National Asset Management Agency Bill 2009 - Committee Stage - 10th November 2009

National Asset Management Agency Bill 2009 - Committee Stage - 10th November 2009

Senator David Norris: I find myself largely in agreement with Senator O’Toole on this matter. These amendments come between the Short Title and the purpose of the Bill. They seek to obtain as much disclosure, accountability, openness and oversight as possible. I can completely concur with that. This is the single most important legislation this House has seen in my period as a Member because it concerns the fate and welfare of the entire country’s economic circumstances. This may not be the correct place to ask these questions but, in the spirit of openness and transparency, perhaps the Minister can guide me as to where I may appropriately ask them.
In the Dáil debate, the question of the special purpose vehicles was raised. The Bill does not seem to make any great provision for them on a statutory basis. Will the Minister be kind enough to explain to me the point in this debate at which it will be appropriate to consider them? They are very interesting. I am not sure whether it would be good to give them a statutory basis if they do not have one. I am interested in them because, although I understand completely the reasons behind them, they are accounting reasons. This is an area in respect of which the public needs to be reassured. The activities of the aforementioned Mr. Fitzpatrick are almost analogous in terms of the burying of material that was inconvenient to be disclosed. Although that is not what the Government intends and the measures are being introduced openly, we need to be reassured as much as possible. Perhaps the Minister will tell me when it will be appropriate to open a short discussion on this matter.
I agree completely with the purpose of the amendments. I was very impressed with the Minister’s performance last night. He was clear and decisive and was able to take up awkward questions and deal with them convincingly on the hoof. This is what we need in dealing with these very difficult financial circumstances. I am concerned that a multiplication of committees of various kinds could lead to a diffusion of energy and responsibilities if we are not particularly careful. This could be very difficult.
Taking into account the kinds of debates that have occurred, both on the Order of Business and during discussions on financial matters, I note that, even in this House, there is sometimes lamentable polarisation and a lack of unity with regard to the national purpose. It is not realistic that Fine Gael expects, on foot of its amendment, that the Government will be likely to vote in favour of handing the chairmanship of the committee supervising NAMA over to a Member of the Opposition automatically. This is not politically realistic at all, although I cannot think of a better candidate than Deputy Richard Bruton, who has shown the same qualities of leadership and incisiveness as the Minister. It would not be acceptable to any Government to hand over the chairmanship of this extraordinarily important committee, if established.

Senator Alex White: What if it were an Independent?

Senator David Norris: If it were the best person for the job, it would not matter a twopenny damn.

Senator Joe O’Toole: There was a news report during the summer that the Minister had proposed to the Cabinet that it be Deputy Richard Bruton or Deputy Pat Rabbitte.

Senator David Norris: It is not realistic that the Government’s hands could be tied.
The Labour Party and Fine Gael amendments, if enacted, would be very significant, bearing in mind that they are significantly different in some ways. The Labour Party gratifyingly refers to the Houses of the Oireachtas while Fine Gael does not.

Senator Paschal Donohoe: I wonder why.

Senator David Norris: I assume it is all part of its plan to get rid of this House, about which plan there is varying enthusiasm among the current membership of the party in this House.
According to my learned colleague, Senator Joe O’Toole, sections 58, 59 and 60 already contain provision for oversight and the issuing of regular reports. It would require a very substantial argument to convince an independent-minded person that this series of amendments is one the Government is likely to or would be well advised to accept. I am not persuaded to this effect.

Senator Marc MacSharry: I agree with Senator O’Toole totally in that we have enough Oireachtas committees. That is not to say we could not re-jig the make-up of some to focus on the implementation of the sections of the Bill that are most appropriate. It is vital that there be as much accountability as possible. The Minister could consider the idea of the French model of the credit mediator. It would be good, not least to ensure the provision of credit. As stated in the Irish Banking Federation announcement of this morning, the committee could ensure appropriate actions will be taken to protect homeowners. This is covered in some of the amendments tabled by Fine Gael.
I do not know whether the Committee on Finance and the Public Service, the Committee of Public Accounts or the Committee on Economic Regulatory Affairs should be involved. We do not need all three to be involved but the terms of reference of one could be adjusted such that it would focus specifically on NAMA. We could consider the membership of the committee and none of us would worry about who the Chairman would be once it was the most appropriate person. As Senator O’Toole pointed out, it was suggested at the meeting of the Committee on Finance and the Public Service on 30 August that there be an oversight commission. It was suggested that a person of the calibre of former Labour Party leader Deputy Pat Rabbitte could be considered. Individuals such as he could be considered.
Rather than trying to set up another committee, let us consolidate those we have to form one in addition to the Committee of Public Accounts and let it comprise Members of both Houses, notwithstanding that some Opposition Senators want to exclude themselves at this point. Perhaps it would be appropriate that other people, such as members of the Irish Banking Federation or public interest committees, would have seats at that committee. Perhaps the Minister will take this suggestion on board.

Senator David Norris: I am reminded of a couple of supplementary questions I wished to ask having reviewed my notes.
I accept what Senator O’Toole said — I note the Minister was nodding in agreement — in regard to the banks’ requirement to meet their tier 1 obligations and so on. However, everything else said reinforces the argument for nationalisation of the banks as they would then be required to act in the interest of their shareholders or owners, who would be the people of Ireland through the Government. I do not believe the banks’ requirement to meet their obligations undermines entirely the idea of nationalisation, which I am rather inclined to favour.
Reference was made to the muzzling of members of the committee or senior civil servants, an issue on which the Minister fought a stealth battle in the Dáil, which I watched with great interest.

Deputy Brian Lenihan: I am sure an amendment on the issue has been tabled for discussion later——

Senator David Norris: I am sure there is.

Deputy Brian Lenihan: ——on which the Senator has a good chance.

Senator David Norris: There is a good chance on it; that is excellent. I note the Minister fought a stealth——

Deputy Brian Lenihan: No, the Senator will have a good chance on it.

Senator David Norris: We have a good chance.

An Leas-Chathaoirleach: If an amendment on the matter has been tabled we should not be discussing it now.

Senator David Norris: I am not directly discussing that amendment but am using it as an analogy for what I wish to say, namely, that in the composition of these committees, whatever about muzzling of civil servants — I point out that the Minister has indicated there are precedents in other enactments to justify this — or utterances made in public, will the Minister agree that given this is such a serious matter it is important we have not destructive but intelligently critical people who will have the breadth of expertise and intelligence to give a critique from inside? This does not mean exclusively people from either House of the Oireachtas. I would hope to be a member of this committee be it an existing committee following expansion or a new committee. It is important this type of critical intelligence is sought. I speak in this regard of people like Mr. Peter Matthews who was extraordinarily impressive recently in analysing the situation. It is hoped that, if we are to obtain the benefit of the best and most varied input, we will include people who will alert us to possible dangers which may not have been by those closest to the preparation of this Bill.
I refer to a comment made by Senator Donohoe about his first employer who said that the guiding principle of their relationship was that there should be no surprises. I regret to say that life is full of surprises. It is not possible to edit all of them out but it is good to make prudent provision to ensure one is alerted to as many of these potential dangers as possible.

Deputy Brian Lenihan: It has been a useful debate in that we have covered an amount of ground. I do not believe Senators have trespassed too far and I will try to deal with all of the points raised in the context of the amendments before us.
Listening to Senator Norris, I was reminded of the late Professor F.S.L. Lyons’s assessment of the position of the old Irish Parliamentary Party in the House of Commons in London whereby they were in the assembly but not of it. It struck me that the Fine Gael Party now finds itself in a similar position in Seanad Éireann in that it is in the House but not of it.

Senator David Norris: I am glad I gave that opening to the Minister.

Senator Paschal Donohoe: While it exists, we are of it.

Deputy Brian Lenihan

Deputy Brian Lenihan: Senator Norris raised the issue of the special purpose vehicle and, correctly, sought reassurance on it. He understood it was an accountancy device and wanted to know if the taxpayer was protected. I arranged for the Attorney General to examine these sections during the Dáil debate and brought forward a number of amendments which ensure the transparency, disclosure and corporate governance requirements, as well as the audit by the Comptroller and Auditor General, will apply to all the special purpose vehicles. The expression “NAMA group entity” is used throughout the Bill. A NAMA group entity includes a special purpose vehicle. That is how this concern has been accommodated.

Senator David Norris: On a point of order, we have received an amended grouping list that includes amendments Nos. 24, 35a, 35b, 35c and 42a , but I do not have those additional amendments. Have they been circulated?

An Leas-Chathaoirleach: They will be circulated to the Senator.

Senator Liam Twomey: I move amendment No. 3:

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

“2.—Where NAMA proposes to establish a Special Purpose Vehicle to purchase, manage or dispose of assets , it shall do so only in accordance with regulations published by the Minister and approved by the Oireachtas which shall include, but are not limited to:

(a) the suitability of investors,

(b) the suitability and behaviours of members of the Board,

(c) the finance, planning accountability and reporting,

(d) the manner in which the Special Purpose Vehicle shall discharge its functions under this Act,

(e) the method of determine the appropriateness of paying a dividend or bonus to investors, and

(f) its consistency with the statutory objectives of NAMA under this Act.”.
There has been much debate in this House and in the lower House on the role of the SPV and how it will function. However, there is not much information on it in the Bill. We would like this section to be inserted into the Bill to ensure there is as much about how the SPV is set up and what it can do. Last night, I spoke about the idea of making the people the shareholders of the SPV. The Minister acknowledged that it would have been a good idea, but he has not advanced it any further than that. During the debate on this amendment, I hope the Minister has a little bit more to add.

Senator David Norris: This amendment refers to the special purpose vehicles and it seeks to control the type of person who is permitted to invest and the suitability and behaviour of members of the board. It is admirable and is to be welcomed. It is highly unusual and I cannot think of many other investment opportunities in which the rights of citizens to invest would be limited. Perhaps the Minister of State can give some examples. It certainly would not occur on the Stock Exchange. Any investor can put money into any company that is floated. However, I would like to think that this amendment means that the people who have been involved in the discredited activities that led to this financial crisis would not be in a position to invest. The Government appears to think there may be at some stage a profit out of this. I would hate to think that the people who brought about this catastrophe would be placed in a position where they could profit from investing in the SPV.
I would like to hear from the Fine Gael Members who tabled this amendment if it is their intention to limit such people. I presume that is what the amendment intends to do. If it is not covered satisfactorily, perhaps the Minister of State can have a look at this. If that is the intention of the amendment, I would happily support it. However, it is an unusual mechanism, unless I am misinterpreting it. I wonder if there are legal or even constitutional implications. Even criminals are not disbarred from investing in anything. The Constitution has provisions on the protection of property, which presumably involves shares, as these can be deemed to be property under the law. I would like to get some clarification both from the proposers of the amendment and from the ministerial response.

Senator Frances Fitzgerald: Can the Minister of State inform the House of any legal advice the Government has received on the setting up and the construct of the SPV? Has the Attorney General given any advice on it?

Senator Alex White: I support this amendment. I understand what Senator Norris is saying in respect of its detail. However, before we go into the detail of the amendment, there is the question of the principle. There is an unanswerable argument that the setting up of the special purpose vehicle should be done by way of statute. We have had the extraordinary experience last week whereby this body just emerged late in a debate we had been having for months on businesses plans, draft legislation, published Bills and so on. This special purpose vehicle hoved into town a couple of weeks ago, but nobody explained how it was such an afterthought that came in so late in the process.
The argument is made that the SPV is a device. The Minister is sometimes almost inclined to make light of it, in the sense that we should not be too worried about it because it is only a device to keep these liabilities off the balance sheet. I accept that, but the idea that the international financial markets would not know what was happening in Ireland because this was not on the balance sheet in accordance with EUROSTAT rules is slightly fanciful. Anybody who is inquiring into the state of the Government’s finances is perfectly capable of finding out the real position. I find the argument less than convincing, but I have to accept it. If this device is put in place, the undoubted obligations on the taxpayer and the State for many years to come will not be on the balance sheet but they will still exist.
Some suggestions have been made by some proponents of the Bill that these are not real liabilities at all. This is the sort of argument which claims that all this is euro funny money that never has to be paid back. It certainly does have to be paid back. While I know the Minister of State has not made that argument, others have done so. Others not too far away from him have suggested it, and of course it is not true.
Senator Norris wants clarification on the specifics of the amendment, and the Minister of State might help him, but I think the Senator and everybody else should support the basic principle that this amendment on the SPV should be inserted in the Bill.

Senator David Norris: Absolutely.

Senator Paschal Donohoe: I concur with many of the points made and I would like to add a few more to it. An accusation that is frequently levelled at the Government during the banking crisis is that it has been making this up as it goes along. The draft business plan was published and discussed in this House last week, yet there was no mention whatsoever of this special purpose vehicle in the draft plan. This gives credence to that charge of making it up as it goes along because it is obvious that when the Government was making the decision to go with NAMA, a core objective would have been to ensure that the liabilities of NAMA do not end up on the Government balance sheet from a EUROSTAT point of view. If the liabilities of NAMA were included in the Government’s formal balance sheet, as seen by the European Commission, then the adjustment programme — a term I hate because we speak gobbledegook when we use terms like that and “bridging arrangements” and so on——-

Deputy Peter Power: “Fiscal consolidation” is the latest term.

Senator Paschal Donohoe: That is the worst term of all. To tell the Irish people that we are in the middle of a consolidation period——

Senator Alex White: How was it for you?

Senator Paschal Donohoe: Exactly. It clearly runs against the spirit of everything we know is going on. I digress. If this was part of the formal liabilities of the State as viewed by the European Commission, then the cuts and tax increases would have to increase by much more. Obviously we would have to make bigger changes to deliver the 3% Government borrowing as a percentage of national income by 2013, or 2014 as it is now likely to be. With that in mind, the Government would have been aware months ago that it was going to use such a vehicle. If it was not so aware, that is even scarier. The Government has ample experience of this method of dealing with liabilities to the State and up to recently it is the way we accounted for public private partnerships — not having them on balance sheets. The Government would have been aware of the need to ensure the NAMA liabilities do not end up on its balance sheet. In addition, the Government would have been aware that this is the obvious way of doing it.
As Senator Alex White indicated, however, the mists parted a week ago and this matter appeared from nowhere. This is despite the fact that, almost certainly, this was going to be the route established by the Government when it was coming up with the NAMA vehicle, selling it to the public and publishing the draft business plan. I always give people the benefit of the doubt, even when they are in government, but when I saw this appear I felt that maybe the Government really was making it up as it went along. Why was this not announced as part of the entire plan? Why did it appear in this manner? As my colleague, Senator Fitzgerald says, why did the Green Party — Fianna Fail’s partners in government — not appear to know anything about it in the discussions on the NAMA legislation?
This is a crucial point at a time when the public is seeking confidence in our public institutions. However, the appearance out of the blue of multi-purpose and special purpose vehicles, when they must have been part of Government planning over the last six months, does not add to that confidence. This amendment is required because of a scenario that could unfold in a number of years’ time. It would be fraught with risk or perceived risk in the minds of those we are serving. Senator Norris already mentioned the real possibility that we could end up in a situation whereby the majority shareholders in this SPV could be the banks, their representatives, or members of the financial services industry, which NAMA — the institution on which the SPV is based — is designed to save. This could happen in a few years time if we find ourselves in a position where a wing or subsidiary of one of the banks in question buys a share in the SPV and, if NAMA makes a profit, gets a return from it. That is why we must discuss this crucial matter.
Two vehicles contributed massively to the global financial Armageddon at the end of last year. The first was what happened with the growth of derivatives and the way they were spread across all banks participating in the sale. The second was the large number of assets which banks moved off their balance sheets in order to avoid the capital requirements we mentioned earlier. The people who created and made most use of these vehicles are those who sowed the seeds of their own destruction, namely, the banks. This is the very vehicle the State is proposing to use, although I can understand why it is doing so. I support the use of an SPV because the alternative is far worse, but they have been shown to be fraught with danger. In addition, they are not understood. They have also shown that what appeared straightforward on day one may, 99 days later, have consequences that nobody understands, least of all the banks themselves. It is for that reason that the amendment should be supported, or the Government should table an alternative amendment of its own because it is crucial to the entire NAMA saga.

Senator David Norris: I confirm what Senator Alex White assumed, which is that I will support this significant amendment. It should be cleaned up a bit first, however. First, in line two, the preposition “of” has been corrupted by the intrusion of the numeral “5”. Second, in subsection 2(e) “the method of determine” is incorrect. It should read “the method of determining”.
When the Minister attended the House this morning, I sought some of the legal background because I was concerned about it. I strongly support Senator Fitzgerald in seeking this from the Minister of State, Deputy Peter Power. One of the reasons is that we have a distorted image of the kind of practices that were engaged in by a certain gentleman in Anglo Irish Bank, where substantial sums of money were apparently — in my opinion, at least, fraudulently — kept off the books for a period so that they would not appear. It was a kind of accounting practice in order to deceive. I accept what the Minister for Finance said, that there is a degree of openness, but the public would be concerned that there appears to be a kind of sleight of hand. I assume that this is an accounting mechanism which allows us to pass the bar of certain European tests, albeit merely technically. I do not think anybody is fooled about the nature or extent of the country’s indebtedness.
I hope I am not misinterpreting my friends on this side of the House, but there seems to be something lacking in this amendment. I would have anticipated it being linked to a further amendment allowing certain persons to be disbarred. For example, if the gentleman whose name I have concealed, but who will be known to everybody in Anglo Irish Bank, were to apply to invest funds in this bank — which he suddenly discovered he had mislaid under a bed, like the former Taoiseach — it might be taken amiss by the Irish public who are paying for all these high-jinks, if he were allowed to do so. However, the only question raised here is as to the suitability, which I do not think goes far enough. This allows us to say that they are not suitable, but I do not see a mechanism here for saying “Not only are they not suitable, we are bloody well not going to let them profit from it”. Is there a mechanism for excluding them? I think there should be, but that needs a further legal determination as to whether it is constitutionally possible to disbar any citizen. I am not a qualified lawyer, but it has never stopped me before. I am known as the lawyers’ friend because I am extremely litigious. As far as I know, not even a convicted criminal is disbarred from investing.
There are a number of points to be teased out, but this will be my last intervention unless I am seriously provoked. The same three or four Members will speak, as on every piece of legislation, and we will be here until all hours of the night. We should bang it to a vote as often and as quickly as we can, and get on with the business of the House.

Senator Fiona O’Malley: In his response the Minister of State, Deputy Peter Power, indicated that it is not envisaged that the banks will invest in the SPV, but how can they be excluded? In response to Senator Norris the Minister of State said it is unconstitutional to exclude anybody from doing anything. I am wary of the phrase “it is not envisaged”. Part of the purpose of legislation is to try to deal with all eventualities, in so far as that is possible. Can we go so far as to exclude banks from investing in the SPV? It might not make sense in that we are trying to shore up the banks at this stage but I refer to a time when the situation will improve. Is it possible to exclude the banks or will the Minister of State give me the same response that he made to Senator Norris’s point about individuals being excluded as investors in SPVs?

Senator Paddy Burke: I indicated on Second Stage that I do not understand the SPV. To be honest, I still do not understand it. Will the SPV have any autonomy when NAMA is set up? We have been speaking for the past hour and I still do not understand what it is about or how it operates. If I was asked to go on a radio or television programme to explain how the SPV will operate and what powers it has, I would make a right fool of myself.

Senator Marc MacSharry: Senator Burke would not.

Senator Paddy Burke: Is it the case that the board of NAMA will buy and sell the properties, but it is going to set up an SPV to do that on its behalf and that it will not have any autonomy? If that is the case, surely the same members should be on both boards? I cannot see why there should be different boards. I accept the Minister’s intention is to get the debt off the balance sheet but it seems a complicated way to do it. It is difficult to understand the process, which appears to have come out of the blue. I do not believe the SPV has any autonomy. However, from what the Minister of State said, this company, which will have 51% of a shareholding and €100 million of share capital that will probably never be used could make a considerable profit but yet will not have any autonomy. The SPV will be at the discretion of the board of NAMA. It will have a separate board but at the same time will be governed by the board of NAMA. It is all gobbledegook. I would prefer if the Minister had a simpler explanation. The Minister said the SPV buys the property and sells it to NAMA. I do not understand who holds these distressed assets after that. Is it NAMA or the SPV?

Deputy Peter Power: The SPV. Senator Twomey’s question about the tax treatment is important. Ultimately any profits accruing to the SPV or NAMA accrue to the Exchequer.

Senator Liam Twomey: No, the SPV is a private entity.

Deputy Peter Power: Yes, but any dividend that the SPV would distribute to its parent, that is, NAMA, is ultimately a matter for the Exchequer. Any private equity involvement in the SPV would be subject to the tax laws in the normal way. Anybody who derives a benefit, assuming it makes a profit which I am sure it intends to do, will be entitled to receive a dividend in the normal way from this country. The equity investors will be entitled to receive an annual dividend linked to the performance and profitability, taking account of all direct and indirect costs of the master SPV, capped at ten year Irish Government bond yields at the time the dividend is declared. On winding up of the master SPV equity investors will only be repaid their capital if the master SPV has the resources. They will receive a further equity bonus of 10% of the capital, up to a maximum of €5 million, if the master SPV makes a profit. This is an equity return for tying up money for up to ten years in——

Senator Liam Twomey: The Minister is not dealing with the issue I raised. I am not referring to the equity investors of the SPV. It is a private company. It is as if the Minister contracted me to do work for the Government and I am a private company under the law of this country and in the eyes of the European Union. I pay no income tax or corporation tax. There is capital gains tax. It is an unusual scenario in which I would be working for the Government as a private company and paying no taxes. Am I paying taxes on what I do? When I send the money back to NAMA, it does not pay taxes. Is it not an unusual scenario?

