Wikileaks US Embassy in Ireland cables on NAMA finally published in full (or at least one cable is)

I must say that for me, some of the shine on Wikileaks has worn off in the past two months. The online disseminator of confidential information, most associated with controversial Australian Julian Assange, has been in the headlines constantly in the past two years, though it was founded way back in 2006. The bane of the US establishment, it has published colossal libraries of secret correspondence, photographs and video footage which have shed unprecedented light into the activity of the US in Afghanistan, Iraq and the Guantanamo Bay detention facility. The Wikileaks organisation has also released diverse information on subjects which have included super injunctions in theUK, Scientology, corruption inKenya, membership lists of the British National Party and activities ofIceland’s Kaupthing bank. And although governments and institutions have reacted with hostility towards the Wikileaks organisation, in the main the general public has welcomed the insights and the leverage Wikileaks brings against powerful governments and corporations.

So why the negativity towards Wikileaks? In Ireland’s case, Wikileaks partnered up with the Irish Independent in May and early June 2011 to publish details of secret USembassy cables (that is, written messages generated by US embassies around the world). Wikileaks has had the 250,000-odd cables since November 2010, over six months ago. Yet it is only in May 2011 that we get to see the USembassy in Ireland’s cables. And even then through the filter of one hallowed newspaper. By the way, the Irish Independent is keen to emphasise that there is no reward element in its dealings with Wikileaks. But why can’t we see the cables directly ourselves and why the delay in making the cables themselves available in full online? Since the Independent first reported the cables in May and early June, I have been keeping an eye on the wikileaks.org website expecting to see the cables uploaded. Weeks went by and journalists contacted from here expected Wikileaks to make the cables available days or a short number of weeks after the Independent had first dibs on the material. And the days and weeks passed without any information being uploaded onto the wikileaks.org website. Wikileaks doesn’t respond to requests for information, or maybe just requests for information from modest blogs such as this one. And then last week, the 22nd July according to the date-stamp on the Wikileaks website, cables reported in the Independent on 2nd June were finally made available – seven weeks later. Unfortunately though, it seems that only a subset of the cables reported has in fact been made available for now.

The report in the Independent on 2nd June, 2011 which dealt with NAMA refers to at least five discrete NAMA-related messages from theUS embassy inIreland. It is not clear how many cables these messages are spread across but the Independent does refer to “other cables”. The cables published online last week by Wikileaks include only one that refers to NAMA.  And  that one cable excludes much of the information reported by the Independent. So there are other NAMA-related cables, it’s just that Wikileaks has not published them yet.

The NAMA-related cable that was published states “On April 7 [2009], Econoff spoke with Kevin Cardiff (protect), Second Secretary General at the Department of Finance, who said that the pricing of assets should be finished within three months. Cardiff said he will need about 30 more staff members, who will come in on a contract basis, to set up NAMA and value the banks’ assets.  He hinted that, given the work he and his colleagues have already done, the assets will be discounted by around 50 percent.  He also said that, while this program is modeled on the Resolution Trust Corporation that was put in place following the savings and loan collapse in theU.S. in the late 1980s, NAMA “will be in no hurry to dispose of the assets.” Cardiff said that they could and would hold the assets for “a decade or more if it took that long to get the right price.”

On 2nd June, 2011, the Irish Independent published an article which drew on references to NAMA in the secret US cables. The Independent claims that the Department of Finance hinted that the losses on loans might be 50% – that is true according to the cable. But the Independent goes on to claim that the official line was that losses would be 30%. That’s not true in the sense that the first NAMA business plan projected loans at a value of €77bn would be acquired by the agency, that the loans would be worth €47bn, that is 39% less than the face value. Of course by September 2009, NAMA was also proposing to pay a Long Term Economic Value (LTEV) premium of €7bn bringing the consideration payable by NAMA up to €54bn which is indeed a 30% discount on the €77bn face value.

It is worth noting that property prices were dropping like stones in Ireland and to a lesser extent the UKin 2009. So if the estimate was of 50% losses in April 2009, then six months later they might have been expected to have been closer to 60%. And John Mulcahy, then managing director of Jones Lang LaSalle in Ireland but appointed to NAMA in February 2010 (but on secondment from Jones Lang LaSalle to the NTMA in the role of Interim Head of Portfolio Management since June 2009), should have known about price falls more than most – his own company’s commercial property index fell from 787 at the end of Q1,2009 to 682 at the end of Q3, 2009, a 13.4% drop. During the same period, the key residential property index at the time, the ESRI/PTSB national index fell from 113.2 to 104.5, a decline of 8%.

So even setting aside the complication of the LTEV premium, when the NAMA business plan was being presented to the Oireachtas in September 2009, there is a suggestion that the Department of Finance had knowledge that the figures were misleading, and that the losses implied in the banks were underestimated. “So what?” you might say, there was still a need to correctly value these doubtful land and development loans because our banks could not be trusted by providers of funding when they had such toxic loans on their balance sheets. So regardless of whether the losses were 30% or 50% or 60% there was still a need for a NAMA-type process. Whilst that is probably true, remember that September 2009 was 14 months before we needed to go cap in hand to the IMF/EU/ECB and a year before the deposit run on our banks started in August 2010. If our Dail had known the scale of the losses in September 2009, then might there have been the time to act on bank losses without needing a bailout?

It seems that at the very least the Department of Finance has questions to answer, both about the knowledge in its possession, its disclosure to the democratic organs of our State and whether a better course might have been charted in 2009 when the scale of losses was apparently known. Kevin Cardiff is now the Secretary General of the Department of Finance – his appointment in February 2010 and abbreviated CV is here – and he seems to be a very unlucky individual. He was present on the night of the bank guarantee when he was still the Second Secretary General (the Secretary General was then David Doyle). He sat alongside Brian Cowen and the late Brian Lenihan at the announcement of the IMF/EU bailout in November 2010 and he has been at the civil service helm of the Department of Finance during a period when some pretty awful mistakes have been made. The last reporting of his salary I have seen suggests his annual salary is €228,466 a year.

It should be said that the term used in the US cable – “hinted” – is not conclusive but it was considered by the US  embassy in Dublin as sufficiently credible to include in a cable.

All of the Wikileaks cables relating to the USembassy in Dublin– or rather all the cables that have so far been published – are available from Wikileaks here. (the Wikileaks website appears to be down at present – Sunday evening 31st July 2011)