This is the second entry to deal with the allegations made in the last couple of days by Fianna Fail senator, Mark Daly, including allegations made in an interview with Pat Kenny on RTE yesterday morning. The allegations were of shenanigans involving loans acquired by NAMA. There is a full transcript of the interview with Pat Kenny in Part 1 but I extract here what I believe to be the relevant remarks. I have merged some parts of the exchange and you should consult the full transcript to see the sequence of precisely what was said.
Mark Daly: It’s not so much an allegation as a fact. In one particular case that I have come across in the UK the original loan was €12m, the haircut was €6m, but the asset itself was undervalued and was worth €9m really and the guy, the original borrower of the loan said to his friends “you pay the banks €6m, they’ll be happy and we’ll sell it for €9m” and they made a nice €3m profit. There’s a lot of shady behaviour going on here. The obscenity of it is that on top of this is that the banks are once they’re quite happy to get the money they owe NAMA, aren’t going to go after the borrowers, the original borrowers for the balance of the money. The original borrowers that have been brought to my attention are arranging for their friends to put in the bids. Nobody else is aware that this place is for sale because no-one else knows that this asset is in trouble, is for sale. This is a scam of monumental proportions
Pat Kenny: NAMA had responded that it had addressed this extensively at the Public Accounts Committee.
Mark Daly: The problem here is that you need smoking guns you need evidence of emails, phones, cheques, money going. This is all quietly, quietly little chats in a corner over a pint. And the guy who came to me on this one was approached at a dinner party to be the third party to buy a property in the UK and he would then be given a cut. And he came to me because he was so disgusted, that the same people who got us into this trouble in the first place are now doing the same thing again.
Emmet Oliver: I don’t have any evidence and unlike Mark there I don’t have the benefit of privilege in the Oireachtas to say these things. So he does have in the dying days of the Oireachtas the opportunity to put names into the pubic domain.
Mark Daly: And in the next six months the guys who caused all the trouble are still going out there and they’re going to make billions, millions, hundreds of millions, billions off the taxpayer because they’re buying property at less than the asset because they’re arranging for their buddies to put in false bids and thereby buying it for less than the market value –
This entry examines the following
(1) The allegation
(2) NAMA’s codes of practice and the NAMA Act
(3) Banks’ codes of practice and the NAMA Act
(1) The allegation
The loan, the senator claimed, had a par value of €12m and related to a property in the UK. NAMA paid €6m for it. A party related to the developer (“friends” according to the senator) acquired the loan for €6m from NAMA. The underlying property is today worth €9m.
To investigate the allegation further, the Senator needs to identify the transaction. It seems that it was the loan that was sold by NAMA or the bank, not the underlying property. So we probably need more than just the property address because the new buyers of the loan may not have registered a loan charge that is publicly accessible and if they were friends of the borrower and wanted to keep the transaction hushed up then that is all the more likely. It seems to me that probably the only parties that can fully investigate the allegation are (1) NAMA or (2) the bank but if the Senator puts the following information in the public domain then the media can conduct some investigations
(a) The address of the property – the media can then identify the owner, the loan charges on the property, the price paid for the property and can probably have a stab at valuing the property today.
(b) The buyer of the loan – this wouldn’t be required and would be clear if the new buyer of the loan registered a charge against the property. But if they were being cute they mightn’t have done this. So the Senator may need to identify the buyer of the loan.
Only NAMA and the banks will theoretically know how much the agency paid for the loan – the Senator says €6m. But if the Senator puts (a) and (b) in the public domain, and as Emmet Oliver said yesterday, the Senator has the advantage of providing details using his privilege in the Seanad, if he does make this information available then the media can have a stab at verifying the allegation and NAMA and the bank should be in a position to comprehensively judge the allegation (see below).
If, on the other hand, the Senator does not put the information in the public domain, then all we have is an allegation and we must ask how credible this Senator is, and for what reason he does not make the information available given his Seanad privilege. Like informed commenter, Who_Shot_The_Tiger (see comment on Part 1), I am a little sceptical about the claim. This blog has a reasonable audience within the property development (and associated professional services) community and receives quite a volume of confidential messages through the contact form on different aspects of NAMA/the banks and there hasn’t been any message that would confirm the allegations made by the Senator. But given that the Senator is one of 200-odd people in the State that can make this information public under privilege, why doesn’t he?
