The NAMA chairman, Frank Daly was the guest on the Marian Finucane show on RTE Radio this morning – the podcast will be here later today and the interview with Frank lasts more than 50 minutes during the first hour. For the non-Irish audience, the Marian Finucane Saturday radio show has the third highest ratings in the country with typically 380,000 listeners, and deals with events of the day, mostly flim-flam. Marian presents the show on Saturday and Sunday only (Sunday’s show has the fourth highest ratings) and she herself is a veteran of Irish broadcasting; her style might be described as light and neighbourly. The interview this morning lasted 50 minutes and would seem to indicate NAMA is trying to raise its profile and dispel some of the mystery about its operations.
Here are the highlights
(1) Fourteen months after taking over the first tranche of loans, NAMA has not yet agreed one business plan. By agreement I mean having a signed Memorandum of Understanding, Heads of Terms and Final Agreement. The NAMA chairman said that one business plan was “close to finality”. NAMA has “signed off” on 33 business plans and the business plans are being delivered, just there is no formal agreement by both parties to the plan. Now these business plans are complex (see below) but failure to get agreement on one business plan after more than a year should worry those whose responsibility it is to oversee NAMA. There would appear to be planning, resourcing, operational or management failure, or perhaps all four.
(2) Without identifying the developer, Frank provided an example of one business plan to evidence how complex they can be. One developer has 300 loans on 600 properties and the ownership structures are complicated with some loans owned individually, jointly with others, by companies, Special Purpose Vehicles (companies also, whose sole purpose is to manage one asset) and some companies are overseas-registered including Delaware and Luxembourg (I wonder when they’ll get to the British Virgin Islands and Panama, then there’ll be some real fun!). There is cross-collateralisation which means that one property might be used as security for a number of loans. Developers have loans with NAMA banks and with non-NAMA banks. And some developers have loans that run into the billions with NAMA alone. Frank didn’t mention personal guarantees, quality of loan documentation and security, spousal issues, trusts etc. Frank said that he thought he had seen complex structures during his tenure of the Revenue Commissioners (Irish tax authority), but that was as nothing compared to the complexity of some structures used by developers.
(3) Frank gave an account of how he was offered the job of chairman of NAMA. He received a telephone call from Brian Lenihan offering him the role, and giving him a few hours only to consider. On the light side, Frank claimed the only good thing about becoming chairman of NAMA was that he was able to abandon his role on the board of Anglo (to which he had been appointed in December 2008 when the full mess there was becoming apparent).
(4) With respect to developers Frank said that NAMA received the most positive commentary in the media when it foreclosed on a developer but that pulling the plug was not something NAMA wanted to do. That said, Frank conceded that “excessive and ostentatious lifestyles of developers” were “offensive” to him. There was no word whatsoever on David Daly, or any other outstanding legal case (NAMA was issued with proceedings by Carl Dillon in the High Court last week, but NAMA has not replied to a request for comment – not clear which Carl Dillon that is, but there is A Carl Dillon that was appointed liquidator at the Whelan Group)
(5) When asked about commercial experience amongst NAMA’s 140 employees (set to increase to 200 shortly), Frank said that there were very experienced property and lending people working for NAMA – three of the most senior had 100 years property and lending experience between them, he claimed. Frank wasn’t challenged on how 200 staff could POSSIBLY effectively manage €73bn of loans.
(6) On the question of the huge costs being incurred by NAMA in engaging outside consultants and companies, Frank claimed that all engagements were subject to tendering. Which we know is not true – take a look at the Comptroller and Auditor General’s report into NAMA’s first months of operation and there are several secondment-type of engagements costing millions; where was the tendering for these? In general though, it would probably be fair to say the majority of engagements are subject to open tendering.
(7) A number of people had contacted Marian Finucane to claim that they had agreements to buy NAMA property, presumably residential property and yet NAMA was delaying the sale. Frank asked that these people would write to him personally as he was unaware of the issue and claimed NAMA was generally responding well to requests.
(8) NAMA still expects to make a profit over its 7-10 year life, though Frank sidestepped the question of whether NAMA had made a loss to date (which it has in the €1bn range according to NAMA and the near-€3bn range according to estimates here)
(9) With respect to the vexed question of Upward Only Rent Review (UORR) leases, Frank said that last year NAMA had written to the Minister for Finance to outline the effect any change would have; there’s no suggestion of lobbying which might put NAMA in hot water. Frank said that NAMA meets with some 50 investors every week – Wow! – and that a common concern was the uncertainty surrounding UORRs.
