Nation Asset Management Agency Bill 2009 (NAMA)
Report and Final Stages.
Senator Ivana Bacik: I second the amendment. It is in keeping with the general theme we have pressed on Second and Committee Stages, that the operation of NAMA should be carried out in as transparent a manner as possible in the public interest and that there should be sufficient scrutiny and accountability to ensure there is public trust and confidence in it. We tabled amendments on Committee Stage that were designed to achieve that. This is another such amendment. It seeks to add the NAMA group entity and the valuation panel to the definition of public bodies under the Freedom of Information Acts.
I emphasise the valuation panel. Amendment No. 7 should be read in conjunction with amendment No. 21 which specifically relates to the valuation panel and proposes that it “shall operate in a transparent fashion and in accordance with the Freedom of Information Act 2007”. Amendment No. 7 seeks to add the panel to the category of bodies under the freedom of information regime. That is particularly important when one considers the provisions relating to the valuation panel in section 119 and succeeding sections in the Bill. The method of appointment of a valuation panel is left to the Minister. I accept a Government amendment was tabled on Committee Stage to specify levels of knowledge and expertise, and there was some debate on that. However, there is a lack of transparency as to who will be on the valuation panel and the method of appointment. This was discussed on Committee Stage. Given the lack of transparency in the provisions relating to the establishment of the valuation panel, it is especially important that the valuation panel be covered by the Freedom of Information Act.
As Senator Alex White said, plenty of exemptions are provided for in Part 3 of the Freedom of Information Act 1997, as amended in 2003. Section 27 refers specifically to commercial sensitivity as a ground for exempting matters from having to be disclosed. There are plenty of safeguards to ensure the danger the Minister identified on Committee Stage is not a problem if these entities are included under the Freedom of Information Act. This is about transparency and ensuring greater public trust in the workings of NAMA. We all agree that public trust is critical in this enterprise. Other speakers when discussing amendment No. 3, and departing somewhat from its terms, referred at length to the Frontline marchers outside the gate of Leinster House. All of us are very conscious of the people who are suffering the brunt of the recession and in whose interests we are hoping NAMA will work. Even Members who are opposed to NAMA very much hope it will be effective in protecting the interests of members of the public, ordinary working people and especially vulnerable people.
In those interests, we require a level of transparency about the operations of NAMA. Some of our amendments seeking to ensure transparency were defeated. This is a critical amendment which seeks to include NAMA as a public body covered by the Freedom of Information Act.
Senator Ivana Bacik: I second the amendment. I will speak to amendments Nos. 11 to 14, inclusive, which include an amendment in the names of Senators Norris and O’Toole. Theirs has a slightly different nuance, although it addresses the same point as that of the Labour Party.
Sections 58(3) and 59(2), both of which we propose to delete and replace, are very prescriptive and impose extreme restrictions on the chairperson and chief executive officer. The alternative wording in amendment No. 11 provides a somewhat more nuanced approach to the giving of evidence, while still meeting Government objectives, as Senator White stated.
Amendment No. 13 would have a somewhat different effect in that it would give more scope to the chairperson and chief executive officer to question or express an opinion on the merits of Government policy. It would simply allow them to decline to express or question an opinion. There is a difference between the amendments. If amendment No. 11 is rejected, amendment No. 13 can be put separately. I am not sure all the amendments should be grouped together. While I know we can vote on them separately, it must be noted there is a difference in their effect.
Senator Ivana Bacik: I move amendment No. 15:
In page 56, between lines 28 and 29, to insert the following:
“(2) It shall be an obligation of a participating institution not to commence or pursue proceedings for repossession of a principal private residence unless the arrears of any mortgage are in excess of 24 months, provided the mortgagor provides reasonable co-operation within his or her means and ability with the participating institution.”.
This amendment seeks to place on obligation on participating institutions not to commence proceedings for repossession of principal private residences unless the mortgage arrears are in excess of 24 months. This matter was discussed at length on Committee Stage. In the context of Government policy, the principle underpinning the amendment is already accepted, particularly when one considers that an agreement is already in place that the two largest banks will not pursue proceedings for repossession for a period of 12 months.
