The dog appears to have eaten Brian Lenihan’s homework. The NAMA Bill, published today , didn’t contain a single material change in the crucial areas of valuation and Ministerial powers. Fianna Fáil remains determined to empower NAMA to overpay for toxic bank loans. If they continue on this course, with the hapless Greens in tow, the burden on this generation of citizens and the next could be enormous.
The Minister sought input from the opposition Parties, and there has been extensive public comment and debate on NAMA in the six weeks since the draft legislation was published. In publishing the official NAMA Bill today, however, it is clear that little or none of this advice has been taken on board.
The new sections 70-76, replacing the old section 58, deal with the valuation process, but there is no substantive change in content with the Minister retaining the power to transfer assets at the so-called ‘long term economic value’ rather than at market price.
The new section 47 sets out to split the taxpayers’ payment into two tranches: NAMA-bonds, which can be used as collateral for ECB lending, and subordinated NAMA-bonds which are supposed to act as a buffer to protect the taxpayer. We will be asking the Minister for a full clarification of what this means and how it will affect the banks’ balance sheets.
While described as a risk-sharing proposal, section 47 is a very poor relation to the interesting proposals made by commentators such as Professor Honohan, which would have allowed existing bank shareholders a share in any upside in the case of underpayment while mitigating the taxpayers’ risk of overpayment. Under NAMA-nua, bank investors may bear a token risk, but taxpayers will have the vast majority of ‘skin in the game’.
The Labour Party, in its analysis of the draft legislation, highlighted the fact that there were no sanctions envisaged for people acting dishonestly or improperly in respect of NAMA. There is a new section 7 which seeks to address these concerns but, while welcome, it falls well short of what is required.
In its commentary on the original draft Bill on Tuesday, the Labour Party highlighted the awesome powers for the Minister at the heart of NAMA. Nothing has changed in the official legislation published today. If NAMA is ratified as proposed, we would still be looking at a Fianna Fáil Finance Minister installed as a property-czar heading up the biggest property company on Earth.
As for the Green Party, they have been sold a pup to placate their grassroots members with a proposal to include an 80% windfall tax on rezoned land in a later incarnation of the Bill. This Provision has nothing to do with NAMA. If it was the case that developers were expecting such windfall profits any time soon, they wouldn’t be queuing up to get into NAMA.
The Labour Party will now be undertaking a line-by-line analysis of this Bill, as we did with the draft legislation, to ensure that the interests of citizens are protected.
Labour’s alternative to NAMA is temporary public ownership of two key banks i.e. Bank of Ireland and AIB. Under this approach, the State acquires the shares in the banks. The bad property loans are written down or transferred to an asset recovery vehicle – an Asset Recovery Trust – and the bank is then recapitalised. In re-capitalising the bank, however, the state is investing in an entity that it owns, and it stands to gain when the bank is re-privatised. A crucial feature of the nationalisation approach is that it dramatically reduces the risks involved in having to value the bad loans.