I wonder will we ever reach a point when the army of consultants and advisers that worked with the late Brian Lenihan in 2009 will be eager to come forward and claim it was they who inspired NAMA? It seems for the time being at least that NAMA is a bit of an orphan with its progenitors muted in discussing their involvement in NAMA’s conception in 2009. Step forward Dr Alan Ahearne who was seconded from his role as economics professor in the National University of Ireland in Galwayin March 2009 to work with the former Minister for Finance, and who is likely to have had no small role in the conception of NAMA. Dr Alan has now returned to his old post and today pens a defence of NAMA in the Irish Independent.
He defends NAMA’s secrecy by comparing it with the five nationalised banks – AIB, EBS, INBS, Anglo and Permanent TSB. These are he says, now state-owned as NAMA is, and yet no-one seems all that concerned about the goings-on there. So if I get this line of argument correct, because we’re not clamouring for more information from IBRC, AIB and PTSB, we’re being inconsistent and perhaps even hypocritical in demanding it from NAMA. After all the five banks and NAMA are both state-owned, so why the difference in treatment? So why would we want a new entity with top heavy public sector and accounting direction, with untested procedures and to an extent, personnel, which oversees €74bn of assets, many of which are in distress, which gets its initial forecasts wrong, which still thought that its portfolio’s value was stable in mid-2010 – why would we want more oversight over this body than IBRC which employs over 1,000 career banking personnel, which disposes of large tranches of assets in pretty transparent bidding processes? Why don’t the two get equal attention?!
Dr Alan credits NAMA with stabilising deposits in Irish banks – “it is simply not plausible that the stability in bank deposits recorded over the past six months could have been achieved if toxic loans had remained on the books of the banks” Hmm, Irish private sector deposits in the so-called covered banks (AIB, INBS, Anglo, EBS, PTSB and Bank of Ireland) declined by 5.3% between May and October 2011, in Spain they declined 5%. Now it is getting a little irritating that neither the Central Bank of Ireland nor the Department of Finance seems willing to publish private sector statistics on Irish deposits in Irish banks, because the DoF is claiming deposits are increasing, but DoF has declined to say how much of the increase is attributable to overseas branches which will be governed by local guarantees. But on the face of it, the stabilisation at Irish banks doesn’t seem materially different to Spain. Spain doesn’t have a NAMA, so isn’t it indeed “plausible” that Irish deposits might have stabilised in the same way Spain’s did? I use Spain because Spain had a property bubble similar toIreland, lending on land and development similar toIreland but has not seen the same collapse in banks (or indeed property) asIreland. Extend and pretend seems to have worked better forSpain in this regard.
Dr Alan defends NAMA’s €1m per working day cost by challenging critics to provide evidence that NAMA is either paying above market rates for its services or that NAMA is wasting money? That seems like a fair challenge and it is hoped that we can benchmark NAMA’s operating costs with comparable organisations on here in coming months. But having said that, Dr Alan hasn’t provided any justification himself for NAMA’s costs. Sauce for the gander?
Dr Alan says that critics have changed their tune on aspects of NAMA over time, that in the beginning the criticism was that NAMA would pay too little for the loans it was acquiring from banks – this was when it was suggested NAMA would pay 70c in the euro, and the upshot of the criticism was that NAMA was bailing out the banks. That criticism has now changed apparently after NAMA had paid 42c in the euro and the upshot is that NAMA has paid so little causing the banks to fall back on state assistance. This is rich, and it is particularly rich coming from an adviser on the NAMA set-up. Cast your minds back to the Wikileaks cables which claimed in relation to then-deputy Secretary General at the Department of Finance, Kevin Cardiff “On April 7 [2009], Econoff spoke with Kevin Cardiff (protect), Second Secretary General at the Department of Finance, who said that the pricing of assets should be finished within three months. Cardiff said he will need about 30 more staff members, who will come in on a contract basis, to set up NAMA and value the banks’ assets. He hinted that, given the work he and his colleagues have already done, the assets will be discounted by around 50 percent.” Perhaps Dr Alan, given he joined the Department of Finance in March 2009, a month before Kevin’s hinting, might give us the skinny on what the projections were, because from this perspective, it seems that it was considered a possibility if not indeed a probability or likelihood that the losses in the banks after NAMA’s work would be so severe as to require nationalisation, in which case, why have a new organisation called NAMA, why not do it at the banks?
