What does Brendan McDonagh have in common with Auric Goldfinger?

Long before Daniel Craig was flexing his facial muscles and narrowing his eyes at some dastardly criminal mastermind, 007 had to confront what was in my opinion, the best Bond villain, Auric Goldfinger, a man whose business and passion was gold. Not only did Mr Goldfinger get to rattle 007 who asked him if “you expect me to talk” which was met with the flip “No Mr Bond, I expect you to die”.But Mr Goldfinger had probably the most fiendish plan of all the Bond villains – he was going to break into Fort Knox, the US gold depository. But Auric was no simple criminal, he wasn’t going to steal the stuff. No, Auric was going to render the gold in Fort Knox useless by exploding an atomic bomb which would contaminate the gold with radiation. All with the aim of increasing the value of his own gold. Or to express it in another (more clunky) way, he was going to demolish part of the existing supply of gold in order to put a floor under the values of his own gold.

And so to Brendan McDonagh, the NAMA CEO who is acquiring property loans, on which the property was originally worth €88bn (or €92.5bn if you believe the figures contained in the EU Decision of 26^th February, 2010). In the first instance according to the draft business plan NAMA is hoping that 80% of borrowers will repay their loans 100% – in the other 20% of cases the property is to be repossessed and sold off. So even in the draft business plan NAMA is expecting to become a significant property owner. The property market (including all of its subsectors) has collapsed in Ireland and various claims that the bottom was reached have proven to be incorrect. In respect of residential property, whilst the Minister for Finance might claim recently that we are at the bottom (again), others like respected Trinity College Dublin Finance Professor, Brian Lucey  says that to suggest we are now at the bottom flies in the face of historical evidence and cites a fellow professor, Morgan Kelly who predicted a 50% drop from peak values which would indicate another 18 months of falls. Whilst the speculation up until recently was whether NAMA would hold onto the repossessed property or dispose of it quickly, following the NAMA CEO appearance at the Oireachtas Joint Committee on Finance and the Public Service on 13^th April, 2010, it has been confirmed that an option that will be considered (and is expected to be actualized) will be demolition. The most tangible defence given for the demolition option was health and safety, and that defence would probably attract widespread approval. However the concern is that NAMA like Mr Goldfinder will demolish property to place a floor under the value of the remaining property – what’s the point in trying to sell two 3-bed semis when there is only one buyer – demolish one and then the buyer loses his advantage and faces a higher price and better still the message goes out to other buyers that there is no excess supply to drag prices lower.

Of course if NAMA were to adopt the approach of demolishing dwellings to place a floor under the values of their other property, they might be considered to be distorting the market place and acting uncompetitively, something which could carry expensive consequences for NAMA. Of more concern perhaps is that the economy is throwing away assets which might be used to create wealth and foster competitiveness (or meet social needs). So I hope Auric Goldfinger’s resemblance to Brendan McDonagh ends at the passion that they both obviously have for the job at hand, and that NAMA’s actions are considered in the context of the wider economy.

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