Deputy Peter Power: It is an unusual scenario. I will address the issue raised by Senator Burke and then deal with the taxation treatment of it. Yes, it is unusual but we are in very new territory. It is a very different situation from what we ever envisaged. The concept behind dealing with these matters through an entity separate from NAMA is essentially about the balance sheet treatment of the assets dealt with in the SPV. It is the SPV and any subsidiaries of it that is the actual mechanism for entering into arrangements and selling the assets. Profits that accrue ultimately go to NAMA. With regard to the profits or any profitable income of the SPV, the way in which it, as a company, will distribute its income back to its shareholders is in a dividend either to the parent company, which is NAMA, or to individual investors, be they corporate entities or private individuals. However, should those people derive a benefit from it, it must be taxed in the normal way.

Senator Paschal Donohoe: The Minister said earlier it is unlikely a bank or a financial service could end up holding a share in the SPV. I challenge that. It is entirely possible that a bank could end up with a share in one of these SPVs. The purpose of this amendment is to put a mechanism in place to examine the ownership of the SPV. There is no reason that an Irish bank would not be in a position to do that. The Minister’s earlier contribution appeared to indicate it would not happen. I contend not only that it could happen but in a situation where our banks returned to financial health it probably would.
It appears that we have got a little confused in the course of this discussion. One of the things I have learned as the discussion has progressed is that the SPVs are a method for disposing of assets but the SPV in this case is also a method for owning NAMA itself, which is my understanding. Is that not correct?

Deputy Peter Power: No, it is not correct.

Senator Paschal Donohoe: Perhaps the Minister will clarify that. I see Members shaking their heads but if there is no provision here regarding the ownership——

Deputy Peter Power: It does not own NAMA; it is a subsidiary of NAMA.

Senator Paschal Donohoe: Then why is it getting paid a dividend? How can the subsidiary take an equity shareholding in something it does not own?

Deputy Peter Power: There is clearly a misunderstanding here. It is an entity of NAMA and it will have to distribute any profits it makes in accordance with the share capital holding in it. That can be anything from 99% for the private sector to 1% for the State, but it is envisaged to be a 51% to 49% division of the share capital. Any profits are distributed to shareholders in the normal way. Let us say it made a profit of €1 million. A total of €510,000 would be distributed to the investors. That would be profits for those investors and they would be taxed and treated in the normal way. The 49% owned by the State would be distributed by way of dividend to the parent entity, which is NAMA. The SPV does not own NAMA, but is an entity of NAMA. It makes that distribution to NAMA. Essentially NAMA is a State body incorporated by statute and is not taxed in the normal way.

An Cathaoirleach: I call Senator Burke. There has been much debate on this amendment.

Senator Paddy Burke: The Minister said the SPV can make a profit. Can NAMA make a profit?

Deputy Peter Power: Yes.

Senator Paddy Burke: Both companies or whatever they are classed as can make a profit. That seems strange. There will be contracts between the banks and NAMA as NAMA will contract the banks to do much of the work on its behalf. Will those contracts be between the SPV and the banks or between NAMA and the banks or will there be contracts between both? The Minister said earlier that the banks would be contracted to do some of the work and that they would have to be paid for that work. Who will have the contracts? Will there be double contracts? Will there be different contracts with the SPV and the board of NAMA?

Senator Geraldine Feeney: The Minister said there is clearly a misunderstanding. There appears to be a huge misunderstanding on the Opposition benches and a clear indication that the Opposition Members are against the legislation. No matter what we talk about, it is against it.

Senator Paddy Burke: That is a load of rubbish.

Senator Frances Fitzgerald: We want to find out how it will work.

Senator Geraldine Feeney: The Minister said that both can make a profit. Is it not wonderful that both the SPV and NAMA——

Senator Liam Twomey: We are hoping for that. We just want to see how they will do it.

Senator Geraldine Feeney: ——can make a profit? This reminds me of last Saturday morning when I listened to Marian Finucane interview the Members’ party leader, Deputy Enda Kenny, on radio. Deputy Kenny did not even know it was called a special purpose vehicle; he kept referring to it as a special purchase vehicle. Before the Senators start shouting at me I listened again to the podcast of the interview before coming to the Chamber. He clearly does not know what it is about or what it is even called.

Senator Frances Fitzgerald: The Green Party did not even know the Government was introducing it.

Senator Geraldine Feeney: I am not surprised, therefore, that there has been a misunderstanding.

An Cathaoirleach: We are dealing with amendment No. 3.

Senator Frances Fitzgerald: On a point of order——

Senator Liam Twomey: I was trying to elicit information on this matter. Now that Senator Feeney has given me the option, however, I will make matters political.

Senator Frances Fitzgerald: ——Fianna Fáil’s partners in government did not know about the special purpose vehicle until a few weeks ago when they discussed the establishment of NAMA at their party’s special conference. Deputy Feeney’s point is nonsensical.

Senator Geraldine Feeney: Fine Gael is seeking to——

(Interruptions).
Senator Liam Twomey: The Green Party renegotiated the programme for Government——

Senator Frances Fitzgerald: It renegotiated in respect of NAMA without even knowing how it was going to operate.

An Cathaoirleach: I call on the Minister of State to reply to the amendment. We are dealing with an extremely important Bill. I ask that Members confine their comments to it or the amendments relating thereto. I intend to put the question when the Minister of State replies to the points made.

Senator David Norris: Good man, Cathaoirleach. That is what I like to hear.

Deputy Peter Power: Senator Burke inquired as to whether both NAMA and the special purpose vehicle could make a profit. The answer is yes.
On the question of whether the banks can have an involvement with the special purpose vehicle, as stated — when Senator Norris had left the House — it would be unconstitutional to restrict any entity, be it an individual or a company, from having an involvement. That is the nature of the advice available to us. A point is being missed in this debate. Ultimately, it will be a matter for the board of NAMA which will comprise people of high reputation and who possess great skills, expertise and experience in the various disciplines from which they will come to enter into arrangements with people. In that context, the board will be guided by the provisions of the legislation. First and foremost, it will be its duty to respect taxpayers to the best of its ability. Its members will be obliged to use their skills and capabilities to enter into arrangements to make profits for NAMA and its SPV.
Senator Burke also inquired about autonomy. NAMA’s autonomy will be restricted to the extent that it will be allowed to carry out activities specified in the shareholders’ agreement. That agreement clearly states the board of NAMA has an obligation to enter into agreements within the aims and objectives, policies and principles set out in the legislation. If NAMA did not do so, it would be acting ultra vires or outside its own powers. Ultimately, the Minister will have a veto in respect of the banks.
People have tried to conjure up all sorts of mysteries in respect of this matter. The Minister signalled some time ago that what we were discussing would constitute an intrinsic part of the Bill. What we are doing is designed to protect the taxpayer and will allow us to treat these matters off-balance sheet. That will make borrowing cheaper than otherwise would be the case. It is a matter for the board of NAMA and the Minister, by way of veto, to ensure any arrangements in respect of the SPV will be in the best interests of taxpayers.

Senator Frances Fitzgerald: Section 214 states, “Income and gains arising to NAMA shall be exempt from income tax, corporation tax and capital gains tax”. If a profit accrues as a result of the 51% shareholding and investments relating thereto, will it be subject to tax?

Deputy Peter Power: Yes, the dividend would be subject to tax.

Senator Frances Fitzgerald: Would it be subject to tax in all its aspects?

Deputy Peter Power: Yes.

Senator David Norris: On what the Minister of State said about me, I was obliged to leave the House in order to make an urgent telephone call. I have been present for almost the entire debate today. I returned just in time to hear the Minister of State reply to the question I had posed.

Senator Liam Twomey: I will withdraw the amendment and reintroduce it on Report Stage. However, I wish to clarify one aspect, namely, how a private company carrying out work on behalf of the Government would not be obliged to pay tax. I am not interested in the 51% and 49% shareholdings. This entity will be buying and selling property and engaging in other transactions over a ten-year period. If it does not pay tax, essentially it will be a charity.

Deputy Peter Power: It will be anything but a charity.

Senator Liam Twomey: In respect of the payment of tax it appears to be a charity.

Deputy Peter Power: I make the point for the third or fourth time that it is the distribution of profits — if such are made — from this entity to the private investors in it which will be subject to tax.

Senator Liam Twomey: I accept that. However, the work done by the entity will not be taxable. The European Union will find that concept strange.

An Cathaoirleach: Is the amendment being pressed?

Senator Liam Twomey: No. I will withdraw it and reintroduce it on Report Stage.

Amendment, by leave, withdrawn.
Senator Liam Twomey: I move amendment No. 5:

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

“2.—(1) There shall be established a “Register of NAMA Assets” which shall be established within 30 days after the service of the acquisition schedule in accordance with this Chapter.

(2) The Register shall include:

(a) the name of the participating institution from which the bank asset has been acquired by NAMA,

(b) the name of the person or body corporate who has the loan agreement with the participating institution,

(c) the quantum of the acquired bank asset and the amount which is outstanding and owing on the bank asset,

(d) the value of the bank asset which has been determined in accordance with Part 5 of this Act,

(e) the security for the bank assets, and

(f) such other matters as the Oireachtas Committee on NAMA may from time to time direct.

(3) The Register shall be maintained in electronic format and shall be accessible by the monitor of the Comptroller and Auditor General.

(4) The Register shall be updated on the first day of each month.

(5) The provisions of the Data Protection Acts 1988 and 2003 shall not apply to acts done under this section and information may be published under this section notwithstanding any confidentiality provisions which may otherwise apply.

(6) There shall be a sub-register of the Register of NAMA Assets established which shall contain details of any credit facilities which are in arrears or in default at the time of the establishment of the Register under subsection (1) or at the time of the updating of the Register under subsection (4).

(7) For the purposes of subsection (6) a credit facility is in default if a debtor, associated debtor, guarantor or surety in relation to the credit facility concerned is in breach of any terms or conditions to which the credit facility is subject.

(8) The sub-register established under subsection (6) shall be maintained in electronic format and shall be publicly accessible.

(9) For the purposes of this section “default” shall mean the position where an asset is in excess of three months in arrears on the original loan repayment scheme.”

Acting Chairman: In the interests of moving business along Senators should keep contributions brief and relevant. We are only on amendment No. 5 and we have a long way to go. We need to prove that the Seanad needs to do its business well.

Senator Paul Coghlan: It needs to do it thoroughly too.

Senator Liam Twomey: I will do my best to be short and sweet as long as the Acting Chairman remains calm with us.
This amendment is straightforward. It proposes that all NAMA assets should be listed in a register and the name of any person who defaults on these assets should be published. This is massive. There will be €54 billion worth of assets in a State organisation. A detailed register of all these assets should be available. If there is a significant default that should be published so people know where it is going.
We are not that happy with the oversight process in this Bill. We have all been long enough in politics to know what was happening during the good times when there was poor oversight of millions of euro of taxpayers’ money. By nature there are close connections between business people, whether developers or bankers, and Government and local authority officials. We are consolidating those connections in NAMA. While we might like to think that everybody would act with utmost scruples in dealing with these issues that is not how life works.
The Government should fully support any single thing that will improve the transparency and accountability of this organisation. I regret the Government is rejecting all of our proposals. They are not there to make things difficult politically but to give a sense of transparency. That applies to all the proposals we have put. I realise the Acting Chairman is anxious that we——

Acting Chairman: The Senator should stick to the point. We have discussed the previous amendments.

Senator Alex White: We are on a new amendment.

Senator Liam Twomey: That is right but it is no harm to outline what has been rejected so far.

Acting Chairman: We are all quite aware of what has been rejected so far. We will stick to this amendment.

Senator Liam Twomey: I should have brought my Mammy in.
Everything we have talked about, whether an oversight committee, an Oireachtas committee or bringing in the Comptroller and Auditor General has been rejected. I would like to hear the Minister of State’s views on a register of the NAMA assets.
5 o’clock
Senator David Norris: Although I voted against the previous amendment this one seems to have merit because we are entitled to know what assets are involved in this area. There is no definition of asset among all the definitions in the Bill. Asset appears to have been stretched to include liabilities as well which is a very odd use of the word. It is reasonable to keep a register and to have this kind of information about value and security available to us parliamentarians. I presume that this information may be available for commentators too. It is not quite clear how public this is to be. Is it to be an in-house Oireachtas document? This kind of information can only be valuable in so far as it may be argued that it might involve commercial sensitivity of some kind. That is the only argument I can see against it. Until I have heard a strong contradictory argument from the Minister of State I will be happy to support the amendment.
Senator Alex White: I am in the same boat as Senator Norris on this. The amendment’s policy objective is reasonably acceptable but I can envisage some of the issues the Minister of State might raise about it. It is not quite the same as having a judgment registered against one as one may be in default for a period but may come out if it. I take Senator Coghlan’s point on this but the distinction must be drawn. There may be a fluid situation, so to speak, for some of these parties who may be in default and may aspire to come out of it.
I am a little bit of an extremist when it comes to measures for imparting information that will touch on freedom of information and data protection. I have to be always persuaded by a compelling argument why they should be relaxed. If one is to have a measure as proposed in this amendment, it would go too far in the opposite direction if data protection were applied. I am always nervous about making exceptions to any of the provisions of the information legislation.
It is envisaged the register itself would be accessible by the monitor of the Comptroller and Auditor General. There would also be a sub-register with details of credit facilities in arrears which would be publicly accessible. This draws a distinction between the main register and sub-register which seems sensible enough.

Senator Marc MacSharry: I support the Acting Chairman’s ruling that we move on quickly and dispense with every interjection coming with the type of in-depth background such as, first the Earth’s crust cooled and then the dinosaurs came.
I oppose the amendment. Several assets will perform and if I were the owner of one, paying my dues of, say, more than €6 million, I would not want information on that asset in the public domain. If it were a default asset, I can see it would be in the public interest to see where the problems are. However, those details will be published in the quarterly report anyway.

Senator Nicky McFadden: I disagree with Senator MacSharry as we must have transparency and a register that can be monitored by the Comptroller and Auditor General. The sub-register would protect the sensitivities to which Senator MacSharry referred.

Deputy Peter Power: This is not unlike an amendment proposed by the Labour Party on Report Stage in the Lower House which the Government did not accept because it sought an exception to the duty of confidentiality that a bank owes to its customers. In respect of these individuals, NAMA stands in the position of a bank and has all the rights of one, as well as added duties set out in the legislation. The Bill already provides for a detailed role for the Comptroller and Auditor General who will have access to all relevant information needed to discharge his functions under the legislation, including the type of information referred to in the proposed amendment.
The proposed publication of details of individuals’ and banks’ assets would lead to significant legal difficulties. It would be difficult to justify the publication of details relating to the financial affairs of a set of debtors who happened to be indebted to institutions which participate in NAMA, while those with non-participatory institutions would face no such publication. In the event the amendment were accepted, it would give rise to a real risk that debtors would become entitled to challenge the transfer of banks assets on the basis of the implications of the transfer to them.
The basic principle at stake is that anyone with a performing loan with a bank is entitled to a traditional banking confidentiality relationship, as well as a contractual relationship set out and agreed to by both institutions. That is the valid reason Senator Norris seeks to oppose this amendment. If the amendment were accepted, the taxpayer could also be exposed to an avalanche of legal claims based on this issue.
I accept there is an issue with transparency. However, transparency ought to relate to qualitative information such as the classes of loans, the extent to which they are impaired, the extent to which they are being collected or not, and if they relate to rolled-up interest or capital and other matters. This is set out in section 53 and is the real information. Do we want a list of all the debtors of banks or the quality information which will allow legislators to make an effective and informed judgment as to whether NAMA is working? I hope that answers Senator Norris’s question and he will be able to support the Government on this matter.

Senator David Norris: Yes, it very largely does. I have noted there are two sections where the names of the individuals or corporate entities are specified. It might be better if that provision were removed. However, in some general way people should be entitled to know what is going on in the bank. It could be helpful to know in some general sense what level of assets are performing or have been written off.
This afternoon the Minister of State referred several times to amendments put forward in the other House and which the Government strenuously resisted and refused to accept. I accept the right of any Member of this House to take amendments tabled in the other House and place them before this House. However, on a matter of principle it is important that we introduce variations to these amendments in light of the debate in the other House or we adduce new arguments that may be persuasive. It is not profitable if we just take amendments which have been put forward in the other House and regurgitate the same arguments that have been already countered by the Government. That is not a sensible employment of our time. I appeal to my colleagues that if this is the case, perhaps we could ensure a more efficient business of the House by not endlessly regurgitating arguments that have been rejected in the other House.

Senator Alex White: On a point of order, many of these such amendments were not ventilated in the other House.

Senator Marc MacSharry: Inefficiencies.

Senator Joe O’Toole: The argument in favour of this amendment has been based on the question of bad debt. NAMA takes over all the operating loan agreements of a bank. Some of these are viable and substantial with people who are trading profitably. It is outrageous to propose that we give public access to the name of a person with a private agreement with a bank who may be fulfilling all the obligations of their agreement. I may be misunderstanding it, but it states that the register shall include the name of the person or body corporate who has the loan agreement with the participating institution. That is very clear to me. That would be outrageous——

Senator Marc MacSharry: Hear, hear.

Senator Joe O’Toole: ——with or without legal threats. I do not know who would do that to anybody.

Senator David Norris: The media. They would be delighted with it.

Senator Joe O’Toole: I do not know anybody who would welcome people’s credit ratings, never mind the details of their credit agreements. It is a question of civil rights. That proposal represents an extraordinary intrusion.

Deputy Peter Power: Senator Norris proposed the possibility of deleting certain aspects of the amendment which would allow him to support it. I appeal for Senator Norris’s support on this matter but I suggest that if we were to delete the points he suggested in his proposal, what we would be left with is something similar to what the Senator will find in section 55. In fact, there is possibly significantly more information available to Oireachtas Members under section 55 than that set out in this amendment.

Acting Chairman: Is the amendment being pressed?

Senator Liam Twomey: Yes.

Amendment put and declared lost.
Acting Chairman: Amendment No. 6 is in the name of Senator Twomey. Amendments Nos. 6, 30 and 54 are related and may be discussed together, with the agreement of the House. Is that agreed? Agreed.
Senator Liam Twomey: I move amendment No. 6:

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

“2.—(1) The First Schedule to the Freedom of Information Act 1997 is amended by inserting at the end of Part 2 “National Asset Management Agency”.

(2) The Third Schedule to the Freedom of Information Act 1997 is amended by inserting at the end of Part 1:

(a) in column (2), “National Asset Management Agency Act 2009”, and

(b) in column (3), “Section 199”.

(3) Section 27 (1) of the Freedom of Information Act 1997 shall not apply to any disposition of an asset under Part 9, Chapter 2 of this Act for a period of 2 years following the completion date of any such disposition.

(4) In this section “completion date“ shall mean the date on which an acquired bank asset was transferred, assigned, conveyed, sold on or otherwise disposed of to another person or body corporate.”.
I accept that some people would have concerns about information that is put in the public domain but it is equally important that we try to be as transparent as possible in regard to NAMA because of the size of it and the connections between many of the people involved. There is a role for the general public knowing what is being purchased, how much it is being purchased for, whether assets were disposed of and for how much they were disposed of and what people got for them. A good deal of information is protected under the freedom of information legislation but in the interest of transparency and knowing there is good corporate governance in place, some of this information should be made available to the general public, although not immediately. We do not want to go after people who are doing good business with banks, and I accept that good loans are being taken over, but there is need for transparency and accountability when it comes to NAMA purely because of its size and the people involved in it. We are pushing these type of amendments to get as much transparency and accountability as possible. If the Government or other Members of the House wish to alter it, I am more than happy to accept those changes.

Senator Nicky McFadden: On the Fine Gael amendment on freedom of information, a two year period would be enough time for a transaction to be sorted and checks and balances put in place if further scrutiny was needed. It might make the people who are engaging in deals dot their i’s and cross their t’s and do actions according to good practice. We must not forget the reason NAMA is being set up. This is to bale out the banks and the developers. If we had scrutiny such as proposed under the freedom of information legislation people might think twice about the way they are carrying out their business.

Senator Alex White: What we are seeking to achieve is similar to that sought in the Fine Gael amendment. I come back to the point I made earlier on transparency generally and imparting the maximum amount of information as is consistent with the commercial realities and any other limitations that might be in place. As we are aware, the terms of the freedom of information legislation allows quite a number of exceptions, savers and so on in regard to information. It is not the case that once an institution is listed in the Act a person can obtain any and all information on their activities. We should remind ourselves of that. There are quite a number of restrictions in that Act, as many people find when they go to make freedom of information requests. It is not the case to say that once the request arrives in it is open season, as it were, in regard to everything.
We are the ones who must table the amendments here and make the argument for them. In respect of freedom of information I tend to take the view that the default position is that all public institutions should be in the freedom of information regime and that it should fall to those who want to exclude a particular institution to make the case as to why it should not be included.

Senator Nicky McFadden: Hear, hear.

Senator Alex White: Because in the nature of the Act and what it is seeking to achieve, namely, the widest possible information, I would want to hear why it should be excluded rather than us having to make the strong and arguably unanswerable case that a body with such a momentous task that will involve such an extraordinary amount of money, exposure and liabilities should be included within the remit of the Freedom of Information Acts. I await the Minister’s argument on why it ought to be excluded.

Senator Frances Fitzgerald: I agree with Senator White. I would like to hear the Government’s reasons it should not be included in the freedom of information legislation. As we know from the many requests that have been put in under that, quite an amount of information is excluded. If it is felt, for example, that the information would undermine the entire NAMA structure or whatever, that can be dealt with.
If we take the issue dealt with in amendment No. 54, namely, the valuation panel, and given the contentious discussions we have had on valuations and current market value versus long-term economic value and so on, it would be in the public interest if the decisions of the valuation panel were transparent to allow people understand how those decisions were being made. The Minister might comment on the valuation panel and whether its operations will be available to the public. Will the decisions it makes and how it makes them be in the public arena? I would be interested to know that.