And lastly Dr Alan says that NAMA’s critics are being inconsistent in saying on one hand that NAMA is a bailout for developers and on the other that NAMA is overzealous in foreclosing on developers. I think Dr Alan might find that different critics have different views, on here for example, you might find commenter Brian Flanagan consistently suggesting NAMA is still shielding developers from the reality and inevitable consequences of their losses, whilst others will suggest NAMA won’t be happy until every developer has a classic 1970s car, the Mark III Ford Cortina, and living in a 3-bed semi-detached property!
NAMA has come in for unrelenting criticism over the past couple of months which seems unfair to an organisation with some success under its belt. However, you can always over-egg the pudding in the opposite direction also.
The complete lack of comment or social awareness regarding the disaster that is Ireland is frightening.
It is no surprise the architects of NAMA think it works, even if the original argument focused on ‘asset management’.
It is sad that a leading light of Irish academia cannot even acknowledge the harm caused and social distress by decisions he was part of.
Could it be that Dr Alan Ahearn(e) owes more to his selection and elevation on the basis of his surname rather than his academic abilities? He just a humble lecturer in 2009 and has only been rewarded with a Professorship since his return to academia but such is the way of things in Ireland.
Historical note: The Ahearns are descended from horsemen as are the Haugheys. A bit of riding roughshod over everyone and everything, including the facts, comes natural!
Working for Brian Lenihan is nothing for a high flier like this guy, who by all accounts deserves much respect.
If only there was a social context to the work of people like this. I guess that extra dimension is for the real high fliers and noble laureates, Most of our guys can’t see that far it seems, they’re more of a trough generation.
I have a lot of respect for Dr Ahearne. Remember that he was one of two academics who warned of a Housing Bubble.
@NWL
What is wrong with a semi D and a ford cortina ???
Can you enable “Smilies on this blog ?
Alan will be remembered for his institutionalization of “paddy pricing” through LTEV.
From a banking perspective it never mattered what NAMA would pay for the loans after the 2008 bank guarantee.
The whole point of NAMA was to get the banks lending again – how’s that working out Alan?
As for deposits flooding back into them, the only way to get to keep their doors open is through emergency ECB funding.
They can’t fund themselves and they can’t lend – what’s the point in banks again?
As for transparency – well, we need to look to our neighbours for that!
Lloyds Says Two-Thirds of Irish Loans May Not Be Repaid in Full
http://www.bloomberg.com/news/2012-02-24/lloyds-says-90-of-irish-commercial-real-estate-loans-impaired.html
@southofdub Read the entire extent of Alan Ahearne’s Property Bubble warning here: http://www.boards.ie/vbulletin/showthread.php?p=68138068
David McWilliams made a similar warning in 2001 but he is not classed as an academic so it probably doesn’t count.
@NWL
Alan Aherne does not address the key failings of NAMA in his article. These are strategic and organizational failures.
At a basic level the key functions of NAMA are
1.Asset (loan and collateral) acquisition from banks.
2.Enforcement of authority over loans and collateral.
3.Debt collection.
4.Asset management.
In relation to these while NAMA has managed to take the loans from the banks, its enforcement of its authority over the loans and collateral has been abysmal. The key failure here has been the decision to ‘work with’ developers who had clearly failed but whose sole objective would have been to leave something in the pot for themselves. This was a dreadful error of judgement which was probably ‘encouraged’ by Fianna Fail’s perception of the importance of the property developers as part of the ‘gene pool’.