In the light of the high levels of personal debt and the increasing number of repossessions taking place, it is important to create a higher level of public confidence in the banking system in order that people might rest assured that their homes will not be repossessed. As the level of negative equity grows and the number of repossessions increases, there are major concerns that people’s homes will be on the line. These concerns arise at a time when jobs are at risk or when serious pay cuts are being contemplated.
For all of the reasons of which the Minister of State is well aware, we ask that this amendment be accepted in order to place Government policy on a statutory footing. Participating institutions should be required to hold off on attempting to repossess people’s homes for a period of two years. This is a fair amendment, to which the Minister of State is probably sympathetic, in principle. Let us place this matter on a statutory footing and provide people with a level of security in respect of their homes.
Senator Ivana Bacik: I anticipated the Minister of State’s reply and I am glad Senator MacSharry put the case in favour of the amendment so eloquently. I do not understand why it is not possible to deal with this matter in the legislation before us, particularly when the Minister of State and Senator MacSharry expressed support, in principle, that there should be a moratorium on repossessions. The Minister of State has indicated that there is no evidence of an avalanche of repossessions. However, we know that the number of repossessions is increasing and that there is major concern that people’s homes will become liable to repossession. As Senator MacSharry stated, there is a need to address these issues by means of a statutory formula. However, I do not believe the Court and Court Officers Bill would be the appropriate vehicle to use in this regard.
Senator Ivana Bacik: I apologise. I do not see it as a more appropriate place than this Bill which is all about trying to increase levels of confidence and trust in the banking and financial systems. Therefore, it would be entirely appropriate to deal with the matter in this Bill.
Amendment put and declared lost.
Senator Ivana Bacik: I move amendment No. 26:
In page 126, line 23, to delete “may” and substitute “shall”.
These amendments arise from Committee proceedings but were not amendments we had tabled on Committee Stage. There was extensive debate on this question last night and we proposed these amendments to reflect that debate. Amendment No. 26 would substitute the word “shall” for the word “may”. The current section 210 provides that the Minister may issue guidelines. We have proposed instead that he shall issue guidelines. As we said last night, section 210 is very significant section and was added very late during the Dáil debate. Therefore, it required full debate here in the Seanad. It is core to the purpose of the Bill as stated in section 2 to free up credit and as the states, “to facilitate the availability of credit in the economy of the State”. This is core to the Bill because it enables the Minister to issue guidelines regarding lending practices and procedures to facilitate the availability of credit. As I said last night, it specifically mentions small and medium-sized enterprises, which we know are suffering currently owing to the lack of credit. It was accepted on all sides last night that this was a welcome provision and that the Minister should issue guidelines. Senator MacSharry and others on the Government side of the House also expressed the view that the Minister should issue guidelines.
I am not sure which Minister was in the House at the time - Senator Norris referred earlier to the whirligig of Ministers we have had - but whichever Minister was in the House said the Minister for Finance had expressed his intention to issue guidelines, but that he wished to issue a number of extra guidelines from time to time and felt that the word “may” would facilitate him in doing so more than the word “shall”. On reflection, we did not see that the word “may” would give him any greater flexibility than the word “shall”. The words “shall issue guidelines” require him to introduce them. Everybody agrees he should issue them. Therefore, the word “shall” would be a more accurate word to use. That is the reason we want to include the phrase “shall issue guidelines”. This is very important. If there was to be a change of Minister, then any promise given by the current Minister would not hold. Therefore, it is important that in the interest of certainty we provide in statute that “the Minister shall issue guidelines”. This is what we want from amendment No. 26 which we feel is vital to ensure the guidelines are made.
Amendment No. 27 also arises from Committee Stage. It relates to an intervention I made initially on Second Stage where I referred to the French model of the credit mediator, the entity established by Christine Lagarde, the French economy Minister. This is a mediator who will intervene where viable businesses are being refused credit by banks. Such a mediator can intervene to ensure business are helped through the issue of credit and can name and shame banks which fail to do so. On Second Stage, the Minister referred to my suggestion and said he was aware of the French model and that he intended to introduce an independent appeal mechanism. In last night’s debate, we ventilated this issue. I said, and I think the Minister accepted, that section 210(1)(b) facilitates the Minister establishing an independent review mechanism relating to the review of decisions of participating institutions to refuse credit facilities. However, this provision is very vague.
