Tag Archives: Nama

Employment & Economy, Uncategorized

Labour Amendments Seek Major Changes to NAMA Bill

The Labour Party Spokesperson on Finance, Deputy Joan Burton, has tabled 56 amendments to the NAMA Bill, 2009, which are designed to increase supervision by the Oireachtas of the NAMA process, place some restrictions on the otherwise limitless powers given to the Minister for Finance, ensure greater transparency in the process, provide additional protection for the taxpayer, reopen the flow of credit to small businesses and impose a two year moratorium on applications for repossession orders on family homes by participating financial institutions.

Deputy Burton said:
“While the Labour Party remains implacably opposed to the NAMA plan, now that the second stage of the legislation has been passed, our key objective will be to try to limit the worst excesses of Fianna Fail’s approach and to provide the maximum possible level of protection for the taxpayer.

“The opposition is also to some extent flying blind, as Brian Lenihan has made it clear that Fianna Fail, itself, intends to table extensive amendments to the Bill. We have not yet seen the changes the government is proposing, but when they are finally published they will almost certainly require the tabling of significant new amendments.

“One of the principal concerns the Labour Party has had since the legislation was published, is the imbalance between the virtually limitless powers given to Minister Lenihan and the very restricted role for the Oireachtas. We have therefore tabled a series of amendments that would provide for the appointment by the Dail of an independent oversight committee that would be required to report to the House every 30 days on the operation and activities of NAMA. In addition NAMA would be obliged to submit an annual business plan to the Dail and would also have to report every 30 days on its operations ‘including the identities of the owners of, and particulars (including value) of, any assets acquired by it during the period in question valued at over €100,000’.

“We will also be proposing the deletion of the Section that give the Minister for Finance limitless power to ‘give a direction in writing to NAMA, concerning the achievement of the purposes of this Act’.

“The ESRI has recently forecast that as many as 35,000 people may find themselves unable to meet mortgage repayments by next year and the Leader of the Labour Party, Eamon Gilmore TD, has expressed fears that once the NAMA legislation is passed there will be a flood of applications to the courts for repossession orders. To counter this we have tabled an amendment that would place an obligation on a financial institution benefitting from the NAMA plan ‘not to commence or pursue proceedings for repossession of a principal private residence unless the arrears of any mortgage are in excess of 24 months, provided the mortgagor provides reasonable co-operation within his or her means and ability with the participating institution’.

“A key objective of the rescue package for the banks was supposed to be to reopen the flow of credit to SMEs, but there is nothing in the Bill to ensure this. We have therefore tabled a series of amendments that would oblige participating financial institutions to increase lending to SMEs and first time buyers and to report to the Dail on a monthly basis on the level of such lending.

“The entire government’s approach is based on the concept of the long term economic value of the assets that will be acquired by NAMA. Long term economic value is a concept unknown to most economists. It is widely accepted that current market value of any asset factors in its long term value. Labour is concerned that this may result in taxpayers having to significantly overpay for assets and has therefore tabled an amendment to define market value as the ‘ current market value and includes such element of the current market value as is commercially attributable to the anticipated long term value of the asset.

“Other key amendments are designed to:
ensure that anyone benefitting from the NAMA process is a tax resident and tax compliant;
provide for the transfer of assets acquired by NAMA to the state or local housing authorities or agencies;
place an obligation on participating institutions to ensure the probity of directors and senior executives.

A full list of the Labour Party amendments are available here.

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Employment & Economy, Uncategorized

NAMA Plans Show Christmas to Come Early for Top Developers

Now that the Greens have decided to stick with Fianna Fail, the Minister for Finance has lost no time in producing, in the final moments of the debate on the NAMA Bill, a business plan for NAMA , which shows that Christmas will come early for the top developers and their bankers.

The publication of the draft NAMA business plan confirms that the discount rate on loans is to be an average of 30%, although all the recent evidence is that falls in relation to Irish property development land, construction and development assets, is far steeper.

