Departments to have an absence of any ministerial control or direction on policy issues such as guidelines. The section as drafted provides that the Minister "may issue guidelines in writing for the purposes of this Act", although there is no question of this being an untrammelled power to impose guidelines on NAMA on an issue unconnected with or contrary to the purposes and policy of the Act. That is clear.

It is drawn in a very broad way. We have had experience of other large organisations in which very large sums of money have been allocated by the taxpayer, and where there was inadequate provision in legal terms for ministerial control. The one point Deputy Bruton makes which should be examined is the question of the publicity of any such guidelines. I accept that these are important and it is provided in a later section that the compliance — as indicated by Deputy Burton — would be noted by the agency in its biennial report. I have agreed that those reports should be quarterly.

The text of the guidelines should be published rather than just having their existence disclosed by a report from the party to whom they were addressed. I am open to amendment on the issue of publicity and disclosure and it would add to the section if the Minister was obliged to lay the relevant guidelines before the Houses. There should not be an automatic parliamentary debate every time such guidelines are issued but they should be laid before the Houses.

It is not only for my protection that this is being inserted. Even more so, it is for the protection of any of my successors in this office. Clearly, such a person should be in a position to give directions to the agency within the scope of the legislation. That is of fundamental importance because while I, as Minister, have had the privilege of working with various individuals who worked very hard on this project and while there is an element of a common mind about what is being achieved, that may not necessarily be the case with a successor who might take the view that a different part of the Act should be emphasised within its overall intendment. It is very important that the legislation should give scope for that and that it should respect the fact that, as has been pointed out many times in this House, there is a very large sum of money at stake here and ultimately somebody has to be accountable to this House for that operation. I do not accept that the body should be insulated from this House by a diminution of ministerial control over the body itself. I do not believe that would be a wise way to proceed with this legislation.

Deputy Burton also made a number of points on this subject. In our laws there is no such thing as a ministerial prerogative. Ministers have functions either under the Constitution or under a statute. We are talking here about a Minister's function under a statute. I speak for the Department. I have to make the decisions. Secretaries General can and do give advice, as do other senior officers, but ultimately I must take responsibility for the decisions made. The Deputy's suggestion is that this is an attempt to give power to a Secretary General or a group of advisers. That is not the intention. The Minister is given the power and must stand over the exercise of the power. How the Minister satisfies himself or herself is a matter of how he or she does the job in the Department. As far as the power is concerned it is conferred on the Minister. The Secretary General is not in a position to defend himself or his Department in this House so it is incumbent on me to make the point that what I have seen in the Department in the past year suggests that the Department of Finance, like many other institutions in our national life and like many citizens, has been very surprised by the gravity and extent of the economic crisis and has had to work extraordinarily hard to devise appropriate remedies to deal with it. That puts the Department in a somewhat different province from any others in our national life who have had the luxury of opposition and criticism but not the necessity of devising remedies and solutions.

With regard to advisers and their cost, it was clearly important, given the nature and extent of the crisis, that the Department would not act on its own but would obtain informed advice on different issues. That advice was obtained and the bulk of it was charged on the banks not on the taxpayer although the sums are audited by the Comptroller and Auditor General because they form part of the public accounts. However, the recapitalisation arrangements resulted in a substantial defrayment of those expenses by the financial institutions as an administrative charge.

Regarding the position of banking analyst referred to by Deputy Burton, as I indicated last week, that is a salaried position and is remunerated not on a consultancy or performance basis but on a salaried basis as is the practice with positions in the public service.

Regarding the special purpose vehicle I wish to put one matter on the record. We have had an extensive discussion on this and no doubt we will return to the subject. It is not correct to say that the House was in some way taken by surprise in this regard. I was reminded during our break at tea time that in April, when Mr. McDonagh appeared before the committee as interim chief executive officer of the agency he made it clear that arrangements were in train to devise an appropriate way of going off balance sheet with regard to the agency. I also expressly referred to this possibility in July and August. Obviously, the precise vehicle was not identified though clearly there was an international precedent. The Deputy referred to the French example. That example relates to a guarantee arrangement whereby common funding is procured for the banks and in certain medium-term debts the banks' treasury departments are supplanted by the sovereign operating a direct operation.

In practice, what has happened in Ireland is not very different to what the French agreed in that context. We have the same sequence when the guaranteed banks go to the market. I have had to do extensive overseas promotions for the State and the financial sector because the sovereign is underwriting the banking system. That has all had to be done but we are a much smaller jurisdiction and did not need the elaboration of the French system. The point is that the French system involved a corporate structure which took all that off balance sheet for them. Equally, that corporate structure has been copied to ensure that in the context of the asset relief scheme it is taken off balance sheet for us. That is the key point in the comparison with the French arrangements.

Deputy Burton is dissatisfied with the three pages of information she already received on this subject. I can certainly arrange an official briefing for her regarding further details of what is proposed but she will appreciate, and it is important to put this in context, that the overall amount involved is less than 0.1% of the total balance sheet of NAMA on its estimated basis. It is important to recognise that and that such is the context in which this discussion is taking place.

Regarding the core issue of ministerial power, I do not know whether I should speak to section 14. In fairness, Deputy Bruton addressed himself to that issue too. I believe Deputy Burton would prefer to consider section 14 in a separate way. I shall leave that section for now and shall deal with the section we are considering.

Deputy Richard Bruton
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I welcome the Minister's willingness to publish the material. That is a step forward. I recognise that providing guidelines in writing to NAMA for the purposes of the Act constrains the Minister in a way. To take the example raised by Deputy Mulcahy as to whether the price charged would deviate from a commercial price, does the Minister feel that is something he could or should be able to influence by guideline or direction? That would be important. Regarding the timing of disposals by NAMA, if the Minister felt he wanted to see cash generated rapidly in a way that might be inconsistent with the orderly development of the property market, would he envisage that in his position he could issue guidelines that would conflict with the other objectives we were seeking to achieve? The guidelines have a very broad nature. It seems to me, that apart from publication, there should be some obligation on the Minister to establish if they are consistent with the orderly implementation of this Act. I must look up other precedents but it seems this is particularly broadened with regard to what the Minister can do.

I take the Minister's point that the Dáil may have been remiss in allowing some agencies to have policy directions only. That has left us totally constrained, with the result that we cannot even get answers as parliamentarians. I accept the Minister's point that we can be too prissy about sticking with past formulae when such formulae are not serving us well. I shall consider what the Minister said but we may need to impose a requirement on Ministers that they act in a way consistent with the orderly implementation of this Act and are required to show in issuing their guidelines or directives, that they are so doing.

Deputy Joan Burton
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I wish to raise some points. First, the Minister's concession that the guidelines will be published is at least an advance in terms of democratic accountability. The most important example of a Minister getting absolute discretion with regard to guidelines relates to the HSE legislation. What happened in that case was directly contrary to the advice of the Labour Party's then spokesperson, Deputy Liz McManus, namely, that almost no mechanism of public accountability or oversight was provided on a timely basis. There was a form of oversight through the old health boards and the much maligned political representation on those boards. All that was swept away.

Regarding the designation of hospitals for closure, particularly the private hospitals initiative, the Minister was and is empowered to write privately to hospitals to offer a directive as to what their conduct and approach is to be in respect of certain matters. There are two issues, the first of which is Government policy. As the Minister for Health and Children says, when she was elected with the Progressive Democrats in 2002, the public-private hospital initiative was a part of their stated manifesto. However, she is still saying this even though her party has disappeared and she and her colleague are, for all intents and purposes, Independent Deputies aligned with the Government. This is probably the worst example. As the Minister for Finance knows, there is a storm of public concern about the money being spent on the HSE, the lack of accountability and some policies heavily motivated by a political stance that is no longer even represented by a political party.

The point of this one example among the others is that, once these items leave the direct provenance of the Dáil, we hear nothing more about them until we learn of a scandal, a failure or a bad story. Together, this lack of accountability and public reporting comprise one of the reasons the Dáil and Seanad are so demeaned. An oversight mechanism is important. The Minister has come some of the way, in that there now will be quarterly reporting in a summary form. However, we need someone who is not a Deputy or Senator to go in, as occurs in the US, and acquire and publish the information for good or for bad. Committees, the Dáil, the Seanad or whatever could then make use of it to commend the Minister or criticise him and call him to account.

The HSE has been an expensive, an extraordinarily controversial and, in many respects, an unsuccessful health service delivery structure in public life. I raised it as an example because NAMA is also an extraordinarily expensive operation with commitments of €54 billion in guarantees on behalf of the taxpayer and a ten-year trajectory, if not longer. The Minister ought to learn from the HSE's example that doing things behind closed doors is not for the best. Sometimes, the Opposition has points that may occur to the Minister. Locked in with his civil servants, however, he might not be able to argue their views against his own.

We are discussing €54 billion in loans, but the Minister will make directions that will affect vast amounts of money, loans and underlying collateral assets in respect of various developers. If one's guidelines are heavily prescriptive and not fully published or publically known, there is a good argument in the tradition of the Constitution whereby persons who feel heavily aggrieved by these guidelines and directions can resort to the courts. They will argue that the guidelines are effectively legislation by the Executive that ought to have been in legislative or regulatory form, went before the Houses in some way or other and were capable of being debated.

My next point is on the special purpose vehicle, SPV. Like many colleagues on the Government and Opposition benches, I attended the entire meeting of the Joint Committee on Finance and the Public Service at which Mr. Brendan McDonagh made his presentation. I have also met him several times privately, as the Minister is aware, to get a briefing and details. Mr. McDonagh, as the designate director of NAMA, the Minister and others in the media and the Department have alluded to the development of SPVs, which we were given broadly to understand related to the working out of assets. For example, each bank might have an SPV that would involve the working out of assets. What the Minister has presented today is something of an entirely greater dimension than the alluded proposals on SPVs. If this is the mindset of the Department or of the Minister, what has been disclosed in the past four or five days since the information became available represents a seismic shift in the direction of the Bill. If this is to be the Minister's approach to guidelines, we will not know where we stand as regards the Bill.

Commercial operators will invest €51 million, but that amount is peanuts to hedge and pension funds that want to place a bet as a derivative on the SPV structure as described. If it is the Minister's opinion that he can enter the House with something as significant as this without telling the Opposition any of the details, it is difficult to know what is the Chamber's function. While I welcome the notion that the Minister might publish all of his guidelines in writing and advertise them, there must be a mechanism whereby they could be laid before the House and debated, and not just laid before the Oireachtas Library.

I want the Minister to consider the HSE's example. The use of guidelines by the Minister for Health and Children is one of the reasons behind some of the devastating decisions and conclusions reached. It is also one of the reasons the costs of that particular development have been so extraordinary. As the Minister for Finance knows, it now occupies a large percentage of our GNP. There was a fault in that Act's design, but there is a similar fault in this Bill. The Minister is given excessive powers and there is excessive secrecy and a lack of publication of information. Since the actions outlined in the Bill are designed to be carried out rapidly, we need 30-day reporting in real-time and an honest explanation about what is planned from the Minister and his officials.

Deputy Seán Barrett
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May I ask the Minister a simple question? Will he be subject to parliamentary questions regarding NAMA's activities? If not, or if so, will he include in the legislation a provision whereby this is clearly stated so that, in future, we will not get a reply, as we do in respect of the HSE and everything else, stating that "the Minister has no responsibility in regard to this matter"?

