I wonder will we ever reach a point when the army of consultants and advisers that worked with the late Brian Lenihan in 2009 will be eager to come forward and claim it was they who inspired NAMA? It seems for the time being at least that NAMA is a bit of an orphan with its progenitors muted in discussing their involvement in NAMA’s conception in 2009. Step forward Dr Alan Ahearne who was seconded from his role as economics professor in the National University of Ireland in Galwayin March 2009 to work with the former Minister for Finance, and who is likely to have had no small role in the conception of NAMA. Dr Alan has now returned to his old post and today pens a defence of NAMA in the Irish Independent.
He defends NAMA’s secrecy by comparing it with the five nationalised banks – AIB, EBS, INBS, Anglo and Permanent TSB. These are he says, now state-owned as NAMA is, and yet no-one seems all that concerned about the goings-on there. So if I get this line of argument correct, because we’re not clamouring for more information from IBRC, AIB and PTSB, we’re being inconsistent and perhaps even hypocritical in demanding it from NAMA. After all the five banks and NAMA are both state-owned, so why the difference in treatment? So why would we want a new entity with top heavy public sector and accounting direction, with untested procedures and to an extent, personnel, which oversees €74bn of assets, many of which are in distress, which gets its initial forecasts wrong, which still thought that its portfolio’s value was stable in mid-2010 – why would we want more oversight over this body than IBRC which employs over 1,000 career banking personnel, which disposes of large tranches of assets in pretty transparent bidding processes? Why don’t the two get equal attention?!
Dr Alan credits NAMA with stabilising deposits in Irish banks – “it is simply not plausible that the stability in bank deposits recorded over the past six months could have been achieved if toxic loans had remained on the books of the banks” Hmm, Irish private sector deposits in the so-called covered banks (AIB, INBS, Anglo, EBS, PTSB and Bank of Ireland) declined by 5.3% between May and October 2011, in Spain they declined 5%. Now it is getting a little irritating that neither the Central Bank of Ireland nor the Department of Finance seems willing to publish private sector statistics on Irish deposits in Irish banks, because the DoF is claiming deposits are increasing, but DoF has declined to say how much of the increase is attributable to overseas branches which will be governed by local guarantees. But on the face of it, the stabilisation at Irish banks doesn’t seem materially different to Spain. Spain doesn’t have a NAMA, so isn’t it indeed “plausible” that Irish deposits might have stabilised in the same way Spain’s did? I use Spain because Spain had a property bubble similar toIreland, lending on land and development similar toIreland but has not seen the same collapse in banks (or indeed property) asIreland. Extend and pretend seems to have worked better forSpain in this regard.
Dr Alan defends NAMA’s €1m per working day cost by challenging critics to provide evidence that NAMA is either paying above market rates for its services or that NAMA is wasting money? That seems like a fair challenge and it is hoped that we can benchmark NAMA’s operating costs with comparable organisations on here in coming months. But having said that, Dr Alan hasn’t provided any justification himself for NAMA’s costs. Sauce for the gander?
Dr Alan says that critics have changed their tune on aspects of NAMA over time, that in the beginning the criticism was that NAMA would pay too little for the loans it was acquiring from banks – this was when it was suggested NAMA would pay 70c in the euro, and the upshot of the criticism was that NAMA was bailing out the banks. That criticism has now changed apparently after NAMA had paid 42c in the euro and the upshot is that NAMA has paid so little causing the banks to fall back on state assistance. This is rich, and it is particularly rich coming from an adviser on the NAMA set-up. Cast your minds back to the Wikileaks cables which claimed in relation to then-deputy Secretary General at the Department of Finance, Kevin Cardiff “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.” Perhaps Dr Alan, given he joined the Department of Finance in March 2009, a month before Kevin’s hinting, might give us the skinny on what the projections were, because from this perspective, it seems that it was considered a possibility if not indeed a probability or likelihood that the losses in the banks after NAMA’s work would be so severe as to require nationalisation, in which case, why have a new organisation called NAMA, why not do it at the banks?
And lastly Dr Alan says that NAMA’s critics are being inconsistent in saying on one hand that NAMA is a bailout for developers and on the other that NAMA is overzealous in foreclosing on developers. I think Dr Alan might find that different critics have different views, on here for example, you might find commenter Brian Flanagan consistently suggesting NAMA is still shielding developers from the reality and inevitable consequences of their losses, whilst others will suggest NAMA won’t be happy until every developer has a classic 1970s car, the Mark III Ford Cortina, and living in a 3-bed semi-detached property!
NAMA has come in for unrelenting criticism over the past couple of months which seems unfair to an organisation with some success under its belt. However, you can always over-egg the pudding in the opposite direction also.
NAMA Wine Lake 