Now NAMA apparently responded to the Pat Kenny show and claimed that this matter was dealt with “exhaustively” at the Committee of Public Accounts (CPA). NAMA has only twice come before the CPA – on 18th November, 2010 and 13th January, 2011. The transcripts for both appearances are available and there is no reference whatsoever to the specific transaction but in general terms the issue was examined in the following exchange between Labour’s Roisin Shortall and NAMA’s Chairman, the hawkish Frank Daly in November:
Frank Daly: On the second part of the question on the phoenix situation, there is a provision in the Act that we are not allowed to sell back properties to the people who are debtors in the first place. We are very conscious, both at the board and in the executive, of the sensitivity of that and making sure it does not happen. I cannot come to the committee and say that somewhere down the road someone will not come back and set up a company or work through a relation, for example, to buy back some properties. It is almost impossible for NAMA to give a 100% guarantee that that will not happen. We are alive to it and we will do our utmost to make sure it does not happen.
Deputy Róisín Shortall: If an outstanding debt is attached to an individual, is there anything stopping that individual from starting up a new development or construction operation?
Mr. Frank Daly: If there is an outstanding debt against an individual that debt is going to be chased up by NAMA and there will be a charge against it. We will use every means to recover it.
Deputy Róisín Shortall: But is there anything stopping one of those individuals from setting up a limited company, for example?
Mr. Frank Daly: I do not think there is anything. I bow to legal advice but I do not think there is a provision in company law to prevent someone from setting up a company simply while he or she has a debt outstanding somewhere else.
Deputy Róisín Shortall: Would Mr. Daly see that as a weakness in company law?
Mr. Frank Daly: The Deputy is getting into an area where in the nature of things people have debts and they cannot repay all their debts at once. To have something like that in company law could appear to be draconian. I am not talking about the developers we have in NAMA. I am talking about ordinary business people who might get into trouble. If one prevents such people from ever setting up another company or going into business, one is in danger of becoming too draconian and of stifling entrepreneurship. I emphasise that I am not talking about the NAMA people.
Deputy Róisín Shortall: But Mr. Daly has said that those individuals would not be able to buy back properties.
Mr. Frank Daly: Yes.
Deputy Róisín Shortall: But could companies with which they are associated buy back those properties?
Mr. Frank Daly: That is the point I was making, namely, we are precluded from selling the properties back to the individuals who are debtors with NAMA.
Deputy Róisín Shortall: But NAMA could sell them back to companies where the principal is a developer?
Mr. Frank Daly: That is the point I am making. We are very sensitive to that. We will do our damnedest to ensure we do not do that. It is unfair to ask—–
Deputy Róisín Shortall: NAMA doing its damnedest is one thing, but—–
Mr. Frank Daly: That is all we can do within the law.
Deputy Róisín Shortall: Well, I am asking about the law then. Is the law sufficiently robust in this area?
Mr. Frank Daly: That is a different discussion. It goes back to the point—–
Deputy Róisín Shortall: It is an quite important question. What happens in the coming years and the extent to which the people in question honour their debts comprise a critical aspect of Mr. Daly’s work.
Mr. Frank Daly: It is a quite valid question. One would have to come up with a law that targets particular individuals. One would have to relate it to the NAMA debtors or borrowers. If one tried to come up with a law that applied the principle that if there is debt outstanding, one cannot set up a company or engage in business, that would probably be a much wider issue. This is not a decision for NAMA but a wider question.
Deputy Róisín Shortall: I expect Mr. Daly to have a view on it.
Mr. Frank Daly: I am sure I would.
(2) NAMA’s codes of practice and the NAMA Act
First let’s be clear that NAMA can potentially control two assets – the loan and the underlying property. When NAMA first takes over a loan it doesn’t have full control over the property just like your mortgage company controls your loan but it is your name on the title albeit with a charge registered in favour of the mortgage company. Just as your mortgage company may foreclose on your loan and repossess your asset, NAMA may also do this but Paddy Shovlin/the Fitzpatrick brothers apart (possibly) this has not yet happened though NAMA is in the thick of five receiverships (Michael McNamara & Co, Radora, Paddy Doyle companies, Paddy Burke Builders and from last week John McCann and the betting would be that McInerney later today will become the sixth) and two liquidations (Pierse and the Whelan group). So NAMA doesn’t really own any real property at present and the sales that NAMA recently referred to (€2bn last year and an expected €200m in Q1, 2011) will take place under NAMA’s auspices but it is likely to be the developer that actually sells the property.