A great deal of what has transpired over the years has been due to the failure of Ministers to answer parliamentary questions properly. No agency for which the Minister of the day is not answerable to this House through a parliamentary question should be ever again established. If these guidelines in terms of the Minister can be included, he could equally insert a special section stating clearly that he is responsible to the Dáil and will answer queries by way of parliamentary question. This provision should be included in any new legislation before the House involving an external agency acting on behalf of the Government. I ask for an assurance from the Minister tonight that if I or anyone else puts down a parliamentary question on NAMA the Minister of the day will give a full and open reply to it. It should be stated in legislation that he or she is obliged to do so.

Deputy Michael McGrath
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It is inevitable with a Bill containing more than 230 sections that there will be particular provisions open to interpretation, such is the nature of drafting legislation. We must decide who should make the ultimate decision in interpreting the wording in the legislation and how it should be implemented. It may well be that following the enactment of the Bill, NAMA will commence operations and may interpret individual sections and words in a manner which is not consistent with the intention of this House. The question will be who do we believe should be the person to make that determination? Should it be someone who is not accountable to this House or should it be a Minister appointed by Government who comes before this House and is accountable to it and perhaps also accountable to the oversight committee if that is the oversight provision the House intends to implement? This is the important point. The suggestion that the guidelines should be published and laid before the House is a sensible and appropriate response.

I refer to subsection 13(2) which provides that NAMA shall have regard to any guidelines. I would seek to go further and compel NAMA to implement the guidelines of the Minister. Precedents exist with regard to other public bodies whereby agencies must have regard to policy guidelines and to particular documents. This does not mean they are compelled to implement the wishes of the Minister. It is appropriate that the Minister will publish the guidelines and come before the House to explain them and they will be subject to the scrutiny of the oversight committee.

Deputy Michael D. Higgins
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I will be brief. I recall a paper given by former Attorney General and former European Commissioner, Mr. David Byrne, to the University College Dublin law society some years ago in which he addressed this issue of Ministers transferring responsibilities. My understanding of his paper was that a Minister could not devolve constitutional responsibility to an agency. It has always been constitutionally improper for Ministers in different positions to argue that they are not responsible or accountable to the Dáil. From memory, Mr. Byrne's paper suggested that the Minister in giving functions to an agency or a body had to do so within a clear policy envelope that retained for him or her accountability in the normal sense of Cabinet responsibility. It has always astonished me that people have operated entirely separate from that view offered by a distinguished jurist who went into this issue at length. It is sheer laziness and evasion that has accepted this practice that Ministers would not account to the Oireachtas but unfortunately this has grown up as an accepted practice.

Deputy Andrew Doyle
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I welcome the Minister's acknowledgment that he will be prepared to publish the directions and guidelines. Whatever oversight committee is established, it will be very difficult for it to scrutinise and ask questions unless it knows the guidelines in the first place. The Bill states that the master SPV will at regular intervals prepare full sets of accounts giving details of sales, purchase and a balance sheet showing its assets and liabilities. Does the Minister envisage that the guidelines or directions will provide that given NAMA's arm's length distance from this House — the SPVs are at another arm's length away — there will be an obligation to provide that at those regular intervals the oversight committee will be able to access those figures and details in the quarterly reports?

Deputy Brian Lenihan
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My instinct is that the full text should be published. I suggest it be published in the select journal, Iris Oifigiúil, rather than being laid before the House but that the full text should also be required to be published in the quarterly report as a dual publication requirement. A single publication requirement is part of the difficulty, whether it is laid before the House or in Iris Oifigiúil, as it can be overlooked. A dual publication requirement would be a confirmation but also it would outline a duty on NAMA to publish the text of any ministerial direction or guideline and this should be clear in terms of publicity. I would not be prepared to concede the idea that we should automatically have an affirmatory resolution of the House every time a set of guidelines is published or a direction is adopted. I would favour dual publication of the information. Deputy Burton’s point that the quarterly report should be intelligible and should have a validity that enables informed parliamentary criticism to take place, is an important one.

In regard to Deputy Barrett's point about parliamentary accountability, I agree with him that it is very important. It is clear a Minister would be accountable on sections 13 and 14 for any guidelines or directions or the absence of a guideline or the absence of a direction or the failure to take a direction or a guideline. It seems to me that under the legislation NAMA will still retain a sphere of operational competence of its own.

On the question of parliamentary questions, I propose to elaborate at this stage a protocol or a procedure which I can outline to the House in regard to it. For example, instead of using the formula, "I have referred the question to the chief executive of NAMA for his reply" and a reply is received by a Deputy three or four months later, it might be possible to annexe the reply and state that the matter lies within the operational competence of NAMA but that the chief executive has advised me as Minister of the following. This is the protocol followed with regard to certain State bodies. I understand one of the difficulties with the HSE is the sheer size of the organisation which created an inhibition about answering questions because of the volume of questions this would generate. While the operational competence of NAMA is very large and very important for the country and the amounts of money are also very large, the questions that can arise are not as widely dispersed. With reference to Deputy Burton's earlier point about the HSE, one of the difficulties was that the element of local oversight had been removed from the organisation and this created a natural expectation among Deputies that they could exercise the oversight but this became so large and complex in transactional terms that it became impossible. In the case of NAMA it should be possible to put in place now a proper protocol with regard to parliamentary questions and not work it out 12 months after the enactment of the legislation. I hope to return to the Deputy on that subject. It might not necessarily require an amendment to the legislation but it should at least be clear from the outset what questions we can ask afterwards. This is a legitimate, correct and proper question to ask and it should be dealt with now, not later, not in the course of a seminar to which Deputies and Senators are invited to consider how they would like to ask questions. This is a matter which the Houses of the Oireachtas should know now.

Deputy Seán Barrett
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It would do no harm to include a provision in the Act. It would act as a warning to everybody in an agency that they are liable to be asked a question by the Minister on behalf of a Deputy as to the reason an action was taken. This in itself is protection. The entitlement to ask a question is important. The question may never be asked but if the entitlement is there, it is a warning to everybody and there is then no need to lay down many more conditions. It is worthwhile putting it into legislation so that everybody knows the Minister is responsible to Parliament by way of a parliamentary question.

Question put and agreed to.

SECTION 14.

Question proposed: "That section 14 stand part of the Bill."

Deputy Richard Bruton
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Does the Minister intend the same protocol would apply for directions as for guidelines?

Deputy Brian Lenihan
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Yes, I do.

Deputy Richard Bruton
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Since directions are more specific and could potentially go down to individual decisions, does he believe power should be constrained in some way to deal with general matters of approach rather than the way in which a particular file would be handled? Does the Minister believe he could issue directions such as not to demand a commercial price in respect of a particular asset?

Deputy Brian Lenihan
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It is not intended that these provisions would apply to the valuation procedures. They must stand alone. We can examine the sections in terms of clarification but the actual valuation of bank assets must be an independent, transparent process. There is a ministerial power in the case of over-valuation.

Deputy Richard Bruton
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What about disposal?

Deputy Brian Lenihan
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This builds on the discussion we held earlier about securing social purposes. Let us consider the case of sites acquired by public authorities for schools, playing areas or health centres. Guidelines would apply in cases where I was in a position, in consultation with the agency, to draw up abstract guidelines about the categories of case or asset in which I would expect it to give the first option to the relevant statutory authority. For example, a direction would arise where I apprehended that prime land in counties Dublin or Cork which may have the possibility of providing sites of urgent public importance for schools or hospitals was about to be disposed of immediately. In such a case I could give a direction that a disposal could not take place without first giving the option for those parts of the site. I am trying to illustrate the distinction between a guideline and a direction.

I have some legal doubt about whether the direction could descend to the level of detail which Deputy Bruton suggests. I do not know whether the Minister could, consistent with the purposes of the Bill, give a direction which would oblige the agency to do something in an individual case unless there was a strong national policy reason articulated in the framework of the legislation to justify the Minister in giving such a direction. In other words, it cannot be used for some capricious, individual reason. That is my interpretation of the matter. I am in favour of the disclosure requirement or double requirement involving not only Iris Oifigiúil, which is not widely read, but also the quarterly report such that there would be disclosures in respect of these directions and decisions.

Deputy Seán Barrett
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The CPOs are linked.

Deputy Kieran O’Donnell
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Do they apply?

Deputy Brian Lenihan
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They would and there are sections dealing with them later in the Bill. I assume they would apply to NAMA assets if a road had to be built or whatever.

Question put and agreed to.

SECTION 15.

Question proposed: "That section 15 stand part of the Bill."

Deputy Michael D. Higgins
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This is a small question. The section states, "When discharging a function under this Act, none of the persons mentioned in subsection (2) shall be taken, only because of discharging that function, to be a shadow director”, and so forth. Does a NAMA group entity as defined in the Bill now include a special purpose vehicle and, therefore, would the definition also extend to the private investment component of such a vehicle? What are the implications of this?

Deputy Brian Lenihan
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The whole purpose of section 15 is to prohibit shadow directorships or de facto directorships. A shadow director is defined as a person not formally appointed. This extends the prohibition. The provision that there shall be no shadow directorships applies to a member of a NAMA group entity. If a person is a member of such an entity, it is made clear that no shadow directorship can be deemed to arise.

Chairman
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I will put the question.

Deputy Michael D. Higgins
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We should give the Minister a chance to reply.

Deputy Brian Lenihan
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I ask the committee to bear with me. This is a highly technical question, quite worthy of the Deputy.

Deputy Michael D. Higgins
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I thank the Minister.

Deputy Brian Lenihan
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As I understand it, we do not wish to expose the agency to a legal action or a threat of legal action by, say, a developer or a bank if one were to suggest that because some of these parties have some alternative source of knowledge, whether statutory or fiduciary, they are thereby incapacitated from making decisions in a NAMA context. This is not limited to a NAMA group entity director but to all the other listed parties. This is the essential purpose of the section.

Deputy Michael D. Higgins
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I have no difficulty with the purpose of the section. My suggestion was simply that the Minister's introduction of a special purpose vehicle changes the capacity of the section. It seems to point in a straightforward way to the definition in the Bill. It places an obligation on the board of NAMA and, perhaps, the Minister in respect of the composition of the private section of the special purpose vehicle. Otherwise, how would the Minister face a challenge that he did not choose to know?

Deputy Brian Lenihan
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That is correct. In fact great care has been taken. That was implicit in some of my replies to the debate thus far on the question of who would be appointed as directors of the special purpose vehicle on behalf of private investors. The selection of those directors is a matter which will require some care. I agree with the Deputy in this regard.

Deputy Michael D. Higgins
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Without taking the capacity to assure the Minister, he has given the same protection as that referred to in all other components of the section.

Deputy Brian Lenihan
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They must have that protection.

Deputy Michael D. Higgins
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That is fine but it might be worthy of examination.

Question put and agreed to.

SECTION 16.

Deputy Brian Lenihan
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I move amendment No. 43:

In page 29, subsection (2), line 11, to delete "proved" and substitute "shown".

This is a technical amendment. Section 16 provides for the prevention of corruption. The use of the word "proved" places the legal burden on the defendant of proving that a payment was a corrupt payment. The word "proved" should be deleted and the appropriate word is "shown", which is more appropriate in this context. It does not change the substance of the section but simply uses the word "shown" which is traditionally the verb used when the burden rests on an accused.

Deputy Richard Bruton
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I believe this section represents a very important marker. A cosy relationship has developed in our regulatory system over time which has been part of the problem that has placed us in the position in which we find ourselves. Sometimes one could have the impression that the regulators defend the banks more than they are probing and sceptical of their operations. Does this mean if someone accepts a bottle of wine from a person in any way connected with any piece of land or any NAMA loan that it could be seen as potentially corrupt? How far is this going?

