Developers asked for stimulus plan months before Nama set up

Minutes said developers wanted corporate borrowings kept separate from personal assets

Three months prior to the establishment of the National Asset Management Agency (Nama) up to deal with the mess left by the property and banking collapse, the Construction Industry Federation (CIF) lobbied government for a property stimulus package.

It also sought the exclusion of social housing considerations from the agency’s workings.

CIF, which represents developers', made its submission on September 28th, 2009 when federation representatives Hubert Fitzpatrick, Joe Cosgrave, Michael O Flynn, Alex Brett and former Progressive Democrat TD and junior minister Tom Parlon, met National Treasury Management Agency officials Brendan McDonagh, Aideen O Reilly, John Mulcahy, together with Department of Finance officials Kevin Cardiff, Derek Moran, and Sean Kinsella.

The purpose of the meeting was to allow the CIF state what it thought of Nama, the legislative details of which were then being finalised by government prior to the agency coming into being on December 21st 2009.

Minutes of the meeting, termed "confidential", were written by Mr Kinsella for Mr Cardiff, and were published this week in Chapter Three of the Oireachtas Banking Inquiry Report.

According to the minute, the federation delegation wanted to ensure that developers’ corporate borrowings were kept separate from personal assets.

According to the memo: “CIF were (sic) concerned that banks were consolidating borrower’s corporate and personal assets and liabilities.

“This would have the impact of undoing efforts by borrowers to separate their business and private operations. CIF were also concerned that Nama would engage in this activity, and have stronger powers than a bank when the definition of ‘associated debtor’ in the Bill was factored in.”

Having been told that Nama’s role was “to achieve the maximum return for the taxpayer,” the delegation was informed that when borrower’s loans were transferred to Nama, the agency “would be in the same position as the banks. . . and would manage the loans in order to ensure the best return. It was important that the transfer of loans dealt with the borrower’s complete exposure across the institutions in order to create confidence in Nama’s operation.”

The CIF delegation “put forward the merits of a government stimulus for the property market” suggesting a package would “unlock substantial tax revenues and be beneficial for the Exchequer”.

The delegation was also worried at Nama getting involved in social policy matters.

According to the memo, “CIF expressed concerns that Nama’s commercial focus might be distracted by the inclusion of social policy related provisions, which would incentivise foreclosures and impact valuation.”

CIF was told, according to the memo, that “the use of property for socially beneficial purposes would only be an issue where Nama had foreclosed. It would not make sense for Nama to foreclose on a borrower where they were in a position to meet their obligations over time.”

The delegation also voiced concern at what the memo described as “certain media commentary proposing the publication of all Nama borrowers” and that the transfer of a borrower’s loan to Nama would be seen as, in effect, a default on the loan.

The department and NTMA officials told the industry representatives that for Nama to work, “it would have to develop and complete projects as well as sell properties”.

They added, according to the memo, that “the position of developers who defaulted to a significant extent would have to be taken into account including the outstanding debt”.

Peter Murtagh

Peter Murtagh

Peter Murtagh is a contributor to The Irish Times