Most of us can identify with the sale of property and at some point in our lives will actually be at either side of a transaction. On the other hand few of us get involved in the sale of loans, that is where our bank sells our loans to another party. But this is not uncommon with commercial loans though in the past it has been more popular in other jurisdictions, particularly the US. Loans are referred to in the NAMA legislation as “bank assets”. It seems to me that the subject of the Senator’s specific allegation was the sale of a loan, not the underlying property, but that doesn’t take anything away from the potentially scandalous consequences.
NAMA’s operations are governed by the NAMA Act (section 172 appears particularly germane), two Regulations (eligible assets and long term economic value) and one Order (the NAMA commencement date), two (one and two) directions (both associated with the accelerated transfer process announced in September 2010) and the five NAMA Codes of Practice (the Disposal of Bank Assets is the most relevant to the questions here). The Disposal of Bank Assets (aka loans) makes reference to the disposal of property and states that NAMA will abide by the terms of the Code of Practice for the Governance of State Agencies 2009.
Sections of the NAMA Act referred to by Senator Daly yesterday:
Section 18
18.—(1) There shall be a Board of NAMA, whose functions are as follows:
(a) to ensure that the functions of NAMA are performed effectively and efficiently;
(b) to set the strategic objectives and targets of NAMA;
(c) to ensure that appropriate systems and procedures are in place to achieve NAMA’s strategic objectives and targets and to take all reasonable steps available to it to achieve those targets and objectives.
(2) For the purposes of the Board exercising its functions under subsection (1), and without prejudice to any of its powers at law, the Board may provide for the performance of any such function by an officer of NAMA.
(3) In performing its functions, the Board shall act in utmost good faith with care, skill and diligence.
Sections 23 and 25 refer to the appointment of board members and the remuneration of the Chairman of NAMA and seem to be irrelevant to the allegations. I think the Senator meant to refer to section 35 which stipulates “Within 3 months after the establishment day, NAMA shall prepare codes of practice for approval by the Minister” which NAMA did and those codes were published in July 2010 some three months after the Minister had received the.
The assertion by NAMA’s chairman at the November 2010 appearance before the CPA, where he said “there is a provision in the Act that we are not allowed to sell back properties to the people who are debtors in the first place.” Presumably refers to section 172 of the NAMA Act which says at subsection (3)
“A person who is the debtor in relation to an acquired bank asset, who is a person referred to in any of subparagraphs (i), (ii), (iii), (v) or (vi) of section 70(1)(b) or who is a person on whose behalf the debtor or the person referred to in one of those subparagraphs acts as a nominee or trustee in relation to an acquired bank asset shall not, if any of those persons is in default in relation to any acquired bank asset, acquire from NAMA or a NAMA group entity, any legal or beneficial interest in property comprised in the security forming part of any acquired bank asset in relation to which the default has occurred.”
However this section refers to property. What the Senator was alleging related to the sale of the loan (aka a “bank asset”) and the relevant section of the NAMA Act is, I believe, 139 which says
“NAMA may validly transfer, assign, convey, sell on or dispose of an acquired bank asset to any person notwithstanding—
(a) any restrictions on such a disposal at law or in equity,.
(b) any contractual requirement, or any requirement under any enactment, for the consent of, for notice to, or for a document from, any person to such a disposal, or
(c) any provision of any enactment that would otherwise prohibit or restrict such a disposal.”
So I think that NAMA can sell a bank asset (that is, a loan) back to the developer as long as NAMA complies with its own code of practice for the disposal of loans. And its own Code of Practice merely says that the NAMA board will develop a procedure but that it will be guided by the principle of maximizing income and if the loan is worth less than €100m will be independently reviewed by one appraiser and if more than €100m by two. In fact the Code of Practice is a dreadful piece of work in that it lacks meaningful detail.
For what it is worth, the issue of NAMA selling property back to the original developers was examined on here in a “moral dilemma” way back in September, 2010. And the conclusion was that this mightn’t be a black-and-white area because if the original developer can pay the highest price for a repossessed asset and has the unencumbered financial wherewithal to fund the purchase then on balance it might be better to sell back to the original developer. Take a look at the entry and you might see sincere arguments on both sides of the table.
