NAMA’s accounts before the Oireachtas

In the NAMA Business Plan published on 14th October, 2009, NAMA set out how it would be accountable to the government. On page 27 under the aptly titled “NAMA – Accountability and Reporting Requirements”, there appears the commitment to “Each quarter, NAMA will report to the Minister giving detailed information in relation to the following: … A schedule of income and expenditure in the period.. The Minister will lay copies of this Statement before the Houses of the Oireachtas”

Yesterday we learned from sources that NAMA had exceeded its legal budget.

If NAMA is unable to report as it is required to do with a limited expenditure (and also to exceed its budget apparently), then what hope is there that it will meet its responsibilities with the big numbers. And what hope for our Opposition that they are not demanding this information to be laid before the Oireachtas?  UPDATE: It has been pointed out to me that under section 55 of the NAMA Bill, the first quarterly report will cover the period up to end March 2010 and will be presented to the DoF by 30 June 2010. I withdraw therefore my statements about NAMA failing to meet its reporting deadlines though the statement that it has exceeded its legal budget apparently still holds true.

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NAMA’s assumption of a 20% default rate

The NAMA Business Plan set out late last year makes some bold assumptions such as inflation on its administration costs being zero for 11 years! One of its key assumptions is that 80% of the then €77bn of NAMA loans (original loans and rolled-up interest) would be paid back 100%.  This key parameter will be returned to in some detail on this blog shortly but for the moment NAMA cited a bank which the media claimed was Barclays who had a default rate of 10% in the UK in the early 1990s and doubled that for “prudence”.  So the assumption with NAMA loans is that they will in the main be repaid 100%.

With that in mind, I guess one of the 80% will be Gerry Gannon who has been awarded a multimillion state contract to provide offsite storage facilities to the National Museum. And why not?

Whilst it is not certain that his loans will be transferred to NAMA (they would appear to meet the NAMA criteria and lenders don’t have a choice over what is transferred and what isn’t, a topic to be returned to on this blog soon), Michael Daly of the Fordham property group told a court yesterday in which Anglo is pursuing him for an unpaid loan “I don’t have €86 million and won’t be able to meet it so the implications for me are catastrophic”” Mr Daly disputes the case against him but if proven he will presumably become part of the 20%.

Given the high profile of some developer’s recovery actions and the fact that property has crashed by so much, have we developed an assumption that most of the NAMA loans will be unrecoverable? I will return to this 20% default rate shortly which on the face of it would seem to this author not to be appropriate.

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