One of the first initiatives launched by this new government on taking office in March was to undertake a comprehensive spending review – checking out the nitty-gritty of where the country was spending its money, and then making efficiency savings. Given Fine Gael (FG) and Labour had been out of office for so long and given the IMF agreement to take huge chunks out of state spending, it was a smart and probably necessary initiative. The review is now coming to an end but it has been overshadowed by demands from Minister for Public Sector Reform, Brendan Howlin that departments save €10.5bn on their costs over a number of years. And last month, Minister Howlin fired a shot across the bows of the departments saying that their proposals for savings didn’t go far enough – “I can’t pretend that every department has measured up in the same way” he said. So the pressure is on for departments to save costs and like a dab of toothpaste being squeezed from one end of a tube to another, it is only natural that Ministers will be trying to grab savings from beyond their departments, either from other departments or externally.
So step forward Minister for the Environment, Community and Local Government, Phil Hogan who seems to have spotted an opportunity to cut his own department’s costs without affecting the internal costs of the department. According to the Irish Independent today “the minister said he was unhappy with the toxic assets agency for not selling properties under its control at a discount to his department.” The famous NAMA “social dividend” is mentioned again in the Minister’s speech yesterday – remember the last of the eight objectives set out in 2 (b) (viii) of the NAMA Act calls for NAMA “to contribute to the social and economic development of the State”. Last week, it was reported here that Dail member, Deputy Stephen Donnelly had written to NAMA to prod the agency into making a decision on the redevelopment of Greystones Harbour and again the “social dividend” was cited in a plea that NAMA wouldn’t solely focus on commercial considerations when making its decision on the developer’s business plan.
One of the great concerns with an asset management agency, capably described by current NAMA board member Steven Seelig in a 2004 paper on asset management companies (AMCs) in which he made it clear that for an AMC like NAMA is to be successful, its objectives should be clear and not confused with social responsibility duties – “experience has shown that AMCs with clearly defined, focused, and consistent goals are more likely to be effective. In some instances, such as the United States, social objectives were added to the asset management objectives of the AMC. The RTC [Resolution Trust Corporation] was required to promote social goals in the areas of affordable housing and historic preservation by developing programs and giving preference to buyers who would meet program goals. The practice of mixing goals, and especially establishing conflicting objectives, is not recommended”
Despite making a loss of €1.1bn in its first full year of operations, NAMA is trying to maximise its return to the taxpayer. But with up to 100,000 people on the list for social housing and with NAMA controlling 10,000+ properties, it certainly makes sense for NAMA’s assets to be used by the State; however, if these assets are not acquired at arms-length then NAMA’s primary objective gets subverted and it may become nigh impossible to hold NAMA to account – if the agency reports further major losses, it may try to divert attention from intrinsic operational failure by claiming it is incurring losses on delivering this famous “social dividend”. Ministers muddying the waters for NAMA may turn the agency into a Buridan’s Ass which doesn’t deliver a profit or a social dividend.
There is still no word from Minister Hogan as to the timing of the introduction of a House Price Database, called for by the IMF and seen by practically all participants in the Irish property market as helpful, if not necessary, to delivering a degree of price discovery to enable a functioning market.
Lastly, it is of intense interest on here as to when an action will be taken under NAMA’s anti-lobbying rules. With the two seemingly all-encompassing exemptions under section 221(3) and 221(4) of the NAMA Act, can NAMA stop anyone – from either the public or private sector – from lobbying the agency to make decisions in their favour? Last Friday the NAMA chairman Frank Daly replied to a question at the Oireachtas Committee on Finance, Public Expenditure and Reforms; he was asked if NAMA wanted any change to the law to allow the agency to operate more efficiently; he replied “no”.
NAMA Wine Lake 
There have been several attacks on the Agency from different quarters in the past week. Which is interesting.
It all began last week with the independent’s coverage of the term sheets and the cacophony on asset transfers and the merits of whether a spouse is entitled to the family home. I mentioned in a comment then I thought that a borrower had leaked the document. I think the possibility of NAMa having done so is now a possibility. They do nothing in the public arena without having a reason. It may be to bring pressure to bear on certain recalcitrant borrowers. If they are being particularly obstreperous there may just have to be an enforcement soon to bring them back into line. Be it in violation of other laws it does not matter. Verily it is a despotate within our republic!
NWL. You asked last week how they’re approach differs? It does. Even a journalist I loathe in a paper I loathe described their actions on Sunday as the virtual terrorism if developers and their families. Jewelry family homes etc what difference does this make? In all honesty? What impact will this have? Except to humiliate and browbeat.
All I know is they react badly to criticism. So keep the head down for the next week or two folks!
