Sending in the clowns to oversee Nama
Accountability to the Oireachtas will mean zero oversight and enforcement
IF YOU’RE not already worried about the National Asset Management Agency, may I offer you a single sentence from its architect and chief defender, Government economic adviser Alan Ahearne. This is from his e-mail to the group of economists who wrote in The Irish Times last week expressing their profound concerns about the scheme (Opinion and Analysis, August 26th). One of those concerns was about the transparency and accountability of Nama. Here is Dr Ahearne’s rebuttal of this argument: “This is wrong. The draft legislation sets out that Nama will be accountable to the Oireachtas in the usual manner.”
If this doesn’t send you running to the hills, you must have nerves of steel. In itself, it is deeply worrying that anyone in a position of influence thinks that “accountable to the Oireachtas in the usual manner” is a good thing. The only formula less reassuring is the “regulated by the Financial Regulator” at the end of all those radio ads urging us to take out more loans.
The usual accountability to the Oireachtas is zero. If Alan Ahearne can point to a single moment in the last 15 years when the Oireachtas stopped any act
of gross stupidity in the management of the public finances, in the non-regulation of the banks or in the inflation of the property bubble, I’ll give Nama my full support.
Who’s going to enforce this accountability? The likes of Frank Fahey, a member of the Oireachtas Joint Committee on Finance? If you’re in two minds about Nama, forget about me or any other sceptic. Just go to RTÉ’s Morning Ireland website and listen to Fahey in debate with George Lee last Friday.
Fahey (let’s call him FF for short, because he now speaks for Fianna Fáil on these matters) admittedly has some expertise in the property game. In his spare time, he has built up an extensive portfolio of apartments, houses and commercial property in Castlerea, Galway, Athlone, Limerick, Gort, Dubai, Boston, Brussels, France, Portugal and Dublin. I’m sure none of this would influence his judgment in any way but equally it does not seem to have done much for his insight into the causes and consequences of the catastrophe that has befallen us.
FF told us five breathtaking things on Friday. Firstly, Nama will work because “the property market will rebound . . . it has already started”. Yesterday, McInerney Holdings wrote down the value of its land banks by another €156 million, meaning that they have now written off 52 per cent of their value since the middle of 2008.
Secondly, FF told us that Nama “is very similar to what happened in Sweden”. Now, FF himself was on the Oireachtas finance committee two months ago when it questioned Bo Lundgren, who was the minister for fiscal and financial affairs during Sweden’s banking crisis in the early 1990s. Lundgren told the committee that “with regard to bad banks, asset management corporations, we only used that concept with the banks that were nationalised since valuation was not a problem because we owned both the good and the bad entity”. He also said, interestingly, that he did this because he is a conservative:
“I believe in market economy and market economy dictates that if we put in capital we should have the kind of influence and ownership that goes with the capital.”
Thirdly, FF told us that the Irish problem was caused by foreign banks: “Look at what the foreign banks have done to Ireland at the moment . . .”
My mind is so numbed by this that I can think of only three words: Jesus, Mary and Joseph.
Fourthly, FF told us straight up that Nama is a way of giving €30 billion to the banks.
Lastly, and best of all, FF assured us that the €60 billion or so that will be borrowed from the European Central Bank on foot of Government bonds is “not taxpayers’ money. It is ECB money.” When George Lee again made reference to taxpayers’ money, FF became loudly indignant: “I cannot believe, George, that you’re saying that this €30 billion will come from the taxpayer. This money will be paid in Government bonds which will then be cashed.”
These bonds, apparently, are magic money that comes from nowhere, like the money that pays for John O’Donoghue’s limousines or for e-voting machines. How much oversight are we going to get from clowns who don’t even know that public money is on the line?
One last point. There was some objection last week to the fact that I used the rise in house prices over building inflation to suggest that property is so overvalued in real terms that it would take another bubble for Nama to work. I used that calculation because it is the one most favourable to the pro-Nama argument. New house prices increased more than four times faster than house-building costs. But if people would like to link them to something else, how about this: they rose five times faster than average industrial earnings and more than seven times faster than the consumer price index.