US told NAMA discounts to hit 50pc but official line was 30pc
Published 02/06/2011 | 17:00
A SENIOR government official told US diplomats that loans transferred to the NAMA could be worth half their stated value -- at a time when the Government was saying losses should be less than a third.
On the day of the April 2009 emergency Budget, Kevin Cardiff -- now Department of Finance secretary general -- "hinted" loans taken by the agency would be discounted by "around 50pc", according to a leaked US embassy cable.
The word 'PROTECT' appeared beside Mr Cardiff's name, meaning his identity and/or his comments were not to be disclosed publicly by US officials.
The final discount imposed on development loans by NAMA averaged 50pc in the end, meaning a loss of almost €40bn for the banks.
Three weeks after the briefing to US embassy staff, the Department of Finance said the IMF was wrong to say in a draft report that the losses at Irish banks could be €24bn. The department insisted the figure be removed from the IMF's final report.
Then-Taoiseach Brian Cowen dismissed the calculations.
"They do not represent the outcome of the specific examination of Irish bank assets which was carried out on behalf of the Financial Regulator by Pricewaterhousecoopers," Mr Cowen said.
Based on such estimates, the government said at the time the banks would need up to €7bn in fresh capital. The final figure was 10 times that.
Other cables revealed how US diplomats pressed Irish government officials for information on NAMA after the agency was formally announced by then finance minister Brian Lenihan in the April 2009 supplementary Budget.
However, despite this briefing, US diplomats were critical of what they saw as a lack of clarity on some key questions.
One US diplomat, deputy chief of mission Robert Faucher, told Washington in 2009 that the plan to set up NAMA was "riddled with questions".
The diplomat expressed these concerns to the US state department in a cable marked 'confidential'.
The chief concerns he raised were that the value of the loans involved and the structure and operation of NAMA were still not officially known.
"In the weeks following the announcement of NAMA, government officials have yet to provide details on the workings or management of the program," Mr Faucher wrote.
Another cable that month quotes an executive with leading consultants McKinsey & Co as questioning Ireland's ability to properly manage NAMA.
"He stated that Irish banks in particular have historically been unwilling to utlilize outside consultants," the cable said.
It would not be until the following September that Mr Lenihan made a formal announcement that a 30pc discount would be involved.
However, the average discount had risen to 47pc by the time NAMA began acquiring the loans from the banks involved in the scheme in March last year.
In an October 2009 cable, American ambassador Dan Rooney told US Secretary of State Hillary Clinton that the setting up of NAMA had channelled public anger over the downturn toward the banks.
"Because the purpose of NAMA is to free up the banks to start lending again, the agency has become a lightning rod for those who blame bankers and property developers for Ireland's financial mess," he told Ms Clinton in a 'confidential' cable.
"In particular, many of the Green Party's rank-and-file are angry at their party's leadership for signing on to the legislation and have pushed for the legislation to be changed."