Nama faces fate of docklands body if it acts beyond brief, warns PAC
Nama is forced to extend €1bn credit to IBRC
The State's bad bank, Nama, has been likened to the disgraced Dublin Docklands Development Authority (DDDA) and has been accused of acting "beyond its brief".
Nama bosses Frank Daly and Brendan McDonagh have come under fire from Fine Gael's Eoghan Murphy of the Public Accounts Committee about the agency's decision to take a 20 per cent equity stake in the €800m Aspen property portfolio, which it also provided the finance for.
Mr Murphy said: "I just worry, I see it as Nama maybe stepping beyond its brief in this regard in terms of getting involved with private entities, in terms of buying loans from itself."
During heated exchanges at the PAC last Thursday, Mr Murphy said Nama's decision to intervene exposed Nama and the taxpayer to a potential "double loss".
Under sustained questioning, Mr McDonagh said the decision to provide funding and take the equity stake in Aspen was because "it was a very important signal to international investors that we are commercial and prepared to do business at a price that was acceptable".
Mr McDonagh was severely criticised by Mr Murphy.
"So we inflated the price to make a good impression. Someone came from the private sector with a price and you said we'll sell it for more, but we'll sell it to ourselves for more," he said.
Nama chairman Frank Daly responded by saying the decision to take an equity stake was a commercial decision taken following deliberations at the very top of the agency.
"Here is a commercial opportunity to see if there is a commercial upside... Nama could continue to get a payback. I know the general point you are making but at the end of the day we are a commercial organisation," Mr Daly responded.
During the heated hearing, comparing the actions of Nama to the embattled DDDA, which the committee has also investigated, Mr Murphy said its failures had cost the taxpayer. The DDDA was the State agency that had oversight in the failed €430m Irish Glass Bottle site debacle during the last decade and has since begun to be wound up by Environment Minister Phil Hogan.
"We have had this before with another agency in our past where they had a mandate to perform certain roles in relation to a particular part of Dublin.
"It decided to get involved itself in the providing financing and providing loans and it worked out very, very poorly," Mr Murphy retorted.
It also emerged at the committee that Nama has been forced to extend a €1bn line of credit to the special liquidator of IBRC, Mr Kieran Wallace, on order of Finance Minister Michael Noonan.
By order of Mr Noonan in February, when he liquidated IBRC, Nama was forced to make a provision of €1bn out of its cash reserves of €4.1bn to extend the credit to Mr Wallace.
"We are also directed by the minister to keep a billion on standby to give to the special liquidator for the businesses within IBRC and he feels it is worth advancing money to them, working capital. That is obviously guaranteed by the minister," Mr McDonagh said.
So far it has emerged that Mr Wallace has drawn down €200m in credit from the Nama facility since taking control of the failed bank.
Amid mounting concerns over the lack of transparency at Nama, Mr Murphy is to seek the creation of a sub-committee of the PAC to have exclusive responsibility to monitor Nama's activities.
PAC chairman John McGuinness said: "The committee is most anxious to ensure proper accountability of Nama, especially now it has taken control of the IBRC loan book."