Liam Carroll saga proves NAMA won’t work

THIS week’s report into the lack of competitiveness in the economy made for grim reading against the backdrop of the financial pressures facing the country and the difficulties surrounding Liam Carroll’s crumbling property empire.

The National Competitiveness Council warned that unless we got our act together, this country could be facing a prolonged period of economic depression.

It was stark stuff from the NCC and for chairman, Don Thornhill, to warn we risked long years of economic depression if we did not resolve the issues dragging us down was gutsy for a man in a state job.

The analysis also put paid to claims by the banks that they are serving the business community well.

“The turmoil in global financial markets and the exposure of Irish banks to bad loans in the declining property sector is affecting Irish firms in terms of their ease of access to finance and its cost. With regard to the cost of credit, the majority of loan types in Ireland were more expensive than the Eurozone average in 2009 Q1”, the report concluded.

That’s pretty categoric and calls into question the findings of the Mazars’ report which said the banks were behaving like good boys.

The real concern is that the Irish banks have become toothless wonders.

Two weeks ago when AIB produced its half-year results showing losses of €900 million it said categorically it was reviewing interest rate policy and we all took this to mean the bank was thinking of raising rates to the consumer.

Questioned about the issue, outgoing chief executive, Eugene Sheehy, said it meant the bank was trying to close the gap between what it pays for money on deposit and what it charges for loans.

And the bank proposed to lower deposit rates to cope with that difficult question.

The subtext of what he was saying was that, while the bank needed to raise interest rates, it could no longer do so because in effect the Government is now in control of lending policy.

If that is so then Brian Lenihan should admit this and go ahead and nationalise the banks. Too much is at stake at this point and the doubts being cast on NAMA due to the massive erosion of property values suggests the Government will find it hard to let the banks away with just a 20% discount on the loans they transfer to the toxic bank.

There’s another problem, which is the presence of other bad debts sitting on the bankers’ books that will further undermine the capital bases of these institutions. This will require more funding for the bankrupt banks and the State may be the only body willing to pick up the tab.

Colm McCarthy of Bord Snip has already publicly raised that question, as have some stockbrokers.

The Liam Carroll saga has highlighted the difficulties facing NAMA. Indeed, ACC Bank should be given a public “thank you” by the citizens of this country for putting into the public domain the extent and the nature of the difficulties facing Irish property developers.

The banks want NAMA, make no mistake about that, even if they were sniffy about the prospect originally. But they must be seriously concerned that the Irish taxpayer will revolt if the discount on the loans to be transferred is anything less than 50%.

Dan Boyle of the Greens says this is the only just figure and he has been backed by Fine Gael’s finance spokesman Richard Bruton.

If the risk is getting too high for the taxpayer then in conscience the Government cannot lumber ordinary folk with that burden.

And if the Liam Carroll debacle says anything it is saying land and property in commercial terms is currently close to being worthless, making it impossible in the circumstances to proceed with NAMA as originally conceived.