Kenny attacks Nama as 'crony capitalism'

NAMA WILL prove to the “most expensive lie” ever told to the Irish people and continue “crony capitalism” in Ireland, Fine Gael leader Enda Kenny said last night.

“The poor are now being forced to insure the rich. For me, that is not capitalism, but some perverse form of crony capitalism, or inverted socialism,” he told the London Irish Business Society.

The background to the establishment of Nama came from the “culmination of the most dishonest, reckless and corrupt political campaign by any Irish government in the State’s history”.

The Government agreed to “vastly expensive solutions” to save Irish banks on “the basis of completely unfounded and untested assurances from the banks that they were adequately capitalised”, he said.

“It was panicked and threatened into this by the people who failed to act to stop it, who threatened that the entire country would be cut off from international markets unless the banks and professional investors were saved,” he said.

However, former Merrill Lynch executive Chris McGale took issue with Mr Kenny’s criticisms of Nama.

He said: “Nama is one credible option. Nama is necessary, but Nama is almost certainly not enough.”

So far, Nama has been successful in that its very existence has helped to cut the rates on insurance paid on government debt, unlike the situation in Greece where the gap is widening again, said Mr McGale.

But he warned that the shortage of banking deposits in Ireland will mean that the banks will have to refinance currently cheap bonds with far more expensive replacements in time.

Describing the economic crisis in Ireland, Mr McGale said: “The patient can’t stand much more of this medicine. There is no lending going on in Ireland. That really has to change sometime soon.”

Private sector borrowing in Ireland expanded to 220 per cent of gross domestic product by 2008, he said, due to “greedy, reckless lending” and a failure of the State regulatory system.

Ernst and Young partner Kieran Kelly warned that banking charges were likely to increase significantly in coming years, because banks had a 1 per cent margin between their own borrowings and their loans to customers.

Leading real estate academic Eamon D’Arcy of Henley Business School said Nama will be one of the world’s biggest property companies once it has taken onboard up to €70 billion of debt.

He, too, favoured Nama’s creation, saying that the setting up of such an organisation in Japan could have helped that country when it was suffering the “lost decade” it endured after its property market collapsed in the early 1980s.