What amendment No. 27 does is insert a new subsection (c) specifying that the guidelines to be issued by the Minister would relate to the establishment of a credit mediator who may intervene to ensure that participating institutions are facilitating the availability of credit to borrowers or potential borrowers, including small and medium-sized enterprises. Therefore, the amendment reiterates the stated intention of the Minister. It specifies his stated intention and fleshes out the provision already in section 210(1)(b) that allows the Minister to issue guidelines relating to the review of decisions. It provides for a mechanism which has been tried and tested in another jurisdiction within the European Union - France - which has enabled there the flow of credit to more than 10,000 businesses, according to recent reports. It is up to the Minister to decide on the exact formula for the credit mediator, but in principle there should be some form of credit mediator process available. This amendment, in an assistive and constructive spirit, strengthens the provisions of section 210.
Senator Ivana Bacik: It is important we require the Minister to issue guidelines, and we will be pressing that amendment. I will not press the second amendment because I am glad to hear again that the Minister is very much open to the idea of an independent oversight mechanism. That is now accepted across the House. I am glad the Minister of State views my proposed amendment as constructive. The credit mediator model is one that could very usefully be adopted here. I will not press amendment No. 27 to a vote because I am very hopeful the Minister will take up that idea and introduce a credit mediator. It would provide a very important mechanism for individuals and businesses who are being refused credit at present.
I am delighted the Minister has accepted it, in principle.
Question put: “That the words proposed to be deleted stand.”
The Seanad divided: Tá, 27; Níl, 24.
Committee Stage (Resumed).
Senator Ivana Bacik: Amendment No. 63 and section 210 are very important. Everyone is glad that guidelines may be issued in respect of lending practices and procedures and that, under the amendment, these guidelines will be laid each House of the Oireachtas as soon as is practicable. I reiterate what I said on Second Stage and Committee Stage, namely, that guidelines may not be sufficient to ensure an adequate flow of credit to small businesses. The Minister for Finance accepted what I said in this regard and stated he would examine the idea of going further and perhaps facilitate the creation of a post similar to that of credit mediator in
While I welcome the amendment, especially as it will strengthen the oversight and accountability aspect of the guidelines relating to lending practices and procedures, I ask that the Minister for Finance go further, either in section 210 or some other section, and provide for the appointment of a credit mediator who could intervene where lending practices are not facilitating the availability of credit. I am concerned that we should strengthen the principle that is already expressed in section 210. This principle will be augmented by the amendment but I am of the view that it could be strengthened further.
I welcome the Minister’s statement to the effect that he would review this model, that he was not averse to it and that he recognised its merit. I accept it may not be appropriate to accommodate it in this section. However, this is the key section which deals with the overriding public interest - the need to ensure the availability of credit to borrowers, including small and medium enterprises - with which NAMA is really concerned.
Senator Ivana Bacik: When I spoke earlier I was speaking on the amendment but as this has now developed into a debate on the section I am not clear whether Senator Harris favours or opposes the section. He seems to express doubt about the working of section 210.
Senator Ivana Bacik: That explains everything.
In answer to Senator Harris, this envisages a system of regulation. A consensus is emerging across the House that the word “may” should be altered to “shall” and that the Minister must introduce these guidelines to regulate the participating institutions.
In response to Senator O’Toole’s critique of the workability of the section, this applies only to participating institutions, credit institutions so designated under section 67 by the Minister. They have already been bought into a system that is different from the normal free market run which has failed us.
Senator Ivana Bacik: I am delighted to hear that. It is imperative that the Minister issues these guidelines. That is reflected in the word ”shall“ in the Minister’s amendment and in the important subsection (2) that requires participating institutions to comply with the guidelines issued. It states ”A participating institution shall comply with any guidelines issued under subsection (1).” We will table an amendment if the Government does not accept this one.
The Minister’s willingness to consider my point about the credit mediator relates to his existing provision in section 210(1)(b) which describes the guidelines as relating not only to lending practices but also to the review of decisions of participating institutions to refuse credit facilities. The objective of the credit mediator model is to intervene where credit facilities have been refused and to ensure that they are granted where businesses are viable, and to name and shame where banks refuse to lend to viable businesses. That is the provision under which a credit mediator model might well be introduced.
