I want to begin by urging the Fianna Fáil-Green Party Government to do its duty to the people and make a commitment, here and now, that if this legislation is passed by the Houses of the Oireachtas it will support a petition to the President under Article 27 of the Constitution to put the NAMA Bill before the people in a referendum. The Constitution provides that the President may refuse to sign a Bill passed by the Houses of the Oireachtas if it "contains a proposal of such national importance that the will of the people thereon ought to be ascertained". If ever there was such a Bill then this is definitely it.
Here is the real challenge to Fianna Fáil backbenchers and the Green Party. If the Government will not put this Bill to the people and if Fianna Fáil backbenchers and the Greens are as exercised as they claim to be about the Bill, they should go to the country — either in a referendum on NAMA or by pulling the plug on this disgraceful, discredited and bankrupt Government, thus allowing the people to vote in a general election.
The people are watching this debate and are watching how those they elect serve them, or if they serve them at all. There is no doubt whatsoever about who Fianna Fáil and the Greens are serving with this rotten Bill. It is a bailout for the greediest and the most corrupt in Irish society — the bankers and the speculators whose boundless avarice has devastated the economy. Throughout the Celtic tiger years, Fianna Fáil-led Governments pampered this elite group. They allowed them to benefit from massive tax breaks at unknown cost to this State. They allowed them to determine the State's housing policy, which was to let the market drive everything and, boy, did that market drive. It drove property prices to unreal and unsustainable levels. It drove a frenzy of greed for profitable property, inducing many who could not afford to do so, to borrow to buy in the grossly inflated market. It drove debt to levels previously unknown in this country. It was fuelled by cheap loans supplied by a banking system corrupted by the culture of greed that saw massive salaries, bonuses and perks lavished at all senior levels in the financial institutions.
Finally, the locomotive was driven into a wall and we are now left to deal with the train wreck that is the Irish economy today. Who are the biggest losers in all of this? Not the bankers and the property speculators who did the crime because they will never do the time. Not the politicians who facilitated them because no-one in Fianna Fáil, the Progressive Democrats Party and now the Green Party ever admits responsibility for anything and they are never made to pay the price for their disastrous policies and disastrous management. The real losers in all this are more than 400,000 unemployed people in this State, the families saddled with massive mortgages, many of whom are being evicted from their homes, people who never had the chance of a decent home during the Celtic tiger years and the weaker sections of the community which are about to be punished most by the savage budget cuts in preparation.
All this need not have happened. Many of us, including Sinn Féin, urged a different direction. Trade unionists, people in the community and voluntary sector, other parties of the left and economists with a social conscience urged policies based on the principle of equality and driven by need, not greed. More than a decade ago, in our pre-budget submission in November 1998, Sinn Féin pointed out that the banks enjoyed a return on their equity that was double the European average, making them among the most profitable banks in the industrialised world. We said that, ultimately, the banks should be nationalised in order that the Irish people would be the true beneficiaries. We also proposed an increase in corporation tax for Irish retail banks with resulting tax funds earmarked for community and local development projects in the most disadvantaged areas throughout the State.
Instead of this, we saw bank profits continuing to soar, a belated, limited and short-lived bank levy, successive banking scandals, which ripped off customers and the taxpayer, and collusion between banks and property speculators as they inflated the property bubble. Now the same corporate criminals are to be bailed out by the Government using the people's money. That is what NAMA is in a nutshell. It is supposed to address the crisis caused by a corrupt system but NAMA may well turn out to be the source of the next decade's tribunals. Higher taxes are coming, something the establishment parties have railed against for years, but they will not pay for better public services. They will disappear into the NAMA black hole created by a Government refusing to take the obvious step of nationalisation to address the banking problem.
The basic concept of NAMA is flawed and this legislation to introduce it is flawed through and through. The focus point for most commentators has been the price NAMA will pay for toxic loans it transfers from the banks onto the taxpayers' balance sheet. This is the argument around what discount NAMA should apply to the €77 billion worth of bad loans on the banks' balance sheets. I hope we will get answers to the questions we pose in these contributions. Will the Minister advise the House how much of that €77 billion was used in the purchase of sites and land banks and employed in development works? In other words, how much of the €77 billion is accrued unpaid interest?
