Business

Thursday 21 September 2017

Doublethink blurs the debate on NAMA and those salaries

Try this for curious doublethink. When it comes to banks lending to householders, we blame the bank for overlending, not the mortgage borrower for overborrowing.

When it comes to bigger loans to developers, we blame not the bank, but the developer for overborrowing. Go figure.

This strange doublethink -- where the size of a loan seems to distort how we view the act of lending and borrowing -- has infected the entire debate about NAMA

An example of it was noticeable last week when NAMA told the world -- for the second time -- it was allowing some developers to draw salaries of between €70,000 and €100,000 for managing assets that can often be measured in the billions of euro.

Some members of the Public Accounts Committee valiantly tried to get into a lather over the practice, but were not able to say who should manage the assets if not the companies which own them.

NAMA is not paying anyone a salary. Companies who are led by certain developers are paying their managers salaries, under the supervision of NAMA. Big difference. Some of these companies are not in arrears on their loans, some (albeit a small group) are not even breaching the loan-to-value covenants on their loans.

While some may want to make it a corporate crime, to overborrow is not a breach of the Companies Act.

Equally for salaries, a development company which is paying down debt and disposing of assets in line with its lender's (NAMA) agreement has no reason not to pay its managers a salary.

Unfortunately the doublethink caused by our thinking on who got a particular loan rules the debate and will continue to do so.

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