Question proposed: “That section 210, as amended, stand part of the Bill.”
Senator Ivana Bacik: We are reassured the Minister intends to issue guidelines on credit flow. In that case there is no reason why “may” cannot be changed to “shall”. It would secure the Minister’s contention. As Senator Donohoe and others said, it would underline the seriousness of this section and the core purpose of this enormous risk-taking mechanism - that credit needs to be made available.
I am glad the Minister is open to the French credit mediator model. On Second Stage, he said an independent appeal mechanism is planned where credit is refused by a bank. It is precisely because the banks cannot be directed to lend to a particular individual that some form of independent mechanism is necessary. In
I ask the Minister to strengthen the wording by substituting “may” with “shall” in section 210(1) and also to strengthen the vague idea in paragraph (b) of that subsection which states the guidelines shall relate “to the review of decisions of participating institutions to refuse credit facilities”. We need to see something a little stronger to ensure there will be an independent mechanism to which people can go when they are wrongly refused credit.
Committee Stage
10th November 2009
Senator Ivana Bacik: I support Senator Alex White and this group of amendments. The Fine Gael amendments are similar to the Labour Party amendments in this grouping in that all of them seek to offer a measure of scrutiny and oversight, as Senators White and Twomey said. There is also an important aspect to the Labour Party’s amendment No. 1 in that, in addition, it provides for review of the Act. I will deal with that amendment first, as I note that review of NAMA is provided for in Part 14 of the Bill, but it is a very minimal review at present. Section 223 states:
(1) As soon as may be after
(2) The Comptroller and Auditor General shall present a copy of that report to the Minister as soon as may be and the Minister shall cause a copy of the report to be laid before each House of the Oireachtas.
That review will take place every three years after 2012, and section 224 has an additional provision for review by the Minister every five years. That seems to be an insufficient amount of review. One of the merits of amendment No. 1 is that it requires not only the appointment of an oversight committee within the Houses, but a review of the operation of NAMA every 30 days. Given the significance of NAMA, I would have thought that the review provided for in Part 14 is insufficient. The amendment proposes a higher level of review as well as scrutiny by an Oireachtas committee. Whether it is the Labour Party oversight committee or the Fine Gael Oireachtas committee on NAMA, the principle is the same. There must be scrutiny and there must be accountability through the Houses of the Oireachtas.
Studies carried out on the operation of asset management agencies elsewhere have shown the need for such agencies to be kept under close review and to operate in a transparent manner. This is not about the minutiae of running NAMA. Clearly that is not something in which an Oireachtas committee should intervene, but it is about ensuring that NAMA acts in such a way as to facilitate the public interest. Given that NAMA is the Government’s chosen mechanism, we want it to be effective and we want it to allow the banks to free up the flow of capital, to free up the flow of credit to individuals and small businesses.
Last night, I and others on the Labour Party benches argued for the temporary nationalisation model, and I am glad the Minister addressed that in some detail in his speech. I felt his preference for the NAMA model over nationalisation could be summed up by saying that it would look bad internationally if we went for full nationalisation. That seems to be the core reason for choosing this NAMA model over the temporary nationalisation model. We all understand the need to increase consumer confidence and the perception of strength in the banking system, yet this may not be a sufficient answer.