(3) Banks’ codes of practice and the NAMA Act
Now this is an area which has been the subject of disquiet on here before eg here and here). Although the NAMA Act provides for NAMA to be involved in decisions affecting NAMA-bound loans, it is not at all clear how that involvement has been effected.
The NAMA Act states at section 71
“(1) A participating institution shall, until it has been served with a completion notice or NAMA directs otherwise—
(a) administer, service and deal with all of its eligible bank assets in the same manner as, and with the same level of professional skill, care and diligence as, a prudent lender acting reasonably would so administer, service and deal, and
(b) so act in relation to those bank assets in good faith having regard to the purposes of this Act.
(2) A participating institution shall not without the prior written approval of NAMA—
(a) deal with any of its eligible bank assets otherwise than in the ordinary course of its business,
(b) deal with any of its eligible bank assets in such a way as to prejudice or impair NAMA’s prospective interests or priorities in relation to such a bank asset,
(c) compromise any claim or release, vary, relinquish or otherwise take or omit to take any action if its doing so could reduce, lessen or impair any security, right, obligation, ranking or priority held or enjoyed, directly or indirectly, in connection with such a bank asset, or
(d) amend or vary any contract relating to such a bank asset unless contractually obliged to do so.
(3) NAMA may issue guidelines or policy statements in relation to the kinds of transactions that it is likely to be prepared to approve under subsection (2).”
To me this section seems quite loose and is capable of abuse. And it may indeed be the laxness of this section that might have allowed this alleged transaction to have taken place.
Conclusion
The allegations by the Senator give rise to at least two concerns
(1) NAMA (or NAMA banks) is selling loans for substantially less than they’re worth
(2) NAMA is selling loans to parties associated with the original borrower with the implication that the borrower is profiting from the bank crisis to the tune of €3m on this one transaction alone
According to the Code of Practice for the disposal of loans, NAMA is required to get at least one independent valuation for loans worth less than €100m. You would expect the banks to adopt a similar code but that is not mandatory and the NAMA Act is vague on the precise steps to be taken by banks when disposing of NAMA-bound loans. So if it was the bank that sold the loan, there may not have been an independent valuation but NAMA should have been consulted on the sale. If NAMA didn’t demand an independent valuation, then I think there is a prima facie argument that someone at NAMA was negligent. If an independent valuation was obtained that suggested the loan was worth €6m and it later transpires it was worth €9m then I think the valuer would have questions to answer, though it should be remembered that valuation is an art, not a science (though it’s not astrology either so there should be a clear basis for any valuation).
It seems to me that there is no bar on NAMA selling loans to either the debtor or an associated party. Whilst the NAMA Act seems to bar sales of real property to a debtor or associated party, there doesn’t appear to be any such bar on the sale of bank assets (aka loans). That would appear to be a gap in the NAMA approach and it is surprising that the Minister passed NAMA’s Code of Practice without making reference to this provision that applies in the case of real property disposals.
So in conclusion
(1) We need the Senator to reveal details of the alleged transaction
(2) If the allegation is well-founded, NAMA needs investigate how the loan was valued
(3) NAMA needs review its Code of Practice in relation to the disposal of loans and specifically whether the bar on sales of real property to the original borrower should extend to sales of loans
(4) NAMA needs to tighten up the procedures used at banks to dispose of loans, to ensure that banks adhere to the same standards as contained in NAMA’s Code of Practice
NAMA Wine Lake 
A “tour de force” NWL. Take a bow!
Hi NWL,
I’m struggling with the distinction between the bank asset, which is undoubtably the loan, the property underlying the loan and NAMA actions relating to the “short” sale of either one back to the debtor or his “associates”.
Section 172 (3) states:
“3) A person who is the debtor in relation to an acquired bank asset, who is a person referred to in any of subparagraphs (i), (ii), (iii), (v) or (vi) of section 70 (1)(b) or who is a person on whose behalf the debtor or the person referred to in one of those subparagraphs acts as a nominee or trustee in relation to an acquired bank asset shall not, if any of those persons is in default in relation to any acquired bank asset, acquire from NAMA or a NAMA group entity, any legal or beneficial interest in property comprised in the security forming part of any acquired bank asset in relation to which the default has occurred.”
Surely the term “any legal or beneficial interest in property comprised in the security forming part of any acquired bank asset” would cover an interest in the loan itself, as the loan has a legal interest in the property comprised in the security?
