Draft legislation to establish the National Asset Management Agency has been published.
The Bill proposes to give NAMA extensive powers to take over land and development loans from banks in an effort to get them lending again and supporting economic recovery.
Minister for Finance Brian Lenihan said he believed the bulk of its work would be done within seven to ten years, although the Agency may have some residual assets after that.
The paper value of property and development loans NAMA is planning to take over from the banks is €90bn, however the current market value is far less. NAMA will pay the banks somewhere between those two figures, as it is required to take into account the long-term economic value of the property concerned.
Each loan will be valued separately, taking into account the quality of the collateral and the likelihood of getting a return.
Over time, NAMA hopes to manage and then sell off the properties to get its money back.
The full cost will not be known until the process of taking over the loans is completed some time next year, but the Minister for Finance, Brian Lenihan, will give an estimated total cost when the Dáil begins debating the legislation in September.
The legislation gives NAMA extensive powers and limits the opportunities to legally challenge its work.
The Government has said the developers who borrowed the money in the first place will still be liable for the full cost of the original loan and will be pursued by NAMA if they default.
Workings of NAMA
The organisation, which will be based in the National Treasury Management Agency (left), is expected to begin operations this October.
The new agency will take control of 10,000 loans by the end of next June. The top 50 developers will be brought into NAMA by Christmas.
Today it emerged it will have significant new legal powers to compulsorily obtain property or other interests such as shares.
Where it faces legal challenge the legislation allows it proceed without being unduly obstructed.
It will also have the ability to enforce developers to sell off properties to pay back loans.
It will be able to seize assets and appoint receivers.
The new agency would work like this:
In the case of a €100m loan to a developer, the bank will sell it to NAMA.
The agency will buy it at a discount, perhaps €60m, and that money allows the bank to restart lending.
The developer would continue to owe €100m but now it owes it to NAMA.
The loans will be administered by the bank but the new agency will control the relationship with the borrower and make all the decisions.
Minister for Finance Brian Lenihan said the Government was convinced NAMA would ensure the 'safety, stability and capacity of the Irish banking system'.
He said all of these were key to supporting the economy.
He added that there was nothing in the proposed Bill that would provide a 'bail-out' for borrowers, whether builders, developers or otherwise.
'Anyone who owes money before NAMA continues to owe it, and is expected to repay the full amount of the debt,' he said.
Fine Gael's Finance Spokesperson Richard Bruton told RTÉ Radio the Government appeared to be asking the taxpayer for 'an enormous blank cheque'.
He said there appeared to be 'very little in the way of independent oversight' in the proposals.
Labour's Ruairí Quinn said his party would study the Bill in a responsible way, but expressed concerned that no limit was being placed on the type of properties to be acquired and the value of the assets to be taken over.
'Despite a figure of €90bn having been bandied about, there is nothing in the Bill to prevent it from going even higher,' he said.
The Construction Industry Federation said it would consider the draft NAMA legislation in full consultation with its members.
'As has been stated on a number of occasions, the CIF supports the major restructuring, of which NAMA is an important part, of Ireland's banking system and wider economy,' a statement said.
Sinn Féin's Arthur Morgan descried the plan as 'the crime of the century', with an immeasurable burden of debt on future generations.
SIPTU leader Jack O'Connor said the draft legislation showed every intention of making ordinary people pay for the mistakes of the rich and powerful.