The ‘working with’ developers and the ‘business plans’ idea and approach was the stuff of genuine nightmare. It should never have been contemplated.
One should note that this error now appears to be recognised with NAMA belatedly enforcing its authority over collateral through more receiverships etc. Common sense alone should have told them where the previous business plans of these people had left the country.
Debt collection should stand on its own and I am sure NAMA are doing their best but are severely hampered by not taking charge of the collateral.
Asset Management:
This is the area that NAMA has really failed in. It is disconcerting to hear Frank Daly talking about getting value for the taxpayer while at the same time seeing half finished derelict buildings through the country, with NAMA sitting on a three billion cash pile and over a hundred thousand building workers sitting on their hands with nothing to do.
NAMA’s concentration on the sale of prime properties abroad has been accompanied by the neglect of properties that are under its control in Ireland or should be under its control were it not for its ‘working with developers strategy’.
NAMA does not appear to understand that the taxpayer will gain better value from finishing and leasing properties at a very low yield rather than waiting for speculators or sharks to buy these for virtually nothing. In a market where rental prices have now been rising for over 12 months (?), why is it that NAMA still cannot see that it is better to rent than sell.
Alan Aherne has defended NAMA because it has removed toxic loans from banks, because it must be as secretive as other banks, and because he says professionals do not work for nothing.
But NAMA was designed to remove the toxic loans from banks, which it has succeeded in doing at quite a cost. But it still does not control the assets and it is making a lousy job of managing those assets that it does control.
Both its initial successes and continuing failures have come at a very high administrative cost.
PS Alan Aherne:
There are thousands of professionals in the country who work for a pittance of what many NAMA funded professionals work for. Many of these would not have taken two years to reject business plans from some developers where instinct would have told them that the concept of ‘uberrimae fidei’ was certainly not an ab initio modis operandi in that ‘gene pool’.
Spelling error: That should read
ab initio modus operandi
Alan Ahearne must be a busy guy. He is serving a four year term as a member of the Central Bank Commission and is also a member of the Fiscal Council.
The fee for serving on the Central Bank Commission is €14,936 a year.
I believe the services of the Fiscal Council members are provided gratis.
This blanket denigration of NAMA, developers, bankers, politicians etc, serves only to demonstrate the lack of thought, judgment and intellectual capacity of those who perpetrate such poison. All too often, this “all black swans are bad” criticism deteriorates into mob inspired character assassination, smear campaigning, and a comprehensive abuse against groups of people as a generality. There are good reasons for concern about this sort of thing. Over the centuries from time immemorial, through Cromwell, Hitler, right up to Assad, people have spread hatred against categories or elements of the population in an indiscriminate manner. All they needed to do was to categorise a section of people as being less worthy than others.
Not all blacks are criminals or junkies, not all Sicilians are Mafiosi. Within each group are both bad and good, whether it is NAMA, developers, Irish, English, gays, women, Catholics, blacks, Italians…….
The spreading of hatred is akin to spilling a poisonous chemical into a body of water. It has certain immediate, obvious effects – some fish die, the water becomes undrinkable. Later, as the chemical embeds itself in the muddy bottom, the effects are more difficult to trace, but no less harmful. Over time, the whole ecosystem becomes unbalanced and dies.
Its equivalent is happening in Irish society today.
A democratic society requires that people be willing and able to make informed judgments. But when we as a people fail to engage in the rational examination of ideas and seek instead to propagate general vilification and personal attack on any sector, the democratic process itself is subverted. Emotionalism usurps reason; prejudice prospers — and democracy suffers a death.
Excellent post. As I posted elsewhere – anger is not a policy. In fact in this instance it is simply corrosive to the heart of our democracy. While this is an excellent blog there is a tendency for rationality in posts to attract and be smothered by mainly emotional responses. I suppose it’s a microcosm of our society right now. Something has to change if we are to progress.
that is certainly one view of the current position, other perspectives might be found on the http://www.rte.ie website and prime time’s most recent review of nama’s work,
@WSTT
I’m confused.