Deputy Pat Rabbitte
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It is purely relaxation.

Deputy Brian Lenihan
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It does, actually.

Deputy Richard Bruton
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That is fine once people are aware of it. It is important.

Deputy Brian Lenihan
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I do not wish to give any leeway to NAMA but it would certainly cover a crate of wine. I would have to take legal advice about the bottle. However, I suspect it covers the bottle as well.

Deputy Richard Bruton
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It is a good principle to establish.

Deputy Brian Lenihan
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These are questions of degree and lawyers refer to the principle of de minimis. I do not know how low a minimal threshold would be but an exemplary standard must be set from the start. The existence of this section assists in that regard.

Deputy Joan Burton
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Would the Minister accept an amendment on Report Stage tabled by the Labour Party which would extend the prevention of corruption provisions to the private interest investors in, and directors of, the SPV because in large part it will take on many of the functions that members understood were to be the principal functions of NAMA?

Chairman
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Does the Deputy intend to table an amendment?

Deputy Brian Lenihan
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Without accepting the Deputy's premise, I might agree the amendment in the context of a group NAMA operation because there is a reference to a group NAMA scheme in the interpretation section. Consequently, it would be logical to extend this section to cover the group NAMA context as well, which would in practice capture the individuals to whom the Deputy referred.

Deputy Joan Burton
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The use of the term "group" is not always completely appropriate because the Minister has constructed the vehicle so that the majority shareholding will be held by the outside, rather than the inside, investors. Consequently, it probably will be quite challenging to provide that the outside investors will be subject to the same corruption laws or anti-corruption laws. I thank the Minister for agreeing to this. It must be done for the outside people in particular because they are the ones who will be wheeling and dealing. The people on the NAMA board and the majority of NAMA officials to date are long-serving public officials, whereas the private investors in the NAMA special purpose vehicle——

Chairman
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Is the Deputy giving notice that she intends to table an amendment on Report Stage?

Deputy Joan Burton
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The Minister should respond because it would be worthwhile to do this. Can the Minister outline an amendment he would accept in this regard?

Deputy Brian Lenihan
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The premise I did not accept is that in the event that such individuals were directors, they would be doing all the wheeling and dealing. I am prepared to accept a proposal that in broad terms would apply section 16 to any such person, if he or she existed. I must take legal advice in this regard and the Deputy will appreciate that while I have not had sight of her amendment, her suggestion seems logical.

Amendment agreed to.

Section 16, as amended, agreed to.

NEW SECTION.

Chairman
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Acceptance of amendment No. 44 in the name of the Minister involves the deletion of section 17.

Deputy Brian Lenihan
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I move amendment No. 44:

In page 29, before section 17, to insert the following new section:

17.—Without prejudice to any defence otherwise available to, or immunity otherwise enjoyed at law by NAMA, a NAMA group entity or a person specified in section 33(1), no action for damages shall lie against NAMA, a NAMA group entity or such a person in respect of or arising out of the performance or non-performance in good faith of any of the functions provided for in Parts 4, 5 and 6, or in respect of any decision made in good faith to perform or not to perform any of the functions provided for in Parts 8 and 9.”.

At present, section 17 provides that, "NAMA is not liable in damages in relation to any act omitted to be done by it in the performance ... of its functions," and in its current form, its application is considered to be too broad as an exemption from liability. The intention of the proposed amended version of section 17 is to narrow this exemption from liability. Under the proposed amendment, the exemption is limited to the performance or non-performance in good faith of any of the functions of NAMA relating to the designation of credit institutions as participating institutions and the designation of eligible bank assets, the valuation methodology and the acquisition of bank assets and decisions that were made in good faith relating to NAMA dealings with participating institutions and their management of acquired assets.

Clearly, it is in the interests of the taxpayer that some defence be available to NAMA in respect of its liability where decisions are arrived at in good faith and that it is not exposed to actions by credit institutions or by individual borrowers. However, I believe the more narrow formula is more appropriate both constitutionally and in respect of policy.

Deputy Richard Bruton
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I refer to incompetence. Can a person act in good faith but be incompetent in the way in which he or she behaves? Does this give them——

Deputy Pat Rabbitte
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They have been doing it up to now.

Deputy Richard Bruton
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Is there not a reasonable expectation that one can sue for incompetence?

Deputy Brian Lenihan
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The decisions of the courts are somewhat conflicted in this regard. However, there have been court decisions which state that when a statutory body acts in good faith and on sound legal advice, such a body is protected against an action for damages. The position of a statutory body is somewhat different from that of a private individual in that the Oireachtas has empowered the body to take decisions in the public interest and it is plain that were there total exposure to a class of negligence actions on the same basis as private individuals, the body would be obliged to insure itself for the performance of its statutory functions. As that is not a satisfactory arrangement either, there is a balance to be struck in this regard.

Amendment agreed to.

Section 17 deleted.

Section 18 agreed to.

SECTION 19.

Chairman
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Amendments Nos. 46 to 48, inclusive, 51 to 53, inclusive, 55 to 58, inclusive, 60, 62 to 71, inclusive, 89, 90, 93, 94, 97, 98, 101 and 102 are related to amendment No. 45 and will be discussed together.

Deputy Richard Bruton
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I move amendment No. 45:

In page 30, subsection (1)(a), line 2, after “Minister” to insert “in accordance with subsection (2)”.

Essentially, these amendments concern the role of the Oireachtas committee that would oversee the workings of NAMA. They start with amendments Nos. 45 and 46, which deal with the appointment of the board, and Fine Gael has proposed a system whereby the Minister would propose names to a committee, the committee would approve or disapprove and the Minister would appoint. The committee can only disapprove up to a certain point as the amendments contain a provision whereby the Minister could push ahead were the committee acting in a way that prevented him or her from reaching conclusions.

Fine Gael believes the principle that is being established by these amendments should have wider application in respect of the boards of agencies. The relevant committee should have a role in respect of appointments in order that people should not alone be chosen by the Minister because the latter considers them to be suitable, appropriate and skilled but because some objective tests exist. The committee can have a role in this regard and can if necessary decline to nominate a person.

In addition, in other amendments grouped together, Fine Gael requires that the committee's approval would be required for the appointment of the chairperson and the chief executive officer, as well as the establishment of committees and audit bodies and the remuneration of various positions. Moreover, the borrowing of €5 billion would not simply be a ministerial decision but would go before the Oireachtas committee when it was proposed to borrow the sum of up to €5 billion that the Minister envisages. In addition, the committee would have a role in framing the type of accounts that will be presented. I refer to powers the Minister intends to take regarding the prevention of certain officers from presenting views to the Oireachtas committee. The current legislation seeks to disbar the CEO or the chair from discussing policy. This is a unique provision that will go beyond those provided for in the Dublin Transport Authority Act, where there is not the same constraint on the CEO or the chair discussing policy. This group includes amendment No. 102, which concerns the establishment of the Oireachtas oversight committee as proposed by Fine Gael. Amendment No. 102 sets out the functions of the committee referred to in the earlier amendments. Important issues are considered, such as the codes of practice that NAMA will adopt in respect of its activities. These codes of practice will have far-reaching implications and we see an Oireachtas committee playing an important role.

Fine Gael is of the view that if an Oireachtas oversight committee is to be effective, it must have the advice of professional officers. We suggest a monitor from the Comptroller and Auditor General should play that role. The Minister does not seem to be keen on the Comptroller and Auditor General's office but it has established confidence and is used to dealing with parliamentary committees. Using the Comptroller and Auditor General to advise the committee on codes of practice moves away from the traditional role of examining matters after they have occurred but this is breaking new ground and it should happen. The Minister suggested that this would interfere with the primacy of Ministers in deciding how money is spent, with the Comptroller and Auditor General examining how it was spent after the event. The Comptroller and Auditor General should have a role in corporate governance and, where the same mistakes are repeatedly being made, the Comptroller and Auditor General should not simply have an ex post view. He should also examine the adequacy of corporate governance. In many ways, we see the broadening of the role as appropriate in general but specifically in respect of this Bill, where the Comptroller and Auditor General is sitting at the elbow of the committee and considering what constitutes sound codes of practice and a sound basis for the remuneration and relationships that should be forged between an SPV and the parent board. Similarly, the procedures of an expert reviewer could be considered. When reviews or evaluations are made by a reviewer, a genuine oversight committee must have professional assistance to help it to evaluate those matters.

Many amendments have been grouped together and what links them is the establishment and remit of an Oireachtas committee in these legislative terms. I expect the Minister will support the principle we are proposing but the real test is the extent to which he will support specific amendments so that there is a genuine oversight committee with the chance to be effective in this area.

We acknowledge that the Oireachtas oversight of the Financial Regulator proved to be ineffective. What the Minister has presented to the House offers no greater oversight of NAMA than was available to the Oireachtas in the past with the regulatory system. We must go deeper to be effective and we need an Oireachtas committee that is sufficiently backed by expertise to undertake a task that we know is so important. Failure of the regulatory system and the way it became sucked into cosy relationships with those it regulated is now history. We know that it happened and the catastrophic impact it had. We can only rewrite that to the extent that new legislation will be presented with much stronger oversight. In this legislation we need oversight and I am interested to hear the Minister's views on how far down the road he will go on our amendments. His officials have advised him that our views are best set out in amendment No. 102, which shows the various roles we envisage. Amendment No. 46 shows the way in which the Oireachtas could play a part in the appointment of the board and its officers.

Deputy Frank Fahey
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In principle I agree with much of what Deputy Bruton has said. I hope the Minister will be forthcoming in ensuring that the type of oversight proposed by Deputy Bruton is accommodated.

I support the concept of NAMA but I have one worry, namely, that the best people must be involved in its running. It will be extremely challenging to get this right and I urge the Minister to ensure that, as far as possible, the Opposition is consulted and involved in critical appointments in respect of the board and the follow-up appointments. I urge the Minister to ensure that the board has people of the highest calibre and that board members have credibility and integrity. To find people at arms length from all aspects of the industry will be a difficult task. It is the key task in this legislation. Consequently, as a Government backbencher, I urge the Minister to ensure the Opposition is happy with the appointments made so that this House is at one, as far as possible, on the key people involved with NAMA.

We must have people that are top class in the property business. We will have bankers, accountants and economists but the key people for the success of NAMA are those who know the property business inside out. This is particularly true of those who know the property business outside of Ireland because I am convinced that the 30% of loans outside of Ireland will be critical in the profitability of NAMA. It will not be easy to find people who have the highest expertise in the property market in the United States, Britain and Europe.

I support Deputy Bruton in the need for genuine oversight by this House. It is critically important that this project has the confidence of the Opposition. Much has been said about NAMA since the idea was first proposed and there has been much misinformation. I appeal to the Minister and to all sides that this is one way in which the whole House can be together. The oversight control by this House must be second to none so that we can ensure the people involved with NAMA are the best and the job they do is the best. I urge the Minister to ensure that the comments of Deputy Bruton can be taken on board. I am not sure that his amendments can be accepted in the way he has tabled them but I support the principle of what he said.

Deputy Kieran O’Donnell
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The key point is that there is need for an Oireachtas oversight committee, as accepted by members of the Minister's party. The Minister has also accepted this point——

Deputy Brian Lenihan
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Not the word "oversight".

