Now how ridiculous would that be? And of course it’s rubbish. What happened instead was, for a NAMA review, we engaged a 58-year old, seemingly unemployed Englishman who left HSBC in September 2010 after a reported tiff when he failed to get the chairman’s job after intense lobbying against his appointment by shareholders. Though there was some dispute about the reasons for Michael Geoghegan’s departure from HSBC, since September 2010, he had been apparently kicking around the place, until our own Minister for Finance, Michael Noonan seemingly gave him the call to conduct a review of NAMA in September 2011.
Indeed such is confusion around the origins of ex-HSBC chief executive’s review of NAMA that we still don’t know who initiated the review – Minister for Finance, Michael Noonan, NAMA itself, or some individual like ex-NAMA director Peter Stewart who has intimated he was instrumental in the decision to have a review.
But this is Ireland, and Fine Gael has continued the Fianna Fail tradition of stuffing state-funded institutions with its own annointees without advertisement or competition. And so Michael was appointed. He conducted his review between 26th September 2011 and 10th October 2011 and subsequently gave his now famous “oral presentation” to NAMA and Minister Noonan – it’s “famous” because when the Committee of Public Accounts tried to quiz NAMA on the review at the end of October, politician after politician was fobbed off by NAMA chairman Frank Daly who said “there is not a written report, as such. I am not holding back a report from the committee.”
Yesterday NAMA published the Geoghegan review – apparently Michael typed up his musings/findings in recent days – after some leaks emerged earlier in the week. NAMA has also provided its reaction to the review. Here’s the reaction on here:
(1) The single biggest failing in this report is that the musings and recommendations of the reviewer are, in general, not backed up with rationale. “I’m Michael Geoghegan, sure why would I need justify myself” seems to be the approach adopted. So these “Tablets of Stone” are supposed to be accepted without challenge, it seems. Just as Moses didn’t get any justification from God for not coveting his neighbour’s wife, we don’t get any justification for Michael’s recommendation that there be three executive directors – why not four, or five? Most recommendations in the report have no accompanying rationale given.
(2) Because the review takes a “Tablets of Stone” approach, it follows that there is no feedback from NAMA to the recommendations. For example, why does NAMA have a part-time Chief Financial Officer? Is it because Brendan McDonagh has such expertise in the financial and accounting arena that all he requires is a part-time role covered by a NTMA senior financial person? Brendan is a fellow of the Chartered Institute of Management Accountants and has had a lengthy chief financial officer type career at the NTMA.
(3) The review’s terms of reference are so vague as to undermine the credibility of the reviewer. His first term of reference is “a high level review of how NAMA is organised functionally”. What is the objective of such a review? Presumably it’s to ensure NAMA is organised in an optimal way to deliver its own objectives as set out in the NAMA Act. But then you would expect some appreciation of these objectives and some comments where the current organisation was sub-optimal. What Michael presents as “terms of reference” are more akin to elevator pitches of plots for Hollywood movies. And because there is practically no detail, it is difficult to assess whether or not Michael delivered on the terms of reference. Given his imminent senior role on the NAMA “Advisory Group”, it would have been nice to see if this former banker can deliver on objectives.
(4) The report makes at least two references to the claim that Michael carried out the review “pro-bono”, that is to say for no reward. NAMA has not commented on whether or not expenses were paid. Regardless, the report has a cost because it interfered in NAMA’s day-to-day operations by absorbing the time for 36 interviews with Michael. The NAMA board also felt obliged to sit through a presentation of Michael’s musings and conclusions.
(5) How well is NAMA actually doing in its asset management phase? The report seems to suggest there are competency issues at NAMA and that there are failings but at the outset says “I make no comment on any commercial or other approaches or decisions made by NAMA”. The perspective on here is we don’t have enough information to form a view on NAMA’s performance in this asset management phase. At one end of the spectrum, NAMA seems to have scored a bulls-eye with selling the Maybourne loans for €800m – the face value of the loans and which NAMA says could not have been bettered. On the other we have a mish-mash of suggestions of intrigue and innuendo that NAMA has not got the best price on other assets. There is nothing in the report to judge whether NAMA is doing a good job during this phase.
(6) Michael seems to have been strongly influenced by his institutionalisation over 37 years at HSBC where the role of chairman was more an executive role than it is in other institutions. Michael seems to recommend in many instances that it be the chairman of NAMA that approves important decisions. Unlike HSBC though, in NAMA, it is plainly the €430,000 a year chief executive Brendan McDonagh who is the hands-on executive whilst the €153,000-a-year chairman Frank Daly is more the traditional chairman and ambassador for the Agency.
(7) And speaking of remuneration, it is the recommendation of Michael that NAMA should introduce a “robust long term plan modelled on the private sector rather than public sector incentives”. So what salaries can we expect to see at NAMA? The chief executive of BlackRock asset management group, Larry Fink, gets €20m per year. Is that what the State should be paying Brendan McDonagh?
(8) British CBE recipient, Michael comes across as an arrogant little sh*t in this report. This blow-in graciously emphasises that NAMA “has no obligation to accept any or all of the said recommendations”. And in his conclusion, he suggests that NAMA might find itself effectively liquidated with its operations handed over to “one or more third parties to manage” if it fails to deliver on self-imposed debt repayment targets. Puts you in mind of the Fine Gael General Election position of farming NAMA’s operations out to 2-3 external asset managers, now doesn’t it?
(9) Michael conducted 36 interviews before committing to his musings. There isn’t a list of the interviewees at the 36 interviews but the report says it limited itself to interviewing “board members, senior executives, certain other middle management, supporting offices and both internal and external auditors” No external asset managers, no bankers, no developers, no investors. This seems like a major failing in the review, unless the bould Michael thinks his cumulative personal experience obviates any need to consult beyond NAMA and its auditors. The shareholders at HSBC didn’t seem so certain.
(10) The creation of an “Advisory Group” which reports to Minister for Finance, Michael Noonan is a worrying development and seems to herald greater political interference in NAMA. The Minister already has an “Advisory Group” – it’s called the Department of Finance which liaises with and oversees NAMA. And while we might all scoff at the notion that NAMA is independent of the political bear-it, the Agency does in fact enjoy a degree of autonomy granted to it under the NAMA Act. This is set to change. The Minister has announced that he will draft a so-called “Direction” pursuant to the NAMA Act to force NAMA to cooperate with the external “Advisory Group”, something which interestingly wasn’t required in September to get NAMA staff to cooperate with the Geoghegan review.
NAMA itself has reacted to the report with grace through gritted teeth, selecting the positives from the review and offering its cooperation with any initiative to ensure the Agency meets its objectives.
Lastly, and because it was extensively reported in the media, the suggestion that NAMA is sold off is limited to a passing remark that towards the end of NAMA’s anticipated lifespan – 2017-2019 according to the review – consideration be given to selling the rump of the organisation. This hardly justifies the “NAMA may be sold off” headlines.