SPEECH BY MARY UPTON TD
Labour Party Spokesperson on Arts, Sport and Tourism, Deputy, Dublin South Central
Wednesday, 7th October 2009
Speaking in the Dáil on NAMA Bill 2009
NOT TOO LATE TO STOP NAMA- UPTON
I welcome the opportunity to speak on the NAMA legislation. This legislation has been called the most important since independence. I would contend that the blanket guarantee extended to the banks of September 30th last was equally seismic. The decision to offer a blanket guarantee to all the major financial institutions closed off so many of the options open to the Government and has lead us to this place and this momentous legislation. Then, as now, the Labour Party opposed the Government’s legislation. I think it is clear that we were right then and I regret to say that we are likely to be right again.
The Labour Party has consistently and calmly argued that the temporary nationalisation of the two major financial institutions in Ireland, AIB and Bank of Ireland, is the least worst option for the Irish people. Temporary nationalisation would allow the Government to control both ends of the deal, eliminating any potential for over valuing or undervaluing assets which are to be transferred.
Instead we have the Minster categorically stating that we are to pay well above market value to the banks for their delinquent assets using an inflated long term economic valuation method. This is purely to shore up their balance sheets and prevent the otherwise inevitable nationalisation of the banks which can no longer survive in the capitalist market, from which they were happy to profit from for decades. As the economist Karl Whelan recently noted “The idea that the only possible way to deal with bank in difficulty is to overpay them for their assets is, frankly, ridiculous.”
Overpayment for Assests
The major flaw in the Government’s NAMA scheme is the deliberate, delusional decision to overpay for assets when the market has not yet bottomed out. This decision was described yesterday by the Nobel Prize winning economist Joseph Stiglitz as “criminal”. Many assets have fallen by substantially more than 47%. On Prime Time recently we saw a field in the Taoiseach’s own bailiwick of Edenderry which was valued at over €12 million now valued at under €2 million.
There is simply no credible, non-partisan information to support the Minister’s contention that we have reached the bottom of the market. A number of commentators across the economic and political spectrum have written that the Minister’s figures simply are not correct and that values have fallen further than this and have further yet to fall. That the share prices of AIB and Bank of Ireland rose 25% on the day after the full details of NAMA were announced is proof that the markets believe the state is significantly overpaying for these assets.
There are hundreds of other land banks dotted around towns and villages in the country with a similar story of grossly inflated prices and no prospect of development, particularly if sane planning laws are introduced. These will all be transferred to NAMA and it will be the taxpayers left shouldering the burden for decades to come.
Dublin, which has the greatest potential for a property bounce has a commercial vacancy rate that is projected to rise to 27% in 2010, the highest in 18 years. Nationally, there are 79,633 houses, apartments and sites for sale on Daft.ie. On a drive from Dublin to Sligo or Kerry you will go through towns which have a glut of unsold commercial developments or housing estates where construction has just stopped. It is unlikely that there will be a need for these houses and commercial spaces for years to come and it is certain that they will not be worth what NAMA paid for them. Instead they will be owned by us the taxpayers, a monument to incompetent regulation, avaricious bankers and greedy developers
Anglo Irish Bank and Irish Nationwide
The Minister has stated that the principal concept behind NAMA is to get the real economy moving again by allowing banks to lend. But €36 billion will be going to Anglo Irish Bank and Irish Nationwide which lent almost exclusively to big developers and whose reputations are beyond recoverable. Irish Nationwide is to transfer 76 per cent of its loan book, almost €8 billion into NAMA. Anglo Irish will transfer almost €28 billion. There is no value in paying this money to these banks, as they will never be lending again in the real economy. This is dead money, plain and simple. We have already paid €4 billion into Anglo which has to be supported form direct exchequer borrowing this year, and which we have no prospect of ever seeing a return on.
This €36 billion from NAMA going into these two zombie banks is more than the entire tax take for this year. It would pay for 6 Metro North’s. It would pay for the cervical cancer vaccine for 12 year old girls for 3 thousand years. It would cover the School Book Grant for 4 thousand years. Even more it could provide for a huge and sustained early childcare intervention scheme tackling educational, health and social issues at the level where the most can be achieved.