In essence, as I see it:
As holder of the loan, NAMA has a right to sell it. (They have refused to use this option to anyone who has requested it, to date. It suits a borrower as they could probably negotiate a release of their guarantees with a new “friendly” mortgagee.)
The borrower has the right to sell the property, subject to NAMA’s consent.
If NAMA forecloses and appoints a Receiver / Liquidator, the Receiver has a right to sell the property on behalf of NAMA. He/she must however obtain the best available market price for the property or he/she can be sued for negligence. That means the asset must be advertised extensively.
In all the above cases, the borrower remains liable for any shortfall on the loan, except where the loan itself is sold as all security would be sold with it. And NAMA can’t chase personal guarantees when it is no longer owed money on foot of the loan.
Hi WSTT, yes I re-read that section a few times and that provision that the developer “shall not” if in default “acquire from NAMA or a NAMA group entity, any legal or beneficial interest in property comprised in the security forming part of any acquired bank asset in relation to which the default has occurred”.
My interpretation which I’ll readily admit is capable of being argued against is that “legal or beneficial interest in property” solely relates to ownership. Would a loan for a property represent a “legal or beneficial interest” in that property? Getting pedantic, the charge would be a legal or beneficial interest but would the loan in itself?
I would have hoped that the Code of Practice for the disposal of bank assets would have clarified the point but that Code is one woeful document which essentially says that procedure hasn’t yet been written.
HI NWL,
Pedantic?…. That’s what good legal battles are made of :-)
I can never understand why those that draft legal documents can’t write them in plain English.
Hi WSTT,
Whilst not knowing the minutiae of the case, we have had exchanges before on the effect of Paul Coulson’s dealings with the Irish Glass Bottle site and a legal point which hinged on the rights of leaseholders and semi-state companies. And we all now know the financial effect of that loophole. Overlooked loopholes might well exist in other pieces of legislation including the NAMA Act. And it is really only by testing the specifics of the Senator’s allegations against the provisions of the NAMA Act that we can see if there is a loophole.
To progress an investigation of these allegations outside NAMA or the banks, the Senator needs to provide details. And any media outlet that he now approaches with these allegations should challenge him to disclose the address of the property and buyer of the loan. And if he declines to provide the information under privilege in the Seanad, then I for one will suspect the Senator’s motives.
I agree fully. I don’t believe that there is any truth in his assertions – and he should “put up, or shut up”. However, it is election time and when it comes to politicians and publicity…..
I have checked with a contact inside NAMA today and they have not instituted any loan disposals. He told me that they cannot sell any asset or loan unless and until:
(a) they have considered and rejected the developer’s business plan.
and / or
(b) they have appointed a liquidator or receiver to do so.
and
(c) any asset that the developer wants to sell must be extensively advertised before the NAMA board will approve its sale.
On a separate but related issue, a big problem that NAMA has in relation to disposals concerns to one or more of their UK staff who are too close to some of the UK developers and funds.
NAMA is not supposed to discuss its “clients” business but the UK “friends” are availing of information on NAMA loans and approaching NAMA through the back door to buy the assets at a discount – In a nutshell, there is an attempt to shaft the Paddy developers in London through insiders of UK origin within NAMA.
The ploy has not been effective so far for the reasons listed above, but it is causing severe aggravation internally.
BTW, NWL I know that you have been speculating on who will head the DoF after the election – A small wager with Paddy Power on Ruairi Quinn as the new Minister of Finance would be money well invested.
WSTT
Off topic, I know, but Ho Chi Quinn would be my bet too; the optics of it (dragged the country back from the brink before) are good.
Anyway, back on topic. I believe NAMA is designed to resell the loans at above what NAMA paid (so NAMA makes a profit), but below the original loan value. It is not a property management agency, but a loan management one. In particular, I believe that for smaller borrowers who continue to have income and assets, the idea is to get them to buy their own loans back at a discount thus saving them from public embarrassment (no longer able to pay the fees for Fiachla to go to the Rock and then on to Commerce in Yucky D, for example). I believe it was originally envisaged that the banks would provide the capital for this so they would end up with performing loans with decent LTVs, which would restore some health to their balance sheets.