The legislation states NAMA will not pay current market value for these loans — the amount that would be repaid to the banks if the properties the loans are on were sold immediately. Instead it will come up with estimates based on "long-term economic value". The moves by ACC Bank against the developer, Liam Carroll, have done the Irish taxpayer a huge service. After being dragged to the courts, he had to admit that if forced to repay his loans he would only be able to repay one quarter of their worth. That is based on the fire sale of his properties at their current market value. Whatever price is paid for the bad loans, risk will transfer from shareholders and creditors to the taxpayer. This transfer of risk creates a real danger of moral hazard in the future, that is, the banks engaging in risky lending behaviour because there are no consequences.
NAMA is incapable of meeting the twin objectives of achieving the best value for the taxpayer and exposing the taxpayer to the least risk possible. The debt to which NAMA will expose the taxpayer is €54 billion — one third of our GDP — and that is before the Government recapitalises, and make no mistake about it, these financial institutions will need to be recapitalised. The detail of this was not placed before the House yesterday. The taxpayer's exposure far exceeds the bank-related debt taken on by Sweden in its bad loan management in the 1990s, which equated to 8% of its GDP. This will have implications for our sovereign credit rating, which has already been downgraded by several ratings agencies, and will incur increased debt servicing costs, potentially in the region of billions of euro annually.
This legislation contains numerous problems. These include a reliance on the banks acting in good faith to give all the information on the loans to NAMA. The Minister for Finance will have sole power to appoint NAMA board members. NAMA will be empowered to "work with developers" to finish projects, potentially lending them taxpayers' money to do so. NAMA will also have compulsory purchase order powers to help developers complete projects if there are so-called "ransom strips" or contested land in the way. Power will be given to the Minister for Finance to overturn "independent" valuations of loans made by NAMA.
Then there are the operational concerns. Deputy Conor Lenihan is not interested in what I have to say but I hope the Taoiseach might listen to some of it. NAMA will not have the expertise to reclaim debts, as it is not used to working in this sphere, and the staff the agency recruits may still be loyal to their former bank employers. There is the prospect of developers' loans being nursed for decades while ordinary loan holders are forced to pay back their debts or face repossession. NAMA will be another huge Government cost at a time other organisations of significant public importance are being amalgamated or abolished. As for the notion that a levy will be introduced on the banks if NAMA makes a shortfall, we do not know how a "shortfall" will be defined, much less what the levy will be.
The Government has put forward NAMA as an alternative to nationalisation but almost all commentators are agreed that even after NAMA, nationalisation might still be the outcome. That is because even after the loans are taken off the books of the banks, there is nothing to guarantee against more loans becoming impaired as interest rates increase. Further liquidity problems may arise and, therefore, the State will go down the route of equity capital shares that may be so large that banks will be nationalised by proxy. The Government claims that cleaning out the banks via NAMA will bring about a return to normal bank practice and lending. We are told NAMA is needed for the economy to return to normal and anybody anti-NAMA is either politically and economically naive, anti-patriotic, or both.
However, this rests on the assumption that private bankers are committed to restoring our economy through providing credit and will place this above the interests of bank shareholders. Will banks lend when they manage to get their hands on cash via the NAMA-issued transfer bonds? A code of conduct for banks covered under the State guarantee scheme on lending to small and medium enterprises was published by the Financial Regulator last February and it took effect in March but SMEs in every constituency say the banks continue to deny loans and credit. That is the reality. This so-called leverage introduced in March has not had the effect it should six months after its introduction. It is not certain what "normal" is when it comes to bank lending practices but it is certain that banks do not fulfil the role of public investment. Historically, banks have lent too much and too easily in booms and have lent too little and too cautiously in recessions.