Deputy Kieran O’Donnell
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The Minister has agreed that there is a need for proper probity. The Committee of Public Accounts has worked very well and an Oireachtas committee dealing specifically with NAMA would bring about accountability and transparency to the public. Effectively, the Minister would submit the names of the seven people to the chairman of the Oireachtas committee on NAMA. Amendment No. 100 deals with the Comptroller and Auditor General having a role, but the Minister seems quite reluctant in this area. He has spoken of a process auditor but in the initial valuation of the loans being taken over by NAMA, or at this stage being taken over by the SPVs, there is a need for the SPVs to interact with the proposed Oireachtas committee.

The Minister stated that if the Office of the Comptroller and Auditor General examined valuations prior to them going to NAMA, it would be taking on an Executive function. It is extremely important that valuations are rigorously audited before they go to the SPVs because if the assets are overvalued, no matter how much regulation is introduced, there will be major problems. Under the proposal the Minister can still nominate seven people to the board of NAMA and its CEO, but they would have to come before a specific Oireachtas committee on NAMA to be approved by it. It would give a level of assurance to the public that there is transparency and accountability in the workings of NAMA and the SPVs.

Deputy Joan Burton
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There are so many amendments listed in this group that it is difficult to make sense of the section and of the Minister's response to the various amendments, which deal with a very wide range of functions and the detail of the carrying out of powers. The Labour Party has taken a global position; we have called for oversight and nominations to be approved by a Dáil committee and we have suggested that the audit of NAMA might be conducted by way of a joint audit rather than by the Comptroller and Auditor General only.

I do not quite know how we will address the difficulty of some of the amendments in the group being really quite different and the sections to which they refer being very wide ranging. It goes without saying that the board of NAMA and its governance is absolutely critical to the enterprise. The Labour Party proposes that the nominations would be subject to a public oversight process, particularly the nomination of the managing director of NAMA. There is a managing director designate so that may be difficult.

In a book published in recent weeks on the banking crisis I read that some time after the banking crisis had erupted and the guarantee had been announced, a private dinner was held for the outgoing chairman of the regulatory authority, Mr. Patterson. It was sponsored by the chief executive of the Irish Banking Federation and attended by all of the principal players and practically all of the banks which had been the subject of the guarantee. The book mentioned that one or two people were absent from the dinner — they were probably trying to sort out their affairs.

The challenge for the Minister is to break the circle which exists between the Central Bank, the regulator and the banks and to achieve for the board of NAMA a degree of independence and, vis-à-vis the directors of the banks and the developers, a level of power which allows those directors to operate in a way that primarily has the objectives of the Bill and the public interest as their first duty. In a board made up simply of a selected circle who reflect the type of groups which have run the Irish financial system the tendency may be to focus on saving the current system rather than providing for reform. The current system of banking and banking regulation and the relationships that have given rise to it is very close to being saved because all the indications from the various banks are that their focus is to recover and then to do again exactly what they did before. That is the most difficult aspect of these appointments.

I do not know whether the Minister proposes to advertise for appointments or whether people will get a tap on the shoulder. The Minister tells us that he has written to the leaders of the Opposition parties asking for suggestions for appointment. That is a slightly strange way of proceeding because it invites the leaders of the Opposition to nominate individuals in a situation where we are not totally clear on what exactly will happen.

In earlier amendments, the Labour Party proposed an independent oversight mechanism, the primary purpose of which would be to report to the Dáil. Fine Gael wants an internal Dáil committee, or the Committee on Finance and the Public Service to sit as a special committee, to receive reports. I want the information out there and published because the closest one gets to a perfect market is when one has perfect information. If the information does not get out, the chances of restoring our banking sector and going on to build a larger financial services sector are quite limited. However, if we take our courage in our hands and decide to have a new culture of openness and transparency, much of the incredible reputational damage done to Ireland could be recovered in a relatively short period.

The amendments we have tabled propose that nominations to the NAMA board would have to be approved by the Dáil. This would remove the Minister's complete discretion. In addition, the NAMA code of practice should be subject to some form of Dáil approval, and the CEO and chairman should be approved by the Dáil.

I told the Minister previously that a couple of years ago, on a private visit to relatives in Washington, I attended, out of interest, the hearings for the US Chief Justice, John Roberts.

Deputy Pat Rabbitte
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Was the Deputy allowed to ask a question?

Deputy Joan Burton
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Almost. I was sitting extremely close to Judge Roberts and close to the various senators on the committee. What struck me was the robustness and the directness of both the questions and the replies. It was obvious that Judge Roberts would meet with the approval of the committee and the house. However, he had to explain not only positions he had taken but, more importantly, how he would approach certain current issues. That is what we would want in the case of NAMA, not a prurient, personal examination, but an exploration of whether there are things in a candidate's past — in public positions or otherwise — which relate to the job, how these would affect it and how he or she would approach the policy issues in the job for which he or she has agreed to be nominated. If we could get to that point in this House, we would be doing a significant service to democracy in Ireland. It would not answer all the questions, but it would certainly bring in from the shadows the kind of structures we have been creating over the past ten to 12 years — devolved bodies with separate chief executives and boards.

I do not want to make a partisan political point, but often the people on those boards are perceived to be strongly associated with the ruling party after 12 years in power. Given the Irish system, that is almost inevitable. However, it means there is no questioning of those individuals — as there should be if we want to get good people on boards — so they can validate in public, as I heard Judge Roberts doing that day, what they bring to the job, which in turn fosters public confidence. It is far removed from what we are used to in the Dáil and in the party political system in a small country such as Ireland, but it has a lot to recommend it.

We have a number of suggestions. For example, we suggest a joint audit with the Comptroller and Auditor General. The Minister referred earlier to France. Joint audits are a strong feature of the French Republic and several people in the Dáil, and perhaps in the Seanad, have commented, for example, that what happened in FÁS related to the kind of work that is done by the Comptroller and Auditor General in terms of assurance questions. Given that the auditing done by the Comptroller and Auditor General is historical auditing, which takes place quite an amount of time after the event, it does not really lend itself to certain aspects of commercial auditing, such as post-balance-sheet events auditing and investigation of organisations' current positions.

The amendments put forward by the Labour Party would transform the public accountability element of the Bill. There are so many amendments grouped together that it is difficult to make a coherent argument. The tenor of a number of the Labour Party amendments is quite different from that of the Fine Gael amendments. They are two parallel suggestions: Fine Gael wants a specific committee and so on. The Minister might, in responding, try to untangle the alphabet soup that is the listing of all these amendments together.

Deputy Arthur Morgan
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I agree with the comments of the previous speaker. The Minister said earlier that we should remember we are on ground Earth here in Ireland. We are talking about a culture that has been carefully fostered over a long period, involving cronyism and downright corruption, and it will take a while to get rid of this. Perhaps, through the step-by-step process in which we are engaged, we may advance along that road.

I have a number of technical points with regard to amendments I hope to raise. One is examination of the board members by the relevant Oireachtas committee — perhaps the Committee of Public Accounts or this committee. With regard to tenure on the board, five years are currently provided for, but this might be too long. I am instinctively inclined towards three years with one roll-over. The longer people are about the place, the more of a cushy number it becomes. I find myself on speaking terms with Fine Gael members, which is an example of this slippery slope — if they continue wooing me, one never knows. A shorter term would perhaps be more appropriate.

With regard to the expertise required of potential board members, some of the examples mentioned are interesting, including public administration, law, finance and economics. However, a couple more should be added. What is wrong with having an expertise in social policy, for example? What is wrong with an expertise in trade union issues? Perhaps somebody with a social conscience could be more readily extracted from that type of background. I am also seeking to make sure that no person with a criminal record, or who is currently under investigation by a tribunal, could be appointed as a board member. A person who is currently serving or has served as a member of the board of any of the banks falling under the auspices of NAMA should also be disqualified.

It is important that the exorbitant remuneration we see in the banking sector is not allowed to take place under NAMA and I therefore suggest that employees should be paid on a scale under which the starting salary is that of the entry-level grade in the Civil Service, with payment to those in the highest grade not exceeding five times that of those on the lowest grade. This allows for a salary of approximately €100,000, so it is more than adequate. I would prefer to see the Oireachtas, rather than the Minister, having an opportunity to appoint the chairman of the board; that would allow us to tease out any issues with the candidate.

I had intended to deal with the frequency of reporting from NAMA to the Oireachtas but I know the Minister has conceded something in this regard. Perhaps now I have referred to it, that is sufficient to hold my position in case I seek to amend the Minister's concession. The Bill should also provide that no employee working in a bank or participating in the board of a bank under the auspices of NAMA should be able to earn more than the highest salary grade in the Civil Service. I have raised that point.

Deputy Michael Mulcahy
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I said last week, and will say here again, that I support, in broad terms, the proposal of Deputy Bruton and his colleagues for a Dáil committee on NAMA. It is an excellent and important idea. The public is liable for a large amount of money and I do not see any proper reason there should not be a committee on NAMA with full powers of scrutiny and strong powers of compellability regarding witnesses and documents. The terms of reference for such a committee, in the normal course of events, should be a matter for debate in the Dáil.

I object to the concept that this is an oversight committee. What does "oversight" mean? It means looking over the shoulder. That is the wrong concept because it more or less implies this committee is taking on a semi-executive role. That is wrong because this House is the legislative branch of the Government. Its role is to legislate, to scrutinise and to review.

Deputy Pat Rabbitte
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What concept would the Deputy use instead of "oversight"?

Deputy Michael Mulcahy
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I would use the word "scrutiny". I wanted to refer briefly to the committee on European scrutiny, which is a full committee of this House but which acts in a legislative way. Under the Lisbon treaty, it will be able to participate in what is called the "yellow card" procedure. All parliaments will receive draft legislation from the European Commission, and within a certain number of weeks they will have the power to raise the yellow card and state that the principles of subsidiarity or proportionality are being breached. The parliaments are acting in a legislative way. They are not trying to trammel on the executive powers of the Commission, and that is very important.

I believe the Dáil committee on NAMA should be a scrutiny committee with strong powers of compellability for witnesses, documents and so on, and which scrutinises quarterly reports, guidelines and directions given by the Minister. The emphasis is on scrutiny. If there is any attempt by this committee to step into the shoes of the board of NAMA, that would be a mistake. We would have endless debates over the decisions made by the board of NAMA, as would occur for any other body. The committee should not try to do the job of the board of NAMA. It should scrutinise the actions of the board of NAMA.

The committee should be properly resourced. I firmly believe the committee on European scrutiny is under-resourced. There is one expert and three clerks servicing the committee for every single piece of EU legislation, and this is unacceptable. For a case like this where so much money is involved, it would be a mockery to set up this committee without a proper budget and panel of experts who could brief committee members, advise them on the pertinent issues, and help in the scrutiny process. The committee should not be allowed to delay or strangle the Minister in appointing the board. This issue is a matter of urgency. The reality is that NAMA is absolutely vital to restore the balance sheets of the banks. We need to get NAMA up and running quickly. I do not believe endless hearings into the suitability of board members would be in any way beneficial. Perhaps the chairperson of the board of NAMA should be subject to the approval of the Dáil committee, and that should go through unless there were exceptional reasons that the Government's nominee should not be accepted.

I pay tribute to Deputy Bruton and his colleagues on coming up with this suggestion. While I strongly support the suggestion, we must allow the board of NAMA to get on with its business and allow us, as legislators, to scrutinise what it does, not tell it how to do it.

