Garret has got it wrong: Nama must be opposed

The idea that we, the Irish people, should tolerate the lunacy of Nama ‘in the national interest’ is badly flawed

GARRET FITZGERALD is mistaken. Every effort should be made to defeat both the Government’s National Asset Mamagemnet Agency plans and its coming budget. What matters first is not the concerns of international financiers but what is right and fair within our society. That we should sacrifice fairness to appease that financial community is seriously misguided.

I write with reluctance in criticism of Garret, in part because of an affection I have had for him since first getting to know him in 1965. But, more so, because of his extraordinary dedication to the national interest for more than half a century, a dedication that has persisted far beyond a stage in his life when he might be expected to ease off.

No other senior politician has continued to engage with such enthusiasm and capacity in the national debate as has Garret, since he ceased to be taoiseach 22 years ago. And because of his stature, his contributions to this newspaper and elsewhere have continued to set the national agenda again and again.

But in this instance I believe him to be mistaken because of the damage Nama may do and the budget will do to our society.

The Government, supported in all material respects by the major Opposition parties, is determined to address the gaping fiscal deficit in the December budget by massive cuts in public expenditure – inevitably focused, in the main, on social welfare, health and education. The Government has ruled out, for now, dealing with the deficit by way of increased taxation.

In other words, the Government is refusing to deal with the fiscal crisis by requiring those with most to pay most. Is Garret serious in suggesting this strategy must not be opposed in the “national interest”? That we should be complicit in injustice?

On Monday Brian Lenihan set out clearly what the implications of Nama are. He said the value of the bank loans that Nama will acquire will be defined “as the long-term economic value”. And: “Following the valuation of the security [for the loans], and in line with the [EU] Commission’s guidance, Nama will adjust the value to reflect the fact that the market for this security is currently illiquid but will not remain so. This recognises that these assets are at crisis values and that the fundamental long-term value, having regard to cash flows and longer time horizons, is appropriate.”

If it is the case that the market values for the security for these loans is now artificially depressed by illiquidity and the “crisis” environment, how is it that the sharp-eyed smart bucks that made such fortunes from turning pennies in the good times are not now lining up to buy up these devalued assets? It is not as though the sharp-eyed smart bucks do not have the pennies to turn nowadays. Several of them were lining up a few weeks ago to buy a British football club. Many of them are buying into bank shares at present because of the Government guarantee to the banks. The Irish stock market has done very nicely over the last month, gaining about 12 per cent. So how is it that only Brian Lenihan and his pals see such a rosy picture on the Irish property market?

Why, if nobody else is willing to take a risk on Irish property, is the country as a whole being bludgeoned into doing so, via Nama? And how is it that Garret thinks it is unpatriotic to oppose this recklessness, which runs the risk of doing such damage to this society?

There is worse. The Irish State, ie the Irish people, is now giving a guarantee to the banks’ bondholders that they will be looked after, no matter what. Inexplicably, they were covered by the bank guarantee. Now they are to be given further guarantees, guarantees to be backed by the Irish people.

As Lenihan said on Monday, the bondholders are investors in the banks, usually pension funds, insurance companies and long-term providers of debt. They invested in the Irish banks in the expectation also of turning a fine penny (ie making a financial killing). And because their gamble has gone wrong, we are now required to bail them out.

Lenihan said: “The Government does not believe the best interests of the State are served by allowing a culture of default [my italics] or potential default to develop. That would undermine financial stability and result in the need for further action to rescue the banking system.”

So, according to Brian Lenihan, the situation is that we, the Irish people, are required to compensate gamblers for their losses because the gamblers might be reluctant to gamble with us again if we don’t, even if some of these gamblers are pension and insurance funds. This is even though we, the Irish people, did not ask them to gamble, we did not give them any guarantees before they gambled and we obtained no benefit from their gambling.

What kind of lunacy is this? How, conceivably, should we be required to go along with this “in the national interest”. Why should we countenance any further arrangement that leaves us open to such blackmail?

Garret is wrong about all this. Oppose, oppose, oppose.