One of the most puzzlings acts of omission by NAMA in 2010 must be the agency’s decision to refrain from absorbing Paddy McKillen’s loans following NAMA’s success in Dublin’s High Court at the start of November. Instead NAMA has said that it will refrain from acquiring Paddy’s estimated €2.1bn loans from NAMA Participating Institutions pending the outcome of Paddy’s appeal (decision expected in January but will Paddy seek an appeal in Europe if he is unsuccessful at the Supreme Court?).
Meanwhile life goes on in Paddy’s businesses and in the past month, the City of Westminster Council has renewed planning permission to extend Paddy’s 5-star Claridge’s hotel in London’s West End (though Paddy would probably correctly claim it was Mayfair). The development work is expected to start after the 2012 Olympics and the plan is to build an extra 40 bedrooms onto the existing 203-bedroom hotel.
The planning permission carries some conditions including the commitment by Paddy’s company in the first instance to contribute GBP £4,786,530 to social housing in Westminster, GBP £33,800 for local council CCTV (the British have some fetish about being the most filmed people on Earth), GBP £162,240 for the so-called Crossrail project which will see rail facilities crossing from east to west London, GBP £226,460 for local environmental projects and not less than GBP £200,000 for public art. Bank of Ireland is also a party to the planning permission agreement and should BoI take possession of the property then BoI will assume responsibility for Paddy’s contributions. And since BoI’s loan is NAMA-bound and Dublin’s High Court has confirmed that NAMA can take over the loan, then it is NAMA that ultimately assumes responsibility here. So that’s how NAMA has made a commitment to potentially spend substantial sums on improving London’s environment.
But wait a second, doesn’t NAMA control the actions of the Participating Institutions with respect to NAMA eligible loans even before they are transferred to NAMA? Indeed it does via section 66 of the NAMA Act and the implication is that NAMA will need to have been consulted and to have approved entering into the agreement which might see BoI or NAMA ultimately having to make the contributions referred to above. There is no suggestion that Paddy’s company is unable to meet its loan obligations to BoI though the recent court case has revealed that although Paddy is able to meet interest repayments, there would be challenges in repaying the principal.
What may further confuse you is that the State owns 36.5% of BoI’s ordinary share capital, that BoI would in all likelihood not be able to survive without the State-guarantee and that BoI needs €2.2bn of new capital by the end of February 2011. So why is BoI facilitating a borrower by underwriting additional financial commitments when that borrower is fighting the State tooth-and-nail to keep his lending outside NAMA? It is not clear from the signature on page 43 of the Planning Department’s documents who at BoI signed the agreement but had they NAMA’s approval to enter into the commitment?
Does the Minister need to write another letter, this time to BoI, to remind that bank of the support it is receiving from the State? Why is NAMA underwriting additional financial commitments to Paddy at the same time as defending itself against an action which might jeopardise the agency?
NAMA Wine Lake 
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I thank you for making the point that NAMA is a very expensive form of social welfare for failed, idiot developers.
Whatever can be done for these parasites will be done at the expense of the stupid and compliant taxpayers of Ireland.
And the minimum wage must be lowered!
I foresee 1789 all over again!
I can’t see the connection with 1789 – maybe you could enlighten me?
The only era that our current situation reminds me of is the time of Joseph McCarthy in the USA. The term McCarthyism has entered the vernacular as a general term for the phenomenon of mass pressure, harassment, or blacklisting used to instill conformity with prevailing beliefs. The term is also now used more generally to describe unfair, reckless and unsubstantiated accusations against people and to discredit them.
McCarthy was a self-promoter, a bully and a liar (any similarity with NAMA recognised yet?). He was the bane of the thinking man. But he never managed to send a single person to jail. The hearings he conducted violated everything the country most admired in itself. Fairness, tolerance and the presumption of innocence are supposed to be the American way. McCarthy abused them all.
Enter the new McCarthyites in the home of his ancestors. Who do our government put in to run an entity that is promoted as the “world’s largest property company” and that needs to compete commercially and profit in a business full of sharks? None other than a man whose talents relate to collecting tax and who thinks that he is running the CAB. Jesus wept!
With all the personal vilification and demonisation being spread by government, NAMA and the media, it is not easy to stand back and ask “where lie the basic truths?”
The fundamental basic truth is that this government “bet the pot” (all the State’s coffers, the pension fund and not an inconsiderable number of taxpayer IOUs) on guaranteeing the banks, entities that had debts far larger than the State and far larger than the taxpayer could ever cover. It lost the bet. And in doing so, pledged the citizens of this country to indentured penury for generations.
The developers did not do this, the banks did not do this. They did not have the ability or power to do it. Our government did it.
It interfered with private commercial contracts that should have been let collapse and it socialised them. In doing so it passed the cost to the taxpayer. An act of treachery or stupidity? Observing the qualities (or lack thereof) of our politicians, I think probably the latter.
It’s more like 1847.
Most of the land was mortgaged to foreign bankers. Irish landlords had to sell Irish produce on international markets to get money to make the interest payments. The Irish peasants starved or left the country.
Only difference is that in 1847 we could blame it on the Brits. Can’t blame this one on the Brits. Ireland is a nation of tinkers. It doesn’t deserve sovereignty.
“where lies the truth”.
I think that your fundamental thesis here is wrong and your arguments unravel throughout.