I don’t see how it can work otherwise. There is neither the capital to purchase the underlying assets, nor the political will to bust a large section of society. Outside capital will be otherwise engaged for the most part with similar schemes in other countries…
Hi WSTT,
“BTW, NWL I know that you have been speculating on who will head the DoF after the election” Oh I think I know who will be head of the DoF after the election and that will be the €228, 466 per annum Kevin Cardiff, the departmental secretray general, departmental no 2 (to David Doyle) on the night of the guarantee, man at the heart of the IMF/EU bailout (bet you didn’t recognise him alongside the two Brians on the night of the announcement). And that’s partly the point, no matter whose name is on the Minister’s door they will still depend on the existing civil service to advise on, cost and implement policy.
Interesting about Ruari, though would Eamon risk the ire of a woman scorned? Also after a FG/Lab coalition Paddy Power put a FG/FF coalition as favourite. The present incumbent?
The Irish Times today reports on the sale of a development loan relating to a New York development. With a par value of USD $ 147m, the loan was reportedly sold for USD $80m, a 46% discount. There is no mention of NAMA.
On the face of it this >€5m,land and development loan, at NAMA Participating Institution Anglo, advanced “some time ago” (presume before 31 Dec 2008, NAMA’s cut-off) would be NAMA eligible. Where was it advertised? Is there any connection between the reported buyer, Ziel Feldman, head of HFZ Capital Group and the original borrower, Zamir Equities? I don’t know of any connection, but (1) was this a NAMA eligible loan (2) what involvement had NAMA in the sale (3) how do we know the loan was sold at a fair market price (4) is there any connection between the new loan buyer and original borrower?
http://www.irishtimes.com/newspaper/finance/2011/0129/1224288526784.html
There’s a Nathan Feldman who is director of acquisitions and real estate management at Zamir Equities. http://www.linkedin.com/pub/dir/Nathan/Feldman/us-70-Greater-New-York-City-Area
Nathan and Ziel Feldman have been attendees at the same Urban Land Institute meetings: https://netforum.uli.org/eweb/DynamicPage.aspx?WebCode=ATNDLIST&Key=A50CED09-DC2E-4E10-8858-E594DEBF46DC
I can’t find a family link, though, and there are a mass of Feldmans in NY. A common surname is not much of a reason for suspicion. Imagine if people suspected some of the Aherns in the Dail were related…
I think I found out the answer to your question (1). Only Irish citizens are going into NAMA. Loans borrwed by Americans are not going into NAMA. It makes sense because I’m sure NAMA wouldn’t want to be defending itself in US courts. I wonder is the same happening in the UK?
Hi Frank, what makes you say loans by Americans are not going into NAMA? Plenty of Northern Irish firms are NAMA bound, and ditto in the UK (though they are mid-league borrowers in the main). What’s the source for the claim that US (citizens? companies?) are excluded?
I don’t have a source, it’s my considered opinion. I have a working knowledge of many loans made in the States by Anglo and Allied Irish. I have seen many US loans go into NAMA where the borrower is an Irish Citizen but, to date, I have not seen 1 loan go into NAMA where the borrower is American. I could be wrong but it seem like a pattern.
Hi Frank, you might be right but I have seen non-Irish borrowers (like Mohammed Al-Fayed of ex-Harrods and Fulham FC earmarked for NAMA – see link below) mentioned for absorption into NAMA and I can’t see what would differentiate the Americans. As I understand the NAMA principle it is the bank being Irish (or at least having substantial operations in Ireland) that is important to NAMA eligibility, but if you come across something definitive, be grateful if you could pass it on.
And if all it took was Americanisation to escape NAMA, I think there would be more visa applications or divorces/re-marriage to Americans!
http://www.independent.ie/business/irish/odd-mix-looks-set-to-end-up-in-nama-pot-1782403.html
if what Mark Daly says is true, then the problem is not necessarily one of corruption or scam (developer tells friend buy it for six, we can sell it for nine), but one of incompetence…NAMA settling for six when it is actually worth nine.
Maybe even those within NAMA don’t take seriously the ‘notion’ of ever turning a profit.
I very much agree. Surely these lands and loans should be sold by transparent open tender?
If they are selling at less than the best current price, that is a big problem.
ps .I reckon Joan… timing is everything, and this is not the time to be MoF. So, Joan.
Nice analysis but, by focusing on the minutiae of the administrative and legal processes you are accepting the parties involved are sincere and act with good intentions. Given what we know of the extraordinarily high levels of corruption in Irish public life this seems highly unlikely.