@Garfunkel “Jewelry family homes etc what difference does this make? In all honesty? ” NAMA’s mandate is to pursue debts to the maximum, extent feasible, and “feasibility” will take into account the cost/risk/benefit of pursuit. You may say that €200k of jewellery will have a negligible impact on a €200m debt but if NAMA can recover €200k of jewellery and spend €199k doing it, then that is the agency’s mandate. I wouldn’t expect NAMA’s approach to be much different to a non-NAMA bank pursuing a debt from a non-developer. And again, I’d challenge you to differentiate NAMA’s approach from that of a non-NAMA bank with a non-developer. To start you off, NAMA has more resources so is probably more likely to deploy the boys (and girls) with macs and Macs to investigate personal finances, which can’t be pleasant but that approach wouldn’t be unknown amongst non-NAMA creditors. But what other differences are there?
NWL. I will try at a later point to expound on this. Diary full today. But I doubt you will find one bank here who has ever taken an engagement ring from a wife. One wonders how Mrs Daly, Mrs McDonagh would feel? It is that personal! Intensely personal.
@Garfunkel, would be interested in the differences as presumably NAMA’s competitors won’t want to see NAMA acting uncompetitively in its scale and freedom to spend when it comes to pursuing debtors. After all Ulster, ACC and BoS(I) may have many of the same debtors as NAMA.
I take your point about personal gifts but would you accept there is a difference between a €10k engagement ring and one that cost €200k?
Ah so this is maybe the reason why: http://www.irishtimes.com/newspaper/frontpage/2011/0913/1224304027609.html?via=mr
Would make sense. But why the deal? Was their position not quite as strong as they thought? It’s academic really, as I would say this was the reason why he was foreclosed. Watch the spin to detract from the obvious deficiencies, greedy parasites etc etc. At the end of the day it was described as having being done for tax reasons. What’s more interesting though is that they may have lost out on this money as well as the monies from Deutsche Bank that would have refinanced Daly’s debt. No pragmatism there. The wives must be in a stronger position than we thought. The sabre rattling was done to belittle the impact of this emerging.
@Garfunkel, we’re still awaiting the 133 page judgment from yesterday and I would take the reporting so far “on advice” as they say. I have chased the court service for a copy of the judgment and it will be posted as an amendment to the David Daly blogpost when it becomes available.
https://namawinelake.wordpress.com/2011/06/22/nama-understood-to-have-pulled-plug-on-david-daly%E2%80%99s-albany-homes/
[…] full article at source: https://namawinelake.wordpress.com/2011/09/13/minister-attempts-to-reduce-his-department%e2%80%99s-co… Advertisement LD_AddCustomAttr("AdOpt", "0"); LD_AddCustomAttr("Origin", "other"); […]
Jeepers NWL. Dont be so clinical :) Too rich for my blood, but each to their own. All I know is if Frank or Brendy or my bank manager tried to take my Mrs’ engagement ring or wedding ring off her, I’d do damage! Alot. Of. Damage.
@Garfunkel; Naw, she would just lose it. Fell off her finger on the Jonathan Swift on the way to Holyhead. They’d have to hire a diver to find it.
Incredulous that someone owing almost 500,000,000 required clarity from a judge as to loan terms but embarks on a very sophisticated tax planning scheme involving moving 80 million in 2009 including 17 million in cash to the wife………….maybe his accountants which I hope will be called to account for their own actions in this TAX planning scheme should have had a quick look at the DUE ON DEMAND section in loans docs.
The DB lending claim is also very hard to believe in case no one has noticed they are NOT lending in Ireland redlined it so that leaves the LV shop in London and a site to build a few houses on… DB was NOT lending 457,000,000 to discharge the short term debt.
Various commentators has suggested 150 to 200 mil for LV but only reasons to own/hold long term assets with short term debt is greed as short term money cheaper than long term or its impossible to secure sufficient long term capital to retire Due On Demand loans or personal borrowings.DB may have looked at lending on LV with proceeds going into this TAX plan……
Besides the junior bonds, my understanding was that participating banks would be levied to make up any losses NAMA would make.
Is this still the case?
If so, the banks should have some say on social dividends.
@Ahura, absolutely right though the idea of a bank levy after NAMA had concluded its work in 2020, say, was always a bit fantastical.
https://namawinelake.wordpress.com/2010/07/08/%E2%80%9Cany-such-losses-will-be-levyable-as-a-surcharge-on-banks-in-any-event%E2%80%9D/
But yes, in theory Wilbur Ross and fellow investors in Bank of Ireland should be ringing Minister Hogan and telling him to keep his snout out of NAMA’s business.
@ NWL,
Damn it, I was holding on to Wilbur Ross for a potential follow-up comment. I’ve a feeling that Wilbur et al may have already addressed concerns on possible contingent liabilities. I’ve given out about this before either here or on the Irish Economy website. It was reported that “A spokesman for the Department of Finance confirmed yesterday that ‘‘the state is in discussions with potential equity investors in Bank of Ireland in relation to a possible material investment in the bank’’ (http://www.sbpost.ie/news/new-deal-set-to-keep-boi-out-of-state-control-57690.html).
