There is no realistic alternative to the Government’s National Asset Management Agency (Nama), Taoiseach Brian Cowen said during a resumed debate today on the proposed legislation in the Dáil.
Shares in AIB and Bank of Ireland made strong gains today, with both finishing up at close of trading. Bank of Ireland finished 18 per cent higher at €3.38, while AIB at €3.37 a gain of 28 per cent.
However, Irish Life & Permanent, which is not participating in the Nama process, saw its share price drop 5 per cent mid-morning, although it regained some ground to close fractionally lower at €5.85.
Green Party leader John Gormley said his party will pull out of Government if its party members reject Nama and the new programme for government at the Green Party’s convention scheduled to take place on October 10th.
Speaking on RTÉ's News at OneMr Gormley said his party would be pressing for further amendments to Nama to promote a social dividend and ensure a windfall tax is part of the legislation.
“If Nama and the programme for government is rejected on October 10th we could not continue our participation in Government,” he said.
Responding, Fine Gael environment spokesman Phil Hogan said Mr Gormley's "telling comments" signalled divisions within the Minister's party on the bank bailout scheme.
Mr Hogan said the publication of the Nama legislation is "an acute embarrassment" for the Greens. "After blowing their own horns last week claiming to have secured major changes to the Nama legislation the reality is they have had little or no impact."
Bank of Ireland said today the discount applied to loans it transfers to Nama could be "significantly less" than the estimated 30 per cent discount average outlined by the Minister for Finance Brian Cowen yesterday.
International reaction to the plan has been broadly sceptical. The Financial Timessaid: "Either way Ireland is on the hook. The more banks rally, the more likely Dublin will be stung for the recapitalisations that will surely loom. If they don't, Dublin will have to foot the bill anyway."
Speaking during the resumed Dáil debate on the issue this morning, Mr Cowen rejected suggestions that Nama is a bail-out for bankers and developers.
“Nama is not designed to be and will not be permitted to operate in practice as a bail-out mechanism for anybody who has operated irresponsibly,” he said.
Mr Cowen told TDs alternatives to Nama proposed by Fine Gael “unrealistic” and “not founded in any practical plan.”
“The suggestion by Deputy Bruton that we can divide most or all of our banks into a good and bad bank system without disrupting the flow of finance to the economy is totally unrealistic and not founded in any practical plan.”
Fine Gael leader Enda Kenny said Nama was a “fatally flawed piece of legislation. He told the Dáil this morning it was the “economics of the madhouse, supported by the fiction of long term economic value”.
Party colleague George Lee said there was a "glaring €20bn black hole" at the heart of the Government’s Nama plans.
“We feared the Government would get this all wrong. Our fears already are being borne out," he said. "The figures published by the Government yesterday are already being exposed as wishful thinking at best."
But Minister for Finance Brian Lenihan this morning defended the risk-sharing mechanism provided in the Nama Bill in which 5 per cent, or €2.7 billion, of the €54 billion to be paid for the loans will be in the form of subordinated bonds. This €2.7 billion only be paid if Nama makes a profit.
Mr Lenihan said the State was paying €7 billion more than the estimated current market value because the property market was distressed and "we have to provide some allowance for long-term value," he told RTÉ's Morning Ireland.
Under the Government's plan, Nama will purchase €28 billion in loans from Anglo Irish, €24 billion from AIB, €16 billion from Bank of Ireland, €8 billion from Irish Nationwide and €1 billion from the EBS.
The full extent of bank forbearance with large property borrowers was revealed for the first time when the Minister disclosed that the loans Nama will acquire include €9 billion in overdue interest payments.
In addition, the Government has proposed extending the State bank guarantee by up to five years to allow them to access longer-term debt.
Two-thirds of the properties are in the Republic, 21 per cent are in Britain, 6 per cent are in Northern Ireland, 3 per cent are in the United States and 4 per cent are in Europe. The Minister suggested alternative approaches would end up costing the taxpayer more, with the Labour nationalisation plan requiring an extra €10 billion to €14 billion to recapitalise the banks.
Mr Cowen attended a meeting of the European Council in Brussels this afternoon.