Senator Marc MacSharry: For the reason I opposed the previous amendment I oppose to this one. In a performing asset it would be prudent of NAMA to have assets valuations carried out. If I am living up to my obligations under a performing asset that is now under the control of NAMA I might not like my assets valuations to be published in that way. We cannot say that all the valuations will be published in the quarterly reports. We will have the opportunity to see who is in default and presumably valuation information but not on performing assets and therefore I do not understand how we could achieve that. I agree we should publish the information on who will be on the valuation panel and carrying them out but I do not believe that valuations should be published. That would cause difficulties in terms of privacy and civil rights, as Senator O’Toole mentioned earlier in regard to other issues.

Minister of State at the Department of Finance (Deputy Martin Mansergh): I am taking the three amendments together, namely, Fine Gael amendment No. 6 and Labour Party amendments Nos. 30 and 54.
The intention of the amendments suggested by the Senators is to extend the application of the Freedom of Information Act 1997 to NAMA with the exception of the disposal of assets which would not be subject to the FOI Act until two years after the date of the disposal.
Much of the information which NAMA will process in its day-to-day operations will be confidential commercial information attaching to the loan assets it requires. The commercial and financial risks that would arise in connection with the disclosure of such information pursuant to the Freedom of Information Act 1997 would not be in the interests of NAMA, the State or the public. Such confidential third party information would not be released under the Freedom of Information Act and applying the FOI Act to it simply introduces extra bureaucracy with no additional transparency. There are already a range of other provisions in the Act which will ensure appropriate transparency and accountability of NAMA. It is likely that if the FOI Act applied to NAMA, developers would inundate NAMA with requests so as to elicit NAMA’s strategy and-or tie-up NAMA in procedures. The public would not get more information as section 55 of the Bill provides for the information. Accordingly, I regard the proposed amendments as inappropriate and cannot accept them.
If I could make one other comment, no matter how often we hear the mantra that the purpose of NAMA is to bail out bankers and developers, it does not make it any more true. It is pure political propaganda. The purpose of the NAMA legislation, and we will know it, is in the public interest to give us a functioning banking system without which this economy and this society will not be able to properly operate.

Senator Nicky McFadden: The taxpayer is liable.

Senator Alex White: Senator MacSharry speaks about the valuations and then the Minister of State speaks about confidential commercial information and this tired old response about extra bureaucracy. There is not a Minister who thinks freedom of information is a good idea because it involves extra bureaucracy. They are always complaining about extra bureaucracy and the annoyance of having to respond to requests from the public under the Freedom of Information Act.
I am sorry. I reject that irritation over bureaucracy as an argument from any Minister. We live in a democracy and sometimes information flow requires civil servants and others to engage in what he calls extra bureaucracy in order to make it available.
Unfortunately, I do not have a copy of the Freedom of Information Act with me in the Chamber and I hope we will get an opportunity to return to this on Report Stage for the following reason. I very much doubt — I will correct myself on Report Stage if I am wrong — that the terms of the Freedom of Information Act would permit the transmission of valuations such as referred to by Senator MacSharry or that there would not be a restriction in the Freedom of Information Act that would exclude that. I will check that and return to the matter on Report Stage.
I would make the same assertion on the Minister of State’s point about confidential and commercial information. I do not have a copy of the Act here and I cannot remember the specific provisions. The Freedom of Information Act is replete with restrictions, constraints and exceptions, and I am sure they would apply in this case as well.
The operation of NAMA involves more than individual valuations. There is a great deal of activity involved in the policy in respect of these matters and it is legitimate for the public to know about it. It is not merely a question of reducing it to individual valuations.

Senator Liam Twomey: For those of us who support freedom of information, it is in some respects almost merely an ideal that we would like to see. The Minister of State would know well that the Freedom of Information Act was altered in 2003 because the initial legislation allowed for much information to be made public. It was not because it was exposing commercially sensitive information; it was exposing commercially sensitive political information and Ministers were being embarrassed wholesale by the sort of information that was coming out from the first Freedom of Information Act. The former Minister, Commissioner Charlie McCreevy, with due haste came into the House after the——

Acting Chairman: I ask the Senator to stick to the amendment rather than give us a history. Please just keep the show on the road.

Senator Liam Twomey: It is no harm, when the Minister of State goes into a history lesson about what happens with the Freedom of Information Act——

Acting Chairman: Come on.

Senator Liam Twomey: ——that we also could go into the background.

Acting Chairman: It is not necessary.

Senator Liam Twomey: Maybe not for you, Acting Chairman. You were part of that Government that introduced that law that alters the Freedom of Information Act 1997. You very much supported the closing down of freedom of information, as we now know it. That has had a significant effect. One would often wonder whether that sort of information, if it was still available, might have highlighted activities going on in government for the past number of years and we might not have found ourselves in the position where we are trying to apply freedom of information to a situation where this country has almost been bankrupted by the misdemeanours of a few with the Government’s complicity.

Senator David Norris: With the greatest respect, Senators should not impugn the impartiality of the Chair.

Senator Marc MacSharry: Hear, hear.

Senator David Norris: On the amendment, I am of the opinion that the Government has already got sufficient strong blocking mechanisms where there may be sensitive information. Perhaps I am wrong on this, but that is my view. That is my first point. I have a second point and then I will shut up.
The second point is that I am a little confused by the fact — perhaps Senator Twomey can explain this to me — that the amendment provides that the only place where the Freedom of Information Act shall not apply is to a disposition of an asset for a period of two years following the completion date. The horse has bolted by that time. I would have thought that was the least sensitive information. There may well be something I do not understand, but I do not see how that could be sensitive in any way. It is sold and the money is paid over, and that seems to me to be the very kind of stuff that will not do any significant damage to reveal. I repeat that there may well be something I do not see in that regard.

Acting Chairman: Has the Minister of State more to add given that Senator Alex White will bring it back on Report Stage?

Deputy Martin Mansergh: I have very little to add to my original reply. I suppose there is always a balance between scrutiny and freedom of information, and actually effective operation. I will not enter into detailed discussion of this because it is not relevant.
I would certainly stand over the changes made in 2003. There have not been further changes since then. Some freedom of information requests require a great deal of time, money and resources to respond to and it is legitimate to have some fee attached to them. Far from freedom of information being destroyed, we have a good and effective freedom of information system which is still considerably more liberal than that which obtains in many other jurisdictions.

Amendment put.
The Committee divided: Tá, 23; Níl, 27.

Senator Liam Twomey: I move amendment No. 23:

In page 17, paragraph (b), between lines 17 and 18, to insert the following:

“(viii) to ensure that the measures taken in this Act restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprise in particular,

(ix) to ensure an orderly property management strategy over a ten year period following the enactment of this Act,

(x) to recover the maximum funds for taxpayers by ensuring that the principal and exclusive purpose of NAMA is to recover the maximum funds possible for the assets acquired by NAMA under this Act, and

(xi) to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis.”.
Having just looked at amendment No. 46, I see that it incurs a charge on the State, but that is beside the point at this stage. Amendment No. 23 tries to ensure that there is an orderly property management strategy over the next ten years. This is very important because one of the things about NAMA is its size. NAMA is massive and when it is up and running, it will probably be the largest land owner in this State and a significant land owner in other jurisdictions, but they do not really matter to us. What matters is how this strategy will affect the market here and how it will affect people investing in business in the future.
We have socialised the property and development market here with NAMA and we need a very clear strategy from the Government over the next ten years as to what it will do and how it will manage this land bank. I do not think this has been as fully thought out by the Government as it likes us to think. The structure may have been thought out, even though that was done at the last minute. However, we have seen no plan from the Government for the next decade. It is not good enough for the Government to claim that business and strategy plans will be published in due course. We need to know these plans as soon as possible. Even if there is only a draft strategy for the next ten years, people will need to know the potential plan for NAMA over the next decade.
The last part of the amendment demands that we “take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis.” It is important that we look back and figure out how we ended up in this situation. Too often we have heard the phrase “we are where we are” and that we must look forward. History is one of the best places to learn what we should not do, because we are all too often inclined to repeat our mistakes. We should have a proper debate and possibly put into the Bill some indication as to how ended up with this mess in the first place. It was not all about global issues and global events. We did some very crazy things here over the past four to five years that landed us in this mess. This section should go into the Bill so that we can have a plan for NAMA over the next decade and that the Bill can contain elements that recognise why we ended up in this mess in the first place.

Senator Alex White: I support the amendment. The language of what is proposed constitutes a far more mandatory instruction to NAMA than much of what is contained within the balance of the section. I made this point before in respect of the purposes of the Act. It is interesting to note, particularly in relation to credit — and we have had this discussion and will come back to it when our amendments arise for discussion — that the words used by the Minister of State on a number of occasions have been about the principle purpose of NAMA being to bring about a situation whereby the banks and financial institutions resume lending to small business, families or otherwise. The Minister and the Minister of State in speeches here used slightly more vague language such as “to facilitate the availability of credit” in the economy and to “facilitate” the restructuring of credit institutions and so on. While I understand why they might have chosen a word such as “facilitate”, it is not all that encouraging to be told that NAMA will take such actions as it sees fit to facilitate the banks to resume lending. We are all looking for something more than simply a state of affairs where they will be facilitated in doing so.
The Minister makes the point over and over again — one has to agree to some extent — that we cannot mandate the banks to lend to this person and not to that person. I accept that, but we have to work out a position between those two extremes. The word “facilitate” and the concept of facilitating are not strong enough to persuade people that the NAMA project will achieve the predicted outcome. Subparagraph (viii) in Fine Gael’s amendment No. 23 reads: “to ensure that the measures taken in this Act restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprise in particular”. It is an acceptable formulation and stronger than the slightly more arm’s length “facilitating” of the bank.ing sector When one reads the new section 210, one gets the sense that the Government knew it was under pressure to have something about this issue in the Bill; therefore, it has gone as far as it feels it possibly can in section 210 in stating that down the line Minister will issue guidelines. However, anytime NAMA is criticised or queried, we are always told the financial institutions are not working, that the economy is in dire straits in terms of credit flow and that this measure will deliver it. That is the principal argument made in favour of NAMA. We are told that if we do this, lending will resume in the real economy, or on “main street”, as the Americans say. What more can we be offered rather than this arm’s length language of facilitating? The Fine Gael amendment is reasonable and I am happy to support it.
I am not absolutely sure what is intended by subparagraph (ix) which reads: “to ensure an orderly property management strategy over a ten year period following the enactment of this Act”. I know what the words mean, but in terms of NAMA operating “an orderly property management strategy over a ten year period”, I am not 100% sure.
Subparagraph (xi) reads: “to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis”. We all want all necessary steps to be taken, but that subparagraph should read: “to take all necessary steps, within the statutory remit of NAMA...”, otherwise one would be trying to mandate NAMA to do things that were not within its power to do.

Senator Paschal Donohoe: The argument that has been made consistently by the Government side is that the establishment of this body will create the preconditions for lending to start flowing in the economy. We are also told that lending and credit flow are the lifeblood of the economy and that this body needs to be put in place to facilitate them. However, the purposes of NAMA, as outlined in the legislation, make no explicit reference to that objective. Ample reference is made to NAMA’s role in acquiring bank assets and how they will be dealt with, as well as the financial return the State shall require from the assets it will then own. The whole purpose in acquiring these assets is to facilitate lending but that is not explicitly included in the purposes of the Bill, which appears to be a grave omission. The new section 210 gives the Minister power to issue guidelines on lending. In the light of this proposed provision, surely the new section would make more sense to NAMA’s primary purposes. It takes a process such as this to make one realise that the glaringly obvious is being omitted. If the whole purpose of NAMA is to get lending flowing again, it beggars belief it is not laid out as a purpose of the body. It is barely laid out as one of its functions.

Senator Joe O’Toole: Nobody could object to what the amendment tries to achieve, but I would like to pose a simple question. Banks are in business to lend, which is how they make their profits, but why are they not lending? Is it because they do not want to give money out? As I explained to the Minister yesterday, I think section 210 is flawed. This amendment which seeks to do the right thing is not implementable, neither is section 210. The Minister can issue all the guidelines he wants, but the banks must still meet regulatory and other requirements. They will not stay in business otherwise. Regulatory requirements in Ireland are slightly more demanding than those in respect of the tier one asset requirements for international banking. When the Irish regulator increased the demands two years ago, there was an outcry led, as I recall, by Seánie Fitzpatrick who talked about interfering with banks doing business.
How can we tell the banks to do something which is against their best interests if we want them to stay within the law of regulation? The law of regulation is that they must have an asset base of 7% or 8%. That is the figure, although the international markets demand a like more — something like 8% or 9%. What will happen is this: the State will issue State paper to the banks in return for the transfer of assets. The banks will go to the European Central Bank with that paper and get money instead. That money will go into the banks and as soon as it takes them over the asset base requirement, they will start lending. They will not start lending before then, but they will have to start lending afterwards because they will have nothing else to do with the money. We need to be very clear in that regard.

Senator Alex White: They do not have anything else to do with the money.

Senator Joe O’Toole: No, but they lend and invest. It is lending in one form or another. Perhaps I did not use the correct terminology. They have to use the money for various financial instruments one way or another.

Senator Alex White: Yes.

Senator Joe O’Toole: They do not sit on money, which is what they are doing. It is not like they are giving it to some and not to others. They are building an asset base and as soon as they have done so they will get rid of the money in whatever way they want in order to make a profit. Intuitively, I do not have any time for the banks, but I do in terms of what we are trying to achieve in this instance.
Subparagraph (xi) reads: “to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis”. The last thing we should be doing is interfering with the regulatory regime. Although that is not what is intended by this proposal, we are interfering. The Minister is only issuing guidelines as a sop to us. It would be more honest if he did not do so and said straight up that he could ask the banks to do things. He can put moral pressure on them to do so, but they may say that under the Companies Acts, they are required to be answerable to their audit committee, internal audit structure — we have been demanding these measures for a while — and at the annual general meeting. The Minister cannot override these provisions. One of the arguments in favour of partial nationalisation is that one could represent more than half the shareholders and demand that these steps should be taken. However, that would bring about a set of accompanying problems. 6 o’clock
There is an issue which we have not talked through. We want money to flow, but we did this previously with ACC Bank and ICC Bank. These State banks were established to lend to small and medium enterprises and they did a fantastic job, but we let them go. The Minister said yesterday that he would like to see new banks being established; these are the kinds of banks we need. We need to bring back respectability to sub-prime lending. Special purpose vehicles got a bad name because of Enron, while sub-prime lending got a bad name because of the US banking system. In fact, sub-prime lending is most effective in this country. Credit unions throughout the country have for many years been giving loans to people who would not have got them from other institutions. This is classic sub-prime lending. The credit union maintains and manages the risk and ensures there is constant contact with the recipients of the loans. These are all matters that could be addressed in the future.
There is nothing in the amendment with which one could disagree but I cannot understand how anybody could make it work, even with the best will in the world. I do not want to be pedagogical about it; suffice it to say there is conflict in the terminology. Section 2 refers to “the purposes of this Act” and it lists those purposes one after the other. Section 2(x), which it is proposed to insert, refers to the “principal and exclusive purpose”. There is a contradiction here. It is but a matter of wording and I acknowledge it was suggested that it be put that way.
The amendment is a case of motherhood and apple pie in that we all want to see its objectives realised but I cannot see how we can bell the cat on this. If somebody could explain how it can be done, I would appreciate it. We can put moral pressure on the banks. Senator Twomey stated last night and Senator Alex White said on a number of occasions that we can offer the money to the banks on certain conditions, by way of a Checkpoint Charlie hand-over, but that is as far as one can take it. There is a difficulty in making this amendment work, even with the best will in the world and in spite of its being well intentioned in all sorts of ways.

Senator Alex White: What Senator O’Toole said is interesting. One view of what he said is that the principal objective of the NAMA project cannot be delivered. That is not an unreasonable view based on the argument he makes.

Senator Joe O’Toole: I stated it could not be delivered until the banks——

Senator Alex White: I am not arguing with the Senator at all because I believe he made very solid points. We are all aware of them and it is no harm to be reminded of them. One view of what he stated is that the principal objective, if not the sole objective, of NAMA, namely, to get credit flowing in the economy again, cannot be realised. That is the proposition and he may be correct. However, the point is that the speeches of the Minister of State, Deputy Mansergh, and the Minister, Deputy Brian Lenihan, are structured in such a way as to say we must take certain action, “thereby” ensuring credit will be made available to the economy again. The word “thereby” turns up quite a lot. They state we will take the assets from the balance sheets of the institutions in the way proposed, thereby facilitating the flow of credit. I have heard the Minister use the word “thereby” time and again and we know what it means.
There is a real conceptual problem at the heart of the NAMA debate and project in that the agency’s very objective cannot be realised. This is one intelligent view on what Senator O’Toole says. We are not alone in that other countries are struggling with this question also. It is not an issue that is just preoccupying the Irish. Many countries are struggling with the question as to how to make credit available short of giving instructions to financial institutions.
The reason I interrupted Senator O’Toole, for which I apologise, is that he said that once the banks get the money and achieve the ratios they are required to reach, they will start lending again. That is not a certainty. How do we stop the banks returning to the casino and engaging in the sorts of practices in which they engaged heretofore? How do we stop them having at the heart of their profit-seeking activities something other than the basic job we all believed banks existed to do?
At the weekend I was listening to an interview with an English businessman, Mr. Harvey Jacobson, a retail magnate in England whom I believe has shoe shops. He was asked what he would do if he were setting up a bank. He stated, slightly tongue in cheek, that he would set one up, invite people to deposit in it and spend some time at this. He said he would pay the depositors a modest interest rate for their deposits and, after a while, when he would have a sufficient sum in the bank, he would begin lending some of it to people who required loans and charge them an interest rate slightly above that being given to the depositors, thus making a modest profit. What is wrong with that? I always believed this was what banks were for. This is what small businesses and families want. They want a banking system that will serve their needs.

Senator Marc MacSharry: I am conscious that we are straying from the amendment from time to time. The function of NAMA is to rehabilitate the banking system. Doing so involves taking the toxic assets from the banks. It is impossible for us to instruct banks to lend to certain individuals or companies and not to others. I hope that when the Minister issues guidelines under section 210, the real section under which we should be discussing this issue, they will be in line with robust, appropriate underwriting standards and procedures and with the tier one capital requirements under the Basel regulations, as mentioned by Senator O’Toole.
At best, all we can do is encourage, through the regulator and ministerial guidelines, the flow of credit to viable businesses and the families who need it. To legislate for this in a rigid fashion would get us into the mess we are in all over again. While we would welcome new banks that want to enter the market, the reality is that banks are not lending at present. Apart from the fact that they are choked with the toxic assets we are trying to sort out with this Bill, they have no money to lend. When the money becomes available through the bonds issued by NAMA, the banks may not necessarily begin to lend then either.
I am glad somebody said section 210 is flawed. It is in its current form but it will be amended by amendment No. 66 to state the Minister “shall issue guidelines” rather than “may issue guidelines”. Banks do not lend from their capital base but from their deposit base. At least that is what they should be doing. It is a question of increasing confidence in our banking system so the banks can attract more depositors and get credit flowing again. NAMA’s function is to take the toxic assets away from banks, not to instruct them who they should lend to and how they should lend. It would be better to have this debate in more detail when discussing section 210. I ask that we proceed.

Senator Frances Fitzgerald: It is important to discuss this.

Senator Marc MacSharry: Yes, but we should do so when discussing section 210.

Senator Frances Fitzgerald: It is linked to this because, I hope, we are in the middle of emerging from the greatest crisis we have ever seen in banking and international markets. They have failed completely and economies have been damaged totally. Many have been destroyed by the excesses of bankers in the United States and other countries. We have witnessed a total crisis in banking. One does not want to go overboard but undoubtedly the issues of regulation, authority and direction are very relevant for discussion. This is what Fine Gael is suggesting in its amendment. It is the failure of regulation and good authority and of the banks to take reasonable action in their lending that has got us into this crisis. We clearly need to talk about this, especially given that €54 billion in taxpayers’ money is at stake. One must consider some direction to the banks, some authority and some control.
The proposed purposes of the legislation, as listed, are very general and obviously need to be included. We seem to be debating their impact but if they are not included and if there is no vision as to what the Government expects from NAMA in section 2, there will certainly be none. The purposes that should be included in the Bill according to our amendment lay the groundwork for what the Government expects to happen. Paragraph (viii) of the Fine Gael amendment No. 23 states:

to ensure that the measures taken in this Act to restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprises in particular.
We must get credit flowing to business which is the life blood of the economy. To include such provision as a purpose of the Bill seems eminently reasonable. Much of the Second Stage debate in the Dáil and Seanad was spent on what needs to happen if the economy is to function again. It makes sense to provide for a proper property management strategy. That is reasonably self explanatory. I cannot understand why the Government is rejecting what we are suggesting should be included as a purpose of the Bill.

