Government policy on the banks is not working. Even in the short time since we met last week, Postbank has announced it will cease operations, with a possible loss of 160 jobs, Hughes & Hughes bookseller has gone into receivership, with 225 jobs lost, clothing retailers Vero Moda and associated retailers are losing 80 jobs, SIAC Butler's Steel is losing 55 jobs, and we do not know how many more jobs have gone from various small businesses around the country. However, we will probably get some indication when the Government leaks the live register figures later this evening in anticipation of their publication tomorrow morning. Meanwhile, we hear from businesses — the ICC monitor companies — that 952 companies became insolvent last year and ISME has informed us that more than half of companies that apply for loans or overdraft facilities are refused. What is happening is that the banks are not lending to businesses. They are not lending. The Government policy on banking is not working and because of that many people in the country are no longer working.

We are now in the third calendar year of this recession. It is a year since the Government announced its policy to establish NAMA. To date, as I understand, not a single loan has been transferred to NAMA. The Government banking policy is not working. Last year, the Government rejected the Labour Party proposal for a temporary nationalisation of the banks. Now it looks as though the Government will gradually nationalise the banks by default. Does the Taoiseach have any plans to change Government policy on the banks or will we have a continuation of a policy which has resulted in little or no credit being made available to businesses and consequences for the survival of those businesses and for jobs? Will he continue with a policy that requires taxpayers to dig deeper and deeper into their pockets to pay over thousands of millions of euros to Anglo Irish Bank, Allied Irish Banks and the other covered institutions?

I do not agree with Deputy Gilmore. With regard to the job losses he mentioned, there were also 250 jobs lost in Athlone and 200 lost in Dundalk within the past week. That aside, the core of the Deputy's question relates to banking policy. The Labour Party idea was to proceed with nationalisation of the banks 12 months ago and order a huge write-down of the value of the banks' property loans. The scale of the write-down would have been arbitrary, as the loans would not have been individually valued. That action would have forced the State to immediately recapitalise the banks to plug the large hole that proposal would have created in the banks' balance sheets. The funding position for the State and banks last year was far worse than it is currently; therefore, the costs of plugging that hole would have been greater. That would have been an expensive mistake for the country to make.

Who wrote that note?

It is true. Throwing jibes is not a policy. The cost of plugging the hole that nationalisation policy would have made, would have been significant, far greater than the interest rates we are paying now.

On the question of trying to provide credit into the economy, the issue is that the purchase price of the assets, through the loans under the NAMA process, will determine the level of losses incurred by the banks. That loss, combined with other variables such as existing capital, profitable operations and other assets will determine the level of capital required by the financial institutions. We have made it clear from the first recapitalisation statement that if additional capital is required, our preference is that it should be raised from private sources in the first instance; if this is not possible, the State will provide the capital. If the State provides capital to a financial institution it will take ordinary equity in that institution. We stand ready to provide capital if necessary, as it is essential to have a financial system that can provide credit to protect and create jobs. That is the reason we have had recapitalisation — to protect and create jobs.

Without liquidity.

The policy of recapitalisation, which we are implementing as outlined, is the best way forward.

It is not working.

I remember the first time I raised the issue of banks with the Taoiseach. On 25 June 2008, I stated: "[T]he banks are closed to new businesses". I said the banks appeared to be squeezing the life out of many businesses because they would not lend to them. That was before the collapse of Lehman Brothers and the introduction of the bank guarantee. The Taoiseach stated in his reply: "It is important to point out ... that, as the Central Bank has confirmed, the Irish banking system is well capitalised and is in a healthy state in terms of its own financial situation". Three months later, we discovered that was not the case.

At that time, when the Labour Party challenged the introduction of the blanket guarantee, the Taoiseach said: "[I]t is my intention to ensure the Irish taxpayer will not be held liable in any way for any deficit that might occur in the event of there being a problem in the future". We have paid €11 billion to the banks since the Taoiseach told us it would not cost anything, and now, apparently, we will have to pay more. AIB and Anglo Irish Bank have lined up with the lámh amach arís. They are coming again for more capitalisation, and the Taoiseach tells us he stands ready to provide capital. How many more times will he get it wrong before he realises the Government will need to change its position on the banks? How many more people will lose their jobs? How many more businesses will go to the wall? For how much more money does the Taoiseach intend to beggar those who are at work today, their children and possibly their grandchildren to pay for a failed banking system?

