The Labour Party has strongly signaled that a discount of 50 per cent is the very least the Government should pay for the estimated €90 billion in large commercial property loans taken out from Irish banks.
Party leader Eamon Gilmore and its finance spokeswoman Joan Burton said that if the National Assets Management Agency paid a discount of only 15 per cent to 25 per cent for distressed assets, as has been suggested by the stockbroking community there would be a huge risk involved for the taxpayer.
“If the discount is less than 50 per cent we will need chapter and verse as to the reasons why,” said Ms Burton.
They were speaking at the launch of a Labour Party analysis of the Nama Bill, which will be debated in the Dáil next week.
Mr Gilmore, who repeated his argument in favour of temporary nationalisation, warned against the adoption of Nama without proper scrutiny and debate by the Dáil and Seanad.
He said that the consequences of the agency were huge and would saddle not only this generation but future generations of taxpayers with the cost of the huge burden of debt that the State would have to buy.
“For decades to come every TD who enters Leinster House will be asked to account for this,” he said.
“It is a huge decision and irreversible, the biggest decision that we as politicians will be asked to make.”
The analysis also argues that the risks of Nama are enormous. It argues that “overpayment by Nama for loans of some €80-€90 billion will impose a huge financial burden on the State.”
The document highlights a number of alleged weaknesses. It argues that that far too much power is vested in the Minister for Finance Brian Lenihan and contends that under Section 171 of the Bill, he may be able to withhold any piece of relevant information as he thinks fit, if he defines it as confidential.
It also says that it is the Minister, not the Oireachtas, who will have the power after five years to evaluate “whether a continuation of Nama is necessary”.
The critique also criticizes what it says are the wide power of the Minister in relation to valuation. It also criticizes the ‘long term economic value’ model which it says is “fraught”.
“The future value of a property is already reflected in the current market value of an asset… The structure of Nama is based on an assumption that property prices will rise again. It is the state, however, that bears the risks if the predictions about long-term economic value are proven to be inaccurate.”
It also points out what it claims are legal difficulties with the lack of specificity in the definitions of ‘long-term economic value’ and ‘current crisis conditions’.
“This legislation will give rise to litigation and its interpretation will be a matter for courts to decide for years to come,” it asserts.
“Nama is being established to manage a vast quantity of loans, yet the draft legislation shows the proposed legal structure to be inadequate and dangerous.
“It is inevitable that political expediency will cause Nama, the valuers and the Minister to gravitate towards bloated and unrealistic ‘long-term economic value’ predictions.
“Ultimately there is no accountability on the part of the Minister of any substantial nature.”