Inside The World Of Business
Nowhere for Cowen to hide on IMF advice on Nama
THE INTERNATIONAL Monetary Fund’s (IMF’s) conclusion that the establishment of the National Asset Management Agency (Nama) will do nothing to increase bank lending really could not be more damaging to the Taoiseach and the Government.
The whole €80 billion-plus project has been sold to the public on the basis that, once the banks have been cleansed of their troubled land and development assets, they will start lending.
While many commentators dismissed this notion from the outset – and it now appears the IMF and some of the banks agreed – the Government kept on putting forward the argument. Both the Minister for Finance and Taoiseach are on record in this regard
The revelation that politicians play fast and loose with the facts and ignore advice when it is expedient is no revelation at all.
What is far more damaging is the revelation that the Government has known since last April that there were, at a minimum, serious doubts over whether Nama would free up lending. By refusing to face up to this, it has done further unnecessary damage to the prospects of an economic recovery.
In the first instance, it has misled many struggling businesses into thinking that, despite their first-hand experience of the banks, there was going to be some sort of sea change, with the banks turning on the lending spigots once Nama was up and running.
Even more unforgivably, the Government has squandered the opportunity presented over the past 10 months to find an alternative. Instead of trying to knock a few heads together to find a way of freeing up credit for business, it has ducked the issue using Nama as a cover.
Worse still, it was entirely unnecessary and avoidable. Admitting that Nama was not a panacea for lending might have made it harder to sell the concept to the public, but it would not have obviated the need for it. The banks’ land and property debts had to be dealt with.
Getting banks lending was always going to the more difficult and more important job, and one that should have been the priority. Given what was at stake, the level of political irresponsibility implied by the Government’s decision to brush the IMF’s views under the carpet is truly staggering.
In praise of Peter Kelly
Is Mr Justice Peter Kelly “the people’s judge”? The man who presides over the conveyor belt of riches-to-rags cases that is the Commercial Court certainly has a skill for delivering his judicial disdain in plain-talking, soundbite form.
Take, for example, his incredulity when faced with the labyrinthine debts of Liam Carroll’s Zoe Group: it was simply “astonishing” and “extraordinary” that AIB had advanced some half-a-billion euro to the group on the basis of “fragile” letters of undertaking that in some instances misstated the name of the Zoe company, he noted on one occasion.
In another session of the court last July, counsel for court regulars Paddy and Simon Kelly were told that the technical nature of their attempts to avoid liability for an overdraft relating to the failed Thomas Read pub group was “about as unattractive a form of defence as I’ve seen for a long time”.
Most recently, the Stokes brothers, owners of the Residence private members’ club, were informed in no uncertain terms that using tax money deducted from employees for trading purposes instead of passing it on to the Revenue was “a form of thieving”.
Now Mr Justice Kelly has politely directed the examiner investigating the viability of the insolvent Residence club to rethink his rates.
Fees of €425 an hour sought by Jim Stafford of Friel Stafford Corporate Recovery – equivalent to an €884,000 annual salary, the judge noted – are not acceptable in the current climate, he said. The good judge also questioned the €50,000 legal bill sought for lawyers who represented the examiner during the three days that the matter was before the court.
Who’s with him? Just about every partisan observer. For when he’s not shooting and scoring against bankers, solicitors and overpriced corporate recovery firms, Mr Justice Kelly has been heard to utter sympathetic words to the those genuinely broke businessmen who are too poor to afford even cut-price legal advice.
Economic prescription
Five months ago, former Intel chairman Craig Barrett lit the touchpaper at the Global Irish Economic Conference at Farmleigh, telling the 180 invited delegates that only one of about 14 reasons why Intel came to Ireland 20 years earlier remained compelling. Last night he returned to Dublin, and to the theme of competitiveness and our lack of it in an address to the Royal Irish Academy.
Barrett’s view is straightforward, even blunt: in the face of worldwide competition, globalised economies like Ireland’s must get serious about competitiveness if they want to succeed. And competitiveness, in Barrett-speak, is the product of three elements: smart people, smart ideas and an environment conducive to innovation.
It sounds straightforward enough but Barrett’s assessment is that Ireland’s performance by these three measures is, at best, average. His prescription – simple to state but inevitably difficult to accomplish – requires a fundamental restructuring of our educational system with a far greater focus on maths and the sciences alongside investment in research and development. The question is whether the will, politically and individually, exists to push through the transformation needed to revitalise our ailing economy for the longer-term challenges it faces.
Today
Retail sales figures for December are due to be released today, giving the first official picture of how the crucial Christmas trading period went. Central Bank governor Patrick Honohan is speaking to the Trinity Alumni Career Network and United Drug holds its annual general meeting.
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