The Government did not “bet the pot”. The developers and the bankers did (and the Govenment turned a blind eye to what was going on). So, IMHO and contrary to what you suggest the developers and bankers created the mess. As I see it, they should pay for their recklessness and replay their gambling debts to the greatest extent that is leaglly possible. Given that these people are all “big boys” and alledgedly tough business people and bankers who undoubtedly pushed their ways to the top in a “business full of sharks”, I have no problem with learning that Nama etc. is carrying a very big stick and will do all that is legally and exconomically feasible to extract the maximum possible repayments. Unlike McCarthy, we have a well established system for sending people to jail for not paying debts. More is the pity that, in practice, it concentrates on defaulters at the lower end of indebtedness spectrum.
Why shouldn’t people be annoyed with the bankers and developers and to bad mouth them as a few score of them have landed the country with debts of billions while they continue to enjoy their big houses, pensions etc?
As regards apparent lack of commerciality in Nama, I for one would prefer it to play the long game and not to rush into things especially in relation its better stuff. I also think that having a former tax collector running the show is not a bad idea. Certainly, preferable to an ex-developer or ex-banker.
Anyway, may 2011 be no worse than 2010.
Hi Brian,
I fully agree with you that the developers and bankers initially created the mess – but it was their mess, not ours. As a capitalist, I believe that it was for them to take the consequences, which includes bankruptcy and liquidation.
However, the government took ownership of it on behalf of the taxpayer. That’s when “the pot” was bet. Left to their own devices the builders and banks (including their shareholders and bondholders) would have had to work the problem through, take the losses, sell the assets, be sold themselves or fold.
I do not recall one developer asking to be bailed out – there might have been a few bankers, but they should have been ignored.
In the post guarantee scenario, the banks and developers are still insolvent, there will still be liquidations and bankruptcies. The only thing that changed is that the taxpayers are on the hook for the losses.
The government did that – no-one else.
Brian,
I meant to wish you a happy New Year!
P.S. I know your feelings about burning the developers and recovering all that can be recovered from them, and if I asked you, “Would you prefer to see NAMA make a profit or have revenge on the developers?”, you would probably answer “Both”.
And this, I think, is where we differ. I do not believe that both can happen. I believe that the London and USA assets are low hanging fruit, but after those sales, if NAMA puts all the developers “to the sword”, it will be left to negotiate with its only other purchasers, the vulture funds, for the balance of its assets. They in turn will deal with our bankrupt developers who will assume a new role as “boots on the ground” partners to the VCs after spending a year in the UK.
The profits will be enhanced for the Vulture Capitalists as they will have purchased assets at prices that will be even more distressed than they are now as there will be no market for NAMA to sell into; and it will enable the VCs to share these super profits with the new “cleaned-up” developers. It will be interesting to see if your scenario or mine plays out. I believe that it will be a combination of both.
We will have very public examples made of most of the top 20 or 30 developers and the rest will find a more accommodating attitude from NAMA once public bloodlust has been sated. The last thing NAMA want is the Vulture Capitalists boasting about how much they made from the property bubble in Ireland.
One thing puzzles me though… How come there is not the same public opprobrium and the same demonization of our central bank regulators and public servants who oversaw all this? They just took off into the sunset with their golden handshakes and nice pensions. No witch hunt there!
just a quick reply. Sorry I misunderstood you regarding the mess creation timeline.
I also would have preferred the bankers and developers to have sorted out their MESS but the cost would hav been the collaple of the entire banking system which the Government could not have permitted. That said, I also agree that the Gov extended and deepened the mess in almost every solution they proposed – guarantees, underestimation, Nama, no to nationalisation, protect bondholders etc.
The developers didn’t need to be asked to be bailed out as they knew that had the bankers etc. by the short and curlies.
And VHNY to you also.
No, I don’t want revenge extracted from the developers but I do see a need for them to repay the absolute maximum. If this requires that they hand up all their ring-fenced wealth then tough.
I think that after disposing of the low hanging stuff and the rubbish, Nama should play the long game and wait for the economy to start recovering (maybe 3, 5, 10 years who knows but I think that 10 years is closer to the mark). By that time the existing developers will be well off the scene and sensible funding and new partners will be available. I would hate to see good quality stuff being sold off to VC/developer partnerships in the next few years simply because the Minister has ordered such a sell off.
There is plenty of private opprobrium from your truely for the regulators and CSs as well as Government ministers, commentators etc. who were proven to be TOTALLY incompetent and who walked in the sunset (should hav been a along a plank) with fancy pensions etc.
@who_shot_the_tiger
“I can’t see the connection with 1789 – maybe you could enlighten me?”
There is a typo here he is refering to “1879”
http://en.wikipedia.org/wiki/Land_War
In his last article in the Irish Times Morgan Kelly also referred to this.
“The gathering mortgage crisis puts Ireland on the cusp of a social conflict on the scale of the Land War, but with one crucial difference. Whereas the Land War faced tenant farmers against a relative handful of mostly foreign landlords, the looming Mortgage War will pit recent house buyers against the majority of families who feel they worked hard and made sacrifices to pay off their mortgages, or else decided not to buy during the bubble, and who think those with mortgages should be made to pay them off. Any relief to struggling mortgage-holders will come not out of bank profits – there is no longer any such thing – but from the pockets of other taxpayers.”