Given that we are moving to the NAMA model, it is essential that NAMA allows for the flow of credit. That is not a necessary consequence of NAMA, nor would it be necessarily nationalisation, but we must ensure that the mechanisms are in place. Whatever model we use, we must ensure that a consequence of that model is the flow of credit and that the banks are working again in the interests of small businesses and individuals throughout
I mentioned the French example last night, where economic minister Christine Lagarde has set up a credit mediator scheme. In this scheme, banks are not only encouraged in rhetoric to start lending again and free up the credit flow, but they are named and shamed if they do not lend to viable businesses. There are figures in the weekend newspapers which show that 10,000 small businesses have been assisted since this mechanism was put in place. I am grateful that the Minister answered my point. I understood him to say that he was planning some kind of mechanism that was similar to the French model. I am not sure what he is indicating right now…
{Interruptions}
…He is referring to credit control in
Amendment No. 64 is tabled by Fine Gael and it relates to section 210. That section allows the Minister to issue guidelines on lending practices and procedures to facilitate the availability of credit. It is something to which I referred on Second Stage because I am not sure it is strong enough to ensure that credit will flow again. Amendment No. 64 provides that guidelines would be approved by the Oireachtas committee on NAMA. I am glad to see the Minister has accepted that principle in his own amendment No. 63. That amendment states that “The Minister shall cause a copy of guidelines issued under subsection (1) to be laid before each House of the Oireachtas as soon as practicable.” That is welcome because it seems to accept in principle the need for scrutiny by the Oireachtas of the consequence of NAMA, which is whether it has facilitated the banks in lending again. Once that principle is accepted, it would be preferable to go further and provide for an Oireachtas committee, along the lines of the oversight committee proposed by Senator White in amendment No. 1, that would scrutinise the guidelines under section 210. We are all agreed on the importance of section 210 and what it will allow, which is for the Minister to review lending practices and procedures by banks.
The core purpose of this group of amendments is to ensure that the banks are lending again in the interests of the public good, rather than stockpiling cash reserves in their own interests and the interests of their shareholders. We are all agreed on the need to ensure that they no longer act in their own self interest.
I referred on the Order of Business to Ulster Bank’s current restructuring programme and the IBOA concern that the new contracts being offered to staff will help to develop a workplace culture based on the old model in which they are encouraged to go along with aggressive policy selling to increase their low pay through commissions and other rewards. The IBOA has rightly stated that we should see a return to the traditional culture of banking. The ethical framework for banks to which Deputy Burton referred in the Dail is something on which the public need to be reassured. Senator White has rightly pointed out that the public are no longer willing to accept the Minister saying “trust me”. We need to ensure that the banks are seen to act in the public interest, and these amendments are an attempt to ensure that the banks will be scrutinised to make sure that they are acting in the public interest, ethically and in accordance with what we might describe as a traditional, old fashioned culture of banking. Amendment No.1 seeks to ensure a regular review of the operation of NAMA to ensure that it is operating in the public interest.
Senator Ivana Bacik: I welcome the Minister’s response to my point about the French model of a credit mediator, saying he would examine it and review it under the relevant heading. The French Minister for the Economy, Industry and Employment, Christine Lagarde, described in January’s Newsweek the credit mediator as:
“. . . a sort of ombudsman, who receives complaints and investigates them. He can go to a bank and say, “Here’s a situation you should really re-examine.” He can finger-point publicly if necessary. And it’s working.
Last weekend’s The Guardian pointed out that in
I am grateful the Minister will review the French model as a way of ensuring the flow of credit. I hope he will re-examine these Labour Party amendments to ensure greater scrutiny and oversight of the way the banks operate after the establishment of NAMA to ensure credit flows in the public interest.
SECTION 79.
Question proposed: “That section 79 stand part of the Bill.”
Senator Ivana Bacik: This is a key provision as it sets out that the Minister may make regulations relating to the determination by NAMA of this fictitious concept of long-term economic value which Members already have spent some hours debating. I am conscious of this, having listened to the debate with great interest. It appears that while this concept simply is fictitious, as other Members have noted it is critical for the entire premise on which NAMA is based. This is the only provision that gives Members an indication of the basis on which long-term economic value of different assets will be determined.
I heard the Minister say something about a discount that I did not quite follow. I believe he stated that discounts were not an issue. However, it is noted on page 7 of the interim business plan of NAMA that the current market value of property loans to be acquired by NAMA is €47 billion and that the consideration to be paid to participating institutions will be €54 billion, which is the estimated long-term economic value of the eligible assets. This will result in an uplift of 15%, which the plan states is “equivalent to a discount of 30% on their loan book value”. In other words, the word “discount” is used in the interim business plan. Clearly, an estimated long-term economic value already has been arrived at in formulating the business plan and in developing the legislation. However, section 79 states that regulations may be made by the Minister by reference to a set of criteria. Can the Minister of State inform Members whether these are the criteria by which this mysterious figure of €54 billion in respect of the long-term economic value was arrived at? Are these the only indication of criteria by which the figure of €54 billion, which is €7 billion above the current market value, was arrived at?
NEW SECTION.