The section of the plan dealing with asset valuation and transfer sets out as an objective that the ten to fifteen largest loans will be transferred to NAMA before Christmas of this year. Given that, in Table 8, the top ten exposures have a projected value of €16bn or €1.6bn per loan group, applying a discount of 30% means that NAMA will pay €11.2bn for these debts. It likely that a high proportion of these will be in Anglo Irish Bank and this will do nothing to restore lending to small and medium enterprises in Ireland.

By February of 2010 it is envisaged that €38bn in loans will have been transferred to NAMA at a cost of €26.6bn. The unseemly rush to complete the NAMA deal appears to mean that Brian Lenihan’s mind is set on completing the deal as soon as possible, regardless of taxpayers’ interests.

The value of a public ownership process is that this valuation would not arise immediately, allowing the best workout in the interest of the taxpayer.

The quoted fees to the ‘master servicer’, which are estimated to be at an average of €240m per year, will strike many taxpayers as requiring very detailed justification by the Minister.

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Employment & Economy, Uncategorized

Short-term NAMA bonds pose massive re-financing risk

Irish citizens face a huge burden in financing NAMA over its expected 10 year life following the admission by the Minister for Finance that the NAMA bonds will be issued with only a 6 month maturity at 1.5 per cent.

This means that when NAMA is up and running it will have to go to the markets every 6 months to re-finance at a time when interest rates are likely to rise slowly but surely from their current record lows.

The repeated assertion by the Government that NAMA will cover its costs, or ‘wash its face’, is based on the assumption that the interest rate will stay at 1.5 per cent. As the Minister now admits, this is just the expected rate for the first six months.

The Taoiseach finally acknowledged that a business plan for NAMA will be forthcoming over the next three or four weeks. Producing a business plan AFTER deals were negotiated is how reckless bankers and developers brought the country to a new economic low. Now the Taoiseach says they’ll work on the figures after NAMA is up and running.

For the Taoiseach and his Government to act in the same way by producing a business plan AFTER they have committed the country to a €54bn gamble is astonishing.

Three weeks is too long to wait for this vital information on a gamble that will impact not just on this on generation, but the next.

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Employment & Economy, Uncategorized

Burton Calls on Lenihan to Publish NAMA Business Plan

On Wednesday the Minister for Finance, Brian Lenihan, will give the Dail his long awaited estimate of the loans that would be transferred to NAMA if his Bill is passed.

I am not at this stage sure just how the Minister intends to present this estimate. In order for the Dail to give it serious consideration I am today asking Minister Lenihan to publish a Government position paper in advance of Wednesday’s debate. It is common for such position papers to be published with embargos prior to Budget statements and this occasion is of similar, even greater, importance.

The Minister has also said he proposes to publish his own cost estimate for the Labour Party’s temporary nationalization proposal. I am somewhat surprised at this as there has been no consultation with my party on how this costing is to be carried out. I do not believe it is appropriate for the Minister to use the resources of the Civil Service
in a partisan way to engage in political point scoring.

I am , of course, anxious to have an independent estimate of potential costs for any policy option that may be debated by the Dail but such an exercise should be carried out in a non-political way.

It is invidious of Minister Lenihan to engage in this exercise when there has been no clear statement of the costings of the NAMA option itself.

All through the past week I have heard repeated assertions from Ministers that NAMA will be a profitable undertaking and will cover its own costs since the rate of interest on the NAMA bonds will be so low.

This is a speculative assertion that takes no account whatsoever of the operation of the bond markets, variations in interest rates and discounts over the projected life of NAMA and most importantly possible changes in ECB policies.

The Minister must set out the expected cash flows and revenues over the coming 7 to 10 years of NAMA’s life. In the legislation the banks may use the NAMA bonds with the ECB or sell them. However we do not know under what conditions and when they may be sold on the bond market and the impact of such sales on Irish Government Debt at a time when the State will be borrowing heavily to meet capital and current public spending.

