Chairman of State agency attacks developers who left lenders to pick up the tab
NAMA chairman Frank Daly launched a scathing attack on boom-time property developers who rarely put cash into their projects, so the banks ended up with 100pc of the losses.
The State's toxic bank said it hopes to be able to pay an estimated surplus of €1bn to taxpayers by 2020.
But the Banking Inquiry also heard that to date fewer than five of Nama's 772 debtors have repaid their loans in full.
In his evidence, Mr Daly accused big borrowers during the boom of "rolling up unrealised paper profit from other developments" instead of providing proper equity when they went for loans.
"In effect the banks were providing all of the real cash funding for both acquisitions and development," he added.
Mr Daly said "it is safe to say that quite often the borrower's paper equity position never paid for an acre of land or concrete or scaffolding or a worker's wage at the end of the week".
When the crash came, the banks took 100pc of the losses, which had now cost Irish citizens to the tune of €64bn.
The Nama chairman explained that when it took over the loans, it found that feasibility analyses of projects "either didn't exist or were incomplete or were based on flawed, overly optimistic assumptions about the future".
The attitude appeared to be that the only way was up - and the banks "were taking the type of risk normally the preserve of private equity hedge fund providers" without the same rigorous analysis.
Both Mr Daly and Nama chief executive Brendan McDonagh agreed they were "shocked" by the extent of the bank loans when the agency began its work.
Mr Daly said the banks "seemed to have been acting almost in isolation".
He said: "They didn't seem to have much interest in the exposure a particular client had to another lender."
It was obvious, he said, there was a massive amount of lending to a small number of people at the top.
He added that there was no doubt that relationship lending existed between the banks and debtors.
"I would contend that if Nama had not reduced its debt as expeditiously as it has, Ireland could have been in a second bailout as market concerns about the contingent liability would have been very real."
Mr McDonagh told Fianna Fáil Deputy Michael McGrath that Nama still had just over 600 debtors on their books - and the plan was to sell off all of the smaller debts in a portfolio sale later this year. That would leave about 140 bigger debtors.
The aim was for the agency to pay off all its debts and to be able to pay an estimated surplus of €1bn to taxpayers by 2020.
Mr McDonagh said banks would never have recovered the €74bn debts they had accumulated during the crisis without the intervention of Nama.
"In the absence of Nama, you would probably have seen a phased unveiling of losses over a period of three, four, five or perhaps more years with a consequent drip-drip effect in terms of the need for capital replenishment and a corrosive impact on the creditworthiness of the sovereign," he said.