Despite Peter Bacon's dismissal of moral issues, integrity and transparency will be fundamental in the challenges ahead, writes ELAINE BYRNE
'I'M AN economist not a moralist, so let's deal with the economic issues," Peter Bacon said on RTÉ television's Prime Timelast Thursday.
Bacon, the special adviser who drew up the plans for a National Asset Management Agency (Nama), was clearly exasperated by Mark Little’s persistent questions on why the taxpayer should shore up those that caused the problem in the first place. The people “will find the answer in their own heart as to whatever moral dilemma they find . . . I’m not a moralist,” Bacon insisted.
Fair enough, Bacon has enough on his plate with the Nama initiative to buy problem property loans with a book value of €80 billion to €90 billion.
But it was the tone in which it was said: that somehow moral questions right now are impractical because we are fighting for our economic independence; that the speed in which this war is being fought leaves little time for the luxury of ethical niceties like responsibility.
As outlined by Prof Justin O’Brien on these pages yesterday, the accountability and transparency mechanisms to be deployed in how the property portfolios are to be priced have yet to be addressed.
In his report to the Minister for Finance, Bacon estimated that the exposure to the taxpayer is “€X billion ”. Will “X” be subject to the Freedom of Information Act after a specified length of time? Will we know exactly how much has been written off and to whom it has been written off?
Will the decision-making process that decides the extent to which property developers will be released from their borrowings be disclosed? Will the identity of these property developers be revealed? Will there be an appeals system?
What ethical mechanisms are in place for those public servants responsible for managing the largest land bank in the State? Will there be post-employment restrictions?
What consideration has been given to codes of conduct and ongoing internal monitoring to prevent any perceived conflict of interest?
Given that the cost of the Nama initiative will be borne by the taxpayer, how will it be accountable to the taxpayer?
Should the remit of the Ombudsman be widened to include Nama? Or should this role be tasked to the new financial services consumer agency?
What role, if any, is envisaged for the Public Accounts Committee (PAC)? If the PAC does have a role, will the concerns of the former comptroller and auditor general (CAG), John Purcell, and the former PAC chair, Michael Noonan, be addressed?
This time last year, both men queried the extent of public accountability within the Public Private Partnership process (PPP), which may have some lessons for Nama.
The pretext of commercial-sensitive confidentiality precludes PPPs from the same measure of scrutiny as is undertaken within the public sector. Parliamentary oversight is exercised only through the CAG, who has access to this data. The private sector is not compelled to come before the PAC, while the accounting officers of government departments are.
In order to promote confidence in the integrity of this process, the public must be given concrete reassurance that their interest will be monitored. A perception of improper influence between the political system and property interests genuinely exists in the public mind.
The roaring Celtic Tiger years between 1997 and 2007 witnessed a total of €5.3 million in donations disclosed to the Standards in Public Office Commission by political parties, TDs, senators and MEPs. (Subscriptions from the salaries of elected representatives to their parties are not included in this figure.) The quantity of individual donations to TDs, senators and MEPs make it difficult to determine the breakdown by category the source of these donations.
I did not have this problem when analysing the source of donations to political parties. Fianna Fáil was in receipt of €599,990 from developers and construction-related donors. This amounts to 40 per cent of their €1.48 million in disclosed donations. The legislation does not require donations under the legal threshold to be disclosed.
“Even the perception, never mind the reality, of corruption is going to be very detrimental to an organisation,” Earl Devaney told me in February. Later in the month he was appointed as chairman of the new Recovery Act Transparency and Accountability Board, by US president Barack Obama, with responsibility to monitor the US $787 billion stimulus plan.
The promotion of the public trust demands an unambiguous accountability framework for Nama. The integrity of the Irish banking system is dependent on the implementation of good governance principles.
A transparent process is the best means of instilling confidence and securing value for money for the taxpayer.
The immediate economic necessity to cleanse bank balance sheets of toxic assets in order to get banks lending again should not distract from long-term underlying lines of responsibility.
On the stimulus plan, Devaney cautioned that: “Since the goal is to get this money into the economy as fast as possible, people like myself are really worried about all the shortcuts and maybe violations we’ll see when that starts happening. We are in for a big challenge.”
One of the challenges perhaps is to merge the moral imperative with economics and politics.