Senator Liam Twomey: This is an interesting point. It is perhaps a point that often makes debate on this legislation tedious for the officials involved but interesting for us.
The question Senator O’Toole asked is what will happen if NAMA has no effect on lending? What will happen if the banks take the bonds, sell them and, rather than lending the money, swap their expensive interbank loans for cheaper ECB funding? What will happen is that the banks will concentrate on shrinking the loans on their balance sheets. Perhaps the Minister of State will explain what will happen if the banks do not start lending again. How long will the Minister wait for the banks to begin lending again? What else, if the Government rejects our proposal, will it do? What other structure can it set up?
A number of months ago I informed the Minister of State, Deputy Mansergh, that there existed a special purpose vehicle as part of the EBS group which had expertise in mortgage lending, the staff of which group were surplus to the requirements of the EBS which is willing to sell that vehicle to Government. Anglo Irish Bank is in State ownership and has expertise in business lending. While it made mistakes and got a little exuberant, there remains within that bank people who understand loans. If we take the business unit in Anglo Irish Bank, which can deal with business loans, the special purpose vehicle which EBS wishes to sell to Government, the available senior management personnel of ACC Bank and others being disposed of by foreign banks wishing to get out of Ireland, and to that add equity from Government which it could obtain from the European Central Bank, we could create a good bank. This could be a wholesale bank in the sense that the regular banks, about which the Minister of State is speaking, can issue loans.
The reason Allied Irish Banks and Bank of Ireland are currently not issuing loans is that they are fearful those loans will fail and end up on their balance sheets. Allied Irish Banks and Bank of Ireland could continue to manage loans. The Minister for Finance stated in this House last night that it would take too long to establish the concept of Fine Gael’s good bank, which is not true. The special purpose vehicle in EBS is still available. We own Anglo Irish Bank which has a business unit which manages the bank’s loans. There are senior managers in this city who would be willing to work for the Government and the Government has access to the funding. One cannot say that Allied Irish Banks or Bank of Ireland could just as easily get their hands on money from the European Central Bank. They do not want it. They do not want to take the risk of lending. If there is a contradictory opinion to what we are saying, if there are people who say this cannot work, what then are the solutions? That is the question continually asked of us.
The Fine Gael good bank concept was rubbished by too many people. I have just explained to the Minister of State how a functioning good bank could be set up. However, I may be wrong. If the French can set up a good bank in a couple of weeks, I am sure, given we are no less intelligent, that we can do so too. If the Government does not agree with what we are saying, if it believes lending cannot be forced on the banks, then we are spending €54 billion just to make the banks look good. I am giving the Minister of State another solution. The Government can if it wants tear it apart and say it will not work and, as it has done previously, say that all this is more Fine Gael good bank proposals. I heard the Minister in his contribution dismiss Fine Gael’s solutions completely although he has never actually read them. I do not believe he ever paid them any attention.
Senators O’Toole and Norris, who are constructive in terms of their criticism of NAMA, may have views on this issue. If this proposal does not work, let us have a debate on whether we can make Fine Gael’s concept of a good bank work.

Senator Joe O’Toole: I never said that NAMA will not work. I said that the proposal in the amendment could not work and I will explain why in simple terms. The amendment is asking that we “ensure” something happens. Not even the Minister can do this, which is the reason I say section 210 is suspect. The manner in which we ensure banks take appropriate risk is by way of regulation, which is what everybody in this House has been saying for the past couple of months. We have been bemoaning the fact that we did not have an effective regulatory structure. What we need to do is make it effective. We cannot buy the dog and bark ourselves. We cannot set up a regulatory system on the one hand and then tell the Minister he or she must ensure the banks do business in a different way. We cannot do that.
I may not have explained clearly my point in regard to the argument made by Senator Alex White. I asked when the banks will start lending again. This is back of an envelope stuff. The figures are big and the thinking and theory is simple. We are putting €54 billion into the banks. The most they will use as an asset base is less than 10% or approximately €5 billion. They already have some money. Effectively, €50 billion will be available for banking. This is the business model. NAMA will take over the assets, give the State paper to the banks who will bring it to Europe and return with money. In the meantime, NAMA will set up a special purpose vehicle, the intention of which is to keep the risk away from it, to take on aspects of the assets, for example, those creating an income through interest or rent, and to set up a securitised vehicle with income attaching to it. That will be sold off through the special purpose vehicle which will then pay that money to NAMA. NAMA will then use that money to recoup the money that has gone to Europe via the banks, thus trying to recoup the €54 billion. I am not suggesting it will work but that is the business model.
When and how will the banks start lending? When they receive the €54 billion they will need to hold back approximately less than 10% of it and the remainder will be used for banking purposes. Senator Alex White is correct. We need to ensure the banks do not return to the casino with that money. That is the important point. We do this by having regulation that works, regulation the like of which has never before been introduced by either House. We must ensure we return to old fashion banking principles where people were dealt with and the banks retained exposure to the risk and liabilities they took over and could not simply sell them on, except under the most stringent of regulatory means.
I do not disagree with what Senator Twomey is trying to achieve. All I am saying is that in terms of how this might work, one cannot ensure without overriding the regulatory function. The regulatory function is not covered by this legislation, nor should it be. The regulatory function will monitor how the banks operate to ensure they do so properly. Also, the State will appoint people to the boards of banks, will have an input into the appointment of the chief executives of banks and we will be receiving regular reports on the principles of banking and how they are applied. That is how it is going to work. The sooner the process starts, the sooner the banks will have money to lend.

I agree with Senator Alex White that we have to ensure the money is loaned under the proper rules and regulations. We cannot tell the banks what to do because we do not own them. That is the other argument in favour of owning more than 50% of a bank, but even if one owns more than a 50% share, one could not override the other shareholders. Let us recall what happened with ACC and ICC. I said in the House last year in September, October and November that is what we needed to do with them but we did not do it, we let it go. This can work if there is good faith, proper regulation and an insistence that NAMA fulfils what it was set up to do. In that way the banks can get back to doing what they always did in the old days, namely, support their local area, maintain the risk in their local area and know the people to whom they are lending money. We need to be clear about that.

Senator David Norris: I strongly agree with the principles enunciated by Senator Twomey, albeit that there are technical difficulties with the amendment. Senator O’Toole indicated that the paragraphs are to be inserted after a section that defines the purposes, so I am not sure whether the amendment can be inserted at the specified point in its current form. Technically speaking, the amendment should be inserted earlier. However, I am all in favour of what the Fine Gael Party is trying to do.
Senator O’Toole said one cannot buy a dog and bark oneself, but one can.

Senator Joe O’Toole: I knew that would happen when I said it.

Senator David Norris: If for one reason or another the dog turns out to be defective in the vocal chords, or due to an awkward temperament or shyness it refuses to bark, one would be a bloody fool not to bark oneself if a burglar was approaching the house. That is not a perfect analogy.

Senator Joe O’Toole: I accept that.

Senator Liam Twomey: The dog may function well in other respects.

Senator David Norris: There was almost an echo of Senator O’Toole’s wonderful series of metaphors about ATM machines when he referred to the banks being able to go off and cash their pieces of paper in the European Central Bank——

Senator Joe O’Toole: Once one builds up one’s credit.

Senator David Norris: Once one has built up credit. It does seem to me that to a certain extent we are issuing a credit card. I am not sure that is entirely unrelated to the fact we do not have the capacity for quantitative easing that the British, for example, have because of their dogged refusal to join the eurozone.

Senator Joe O’Toole: There goes that dog again.

Senator David Norris: Yes, we are plagued by dogs. Without the technical expertise of various people, including Senator O’Toole who is most persuasive, most people would certainly be in favour of this approach because it enunciates the principles, even if it is just an exhortation. This is what we all want; we want credit freed up. We know the banks are a bit constipated. We know they are not shelling the money out. We know that it is exactly like what always happens in big bureaucratic institutions.
One of my principal interests throughout my life has been to try to protect the 18th century core of the city of Dublin. One of the difficulties we had was with the collapse in the 1960s of a row of tenement houses in Fenian Street. The city authorities, which had done absolutely nothing whatever for decades to protect the unfortunate inhabitants of those buildings, suddenly got scared and it pulled everything in sight down. It was a gross over-reaction. The same may be true of the banks. They have been caught out at the roulette table and now they seem to be almost traumatised.
It is clear from people who appear on the radio and television that small businesses, including viable businesses, are being starved of cash. No one in his or her right mind could object to the proposed section 3(b)(ix) which outlines, “to ensure an orderly property management strategy over a ten year period”. How could anyone possibly disagree with that? To disagree with it would suggest that one wants a disorderly strategy. Likewise, how could anyone disagree with the proposed section 3(b)(x) “to recover the maximum funds for taxpayers by ensuring that the principal and exclusive purpose”? That is the part of the amendment that gives rise to the principal difficulty for the technical reason that has already been explained by Senator O’Toole. Section 3(b)(xi) specifies “to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis”. Is that not what we all fervently pray for? I am very much in favour of this amendment, although there may be a technical glitch. Perhaps the amendment could be considered again and reintroduced on Report Stage at an earlier point in the Bill. Apart from that, I am not persuaded by the arguments against it.

Senator Paschal Donohoe: As my colleague Senator Fitzgerald has pointed out to me, in the purposes of the Act there is a reference in section 2(b)(i), (ii) and (viii) to facilitating the availability of credit in the economy of the State, to resolving the problems created by the financial crisis in an expeditious and efficient manner and to contributing to the social and economic development of the State. They are some of the purposes of the Act. If that is the case, why are they not the purposes of the organisation that has been set up to deal with the financial crisis?
The Government has continually said that if NAMA is set up it will facilitate the flow of credit again in the economy. That is why it is being pushed so strongly. Regardless of our view on NAMA, that is the result we want to see. Why is that not mentioned in the purposes of NAMA? That is what people seek and that is what the body is meant to do. However, it is not mentioned anywhere among the purposes, functions or powers of NAMA. We are getting to the difficulty that is at the heart of the concept behind NAMA, which is that all of this work can be done by taking the toxic assets off the banks but it still does not give the ability to deliver the objective that the Government has said it will.

Senator Pearse Doherty: This amendment, my amendment No. 24 and later amendments touch on the same issue, which goes to the core of what the Government hopes the legislation will bring about. Senator O’Toole put it very eloquently, wisely and clearly in terms of what will happen when NAMA kicks in and frees up finance to the banks to allow them to lend. As other Senators have outlined, the principle of the Act is to free up finance for the economy. What this amendment and my amendment do is stipulate where the funding should go, namely, to first-time buyers and to fund SMEs because that is where the funding needs to be directed.
As Senator O’Toole indicated, banks will lend, as that is where they make their profit. We know they will lend. They have loaned in the past. The reason we are dealing with NAMA in the first place is because there has been reckless lending in the economy and NAMA has to deal with that. How many assets of small and medium enterprises will NAMA take over? How many home loans of first-time buyers will it take over? The answer is none. It is the assets of the big property developers that we are taking over. It is a few in society who have given in to such complete greed and have taken the State to the position it is in today. The amendments aim to ensure that money flows into the economy in the direction in which it needs to go. We need money to flow so we can create a stimulus package that will get businesses back up and running and get small and medium enterprises going again in order to create jobs and take people off the unemployment register.
Senator O’Toole might regret some of what he said earlier. He may be right that one cannot direct institutions to lend to certain individuals but that is what our amendments seek. That is the reason my party has called for the scrapping of the NAMA proposal and the establishment of a State bank, in which we would have complete control and which would not be subject to the whims of shareholders. The first priority of that bank would be to serve the needs of the State.
I support the amendment. The subject is also dealt with in my amendment, amendment No. 24, which I will press when the time comes.

Deputy Martin Mansergh: There is a technical flaw in the Fine Gael amendment. It does not take account of the fact that a subparagraph (viii) was added on Report Stage in the Dáil. The party is not proposing to remove the existing subparagraph (viii); therefore, strictly speaking, the subparagraphs in the amendment should be numbered (ix) to (xii). It is a minor technical point.
Without necessarily agreeing with everything he said, I thank Senator O’Toole for bringing a note realism to the debate. We do not live in a command economy in which the Legislature is able to lay down what commercial institutions can do beyond a certain point. It is a question of balance. The purpose of the legislation is to deal with the toxic assets by removing them from the banks and allowing the banks to lend. The purpose of NAMA is to deal with these toxic assets. I do not accept that the extensive additions to the purposes of the legislation proposed in the amendment are necessary or appropriate and do not intend to accept them. Following the numbering in the amendment, as it stands, the new subparagraph (viii) is already covered in subparagraphs (i) and (ii) and, to ensure the purposes are fulfilled, the Bill was amended on Report Stage in the Dáil to allow the Minister to issue guidelines on lending to SMEs and other classes of borrowers with which the participating institutions must comply. I am not aware that the Minister said he would substitute the word “will” for “may”. The matter was discussed and he did not intend to do it. However, Senator MacSharry might have had amendment No. 63 in mind, as it provides that the Minister shall issue the guidelines to the Dáil.
With regard to subparagraph (ix) in the amendment, this is not a purpose of the legislation but something NAMA might adopt to achieve its functions. Obviously, NAMA by itself cannot ensure an orderly property management strategy because although it will be a very large player in the market, it is still only one player. There will be many others. I draw Senators’ attention to section 11(2) of the Bill which addresses the property market and 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”. The Minister took a particular interest in that subsection because it is important that the property market develops on a sustainable basis. Section 11 deals with NAMA’s functions, not the functions of the legislation.
The proposed new subparagraph (x) is already covered to a degree by subparagraph (iv) which is then translated into NAMA’s purposes in section 10(2). This clearly sets out the objective of NAMA to achieve “the best achievable financial return for the State...”. The proposed subparagraph in the amendment is clearly unnecessary. Subparagraph (xi) in the amendment is clearly beyond the scope of the legislation. Of course, the Government is and will be taking all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis. The Minister’s recent appointments of a Governor of the Central Bank and Financial Regulator and his proposed restructuring of the Central Bank and the Office of the Financial Regulator will be critical to the new banking regime. NAMA will have no role in regulating the banks.
The Minister said this morning that the regulatory capital of the banks would have to be reassessed once they had realised the losses on the transfer of assets to NAMA. He also said that if the banks could not raise that capital privately, the State would provide it. NAMA will force the banks to realise losses. The problem is that the banks fear these losses, are hoarding capital and not lending. To enable them to start lending as we would like, we must realise losses through NAMA, address capital needs and ensure, through section 10, fair treatment of all customers.
Senator Alex White said the word “facilitate“ was too weak. However, the beginning of section 2 states: “The purposes of this Act are . . . (b) to address the compelling need . . .to facilitate . . . ” restructuring.

Senator Alex White: It is the compelling need to facilitate, not the compelling need to provide credit.

Deputy Martin Mansergh: Yes, it is the compelling need to facilitate. In the last analysis, it is a balance.

Senator Alex White: I understand the Minister of State.

Deputy Martin Mansergh: A large number of amendments relating to a national recovery bank were ruled out of order. I do not intend to discuss them, as they have been fully discussed by the Minister in other places.
Senator Doherty spoke about a State bank. I recall the ACC and the ICC which were State banks established for particular purposes. It was not the case that the Minister could ring the ACC and the ICC and tell them what to do. Even State banks must operate on commercial criteria with regard to the rest of the market. They must operate at arm’s length. A Minister cannot dictate that they shall lend to this, that or the other person. It does not work that way. The idea seems to be that a State bank is a panacea and can do many things private banks cannot do. State banks exist in a marketplace with private banks; therefore, they are not essentially a stronger instrument to achieve State objectives. That is a mirage and experience shows that to be so.
The foundation of the Fianna Fáil-Labour Party Government of happy or not so happy memory, as the case may be, from 1992 to 1994 — personally, I regretted that it ended the way it did — was the so-called third banking force which was to be a State bank. I was directly involved in producing a paper, the centrepiece of which was Fianna Fáil accepting the Labour Party idea of a third banking force. The only trouble is that when we were in government for a year or two, the Labour Party no longer appeared to be particularly interested in the third banking force.
Senator O’Toole mentioned old-fashioned conservative bankers. I met one recently who described himself as such. He is partly based in Ireland and partly based across the water. He told me he was a conservative banker and, therefore, doing reasonably well.
Senator Alex White asked how we might stop the banks from returning to the casino. It is a pity Senator Hanafin, who is from north Tipperary, is not present. Senator Alex White’s question rather assumes that a casino will be built and that the legislation will allow for such a development to take place. All I will say on the matter is that the Government has considered matters of this nature in the past and no doubt it will do so again in the future. I cannot say that I am personally enamoured of casinos.

Senator Alex White: As the Minister of State will appreciate, the casino to which I referred is much more metaphorical in nature.

Deputy Martin Mansergh: I would be extremely happy about developments involving racecourses etc., but I am not sure we need a replica of the White House. I am sure experience has taught us that some of these projects should be somewhat less ambitious in nature.
Senator Norris referred to how people who for health and safety reasons had pulled down Georgian Dublin. Happily, however, they did not pull down the buildings on North Great George’s Street. I am aware that what remains of Georgian Dublin, which is quite a lot, is to be submitted for consideration as a world heritage site.

Senator Paddy Burke: Senator Twomey made a good case in respect of this amendment. The Minister of State indicated that there would be a strong input from outside the banks in cases where small businesses and individuals were refused credit. How far has the thinking in this regard progressed to date?

Deputy Martin Mansergh: There is an ongoing problem in this regard, which is sometimes outlined in terms that are too black and white. Banks certainly are lending money. It has been stated that cattle prices are far from wonderful at present and that part of the reason for this is that the banks are not lending in the way they would have done in previous years. We are working on an appeal mechanism that will incorporate an outside element. Full details in respect of that mechanism are not yet available. The Tánaiste and Minister for Enterprise, Trade and Employment also has established a monitoring group to which systemic problems relating to lending to particular sectors can be brought.

An Cathaoirleach: Is the amendment being pressed?

Senator Liam Twomey: I will withdraw the amendment and reintroduce it on Report Stage.

Amendment, by leave, withdrawn.
An Cathaoirleach: Amendments Nos. 24, 42a and 45 are related and may be discussed together by agreement. Is that agreed?

Senator Alex White: On a point of order, amendment No. 46 was previously grouped with amendment No. 23 and that probably should have remained the case. However, would it be possible to group it with amendments Nos. 24, 42a and 45? Taking this course of action would make some sense because it does not really belong anywhere else.

An Cathaoirleach: It will be taken on its own.

Senator Alex White: We have already ventilated many of the issues relating to it and it would seem sensible to include it in this group. I propose, therefore, that it be grouped with amendments Nos. 24, 42a and 45.

An Cathaoirleach: Is there agreement on that matter from the Government side?

Senator Marc MacSharry: Yes.

An Cathaoirleach: Is it agreed, therefore, that amendments Nos. 24, 42a, 45 and 46 are related and may be discussed together by agreement? Agreed.

Senator Pearse Doherty: I move amendment No. 24:

In page 17, paragraph (b), between lines 19 and 20, to insert the following:

“(ix) to oblige all participating institutions to increase lending to SMEs and first time buyers and to report on lending activity in these areas bi-monthly to the Houses of the Oireachtas,

(x) to oblige all participating institutions to cease mortgage repossession for a period of two years, in cases of genuine hardship, following commencement of this Act.”.
Amendments Nos. 24 and 42a are tabled in my name. On Second Stage I indicated that I would table a number of amendments to try to support those who are suffering and who cannot obtain access to credit. I refer here to first-time buyers, SMEs and also those who were caught up in the casino culture in which, as Senator Alex White stated, the banks were involved. Within that culture, property prices were pushed up and people now find themselves in negative equity.
Amendment No. 24 involves a simple proposal and I do not expect to speak at length in respect of it. Other Senators, in their contributions on previous amendments, eloquently outlined the matter to which it relates, namely, the freeing up of credit to viable SMEs and first-time house buyers. The debate on amendment No. 23 led to my concerns in respect of the legislation being amplified. If we cannot direct funding to SMEs and first-time house buyers, then there is a serious flaw in the legislation and it is evident the country is being sold a pup. There is nothing in the legislation to prevent banks from returning to the casino culture in which they were previously involved.
On Second Stage, the Minister for Finance referred to advice he received to the effect that there will be an increase of 20% in property prices during the next ten years and that a 10% increase has been factored into the NAMA business plan. If that is the type of information on which banks are relying, why then would they then not proceed to fuel another property bubble by lending to speculators and developers, leaving first-time house buyers and SMEs to go without?
Amendment No. 42a deals with house repossessions, a matter which has been well debated in this House and in the Dáil during Private Members’ time. The position in this regard must be addressed. The issue of house repossessions goes to the core of the Irish psyche and relates to our history of being dispossessed. When the country was under British rule, people were evicted from their houses by their landlords by means of the thatch roofs being set on fire. It was as a result of such events that the Land League was established.
The notion that modern banks might replicate the behaviour of the landlords to whom I refer is anathema to the people. The latter cannot understand why such behaviour is being facilitated or is at least not being prevented by the Government. What makes matters worse is the fact that we are lending billions to the institutions that are involved in this practice. Ordinary people who are trying to get by on a week-to-week basis just cannot understand what is happening.
When contributing on similar amendments in the Dáil, Deputy Morgan referred to trying to quantify what constitutes 1 billion as opposed to 1 million, particularly in the context that there has been much reference to billions of euros during the past 12 months. Deputy Morgan indicated that someone explained to him that it takes 12 days for 1 million seconds to pass but that it takes 32 years for a billion seconds to pass. The type of investment we are making in the banks at a time when we are not assisting those who were caught out as a result of the activities of developers and bankers which pushed house prices up to an all-time high and who are paying out well above the average just does not make sense. The people to whom I refer have lost their jobs or their incomes have been reduced and they cannot meet their mortgage repayments and are being taken before the courts.
If the Minister of State were to indicate that only one house repossession occurred last year, it would not alter the fact that amendment No. 42a should be accepted. One person being dispossessed by a financial institution the ordinary taxpayer of the State is bailing out because of its corrupt practices is one too many. It is one family and broken heart too many. We all know that, unfortunately, it is not the case that it is only one family that has been dispossessed. We have seen a large increase in the number of applications for repossessions through the courts. Between 2007 and 2008, the number of applications increased by 100%. There is every likelihood that these applications are being progressed in the High Court in anticipation of the NAMA legislation going through when they will be processed further.
I ask the Minister to take my amendment on board and if he feels the wording is wrong, he should come back with his own terminology. However, he should agree to what is intended in spirit by the amendment. I understand the Minister will not accept the first part of the amendment because of the amendment put forward earlier by Senator Twomey and his colleagues in the Fine Gael Party. However, mortgage repossession is an issue that must be dealt with.
The second amendment in this grouping is No. 42a. This again deals with the issue of mortgage repossession and allows for those who took out mortgages post-2004 and were forced into a situation of paying way over the odds to have their mortgages written down by the financial institutions, as long as those mortgages do not exceed a limit of €500,000 and the maximum write-off will not exceed 30%. Applications for this would only be accepted within one year of the commencement of the repossession process.
The second part of this amendment allows customers of these institutions with mortgages on primary residences to move from fixed interest rates to variable rates without incurring a financial penalty. I have raised this issue previously in the Seanad and in the context of the local authorities. I am aware we could deal directly with local authorities without dealing with the financial institutions. Some local authorities throughout the State have tenants in local authority houses who have been provided with mortgages by the local authority. Some of these tenants are paying over 10% fixed interest rates. It is scandalous this continues in this day and age. Some hundreds of these mortgages are in existence in my county of Donegal and I know this situation is replicated throughout the State. The issue should be dealt with.
The third part of the amendment seeks to ensure the services provided to disadvantaged urban areas and rural towns by these banks continue to remain in place. Where there are gaps, a basic, limited banking service should be provided for those who are financially excluded so that they have right of access to the same types of services as other communities. I ask the Minister to consider these amendments. I intend to press amendment No. 24.