Deputy Pat Rabbitte
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Whatever the reservations that exist about the NAMA route, what we are putting in place now is likely to be irrevocable. In the years ahead, no matter who is in charge of its stewardship and no matter what their emphasis, the architecture will be irrevocable. I agree with the remarks made by Deputy Burton that the nominations should be approved by the Dáil. None of us knows the configuration of this House six or 18 months down the road. It is, therefore, very important that the nominees have the allegiance of the House in so far as is possible. I do not think it is a particularly glamorous posting when compared to being a partner in an advisory company outside, or when compared to being a partner in a legal company that is advising. I do not think being a member of the board is an especially glamorous prize. It might be a very valuable position for a partner in an estate agency, or at least to know the person in that position, for obvious reasons. However, given that this will be a lucrative pot of gold for professionals who will be advising, being a member of the board is likely to be an arduous task requiring a great deal of commitment and a great deal of knowledge in the area. For that reason, Deputy Burton is right in that these nominations should be approved by the House. We should have agreement on the methodology and composition of the board in so far as we can.

We never resolved the debate the last day on Deputy Burton's amendment No. 2, when she said that the emergence of the SPV in its latest fashion underpinned more than ever the necessity for that amendment. I am very enamoured with Deputy Bruton's amendment No.102 for the same reasons Deputy Mulcahy has set out. The discussion we have had bears out the argument that a committee of the House specialising in this area would be a good thing, with the necessary back up available to the committee to develop the required skills. Deputy Burton suggested that this might be the finance committee sitting under a different hat. I do not mind whether it is or not, but does it have the time to devote to what Deputy Mulcahy now calls a scrutiny role?

Given the importance of what we are talking about, it will be such an important aspect of the work of this House that people will need professional guidance on how to discharge their functions, no matter who is in Government. No more than being a member of the board, this will not be a particularly glamorous role. There will not be too many people volunteering for the job.

It seems a great deal of thought has gone into constructing amendment No. 102. Regardless of how we resolve the debate on the distinction between the two and the differing concepts involved, it seems to me the core purpose of this legislation is of such moment to taxpayers and those who wish to remain employed that they would expect a specialist Oireachtas committee which would competently scrutinise — if I am prevented from using the word "oversee" — the implementation of this legislation over the coming decade.

Deputy Michael D. Higgins
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Considerable pressure to maintain continuity will be brought to bear on whoever makes the nominations. I have read arguments in some of the banking journals on the importance of intellectual inheritance. I hold a totally different view, however. The National Economic and Social Council's report No. 118, of March 2009, includes the reputational crisis among the five crises we currently face, stating:

Here we come upon a most important aspect of the reputational crisis: the close connection between a country's international reputation and the domestic credibility and effectiveness of its governance arrangements. In the case of banking and financial regulation, the requirements for repairing Ireland's international reputation would seem to overlap with other requirements.

As we debate the Stages of this Bill, it is important that we recognise what the public wants. International commentators on the banking crisis in the United States and various European countries have noted that the public of these countries wants a complete break with the culture that created the problem. The exclusion of those who were apologists or, worse still, negligent in their silence must be stressed. NESC's report No. 120 repeats this point in the context of further necessary steps. I raise these issues with positive intentions and I support, for example, parts of what Deputy Mulcahy has suggested. However, to achieve consensus we must accept without question that we cannot continue with a failed model. If that rules out a large number of people, so be it. At the risk of abusing my privilege, I never believed many of the people in question were worth €500,000 or that anyone is worth that much money. That is history, however, and the game has concluded.

The list of expertise set out in section 19 is extraordinary. I urge the Minister to remain open to suggestions for improvements between now and Report Stage. There is, for example, a huge difference between finance and economics and finance and political economy. Political economy includes all the policy directions and options in relation to differing models whereas economics is a very narrow interpretation. Excuse me if I am influenced by my life within academia but I remember when political economy became economics and it was not a very good development. On some of the specialties that are missing that are interesting, there are several repeats such as project finance which later moves on to property management and sales. I am sure people who are from a different background to mine will notice the differences. Why is no reference made to social policy, which would take account of the importance of being generationally neutral in asset management? Construction and land development is mentioned but housing and shelter are not and there is no reference to land use. It would also have been useful if regional planning had been recognised. I am, with Michael Bannon, one of the first members of the institute for regional studies. Perhaps the intention is to include the aforementioned specialties as examples but the legislation does not make that clear.

I find reluctance to accept the need to break into a new space. This view is shared by NESC's reports, which I think represent a consensus here. However tedious people may find them, I have reasons for making my arguments. In the present debate we are not well served by those who claim expertise and a version of the truth which does not exist. I watched, for example, a programme from the national broadcaster yesterday evening on which someone said the only choices in public service employment are to cut numbers or cut wages. That is not an expert or scientific opinion nor does it represent some singular truth. It is in fact a kind of epistemological arrogance. I listen to this all the time. A long time ago, my first job in university was teaching economics. This is a shabby list. Amartya Sen suggests that we have to recover political economy. He no longer uses the word "economics" but perhaps he is not up to the standard of some of the people who appear on RTE. I ask the Minister to reconsider the list with a view to making it representative of engaged scholarly interest and experience.

Deputy Terence Flanagan
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I support the amendments. An Oireachtas committee on NAMA is necessary to keep Members informed of the agency's progress. Certain committees which are surplus to requirement could easily be reconfigured and given proper powers of scrutiny. They need to be able to scrutinise the seven people nominated by the Minister to pre-empt charges of cronyism and ensure they are suitably qualified. Quarterly reporting, which the Minister has accepted, is not sufficient. Reporting should be done monthly, particularly given that all banks report monthly accounts. Real-time information is required and we should follow the template of the monthly management accounts produced by banks. Members of the committee should be provided with monthly accounts.

Amendment No. 100 provides for the assignation by the Comptroller and Auditor General of a monitor in NAMA. This is a crucial proposal because an independent monitor from the Office of the Comptroller and Auditor General is needed to protect and give comfort to the taxpayer that everything is in order.

Deputy Andrew Doyle
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This group includes a large number of amendments. I support, in particular, amendments Nos. 100 and 102.

Section 43 deals with professional standards and audits, an issue which has not yet been addressed. The banks recently flexed their muscles and indicated they plan to introduce pay increases. A restriction on the payment of bonuses has not been introduced. The National Asset Management Agency will be viewed as a gravy train for many professionals. Amendment No. 86 defines an "adviser or service provider" as a provider of legal, accounting, taxation, financial, property, surveying, valuation or other similar service to NAMA. Many of those engaged in these professions have been heavily involved in property development. For this reason, it is vital to ensure that NAMA may not engage as a consultant or pay anyone who has been contaminated in this way for the provision of services.

Amendments Nos. 84 to 86 must be given careful consideration.

Chairman
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The amendments to which the Deputy refers are not being discussed.

Deputy Andrew Doyle
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I beg the Chairman's pardon. I may not be present when they are being discussed.

Is the payment of all forms of performance bonuses prohibited for National Asset Management Agency executives and others who receive payments by NAMA? This practice has caused problems in the Health Service Executive.

Deputy Brian Lenihan
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This debate has ranged far and wide. I am pleased Deputy Doyle has given me an opportunity to make the following point. When the bank guarantee was put in place last September the subsequent scheme provided for a ban on bonuses in the banking system. The ban, which applies to all the banks in the guarantee arrangement, was not retrospective in scope because that was not possible.

We have seen in the United Kingdom in recent days a major public controversy erupt because the Government finds it necessary to sanction bonuses to maintain Britain's attractiveness as an international investment centre. That is a matter for United Kingdom opinion. As far as this jurisdiction is concerned, the banks do not have guaranteed bonus payments.

As far as the National Asset Management Agency is concerned, there appears to be a presumption in a number of the contributions — I will return to Deputy Michael D. Higgins's contributions on the broader issue because it was important — that NAMA is the Financial Regulator or Central Bank. I am not suggesting Deputy Burton erred in this matter. Deputy Higgins correctly referred to the paragraphs in the NESC report on this whole subject. The State has already re-established some element of credibility on this front through insisting on a fresh approach in the context of the appointments made to the Governor of the Central Bank and new Financial Regulator. These appointments and the general reformation of the two institutions in question are crucial in the context of restoring and repairing trust in the banks.

We have lost sight of what the National Asset Management Agency is about. It is a work-out vehicle to protect the taxpayer in relation to the assets that are being acquired, attach a correct valuation to them and make the necessary consideration available to the banking system. These objectives are very different from some of those that appear to have been set out for the agency in the interventions of the past 80 or 90 minutes.

I concur with Deputy Higgins on one point, namely, that political economy is a much more adequate description of the science than economics. One point that struck me after 16 months in the Department of Finance is that the profession of economics has become somewhat debased through an excessive reliance on econometric, quasi-mathematical and mathematical models which make assumptions about the operation of markets and the conduct of market actors without reference to social or economic realities.

Deputy Michael D. Higgins
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——and without meeting the mathematical assumptions.

Deputy Brian Lenihan
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I agree with the Deputy that the old-fashioned definition of the term "political economy" is much more adequate than the term "economics". We do not need epistemologists, metaphysicians or sociologists on the board of NAMA. The first great economist, Adam Smith, was firmly in the empirical tradition and his greatest successor, John Maynard Keynes, stood in a similar tradition. Political economy is a better description for the science.

Deputy Michael D. Higgins
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Smith's The Theory of the Moral Sentiments precedes The Wealth of Nations.

Deputy Brian Lenihan
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The Deputy is correct and modern scholarship suggests there is no conflict between The Theory of the Moral Sentiments, as adumbrated by Adam Smith, and his The Wealth of Nations. As Deputy Higgins will be aware, scholars did not agree on that for a long period. However, there is now a view, having examined Smith’s lecture notes, that the positions taken in these two works are consistent. I am digressing from the amendments but I am entitled to do so once today.

The confidentiality issue was raised by Deputy Bruton. The provision included in the Bill is a standard one which does no more than prohibit the chief executive from commenting on Government policy. It does not prohibit him or her from commenting on the operations of the agency for which he or she is chief executive.

On the important issue of corporate governance, as Deputy Burton correctly noted, there is a slight divergence of emphasis between the Opposition parties, and it is one which I do not wish to exploit. If we are to create confidence in this National Asset Management Agency, as we must do, the first issue of importance is the board and internal structure. These are fundamental. The Labour Party and Fine Gael agree that they want the chair and members of the board examined by an Oireachtas committee before their appointment. We do not have time to do that as it is not a matter on which we can proceed leisurely. Having said that, I wrote to the Opposition leaders, although I appreciate and accept Deputy Burton's comment that this is not adequate on its own. If a structure or process was to begin as and from the conclusion of the legislation that not alone would I consult the Opposition leaders but also that I would disclose to them names I was considering and they would add to that list of names and, in particular, the appointment of the chairman and members of the board would be subject to all-party discussion, I believe it would meet the urgency of the case and the need to create all-party confidence in the board.

I am concerned about the precedent of having Oireachtas examination of nominees. I heard Deputy Burton comment on a hearing she attended in the United States Senate. The US Senate operates under a different constitutional system from that of Ireland because the executive in the US is elected separately from the Congress. In our system, the Government is responsible to Dáil Éireann. While I do not say this out of lack of respect to Members of the Oireachtas, technically the Oireachtas is not, as a collective institution, responsible to anybody. We are individually responsible and at the next election the voters can make up their minds about our merits or demerits. We are not responsible as a body before the people in the same way as a Government is responsible to this House. This puts us in a different position from that which obtains in the United States.

The process of all-party consultation, with full disclosure by me of who I have in mind, together with a full disclosure by the Opposition leaders of who they have in mind, is the best approach to this matter. We may arrive at a number of similar individuals.

