ANALYSIS:THE FINANCIAL details of the Nama Bill announced by Minister for Finance Brian Lenihan in the Dáil yesterday have not changed the politics of the issue. Fianna Fáil is fully committed to the Bill, the Greens are providing reluctant support and all the Opposition parties are vehemently opposed to the measure, writes STEPHEN COLLINS
As long as the Greens continue to support Nama the Bill is safe. The party’s Ministers and TDs are doing everything they can to convince their members of the need for Nama while Fianna Fáil is leaning over backwards to keep the Green Party on board.
The structure of the Dáil debate and the timing of the vote on key stages of the Bill has been dictated by the need to get approval for the measure at the Green convention scheduled to take place on October 10th.
Instead of the normal vote at the end of the second-stage debate on the Bill next week it has been put off until after the convention, assuming Green Party members give their approval for the measure. It had been expected that there would be a second-stage vote on the principle of the Bill next week with the more detailed committee-stage votes in October.
The change in normal practice is an indication of just how sensitive the issue is for the Greens and by extension for the Government. Without Green support the Bill will be defeated and that is something the Ministers of both parties want to avoid at all costs.
Although it represented the biggest financial commitment by the exchequer in the history of the State, the details of the Bill unveiled in the Dáil by the Minister for Finance did not contain any great shocks.
There was some surprise that the “haircut” on the banks was not slightly more and that the risk-sharing mechanism did not apply to a bigger proportion of the overall funding being provided to the banks, but the overall thrust was as expected.
Still, there were some gasps in the Dáil chamber at the sheer scale of the money that is involved in Nama. The total book value of the loans being purchased is €77 billion and the price being paid by Nama is €54 billion.
Of that figure, the estimated current market value of the loans is €47 billion, with €7 billion being attributed to long-term economic value.
Probably the most jaw-dropping figure of all is that the biggest chunk of impaired loans comes from Anglo Irish Bank, which is transferring €28 billion worth of book-value loans to Nama. While the bank is now owned by the State, the fact that such an enormous amount in loans is being transferred to the taxpayer from what was essentially a rogue bank for speculators and developers is a shocking indictment of the banking system, the regulator, and those who ran the country in the years leading up to the crash.
Brian Lenihan was adamant that the sole objective of the Government’s actions over the past year in response to the banking crisis had been the common good. He said that credit was the lifeblood of the economy for business and individuals. “The only way to restore the flow of credit is through a cleaned-up banking system,” he said.
The Minister gave a robust defence of his actions in the circumstances in which he found himself and he insisted that Nama would at least break even over a 10-year period on modest projections for a recovery in property prices of 10 per cent during the period. He estimated that property prices in 10 years’ time would still be 45 per cent below their value in late 2006. “There is no assumption in our work that peak property prices must and will be repeated,” he added.
Lenihan provoked the ire of the main Opposition parties by saying their proposals would cost the taxpayer much more than Nama. He estimated that the Fine Gael proposal to pay just current market value for the loans would end up costing €4 billion to €7 billion more in the funding costs of the banks and the State would have to pick up the tab.
He went on to estimate that the Labour nationalisation plan would required the State to borrow an extra €10 to €14 billion to recapitalise the banks.
Richard Bruton’s response was to point out that the €54 billion being spent by Nama represented a mortgage liability of €34,000 for every family in the State and he was scathing about the Government’s credibility.
“One thing that Irish people have learnt from the past seven years is not to accept glib assurances from Ministers that everything will turn out all right,” said Bruton.
He added that many of those saying Nama was the only option were the same people who had claimed that the property bubble was founded on sound economic fundamentals.
“They have found a new creed in ‘long-term economic value’ but the message is the same. For them, the dream lives on. A bounce back is inevitable. Suspend your critical faculties and accept our word.”
Labour’s Joan Burton was equally critical, saying the people of the country did not trust Fianna Fáil when it came to the economy and she disputed the Minister’s claim about the cost of the Labour proposal, saying he had not even properly costed his own. Sinn Féin’s Arthur Morgan attempted to obstruct the debate from the beginning and was ordered from the chamber after some unruly scenes. Outside the gates of Leinster House an anti-Nama protest attracted a small number of demonstrators but the real action was in the chamber. As long as the Greens stay on side the Nama Bill will be passed, and if it is, it will vanish from the political agenda to be replaced by the budget as the next big issue.