The Government's banking policy is not working and because of this, people are out of work. It is about time it changed tack on the banking system instead of maintaining its dogged approach and saying it was always right. The Taoiseach told the Labour Party a year ago in the House that he would not accept the policy we were advocating at the time, which was temporary nationalisation. That is fair enough; we can differ over policy. However, even as recently as this morning, some fairly cautious commentators on the radio were telling us it was now inevitable that nationalisation would take place. How much does the State have to own before one can say a bank is nationalised?

It is time the Taoiseach woke up to the reality that the Government's banking policy is not working. It is not working in the interests of the taxpayer, of businesses, or those who are losing their jobs, and it is time to change it. If the Taoiseach is not prepared to accept the alternatives proposed by the Labour Party, Fine Gael or anybody else——

Different ones.

——he should at least present an alternative that has some prospect of success, because what he is doing now is not working.

Hear, hear.

I do not accept that the alternative policies on banking suggested by the Opposition are credible. The parties presented two very different policies, but each is entitled to its position. With regard to the policy of the Labour Party, I am simply making the point——

Can we talk about Fianna Fáil's policy? Let us talk about its policy and how it is not working.

Deputy Gilmore indicated that we are entitled to our differences and that we should articulate them in the House so that people know what they are.

Yes.

Yes, Deputy Higgins. The difference between our policy and that of the Labour Party is that it would have nationalised the banks 12 months ago. The cost to the State and to banking at that time was greater than it is now and therefore the exposure to the taxpayer would have been greater.

That is not true.

We said we would provide if necessary——

Who told the Taoiseach that?

Those are the facts. Interest rates tell me that.

They are not facts.

The cost of funding tells me that.

Does the Taoiseach know all this happened 18 months ago, not 12 months ago?

Allow the Taoiseach to continue without interruption.

The Taoiseach thinks this was 12 months ago. It was not, it was 18. Time passes.

Four and a half percent is less than 6% even in the socialist nirvana in which the Deputy lives.

One speaker at a time, please.

He has forgotten. There is a big difference between a year and a year and a half.

The Government wants to pay €26 billion for two banks that are worth €2 billion.

We put forward a position — that is, the establishment of NAMA — that was not supported by the other parties. NAMA puts banks in a better position to access funds and provide credit to viable businesses and households because it will increase investor confidence in the banks through the removal of risky assets and improve liquidity through the exchange of illiquid assets — that is, the loans — for more liquid assets, namely bonds.

It is not achieving that.

It is not yet operational. We received approval from the European Commission last Friday.

There is an idea that recapitalisation is somehow unique to this country. However, more than €300 billion——

Liquidity is the issue.

We will come to that, if that is the point the Deputy wishes to make. More than €300 billion has been offered in recapitalisation schemes of different types by various EU countries.

The means by which we obtain liquidity is to take the illiquid assets — that is, the billions of euro worth of property and development loans — off the balance sheets of the banks, put them into NAMA and trade them for Government bonds. This will provide the reserve liquidity that is required so that people can go on to the wholesale markets and obtain funds in the sure knowledge that the difficulties with the banks' balance sheets have been properly priced in. NAMA is proceeding with this and ensuring that banks face up to their losses. The losses announced today by AIB and those of other banks are precisely because the NAMA vehicle is involved. Were it not involved, banks would be seeking to protect their interests by spreading those losses over a longer period in order to protect shareholder interests only. That was the experience in Japan in the 1990s.

NAMA is bringing things forward. It is providing, through the exchange of Government bonds for illiquid assets — that is, the loans — the means for banks to access funding at an affordable cost. At the moment, banking institutions are chasing deposits. The interest rate they are paying on those deposits is greater than the amount they are lending out. That is not a sustainable position in the long term. We have implemented a policy which has the support of those independent commentators who are not partisan on the issue, such as the Governor of the Central Bank.

The question Deputies opposite need to answer is this: how do they propose to ensure credit is released? We all know the banks have curtailed lending, mainly because they are finding it a challenge to obtain funds, and the reason for this is that providers of funds are reluctant to deposit their money in banks with balance sheets of questionable quality. NAMA will remove that uncertainty and allow the banks to attract sufficient funding again. None of the parties opposite has come up with a workable proposal to achieve that end.

In the meantime, how many jobs will be lost?

Without NAMA there will not be sufficient credit.

If stuck, keep repeating the above.

Having set up NAMA to clean up the banks' balance sheets, the Government is determined to ensure that through the guidelines provided for in the NAMA legislation and the credit review system, the banks will begin to perform their proper role in the economy, which is to support viable and sustainable businesses and households. That is the Government's policy.

It is not working.

I am not sure the Opposition parties have yet suggested a credible alternative, on any basis, that sufficiently meets these needs.

What the Government is doing is not working.