Call to replace Nama with 'good bank'

ACCESS TO CREDIT:THE GOVERNMENT'S proposal for a "bad bank" in the shape of the National Asset Management Agency (Nama) is unlikely to succeed and should be replaced by a "good bank", NUI Galway professor Terrence McDonough told the TASC economic conference.

The deposits and other assets of banks should be nationalised, rather than the debts, which should be housed in “legacy” banks run by the existing banking management, Prof McDonough said.

All of the alternatives to Nama, including the risk-sharing mechanism proposed by Central Bank governor Patrick Honohan, were superior to Nama, he said.

“The only way we will dodge this bullet is if a new government refuses to implement the legislation.”

Jim Stewart, a senior lecturer in finance at Trinity College, said it was “most unlikely” that Nama would ensure that households and small businesses have access to credit, as it was irrational for banks to lend in the current crisis.

Instead, mutually owned societies and credit unions should be given the power to act as lenders of guaranteed State loans to micro-businesses, he said.

Such financial institutions suffered from fewer conflicts of interest than publicly-quoted financial institutions and had important local knowledge, Dr Stewart added.

Meanwhile, the Green Party’s endorsement of Nama is likely to have a positive impact on the share prices of Irish banks, however, the impact will be muted today, as trading volumes on the Iseq will be low due to the closure of United States’ markets for Columbus Day.