The Government has to tell the public honestly what assumptions it is making about these bonds. This is as critical a feature of the entire project as the valuations and ‘haircut’ to be announced this week.

If speculative assertions form the basis of Government costings for NAMA then the entire project will suffer from a fundamental credibility problem right from day one.

For this week’s Dail debate to be relevant I suggest we get a NAMA Business Plan from the Minister before Wednesday. It was the structural weaknesses in the ZOE business plan that caused the High Court Judge to dismiss that company’s plea for court protection on Friday.

The Court had to make an assessment of Zoe’s capacity to survive and pay its way based on objective tests. The Dail has to make much the same assessment on NAMA using exactly the same objective tests since the stakes for the national economy are so high.

We need this NAMA Business Plan when we commence the debate on Wednesday. It would be a shocking betrayal of the public interest if the information to be given by the Minister consists only of broad brush estimates about distressed bank loans.

A proper NAMA Business Plan has to set out a realistic forecast of NAMA’s cash flows and accounts for each of the coming years with special reference to the refinancing of the bonds to be issued on a year by year basis. Any SME that goes to a bank is familiar with doing up a business plan that sets out the expectations of what will happen over the life of the loan.

One commentator in a stockbroker bulletin this week (Mr Brendan Dowling in a DKM bulletin on dkm.ie) has described some of the assertions made by proponents of NAMA as tantamount to the unbridled optimism normally only seen in the prospectus of a new stock market flotation. We had that before on Eircom. Let us have none of that on NAMA but every day brings wilder and wilder claims on NAMA’s profitability from Ministers.

One essential feature has to be consolidated statements of the loan situation for each developer. I am not asking for names of individual bank clients but we are entitled to a full picture of the loan situation for the main bank debtors, the true value of the collateral they have offered for these loans and also the extent of their personal wealth that ought to be put into the mix before the taxpayer is asked to contribute.

Already there are disturbing reports of some developers seeking to make part of their asset portfolios ‘NAMA Proof’ by the transfer of these assets to spouses or abroad. He Minister needs to clarify this issue quickly before we experience another decade of public scandal .

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Employment & Economy, Uncategorized

Joan Blogs on NAMA



‘May you live in interesting times’ – so goes the Chinese curse.

The next 100 days could be the most interesting times an independent Ireland has seen yet. The word ‘historic’ may well be a hackneyed cliché, but it’s quite possible that the months that lie ahead will come to be viewed as such many years hence.

First up is the Lisbon Treaty – given Ireland’s financial predicament, Ireland now needs Europe more than ever. A Yes vote won’t guarantee recovery, but a No vote would make it that much more difficult.

Next up is NAMA – never before since independence has so much been at stake. Fianna Fáil have led the country up a blind alley with their blanket guarantee, botched recapitalisation and nationalising a basket case called Anglo… not to mention the fact that it was they who stoked the property bubble with outrageous tax incentives and then forgot to regulate their sacred free market. Ooops! Now they are trying to foist on us NAMA, which appears designed to bailout the banks with a back door capital injection by overpaying for dodgy assets. NAMA could well be the GUBU of the noughties. This week, the Labour Party published its comprehensive critique of NAMA and set out its vision for a public ownership alternative.

As if that wasn’t enough excitement for political junkies, the 2010 budget could be the big kahuna. Ahead of budget preparations, the Commission on Taxation report was published this week. It set out a wide menu of tax reforms for the Government to choose from. With a budget deficit heading for €25bn, there is no doubt that Fianna Fáil envisages more tax hikes to plug the gap. In some sense, this report was a missed opportunity to explore the myriad of tax loopholes for the wealthy. Closing these down should not be an optional extra – the people who have most must pay their fair share before low-to-middle income families are stiffed for yet more cash.

