NAMA is in deeper trouble than before Christmas and its troubles will get deeper still. Once it was a flagship solution to get us out of the development collapse. Now, it has become a growing nightmare, ill-conceived and its legal basis increasingly questionable.
Much of this still remains secret -- itself always a bad sign -- as is the blame-laden approach adopted by the organisation and its chief operator, Frank Daly, which was demonstrated in the profoundly biased 'Prime Time' programme shown at the end of last year.
A large part of the problem derives from the increasing chaos that now surrounds NAMA's operations, making it -- despite the vast sums involved in the debts that it is taking over -- a rapidly declining asset-stripper and profit-maker when compared with the losses in the banks which were responsible for the setting up of NAMA in the first place.
At the time, it seemed like a good idea to value the developers' loans that were crippling the banks, take them away and recycle them, selling them on.
Unfortunately, it was a juvenile concept that did not take into account the following: firstly, grossly understated losses in the banks; secondly, NAMA's inexperience in dealing with major and complicated development projects, many of which had taken skilled developers years to bring forward; thirdly, the huge negative impact of the NAMA idea on any prospect for the recovery within Ireland of land and property development; fourthly, the secrecy or lack of transparency, often with the meretricious claim of 'commercial sensitivity'; fifthly, legal doubts among potential NAMA clients as to the legitimacy of what was being done.
The first of these, involving the banks, has turned into a crisis of immeasurable proportions because the Government's measure of what is happening is also secret and the scale of the banks' losses is given as a drip-feed. Worst of all is the loss of confidence that is causing an outflow of capital and the loss of liquidity. The property market is not responding at any level and certainly not in respect of the NAMA idea.
That idea itself has been corrupted, in public and in terms that are as humiliating for the NAMA operatives as they are for the pilloried developers, who are now the number-one scapegoats in the public mind.
Bank losses will continue to mount and there is speculation that credit unions will also need a bailout. All the actions taken to stabilise Irish banking so far have ended in instability, as expressed by the flight of capital. This defies yet again the solemn, sincerely given but largely ill-founded assurances of Brian Lenihan. Who fills in the empty coffers? IMF and EU bailouts have not stopped the drainage. Will they try again?
All of this renders NAMA increasingly insignificant as a generator of funding, because the funding required vastly exceeds what NAMA can possibly recover from the debts it has taken over. The agency will be further damaged by legal uncertainty in the road map it is following and by the sense that NAMA is antagonistic towards all the developers.
On a personal and individual basis, and in fairness privately, there are grounds for anger at the financial troubles that caught developers as the Celtic Tiger collapsed. They put the financial debt for this back on the banks and then, through the over-liberal and ill-conceived bank guarantee, on to us, the taxpayers, letting the big creditors off unharmed.
Nevertheless, bringing the development circus to a shuddering halt was not a good idea and NAMA is the guilty party.
On the legal side, there is a huge body of European regulation about the environment which NAMA has to follow. So long as NAMA deals in the loans only and does not become directly involved in development, it is unlikely to fall foul of European law. Yet every indicator is that it intends otherwise and in specific cases it has already crossed that line.
The legal restraints are vastly comprehensive. The relevant EU Directive is the Strategic Environmental Assessment. Vast in its scope, it imposes on EU member states a catalogue of measures requiring regular environmental assessment. These have the force of law.
With NAMA operating as the world's largest global real-estate investor-developer, its need to conform with the law is greater now than at the time of its conception -- and far more delicate since, if it can find clients, it will have to satisfy them about the legality surrounding the developments they sell.
"A high level of protection of the environment ... and the adoption of plans and programmes ... promoting sustainable development" is central to this directive. What NAMA sells has to promote "a harmonious, balanced and sustainable development".
In theory, this is already part of the structure of permissions that attach to the developers' schemes now taken over by NAMA. If passed on without any change at all, they may satisfy legal requirements. However, there is strong evidence that developers' schemes have been modified, changing the original concepts and rendering the projects liable for reapplication under the requirement of the EIA (Environmental Impact Assessment) Directive.
There is a preliminary stage called screening. It ascertains whether an assessment is required. If no screening is done, there has to be an assessment. It is thought no screening of NAMA was addressed or took place. Both types of assessment provide for public consultation.
Taxpayers were denied the opportunity to make observations on the Strategic Environmental Assessment of NAMA since it did not take place.
Since we are such wonderfully obedient Europeans, it is perhaps sensible to point out that where there is an internal conflict within the legislation of a member state that impedes the delivery of EU law, then EU law takes precedence.
Even without entering these minefield of reassessment, the more general impact of NAMA, in bringing the whole development world in Ireland to its knees and into a state of collapse, is in direct confrontation with the EU environmental directive.
To quote one planning expert: "Even if some or all of these projects are already the subjects of a development consent (such consent having been given under a different legal regime, for a different purpose and in a different context), NAMA inevitably creates a new framework, modifying the legal effects of any development consent already given."
That is some deterrent for a potential buyer.
ONE can immediately hear the scoffing tones of dismissal about this. "Haven't times changed and isn't this Ireland, where you'll get away with it?" But it isn't Ireland. The money for the development is now international and the standards of perfection over legal title to proceed are potentially matters for European and international law.
NAMA already faces the problem of legal actions -- though with successful judgments in some recent cases -- mainly over the transfer of the debts. These actions are costly and time-consuming and could be taken to Europe in some instances before settlement.
I question whether the public is behind the extortionate approach being adopted with developers and developers' wives and whether the terms of the transfers are fair and just, taking into account the development vision that is being reduced to brick-and-mortar valuations and downgraded land assessment.
NAMA will have up to €5bn of funding available for finishing projects. But it seems that NAMA's funding programmes, launched last September and presumably agreed with the IMF-EU in November, have been scrapped.
Were they queried or raised with the Government by Europe? We do not know. Was the question of compliance with the Strategic Environmental Assessment Directive considered at all? Again, we don't know.
The secrecy surrounding NAMA is a major impediment, although it may be clarified with the change of Government, when doors and windows will be opened.
Unfortunately, it may not be so clarified, since the Government reduced its stake in NAMA Master SPV by an accounting trick in the past few weeks. This means that ownership of NAMA may now be completely private.