ANALYSIS: The battle lines have now been drawn over the National Asset Management Agency (Nama), with all the Opposition parties set to oppose it when the legislation comes before the Dáil on September 16th. The only doubt is whether the Greens will continue to back Nama after party members debate the issue
THE NAMA PLANS
THE GOVERNMENT
The new State agency will take around €90 billion in development loans off the banks’ books.
Minister for Finance Brian Lenihan has insisted that Nama is the best way of restoring the health and stability of the Irish banking system and getting credit flowing again in the economy.
“There is nothing in the proposed Bill that will provide a bailout for borrowers, whether builders, developers or otherwise. Anyone who owes money before Nama continues to owe it, and is expected to repay the full amount of the debt,” he said at the launch of the Nama Bill last month.
Under the terms of the Bill, the price Nama will pay the banks for their development loans will take account of the current market value “adjusted to reflect a longer-term economic value which the underlying asset could reasonably be expected to attain”.
In return for the transferred loans the banks will be paid in Government bonds, backed by the European Central Bank.
The crucial issue is the price Nama will pay the banks for the loans.
That will become clearer when the Dáil debate on the Nama Bill begins on September 16th. Then Mr Lenihan is due to announce the value of the bonds to be issued by Nama.
The Bill contains a provision that would allow the State to take a majority share in any of the banks if they require more capital as a result of the price they are paid for transferring their loans.
The price paid by Nama will depend on valuations carried out by experts, but Mr Lenihan has said it will not be based on the “bubble property prices” of recent times.
The Green Party will hold a conference to discuss Nama on September 12th, but it will not make any decisions on the issue. A convention to review the party’s continued participation in Government will be held in October.
FINE GAEL
Fine Gael leader Enda Kenny announced yesterday that his party will oppose the Nama Bill, which he described as a “€90 billion double or quits” gamble by Fianna Fáil on the property market.
He said Fine Gael’s solution was that the State should establish a “good bank” with a credit facility of up to €20 billion. The credit would come from an initial Government injection of €2 billion and the sale of good loans to the ECB to provide the additional funding.
The bank would have about 50 staff but would not have its own retail network. Instead, it would subcontract the existing banks to run its loan book.
The existing banks would be restructured, with the bondholders and shareholders being asked to share the risk of the bad loans. The banks would have until September of next year, when the bank guarantee ends, to get their affairs in order.
“If individual banks have failed to make real progress, particularly in their negotiations with the bondholders, a Fine Gael government would then nationalise them,” said Mr Kenny.
LABOUR
Labour wants to nationalise the banks immediately.
The party opposed the bank guarantee scheme last September and had consistently advocated State control through nationalisation. Party spokeswoman on finance Joan Burton said yesterday that nationalisation was the safest policy, as it would not require early valuations to be placed on the transfer of loans which would be between different public bodies.
She said the Nama Bill was flawed by the section referring to long-term economic value, which was designed “to pay way over the odds for the banks’ dodgiest loans on the pretext that the assets so acquired have an enduring value that is not reflected in the current market”.
SINN FÉIN
Sinn Féin also supports nationalisation of the banks and will vote against Nama in the Dáil.
The party’s finance spokesman Arthur Morgan said that the issue has such large ramifications for current Irish taxpayers and future generations that it should be put to a referendum.
“Sinn Féin believes the only way to deal with the current crisis is to nationalise the banks and create a legacy bad bank to deal with the bad loans that the nationalised banks will have to write down.
“This is more similar to what Sweden did in the 1990s, and will offer far more security for the taxpayer,” Mr Morgan said yesterday.