My problem with this is that these investors may have received market sensitive information that could influence a decision to invest. If so, such information should be disclosed to the whole market. What if Wilbur got assurance that a post NAMA levy would not apply, but politicians, fearing an angry public reaction, decided to keep it secret.
@Ahura, just to be clear, I think NAMA should be selling excess property at market prices to the Department of the Environment. There is nothing to stop NAMA paying a dividend to the Govt but at least NAMA’s primary objective would be maintained. Eg if the market price of a house is €150,000 then NAMA might sell the house to the DoE for €150,000 and prepare its profit and loss on that basis. But then NAMA could make a distribution from its profits of €50,000 to the Government so that the net cost to the State was €100,000 but the integrity of NAMA’s objectives would be preserved, and also you wouldn’t get individual ministries trying to chip some advantage out of NAMA to mask failure to find savings in their own departments.
Not ONE charge or prosecution of ANY Nama developer banker or regulator but a 65 year old woman asserting her constitutional right to private property is heading to jail what a country ….
http://www.independent.ie/national-news/courts/judge-jails-woman-for-powerline-disruption-2874148.html
@am that would put the “other” bidders at a competitive disadvantage and they would complain …Eh there were no other serious bidders it was this or state control of entire Irish banking sector… plan is to return B of I to profit quickly and as they enjoy a complete monopoly in Irish market that should not be too difficult most likely these opportunistic investors will have received majority of their investment back and possibly more before the sums for Nama are finally calculated-post Nama levy low priority how many more B of I loans are Nama bound which in effect is a backstop against future losses.
@John Gallaher,
It may be the case that there were no other large investors, but this is about how a proper economy should function. Who knows what comforts were given by the DoF? If any were given, they should be made public.
Ireland needs to get rid of green jerseys / cronyism.
A little off topic (& half thought out conspiracy theory) alert: re the anglo / Irish Life and Permanent B&B deposits scandal – did the US listing of BOI and AIB prevent them from digging out anglo? I don’t think the SEC would still be investigating 3yrs on.
@NWL
Thank you for the reference to Buridan’s Ass which was new to me.
There will be no fear of NAMA staff dying of hunger and thirst as in the case of the hapless donkey of the Buridan’s ass hypothesis. One of the first tasks of NAMA was to increase its directors fees and to appoint a Chief Executive on a kings ransom.
It appears that the largesse is continuing with news of the latest €7milion gift to a developers wife. Gift from NAMA that is.
I hope Mr McDonagh will be asked to explain this latest decision to the public accounts committee.
“Steven Seelig in a 2004 paper on asset management companies (AMCs) in which he made it clear that for an AMC like NAMA is to be successful, its objectives should be clear and not confused with social responsibility duties”.
Social responsibility duties . Who needs them? Certainly, none of our banks needed wanted or paid a blind bit of heed to social responsibility which is the cornerstone of democracy and which has been removed. However, they rediscovered these values fairly lively on September 29th 2008 when they needed, nay demanded, their losses be socialised. Notice they were not looking for “clear lines or rules” to separate their private debts from the tax payer back then,
Having achieved a rip off of €73bn to date while they remain largely unscathed and well salaried and pensionable, we are now fed this nonsense about NAMA being doomed to become an even greater failure than it already is, were it’s profit motive is diluted by some sort of perverse form of social responsibility. The dreaded social dividend which would expose the soft under belly of NAMA.
It seems that, in a corrupt elitist society, economics and capitalism gone wrong need only intersect very briefly with the rest of society and social obligations, this intersection for the express purposes of off loading losses to the public.
The mind boggles. So, NAMA is a place where accountants and auditors would prefer to go, instead of heaven, when they die?
As for political interference? Does anyone think NAMA was found under a head of cabbage? You don’t need “interference” when you are the daddy of the whole thing!
@Robert, fair points but there is nothing to stop NAMA selling a house to the DoE for €150,000 the current market value and agreeing to give the Government a dividend of €50,000 meaning that the net cost to the Government would be €100,000 but NAMA would still be able to report its profit and the agency would be protected from lobbying from individual ministries scurrying around to deliver savings under the comprehensive spending review. Capitalism and socialism can live quite nicely one alongside the other – generate more profits and taxes from business and you can afford better services and welfare.
@Jr the amount owed to Nama is 457,000,000 actually 80,000,000 in assets were transferred to the wife in 2009 including 17,000,000 cash in order to transfer back the majority of assets a ‘deal’ was offered its off table now..she still has the 80,000,000 as part of TAX planning…………if this is what the accounting firms in Ireland are advocating and executing for clients who owe the Irish taxpayer almost HALF BILLION on DEMAND they should be held fully accountable and prohibited from any future state work.
