No certainty what NAMA will bring
Yesterday, the Bill that will introduce NAMA began its journey through the Upper House. The Government have insisted that the legislation must be back in the Dail by Thursday, giving the Seanad three days to deal with the Bill. Below is my Second Stage speech. Keep with the site or with the Facebook page for further updates.
It is true there are no certainties in this matter. There can be no certainty on anybody’s part. In particular, the Minister cannot be certain that what he hopes will occur will actually transpire. There can be no certainty associated with the assertion that matters will come right. None of us can be certain with regard to what is going to occur. That is a measure of how momentous and serious is this debate.
We have reached the 11th hour and the Government has signalled that the legislation will return to the Lower House on Thursday, which constitutes a curtailment of the debate in this Chamber. In such circumstances, there is a sense of inevitability regarding Members’ approach to this debate. However, this should not mean we should set aside our serious and genuine objections to what the Minister is proposing.
Like other Senators, I recognise the Minister’s good faith about the way he has approached this matter. I sometimes feel uncomfortable making that point in respect of Government Ministers. I assume good faith on the part of members of the Government, whereas other Senators often use half of the time available to them to inform a Minister that he or she is a great man or woman. I operate on the basis that the Minister for Finance is doing a professional job for the country and believe this is also the basis on which he operates. He does not, therefore, require to be congratulated. In so far as it is important to say so – particularly on a personal level – the Minister’s input has been considerable, if wrong-headed, in recent months. However, that input has been solely motivated by the need to act in the very best interests of the country.
Unfortunately, in the context of what has occurred in the past 15 years, the Minister is dealing with a legacy created by the Government and his party, as a component thereof. It is fine for Senator MacSharry to express his frustration and annoyance that this point continues to be raised. I will not treat him to a few minutes’ worth of material on the Galway tent. Owing to time constraints, I will not refer at all to the history of Fianna Fáil, its associations, etc. but if I had time, I would gladly do so. I am referring to Fianna Fáil as the party of Government; I am not dealing now with its historic links with the building industry or anything else. Fianna Fáil was in office when our current difficulties emerged. It was in power when my party brought forward proposals in the late 1990s to examine the matter of house prices.
At that time my party argued, in trenchant terms, that there was no requirement to amend the Constitution in order to implement the principal recommendations made in the Kenny report which was published over 35 years ago. These issues were canvassed and debated during the lifetime of the last two or three Administrations. It is not satisfactory for those opposite to simply state they are not to blame and that everything happened around them and that they had nothing to do with it. That is simply not the case.
Regardless of who is in power, the Government retains principal responsibility for what happens in respect of any matter. It has such responsibility with regard to oversight, regulation and monitoring, particularly in the context of the financial institutions. When I studied economics many years ago, I came to understand that the banking system worked because we had a strong Central Bank. I also came to understand the bank had functions in respect of regulation and monitoring and was in place to ensure the financial institutions and commercial banks did not engage in excesses. If one drove through Rathmines five years ago, one might have seen a billboard outside a particular institution inviting people to take out 100% plus mortgages and that if they did so, they would be given a new car. Members of the Government knew there were these excesses. It is not enough to state we did not think this behaviour would have the impact it appears to have had.
Senator Dan Boyle has stated the notion of long-term economic value is bedevilling the debate. Long-term economic value is the essence of the debate on NAMA. I love the Minister’s references to ideology and his condescending statements to the effect that the Labour Party holds a certain view on nationalisation because it is bedevilled by ideology. The real ideology relating to this matter is that of certain people, including the Minister, who will do anything to avoid nationalisation. These are the very individuals who will proceed to nationalise the banks in six months’ time. That is the problem for the Minister.
I do not want to be excessive by using the word “countless” but I could certainly refer to quite a few comments made by the Minister, particularly during the course of the crisis that occurred 12 months ago in respect of how he perceived the position, what he thought would occur in the future, what was the strength and robustness of the banks, etc. It was also stated the Government would never nationalise any institution because such a policy would be completely wrong-headed. However, Anglo Irish Bank was then nationalised. Is someone from the Minister’s Department already working on the script he will deliver in the House on the night on which he comes here to nationalise one of the other banks?
I return to the issue of certainties. I accept that there are no certainties associated with the argument relating to nationalisation. In view of Senator Ross’s support for nationalisation, the ideology relating to the latter could hardly be left-wing in nature. I do not claim, either on behalf of my party or anyone else, that there are certainties associated with the proposal that the banks ought to be nationalised on a temporary basis. However, I am aware that this has happened elsewhere.
Senator Boyle referred to confidence. The only confidence in which I am interested is that which has some basis to it. I am not interested in confidence based on hope or wishing that matters will come right. As legislators, we are supposed to seek some evidence of this confidence. The approach of nationalisation has been employed in other countries and proven to be successful, albeit at a cost. The one thing of which we are all aware is that what we are doing is going to cost us an enormous amount of money. Taxpayers, my children and everyone else’s and perhaps our grandchildren will all be saddled with the bill. The question is: how can we minimise the cost? I genuinely accept that the Minister is interested in minimising the cost to the taxpayer. I do not, however, accept the notion that NAMA should deliberately and knowingly overpay for assets.
