LEGISLATION:MINISTER FOR Finance Brian Lenihan was told by one of his party's backbenchers that the National Asset Management Agency (Nama) legislation required "serious and major" improvements and amendments because "it in no way deals with the issues which must be addressed".
Detailed proposals for changes in the legislation were put forward in a letter last September from Fianna Fáil TD Seán Fleming, a former chair of the Oireachtas Finance Committee who shares the Laois-Offaly constituency with Taoiseach Brian Cowen.
The letter has been released to The Irish Timesunder the Freedom of Information Act. But last night Mr Fleming, a chartered accountant by profession, said that "very little" of his approach had been incorporated into the legislation that was passed.
He wrote to Mr Lenihan on September 8th that: “This legislation does not guarantee that credit required by the economy will be provided.” He added: “This is a life-support measure for the banking system, ie, a bailout for the banking system and primarily for AIB and Bank of Ireland.”
At the same time, Nama could cause solvency problems for the banks, requiring additional recapitalisation: “This is further exposure for the Irish taxpayer.”
The banks would then be “cash rich” and could be taken over by major foreign institutions. Unless mechanisms were put in place this could result in “the main beneficiaries being foreign institutions at the expense of the Irish taxpayer”.
He said there was a “naive assumption” in the legislation that the banks would automatically extend credit to the economy.
“There is no basis for saying this.” It was fundamentally important that “every single director on the board of the banks who was in office prior to the 30th September 2008 [when the Government issued their guarantee scheme] should be removed from office”.
According to Mr Fleming: “If the Government leaves a number of the old directors in place we are saying ‘carry on again’.”
Pointing out that the banks would incur “billions in losses” by transferring their loans to Nama, he continued: “The resultant losses will be used by the banks to eliminate future income / corporation taxation payments”.
The Minister should not have “the ultimate say” in deciding the transfer value of loans. This would only perpetuate the public belief, “that there is too close a relationship between politicians, the banks, the construction industry and Nama”.
The proposal that Nama would not be regulated by the Central Bank was “a disgrace and must be changed”. And there should be no compensation for shareholders by the taxpayer as this would “add insult to injury”. Describing the inclusion of the word “asset” in the agency’s name as “a serious error” he added that, “the name should be changed to reflect the fact that we are taking over certain loans from the banks”.
The document also includes amendments submitted to the Minister by the Green Party including a proposal to withhold a “percentage” of the Nama chief executive’s pay which would be disbursed over three to five years, “subject to performance targets being met”.
Green Party sources said last night that this amendment was not accepted because details of the chief executive’s pay arrangements were “an operational matter” and therefore inappropriate for primary legislation.