Senator Marc MacSharry: I wish to address the second part of amendment No. 24 which concerns the proposed moratorium. The Minister and Members are aware that I have pursued this issue and have sought to prevent every repossession of family homes over many months. I, with another group of individuals, have drawn up a set of proposals which was presented to every Member. Some of those proposals have been debated here. The Minister received those proposals in August.
I know the Irish Banking Federation, IBF, in conjunction with the money advice and budgeting service, MABS, issued a statement of intent with regard to working with people and announced the establishment of its own oversight committee to monitor the application of that statement of intent. I recommended on the Order of Business today that the Leader of the House should contact the IBF to see if Members could sit on that committee and contribute to that oversight.
Notwithstanding the stated intentions of those banking institutions affiliated to the IBF, we need to provide some legislative basis to protect family homes against repossession. Not all the institutions are covered by the statement of intent. Start Mortgages, GE Capital and, perhaps, Springboard are not covered. I am not too sure about Springboard as it may be affiliated to the IBF, but the first two are not. If we did an analysis of repossessions or of the applications for court orders for repossessions, we would probably find that the increase in numbers is largely included in those institutions.
It does not appear that any amendment in this regard will be included in this legislation, but perhaps an amendment could be included in the Enforcement of Court Orders (Amendment) Act 2009. We should look at giving the public some element of further security and this should be enshrined in legislation. I accept we have the regulator’s code of conduct for mortgage arrears and that we have had the IBF protocol heretofore and that we had a further IBF commitment today. However, much of the language uses terms such as “in the event that” or “where appropriate” which scares me somewhat.
I am not trying to score any political points in this area and fully accept the aspirations of all Members in trying to cater for families faced with difficulty in the current economic circumstances. Something must be done to acknowledge that what we see at the moment is but a ripple in what could build to be a tsunami. The ESRI’s predictions of 35,000 may well be conservative. These figures are not cited to scaremonger in any way but to encourage us to take the appropriate steps to prepare for what could be a very difficult situation in the coming years. I think we will face these difficulties and do not think anyone would blame us for being prudent. While I do not support the entire amendment, I ask the Minister to take these points on board.

Senator Liam Twomey: I move amendment No. 31:

In page 24, between lines 24 and 25, to insert the following subsection:

“(2) The establishment day referred to in subsection (1) shall not precede the submission of an updated business plan and an analysis of the assumptions underpinning it to the Oireachtas Committee on NAMA.”.

Amendment put and declared lost.
Section 8 agreed to.
Section 9 agreed to.
SECTION 10.
An Cathaoirleach: Amendment No. 32 is out of order as it involves a potential charge on Revenue.

Amendment No. 32 not moved.
An Cathaoirleach: Amendments Nos. 33, 35 and 35a are related and may be discussed together, by agreement. Is that agreed? Agreed.

Senator Dominic Hannigan: I move amendment No. 33:

In page 25, subsection (1), between lines 2 and 3, to insert the following:

“(d) facilitating specified service providers in the fields of the provision of emergency housing, transitional housing and related areas to have preferential purchasing rights in relation to the purchasing of such housing units, particularly where there are housing problems as defined by the local authorities.”.

Senator Joe O’Toole: I welcome the Minister for Defence, Deputy O’Dea, and wish him well in dealing with the legislation. I am proposing my own amendment, amendment No. 35a, and will also speak to Senator Mullen’s amendment.
Page 26 contains the words “distribute assets in specie to the Minister“. It is my understanding that the words “in specie” mean that something will be transferred as is, more or less, that it will not be developed land and that it will not be land that will be transferred to the Minister for Finance in order for him or her to liquidate or sell. I tabled amendment No. 35a to gain an understanding of the Minister’s intentions. This is something I raised with him during the course of the summer, that there should be some community input, community gain or added value for ordinary people and communities.
The only reason I can see that these words are included is that the Minister will use something for the common good or the implementation of public policy. Therefore, if, for instance, NAMA has a field that is now worth nothing more than agricultural value, it might be made available for the building of a hospital, a school, houses for local authorities or a sports or other local facility. In other words, the Minister could pass it on. I presume — I want to be assured on this point — this will not be a cash transaction at any stage and that the term “in specie” means that it will involve a transfer of deeds for one property to another.
The other issue that struck me was that if, for instance, NAMA found itself with 50 houses in an area, in which their value had certainly not met the cost of building them but where they were appropriately situated for use by a local authority, the local authority might get them from the Minister, displace the cost of building alternative housing and thereby save money through a transfer of property deeds, etc.
I have given only a few examples of what I am talking about. I have proposed the insertion of the words “to facilitate, inter alia, the development of infrastructure and public services for communities recovering from the financial crisis”, but it is necessary to gain an understanding. It is not that I consider the words I am proposing are crucially important, but I want to hear the reason the Minister would want some NAMA deeds, property or assets transferred into his or her ownership.

Senator Marc MacSharry: I know from where Senator O’Toole is coming. While it would be great if, ultimately, there could be a community gain if NAMA were to make a profit and get credit flowing again, I have a concern that when assets ultimately come into the ownership of NAMA, as a result of default or otherwise, it will undermine its ability to make a profit if we do sweet deals for the certain local authorities or otherwise. I am interested in hearing what the Minister has to say in that regard. I agree that infrastructural projects such as community facilities and social housing need to be undertaken, but not if it is the case that Senator O’Toole wants the State to rape NAMA for these assets without having to pay for them because that would undermine effectively the functions of NAMA. Like Senator O’Toole, I am interested in hearing what points can be made in that regard.

Senator David Norris: I support Senator O’Toole’s amendment which is an important one and I agree completely with my colleague. I do not share Senator MacSharry’s reservations, although I am sure they are well meant. I accept what Senator O’Toole stated. It is almost like the phrase “in kind” and it refers to material assets. One of the reasons I am particularly keen on this is that I have since January been suggesting that there should be a kind of land pool. Since much of this distressed land is around the major areas of population, it should be possible and would be a laudable objective of Government to take control of some of that land, divide it into allotments and issue it to every unemployed person in that area. To have a small parcel of land, a kit of tools, seeds, plants, instruction booklets and so on would get them out of the house, be a cure for depression, give a bit of exercise and supplement both their budgets and their diets. I would include that with all the other objectives to which Senator O’Toole referred.
Why should the State not have access to these things if infrastructure projects can be aided? That is exactly what we want. We want to get infrastructural projects moving. I strongly support what Senator O’Toole has said and I look forward to the Minister’s reply.

Senator Liam Twomey: There is scope to have a good debate on this issue at a later date. A lot of land and property is being taken over by NAMA. There will be groups of houses, property and land for which NAMA will have no function. When NAMA is managing this type of property, it might not get around to making contact with the relevant authorities in regard to what it might be able to do with it. It would be good to see a proactive approach between the different State agencies. For example, if the NRA is planning to build motorways or roads, it could contact NAMA to see whether the infrastructure is there for it to access. The same goes for housing and other property.
However, this could also go the opposite way. NAMA will be left with thousands of half-built houses, which will possibly not be in the best areas or zones, and there might be a desire to offload these to NAMA for social housing, which would be inappropriate because they might be socially isolated or not close to infrastructure. Nonetheless, while it can go both ways, this is certainly something that should be considered across Departments and agencies. It is not just a housing issue as there is also an infrastructural aspect, which could be very useful. We should consider this matter again when we have finished dealing with the Bill.

Senator Dominic Hannigan: I support amendment No. 35a in the names of Senators O’Toole and Ross. Earlier I moved Senator Ronan Mullen’s amendment No. 33 in his absence. I also wish to deal with my amendment No. 35, which seeks to make appropriate assets available for public, community or social use either free or at a non-commercial cost, or transfer assets to appropriate statutory agencies to facilitate such use. The motivation for this is to try to make up for the lack of facilities for young people across the country, particularly in the commuter belt around Dublin.
I carried out a survey during the last year of several hundred young people across the commuter belt, asking them what they thought they most needed in their area and what facilities were lacking. I can make the report available to the Minister. From the responses we received, we found that different age groups felt they could not go to youth clubs because none existed. Over 60% of 10-year old and 11-year old children had nowhere to go in their locality. When we asked them in focus groups what the result of the lack of facilities was, one comment we received was that it lead to a lack of integration with their peers and anti-social behaviour with everyone else. The feeling we got from talking to them was that all teens would use a youth cafe-type facility.
We also carried out interviews with individuals involved in providing facilities for young people. Mr. Tommy Lavelle, programme manager at Kildare Youth Services, said:

One of the main obstacles to providing services for young people locally in Kildare is the lack of community-owned facilities. Unfortunately a lot of our work currently is carried out in commercially owned properties, which means paying commercial rent.
Geraldine Hogarty, regional director of Meath Youth Federation, said:

Like most voluntary organisations, the main challenge is funding, particularly this year because our budget has been cut dramatically, which means we’ve had to close our facility in Ashbourne. We are hoping to save the youth club by using St. Declan’s school but the drop-in centre we operated three nights a week for older teenagers is gone.
This is the type of reaction we are getting across the commuter belt. To try to provide facilities, particularly for young people, is very difficult because those involved must pay commercial rents and, with the cutbacks, they are finding it very difficult to find the money.
The amendment calls on the Government to recognise this and to put a process in place to enable NAMA-type properties to be made available to youth groups. We recognise that this would be on a short-term basis, perhaps for a short number of years, and we would like it to be for a peppercorn rent. What we suggest is a process whereby the Government can put this into action. The first step would be the identification of the need for these facilities, which would probably initially involve some sort of analysis carried out in some 50 towns and villages around the commuter belt, and then throughout the rest of the country, to find the gaps. Some towns and villages already have facilities available for young people but many do not, say, 60%.
The second step is the analysis of the supply. One of the aspects the €240 million annual cost of running NAMA will cover is the assessment of what properties are available in town and village centres in terms of empty office blocks and empty retail shops. NAMA will carry out an assessment of how likely it is for these properties to be rented out or sold in the short term and medium term. No doubt, because of the amount of oversupply — anybody can walk down the streets of any of our towns and villages and see the amount of oversupply — one of the points that will come out of such a study by NAMA is the number of properties that are likely to remain vacant for a considerable time in the future.
What we are then asking is for NAMA to direct the owners of the properties to enter into arrangements with those identified groups which lack facilities, on a peppercorn rent-type basis, for a short number of years. We recognise and hope that in years to come these properties will become more desirable as the economy picks up and, as it does so, the Government will no doubt have more resources available to provide additional funds to these youth groups so they can expect in a number of years perhaps to pay higher rents or purchase their own properties. In the short term, when that funding is not available and when the properties are available, we suggest they should be made available at a peppercorn rent for a short number of years. I ask the Minister to consider this amendment.

Senator Pearse Doherty: I support Senator O’Toole’s amendment, which makes sense. If I understand it properly, we are referring to assets that have already been transferred from NAMA to the Minister; therefore it is not a case of raping NAMA to provide for infrastructure such as schools and other facilities. My amendment No. 32 was ruled out of order, rightly so, and perhaps it showed lack of experience on my part in terms of the levy. However, the core of my amendment had the same idea behind it, namely, that we should be using some of the assets of NAMA to provide for the future infrastructure of the State.
I understand the point made by Senator MacSharry, which was that we cannot just open the asset trunk and take whatever we want, and that we need to manage these assets and ensure the State recoups the billions of euro we will pay for them. However, where it makes financial sense, where resources are needed and where greenfield sites are required for infrastructural projects such as railways, new schools or housing estates in areas where it is proper that there should be housing development with all the access and amenities delivered, then it does make sense. The contrary to this is where a local authority will take out a loan from a financial institution, perhaps the same institution covered by this legislation, pay a high interest rate for it, then go to building developers and probably pay over the price for a housing estate to provide social housing, when there is a similar asset in NAMA that we already own but do not decide to use for that purpose. It makes sense that this proposal has been made. It is not a case of opening up everything and asking where we will locate these assets throughout the country but rather a case of where there is a need for society and where it makes financial sense, it should be followed.
The proposal by Senator O’Toole is different from mine because it deals with assets already transferred to the Minister, whereas I and others have spoken about assets with NAMA that should be at the disposal of the Oireachtas for building the type of infrastructure that is needed, such as schools, hospitals and community services, if it is financially prudent to follow that course of action.

Senator Eugene Regan: I do not see the difficulties with Senator O’Toole’s amendment, which I fully support. It is an enabling provision, not an obligation on NAMA, to transfer assets in specie. It is not limiting, as it specifically states “to facilitate, inter alia, the development of infrastructure and public services“. It seems it can be in the interests of both parties. Since it is not an obligation, there will have to be consideration for the transfer of these assets. In all the circumstances it is not a question of the Minister appropriating property, but it does provide some guidance on what these assets may be used for. As it states “inter alia”, it does not constrain the Minister unduly on what use can be made of the assets. If the assets cannot be used for these purposes, what is the purpose of the provision itself?
Senator MacSharry spoke about sweet deals and so on. There has to be consideration. It must be a sort of arm’s length transaction between NAMA and the Minister. Why not have deals of this nature in the public interest? It is a good amendment and if we are to have any reasonable dialogue on the Bill in this House, it is the type of amendment that should be accepted by the Minister. What is the intention of this particular provision? What would be the uses of such property when transferred in specie?

Senator Michael McCarthy: I support the points Senator Hannigan made on our own amendment. It states:

In page 26, subsection (2), between lines 10 and 11, to insert the following:

“(a) make appropriate assets available for public, community or social use either free or at a non-commercial cost, or transfer assets to appropriate statutory agencies to facilitate such use,”.
There is a huge economic challenge now more than ever, but there is also a political dilemma facing a generation of politicians of a magnitude that has never occurred in the history of the State. We will all make cases for the retention of funding for various resources and services, but one of the poor relations in the community and voluntary sector is that of youth work. Senator Hannigan quite rightly points out that there is a poverty of resources in respect of youth facilities. There are a few very successful youth cafés in my area, such as those in Skibbereen, Bandon and most recently in Dunmanway. As I was involved in the creation of the Dunmanway youth café, I know how difficult it is to source funding.
There are infrastructural problems with projects such as youth cafés, for example, locating a suitable premises, that can make or break the projects. We see so many housing estates, apartments and other assets that are lying idle owing to the economic conditions. We are now in a situation where we can do something about it and I think this motion is worthy of consideration and adoption.
The former Minister of State with responsibility for youth affairs, Ms Síle de Valera, published a youth strategy in 2003. It was the first co-ordinated approach to youth work in this country and it dealt with the period 2003 to 2007. We are now in 2009 and there has been no successor to that strategy. That is indicative of the failure of the Government to look in a co-ordinated way at providing facilities and developing a new strategy.
Family resource centres could also benefit from this amendment. We all have been lobbied extensively by people in family resource centres to retain funding and to meet head on the McCarthy report which seeks to merge, reduce in number or abolish these centres. Many of them do not have suitable premises, yet they are paying for leases and rents with effectively dead money because they will never realise the assets involved, even though there is a short-term return. We should look at this motion in the spirit in which it is attended and do something about providing resources in these critical areas. The results of Senator Hannigan’s survey on youth attitudes in the commuter belts is available on the Labour Party website, www.labour.ie.

Deputy Willie O’Dea: As explained, NAMA must have a commercial remit and generating a return for taxpayers is its overriding objective. The purposes and powers of the agency have been carefully drawn up to ensure it can operate effectively and generate a return on the State’s investment.
That being said, the Minister is not opposed to giving Ministers and State agencies a first opportunity to purchase NAMA assets where this is important to social developments in their areas, so long as the purchases are at a commercial rate. For example, NAMA may be in a position to facilitate the Department of Education and Science or the Department of the Environment, Heritage and Local Government where these bodies have requirements such as schools, parks and so on. These requirements facilitate the creation of desirable developments and encourage vibrant and sustainable communities. Such bodies could be given a first option on disposals for a limited period and they would have to pay the reasonable market price.
It is unnecessary to include Senator O’Toole’s amendment under section 12(2)(h) because that is explicit from the purpose of the Bill which was amended by the Minister in the Dáil to include a phrase “to contribute to the social and economic development of the State” in section 2(b)(viii). The needs of the community and the economy will change over the ten-year life of NAMA and it has sufficient powers to address the various issues. The inclusion of that amendment by the Minister on Report Stage in the Dáil gives NAMA sufficient powers to do the very desirable things that are being discussed in this House. It also enables NAMA to give guidelines, directions and so forth. That is a much better way to proceed than enshrining the thing in law because the needs of the community and the economy will change over the projected ten-year lifespan of NAMA. The Bill, with its purposes amended by the Minister in response to the debate in the Dáil, provides a much more flexible way to achieve what we all collectively want to achieve.

Senator Joe O’Toole: I hear what the Minister is saying and do not disagree with the points he has made, but there is something wrong here. What is the Minister doing in the middle of an arrangement where a local authority has first option on an asset put up for sale by NAMA? There is no place in the business plan for the Minister to be acting as an agent between NAMA and a buyer, whoever that buyer happens to be. That is the reason I have asked this question. There could only be one reason for transferring it in specie to the Minister. As Senator Regan pointed out, I have been careful with the words. It leaves all sorts of options open and does not require the Minister to do anything. It could sit there for ever more and never be utilised. The language jumped off the page when I read the Bill, to “distribute assets in specie to the Minister”. It does not say to sell or to move, but it clearly indicates a transfer of value. I tried to interpret its purpose or intention. All I can think of is that if the Minister or Senator MacSharry were driving home tonight they would see villages with perfectly finished houses for sale for €100,000. There are no takers for them, yet they cost more than that to build. They are effectively white elephants which are way below the long-term market value; therefdore, what does one do with them? One Minister told me: “Sure we might have to bulldoze some of these houses and turn them into football pitches”. I understand the thinking behind it, although I am not saying that in a snide manner.

Senator David Norris: Mr. Tom Parlon said it on radio.

Senator Joe O’Toole: He was reacting as any of us here would do. The suggestion was that if somebody built 30 houses in the middle of nowhere, the location was all wrong and nobody would ever live in them. I understand what the Minister has explained and the change on Report Stage in the Dáil makes sense, but he did not answer the question posed by myself and Senator Regan, namely, what exactly was the purpose of that line in the Bill. Section 12(2)(h) states: “distribute assets in specie to the Minister”. I spoke earlier on the business plan and I understand how NAMA works, but I do not understand that line. Can the Minister explain why NAMA would be transferring anything to a Minister? I could understand it if it was being transferred to an auctioneer or somebody else, but not a Minister. Will the Minister be accepting bids? What exactly will happen? It does not fit with everything else that is there. I am not disagreeing with one word the Minister said, but there is a lack of clarity. The Minister and I have argued for many years, but I think he does not know what that line is there for.

Deputy Willie O’Dea: I think I do.

Senator Joe O’Toole: I would like to hear what the line is there for.

Senator Dominic Hannigan: The Minister mentioned that the needs of the community will change over time and that, as a result, he did not want to direct NAMA on what it should do with its land. It is clear that needs will change. If one looks at the demographics of the commuter belt one will see that at the moment we are going through a baby boom. In the past decade, thousands of families have moved into the commuter belt and many of them have eight, nine or ten-year-old children who will soon be teenagers. Needs will change in that there will be a greater demand for youth cafés and other facilities than at present. We already have a problem in towns and villages due to the lack of facilities leading in some instances to anti-social behaviour. The long-term development of teenagers is suffering as a result. I agree with the Minister that the needs of the community will change but what will not change is the supply of facilities. It is clear that in the short to medium-term there will be less funding from local and central Government to fund new facilities. Therefore we need to examine this imbalance between a growing demand for facilities and a supply that, at best, will stay the same. Given the proposed cutbacks, however, the supply may actually be reduced.
We need to do something, but I disagree with the Minister on the way to handle this matter. I do not think we can leave it to the market to sort it out. As a former member of a local authority it is clear to me that developers and landowners will not make such facilities available unless they are directed to do so, or they see a commercial return. There will not be a commercial return from the provision of youth facilities in the short to medium-term; therefore, we need to see a direction in this regard.
I would like to hear the Green Party’s view on the issue. Six weeks ago, before the Green Party conference, I thought I heard Green Party Ministers claim they had got a social dividend within NAMA, which would be included in the revised programme for Government. That seems to have disappeared completely, however. I know it is late in the day, but I would be interested to hear the views of a Green Party Senator on the issue. I fail to see why one cannot make some such provision. Direction is best, rather than leaving it to individual owners to decide on their course of action.