The ‘gift’ was from a heavily indebted Nama developer of 80 million to his wife in 2009.
Any reporting on who the accountants are cant find it anywhere ?
“He had told the court this had been done in 2009 as part of tax planning and on the advice of his accountants”
But the agile Michael Cush SC familiar to many from his involvement in clarifying loan documents in the AIB case..Zoe Developments and McKilen required clarification from the High Court on the DUE ON DEMAND loan terms for his client……….
“There is not a scintilla of evidence adduced by the plaintiffs of bad faith or improper motive on the part of Nama in the matter of calling in these loans and appointing receivers,”
http://www.irishtimes.com/newspaper/finance/2011/0401/1224293541374.html
http://www.independent.ie/national-news/nama-builder-to-pay-damages-if-legal-bid-fails-2265962.html
@John/others, the judgment in the Daly case is now available and is linked to here. We might comment on this blogpost with respect to the Daly/NAMA case.
https://namawinelake.wordpress.com/2011/06/22/nama-understood-to-have-pulled-plug-on-david-daly%E2%80%99s-albany-homes/
Please remember your responsibilities when commenting on here and remember the Daly case is ongoing – all that apparently happened yesterday was that the Daly family application for injunctions was refused but the family was granted permission for a full hearing to air their objections to their treatment by NAMA. This case has some distance to go yet.
I feel sorry for drug dealers’ wives. It’s not their fault their husbands were engaged in criminal activity. And let’s face it, your typical drug dealer doesn’t owe any money or if he does he knows his creditors will pursue him actively. When the drug dealer gets caught he faces criminal penalties. However this doesn’t satisfy the vindictive state, no siree; they seek possession of his assets through CAB. This is his wealth accumulated through criminal activity, but it’s unencumbered – he doesn’t have creditors. As I understand, the wives don’t get to keep the lifestyle they had come to expect or the family home.
I believe the state is right to do this. What I find difficult to reconcile is that people owing many millions can enrich spouses and dependents and impoverish their creditors.
@Ahura, I see the point you’re making but obviously property development is not an illegal activity. Moreover I think many developers would be offended at being compared with drug dealers. Whether you’re a teacher (use this illustration because I think it’s one of the most respected professions) or a developer, you’re entitled to share your wealth and income with your spouse. And unless you’re clearly setting out to deprive your creditors then that pooling is legal regardless of whether or not you’re a teacher or developer.
@am totally agree and B of I should have no reason to transfer any more loans to nama now that its in ‘safe’ hands.
re second point simpler that that they hated Anglo some people think AIB pulling its line was begging of end-wstt would know better.
http://nymag.com/nymetro/news/people/columns/intelligencer/15561/
‘She had previously told the court that she would “gladly go to jail”, and that she did not want compensation after the work was done.’
H
igh Court yesterday 65 year woman WITHOUT legal representation more integrity and strength of character than any Nama developer banker regulator what a national disgrace to jail this woman same day a developer who owes Irish taxpayer almost HALF BILLION needs to have his loan documentation explained and defends transferring 80 million to his wife as tax planning.
update on prior point page 35.
‘Mr Daly fears that sales of properties in the UK will result in significant capital gains tax liabilities in order of €35 – 40 million, with no possibility to set-off these gains against losses on Irish assets, as was his own strategy on the advice of his accountants, KPMG …….’
The developers accountants advised him to move 80million to his wife in 2009 and are the main auditing firm for Nama…………
“KPMG holds the main auditing contract for Nama”
http://www.irishtimes.com/newspaper/finance/2011/0506/1224296278823.html
“KPMG is the latest firm to be awarded a contract. It staved off competition from eight other applicants to win the overall auditing contract.”
http://www.istockanalyst.com/article/viewiStockNews/articleid/3963914
@ John Gallagher
You could call it the cute cunning of the common peasant. BTW, I wonder did the wife pay tax, PRSI and USC on her “earnings”?
Well Nama auditors are the family advisors on these matters ….
@NWL
I have always been of the view and still am of the view that the NAMA decisions not wind up companies that are clearly bust is no accident.
There are several sections of Company Law (CL 1963, approx S 293 ..etc) which are quite specific in relation to offences which can prosecuted for companies. However none of these sections apply unless the company is being wound up.
One does not have to be a legal expert to know, therefore, that it is best to stay outside of the winding up law, to put distance between oneself and any over zealous DPP official, if such a person exists in the DPP’s office.
If NAMA was clearly interested in using existing law to its full effect then it would have put all compnaies into receivership.
It would then have a body of law to support its claims against both companies and directors.
Unless companies are in receivership, all NAMA has is the old ‘Ah, come on lads, please be reasonable’. Not a very effective exhortation at the best of times.
So why does NAMA not want to use the full force of the law? It puzzles me to say the least.