The row between the Government and Fine Gael over Nama is good old-fashioned toe-to-toe political pugilism. The subject matter of the debate is complicated (class exercise: explain the difference between senior, and subordinated, debt in one sentence) but the intensity and adversarial nature of it is unmistakable.
Richard Bruton made what seemed to be a mistake last Sunday on RTE when he said that EU had asked the nationalised Anglo Irish Bank to to stop paying interest to senior debt holders. Of course, it was a slip of the tongue. Bruton should have said subordinated debt holders (whose debt carries a much higher risk rating than senior debt holders who enjoy, to shorthand it, a similar status to deposit holders).
It was a simple mistake. Nobody thought much of it and there was zero public reaction to it.
But it did not go unnoticed in Merrion Street. Brian Lenihan (looking nothing like the corpulent tooth fairy that Morgan Kelly described him as) came out fighing yesterday with the most gloriously disproportionate response (the full text of the letter is here).
The language of the three-page letter is totally OTT. You have to look at it for what it is. The letter provides the basis for an all-out attack on the Fine Gael good bank/bad bank solution; and represents the Government’s first volleys in the battle for hearts and minds over NAMA.
Lenihan described Fine Gael’s policy as a mirage and one that was unreal. At its heart, he said, it involves Ireland defaulting on its international loans. The Government position has been that senior debt (it said yesterday that the lenders included intennational insurances companies; pension funds; foreign soverign governments; and central banks) is sacrosanct and can’t be defaulted on. They say that the same doesn’t apply to subordinated debt and point to Anglo buying back that class of debt at deep discounts. It claims that the logical conclusion of the Fine Gael position is a default on senior debt, a turn of events that it claims would transform Ireland into an international pariah.
There was a milder attack on Labour. Its call for preemptive nationalisation is understandable, Lenihan said, given its ideology. The reason he has set himself against it is that some markets simply don’t lend to nationalised banks. He went on to say that Anglo had difficulties in certain markets when it became nationalised. But then Lenihan slightly undermined his own argument by saying that those initial difficulties the nationalised Anglo had were subsequently ironed out.
The real reason seems to be that he wants both the big banks (which are the two that really matter) to be “ship-shape” as he puts it when the Government guarantee comes to an end at the end of 2010. It seems he believes this won’t be easily achieved if both banks are nationalised.
It’s going to be like Lisbon. A lot of the arguments will be dense with detail, the kind of detail that washes over the public. There does seem to be a public antipathy out there to NAMA. My own guess is that there are three motivations behind it. The first, from the Government’s perspective, is unavoidable. There is lingering resentment over the way that Fianna Fail (and its Green sidekicks) have steered us into this mire.
The second is that there’s a belief that the Government is bailing out the bankers. That’s a myth.
The third is that the Government is giving a ‘Get out of Jail Free’ card to developers. That’s also a myth.
But Lenihan and Co have so far failed to nail those lies emphatically. They will have to do so now. And if the alternatives suggested by the opposition parties are as flawed as the Government portrays, they need to bring out the big guns now.
And that’s what we saw yesterday: A propaganda slugfest. Expect much more in the weeks and months ahead. This will be a fifteen-rounder.