(10) NAMA’s mortgage product will be introduced “by the end of the year” and Frank provided a worked example of a property that NAMA might sell for €200k, with the buyer putting up €20k, the bank €140k and NAMA would assume responsibility for the rest and if the property fell in value subsequently NAMA would write off the loss.
(11) Frank said that NAMA had indeed crystallized losses in the banks, but he made the point that this was not NAMA’s fault – the losses were already there and it was the banks that had incurred them. NAMA has apparently been praised by ratings agencies for providing clarity to the level of losses in banks and has contributed to us finally having a handle on the costs of the financial crisis in our banks. Frank makes a good point – does anyone think that Spanish banks with €450bn of development loans and €45bn of loan provisions are being anything other than delusional?
And lastly Frank (aged 66) said that he didn’t expect to be chairman of NAMA when it is eventually wound up in 7-10 years. If it has been a sharper presenter than Marian, Frank might have been asked if he expected to be chairman in 7-10 weeks.
NAMA Wine Lake 
I think on point 5: the problem is surely not the number of loans or the value of them, but the number of borrowers. In this, though, NAMA is probably still short of bodies.
NWL
On your first point about only one business plan being close to finality, you appear to be suggesting this this is due to “planning, resourcing, operational or management failure” within Nama. That’s a bit one-sided as there could be problems on the borrower side also – poor document, slowness to deal, lack of clarity, belliigerence, pride, lack of resources and so on. It takes two to tango!
Although I’d be a big critic of Nama, I don’t think (from my very limited perspective as an outsider) that Frank has been a poor performer at all. I think Sean Citizen would have much greater trust in him than some wheeler-dealer , City-type who might appear to move things along more quicky but at a very high ultimate cost to the the taxpayer. The main problem seems to me is that Nama is undermanaged rather than mismanaged. They need far more resources at management levels to handle their portfolio which is huge by international standards. See http://www.planware.org/briansblog/2009/12/management-of-nama.html
@Brian, I’d take issue with that because NAMA should be in control of the process. In many ways NAMA holds all the cards, the resources, the loan agreements, the might of the State. And you’re generally not talking about one-man bands in terms of debtors, you’re talking about companies with sometimes hundreds of employees, finance departments, access to investment banking and the best financial advice.
As for Frank being a poor performer, I may have given the wrong impression and in many ways can’t speak highly enough of him. As part-time €170,000-a-year chairman, he has represented the agency very well and indeed NAMA has done many things well. But the early part of NAMA’s life is about process; now is about results and there is an emerging criticism that NAMA is not commercial enough. Arguably that’s not in the chairman’s remit and it’s more a management issue.
@NWL
I’m sure that Nama could exercise the Golden Rule – he who has the gold makes all the rules – but it is dealing with dozens and dozens of very complex cases and it must be be fair in its dealings. These cases take time to understand, analyse, check, plan and negotiate on. I suspect that some borrowers may not be as up to speed as they might might like people to believe (recall some of Judges Kelly’s and Clarke’s remarks). Instead of having up a dozen professionals dealing with each major borrower, Nama’s manpower might only provide for one/two professionals per case on a part-time basis!
I’m not sure that Nama should be overly commercial (i.e deal orientated) about its IRL loans. A (very) long game makes great sense here and sitting on hands might be the best strategy. So what if we have a semi-nationalised property sector (or dominant State player) for the next decade. In the case of the USA and UK, a more commercial approach is evident and matters seem to be moving along.
Overall, I’d like to see Nama have more resources, greater transparency (via FOI) and remain committed to getting the very best possible deal for the taxpayer.
So on franks salary… The stated number…then the pension from revenue..:and others….topped..:at what? Guts of 500k? No/yes? And we talk about limits ???
“Frank makes a good point – does anyone think that Spanish banks with €450bn of development loans and €45bn of loan provisions are being anything other than delusional?”
Did he actually say that? I did not hear him say that.
Any way you know my view on Spain. For anyone that is interested Just go to google maps and browse around Toledo ” An Irish developer’s wet dream, not”
@southofdub ““Frank makes a good point – does anyone think that Spanish banks with €450bn of development loans and €45bn of loan provisions are being anything other than delusional?”
That’s an assessment on here, not what Frank said. And you are right about Toledo; indeed if you want to see pictures of Spanish ghost towns (not estates) see here
https://namawinelake.wordpress.com/2011/06/18/spain%E2%80%99s-cost-of-borrowing-from-the-markets-is-now-more-than-the-portugese-bailout-rate-have-we-finally-reached-the-citadel/
NWL – Yes, I think Mr Cameron’s smirking about Greece may change very rapidly if anything happens to Santander!