Last summer on a visit to Dublin I met a number of friends involved in property development. The big news was that a Irish resident of the Cote D’Azur was buying properties and some high profile businesses for nominal sums. The people selling to him continued to manage the assets in the basis of agreements which would be unenforceable in any court. In the same circle of “friends” theoretically insolvent property developers were using the same individual’s services to create deniable ownership vehicles to hold offshore assets in places like the United States. I head the same story from three different people with links to the developers involved. I imagine similar activities are ongoing in many of the important property dealing networks. Mark Daly would surely be in a position to know this very well. Whatever his reasons for publicly making these allegations I wouldn’t be surprised if he simply cherry picked the most flagrant example of fixing the process that he was aware of. Examining the allegation in isolation as if it was an extraordinary lapse or even unusual suggests to me that you haven’t accepted what NAMA’s true purpose actually is. NAMA, created by the establishment that presided over the astounding mismanagement of the economy, is an enormous trough of public funds designed to allow these same people an opportunity to preserve their wealth and therefore the existing status quo. As you pointed out, NAMA has almost no transparency in its dealings, is completely open to abuse to a point where the abuses cannot even be stated to be illegal and does not even have a publicly accountable official in place to conduct some sort of oversight. Its a gigantic slush fund, financed by the public purse in order to bail out the private finances of the very people who created the problem in the first place.
I cannot see any reason (apart from legal intimidation) why anyone can seriously doubt the truth of Mark Daly’s allegations. Nama is an enormous trough of money and if anyone seriously thinks that its activities are ever going to be subject to scrutiny then they really must have been sleepwalking through Ireland for the last 10 years…
I don’t understand why more people in Ireland do not recognise that the very existence of NAMA guarantees that not only will the elite bail itself out at the expense of everyone else, but that the economic recovery of the country will suffer for many many years as a direct consequence of NAMA’s existence and its affect on public finances. Its an appalling institution that will do tremendous damage if it is allowed to continue to exist. No wonder the Europeans have given up on the Irish. No strangers to publicly funded slush funds, European Union officials can recognize Nama for exactly what it is.
A very powerful contribution. I hope what you say is not correct but I suspect that it is true. Witness Nama’s failure to observe codes of conduct as highlighted by NWL, and the forgetfulness of people presenting statements of affairs in the courts and all the diving and ducking by developers including transfers to spouses, moving overseas and bankruptcy tourism. This behaviour would not be tolerated in any other country. What happened to “moral Hazard”, lying under oath and good old fashioned honest dealings? How in God’s name can Chinese Walls can be built between professionals who work(ed) for same firm, socialise together, live in same area, went to same school etc. and now sit on the opposite side of the table to colleagues and former (and prospective) clients ??
And my hobby horse, the fact that Nama is measuring its prospective profitability/performance against the value paid for loans rather than their par value. You couldn’t make this up (unless, of course, you are in Ireland).
Ah, NWL. I knew as I was writing it, that you were going to pick up on the point (Cardiff not Quinn as head of the DOF) – now that is “pedantic”. Whoever posts here had better be very accurate. No imprecise comments need apply! ;-)
Sorry WSTT for jumping at any opportunity to highlight the fact that any administration will depend on the permanent civil service for advice. Minister Lenihan claims to have made the guarantee decision on the basis of there being assets of €500bn versus bank liabilities (deposits, bondholders etc) of €440bn, so on the face of it, the guarantee made sense. But it was presumably the civil service that stood over the numbers and risks. And the same civil service would presumably have been around for the decisions on bank recapitalisations and NAMA. I wonder will the review of “fitness for purpose” of the DoF ever see the light of day?
Whoever occupies the Minister’s office in Upper Merrion Street needs a staff that can produce accurate information, robust forecasts, have experience that extends beyond the box of what has gone before and has a curiosity and desire to do more than cover their backsides and careers.
UPDATE: 31st January, 2011. The Sunday Business Post reports on the “confidential” committee report into the DoF’s fitness for purpose. The committee was headed by former Canadian deputy finance minister Rob Wright and included Hans Borstlap, a Dutch public servant, and John Malone, former secretary general at the Department of Agriculture and Food apparently isn’t as scathing as you’d imagine and blames ministers (McCreevy and Cowen it seems) for ignoring advice about the sustainability of tax cuts and public spending increases. Will this report ever be made public or will selected news outlets get a drip-feed of selected snippets?
http://www.sbpost.ie/news/ireland/report-dept-of-finance-warned-government-of-dangerous-policies-54247.html
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