This brings us back to the skill sets on the board, but it is the best way to go regarding this. I discussed the views of Deputy Higgins regarding skill sets earlier. I wish to make one point This is not a board of a conventional bank or regulator. It is the board of a work-out agency and the kind of skills there, some which are somewhat mundane, are fundamental to the proper operation of this agency. A knowledge of issues such as urban and land planning, project finance, construction and land development and property management, sale and valuation are fundamental in this area. A knowledge of law is also fundamental. Dr. Somers outlined the many legal obstacles we faced in establishing this agency earlier in the year. The Attorney General has gone a long way in the Bill to address them. One would not want a group of lawyers managing this, but some legal knowledge would be desirable.

In looking at the qualifications, it is important the board is right and commands public confidence. I do not have any wish to have an exclusive property on these appointments. I have a concern that if we prolong this through Oireachtas hearings we will deter some from serving and delay the eventual appointment of those who should be appointed. It is better that we get on with this quickly. I am prepared to give an undertaking to the House that the consultation will be structured. It is not a matter of meeting the members of the other parties at a casual venue and saying, "Show me your list", but a detailed mutual disclosure leading to an agreed body.

I have reflected on the whole question of Oireachtas confidence in the board since the last debate. It is a fundamental issue because of the character of this agency, to which many have drawn attention. I am prepared to table an amendment on Report Stage to provide that two Members of the Oireachtas should be observers at the audit committee of NAMA. Perhaps the Opposition will not agree with this. I am not forcing this amendment through; I am putting it forward as an option to be considered. I will draft the necessary amendment which can be withdrawn if there is dissatisfaction with the proposal because it is believed it will put a Deputy in a position no Deputy would like to be in. A Deputy or Senator's fundamental responsibility is to the people and it may be that a Deputy or Senator will take the view that, especially if he or she is a member of an Opposition party, his or her capacity to hold the Government to account will be impaired by membership of such a committee. I am prepared to put that proposal on the table for consideration and we can return to it on Report Stage.

The internal structure is crucial and the questions of process audit and independent oversight were raised during the last debate. I had to consider that further. The appointment of a process auditor does not require a legal amendment but there was discussion this evening and last week on the audit arrangements for NAMA. In that discussion it was noted that NAMA would be subject to audit by the Comptroller and Auditor General and would have an external membership on its internal audit committee. The further possibility of a process auditor was mentioned.

I have since reviewed the terms of the EU communication on the treatment of impaired assets. It requires that there be adequate valuation, certified by recognised independent experts and validated by the relevant supervisory authority. The agency is already in the process of recruiting panels of independent auditors to meet this requirement and this will be subject to oversight by the Financial Regulator, which will be required to report back to the European Commission. Given the existence of that arrangement, it would be worth imposing a parallel obligation on the regulator to report back to the Oireachtas in that regard.

The internal board issue is fundamental because if we want proper oversight it is the duty of the board to provide it. I have suggested two ways in which confidence in the board can be built up. The other issue is the question of the position of the Oireachtas, which was canvassed by Fine Gael at length and Deputy Rabbitte expressed some sympathy for it. I have made clear I am not opposed to this in principle. I have a reservation about writing another committee into legislation, given the fact that we are considering the rationalisation of committees. I have a concern, which is magnified by the amendment I noted has been tabled in this regard, about the very wide powers the committee will have, not just to approve or decline the persons to be appointed, but to approve the remuneration of the board, the removal of a board member, the appointment of casual vacancies, the chair — which is a fundamental matter — the appointment and remuneration of members of the audit committee, the remuneration of advisory committee members, codes of practice, the CEO, the removal of the CEO, any guarantee issued by the Minister for debts and securities raised, the form of accounts, the appointment and remuneration of the expert reviewer and the procedures of the expert reviewer amounts to a significant degree of oversight of the body itself. It is trenching on this House, exercising not just executive powers but direct management powers regarding the agency. It goes very far in that regard.

Having said that, I have already agreed to a quarterly report. There is an issue regarding the amount of information to be furnished. We are examining this question with the Attorney General and whether we can include a list of all default proceedings with regard to loans acquired by NAMA. We agreed earlier that the report should include any particulars, directions or guidelines issued by the Minister. Any other suggestions for improving the amount of information which can be located in one place would be most welcome.

To illustrate the points I am making, I would like to take the position of the CEO. Clearly, because of the volume of preparatory work involved the Government made a decision to appoint an interim CEO. The question then arises under this legislation as to who appoints the CEO. There is no precommitment to any person because the normal practice in corporate governance is that the board appoints the chief executive officer, yet speakers opposite suggested that the committee should sanction this appointment. To my way of thinking, that would undermine the confidence which should exist between the chief executive and the board. Fundamentally, it is the board's job to hold the organisation to account. That should be our philosophy and anything we can do to strengthen the board in terms of its membership is valid and valuable. Ultimately, it must rest with the board to decide who the chief executive can be. It cannot rest with the Oireachtas or some extraneous influences on the board itself. It cannot lie with me. That is essential in this operation regarding the appointment of a chief executive. I do not believe it is something which could be properly transferred to another body.

The question of the chairman is different. In that regard, even if there were extensive party consultation leading to an agreed chairman, he or she, if not before his or her appointment then immediately on it, would need to be interviewed by an Oireachtas committee. The position regarding the chief executive is fundamentally different because the function of a board is to hold the executive to account. We can ask collectively as a House what the proper functions of the Oireachtas are, assuming we can create a board which commands the confidence of the parties here and we leave to it the issue of the determination of the chief executive.

I agree, despite my criticism of the amendment which listed a great range of functions, with the view that there is a case for the Oireachtas to have some measure of examination——

Deputy Michael Mulcahy
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Scrutiny.

Deputy Brian Lenihan
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"Scrutiny" was the word used by Deputies Mulcahy and Rabbitte in passing. We need to have adequate scrutiny of the quarterly report. Calling the chairman and chief executive to account in respect of the report would be very important and would help to provide understanding of NAMA.

The question then arises regarding what office or expert assistance is available to the committee. The Comptroller and Auditor General is very clear that it is not his constitutional function to look forward. He looks back and does audits, which is dealt with later in the Bill and does not see himself having an exploratory role in this context. Building on what I said earlier to Deputy Burton, that is, if there was a designated person within the regulatory system that would be the person who is assembling the information. I can give further guidance to Deputies on such a committee as to the direction of the operations of NAMA. That person will serve valuation purposes by virtue of the EU directive, but could also play a useful role in amassing useful information.

That is not to suggest that the regulator will regulate NAMA, but a person will have to be designated within the regulatory structure to deal with valuation issues. That person could usefully liaise with such an Oireachtas committee. That is all I will say on the matter and it is as far as I can bring it this evening.

Deputy Richard Bruton
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I welcome the Minister's contribution to the debate. There are elements to welcome, as he is agreeable in principle to having an Oireachtas committee for the issue. I am not clear on what resources he feels that committee must have in order to complete its task. If the committee is modelled along the lines of existing committees, it will not be equipped to do the required task.

The Minister is correct that the Office of the Comptroller and Auditor General has traditionally operated on a look-back basis but more recently its function has been broadened, and now the Comptroller and Auditor General looks at systems, procedures and practices employed by an agency and the economy and efficiency of an agency and the use of its resources. These are issues of principle in how the Comptroller and Auditor General approaches tasks; it is very much in the codes of practice and the principles applied.

We have already as an Oireachtas moved beyond what the Minister is saying in terms of what the Comptroller and Auditor General does. It does not operate solely in a look-back function and the Oireachtas recognised a number of years ago the deficiency of such a function. The same mistakes were repeated so we tried to bring the Comptroller and Auditor General into a more contemporaneous role. We are suggesting a logical development here in that it would act as an adviser to a monitoring committee and give advice to the committee on the efficiency with which money is being used, as well as systems, procedures and so on. It would be very much from the same stable as the existing legislation for Comptroller and Auditor General functions, which are continuously reproduced in legislation.

We are not breaking entirely new ground in looking for professional advice to a committee, if we are to have it. If it is to be a committee of the traditional sort without such resources, it will not be very effective.

With regard to having two Members of the Dáil as observers, the Minister is clearly making a genuine gesture towards including the Dáil in the process. I do not want to dismiss the concept on a hunch but I sense it as responsibility without power. It would mean a member of an elected assembly would have the job of scrutinising——

Deputy Brian Lenihan
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That is the position.

Deputy Richard Bruton
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We are putting such people into a position where they would not scrutinise matters of public record but are being asked to become quasi-appointees instead of public representatives. They would see material that I presume will not be admissible to the public record because of its confidentiality. Instinctively, I would be nervous — rather than suspicious — of this even if I or somebody else was asked to fill the role. We could be confusing roles; the Oireachtas is meant to scrutinise the Executive and its agencies and this would move from that role. I am not condemning it and as the Minister is to think about certain issues, I will ponder this as well.

I accept the Minister's good faith and willingness to meet full disclosure in the selection of people. He would like to hear the views of the Opposition and emerge at the end of a process. That is certainly a dramatic step forward from what we are used to, but in the context of this issue, all international evidence suggests that agencies like this have more success if there is all-party confidence. The Minister is responding to genuine evidence.

I sense that urgency alone is not a sufficient reason for eschewing an Oireachtas committee role for a body of such importance. While there may be in the context of establishment a reason for proceeding down this road, there is no reason for the Minister to say, for example, that after the appointment of the first board the suggested procedure would come into play. He feels that we are in a big hurry and the committee might not be up and running so we may need to act in an accelerated fashion but if that reason is valid, we should still have legislation to bring about a solid committee process and role.

It is an important principle that we as the Oireachtas must establish; we have a right to see that the people appointed to these jobs are suitable. If the Minister feels he needs to deviate from this on the basis of great urgency, I would be willing to listen to his case but it has not yet been made.

I am not clear on what the process auditor will do. Will the Minister circulate a note to us so we can consider the role? I do not understand with sufficient clarity what the process auditor will do and whether it would in any way help the committee. I take the point made by the Minister that perhaps we have, belt and braces, gone too far in the powers of the Oireachtas committee as set out. I believe the Minister agrees with me on the position of the chairperson and the codes of practice are pretty vital. There are certainly roles on the list that we could agree to jettison but there are others which fall into the areas of the economy, efficiencies, systems and procedures. There would be a right of the Oireachtas to have confidence in them.

The Minister has said that the CEO should not be part of a committee but in his provision he is making the position someone to be appointed by the board.

Deputy Brian Lenihan
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The Deputy is correct that the initial CEO is appointed by the Minister. The legislation would need to be changed because a subsequent CEO should be appointed by the board.

Deputy Richard Bruton
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If that is the case——

Deputy Brian Lenihan
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All-party consultation would be required on the CEO if it is a ministerial matter in the first instance.

Deputy Richard Bruton
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Yes.

Deputy Brian Lenihan
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I would not like the appointment of a CEO delayed for months by an appointments procedure either.

Deputy Richard Bruton
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No. I accept that these are unusual circumstances. Personally, I believe that all these positions should be advertised, even the board membership. I have a very limited knowledge of people suited to this field and my suggestions to the Minister may be haphazard. We should advertise the positions.

Deputy Brian Lenihan
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Should we advertise for expressions of interest?

Deputy Richard Bruton
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Yes, there should be an opportunity for people to come forward. I have very limited ministerial experience but I appointed a Competition Authority at one time. Traditionally, it was appointed by ministerial appointment but I advertised for it. We got people who we would not have dreamt of being willing to be considered for the position. One would never have thought that some of the people who offered themselves for selection would have deigned to be involved.

Deputy Brian Lenihan
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I presume a large number had to be excluded at the start but from what was left, there were a number of good quality candidates.