Senator Ivana Bacik: I move amendment No. 49:
In page 65, before section 80, but in Chapter 1, to insert the following new section:
“80.—A person who is a debtor in relation to an asset acquired by NAMA shall disclose to NAMA the full extent of the person’s assets and liabilities whether within or outside the State, whether personal, commercial or related to any associated body or company and whether any such assets are being acquired by NAMA or not.”.
This amendment is more clear-cut than some of the other amendments we have debated. It refers directly to the issue of transparency and provides that a debtor, defined in section 4 as a person indebted to one of the participating institutions, shall, in relation to an asset acquired by NAMA, disclose to NAMA the full extent of his or her assets and liabilities. We are seeking to insert a new section to impose a duty of disclosure on debtors. A small number of persons are debtors to some of the institutions involved, especially Anglo Irish Bank which has 37% of the total loan portfolio to be taken over by NAMA, amounting to €28.4 billion of the €77 billion overall. The public is taking on this liability and the risk involved.
On Second Stage the Minister said risk was the key concept and we all agree with that. Given the level of risk, the debtors should have a duty of disclosure and the Minister has already accepted this in principle. A minimal duty of disclosure is provided for in section 83(1) which states that a person who is a debtor shall co-operate and shall furnish to the participating institution such information. Subsection (3) provides that a court may make an order for disclosure where the compliance sought is reasonably
necessary. We have an amendment to section 83 but we feel the section is too limited and a broader duty of disclosure is required, not just to participating institutions but to NAMA itself so that the latter can get a fuller picture of the extent of a person’s assets and liabilities. One is reminded of the ACC Bank case against Liam Carroll and his Zoe Group and the extent of the information required to be disclosed before the High Court. NAMA is supposed to be about pursuing debtors aggressively and ensuring moneys owed are recouped in the public interest. A stronger duty of disclosure will facilitate NAMA in this task.
Senator Ivana Bacik: It is not disproportionate. We have been told that a small number of debtors are understood to be in a large amount of debt to particular institutions. On 2 November, a report in The Irish Times referred to the Quinn Group and stated that Sean Quinn’s family and its businesses are understood to comprise the largest single customer of Anglo Irish Bank. The report focused on a payout of €200 million from the Quinn Group holding company to Sean Quinn’s five children. A spokesman stated that the payment was to “facilitate the development of their independent wealth portfolios”, which was a nice way of putting it. Given the extent of capital washing around among some of the debtors and in respect of whom NAMA is being set up, a fuller duty of disclosure is important. I do not see how the amendment would go too far, particularly given the duty of disclosure, albeit of a more limited type, in section 83.
NEW SECTION.
Senator Ivana Bacik: I move amendment No. 58:
In page 113, before section 180, but in Part 9, to insert the following new section:
“180.—(1) For the purposes of this section, “business” and “lease” shall have the same meanings as they have in the Landlord and Tenant (Amendment ) Act 1980.
(2) This section applies to a lease of land to be used wholly or partly for the purposes of carrying on a business, being a lease which—
(a) is entered into by NAMA or a NAMA group entity as incidental to the achievement of its purposes and performance of its functions, or
(b) was entered into (whether before or after the passing of this Act) in respect of premises in respect of which NAMA or a NAMA group entity exercise functions, prior to NAMA or a NAMA group entity exercising such functions in relation to the premises concerned.
(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of the rent payable immediately prior to the date on which the rent falls to be reviewed.
(4) Subsection (3) shall apply:
(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and
(b) only in respect of that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.
This is a clear proposal that would insert a new section 180 into Part 9 to address the difficulty lessees or tenants are facing with upward only rent reviews. It has been well rehearsed in the media, with a great deal of concern expressed by lessees in the retail sector, particularly in Dublin city centre but generally in small businesses around the country, who are in difficulty because of upward only rent review clauses in their leases.
Given that we have heard a great deal about market value tonight, it seems unjust that when the market value of rents is going down, upward only rent reviews are still in-built in leases. This provision allows for the rent payable following a review to be fixed at an amount less than the amount of rent payable immediately prior to the date. It is a simple amendment. The Minister of State may say this is not the place to do it but given that this part of the Bill deals with powers related to land, with different powers provided for, we see that this would be an important power and it is clearly limited to those leases entered into by NAMA or NAMA group entities.