On long-term economic value, Senator Boyle does not appear to understand the prospect of a property either rising or falling in price is already included in what we understand to be market value. If I purchase a house, I am aware that there is a prospect, possibility or even hope it will increase in value or that there is also a risk that it will decrease in value. That knowledge is incorporated in one of the laws of capitalism – the Senator probably does not need a lecture from me on the latter – namely, that of supply and demand. In the context of the laws of capitalism, long-term economic value is a fiction. It is a direct intervention in the dynamic relating to prices being determined by the law of supply and demand.
I have read most of the material in respect of this debate and would like someone to draw my attention to how and on what basis the uplift amount of 15% – as opposed to any other figure – was arrived at. On a number of occasions the Minister has indicated that it was part of the best advice he had received. He stated Professor Honohan and his predecessor, Mr. Hurley, thought it to be reasonable. He consulted both men and others in the matter. However, I would like an evidence-based argument to be made as to why this figure, as opposed to any other, is deemed appropriate. Was it simply plucked from the ether? I do not intend to criticise the Minister but he was not in a position to supply a figure until the Second Stage debate in the Dáil. What mechanism was used to arrive at that figure and how may we rest assured that it is accurate?
Many terms have been used during the course of the debate on this matter. There was a stage when the Minister used to become extremely annoyed with regard to the use of the term “bailout”. He has, however, become somewhat more relaxed in that regard.
We will have the argument on another day as to whether NAMA constitutes a bailout for developers. A good argument can be made to the effect that it does constitute such a bailout, even if only in the context of the delay of which developers will be able to avail.
Whereas the Minister certainly would not be prepared to accept that this measure constituted a bailout for developers – a debate we can have another day – he is less concerned, annoyed or irritated with the suggestion made by Senator Ross that it clearly constituted a bailout for the banks. Senator Boyle referred to it as a rescue, a word the Minister preferred. I will not quibble as to which it is. However, we should be clear for ourselves and the public that what we are doing constitutes a bailout for and a rescue of the banks which are in such difficulty.
I want to touch on some issues that have already been raised and ask the Minister to comment on them. He introduced an amendment in the Dáil to what is now section 210 of the Bill which deals with guidelines on lending practices. I presume this was a response to legitimate concerns that, although the NAMA project is stated to be one that will bring about a change in the lending practices of the financial institutions and lead to a resumption of lending by the financial institutions, there is no guarantee this will occur. Very often the language used in ministerial speeches, as on this Bill, hedges on that question. For example, the word that appears most often in speeches – I think it appears in the Bill also – is “facilitate”. It is suggested the measures will “facilitate” the financial institutions in returning to the job we all thought they were in place to do. I noted in an earlier speech in which the Minister was justifying the proposals made in the NAMA legislation that he said they would “thereby” bring about a resumption of lending practices. There is no guarantee this will occur and the Minister has, belatedly, responded by introducing the provision in the Bill, whereby he can introduce guidelines. However, we need more clarity on the issue and the public must be given far more by way of reassurance that a resumption will occur. There is a need to hear more than that the Bill “facilitates” a resumption of lending, “allows” the banks to resume lending or will bring about a scenario “whereby” the banks will be able to do so. That language does not deal with the question of whether it will happen. If greater certainty does not emerge from the Government on the matter, why should we accept its faith and hope this will occur, particularly given we are spending so much of this and future generation’s taxes on this expensive and uncertain project?
I have never accepted that NAMA is the only game in town or represents the only legitimate approach to the problem. I accept that there is no basis for doing nothing and nobody has argued that we should wash our hands of the problem and hope everything will come right. Everybody accepts some action must be taken. However, I do not believe that throughout the long months of the summer and autumn the Minister investigated all avenues – certainly not to my satisfaction – in order that he could assure us this proposal was the only way to proceed. It does not seem to have the international or academic support often invoked by the Minister on its behalf. Some professional economists have come out in favour of it, but they seem to be largely individuals – good as they may be – who work for the existing financial institutions. While I do not suggest they have their comments written for them, we must take what they say in the context in which they find themselves.
We have seen the newspaper interventions by the 46 economists. The IMF is often invoked in support of NAMA, but what the IMF stated was that these asset management strategies were acceptable and legitimate, but that it was preferable they should happen alongside nationalisation. The OECD has also stated nationalisation should not be ruled out. Many of the bodies which have been invoked in support of this proposition are far less enthusiastic than has been suggested. One main belief among all of them is that it is good the Government is doing something. A measure of their relief is that, at least, it is seen to be doing something in the international context. That is what the European Union and international financial markets want to see.