My colleague, Sinn Féin finance spokesperson, Deputy Arthur Morgan, has rightly asked where is the NAMA for ordinary people. When homes and small businesses are being repossessed the length and breadth of the State and people are facing negative equity and economic hardship, the Government can stand over bailing out banks and developers alone. The guide to NAMA by the Department of Finance exposes the fundamentally flawed thinking behind it. Frequently asked question No. 2 is: "How can you justify this further bail-out of the banks for assets and not prevent banks from increasing mortgage rates?" The answer given states:
It is true that the banks in most instances will not be paid the current market value but will be paid a price which is in accordance with the long-term economic value of each asset. With regard to mortgage rates, the interest rates reflect commercial market realities as banks must pay more to access funds in wholesale retail markets. The Government has no role to play in the commercial day-to-day operation of banks here and believes that it is important that the banking sector has a market presence and operates within market discipline and constraints.
Surely if banks were operating in normal market conditions with discipline and constraints they would not be under a blanket state guarantee and in the middle of shifting all their bad loans off their books onto the taxpayers' heads at a bargain price for themselves.
One of the most incredible aspects of NAMA is that it is outsourcing the property management aspect to private development firms. Had it been used as a property management company, the State could have used land seized on defaulted loans for vital infrastructure, social housing provision or tourism development. We now have the crazy situation where people throughout the country are sitting in homes and business premises in negative equity and worse, and are being evicted as their property is repossessed. The property managed by NAMA should be available to local authorities to house people currently in need and those who will find themselves evicted as a result of banks moving against them, and they are moving against them with no care or thought for the human suffering involved. However, the NAMA-owned property, paid for by taxpayers, is to be managed by private development companies. Tenders have already been put out to attract such companies. This revelation is highly suspicious and will lead many to believe that the taxpayer is again being deceived and robbed by the Government, banks and developers.
Sinn Féin believes the only way to deal with the current crisis is to nationalise the two main banks, AIB and Bank of Ireland, with the potential of turning these two banks into a State bank. This will offer far greater security for the taxpayer. Bad loans can be dealt with in the context of nationalisation and the State can make informed decisions about whether these loans should be foreclosed or managed. We may need to set up a bad bank to deal with the toxic loans within the nationalised system. The Government can then decide on a process of recapitalization and restructuring, and deliver the management control that will ensure resumed lending. That is the critical need, namely, resumed lending to allow for a rejuvenation of the housing sector, affordable mortgage access for ordinary people, restructuring of existing mortgage arrangements and the opportunity for people in small and medium enterprises and retail outlets to have the chance to have working capital to get through these difficulties. They are being choked off by people in banking institutions who have no other allegiance than to the profit line of their shareholders and management.
The current upheaval in banking will undoubtedly have an impact on the staffing numbers at the banks. This is a very important point that needs to be taken on board. While a clear-out of those at the highest levels of the banks whose reckless mismanagement brought about the current banking crisis is required, Sinn Féin recognizes that the vast majority of bank employees played no role in the corruption and bad management that pervaded the sector. The Government should work with the IBOA and other trade unions representing these workers to ensure the retention of the maximum possible number of jobs in banking and to ensure that employees who lose their jobs receive proper redundancy packages and the opportunity to retrain.
The restructured banking sector envisaged by Sinn Féin goes far beyond just restoring so-called normality to the system. There was nothing normal about a sector that systematically overcharged customers, was complicit in tax evasion and routinely withdrew access to financial services from working class and rural areas because of the profit pursuit. I have raised these issues many times, not only on the floor of this House — I was first elected here in 1997 — but over the course of my five years as a member of the Committee on Finance and the Public Service where we encouraged and were part of the decision taken to go into a thorough examination of bad banking practice. It would have kept the Government very busy.
Nationalisation is preferable to repeated recapitalisation, which is excessively costly for the taxpayer, yet leaves the Government with no real say over how those banks are run. It also deals with any potential losses that could be incurred by the taxpayer, having left the banks in private hands and bought the bad loans off their balance sheets. If recapitalisation of a State bank or the nationalised banks is required this could be funded through national bonds which, unlike bank bonds, would be guaranteed. The EBS, Irish Nationwide and Irish Life & Permanent must be examined to see if they can function with recapitalisation and the State taking a stake alone or if they need to have their business wound up and-or transferred to the other two banks.
