A new report commissioned by the Construction Industry Federation (CIF) has described NAMA as "a flawed idea and a failure" that has contributed to the deterioration of Ireland's banks and the need for last weekend's IMF/EU bailout.
The report, compiled by Lombard Street Research, has looked at NAMA a year after its establishment and identified a number of alternative solutions and recommended improvements that could help the agency to fulfil its mandate.
Its key recommendation was that NAMA should operate as a developer and not just a liquidator. By acting in this way, the report says it is "destroying value" at a time when it is crucial to try to put a floor under property prices to stop the downward spiral in values. "The current position undermines values and prolongs the uncertainty over the Irish real estate sector, thus exacerbating the losses that may ultimately be suffered by the Irish tax payer," it warned.
The report is also critical of NAMA's policy of pursuing debtors for "every cent" they owe. This approach could ultimately deny a return to the taxpayers because it could reject bids that do not cover the full nominal loan value to only result in a "fire-sale" of assets in the future when it turns out that it wouldn't have received a better price.
It is calling on NAMA to be more receptive to outside capital and said it should cease to acquire so-called "good" loans together with bad ones.
By acquiring good loans, it suggested, NAMA undermines the Irish banking system it was set up to save. "It also has an incentive to underpay for such loans, which exacerbates the situation by further eroding banks' balance sheets," according to the report.
NAMA should also drop its objective of radically restructuring the Irish construction industry it said. Ireland will need a viable construction industry and attempting a root and branch restructuring is not in the country's interest.
NAMA rejected the report's findings describing it as "flawed and one-sided" analysis. The report was not objective, it claimed and said the CIF would prefer Nama to help developers deal with their problem loans at the taxpayers' expense while allowing them to siphon off and profit from their performing loans.
"The CIF has engaged in regular criticism of the agency since it was first conceived. That criticism has been grounded in a naive expectation by the CIF that NAMA would protect the developers and the broader construction sector from the impact of the excesses of the property bubble and its subsequent collapse in which some members of the CIF played a significant role," it said.
Nama is bound to implement a policy set out by the Oireachtas and approved by the EU Commission, it added. "This specifically requires NAMA to deal with borrowers and banks holistically so that they cannot walk away from the consequences of their poor decision-making and continue to profit from those investments which are profitable or performing."
CIF director of housing and planning, Hubert Fitzpatrick, said the views expressed in the report were those of its authors, Gabriel Stern and Michael Taylor. A number of substantive issues have been raised in the report that the industry is anxious should be addressed with NAMA, he said.