Somers tells of Trichet's shock at toxic loans

 

EUROPEAN CENTRAL Bank president Jean-Claude Trichet “gulped a bit” when he was told by the former chief executive of the National Treasury Management Agency (NTMA), Dr Michael Somers, that the State might need up to €60 billion to buy toxic loans from the Irish banks.

Speaking on RTÉ’s Marian Finucane Showyesterday, Dr Somers said he travelled to meet Mr Trichet because there was nowhere “except the ECB” that funding for the National Asset Management Agency (Nama) could come from.

Dr Somers said he did “a lot of hard swallowing” about Nama. “It sort of sticks in my gullet to hand all this money over,” he said, but stressed that he supported Nama.

“I was swallowing very hard at the idea of handing money out to the banks, particularly in such large quantities, with no great certainty that we were going to get it back,” he said.

Dr Somers was critical of Nama when he spoke at the Dáil Public Accounts Committee a year ago.

Speaking yesterday, he said the NTMA was pressurised by Anglo Irish Bank in phone calls during the crisis in 2008 to put more cash on deposit out of the billions held by the agency for the Government.

The NTMA had concerns about Anglo, he said, and was “hesitant” to put any more than €40 million on short-term deposit when it had put €300 million on deposit each with AIB and Bank of Ireland.

“Looking at Anglo, we took a view that the business model was odd – it wasn’t an outfit with a whole load of branches but they were raising an awful lot of money and they were lending an awful lot of money and they seemed to be paying over the odds for what they raised and charging over the odds for what they lent,” he said.

“But they were very popular because they gave quick decisions and they put money out into the system.”

Dr Somers said that Anglo was being “feted” and growing at 30 to 40 per cent a year, outstripping growth at the two main banks.

“These guys were leading the charge – they were the sexy outfit in Ireland. The two main banks were seen as sort of slumbering giants,” he said.

Anglo and Irish Nationwide were “real basket cases”, he said, adding that the “€20 billion to €25 billion” being invested by the State into the two institutions is “going to go down a black hole”.

“That [money] is dead – it is just gone. It is unbelievable that that amount of money is gone,” he said.

Speaking on RTÉ’s This Week, Anglo’s incoming chairman Alan Dukes said about half of the bank’s €35 billion loans remaining after the Nama transfers are impaired.

Mr Dukes said the identity of Anglo’s bondholders was “absolutely irrelevant as far as strategic decision-making is concerned”.

The bank hopes to submit a revised business plan to the European Commission next week, he said, in response to queries about a plan to split Anglo.