Nama is 10 years old. Brian Lenihan’s brainchild to fix our collapsed banking system is about to reach its due completion date, but does so under a cloud of controversy which has dogged it since day-one.
It also bears a highly mixed legacy, to say the least, with calls this week that Nama more than anything else is responsible for the country’s housing crisis.
Nama and its defenders will say it will return a profit of €3.5bn back to the State; that it has been a success in cleaning up bad loans and distressed property assets; and it has done it efficiently and well.
Established in April 2009 by Lenihan as a means of stripping all of the bad debts from the bailed-out banks and restoring credit back into the system, Nama has been engulfed in mystery and treated with suspicion from many quarters.
"These may be sold too cheaply but at least that would establish a floor in the property market and people would start again.
"Currently, everybody is watching prices continually falling and nobody will get into the market. They believe prices will fall further and are waiting for the bottom,” is how Michael Noonan viewed Nama in 2010 just months before he would become finance minister.
As leading Nobel Prize-winning economist, Joseph Stiglitz, put it: “Nama’s structure and objectives create negative value, destroying incentives that can hurt... the economy”.
Nama’s plan was to take loans, good and bad, with a book value of more than €72bn off the bailed out banks, paying just €32bn for them. It was given 10 years to work out those loans in order to return as much money as possible to the taxpayer.
“We will chase developers to the ends of the earth,” was Nama’s rallying cry in its early days.
Its job was to rid the busted banks of their toxic development loans and recapitalise them so they could lend again. Secondly, to restore a functioning property market.
"It will ensure that we avoid the Japanese outcome of zombie banks that are just ticking over and not making a vibrant contribution to economic growth,” Lenihan said.
Its own mission statement read: “Nama will conduct its activities in a way which assists the property market to operate efficiently and in a way which achieves longer-term sustainability.”
Certainly, in the first five years of its existence, Nama’s record on both fronts was extremely dubious, and the availability of credit within the system has only fairly recently returned to a more normalised situation.
Bank lending remained unnaturally low, the property market went from a moribund wasteland to one where chronic shortages of adequate housing exist, particularly in the greater Dublin region.
Having said it would chase the reckless developers to the ends of the earth, Nama became engulfed in controversy when it was revealed that it was, in fact, working with same said developers and allowing them salaries of up to €200,000 a year.
Then along the way, it was decided that rather than chase and seek to recoup as much of the €72bn book value of the assets taken over by Nama, its remit was to merely break even on what it spent on the loans, ie the €32bn.
By doing so, Nama was crystalising a whopping €40bn loss to the taxpayer.
But it was not couched in terms of a loss — we have been told repeatedly by Nama’s bosses Frank Daly and Brendan McDonagh, the Department of Finance and even the Comptroller and Auditor General that it will make a profit.
Even Michael Noonan, who had demonised Nama in opposition, came to be one of its strongest supporters in Government and fell into line on the profit spin.
This very topic was the subject of pertinent questioning by Fine Gael’s Michael D’arcy of NUI Galway economics professor Alan Ahearne at the Oireachtas banking inquiry in 2015.
As Mr Lenihan’s special adviser from March 2009, Mr Ahearne was a key player in Nama’s development.
Here is how the exchange proceeded.
Mr D’Arcy: “Would it be fair, then, to say, according to the Nama numbers, that there’ll be a loss of €41bn in the entire figure, on the €74bn?”
Mr Ahearne: “The banks would have lost €41bn on the loans that they made during the bubble, yes… on those particular loans.”
Mr D’Arcy: “Yeah. So the conversation about Nama making a €1bn loss… can I ask you your view on that? Is it a €1m — sorry, a €1bn profit, or is it a €41bn loss?”
Mr Ahearne: “The banks have made losses of €40bn off it — on those particular loans.”
Mr D’Arcy: “Which is the fairest? Is it Nama making a €1bn profit or the banks losing €41bn?”
Mr Ahearne: “Well, you can say both of them.”
Mr D’Arcy: “Well, I’m asking you.” Mr Ahearne: “Because they’ll both be true.”
Mr D’Arcy: “I’m asking you which is yours.”
Mr Ahearne: “I’d say both.”
As Nama looks to the end of its original projected lifespan and its legacy will be examined, it must start being honest with itself and the public about the basic facts of its
I am not saying it lost this money. The idiot greedy bankers, along with their Fianna Fáil cheerleaders and their developer clients, did the damage.
Nama’s job was to clean up the mess and it has managed to make progress.
But given how secretive Nama is about its dealings, it is difficult to make a considered judgement on its work as of now.
Aside from its secretive modus operandi, Nama has been engulfed in various controversies.
In 2016, ex Nama official, Enda Farrell, pleaded guilty to eight charges of leaking potentially commercially sensitive information to third parties between May and July 2012, some months after leaving Nama.
Reports from the time state that Farrell sat stony-faced in the dock as the sorry tale of his misdeeds dating from 2012 was explained to Judge Karen O’Connor in the Dublin Circuit Criminal Court.
These actions breached two sections of the Nama Act 2009 which underpinned the establishment of the agency, gave it extensive powers, and made Farrell’s actions a criminal offence.
More serious than that, is the still yet to be concluded Commission of Investigation into the sale of Nama’s Northern Ireland loan book, given the title Project Eagle, following months of controversy.
The Commission of Investigation into Project Eagle has asked the Government for a six-month extension to the end of June for a final report to be completed.
The Government appointed retired High Court judge John Cooke in June 2017 to investigate Nama’s £1.24bn (€1.38bn) sale in 2014 of the portfolio to US distressed-debt firm Cerberus.
Independent TD, Mick Wallace, had alleged in the Dáil that £7m in fees related to the transaction had been lodged in a bank account in the Isle of Man that was “reportedly earmarked for a Northern Ireland politician or party” following the transaction.
It is also under investigation by British authorities.
Former Cabinet minister-turned-broadcaster, Ivan Yates, has accused Nama of continuously “licking themselves” in terms of their public relations machine.
He added bluntly that its holding of so many properties, making it, at one time, the largest property portfolio in the world, has precipitated the housing crisis.
"They were asleep at the wheel and they should have been building houses,” said Yates.
So, as we reach this 10-year milestone, it might be noted that it has had some success, but Nama’s bib is far from clean.