Deputy Richard Bruton
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Exactly. There were surprisingly good people that we would not have thought could have put their names forward. We would have considered a much more limited circle that would have excluded people who were willing to be considered for the position.

Deputy Brian Lenihan
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When will the Deputy give me liberty to advertise? Will it be when the Bill is passed?

Deputy Richard Bruton
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I know time is a limitation. Trawling for the best people and excluding those with a history that would make them unsuitable will be a skill in itself and we will need hard-nosed people to do it. Testing the knowledge of Members of the Oireachtas to find suitable people is not a good enough process, although I recognise that it is a significant gesture towards all-party consensus.

Time is an issue. There is much to be welcomed in what the Minister said. However, he has not indicated support for any particular amendments. He must give us some indication in this regard. We can dwell in the warm glow of his approval of some of what we say but he needs to say "Yes" to items one, two, three and four and "No" to others. We might then consider those rather than having them left vague and up in the air and go to Report Stage without really knowing the Minister's mind despite having had 24 hours of debate in the Chamber. We would end up tabling the same amendments and having the same shadow boxing exercise without knowing to what the Minister agrees and to what he does not agree. Perhaps at some point we might distil the elements into those with which the Minister will run and those with which he will not and can consider further. If there are to be votes at least we will vote on the areas of difference, not those of commonality.

Deputy Brian Lenihan
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If I may say so — I believe it will assist the Deputy regarding the section I went through on powers of the committee — this should be dealt with by Standing Orders and by resolution of the House. I do not know whether we should draft a resolution outlining what the committee should deal with, leaving open the option of a committee or a sub-committee of the Select Committee on Finance and the Public Service, as Deputy Burton suggested. At any rate, there should be draft terms of reference for whatever entity is eventually agreed on that issue.

Regarding board membership, the provision is that the Minister will make the appointments. I do not propose a change in that but simply give an undertaking that I would like to make the appointments by way of all-party understanding.

In regard to the audit committee, again I made an offer and the Opposition must reflect on it. I cannot compel Opposition parties to agree with that and I do not want to do so. However, if they believe it is of help I am willing to draft a suitable amendment. I indicated I would withdraw it if they were unhappy with it. That is where I stand regarding the issues raised.

With regard to the liaison and support for the committee, it is clear that a person will be designated within the regulatory authority on the question of valuation. Confidence in the valuation system can be ensured by requiring that person to report to the Oireachtas on valuation issues in parallel with the report to the European Commission.

On the question of other aspects of NAMA, I remain of the view that the Comptroller and Auditor General would not be comfortable with that position and would not fit into the constitutional framework. The Comptroller and Auditor General would check out items that he would have to audit subsequently. I do not believe any auditor wants to be put in that position. That is why with regard to matters other than valuation matters I am not clear what control is being sought in this respect. One could provide that the regulator should report to a committee regarding the valuations and have the Comptroller and Auditor General doing the customary audit as envisaged under the Act but subsequently reporting to this committee rather than to the Committee of Public Accounts. That would be a big innovation in respect of the Committee of Public Accounts but it is a possible approach where there is specialised knowledge. I firmly believe that if we set up a committee to deal with NAMA it will not last for the duration of NAMA but will last for the early years. These are the important ones because of the valuations and the basic corporate standards to be laid down.

Deputy Joan Burton
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I acknowledge the Minister is engaging with the criticisms and critiques that have been made concerning the Bill. However, we need to go back to a number of principles. In the first place, we talked a great deal about the primary purpose being the flow of credit into the economy. The Minister now has such a wide number of institutions taking part in this that it is rather difficult to know how the primary objective of oversight in respect of the flow of credit to small and medium businesses will be addressed by this.

Second, NAMA proposes a number of different actions but with regard to the draft business plan the bulk of the bad loans, the toxic debt and some of the good loans are due to be transferred by the end of June 2010. We will have the ten biggest developers and €16 billion dealt with by Christmas and will have half the rest dealt with by February. The reason I have continued to ask for public reporting oversight on a monthly or 30-day basis, as in the amendments tabled by the Labour Party, is the speed at which the takeover of the loans moves. I acknowledge that by moving to quarterly reporting the Minister has advanced considerably on his first position. However, the takeover of the distressed loans is due to be completed by the end of next June, or perhaps even more quickly. That is where the biggest exposure of risk lies. If the Bill gets the presidential seal by the end of November, according to the Minister's schedule, a report would be due a quarter after that. It would take two or three weeks to present the report so the report would appear some time in April if we are lucky. That means that by April the majority of decisions about the transfer of loans will have been made. That is why I placed so much emphasis on the equivalent of real time reporting. I did not suggest there should be a report of the full accounts of NAMA but suggested a report of pertinent information about the key jobs NAMA would be undertaking at that time, namely, taking over the distressed loans.

Thereafter, NAMA also will go into a ten year period, or at least NAMA as we understood it until now, although the SPV of today may have changed that. Mr. McDonagh said NAMA would take over the top ten to 35 developers. That is the general understanding we were given. We do not know from the notes the Minister gave us on the SPV whether that is the vehicle which will take them over. That is how the Minister described it because the SPV is to issue the bonds. The Minister must come back to the committee and tell members how this part of the Bill fits in with the SPV.

Chairman
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The Deputy is circulating around the entire issue once again.

Deputy Joan Burton
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The Chairman is being unfair. I did not hear him object to what Deputy Bruton said.

Chairman
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He was speaking to the amendments.

Deputy Joan Burton
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I am speaking to the amendments because the SPV has changed the territory very considerably. The Minister has made offers to the House. The SPV is now at least as important a vehicle as NAMA, yet it is not referred to anywhere in the legislation unless implicitly, if as the Minister suggests, all the members of NAMA are to be members of the board of the SPV. At least then we will know who some of them are and we will have some sense of their qualifications, but we do not have any sense regarding the other side.

My request for the public availability of oversight information on a monthly basis stands. This is one of the most important actions that can be taken to create public confidence in this process and in its accountability and transparency.

In his reference to the point about the audit, I was not sure whether the Minister was accepting my proposal that the audit should be effectively a joint audit between the Comptroller and Auditor General and a firm of auditors.

Deputy Brian Lenihan
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I did not deal with that. I apologise to the Deputy. The position is that in current practice the Comptroller and Auditor General engages in joint audits.

Deputy Joan Burton
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I beg the Minister's pardon.

Deputy Brian Lenihan
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At present the Comptroller and Auditor General makes joint audits. There is nothing unusual in a joint audit involving his office.

Deputy Joan Burton
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I know the Comptroller and Auditor General contracts expert services from auditing firms, but that is not the same as a joint audit. A joint audit would be addressed as a positive within the legislation for a simple reason, namely, that the Comptroller and Auditor General audits on an historic basis. He conducts value for money audits, many of which are contracted out, but we are not discussing a value for money audit. Rather, we are discussing a process that will occur extremely rapidly. I doubt that the Comptroller and Auditor General has the resources to have the type of audit oversight that will be required on a fortnightly and certainly monthly basis.

The business plan suggested that the bulk of the funding side of NAMA and taking on board the distressed loans will be completed entirely by the end of June 2010 on a 30-day basis. There must be a reciprocal arrangement in respect of reporting information on that 30-day basis. Otherwise, it will all be done and dusted and we will never hear about it.

This measure would provide strong protection to the Minister's position. If the process was done incorrectly and this was revealed in the public domain as early as possible, there would be an opportunity to correct and discuss the situation.

Chairman
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This matter has already been dealt with.

Deputy Brian Lenihan
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The regulator must take responsibility for the evaluations in the report to Brussels. I am trying to be of assistance.

Deputy Joan Burton
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The question of a committee poses a significant problem. Three Oireachtas committees deal with this issue. The Committee of Public Accounts, with the Comptroller and Auditor General, has an after-the-fact capacity. The Committee on Finance and the Public Service deals with all of the bodies, including the Department, regulator, Central Bank and the NTMA, that have functions in respect of NAMA. It would be foolish to leave either committee entirely out of the picture. A regulatory committee was also formed in recent years.

In terms of the House's public reputation, it is insane to suggest forming another committee unless the Minister first abolishes one of the existing committees. Having an extra committee with costs that are legitimately laid out as being essential for its work would be crazy.

Chairman
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Deputy Burton agrees with the Minister.

Deputy Joan Burton
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I cannot be dishonest. We need to cut back on public spending. Creating an extra committee while there is a surplus of them, including three that already deal with this area——

Chairman
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I would like to clarify something. The Minister commented on this matter previously.

Deputy Brian Lenihan
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I stated that there could be a sub-committee of the finance committee.

Deputy Joan Burton
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I was trying to suggest a mechanism whereby we would not impose an extra cost on the taxpayer. The Minister should get rid of a committee. Doing this job properly should not be a question of putting extra costs on the taxpayer. I would be happy to exchange ideas with the Minister.

Regarding the two Deputies who would be observers on NAMA's audit committee, I have previously stated that it is wrong to expect Deputies to be involved in a detailed operation that gives insight into the decisions being made by an audit committee and a board, partly because of the nature of politics here and Ireland's small size. Placing this requirement on Members might not be in their best interests. The way around this is to have a representative of the audit committee — or whatever it is, given the Minister's different descriptions — use an oversight mechanism to report publicly. There is a problem. I do not know whether the Minister has served on boards that had audit committees. Such committees have a specific function.

In terms of the NAMA board, we are discussing valuations, risk and credit. It might be more important to have a flow of information on the credit flow and its conditionality than anything else. I do not have a finished opinion on this matter. I have listened to the Minister and I am saying something that might be helpful in restoring the credit flow, which is the most difficult part of the oversight function.

Deputy Brian Lenihan
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I found Deputy Burton's contributions extraordinarily helpful, but NAMA is only responsible for NAMA. The flow of credit is a wider issue.

Deputy Joan Burton
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Yes. To be helpful, might I revert to the Minister briefly in that regard?

Chairman
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No. We are moving on to Deputy Flanagan.

Deputy Joan Burton
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We have all agreed that the most important issue is the flow of credit. I suggested a percentage increase in the flow together with information on that flow, but there must be an increase.

Chairman
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We have heard the Deputy's suggestions. I have asked Deputy Flanagan whether he wishes to make a contribution.

Deputy Joan Burton
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The Bill is not worth tuppence if there is no increase.

Deputy Terence Flanagan
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I asked the Minister whether he would consider monthly reporting. Why is he not open to the idea of NAMA producing monthly accounts and reporting on a monthly basis to the Oireachtas and the committee on NAMA? It is the practice in the banking industry to produce monthly accounts that contain real-time information. The public and Members of the Oireachtas are entitled to know what is occurring. As we know, much can happen within a quarter. It is important that we have timely reporting.

Deputy Arthur Morgan
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If or when the Bill is enacted, the most important feature will be public confidence in NAMA and its processes. Two things come to mind, namely, scrutiny and accountability. If these structures are not right, general confidence in the economy will be capped and weighed down. It is important that our deliberations arrive at reasonable conclusions.

I agree with the Minister that the appointment of the board is a critical element. Approximately two years ago, we advertised a position in our business. We were amazed and astounded by the quality of applicants who came in. I understand Deputy Bruton's point concerning his experience in that regard. It is a useful feature.

Of concern is that we were sailing along nicely with the Bill. Actually, we were not. After two long days, we have just crossed the amendments Nos. 1 to 17 threshold. Maybe we were not quite sailing along nicely.

Deputy Brian Lenihan
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In fairness, we have examined many of the main issues.