Senator Marc MacSharry: I would be glad to hear the Minister’s response on that matter. I would be uncomfortable if we just go to line up the chest and say “Everybody take their pick”. Is it being suggested that we should provide free social housing through the NAMA process? I agree we need facilities such as social housing and youth cafés. This country has had a catastrophe. We no longer have a sports capital programme, for example, whereby these kind of facilities were being provided. That is due to the fall in revenues, so we cannot afford it. NAMA will help us to get back on the road to recovery and get the economy operating properly; perhaps therefore we can have the sports capital programme and youth cafés. Of course, social housing is needed and I agree with the Minister that it is appropriate that various State institutions or subsidiaries should take first place in the queue to purchase such things at their market value.
It is important to have the provision to “distribute assets in specie to the Minister” because at some stage, we hope, this downturn will come to an end and NAMA will make a profit. It is conceivable that there will be some assets left over and so it will be appropriate that they be handed over to the Minister as the representative of the State.

Senator Eugene Regan: What is the purpose of this provision? It is either for the type of purposes which were the subject of Senator O’Toole’s amendment, or for facilitating developer friends of the Government.

Senator Marc MacSharry: Come on.

Senator Eugene Regan: I do not want to load my argument but it has to be for a purpose; therefore, that point needs to be clarified. When the Minister is explaining things such as first options, he is going down the road which Senator O’Toole is endeavouring to outline in his amendment. NAMA’s commercial remit is accepted, although one would have serious reservations as to its commerciality, but that is beside the point in this regard. It is loading the argument to suggest that it cuts across that remit because it does not. The amendment simply gives some guidance for and purpose to the transfer of assets in specie to the Minister. If it is not for this purpose, I would be concerned about what other purpose it may be for because that is not outlined. The Minister says it is covered in section 2(b)(viii), but that is a general provision.
Section 12(1) states that “NAMA has all powers necessary or expedient for, or incidental to, the achievement of its purposes and performance of its functions”. The board would have the power to exercise those functions, yet section 12(2)(ae) states exactly the same thing — that NAMA may “do all such other things as the Board considers incidental to, or conducive to the achievement of, any of NAMA’s purposes under this Act”. One can say that is overkill in terms of being specific. This is a detailed Bill and is specific on many issues, so I do not see why it cannot be as specific on this point. The reality is that this is a very detailed Bill that is very specific on many issues. I do not understand, therefore, why we cannot be specific on this point.

Senator Nicky McFadden: What is the Minister’s opinion on the homeowners’ support scheme, about which I tried to speak to the Minister for Finance yesterday. This scheme could work in the area under discussion. NAMA could have an equity share in the property of the poor, unfortunate homeowners facing repossession. After the negotiation of a write-down agreement with the mortgage provider and homeowner, the latter would then be able to pay rent or some of the equity share in the house. At a later stage he or she might be in a position to buy back the equity in his or her house. Today the Irish Banking Federation made grandiose suggestions but it was really just inviting people to negotiate on their mortgage repayments. That is well and good but the banks are not offering any extensions of the terms of mortgages or security. There are so many in negative equity that I support Senator Mullen’s amendment fully. Will the Minister comment on it?

Senator David Norris: I will be very brief because we all want to proceed as quickly as we can. Senator O’Toole carefully crafted his amendment “to facilitate, inter alia, the development of infrastructure and public services for communities recovering from the financial crisis”. That would not be restrictive. The provision would be sufficiently flexible to take into account any changes in the community. I do not see a problem with it. Senator Regan has put his finger on the difficulty, namely, that we do not know the purpose of the provision allowing for the distribution of assets in specie to the Minister. We need to know the purpose. It chimes perfectly with the small phrase “social and economic development” in the introductory part of the Bill, which phrase the Green Party managed to include. That will be my last contribution. Perhaps we will move on.

Deputy Willie O’Dea: I am sorry to hear that was Senator Norris’s last contribution.

Senator Nicky McFadden: The Minister should not hold his breath.

Senator David Norris: I could change my mind, even on that one.

Deputy Willie O’Dea: On the various points made by Senators, contrary to what Senator Hannigan might believe, I am not an unthinking——

Senator David Norris: Monster.
SECTION 35.
Senator Liam Twomey: I move amendment No. 39:

In page 39, subsection (1), between lines 32 and 33, to insert the following:

“(f) the avoidance of conflict of interest by any expert adviser or service providers to NAMA and the participating institutions,

(g) the orderly property management strategy over a ten year period,

(h) for issuing loans, or for allowing security over which it has a charge be used as collateral for loans by other institutions by persons whose loans with NAMA are functional and not in arrears”.
Section 35 relates to the preparation of codes of practice for approval by the Minister. A number of aspects of NAMA are covered in this regard. Amendment No. 39 proposes that these codes of practice be extended to cover any conflicts of interest on the part of expert advisers or those who provide services for NAMA. It also suggests there be a proper management strategy over the ten-year period in which NAMA will be in existence. It further suggests there be a code of practice in respect of the issuing of loans and matters relating to the security of such loans. In view of the potential for conflicts of interest and problems to arise in respect of NAMA, I am surprised that codes of practice have not been laid down with regard to the matters to which I refer.

Senator David Norris: I support the general thrust behind the amendment. I am particularly in favour of the suggested new paragraph (f) which relates to the avoidance of a conflict of interest by any expert adviser or service providers to NAMA and the participating institutions. It is important to note that the matter of conflicts of interest is not sufficiently understood or recognised by those involved in business. I am a member of a number of boards which are non-profit making but which generate money that is distributed for other purposes. In that context, on numerous occasions I have been obliged to draw the attention of fellow board members to clear conflicts of interest. I was horrified that people at quite an elevated level of Irish life had no apparent understanding whatsoever of that which constituted a conflict of interest. I am of the opinion that serious conflicts of interest contributed in part to creating the predicament in which the country now finds itself. It is important, therefore, to make specific provision in respect of conflicts of interest in codes of conduct. This is the element of the amendment which is particularly important, which is why I am supporting it.

Senator Paschal Donohoe: I underscore the point on conflicts of interest. This matter is extremely important, particularly in the context of the companies which will be bidding for contracts relating to the €240 million or €250 million that will be on offer, in the form of professional fees and services, for each of the ten years in which NAMA will be in existence. Many of the services NAMA will be interested in acquiring will be so specialised in nature that it is likely one company will provide three or four of them.
We previously debated at length the conflicts of interest in respect of ratings agencies, the banking sector and what had happened with regard to shares.

Senator David Norris: Hear, hear.

Senator Paschal Donohoe: That is a classic example of a conflict of interest and there are many others during the lifetime of this agency. If guidance is to be given to the board on the kind of sub-committees it should establish, it should be given very pointed guidance on the need for it to be aware of the potential for conflicts of interest to arise in the context of the work it will do. Let us be clear that the boards of numerous existing financial institutions have failed to meet their responsibilities in this regard. If we are going to learn from what happened in the past, an amendment of this nature is extremely appropriate.

Senator Fidelma Healy Eames: I support the amendment. We must be extremely careful with regard to conflicts of interest on the part of expert advisers or service providers to NAMA. I have always been strongly of the view that we have suffered as a result of relationships that were too close. At local government level, for example, architects or engineers who worked for county councils often took up positions in private practice. It was always my contention that these individuals were way too close to the decision-making processes relating to their previous jobs and should have been obliged to wait for a specified period before moving into the private sector. Equally, I am aware of instances where auctioneers who were local councillors voted on zoning matters. This behaviour was inappropriate and the individuals in question should never have had a say on any matter which related so closely, in financial terms, to their own interests. There is a need for a clear code of conduct to be established in this regard. Anyone who is offering advice or a service to NAMA must make a clear declaration of interests. If a question arises with regard to there being a conflict of interest, the individuals concerned should absent themselves from proceedings at that point.

Senator Alex White: I also support the amendment. As it stands, section 35 contains a list of the matters in respect of which codes of practice shall be prepared. There is then a provision in which the phrase “any other matter in relation to which the Minister directs NAMA to prepare a code of practice” is used. On the basis of past experience and the matters to which other Senators referred, I would have thought a code of practice relating to the avoidance of conflicts of interest would have to be included in the legislation.

Deputy Willie O’Dea: Section 35 provides that NAMA, within three months of establishment day, is to prepare codes of practice for approval by the Minister for Finance. It is normal practice for codes of practice at a State agency to be approved by the Minister with responsibility for that agency. Section 35(1)(f) allows the Minister to make a code of practice with regard to any other matter in respect of which he deems such a code to be necessary. This general power of direction to make codes of practice is sufficient and it is unnecessary to include the codes of practice enumerated in the amendment.
Senators should consider the tenor of section 35. The codes of practice specifically referred to in the section cover the conduct of officers of NAMA, risk management and the disposal of bank assets. In other words, they refer to how NAMA behaves. With regard to how service providers should behave and possible conflicts of interest, that matter is best dealt with in the contract in engaging the services of the people concerned.

Senator Eugene Regan: The NAMA project must be approved by the European Commission, but I am not aware it has been notified to the Commission as yet. Therefore, when we have finished our work and the Minister has slapped down the various amendments suggested, recommending that general provisions be made to deal with the specific suggestions made therein – this is the second time he has done this with regard to the few amendments on which I have commented – we will still have to gain the approval of the Commission. In accordance with the communication from the Commission on the treatment of impaired assets in the Community banking sector, with which the NAMA Bill must comply, detailed information must be provided for the Commission before it signs off and approves this entire enterprise.
One of the specific provisions stated by the European Commission — the guidance on the application of state aid rules — is based on a number of principles, one of which concerns the management of assets subject to relief so as to avoid conflicts of interest. However, we do not deal with that issue. The Minister may not accept the amendment proposed, but when the Bill and the project are vetted by the Commission, he may find it has a difficulty because this is a specific requirement of the guidelines.
I commend the amendment to the Minister. If he does not accept it on Committee Stage, perhaps he will reflect on it before Report Stage. In avoiding the issue now and leaving it covered by vague general terms, he may find the Bill is outside the terms of the guidelines.

Deputy Willie O’Dea: I will mention the Senator’s arguments to my colleague, the Minister for Finance. As far as the European Commission is concerned, I am aware of its requirements. I am also aware of the fact that in our discussions with it, it expressed the view that there should be a certain degree of flexibility in the legislation because it must deal with an evolving situation. Therefore, everything should not be tied down rigidly, a point on which the Commission was specific. I hear what the Senator is saying and will communicate his comments to my colleague.

Senator Liam Twomey: I support Senator Regan that we should withdraw the amendment now and raise the issue again on Report Stage. That will give the Minister for Finance time to reflect on the amendment and perhaps he might wish to insert an amendment tomorrow.

Amendment, by leave, withdrawn.
Section 35 agreed to.
Sections 36 to 42, inclusive, agreed to.
SECTION 45.
Question proposed: “That section 45 stand part of the Bill.”
Senator Jim Walsh: Will the Minister give consideration to an addition? I am not sure whether this relates to section 45 which deals with the requirements NAMA will make of the people from whom it will receive a service — the service providers — or whether it relates to section 46 and the incurring of expenses by NAMA. I would like to see some reference made and some obligation imposed to ensure adherence to good corporate governance practices with regard to cost effectiveness and in securing value for money. I want to see this because of the manner in which, for example, money was paid out at the tribunals, one of the great scandals of our time. I would hate to think that the €2.5 billion, or whatever sum is involved in the next ten years, will not be spent as tightly as possible. I appreciate this could be taken to be understood, as it should be being part of normal corporate governance procedures. However, there are so many examples across all services which show that has not been happening that we should ensure there is a statutory obligation in this regard. I ask the Minister to reflect on the matter and consider whether there would be merit in bringing forward an appropriate amendment on Report Stage.

Senator Marc MacSharry: I agree with Senator Walsh. We must ensure this done. The issue must be explored. We have often heard, whether with regard to auctioneers — I am one — or solicitors that there is one price for Joe Public and a different one for the State agency. The attitude seems to be that we should milk the State. We must provide for whatever safeguards we can to ensure we get value for money, while at the same time ensuring we have the right expertise available.

Senator Paschal Donohoe: Senator Walsh has made a very important point and pointed to something that is missing. In the context of €240 million being spent each year on professional fees and services, it is vital some reference be made in the Bill to the need to seek value for money. I hope the Government will find a way to address this issue in the context of the further changes it may make to the Bill on Report Stage.
Section 45(c) refers to the need to avoid conflicts of interests, a point touched on by Senator Regan. The section gives credence to the point made that the need to avoid such conflicts should be met in the guidance to be given to the board.

Senator Liam Twomey: I offer Fine Gael’s support to Senator Walsh on this issue which involves the cost of professional fees. A substantial number of professionals will be taken on to deal with NAMA. From the point of view of transparency and accountability, it would be useful to include such a provision. Senator Walsh has raised the issue of costs on a number of occasions, particularly the cost of tribunals and the excessive fees paid to those involved. We have an opportunity before the legislation is enacted to provide for this. This side of the House would be prepared to give the matter strong consideration.

Senator David Norris: I too support Senator Walsh who has found an important loophole. The Minister referred to this issue on Second Stage. A number of us mentioned that the provision for the payment of fees was such an enormous sum and he made the point that it was to provide for a period of ten years. He also said that to obtain the best advice one had to go into the marketplace and that the best advice sometimes came at a very high charge. I will make two points in that regard. First, professional fees in a number of areas now show signs of a slide. That slide should be encouraged. Second, ordinary people looking in would be aghast if they thought that once again professional groups in the financial or legal areas were making considerable profits from the desperate attempts of the State to rescue the financial situation. For that reason I very much hope the Minister will take this important point back to the advisers and the Minister for Finance to see whether something cannot be put in place. One assumes it is good practice that this be done. It is important that it be put in place and clearly spelled out in the legislation.

Senator Fidelma Healy Eames: I, too, see a good deal of merit in what Senator Walsh said. Value for money is critical, given that the whole Bill has come about as the result of financial mismanagement and a lack of vision. We certainly do not want to see an industry developing around NAMA, as we have seen in the case of the tribunals. Let us be wise for the sake of the people.

Senator Eugene Regan: There will be a €2.4 billion industry developing around NAMA, reflecting the fees to be paid over the ten-year period. NAMA has already appointed legal advisers and auditors, but the question is whether there is a tender provision for services. There is no provision to ensure value for money is obtained. There should be a standard procedure to ensure value for money is achieved in the case of these services.

Senator Larry Butler: I support Senator Walsh who is quite right. He has mentioned this aspect on many occasions. We have seen millionaires being created on a regular basis at the tribunals. We do not want this to occur with NAMA. This is a good opportunity for us to ensure we set a trend in professional fees which should be looked at, given that everyone else’s wages are going down. I have said at parliamentary party level that wages cannot be driven down without the cost of services being decreased also. Professional fees are one aspect of the matter.

Deputy Willie O’Dea: On Senator Regan’s point, I must clarify that NAMA will tender for all contracts on the Government website, as required under EU legislation. As regards the specific suggestion made by Senator Walsh, section 45 imposes clear and onerous obligations on those taken on by NAMA, either as advisers or service providers. For example, they must “operate to the highest standards of honesty and fairness” and “with due skill, care, prudence and diligence” and must always act “so as to promote the best interests of NAMA”. That is sufficient to cover the point the Senator is making, but I will certainly communicate his views to the Minister. As it happens, he is just arriving; therefore, the Senator can repeat his suggestion to him, or I shall pass it on to him, if he so wishes.

Senator David Norris: I accept absolutely what the Minister says. On the other hand, people can behave in an extremely professional manner with due diligence, honesty and all the qualities the Minister listed. That does not mean, however, that they will not charge a great deal of money. I know, because I am very litigious and frequently have cause to employ lawyers. They sometimes do not see any conflict between all the requirements for honesty, probity, good governance and all the rest. They still see one as a bloody good fee. There is an opportunity here, therefore, to try to bring fees down, if possible.
Had I spoken immediately after Senator Regan, I would have said, as the Minister did, that there was a requirement in European Union law for open tendering, so on and so forth. I am very grateful to the European Union for this. I recall when the Competition Authority was being set up that one notable absentee was the requirement for an open competition for the executive posts. I managed to persuade the Government to include it. That was one small favour to which I contributed, but I make the point that there can be all these wonderful qualities and nobody says they are dishonest. It is not dishonest; in certain professions it is a particularly notable human trait to try to get the highest price possible. That does not conflict with any of the admirable qualities the Minister adumbrated, but it does not address the point made by my colleague on the other side of the House.

Deputy Willie O’Dea: Senator Norris should be aware that the words “prudence”, “honesty” and “fairness” are also included.

Senator David Norris: Any lawyer worth his or her salt could deal with that matter. I realise that the Minister and various others in this room could very well argue that it was honest and prudent. It would certainly be prudent from their viewpoint.

Deputy Willie O’Dea: And in the best interests of NAMA.

Senator Jim Walsh: I do not want to delay on this point. All I am asking is that the Minister for Finance is reflect on it. I appreciate what the Minister is saying and it should be understood in any private or well run operation but experience shows differently. I thought Senator MacSharry made a good point about the tendering process. I know from my many years of experience on local authorities, for example, that the official in charge of the tendering process was very happy once he or she had the required number of tenders. I also would have known that in real business operations he or she had one tender, with somebody else giving a cover price. The result was that the taxpayer was not getting value for money. I have been a consistent critic in this House of the waste of money at tribunals. The last thing we want to see is something like that happen with NAMA. It is part of good corporate governance to have cost-effectiveness and achieve value for money. Ideally, it should be a statutory obligation. I am not being prescriptive as to how it should be done, but it would mean that if subsequently a Minister found that someone had not performed to the required standard, he or she would have the power to fire him or her. To be quite honest, we must achieve such norms within the public service.

Senator Eugene Regan: When the Minister says there is an obligation under EU law to tender, in fact, some of the services to be obtained by NAMA will not be subject to the full rigours of EU tendering procedures as laid down in the services directive. Therefore, it is important that there be an effective tendering procedure for all the services to be acquired by NAMA, including legal services.

Acting Chairman: We thank the Minister for Defence, Deputy Willie O’Dea, and welcome back the Minister for Finance, Deputy Brian Lenihan.

Question put and agreed to.
Sections 46 to 48, inclusive, agreed to.
Amendment No. 40 not moved.
Section 49 agreed to.
Sections 50 to 57, inclusive, agreed to.

SECTION 58
Acting Chairman: Amendment No. 41 is in the name of Senators Alex White, McCarthy, Ryan, Prendergast, Bacik and Hannigan. Amendments Nos. 41 and 42 are related and may be discussed together, by agreement. Is that agreed? Agreed.

Senator Alex White: I move amendment No. 41:


In page 50, lines 34 to 37, to delete subsection (3). 10 o’clock
My amendment seeks to delete section 58(3) and section 59(2) for the same reasons, challenge the reason it is considered necessary to embed in legislation a restriction that looks, on the face of it, to be very considerable and draconian on an official such as the chairperson or chief executive of the agency. One could have an argument on one level about why it is necessary to restrict people at all in what they say. That is somewhat controversial because an employee at any level but particularly at the level of chief executive or chairperson would be expected to observe a duty of confidence and fidelity towards his or her employer. That would be no less of a requirement for the chairperson and chief executive of NAMA. I do not seek to argue — it would be hard to do so — that people should be invited to express their own views or debate issues on a frolic of their own outside their duties as chairperson or chief executive. Everybody expects, when coming before the Committee on Public Accounts, he or she is acting on behalf of the organisation he or she represents and leads. The expectation is that a person will conduct his or her submissions and questioning in a manner that is entirely consistent with his or her duty of fidelity to the organisation.
I cannot understand why it is considered necessary to place this considerably restrictive provision in the legislation. From what does it arises and does it reflect a particular concern of the Minister about particular recent events? I will be interested to hear his response before I come back to the amendment.

Senator David Norris: This is an interesting amendment. As I said earlier in the debate on the Bill, when I think the Minister was present, I recall his dealing with this issue in the other House. His response was to give precedents. The members of the Opposition claimed it was a unique provision. The Minister, however, had done his research or was supplied with information and stated this provision was contained in other statutes. I presume that this is the case and that the Minister will be able to rehearse these statutes for us tonight. However, this is such serious legislation that it is not appropriate for the Minister to rely on precedent alone. This is his nominee and suggests a curious lack of trust on his part in advance of the appointment; therefore, it is not related to the supposed defects of a particular individual. It is a generic matter. There is in government a suspicion of any person of goodwill within the apparatus who will give critical views of government. That is rather unhealthy. Government is improved by critical views. I do not mean critical in the sense of destructive but in the sense of being able to hold up the matter in hand to a reasoned critique. Government should not in any sense be afraid of a reasoned critique.
Whether it is contained in previous statutes, the phrase is a quite extraordinary form of words: “The Chairperson and the Chief Executive Officer, in giving evidence under subsection (1), shall not question or express an opinion on the merits of any policy of the Government or a Minister of the Government or on the merits of the objectives of such a policy”. That is a limitation on the giving of evidence which limits the material the committee can examine. For example, an opinion “on the merits” of a policy could be not just on the demerits but could indicate, “This is a very good idea because of (a), (b), ( c) and (d)”. In other words, the language prevents the chief executive or chairperson from giving any useful opinion because he or she can talk neither about the demerits nor the merits or positive aspects of a policy. I do not know whether this interpretation would stand up in law but it is certainly how it seems and would have the effect, if strictly legally applied, of spancelling the most significant member of the committee in giving vital evidence. I am still concerned, despite the Minister’s valiant defence of the provision in the other House. Can he find a way to consider the matter again?