The issue of ordinary bank shareholders is a sensitive matter. While many of these shareholders benefited during the boom period for the banks, many reinvested dividends in order to secure their future and have lost much of their pensions. We have genuine sympathy for their conditions. However, the interests of the taxpayer and public shareholders cannot be held hostage to the interests of private shareholders. The most appropriate way to protect vulnerable shareholders and pensioners is to ensure — I hope the Government will note this in its preparations for the budget in December — that no cuts take place to State pensions or other social protections and that the State pension for all those currently in receipt of same is increased. In doing so one protects equally those who have lost life savings through risky investments and those who never had the money to make investments or build up a private pension in the first place. It would be an exercise in equality.
Sinn Féin opposed the Financial Measures (Miscellaneous Provisions) Bill 2009 which sought to grant the Minister for Finance the power to extend the guarantee beyond 2010. While other states ran guarantees for longer while securing their banking systems, none had the extensive guarantee with the lack of appropriate conditions that we have. A blanket guarantee is not the way forward for the banking system.
We believe that the Committee of Public Accounts should be tasked with carrying out a full investigation of malpractice in the Irish banking system over the last decade. Its findings should inform better regulation of the banking sector. Malpractice and even criminality by the banks led to this crisis — those are the accurate words to employ — yet there have been no arrests, fines, admissions or findings of guilt. All those responsible must be investigated and prosecuted where the evidence warrants. In one case since Christmas members of my community were brought before the courts and terms of imprisonment were handed down, not for defaulting but for being unable to service relatively small loans from financial institutions in our constituency. That is mirrored in many other areas. There are two very different laws at work, one for the poor and those who cannot afford to cope with the situation now presenting and those who were at the helm of what went wrong and whose actions and decisions influenced the current situation and were absolutely corrupt.
The Minister for Justice, Equality and Law Reform must disclose to the Dáil if investigations are currently being undertaken by the Garda or the Criminal Assets Bureau and the public must be kept informed of criminal proceedings being taken against those guilty of corporate malpractice. Those at the highest level of the banks over the last number of years and suspected of culpability in mismanagement and fraud must be removed from their positions and new management installed in the nationalised banks.
Other measures we would commend include whistleblowers' legislation to cover workers in the financial services and banking sectors. The regulation of the banking sector should be intensified and made independent. The role of credit unions should be enhanced through reforming legislation that allows them to expand their work as community-based not-for-profit services that support social and economic development. I suggest that the Government should legislate for the right to a bank account, as has been done in the Netherlands, France and other states, to enable people without a bank account to open an account at a financial institution of their choice. Several of my constituents have not been accommodated in this manner and therefore have no means of opening a bank account. Deputies will appreciate what that entails for them. It is absolutely outrageous. I ask the Government to introduce legislation post haste that mirrors the approach taken in the Netherlands, France and elsewhere. We also suggest that the Government should enable An Post to provide basic banking services, including a basic bank account. I refer to simple, low-cost, no-frills current accounts that are designed for the many people in our communities who are financially excluded. The Money Advice and Budgeting Service should be given more support as it deals with the increase in personal debt and assists those who are trying to address personal financial crises.
I accept that emergency action on banking is required. There is no difference of opinion in that regard across this Chamber. Emergency action should be taken to rescue the people's economy, rather than to rescue the bankers and developers who have devastated it. The provision of fresh capital is just part of the solution. It is more important to provide new leadership at the banks. Such leadership should put the public interest first and work to strict criteria and guidelines. We need a banking system that serves the people and in which the people can have confidence. NAMA has nothing to do with improving Irish society. The ultimate point of it is to socialise debt and privatise profit. Therefore, this Bill should be rejected. Even at this late stage, on the second day of the Second Stage debate on this facilitating legislation, Sinn Féin urges the Government to go back to the drawing board and reconsider its proposal. It should recognise that Opposition voices, like large swathes of public, informed, professional and expert opinion, are cautioning it not to take the course on which it is set. It is important for the Government to listen, to examine the alternatives and to accept, in light of that exposure, that there is a better way. This Bill should be rejected. On the basis of its failings to date, the Government should also be rejected. If the Government is not prepared to support the petition to the President for a referendum on this Bill, if it is to pass, it should do the honourable thing and stand down. The people should be allowed to decide who should be at the helm of the Government of this State.