NWL,
You should invite Frank Daly to do a guest Q&A here. I think this blog is high profile enough that Mr. Daly – in the spirit of NAMA’s glasnost nua – might give it a twirl. Just you and him rather than a live chat or anything, and post the transcript here.
@Hagman
I’ll ask
I had considerable dealings with Frank Daly in his previous job as Chairman of the Revenue Commrs. He has an ability to absorb huge amounts of detailed & complex information quickly. He comes from a Customs background rather than the general tax stream (Income Tax, VAT & CT)
During his time as Chairman of the Revenue, he was very much the “lucky general” but his legacy to the Revenue is much more mixed. Former colleagues tell me that the reorganisation commenced under his reign is a bit of a disaster. While many senior Civil Servants went out of their way not to co-operate with Madman McCreevey’s relocation plans, Daly went out of his way to co-operate opening small unsustainable offices for what was already the most decentralised State body. His successor is busy closing offices, as she noted in her Croke Park Report,
“18 offices closed since 1/1/2009, the most recent was in Dec 2010. Another office is scheduled to close on 1/7/11. Further closures are being examined”
His disdain for Joan Burton was legendary and if she had been given her rightful position as Minister for Finance, he would be well gone by now. He consistently opposed her policies such as the restriction on tax breaks for high earners, later taken on board by Brian Lenihan. He also defended the many and varied property tax breaks.
Despite a veneer of political neutrality he seemed very close to then ruling party. His initial contract at the Revenue was extended and his Fianna Fáil friends further looked after his bank balance with the Anglo & NAMA appointments.
However I cannot see Noonan moving him, purely because the hassle of making a new appointment is huge. Daly is clever enough to know that the political wind has changed and that he can work with Noonan. Despite all the talk about retirement to his boat in Dungarven, I suspect he likes the public attention his current job gives him. I also suspect he may like the additional top up on his pension.
Boats? Plus Brendan McDonagh, the NAMA MD earning €500,000 plus per annum….. and they talk about the developers living “high on the hog”!
@WSTT, haven’t you realised yet, there’s a world of difference between a boat and a yacht, even when they’re identical craft.
@Brian: Careful what you wish for…. you might just get it. A nationalised property market is the worst possible solution. We would end up like the Soviet Union. Not that we are far off it at present. And the hope that NAMA would maximise the return to the taxpayer… forget it! It just doesn’t fit with the facts to date. All NAMA’s marketing so far has reflected a desire for expedient and expeditious sales (particularly in London) rather than maximisation of returns for the taxpayer.
@NWL: Say it ain’t so. We don’t want you taking the soup. It’s an old civil service trick – “Bring the agitator on board. Better too have him inside the tent….on the same page, etc”
Be careful out there, NWL.
I was rather surprised by the tenacity of Ms. Finucane and her appreciation of the basic fact that NAMA has not achieved its objectives and has contributed in no small measure to the insolvency of the entire Irish banking system the lockdown in the property market and the insolvency of the state itself. Yes, they were insolvent but our choices to resolve them were disastrous and as the auction on friday proved are disastrous.
The reason we are under an MOU is that our FF and Green government were in complete denial of the extent of their own problems and the problems in the Irish banking system for about two years. Then they were completely gung ho in running in to “deal” with the ‘solvency’ crisis which was in fact an insolvency crisis. The quagmire they jumped into, by was of NAMA and the guarantee, bankrupted the state.
Frank seems rather proud of that fact, but coyly admits that NAMA could never have achieved the objectives its backers claimed for it. Despite pushing the implausibility down the throats of the Irish electorate. Firstly we were told NAMA would solve the banks “liquidity” problems and secondly, that it would get credit flowing again. Now, it is admitted in soft dulcet tones by Daly that we were sold a total pig in a poke, while he also freely admitted that what actually happened was that the banks used the NAMA money to pay down debt instead of lending it out to cash starved businesses. This was predicted ad nauseum on many, many of the forums on the irisheconomy.ie website.
He also seemed to be changing his mind about the UORR saying that he was “only reminding the government of the impact these have on the NAMA portfolio|”. Jobs and the real economy are infinitely more important than the NAMA portfolio and it is jobs that make the economy viable not NAMA and the raft of 300 years or more experience that they are supposed to have between them. Where were all these guys with their hundreds of years experience when we needed them? My guess, they were making money creating the problems they are now managing. Frank even apologised for having to deal with the same monopoly accountancy firms who’s audits were so misleading and which failed to warn anyone that they were actually about to have their investments in shares and property wiped out.
There is much in this interview and I want to read the transcript. If we could get a full transcript that would be even better than the podcast.