Senator Liam Twomey: This is an interesting provision because it means the chief executive of NAMA will have the same obligations as a civil servant because he or she will not be able to comment on Government policy or state a personal opinion on policy that might criticise the Minister. I have never heard the CEO of any semi-State organisation, or any other organisation, who is employed by the Government and has come before a committee of the Houses criticise Government policy. If the Governor of the Central Bank was before the Joint Committee on Finance and the Public Service and was asked for his views on the structure of NAMA, they would contradict the public statement he made before getting the job because he would be forced to say nothing but to go along with the Government line.

Deputy Brian Lenihan: There is no contradiction. I had a long consultation with him today.

Senator Liam Twomey: The public comments he made before the Minister offered him the job were different.

Deputy Brian Lenihan: There is no contradiction.

Senator Liam Twomey: They were different. It does not allow these well——

Senator Alex White: He said there was a false dichotomy between nationalisation and NAMA.

Senator Liam Twomey: The opinions of these individuals are not going to be so critical that they will bring down the Government or seriously embarrass a Minister. It shows a lack of self-confidence that such a provision would find its way into legislation because I have never heard an individual at this level say anything extremely critical of a Minister or the Government. They may sometimes couch their comments in such a way that one might not be happy with them but they certainly would not give offence.

Senator Fidelma Healy Eames: This choice of words is extraordinary. It sounds as if the Minister wishes to hire a zombie instead of a competent individual. By spancelling the chairperson and chief executive in this manner the Minister does not allow for the benefit of their experience over time. NAMA will change and Ministers will come and go. The Minister does not allow for the judgment of the people concerned which may be critical in informing the Minister of the day. In this choice of words the Government is acting like a dictatorship. I said yesterday that the Minister had given himself extraordinary powers. They might belong to another Minister for Finance on another day. We would not want to see another disaster in the state of the public finances and the lack of bank regulation such as that which the Minister’s predecessor allowed to emerge and develop. I strongly urge the Minister to reconsider this provision and, if he does not delete it completely, to find another way to state it because it is extraordinary.

Senator Eugene Regan: I support the amendment which I presume arises from section 37(4) which reads: “The Chief Executive Officer is not a civil servant within the meaning of the Civil Service Regulation Act 1956”. The provisions indicate the chief executive officer “shall perform any other functions conferred on him or her by or under this Act or by the Board” and that the “Chief Executive Officer is responsible to the Board for the performance of his or her functions and the implementation of NAMA’s strategic targets and objectives”. For example, the chief executive officer will report to an Oireachtas committee but may discover the Government has adopted policies which cut across his or her ability to carry out the functions designated to him or her by the board. The provision is very limiting. One’s evidence might have to be so constrained to ensure one would not touch on the Government’s policy, even if it has had the gentlest impact. This is an unnecessary provision, particularly for a body to which we are conferring so much responsibility and trust with the banks’ liabilities. Not to be able speak freely on how these functions are being carried out and being constrained in this manner is over the top.
Section 38(5) states, “The Chief Executive Officer is the person who is accountable for the purposes of the Comptroller and Auditor General (Amendment) Act 1993.” Again, there is a link with this constraint and the officer’s responsibility in this regard. What is the Minister’s rationale behind these provisions? There must be a good reason to justify these draconian provisions.

Senator Joe O’Toole: I welcome the Minister for Finance back to the House. It is worthwhile examining the birth of these of sections. Every Member has asked why the Minister is doing this and what was he thinking. I will wager with him that he never saw those words, never asked for them to be inserted but only saw them when the Bill was finally drafted. I will wager further that the officials sitting behind him tonight who put together the heads and contents of the Bill never recommended this section be inserted. I would like the Minister to confirm this to the House as I know how the process happens. The Department works hard at putting together all the important aspects of the legislation. It then sends it to the Office of the Attorney General and the Parliamentary Counsel. They are the people who control the country; they are the permanent Government.

Senator Paschal Donohoe: That is a chilling thought.

Senator Joe O’Toole: They press a button that ensures a section stating no councillors, Deputies or Senators and various other clauses concerning the powers of chief executives are inserted in legislation. This happens mindlessly without discussion with the Minister. If the did not ask for it to be inserted, he should take it out. He should assert himself.

Senator David Norris: Hear, hear.

(Interruptions).
Senator Joe O’Toole: There is no legal or practical reason for this section to be included in the legislation. If the chief executive were to rubbish the Minister of the day at an Oireachtas committee, he or she would be sacked the following morning for breach of trust and confidence. There is no protection whatsoever provided in this provision.
We could have a nice discussion about the constitutional issues that could arise. I am waiting for someone to test these provisions in the courts. One Member has said these words are normally included all the time. They are, in fact, relatively new and only have been inserted in legislation for the past 15 years. To make life easier for the Minister when he responds, I recall having such a clause removed from legislation before. In a moment of passion here one night we addressed the appointment of a chief executive to a semi-State body and the then Minister of State, Joe Jacob, conceded the point. It would be interesting for the Minister to listen to the rational and reasoned argument of the Upper House and remove this provision, as it adds nothing to the Bill. Would the Minister hide behind that provision? There is no way that he would. This is a piece of work and has no business being included in the legislation. I will just say, “There are only a couple of us here. Let us take it out.”

Senator Paschal Donohoe: I support my colleagues on this amendment. I cannot imagine why anybody with the serenity and judgment for the post of chief executive officer of the agency would attend an Oireachtas committee and perform in a negative manner. Will the only person from NAMA who will be able to attend an Oireachtas committee be the chief executive? Section 58(2) states, “the Chief Executive Officer appears as an accountable person and not as an Accounting Officer” before the Committee of Public Accounts. I can imagine many circumstances in which the Committee of Public Accounts would want to engage with the Accounting Officer of NAMA, particularly given that one of the main areas in which it can engage with the agency covers its economy and efficiency and the use it makes of the resources at its disposal. What about other officers such as the finance officer attending a committee?
Section 59 deals with the chief executive officer going in front of other Oireachtas committees. If he or she cannot respond to issues of policy, it beggars the question: will they go in front of any of them in the first place?

Senator David Norris: I invite the Minister to outline for us the precedents, if he still has them. Senator O’Toole has jogged my memory concerning the battle in which engaged as an awful duo in having one of these provisions removed from legislation.
Let us suppose the chief executive or the chairman of the agency comes to discover evidence that suggests a certain element of policy could be dangerous to the country’s interests. He or she will be inhibited by this section in giving this in evidence to the Committee of Public Accounts. Does the Minister consider that to be a good provision because I believe many Members on both sides of the House would not? What will be the penalty if he or she does not observe this provision? As Senator O’Toole correctly said, if the chief executive went out to, say, hold up to ridicule the Minister, one could not have this treasonous behaviour undermining the Minister’s standing. In a case where in good conscience the chief executive wishes to alert the committee to a danger, however, what course of action would the Minister recommend? Would the chief executive have to resign or would the Minister fire him or her? Is there a penalty included in the legislation for such a transgression? There appears to be no penalty, which seems very strange. This is beginning to sound very much like the Minister’s colleague, the Minister for Justice, Equality and Law Reform, in introducing the blasphemy Bill, when he said it was being done to salve the old backwoods people round the joint and that it could never under any circumstances be operated.

Deputy Brian Lenihan: There would still be a penalty in that case. There is no penalty in this instance.

Senator David Norris: That is even better.

Deputy Brian Lenihan: I will explain why in a moment.

Senator David Norris: I am delighted. I have actually unearthed something. It is complete nonsense.

Deputy Brian Lenihan: No, it is not.

Senator David Norris: Of course, it is. If there is no penalty, he or she can happily whistle away like a canary down a mine, warn everybody about it and the Minister can say, “Tut, tut, next business.” It is wonderful. This is Ireland. I am glad I live here.

Deputy Brian Lenihan: This is not Ireland. This is the United Kingdom of William Ewart Gladstone.

Senator David Norris: I knew the Minister would go back to the empire sooner or later.

Deputy Brian Lenihan: Senator O’Toole sought the precedent for this.

Senator Joe O’Toole: No, I did not.

Senator David Norris: I did.

Deputy Brian Lenihan: Obviously, the details of the legislative process in the Department are internal to it and the Minister but it is the case, in regard to the amendment, that it is standard procedure to include a provision in legislation dealing with State agencies on the giving of evidence by officials.

Senator Joe O’Toole: The problem is it is not the Minister’s Department. That is the point.

Deputy Brian Lenihan: It is a standard provision, for which there is precedent which I will outline before dealing with the merits of the section. In the Standing Orders applicable to the Committee of Public Accounts Standing Order 158(7)(b) provides that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a member of the Government or the merits of the objectives of such policy or policies. There is a provision applicable to all Secretaries General in one of the Oireachtas enactments but apart from that, it is being extended to chief executives, for example, in the context of section 16(2) of the Consumer Protection Act 2007, section 43 of the Garda Síochána Act 2005 — Senators will recall that was the section which made the Commissioner available to appear before parliamentary committees, section 21(9) of the Health Act 2004 and section 50(2) of the Employment Equality Act 1998. In terms of the scheme of the two sections at which we are looking, sections 50 and 58, section 58 deals with the position before the Committee of Public Accounts, while section 59 deals with any other committee.
Senator Donohoe has asked why the chief executive is described as an accountable person. In our financial procedures the Accounting Officer is responsible for a Vote. If a person is responsible for expenditure from the Central Fund, he or she is designated as Accounting Officer. That practice is also followed in regard to agencies. Staff for NAMA are being seconded by the National Treasury Management Agency; hence the chief executive, where advised, should be described as an accountable person. That is a pure matter of nomenclature. I understand that in the United Kingdom all such persons are designated as Accounting Officers but in Ireland the tradition has been the Accounting Officer is only the officer responsible for a Vote.
What section 58 reflects is the traditional practice of the Committee of Public Accounts dating back to the time of Gladstone. I assume the basis upon which civil servants agreed to engage with the committee and appear before it was that they would not be placed in a position where they would have to criticise Government policy or evaluate the merits of Government or ministerial decisions. They appear as Accounting Officers; that is the origin of section 58(3). In fact, the section is not inserted to protect the Minister against some revelation. Neither is it inserted to protect the disclosure of any fact nor for the purpose of ensuring the person cannot communicate freely on matters of public importance. No criminal sanction is provided for in the section, the purpose of which is to protect the chief executive against the activities of Deputies and Senators.

Senator David Norris: That is the problem.

Deputy Brian Lenihan: It does not just rest on Standing Orders. It rests on the principle of the public servant appearing before the committee; the Chairman can then refer to an express provision in the statute which states that, when questions are asked about general Government policy, the person is not obliged to answer them. That is the purpose of the provision.
The chief executive of NAMA, when appearing before the Committee of Public Accounts, can be questioned on the accounts of the agency. It has always been the practice at the Committee of Public Accounts that the Accounting Officer does not comment on the merits or demerits of a Government decision or Government policy. The purpose is to audit the moneys spent.
The principle is extended in section 59 to any other Oireachtas committee. The practice of chief executives appearing before Oireachtas committees has grown in recent years and it is a good one. I am not disagreeing with it. It is not a practice in which Secretaries General have engaged to any great extent. In general, the Minister takes full responsibility before any other Oireachtas committee because the division between the Secretary General and the Minister in the management of the Department is an unusual administrative arrangement, different from that which obtains, say, in a company. I am always quite shocked at the number of experts on corporate governance who suggest a Minister is like a chairman of a company and the Secretary General is like a managing director. That is not the position in a Department of State. In effect, in a Department of State the Minister is the chairman and managing director and the Secretary General is the head of personnel, the head of finance and the secretary of the organisation.

Senator Joe O’Toole: He or she is the Accounting Officer.

Deputy Brian Lenihan: He or she is the financial controller. In that capacity he or she can say no to the Minister and tell him or her to back off. That is a different management relationship.

Senator Joe O’Toole: Not every day.

Deputy Brian Lenihan: It happens more frequently than the Senator might believe. That is the practice of departmental administration and the Committee of Public Accounts has fitted into that tradition for a century and many decades beyond. That is the origin of the provision in section 58.
The Oireachtas and the Government of the day have agreed that executives of these companies should appear before Oireachtas committees but, again, the executive is in the same position. If the executive is being questioned on the policy of NAMA, for example, the obvious question which would suggest itself to Opposition Senators and Senators generally is whether the executive can be questioned about the policy of NAMA. The answer is that the executive can be questioned because that is something that stems from the policy and the purposes of the Act. There is nothing in this subsection which prevents Deputies or Senators in a parliamentary committee questioning the chief executive on a matter relating to the implementation of the policy of the legislation. What is prohibited is comment on decisions of the Government or policies of the Minister.
One might ask: what are they? The Government is the collective body established under the Constitution which makes administrative decisions and no executive whose responsibility is limited to a particular Act will want to be dragged into a political controversy about an issue relating to a Government decision. Equally, the policy of the Minister is made clear in the relevant Finance Act and in this legislation only through written directions which have to be disclosed. If we take the position of the Finance Act and say, for example, I introduced a tax measure which impinged on the commercial efficacy of NAMA, and Deputies or Senators wanted to question the chief executive about this particular tax amendment, the chief executive would be free to say that as a result of section 44 of the Finance Act 2011, NAMA had lost €500 million in the value of its assets, but he or she would not be free to say the Minister was wrong to enact that provision. That is the distinction made in the section. Equally, if the chief executive was questioned on a ministerial direction to NAMA and he or she recited the ministerial direction and said the consequence of that ministerial direction was that we had to sell 20 properties under value — that is a more plausible scenario under the legislation — he or she would not be prevented from disclosing to the committee that property had been sold under value as a result of a ministerial directive. What he or she would be prevented from saying is that the Minister was wrong in giving the directive.
The purpose of this type of section is to set the correct constitutional relationship between the Oireachtas, the person appearing before the Oireachtas committee and the Minister who is accountable to the Oireachtas for that body. That is the thinking behind the section. Of course, it is primarily of value to the Chairman of the committee and the witness appearing before it who, as I said, can be protected, not against the Minister or a public disclosure, but against the committee.

Senator Paschal Donohoe: Will the Minister to respond to my question?

Deputy Brian Lenihan: About the accountable officer.

Senator Paschal Donohoe: No, I asked the Minister if it is just the chief executive who he would envisage.

Deputy Brian Lenihan: Sorry. The chairman and the chief executive are referred to in both sections. It is an interesting point. In appearing before the Committee of Public Accounts, I would have said the chief executive is the accountable person and the appropriate witness. It is not clear to me what the chairman would do before the Committee of Public Accounts, but there are occasions when the chief executive might want to have the chairman with him for his own protection.
In the case of all other committees, it is commonly the practice for chairmen to appear with chief executives and if they want other members of the organisation to assist them, that is open to them as a matter of course. As a matter of general practice with agencies, however, as I understand it, the chairman and the chief executive appear before an Oireachtas committee.
Incidentally, Senator Donohoe re-jigged my memory on another point. There is no comparison between the Governor of the Central Bank and the chief executive of the agency. The Governor of the Central Bank is an independent statutory authority who is not subject to any ministerial direction of substance in the performance of his functions. The chief executive of NAMA is in quite a different position.

Senator Alex White: The Minister has not really explained why something which he says is a protection for the chief executive and the chairperson is expressed in terms of a prohibition on them. An honest expression of what the Minister is doing is that he is seeking to protect the chief executive from himself or herself. That is what flows naturally from what the Minister is saying. Why would it have to be expressed by way of a prohibition on the individual if, as the Minister correctly states, that person would not want to be drawn into this or that expression of a view on the merits or objectives of a policy. The Minister is correct in stating that the person probably would not want to be drawn into that, but why is it being done in legislation by way of a prohibition on the individual? That does not make sense.

The Standing Orders point makes sense. The question of Standing Orders of the committee and what is appropriate and correct to be put to the chief executive or the chairperson is one I can understand, but I am not at all persuaded that the policy objective needs to be fulfilled, as Senator Norris pointed out, in this quite extreme and draconian fashion in the legislation.
I am not at all persuaded by the Minister’s argument. I am not prepared to let the Minister off on the basis that it is somebody else who is doing it and the poor man really must go along with it. That will not wash with me. Clearly, it is in the Bill on the Minister’s watch and he stood up and defended it. It is his call to put it in or to take it out, and he should take it out. There is no point in saying that it is Mr. Paul Gallagher’s staff or somebody else’s staff who are putting it in over the Minister’s head.

Deputy Brian Lenihan: I did not suggest that.

Senator Alex White: I know the Minister did not suggest that. I am just stating the case.
The other problem about it is that the Minister is able to make distinctions now between what constitutes a policy of the Government, and what does not necessarily constitute a policy of the Government and would, in fact, be amenable to discussion but this legislation will be in place for quite a long period. While I cannot think of examples off the top of my head, and, certainly, not at this hour of the night, the future is not clear. Other issues may emerge which may or may not constitute policy questions of the Government on which somebody expresses a view. If I had time, I could contemplate different areas of discussion which trespass on the Government policy area which might well become a problem in the context of this provision.
The Americans use this phrase “chilling effect”, where a person is so concerned not to cross the line in the case of a provision that he or she is too careful and restricts himself or herself unduly in terms of what he or she says or does. That is a real concern. It is a heightened concern in the context of the sort of legislation with which we are dealing where there should be the maximum amount of frankness and clarity, not only on the part of the Government but on the part of public officials who appear before these committees.
If, as Senator O’Toole states, it has reared its head and been seen off in other legislation, I cannot see why that cannot be done here. I cannot see why there is this absolute necessity to include it in such draconian terms in the legislation. I maintain my position that it ought to be deleted.

Senator Eugene Regan: I agree that this is a valid amendment, notwithstanding the observations and comments of the Minister. In fact, these are contradictory and I will suggest how they are.
The distinction being made is really not what is or is not a policy of a Government; it is between opinion and facts with regard to a policy of the Government or the effects of a policy, which is a subtle enough distinction. To say the Minister took a decision and that cost us €500 million is very close to expressing an opinion that such was a bad decision, at least as concerns this organisation.
The Minister mentioned certain precedents and statutes — the Garda Commissioner and the HSE — but there is a distinction. The Minister mentioned the Governor of the Central Bank being independent, and that is all very different, but he is overlooking section 9(3) which states that “NAMA is independent in the performance of its functions under this Act.” Is that not the fundamental distinction to be made, that NAMA is independent of the Government and, therefore, how can the Minister put such a restriction on the chairman and the chief executive officer? I accept that the Bill states “Except where otherwise provided”.

Deputy Brian Lenihan: “Except where otherwise provided”.

Senator Eugene Regan: However, the point is that the principle is there that NAMA is independent and that is where the contradiction in the Minister’s statement comes in. It cannot be independent if it cannot express an opinion on decisions or policies that may cut across the ability to carry out its functions. I rest my case.

Senator David Norris: Matters are getting a little more interesting because the Minister is hedging it round now with further qualifications all the time. We now have “Except where otherwise provided”.

Deputy Brian Lenihan: Senator Norris is elucidating the meaning of the section.

Senator David Norris: We are, which is what this House is for. The Minister has previously been very complimentary about it——

Deputy Brian Lenihan: I agree.

Senator David Norris: ——and it would be useful if he were able to accept this having been persuaded by the arguments, including from my eminent legal colleagues.
It is beginning to sound to me rather like a situation that occurred in the Dáil a few years ago where information was concealed and a Minister — not of Fianna Fáil — stated delightedly that the right question was not asked. We are saying that he can put out facts but he cannot give opinions, in other words, one is given the facts, one must draw the deductions from them and one must ask the right questions, and, presumably, he cannot volunteer anything.
Suppose, for example, to take up the kind of examples the Minister gave, the policy of the Government was to make a profit and the chief executive or chairperson stated that in taking this action it is almost certain to make a loss, surely that would be a clear criticism of the Government. Would he or she be inhibited in so doing because it might be interpreted as a criticism?
The Minister spoke of the wish to protect these people, whether it is from themselves or from a kind of garrulousness that may come late at night at one of these sessions. Suppose they want to say something to alert people. I still believe they may be inhibited. The Minister might be kind enough to take that away and consider for Report Stage not the complete deletion of this section but rather a new form of words because, as has been echoed very trenchantly by Senator White, this is a draconian measure. The Minister himself indicated that this came from the era of the late William Ewart Gladstone.

Deputy Brian Lenihan: He was a liberal, not draconian.

Senator David Norris: He was a Victorian. Being a liberal in the reign of Her late and glorious Majesty, the Queen Empress, is quite a different thing from being a liberal nowadays.

Deputy Brian Lenihan: He left a lot of furniture around our Constitution.

An Cathaoirleach: We must address the relevant sections of the Bill.

Senator David Norris: Yes, and it is time we had an auction or a clearance sale for some of it. We have, for example, something we did not have, namely, a whole series of liberal measures such as freedom of information and all the rest of it. It is a completely different age.
The Minister might take away a form of words that I would suggest and see if they would meet the situation. I am not at all proprietorial about this and perhaps my suggestion could be tweaked by his excellent advisers. Perhaps it could read that the chairperson or chief executive in giving evidence under subsection (1) may decline to question or express an opinion on the merits of any policy of the Government. That is the protection the Minister has been talking about but it is given in a way that is not absurdly defensive or restrictive.
I would like the Minister to take this back to his advisers. I will certainly consider putting that down for Report Stage. I hope the Minister would entertain this as a positive and constructive idea which does not go as far as deleting the entire section and retains the protection while allowing the person involved, in the light of our modern democracy, to make statements that are in the interests of the country.

