NAMA workings have even the experts baffled
CONFUSED about the National Asset Management Agency (NAMA)? Don't worry, you're not alone. The Oireachtas Joint Committee on Finance and the Public Service seemed as confused when it met yesterday to try to understand the agency which is due to begin operating later this year and brought in an interim managing director earlier this week.
The committee was hearing evidence from Professors Patrick Honohan and Karl Whelan. The Trinity and UCD professors seemed pretty confused as well.
The Government has been quick to defend NAMA but much slower to tell anyone exactly what it has in mind and both legislators and professors were reduced to citing leaks to the press much of the time as they struggled to tease out how it will work.
NAMA "could well be described as a pig in a poke" was how one of the professors put it after calling for more transparency and admitting that he had little idea how much the plan might cost. The entire cost of saving our banking sector could be anything from €50bn right down to nothing over the medium term, Professor Honohan told the deputies. We will probably only know several years after the scheme ends, he added with academic detachment.
"How deep is a hole?" Prof Honohan said at one stage. His Socratic manner might go down well in Trinity, but it seemed to frustrate his questioners. When pressed once again on potential liabilities, the professor noted that "people are just throwing numbers around".
Pressed once more, it was possible to detect a slight rebuke. "As professionals with reputations, we don't want to give figures we can't defend," Prof Honohan said in a friendly manner that brought that particular line of questioning to an end.
Prof Whelan was even blunter at times. He dismissed NAMA's reported modus operandi which will be to either hire bankers to sweat the loans or alternatively allow bankers to remain in their banks and farm out the loans to them.
Academics
The academics had some good things to say about NAMA. Prof Honohan said it was "far superior" to US and UK proposals for dealing with bad debt. However, they warned that similar schemes elsewhere in the world have enjoyed mixed fortunes. Spain and the US had done quite well in the past but Senegal and Ghana had not.
Both men warned NAMA could effectively serve as an unofficial subsidy to the banks if it buys property at high prices -- what Prof Honohan termed an "opaque recapitalisation".
Prof Honohan said that transparecy is key while admitting he might be "naive" to expect any light anytime soon. We'll find out one day if he's right.
- Thomas Molloy