Why should the taxpayers bailout Anglo and Irish Nationwide, the homes of golden circles, loans to inflate balance sheets, executive loans and million dollar bonuses for people who run their companies into the ground? Bernie Madoff was sentenced to 150 years in jail just 6 months after being arrested. But unlike the USA we don’t appear capable of forcing those guilty to be held to account, to do the “perp” walk.
Why can we jail 167 people between 2003-2007 for not paying their TV license fee but we allow those guilty of impoverishing the future prospects of the country to continue to play golf?
We need real regulation that will completely clear out those responsible for the catastrophe the banking sector has caused the real economy, and without any more golden handshakes, particularly as they are now being funded by tax payers money.
It seems, however, that Fianna Fáil, are not capable of introducing legislation that would end the cosy relationships that they enjoyed for over a decade. They have shown this in FAS and other semi state boards, and it will be the same old story in NAMA, where the plain people of Ireland will be forced to shoulder the pain of the elites who creamed it during the boom.
Non Payment of Interest
The Minister has stated that NAMA will pursue the developers for everything they owe. But the banks have admitted that they have rolled up over €9 billion in unpaid interest on developers loans. This hardly paints a picture of a determination to pursue the developers.
The only bank which went after Liam Carroll and Zoe is one which is not Irish and not involved in NAMA. The NAMA banks were happy to nurse his loans until they could be transferred to NAMA, when they would become the states problem.
These are the people that NAMA will be rewarding, not the people struggling with negative equity, or with banks waiting to foreclose on their homes or SME’s who will have to close because they cannot get credit. Thanks to the Supreme Court we may get a solitary scalp, but the majority of the developers and bankers will continue to be treated with the hospitality their years of donations to Fianna Fáil have built up.
Business Rents and Rent Reviews
Businesses are going to the wall because they are paying unrealistic rents. According to figures supplied by a survey in Retail Excellence Ireland, 86% of businesses have requested a rent reduction and 52% of these businesses would need a rent reduction of between 16-40% to break even. Yet the Minister has now put the kibosh on legislation to allow for downward rent reviews. It appears that this is to protect the banks and the speculators who own the shopping centres and the prime retail streets and which is keeping rent yields artificially high.
If the Minister was true to his pious assertion that the protection of the real economy was paramount then we would have had late night sittings to pass legislation to allow for downward rent reviews. This would take the pressure off the real businesses which are providing employment and paying taxes, not the speculators who are probably tax fugitives and the bankers whose august organisations continue to exist only because of the intervention of the Government.
“When the facts change, I change my mind”
I would urge the Minister to act sensibly and for the good of the country on NAMA. It is not too late to pay heed to the words of John Maynard Keynes, When the facts change, I change my mind. The facts have changed. Everything that we have learned about NAMA and the toxic triangle screams of the need to reassess this proposal. It is my opinion, and the opinion of the majority of the citizens of this state, according to a recent opinion poll, that the NAMA legislation will imperil current and future generations with the debts and sins of a coterie of the few, in banks, construction and government. As Eamon Gilmore recently stated NAMA is a scheme to nationalise losses and privatise profits. We must step away from the brink of overpaying for assets which will never recover their bubble prices and work on a solution which will offer the best case scenario for the citizens of the state, temporary nationalisation.
If, however, the Minister is not for turning on this legislation then I would urge him to heed the following:
• We must not pay above the real market prices for assets.
• Any condition of taking loans must include a real guarantee to increase lending to the real economy and not merely to repair balance sheets.
• Anyone who has loans taken over by NAMA should be banned from ever being involved in building or development in Ireland again
• Legislation for downward rent reviews must be introduced immediately
• Any wrongdoing should be prosecuted with all speed where any suspicion of illegal activity has been identified
• Protection for whistleblowers within the covered institutions and NAMA must be extended
• Anyone involved in driving the banks to this perilous position should be forced to resign and repay their bonuses as a condition of securing a bailout
• A sunset clause must be introduced on repayment of loans
• Any guarantees given on now delinquent loans should be fully pursued, even in the cases where it has been transferred to a spouse