News Brendan Keenan

Thursday 29 September 2016

Nama's critics spoke too soon but questions are needed now

Published 13/08/2015 | 02:30

The rising property market has reaped big profits for those that bought Nama loans recently.
The rising property market has reaped big profits for those that bought Nama loans recently.

Did you know that the idea of a constitutional opposition to government originated in a family bust-up between Britain's King George I and his son? No, neither did I.

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One lot sided with the king and another with the son. The point was that, after a century of dynastic wars - ending in the Battle of Aughrim - nobody could accuse the prince's lot of treason, since he was the Prince of Wales. They were just being troublesome.

So what, you may say? I hasten to add that I have little interest in Hanoverian family squabbles as such. But it did strike me that the theory fits with the problem of opposition in modern parliaments. A "loyal opposition" is merely waiting to become a government, just as the prince's lot were merely waiting for him to become king, and receive the rewards for their loyalty.

Which, with a mighty leap, brings us to Sinn Féin. How that party would hate to be described as a loyal opposition. And how doubtful the rest of us are still entitled to be about regarding it as a constitutional opposition.

We have been here before, of course. It was Sean Lemass who in 1929 described his own party, Fianna Fáil, as "slightly constitutional". But we have never been in quite this situation before.

There is a crisis, not of government, but of opposition; well illustrated by the case of the National Asset Management Agency (Nama).

Like so much else, Fianna Fáil's role as its creator prevents it from acting as a muscular opposition to the present government's handling of the development loans behemoth.

It is true that there has been no shortage of complaints about Nama actions. It has rarely been out of the news since its inception. Another odd thing, though, is that most of the criticism was at the time of its inception.

At the beginning, there were lots of complaints that the agency would burden the taxpayer with yet more debt; that it would distort the property market; that it would rescue developers who would otherwise have disappeared beneath the financial waves; that it would be secretive and opaque and open to political jobbery in its decisions.

But all of that was going on before anything had actually happened. As one can see from that short list, at least one of the fears - more heavy losses for the taxpayer - proved unfounded. The others are still wide open to debate but, for some reason, the reality seems less exciting than the imagined futures (and not just with Nama).

Parliamentary opposition ought to supply a more persistent, evolving scrutiny of government policies such as the operation of Nama. It needs several changes to be able to do so in Ireland - one of them, as is well known, being proper information.

In Nama's case, information is infamously restricted. It has become obvious that the agency will end up in the black. The Government has produced a figure of €1bn, although it is not clear whether this is a forecast, a target or an instruction. It has also become obvious that the rising property market has reaped big profits for those who bought Nama loans early in the cycle. Most were foreigners, and some have bankrolled the big Irish developer names for a second coming.

There is understandable unease about this, although nothing like the waves of furious predictions which greeted the agency's birth. One reason for the relative silence is that, back then, much of the dire warning and finger-waving came from the opposition parties Fine Gael and Labour.

In today's conditions, Sinn Féin does not have their political heft and, given my dislike of prophecy, I shall wait to see if it ever does. But it has picked up on the fact that Nama's world is now quite different from any of the prophecies of 2009.

The agency paid €32bn for loans which the banks had valued at €74bn. We know now how ludicrous that valuation was, and most of that loss can never be recovered, but we do not know with any certainty how much they eventually be worth, even allowing for the fact that the best of the loan book is already sold.

Nama was once described as the world's biggest property development fund. On the face of it, such a fund, buying assets at fair value in 2009, should be able to make a killing. Shouldn't Nama be able to do so too?

I don't know, but then neither does anyone else. The Nama board believes its current approach is the one most likely to achieve the best financial outcome for the State, but we have only their word for it. Besides, the Government has told it to wind up early, which by definition rules out aiming for maximum financial return.

There are good arguments as to why government should not engage in financial speculation, whether it be on currencies, property or, for that matter, prospects for global growth. It is also the case that the €74bn can never be recovered, although the Sinn Féin document might give that impression at first glance.

On the other side, Nama's strategy of moving early to raise cash by selling its best assets can be said to have worked. It can take part of the credit for the remarkable fact that Ireland's debt ratings are returning to prime levels just five years after national bankruptcy.

But the argument remains that this very success may make the original mandate irrelevant. It is one that should be teased out honestly in public. The idea of a suspension of any new disposals while there is a new appraisal of the Nama assets, and a return to the 2020 deadline, certainly merits examination. In current circumstances, every billion counts.

One can see why the government would want it all to go away as quickly as possible. Nama remains politically toxic, even if most of the trouble had to do with individual behaviour rather than policy. The agency may be at fault in some of these, or it may be blameless in all of them. The way it is structured, we are unlikely ever to find out.

So we arrive at the extraordinary spectacle of Michael Noonan using exactly the same argument for Nama's refusal to attend the Northern Ireland Assembly committee as Jean-Claude Trichet used for not formally appearing before the Oireachtas inquiry.

Taking one stance in opposition and another in government is one thing: taking two different ones while in the same position means something is awry.

As for Nama, what was the extraordinary information that Fine Gael and Labour learnt on taking office which rendered all their previous opinions null and void? And why can't the rest of us be told?

If there was no such information, and politicians merely change what they stand for on the basis of where they sit, they are of little more use to the citizen than that Prince of Wales's lackeys; who at least could say they were doing something new.

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