Deputy Brian Lenihan: I am very stimulated by the various interventions. First, in regard to the issue raised by Senator Norris, suppose information came into the possession of the chief executive which reflected discredit on the Government of the day, what course of action should he take?

Senator David Norris: Tell the Minister.

Deputy Brian Lenihan: No, the first course of action a wise chief executive would take is to tell his board. NAMA is independent in the exercise of its functions, as Senator Regan pointed out, and the board then has a duty to raise the matter with the Minister. The board can resign and put the correspondence in the public domain or the board can choose to disagree with the chief executive. If the board chooses to discipline the chief executive, he will no doubt then take the opportunity to put the matter in the public domain himself. That is how corporate standards should operate in this country.
I accept it is very difficult to convince either Deputies or Senators of the merits of this particular section because, of course, they come from an entirely different perspective from the person who was summoned as a witness to an Oireachtas committee. The Deputies and Senators generally as a profession, we can all fairly say, are very fond of opinions about matters and very quick to draw inferences from facts. Public servants in general tend to concentrate on the factual side and are rather reluctant to draw and make an inference as to an opinion. All that the subsection prohibits is the giving of an opinion; it does not prohibit the disclosure of any facts. An opinion is an inference from a set of facts, so the chief executive can lay all the facts he or she pleases before the committee but cannot draw that ultimate influence.
We know in our system of parliamentary democracy, which has a necessarily confrontational aspect to it, that chief executives of State companies have no wish to be part of that confrontation, irrespective of what their private opinion might be on the merits or demerits of a particular issue. Therefore, I cannot really put the matter beyond where I left it earlier, which is to say it is a provision to guide the chairman of a committee, and it does not have any criminal consequences.
Senator Norris raised an interesting alternative wording. Although Senator O’Toole has vanished, he would be interested to learn that the original formulation was more extensive, as was noted in the Lower House, because the more extensive formulation departed from the traditional precedent and contained a prohibition on the disclosure of documents as well. I agreed to delete that in the Lower House and it is deleted, but the provision there is the canonical provision. Whether there is some better way of addressing this through a standard provision in Standing Orders or through a formulation of the type which Senator Norris suggested, to which I am quite attracted because, instead of containing the negative prohibition, it puts it beyond doubt that it is for the protection of the committee——

Senator David Norris: Will the Minister consider it for Report Stage?

Deputy Brian Lenihan: I will ask the Parliamentary Counsel to examine the Senator’s formula, although in the short time available, I am not overly optimistic of success. However, I will have the matter examined before Report Stage.

Senator Eugene Regan: When we were discussing this amendment, we focused on the chief executive officer. In the Minister’s example, if the chief executive reports some issue to the board and the chairman goes to the Minister and is not happy with the answer, as the Minister has suggested, because it is an independent body, if the chairman finds himself before the committee, he is constrained in the way the Minister has provided for in this Bill. That is inconsistent with the notion that NAMA is an independent body. It cuts across that completely.
Section 58(1)(d) states that the chairman or chief executive can be questioned on any matter affecting NAMA. Again, this cuts across this notion because it does constrain them in how they can report and answer questions. The easiest solution, given there is very limited time to redraft, is to delete the provision.

Deputy Brian Lenihan: Of course, the chairman is perfectly free to comment on behalf of NAMA about any matter outside the context of a parliamentary committee. The chairman is quite free to issue a statement, for example, criticising Government policy. Again, that has happened, and boards have resigned in the past.

Senator David Norris: Things get worse. Now we can have somebody inhibited from giving an opinion to a committee of Parliament but he or she can go bleating all over the bloody media. It is daft.

Deputy Brian Lenihan: The Senator is far more dangerous than the general public.

An Cathaoirleach: Is the amendment being pressed?

Senator Alex White: In view of what the Minister has said, I will try to come up with something for Report Stage. He has given us some hope for a different approach tomorrow, so I will not press the amendment at this point.

Amendment, by leave, withdrawn.
Section 58 agreed to.
Amendment No. 42 not moved.
Sections 59 to 61, inclusive, agreed to.
Amendment No. 42a not moved.

Senator David Norris: Just before the Leas-Chathaoirleach puts the amendment to the House I thought I would refresh the Minister of State, Deputy Mansergh’s mind on what I said previously. I am a little puzzled. I understand the Minister wants to get things going to make sure there is not a further collapse. I am not haunted by the spectacle of a further property boom. That is a mirage. Some people would like to see it, but it is impossible. It is something that there is not any point in contemplating.
Values are notional to a certain extent. In the property supplements of the newspapers we read about something called AMV. Very often they are grossly wrong. Mostly, they are grossly under estimated but sometimes they are over estimated. We have the example of Japan where over a long period of approximately 16 years, urban property prices continued to decline. One hopes that will not happen here but it is a possibility. The Minister of State will be well aware of the advertisements on the radio, which are a legal requirement when one is flogging financial goods and services. One has to say the investment may go down as well as up. I accept the incremental amounts are quite small but it is a consistent and inexorable small rise. There is no provision for a downturn, which could be of either a small or large nature. I am concerned by that.
I would not like to see our money — the money of the people — which has been gathered together with great pain to make this investment, invested above the odds unless there is a really clear and cogent reason we should pay above the odds. It appears that we may well pay above the odds because there is this notorious phrase, the haircut, with which I am sure the Minister is very familiar. A distinguished former Member of the other House, Ivan Yates, spoke of a 40% to 50% haircut being a realistic one. The group called Arc consists of property people outside the scope of NAMA and I understand it is talking in terms of approximately 40%. I am not a big advocate of the market, far from it, but if we are looking at market approaches then that is something that must be taken into account as well. I am concerned and, if he can, I would like the Minister to reassure us that there is good reason for this additional premium, which appears to be above the market value as the market is currently telling us. Speakers have referred to the Irish Glass Bottle site and various other sites, which are down considerably more than has been estimated.
I mentioned to the Minister — I am not sure if it was this Minister because there has been a rather bewildering whirligig of Ministers in and out of the House, and I know that the Minister of State, Deputy Mansergh, who is here now, is one of the most competent — but I cannot recall whether it was to him that I made this remark as a very ordinary member of the public with no particular financial expertise. I am in the position of many citizens who would say “if I were to buy a house for let us say €100,000, which is a nice round figure——

Senator Phil Prendergast: Does Senator Norris mean in Azerbaijan?

Senator Paul Coghlan: The Senator would not buy one in North Great George’s Street for that amount.

Senator David Norris: Wherever. It is just a notional figure. I chose €100,000 to make things easy because I am arithmetically challenged. However, very few people would be inclined to say that the price established by the market currently is €100,000 but just in case it goes up he or she would like to give another €25,000. I would feel pretty bloody sore if it went down instead. I would say I should not have paid the €100,000 let alone the extra €25,000 I gave as a little tilly or goodwill bonus. Those are the kind of concerns I hope the Minister of State’s sophisticated financial intelligence will be able to assuage because I am a bit of a nincompoop in this House but there are thousands more outside who have very much the same simplistic view of the situation and they view the application of a macro approach in very much the same way that they view a micro approach. That is what the micro approach would be so there must be some super sophisticated reason for the way people deal with their personal finances does not apply to the macro-economic sphere. I would be grateful if the Minister would let me know what that is.

Senator Pearse Doherty: This debate has been well rehearsed in this House and previously in the Dáil and among the general public. It is one of the big flaws in the legislation. Senator Alex White got it exactly right when he said the reason we are paying over the odds for those assets is to keep the banks afloat. The Government should admit that and be clear about what is happening. We should pay the current market price. If the banks need to stay afloat we should recapitalise them but take out shares. The Government does not want that because it is aware that we will probably have to recapitalise the banks even after we spend the €54 billion and we might end up with a number of banks being nationalised, which is something the Government wishes to avoid. What it wants to do instead is to pay over the market price to the tune of €7 billion and get no shares in return that one can either sell or use to influence decision making in the bank.
That is a deeply fundamental flaw in the legislation. We have had various examples of why one should not take that nonsensical approach. Senator Norris has just related another one. People do not understand why one would pay over the market price for anything. I am sure that when State agencies or Departments buy land for social housing they will not pay the projected market value of the land, they will pay the current market value, which makes sense. The fear that the market will not improve in the manner projected by the Minister could be well founded.
This is the same Minister and the same Government that warned there would not be a collapse in the construction sector. It is the same Minister and Taoiseach who told us that we were about to experience a soft landing. I am sure they were advised by the same type of experts who now advise us that we are facing an upward trajectory in the next ten years. I referred last night to the different types of taoisigh we have witnessed; the risk taker, the cautious one and now we have the gambler. This gamble is far too much of a risk.
Another fundamental flaw is apparent in addition to the fact that we are paying more than the current market value. Individual cases have been cited in the debate yesterday and today about various properties, the example most frequently mentioned is probably the one in Ringsend. Let us take the example of Liam Carroll’s Zoe Group and the property portfolio that was before the High Court and the Supreme Court recently when the banks moved against the companies. On studying the documents that were laid before those courts the judgment was that the assets were worth between 20% and 25% of the original market value. If that yardstick was to be applied to the various types of asset that NAMA is about to take on board then we have completely over estimated even the current market value let alone the long-term market value. My amendment’s purpose is similar to the Labour Party amendment. I commend it to the House.

Senator Marc MacSharry: I am not sure whether this is the right time to bring it up but Senator Norris referred to the fact that the public is confused on many issues relating to NAMA such as long-term economic value. As the debate has taken place so many times in these Houses over the last six months, we are all familiar with terms, references and processes we were not aware of this time last year, but the public is not. I ask the Minister and his officials to take this on board. Would it be possible to have a type of Ladybird version put into the public domain, be it through the newspapers or otherwise, to provide some basic simple explanations after the Bill is passed? That would be of help. Senator Doherty also mentioned this.
The beauty about the long-term economic value is that it strikes the appropriate balance between rehabilitating and capitalising the banks and paying close to the market value, and the beauty about NAMA is that it can take a longer term view. Another buyer of an asset or house cannot do that. Senator Norris mentioned Japan where prices had fallen for up to 19 years. That is true but, as the Minister pointed out, Japan did not have an asset relief scheme. Japan did nothing and let the banks continue to go downhill. An analysis carried out of peaks to troughs in property booms has shown that, in the case of residential property, within seven years of action being taken, 90% of values were recovered. We are not betting on that unrealistic figure. Furthermore, I read some time ago about an examination of the property market in Ireland over the past 40 or 50 years. If asked what decade saw the biggest increases, most people would reply that it was the last ten years. It was actually 1970 to 1981 when the increase was approximately 600%. The long-term view the Minister is factoring into this is 10% over ten years. I believe that is realistic.

Senator Joe O’Toole: The points that have been made by everybody on all sides of this argument have value, if I can use that word. However, with regard to how one moves forward, there is a leap of faith in this and the Minister should confirm it. I do not trust economists. I did not trust them in the last ten years and I do not trust them at present. They were wrong two years ago when none of them forecast the bottom falling out of the market. When it did fall they were wrong in predicting a soft landing. As I said in the House recently, I have copies of the forecasts from all the economist groups for the last week in October last year, when we were well into the recession, giving their prognoses for 2009. Not one of them was even close to being correct. The same people now have a consensus about what will happen next year and in the following year. I do not trust or believe any of them.
I have a number of problems with this debate. I do not understand the long-term economic value. I do not have the knowledge necessary to reach a conclusion about it because I am not being told the exact percentage the Minister will put in place through regulation to make the connection between the market value and the long-term economic value. However, I know where I stand regarding market value and long-term economic value, and it is exactly where I have stood all my life on the question of value, market and cost. I have stood here countless times over the past 22 years accusing the Department of Finance of knowing the cost of everything and the value of nothing. The argument is turned on its head in this debate but it still applies. If I try to sell a piece of a gold ornament and nobody buys it, it is only worth whatever number of troy ounces it is and one multiplies that without looking at the inherent value. There is an intrinsic value. The fact that there is no market for it does not take from the value. There is a difference.
We must acknowledge that this long-term economic value is a leap of faith. We must also acknowledge that there is a difference between the value and the cost of something. These are realistic matters. What one does about it is the issue, and that is why the Government is taking a decision here. One cannot argue with the points made by Senator Doherty. If I intend to purchase something, I want to buy it at the lowest price. On the other hand, if I want to sell something, I want to sell it at the highest price. These two points are important.
All the discussion is based on the assumption that 100% of the assets are impaired. It is important that the Minister correct that assumption. One third of these assets are overseas, most of them in places where there is already a slight upturn in the market. Another third of the assets are washing their face, and the proposed boss of NAMA, he who cannot criticise his Minister, has said the income stream from that third in rental, interest and repayments will pay the coupon costs of the bonds being issued. From the start there will be no ongoing drain on NAMA other than the obvious long-term €54 billion that we must retrieve in some way or other. These are important points. One third of the assets are overseas, one third are paying their way and another third appear to be totally useless. They comprise half-built or unbuilt property. The Irish Glass Bottle Company site, whose value has plummeted, is probably the best example. However, a third of the properties are built. They might be empty but they exist. It is important to recognise what we are dealing with.
It should be understood also that while there will be a transfer of all these assets and loans into NAMA, the customers at the end of the line or the people who have taken out these loans will, in many cases, be profitable, viable, healthy industries. They will continue their repayments into their own banks. They will probably be made aware somewhere along the line that the money is just being channelled through the bank to NAMA because the deeds, lien or whatever have been transferred to the agency. Therefore, it is not a standing start, although it is not a running start either. Developments continue to be built. The Government will make the judgment call between market value and the long-term economic value. How does one get to that? I do not know. That is what the Government is elected to do. The gap is not as wide as the argument indicates but there is definitely a gap. Only time will answer that question. I cannot see another way of answering it.

SECTION 83.
An Leas-Chathaoirleach: Amendments Nos. 50 and 62 are related and may be discussed together by agreement. Is that agreed? Agreed.

Senator Alex White: I move amendment No. 50:

In page 68, lines 25 to 27, to delete subsection (4).
These amendments essentially refer to the same issue. If the court is satisfied that, for reasons of commercial confidentiality, a hearing under this section should be conducted otherwise than in public, the subsection empowers the court to so order. I await with some interest the Minister of State’s explanation, although I can anticipate it to some extent.
I caution my colleagues. In any commercial case, there will almost always be an argument made by one or both parties that it or they would prefer for the matter to be held otherwise than in public. One can hardly conceive of a commercial case in which the parties are happy to have the matter heard in public. The Constitution provides that the law be administered in public, which should be the overarching and continuing principle governing the approach to every aspect. There are clear exceptions with which we are all familiar, such as family law, child protection and a number of others in which matters are heard in camera.
I would be concerned were this provision to lead to a general change in the trend of the law or in parties’ expectations to the effect that, when they appear before a court, their applications could be made and quickly granted for cases to be heard in private. It would be a retrograde move, for which reason I have some concerns about the provision appearing in this way in the Bill. Why has it appeared in this way and can the Minister of State justify it beyond simply stating the phrase, “Commercial confidentiality”? We need a better argument than the one that baldly appears in the Bill.

Senator David Norris: I see no difficulty with the section. There is no implication that an order to hear the matter in private would be automatically granted on application. It is for the court to determine. I have reasonable confidence in the Judiciary. It is able to determine whether something is being done to protect a person’s reputation in a manner that is indefensible. This is the situation that currently exists and seems to work reasonably well. There is no suggestion that the mere fact of someone saying that he or she would prefer a matter to be heard in private will make that inevitable. I am happy to leave a court to determine the issue in its own reasonable and judicial way.

Senator Rónán Mullen: I wish to record my agreement with Senator Norris. It is well established that the court may make such an order in some situations and not just in respect of family law matters. Senator Alex White knows that it can be done in terms of company law and so on. We should take comfort from the requirement that the court be satisfied. It is clear that the court, as has often been the case, must make an adjudication on the basis of hearing the circumstances. For this reason, it would be less than sensible of us to oppose the inclusion of this subsection.

Deputy Martin Mansergh: I seek the Leas-Chathaoirleach’s guidance. Am I to deal with amendment No. 62 at the same time?

An Leas-Chathaoirleach: Yes. We are dealing with both.

Deputy Martin Mansergh: Amendment No. 62 was not really raised in the contributions, but I will deal with it anyway. The Senator proposes to delete a provision that gives the court discretion, where it sees fit, to provide for in camera hearings. As the Minister indicated to the Dáil, he sought the advice of the Office of the Attorney General on this issue. The office indicated that a provision of this type is standard and necessary, as there needs to be express statutory provision for the exception to public court hearings. In this case, the provision is necessary to respect commercial confidence, which inevitably arises in dealing with information on bank assets that are otherwise covered by bank or customer confidentiality.
Providing for in camera hearings is a permissible exception allowed under Article 34.1 of the Constitution. Other examples to protect business secrets include section 205(7) of the Companies Act 1963 and section 902A(7) of the Taxes Consolidation Act 1997, concerted by section 207(d) of the Finance Act 1999. In this context, I cannot accept the Senator’s amendment, but I reassure him that there is no intention of modifying the practice.
I agree broadly with Senators Norris and Mullen. This type of section is included in various areas of commercial law. It is an enabling provision and does not mean that the High Court must do something. We would not expect the High Court to change its practice in these matters as a result of these provisions.
Regarding amendment No. 62 to section 209, the section provides that, where the Financial Regulator is of the opinion that a participating institution has failed to comply with a direction under this Part, he or she may apply to the High Court for an order that the institution comply with the direction. Subsection (6) provides that hearings under this section may be conducted in private if the High Court is satisfied that commercial confidentiality applies to the particular hearing. This provision is included to ensure that, where necessary, the commercial interests of those involved can be protected and, in so far as is possible, that the interests of the taxpayer and the work of NAMA can be protected when it comes to court cases taken under this section.
Having considered the advice of the Office of the Attorney General, the Minister is in a position to confirm that these are standard provisions to provide for in camera hearings and are necessary as a statutory provision for the exception to public court hearings. They are necessary to respect commercial confidence, which inevitably arises in dealing with all information relating to bank assets that are otherwise covered by bank-customer confidentiality. As I stated in respect of amendment No. 50, it is a permissible exception under Article 34.1 recognised by the Supreme Court. I reassure the Senators that there is no intention of softening practice in this regard.

Senator Alex White: The fact that it gets onto the agenda in legislation is bound to give rise to queries, but not a suspicion that courts would not exercise their discretion properly, as I am sure they will. Once it is off the agenda, as the type of application that can be made in the context of these cases, we can reasonably predict that such applications will be made, perhaps, almost as a matter of course. Whereas I am very happy, as Senators Norris and Mullen will appreciate, to rely on the good sense of the Judiciary in respect of the decisions they make, I still believe there is a risk the culture will change in circumstances where one is putting in this specific statutory provision. I do not say there is not the protection of the Judiciary in respect of a decision as to whether it should be granted but it is a change to which we should draw attention and that it is marked as representing a new power and it is one that I am not particularly comfortable with. I mentioned section 62 at the beginning because the same principle applies to both. I am even less comfortable with the provision in section 62 in circumstances where the regulatory authority makes application to the court. I am not comfortable with this change. I understand what the Minister has said and that there is a need for it in certain circumstances but I am not absolutely certain that it should be put into legislation in the way that it has.

Amendment, by leave, withdrawn.
Section 83 agreed to.
Sections 84 to 110, inclusive, agreed.
SECTION 111.
Senator Alex White: I move amendment No. 51:

In page 86, lines 1 to 16, to delete subsections (4) and (5) and substitute the following:

“(4) If the Minister considers that an order under subsection (2) contains matter that is commercially sensitive to the extent that it ought not be contained in the order, it shall be lawful for the Minister to set out such matter in a direction signed by the Minister and lodged in the Department of Finance, and to provide in the order that such direction (specifying the date thereof and such particulars of it as are not commercially sensitive) shall have effect.”.
I am interested to hear the Minister’s response.

Deputy Martin Mansergh: Section 110 ensures that certain clauses in commercial agreements are not triggered by virtue of certain events related to the establishment of NAMA. Following the advice of the Office of the Attorney General and consistent with the principle applied in section 9 of the Anglo Irish Bank Corporation Act 2009, section 111 was included in the Bill to provide that the Minister may, where he thinks it appropriate, reduce the effect of the restriction provided for in section 110 where the effect of the section would be unduly onerous or cause undue unfairness or hardship.
In relation to the Senator’s proposed amendment of subsection (4), the Minister consulted with the Office of the Attorney General on the issue, during the examination of the Bill by the Dáil. The Minister was advised that the provision is a standard provision to protect commercial sensitivity where other parties to an instrument would be affected by the disclosure of commercially sensitive information concerning the third party. As any order made under the provision will relate directly to certain assets, persons or commercial transactions which will be in areas of commercial competence, it falls under the standard exemption to the Statutory Instruments Act 1947 and in that context the Minister is satisfied with this provision. In any event the Minister is required to publish any decision in Iris Oifigiúil to direct the omission of any commercially sensitive information from an order or not to publish an order in the normal way.
I am not accepting the Senator’s amendment.

Senator Alex White: I will not pursue it at this point.

Amendment, by leave, withdrawn.
Section 111 agreed to.
Sections 112 to 118, inclusive, agreed to.
SECTION 119.
Senator Alex White: I move amendment No. 52:

In page 88, subsection (3), line 41, after “if” to insert the following:

“the nomination of the person is approved by a committee appointed for the purpose by the Houses of the Oireachtas, and if that committee determines that the person is properly qualified and was not a person whose previous employment in the property or financial services sectors or related sectors was such as to raise issues as to whether the person was involved in activities which contributed to the distortion of the property market and”.

Amendment put and declared lost.