The IMF yesterday issued their conclusions following their periodic “mission” to the State. Remembering that one of their former number, Steven Seelig, has recently taken up his post on the board of NAMA, perhaps their advice will more directly feed into NAMA operations than you might expect. Here’s what the IMF say:
“Financial sector weakness, fall in real estate prices, and high unemployment could continue to reinforce each other. For this reason, current policy efforts to boost banks’ capital-ratios are important and will help counter these tendencies.” With unemployment set to stay at 10%+ for most of the next five years, according to the IMF and most short-term forecasts saying real estate has another 10-40% to fall and a seizing up of the mortgage market, it is reassuring to hear that boosting the banks’ capital-rations will help counter the cycle, though to what extent remains unclear.
“Three restructuring priorities deserve attention: [one of which is] NAMA should schedule an orderly disposal of the property assets acquired aimed to reduce the large overhang of property in state hands, restart market transactions and, thus, help normalize the property market. Oversight of NAMA operations, which is provided for in the legislation, is desirable.” The hoard-or-dispose debate is no doubt raging within NAMA. Savills recently told a prestigious London conference that NAMA was more likely to take a longer period to manage domestic assets and it would be foreign assets that came to the market sooner. Does the IMF mean clearing the overhang (ie disposing of the assets here) will restart the market? What about NAMA’s objective of maximising a return for the taxpayer, might that be at odds with a more short-term disposal of assets? Sadly the IMF did not go beyond the NAMA legislation in calling for oversight – NAMA is still outside the Freedom of Information Act, it hasn’t a Business Plan still (another 5 days lads!) or published Codes of Practice.
“Mindful of the moral hazard risks, narrowly-targeted support measures for vulnerable homeowners would limit the economic and social fallout of the crisis. With their bolstered capital, banks could absorb the initial costs, perhaps basing themselves on the welfare system to identify eligible beneficiaries. This process will be aided by an overdue shift to a more efficient and balanced personal insolvency regime.” Whilst the call for an “overdue” reform of the personal solvency regime is to welcomed, it is unclear the extent that the IMF is calling for an unnatural social support of what might be impossible mortgage cases, and whether such support would unhelpfully distort the market for a long period.
NAMA Wine Lake 