Are you not the same tiger who personally denigrates Frank for sniffing through the WAGS knicker drawer?
Have you not squealed at NAMA for it’s tax collector mentality?
Have you not constantly (and incorrectly) warned of “Fieldien” nightmare scenarios?
I fear you are being too subtle for me, as I’ve read posts of yours that “propagate general vilification and personal attack” – unless this is some backhanded apology?
@WGU, I knew it was too subtle! :-)
Nothing I can do about Frank’s fetish…. He needs to see a doc.
NAMA has a tax collector culture – it’s just a fact.
“Fieldien” future? … stirrings in Portlaoise last week?
I’m not sure when I have propagated general vilification or really even personal attack, I have criticised the actions of NAMA and where appropriate of certain individuals, which is different.
@WSTT :-) I am but a simple soul.
It seems though that one man’s criticisms is another man’s vilification!
P.S. … Maybe that’s too subtle for some!
One of the problems with NAMA is that they were not magnanimous enough to look next door and take on another 20 billion or so in loses. Why should asininity be limited just to Irish banks?
“Of the £10.8bn of loans granted to commercial property, some 90% are now deemed to be impaired.” If that does not warrant a bonus, I don’t know what would.
http://www.guardian.co.uk/business/2012/feb/24/ireland-lending-lloyds-rbs
@ WSTT:
“There are plenty of good reasons for fighting, but no good reason ever to hate without reservation, to imagine that God Almighty Himself hates with you, too.”
Kurt Vonnegut
Hi Jake how’s goes it down In Mexico,visited a few times.Here WSTT
“The Conversion of Paul the Apostle (anglicized from the Latin Vulgate section title: Conversio Sauli), as depicted in the Christian Bible, refers to an event reported to have taken place in the life of Paul of Tarsus which led him to cease persecuting early Christians and to become a follower of Jesus; it is normally dated by researchers to AD 33–36.[1][2][3] The phrases Pauline conversion, Damascene conversion, and road to Damascus allude to this event.”
http://en.wikipedia.org/wiki/Conversion_of_Paul_the_Apostle
@wstt
I agree there should be a little less agro among all the various factions.
I disagree that emotionalism upsurps reason.
Emotions are a buffer solution which provide a humane equilibrium in which technical arguments can dissolve.
25 years as a scientist and a lifetime as a poet have taught me this.
@Jake Watts
I might as well be in Mexico.
@JG
I swear I saw visible signs of recovery here driving on El Camino Real today, Nearly knocked me off my horse.
@nwl interesting post on academic blogs on Irisheconomy, almost invalidated by the existence of your non-academic powerhouse.
@sf ca writer. “I disagree that emotionalism usurps reason.” Point well made and taken :-)
I would have expected no less from a resident of Mount Parnassus!
@sfca chilling in Denver airport,four hour delay ahhhhh,supporting Irish Economy via Guinness and Jameson,the joys of travel.
Agreed,there are “signs” mostly for sale….but it is picking up here stateside.
Hope you stay in the saddle,I would be extremly pissed if I lived in Ireland,the passivity and acceptance amazes me.
@ JG Seems like Warren Buffet sees the same signs too, and he likes my favorite Bank Wells Fargo.
One of my ‘topics’ this last year is what I see as a slow but inevitable ‘taking back home of US business’ vaguely alluded to here. It’s not something people talk about at all, maybe it hasn’t occurred to anyone yet, or maybe they need to hear it from Warren himself.
http://www.reuters.com/article/2012/02/25/us-berkshire-economy-idUSTRE81O0PH20120225?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943
@ sf ca
Come on down to the real Mexico and hang out with the Maya in Merida waiting for the 13 b’ak’tun to come to its glorious end. Your Cholos have other plans.
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