Transparency is the clearest way for NAMA to keep public onside
Published 19/12/2013 | 17:00
A lack of transparency at the heart of Nama's commercial operations may be coming back to haunt the state agency.
Allegations that at least two former officials leaked highly sensitive information are potentially very damaging.
Nama is a commercial organisation but with a difference. It is a lender, a borrower, a joint venture partner, a buyer of assets and a seller. There is an inevitability that perhaps one of its officials would cross a line and leak to bidders some of the myriad of confidential information contained inside the walls of the NTMA building where Nama is based.
But the allegations are much more serious. There is even one allegation, contained in documents due to be handed over to the gardai by Fianna Fail senator Darragh O'Brien, that somebody's entire file was given to representatives of a business rival.
The obvious thing that many of us wanted to see at Nama from the beginning, was the publication of the price it paid for every asset and the price it receives when the asset is sold.
Nama chairman Frank Daly has defended the need for withholding this commercially sensitive information on the basis that Nama is charged with making a profit. People are entitled to a level of privacy in their business dealings, plus knowing what Nama paid for something could undermine the price it would fetch in a sale.
But there is a problem here. The sheer scale of Nama means that property loans of over €70bn have been taken over by the taxpayers. The property world has various 'Del Boy' type characters who have tried to hide assets from Nama, transferred assets and tried swapping assets with each other to get around the system.
Nama has to stay on top of all that. Yet, fortunes could be made and lost here. Some people will make enormous sums of money by taking a risk at the bottom of the market.
How do we know if Nama is doing a good job? It has non-executives on its board, an advisory board appointed by the Minister for Finance and various other internal controls. It will be judged on the size of the profit or loss it makes when it is wound down.
But surely it needs more scrutiny than that. Maximum transparency is the best way to assure an uneasy public.
Nama would argue that it is already criticised for being too slow, partially because of the bureaucracy that is involved. Greater transparency would slow things down even further, they could argue.
The other argument put forward is that as the property market improves, it matters less and less what Nama paid for an asset. After Nama bought over €70bn in assets, the market fell further and it looked like the €32bn it paid was too much.
So for example, let's say a developer paid €200m for a building and he borrowed the money. He can't make the repayments. Nama bought the asset for €100m.
When the property market was completely dead and few deals were being done, somebody could offer €102m for that building, knowing Nama would make a small profit on it. With a dead market a few years ago, there might be only one, two or no bidders.
Now there is greater interest and Nama could argue that it isn't looking to get its money back on a property, but instead wants to ensure it gets whatever the market value is.
The problem is the market value of something is what somebody is willing to pay for it. Undoubtedly information about what Nama paid for something has less value as time goes on, but it is still sensitive and highly useful information.
Nama is simply too big, too important and too unique, for exclusively normal commercial rules to apply. It must have a level of transparency and accountability that go well beyond that of a bank or an asset management company.
When founded it was supposedly based on the Swedish state bad bank model of the early 1990s. But the Swedish Nama was just 4pc of Swedish GDP. Ireland's Nama took on loans worth around 40pc of Irish GDP. The top four Irish borrowers were bigger than the entire Swedish Nama.
The agency gets heavily criticised from all sides. Some say it is too soft on developers, others say it is too hard. Some say it is too powerful, others say it isn't doing enough for social housing.
Management at Nama are trying to deliver the best commercial result for the exchequer. That is not in doubt. But it was a flawed solution to the problem and it requires the maximum transparency to assure the public that they are not getting fleeced, yet again, by property speculators.