The amendment is in keeping with the overall purpose of the Bill, to ensure greater scope for the public interest in terms of facilitating the flow of credit to small businesses while ensuring they are not penalised by upward only rent reviews. It is vitally important to allow free negotiation to take place and to allow rent payable to be less than the amount payable before the review.
Senator Ivana Bacik: I do not understand why it is not appropriate. The amendment does not provide that leases entered into by NAMA or NAMA group entities may not be upward only, it simply states that these reviews may be fixed at less than the rent payable immediately prior to the date of the review. It gives discretion; it does not preclude the continuance of upward only rent reviews.
The Minister of State has accepted in principle that guidelines should be issued to NAMA under sections 13 and 14 but I ask between now and Report Stage for him to give something more to lessees who are facing difficulties and the prospect of a NAMA group entity being in the position of their lessor. In that instance it is appropriate to distinguish between NAMA and other entities.
Senator Ivana Bacik: As the entire purpose of this legislation is to create the new structure of NAMA, inevitably there will be discrimination between entities that are going under NAMA’s control and those that are not. Although I do not accept the Minister of State’s answer, I propose to reserve my position and renew the argument on Report Stage.
Amendment, by leave, withdrawn.
Sections 180 to 202, inclusive, agreed to.
Second Stage
9th November 2009
Senator Ivana Bacik: I am very grateful to Senator Alex White for sharing his time with me.
I welcome the opportunity to debate the NAMA legislation in the House, as many of us had sought that opportunity. As I said on the Order of Business, it is unfortunate the business has been ordered by the leader of Fianna Fail in the House in the way it has been. I cannot understand why we cannot have more time to consider NAMA, particularly on Committee Stage. Given that the legislation was published more than three months ago, on 13 July, it appears there is a certain macho posturing on the idea that the Seanad should have to sit through the night. A more efficient and orderly way to allocate the same length of time to the debate could have been found.
I would describe NAMA as the biggest gamble the taxpayer has ever been asked to take. Deputy Joan Burton, the Labour Party spokesperson on finance, described the €54 billion NAMA gamble in the Dail as a debt of €12,000 for every man, woman and child in the country. Therefore, as has been acknowledged by everyone in the House, the legislation is of major importance. The debt will bind our children and grandchildren. Those of us who are critical of the legislation are trying to be constructive and make our criticisms in the hope the plan will succeed. This is the gamble on which the Government is placing all its bets. I have described it earlier as the triumph of optimism over aggression. It is too optimistic in its attempt to rescue or bail out banks, and insufficiently aggressive in terms of pursuing those who owe such enormous sums to the banks. The Minister stated the asset management approach was best for ensuring a properly functioning banking sector. However, as Senator Alex White said, it was never the only game in town. The Government has presented it as the only game, but it is not. The Minister in his speech essentially acknowledged this, saying it was his preferred option, but clearly there were other approaches. The alternative of temporary nationalisation, which the Labour Party has been pressing and which Senator Ross spoke in favour of, clearly should not have been ruled out by the Minister and should have been favoured over the asset management approach. The Minister said his proposal received backing from the IMF, the European Central Bank and the OECD and dismissed, essentially, Fitch’s downgrading of the Irish credit rating.
The alternative read on this, as Senator Alex White said, is that the international financial markets and the organisations mentioned require stability and certainty in the Irish response to the crash. The worst thing is to be indecisive. They seek a decision, something that achieves certainty. Temporary nationalisation could equally have done that. The bank guarantee scheme last December was an example of decisive action by the Minister. We acknowledged that, but we said it was the wrong decision at that time. It was somewhat akin to Tony Blair and the war in
There is no point in dwelling on the past, however. In the short time left I want to ask the Minister some key questions, to which he might respond when he returns to the House. I am glad to see the proposals for the surcharge and a windfall tax which essentially flowed from the NAMA proposal. We hope the NAMA scheme will work, but we are very fearful it will be too big a risk for the taxpayer and we will all be paying for it for generations. I ask the Minister, specifically, whether he has considered introducing a Tobin tax. What about looking at ways to make the financial sector pay through a tax on international transactions? The Tobin tax idea has been around for a long time. Prime Minister Gordon Brown embraced it at the weekend in a somewhat surprise move. It is something that is gaining traction and I ask whether the Minister might contemplate introducing that.