Deputy Arthur Morgan
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Yes. It is only right that they were teased out. However, there has been the rabbit out of the hat that is the SPV. Is it any wonder that we got bogged down — I was going to say "when we were ambushed like that" but maybe I should find another term? The Minister needs to put his cards on the table so that we can deal with them. Let us not create surprises such as that which we had this afternoon. Inevitably, they will bog everything down. The lack of trust is evident.

Regarding the oversight, scrutiny, Oireachtas accountability process or whatever it is, I agree with Deputy Burton that creating a new committee of the House without collapsing an existing one would give rise to angst among the public. If the Joint Committee on Finance and the Public Service or a sub-committee of the committee is to be expected to do the job, then I suggest that the Joint Committee on Finance and the Public Service would need to be extended somewhat because I do not believe it is possible for members of the committee to take on that new role without shedding some of their current responsibilities. Considering the economic crisis, members of the finance committee and the spokespersons in particular will be so weighed down with current matters that they simply will find it almost impossible to take on the new NAMA role together with their existing role so there would need to be an extension of some kind to deal with it and it would be a token cost. The key element to the cost in that event would be the expertise I agree would be required. If NAMA is going to be expending €240 million per annum or whatever it is, some crumbs from that table could be found to provide the requisite expertise for the finance committee.

Deputy Kieran O’Donnell
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If I understand the Minister it will be necessary for him to report to the European Commission on an ongoing basis with regard to the valuations on the assets being taken over by NAMA. My understanding is the Financial Regulator will be undertaking an audit or review process. Am I correct in that assumption?

Deputy Brian Lenihan
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Yes.

Deputy Kieran O’Donnell
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It would seem to make eminent sense for the Comptroller and Auditor General to undertake an interim audit as well as the annual audit on the process and to work with the Financial Regulator to produce an overall view.

If the Minister is seeking practical suggestions, the Comptroller and Auditor General could have a dual role by conducting a year-end audit and by reporting to the Oireachtas Joint Committee on Finance and the Public Service. Outside of credit flowing, the valuation process and the valuations applied to the assets are the most important factors with regard to NAMA. If we do not get the valuations right, no matter what other procedures are put in place, we are in trouble.

On the question of transparency and accountability, Deputy Barrett made a very practical suggestion regarding Deputies submitting parliamentary questions in respect of the operation of NAMA. Could a situation arise where a reply to a parliamentary question would state that the SPVs have a majority private stake and hence the Minister will say he is unable to divulge information in respect of the SPV because it is a private vehicle? I ask the Minister to address those two points.

Deputy Brian Lenihan
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I do not speak for the Comptroller and Auditor General. He is not accountable to me; he is accountable to the Houses. On the question of the valuation of assets, this was raised by Deputy Burton earlier. I meant to say that with regard to the issue of State bonds, this is a public matter and it will also apply to any bonds issued under this statute, irrespective of who formally issues the bonds. These are State bonds. Regardless of whether it is a State guarantee or a direct State issuance or NAMA issuance or spacecraft issuance, they have to be disclosed like other State bonds. We are not going to wake up after the first few three monthly reports and discover that €20 billion was issued after three months and €10 billion after the following three months. It has to be a matter of public record. In answer to Deputy Terence Flanagan, to have a coherent picture of how NAMA is going about its business apart from the issuing of the bonds, a quarterly report is preferable to monthly report.

On the question raised by Deputy O'Donnell about the regulator's involvement, the regulator is the independent auditor which the Commission insists upon. I suggest we should put into the legislation a separate requirement that the regulator also report in parallel to the Oireachtas along with its report to the Commission. This information has been laid before the House and before the Commission. This gives the information lifeline with regard to the valuations. The Deputy then raised the wider question of process above and beyond valuation. The question of valuations will arise in the early few months. In my opinion, while I am not accountable for the Comptroller and Auditor General and I do not wish even to purport to speak on his behalf, I would have thought that any auditor looking at an organisation such as this would give the organisation some time to find its feet and would not presumptively judge the corporate governance standard from the first week, three weeks or six weeks by means of an interim audit. Control by the Comptroller and Auditor General is provided for in the legislation but it is a matter for the Comptroller and Auditor General if he wants to start by having an early shadow. I do not wish to pre-empt how he does his work but I am suggesting a note of caution in this context about how matters might proceed. I hope I have dealt with the latest round of questions.

Parliamentary accountability is an important matter that needs to be cleared up before the Bill goes through the House. We want a clear understanding for all Deputies about how questions will be answered before the legislation comes into force. I agree with this. The reason the Oireachtas historically has set up State-sponsored bodies and bodies outside the aegis of immediate departmental control is because it was the view that the full parliamentary scrutiny was not appropriate to those bodies. However, we are dealing here with a very special case where Parliament is entitled to ask questions. We have to work out a process for the answering of those questions that gives real information in real time to Deputies.

Deputy Kieran O’Donnell
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The Minister does not envisage any difficulty with the fact that the SPVs will be privately controlled.

Deputy Brian Lenihan
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Not in the context of dealing with parliamentary questions. I will address that issue because that is the context of the Deputy's question.

Deputy Kieran O’Donnell
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The Minister has no particular difficulty if the Comptroller and Auditor General was of the opinion it was within his remit to look at the valuation process before the assets are put into NAMA. I presume the Minister is not against this in principle.

Deputy Brian Lenihan
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I must say I have a certain amount of difficulty with that. What we are obliged to do in the Oireachtas is establish an independent valuation process as our first duty in considering this Bill and to ensure the valuation process is robust, independent, transparent and objective. I know we will have arguments about the actual standard evaluation but leaving that aside for a moment, I anticipate the valuation methodology will occasion debate between us in our remaining hours and days but as to the actual process of valuation, it is our first obligation in considering this legislation to ensure the process in itself is robust, independent and transparent and staffed by qualified persons. I do not see how a preliminary audit by the Comptroller and Auditor General is going to add to that. There is clearly an immediate information flow, in terms of what Deputy Burton has said, through the appointment of a designated person by the regulator who, in any event, has to report to the Commission and who should also report to the House.

Deputy Joan Burton
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I think we are now starting to get somewhere. The issuance of the bonds is one side of what NAMA will do every number of days. As the Minister said, that information is a matter of public information to the bond markets. The corollary question is if at the end of December NAMA or NAMA-SPV decides to issue €12 billion in bonds, unless everything in the Bill has changed, that implies that X amount — suggested in the business plan as €16 billion of loans — have been purchased from the banks for that €12 billion of bonds being given to the banks. As one side of that equation is public information for the bond markets, as it has to be, what is wrong——

Chairman
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That is not dealing with section 19 which we are discussing.

Deputy Joan Burton
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Pardon? The Chairman listed a whole series of amendments. The Labour Party has a proposal in several of the amendments to have information published on a 30-day basis. How else can we make sense of it? The bond issues will be public. Every time the NTMA issues a bond it is in the public domain.

Are we supposed to guess a bond issue of €10 billion is in respect of €12 billion or €13 billion of distressed loans? It is easy to publish this information and it must be given to the Central Bank. As the Minister indicated, the regulator has the information. The only step that remains for the Minister to complete is to release that information in summary form into the public domain. It is not enough to give it to the Dáil; it should be put into the public domain. This is the other side of the information in the bond market. If I were a bond trader I would not buy the bonds or use them in the ECB window unless I had information concerning what the bonds were about. That is what people do in the bond markets.

Deputy Arthur Morgan
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I refer to the suggestion by the Minister that perhaps two Members could be appointed to the audit committee of NAMA. I respectfully suggest it would need to be two Members due to retire soon or who do not intend to contest the next elections, at least in the short term, because NAMA is so unpopular and will continue to be for some time. One would have to seek two political kamikazes to take on such a position, because they would be scrutinising something to which they cannot refer and upon which they cannot remark. Whatever the outcome of NAMA, any two such people would be on a hiding to nothing. I agree with Deputy Bruton's point that perhaps it warrants more consideration.

Chairman
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Is the amendment being pressed?

Deputy Richard Bruton
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I will withdraw the amendment at this stage and consider a re-submission of amendment No. 46 on Report Stage, perhaps framing it with regard to what will take place after the first board.

Amendment, by leave, withdrawn.

Amendments Nos. 46 and 47 not moved.

Chairman
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Amendment No. 48 was discussed previously with amendment No. 45. Is the amendment being pressed?

Deputy Joan Burton
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I move amendment No. 48:

In page 30, subsection (2), line 7, after "if" to insert the following:

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

I am unclear about the Minister's response to this amendment. This requires that the nomination to the NAMA——

Chairman
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This has already been discussed.

Deputy Joan Burton
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I am unclear what the Minister's response was to the amendment. The Minister proposed and seems to have agreed that nominations to the NAMA board should be advertised. Do I take it this has been agreed?

Deputy Brian Lenihan
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We can all agree on this matter. I propose to advertise for indications of interest in membership of the board and it is my intention to advertise forthwith. I trust this is no disrespect to the House but because of the urgency of the matter I must proceed.

Deputy Joan Burton
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I congratulate the Minister on doing so.

Deputy Brian Lenihan
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This is what I propose to do in this regard.

Chairman
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Is the amendment being pressed?

Deputy Joan Burton
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Can I continue with my point?

Chairman
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I am afraid that is not possible. Under Standing Orders we cannot discuss it further.

Deputy Joan Burton
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I need to understand how the Minister has responded. It would require the nominations to——

Chairman
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Unfortunately, the procedure is that it cannot be discussed because it was already discussed as part of a group of amendments. Is the amendment being pressed?

Amendment put and declared lost.

Deputy Joan Burton
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I move amendment No. 49:

In page 30, subsection (2), between lines 11 and 12, to insert the following:

"(c) social housing and community development,”.

I cannot imagine the Minister would have any difficulty in accepting this amendment. It is to extend the qualifications described in the qualification section in respect of the board to include persons with a knowledge of social housing and community development. This requires a simple "Yes" or "No" answer from the Minister. I imagine people with such qualifications would add to the board.

Deputy Brian Lenihan
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We have a very long list of qualifications and if I accept this amendment, there is no assurance that such a person would be appointed because of the vast range of qualifications involved. However, I am prepared to accept the amendment.

Deputy Joan Burton
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I thank the Minister. I realise his officials may not be so keen.

Deputy Brian Lenihan
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However, it does not amount to a guarantee of membership.

Deputy Joan Burton
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No. It is simply one of the qualifications.

Deputy Michael Mulcahy
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One among several or inter alia.

Deputy Joan Burton
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The Chairman should note the Minister has accepted the amendment.

Deputy Brian Lenihan
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I am pleased to accept the amendment. It does not require further consideration.

Deputy Joan Burton
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The Minister should inform the Chairman.

Deputy Brian Lenihan
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I accept the amendment.

Chairman
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I wish to check the procedure.

Deputy Brian Lenihan
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I wish to make clear that I cannot guarantee a given appointment. I have only seven appointees and the qualification range is widening dramatically.

Deputy Richard Bruton
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There will be some more on Report Stage now that we realise the Minister will accept amendments.

Deputy Brian Lenihan
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If there is an economist it will have to be a political economist.

Amendment agreed to.

Chairman
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The next amendment is amendment No. 50 in the name of the Minister. It will be discussed with amendments Nos. 54, 72, 82 and 88 by agreement. Since it is almost 10 p.m I propose we adjourn the debate.

Progress reported; Committee to sit again.

Prelude

Back to table of contents

Business of Select Committee.

SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate - Tuesday, 27 Oct 2009

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

SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Tuesday, 27 Oct 2009