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Employment & Economy, Uncategorized

‘Stop NAMA’ Protest outside Dáil, Wednesday at 1pm

Following the decision of the Labour Parliamentary Party at its meeting in Waterford this week, the Party is inviting members of the public who share Labour’s concern about Fianna Fail’s NAMA plan to join Labour TDs and Senators to demonstrate their opposition outside Leinster House at 1.00pm on Wednesday, September 16th. The debate on NAMA legislation will begin in the Dáil 2 hours later.

Why not use your lunch break next Wednesday to add your voice to those opposing Fianna Fáil NAMA bank bailout?

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Employment & Economy

Passing Lisbon & Stopping NAMA Key to Economic Recovery

Speaking this morning in Clonmel, Deputy Joan Burton highlighted the key challenges facing the country in the coming weeks.

The publication yesterday of the official NAMA legislation emphasises just how much our economy has faltered. Our banking system has been brought to its knees by the Gordon Gecko-type greed and rampant speculation of our bankers and our developers.

Together with Fianna Fáil, they make up a ‘toxic triangle’ that has damaged and destroyed our economy, sending Ireland into the deepest, and maybe even the longest, economic depression of any advanced economy since the second World War. Together, they have shattered the confidence of a nation.

Fianna Fáil does not have a mandate to inflict pain on the ordinary people of Ireland to clean up a mess of their own creation.

There are critical challenges ahead for the country. We need to rebuild our economy at home and restore our battered reputation abroad.

The most immediate threat to our domestic economy is the stymied flow of credit that is putting viable businesses at risk and making it difficult for credit-worthy families to borrow to buy the homes and cars they need. Only when we have restored the flow of credit can we address the other pressing economic challenges: the jobs crisis and the fiscal crisis.

To get credit flowing, we need to clean out the banks’ balance sheets. Everybody is agreed on that. The challenge is to do this at least cost and at least risk to the taxpayer. Fianna Fáil has concocted NAMA to pump capital into the banks through the back door by paying way over the odds, billions over the odds in fact, to take over their dodgy assets.

At this stage of the game, and with the disastrous bank guarantee still in place, there is no cost-free, risk-free way to restore our banking sector to the extent necessary so that it can support economic recovery. The Labour Party is opposed to Fianna Fáil’s NAMA bank bailout. Instead, we propose taking the banks into temporary public ownership, cleaning them up and returning them to a private sector governed by robust regulation. This, we believe, is the safest approach. By giving taxpayers’ ownership of the banks, they will have a direct stake in their success and could potentially reap a profit when they are returned to the private sector.

Back in February of this year, the Labour Party proposed the establishment of an independent Banking Commission to oversee the restructuring and restoration of our banking sector. By putting the banks at arms-length from politicians, valid concerns about political interference in banks’ operations can be addressed. This is the mechanism we propose for overseeing bank nationalisation while ensuring the banks’ can act commercially and independently, but under close supervision. The mistakes of the past must not be repeated.

For the past year, the Irish banking system has been on ECB life-support, borrowing tens of billions from Frankfurt, proportionally far more than any other EU country. If it were not for the finance facilities provided by the ECB and the solidarity of our EU partners, Ireland would be in a much more difficult position. The European Union is a safety blanket that we discard at our peril.

A No to Lisbon at this point in time would send out a host of wrong signals about an Ireland that is not only mired in economic difficulty, but is distancing itself from Europe.

The Labour Party believes that it is only by working with Europe that we can solve the severe economic challenges we face domestically.

I will be voting YES to Lisbon on October 2nd, and personally recommending to women and men across the country to do the same.

I have no doubt that as voters go to the polls this time, they will be primarily trying to make a decision on how to vote based on the best interests of themselves, their families and their children.

Now is not the time for Ireland to become isolationist and retreat from Europe. The Lisbon referendum allows us to reaffirm our commitment to Europe and to European solidarity that in the past has assisted Ireland significantly and is doing so again now through the European Central Bank, at a time of unprecedented economic turmoil.