Again, Deputy Joan Burton has spoken about the need for an ethical framework for banks. Lest it be said we are just being critical, I was interested to see at the weekend that there are alternative approaches. Christine Lagarde, the French Minister for Economic Affairs, Industry and Employment, instead of relying on exhortations to the French banks to free up credit and lend to small businesses, has taken what is described as a more directive based approach. She has appointed a credit mediator and insisted that banks that fail to extend credit lines to viable businesses are named and shamed. So far, some 10,000 firms have been helped and the French economy, it must be noted, has been receiving much more positive financial ratings in recent quarters. She has introduced regulations placing limits on banker bonuses. A much more directive based approach could have been taken here, therefore, rather than the provision to which Senator Alex White referred, namely, the power of the Minister to issue guidelines, only introduced in the Dail in section 210, which does not go far enough in ensuring the desired result of NAMA is achieved, namely, that banks free up credit for small businesses which are struggling so hard.
I have a few other key questions. The elephant in the room is the haircut or discount on the NAMA assets, €77 billion on which a discount of more than 30% has been given. We debated the NAMA business plan in this House and I raised the question of the haircut of 37% of the overall value and the enormous proportion of the €77 billion NAMA loan portfolio relating to Anglo Irish Bank, equivalent to a €28 billion exposure. The Minister and his advisers, of course, will be well aware of this, but it means that what has been described as a bailout for banks is in particular a bailout for Anglo Irish Bank, which will account for more than one third of the assets taken by NAMA. Others have asked the reason for this discount and how this figure was reached. The idea of long-term economic value, which has been extensively teased out, still remains fictional in essence. We still have not seen the real basis for this fictional notion that is so crucial to the working of NAMA.
One thing that jumped out at me from the NAMA business plan, about which I asked in a different stage of the debate, was why the administration of all but the top borrowers was to stay with the institutions rather than with the agency. Again, I cite my comment that NAMA appears to be a triumph of optimism over aggression. The Minister has told us before that NAMA will pursue aggressively the borrowers, those who are exposed, and yet we saw with ICC how some banks are pursuing aggressively, and the Irish banks were not prepared to do this in that particular case. We see in the NAMA business plan that the administration of the top 100 to 150 borrowers and their loans is to stay with the institutions rather than being transferred to the agency. Will the Minister say why NAMA is not going to take on the task of administration, pursuing all the borrowers rather than just the top 100 to 150?
A further question is how the assets will transfer ownership from individual lenders to NAMA. Clearly NAMA is taking on the management of some of the top assets. It is taking, in some cases, enormous powers over half-completed construction sites, including the power to complete construction in some cases. There will have to be transfers of title. Again, there is a great deal of detail, some of which is in the Bill, in terms of vesting, but some of which is not.
The points raised by Senator Ross in terms of the immense benefit that nationalisation could have offered, instead of the NAMA approach, is an argument that must be answered by the Minister. Again, I ask him why we have simply nationalised the worst of the banks and not the others. Why are we not willing to accept control by the State of the other banks, some of which clearly have much healthier loan portfolios than Anglo Irish Bank? There would be a much lower rate of default on those loans. Why is the State not doing so it could control the operation of those banks in the public interest? We are merely talking about temporary nationalisation, not a permanent state of affairs. We are talking about the need to ensure certainty and the effective and efficient operation of the banking system. The need for the State to take over and control the way the banks act is to ensure they act no longer in their own self-interest, but rather in the public interest so that, in the words of Senator Ross, the State is more powerful than the banks. With NAMA, however, we see the banks calling the shots, apparently keeping the upper hand over the State, with the latter bearing the entirety of the risk, which the Minister in his speech said the private sector was not keen to take. Resolution of the banks’ difficulties, he said, involved risk. It is a risk the private sector is not willing to take, but it is one the Irish taxpayer is being asked to bear to the tune of €12,000 for every man, woman and child, and for generations to come. We owe to the tens of thousands who marched last week and to the many thousands of people for whom this will remain a burden into the future to ensure the option we choose is the best one for all of us.
