Lenihan adviser accused of 'letting cat out of bag' on NAMA payments
BRIAN Lenihan's personal economics adviser was last night accused of letting the cat out of the bag on the State over-paying with taxpayers' money through NAMA for failed land deals.
The Finance Minister's guru, economist Alan Ahearne, wrote in a column which is still featured on his personal website: "A key question would be what price the agency should pay the banks for the loans? Buying the assets at inflated prices would amount to a back-door recapitalisation of the banks."
He adds in the column, which was written last year: "Best practice is for the banks to recognise the losses on these loans upfront and sell the assets at fair market value."
But Mr Ahearne is now one of the principal voices in favour of the new National Asset Management Agency (NAMA), which will not give "fair market value" for impaired property loans, but which will add a premium in its payments to banks.
The takeover of the loans will involve an assessment of current market value -- plus a top-up based on what the assets might be worth in future.
The legislation setting up NAMA repeatedly refers to a setting "long-term value" for NAMA loans -- which Mr Ahearne wrote on July 27 last year would amount to "a back-door bailout for banks".
Mr Ahearne has not added any further articles to his website (www.nuigalway.ie/staff/alan_ahearne/media) since joining the Department of Finance on secondment from NUI Galway earlier this year.
Labour Party finance spokeswoman Joan Burton, called on Mr Ahearne to explain the disparity between his position last year and his contention now that the planned NAMA approach was correct. The two stances were in opposition to one another, and "the cat has been let out of the bag".
Artificial
She said: "This article proves that what NAMA is about is creating an artificial edifice that will pay more than is necessary in order to get banks and developers off the hook."
In his web article, penned originally for a Sunday newspaper, Mr Ahearne declared: "In this country, one could imagine an agency like the National Treasury Management Agency buying nonperforming loans from the banks and then managing and disposing of the properties that are collateral for these loans. These distressed properties could be disposed of gradually, thereby avoiding fire-sale liquidations."
He said the banks should sell the assets at fair market value. "If banks do not have sufficient capital to take the hit, then they should raise new capital to plug the hole. Dealing with impaired assets properly will be critical for our economic recovery."
Meanwhile, former Fine Gael leader Alan Dukes yesterday came out to back NAMA, joining fellow FG leader and ex-Taoiseach Garret FitzGerald in supporting the coalition policy.
He said that while there were dangers and unknowns inherent in any approach, the NAMA idea appeared the best option. He said the FG proposal to set up an alternative 'good bank', was "cumbersome, very doubtful of success, and much less clear than the NAMA proposal".
- Senan Molony