At this time of economic crisis, voting YES to retain our position as a core member of the European Union makes good economic sense.

The Lisbon Treaty, in particular the Charter of Fundamental Rights, has enormous possibilities for improving access and provision of fundamental public services like health and education.

While these are matters for actual implementation for the governments of each country, nonetheless, including these in the charter would positively enhance the commitment of Labour, if elected to government by the people, to improve these areas.

Many Irish people abroad have rightly marvelled at the level of health provision and other public services in France, Holland and Scandinavia. Positive commitment to the EU by ratifying the Lisbon Treaty will allow Ireland to take these progressive countries and their health systems as positive templates for Ireland.

One of the greatest global challenges, and one of the great human tragedies currently afflicting Europe, is people trafficking. Many thousands of women and children are trafficked into and around Europe every year against their will. Almost by definition, this needs a response based on cooperation between nations. Ratification of the Lisbon Treaty will not only explicitly prohibit trafficking – in the Charter – but will facilitate greater cooperation between police forces across the Union, allowing them step up the fight against people traffickers

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Employment & Economy

‘Nama-nua’ Falls Short

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.

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Employment & Economy

Why Bank Nationalisation beats NAMA hands down

There are several fundamental problems with the proposed NAMA legislation. One is valuation, in Section 58, and the second is the awesome powers given to the Minister for Finance in the Bill. As reported in the Irish Times, he Labour Party has set out a comprehensive critique of NAMA and outlined its public ownership alternative in ‘Protecting the Taxpayer’,

Citizens need a clear statement from the Minister of the loans and the assets to be taken over. We need a consolidated statement of the position of each of the top 100 developers whose loans are proposed for transfer to NAMA. While the identities of the individuals need not be revealed, we need a clear picture of the state’s potential exposure. This statement should set out the nature of collateral, level of cross-collateralisation between developers, the extent of the use of derivative instruments and personal guarantees.

While this information is of a complicated nature, it essential that it is made public so that we can have a breakdown of what the NAMA loans are likely to consist of and how much is likely to be recovered. It is quite possible that this information could render dubious the value that can be recovered from these loans, and taxpayers deserve to be told what the Fianna Fáil Government intends to sign up to on their behalf. Such disclosure is fundamental to the functioning of a transparent and accountable democratic process.

The most critical NAMA problem is the valuation of the distressed loans.

The State has a wealth of valuation experience and advisors. The Valuation Office/Commissioner of Valuation (property advisors to the Government) has access to all property transactions in the State and would be in a far better position to advise on valuation issues than any other expert. One recent case, Gillen & Farrrell v Bray Town Council, 1st August 2008 (see note below), in which the valuation was appealed to the Valuation Tribunal is instructive.

The higher the discount set, the greater the losses the banks must record and the more their capital is eroded. Since higher losses mean the state having to re-capitalise the banks, and since this will increase the share of the banks owned by the state, the Government’s determination to avoid nationalisation makes it highly likely that NAMA will over-pay for the loans.

The remarks of Minister Lenihan to the Finance Committee confirm that this is what he intends no matter what assurances he gives to the contrary.

He was asked about the operation of long-term value and how he could be so sure that the write downs of loans would maintain bank solvency. His answer was revealing. He knew this because of the current value of bank shares. The market, he asserted, was showing through these share values that it had confidence in bank solvency even after NAMA ‘haircuts’. Minister Lenihan was effectively defining long term value as that which would maintain the value of the banks’ equity capital and hence he was asserting he would exercise his valuation powers under the Bill to secure that result.

This is an absurd Alice in Wonderland situation. The stock market is working on the assumption that the NAMA process will secure the banks’ and accordingly the current share value reflects this underlying Ministerial assurance. Then the Minister uses those same share prices as the basis of setting valuations. The Minister believes the stock market and the stock market believes the Minister.

It is a truly astonishing way to make policy and to avoid, at enormous cost, the only alternative that could get banks back into business again; that is temporary nationalisation.

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