TAOISEACH Brian Cowen has insisted that banks will start to lend more as a result of NAMA, despite warnings from the International Monetary Fund (IMF) that the agency would not result in the freeing up of credit.
Documents released yesterday revealed a senior IMF official warned Government officials at a meeting last April that NAMA will not boost lending levels by banks.
But Brian Cowen dismissed the warning and said NAMA will be “absolutely vital and necessary” to free up credit.
The IMF – which oversees the global financial system – has endorsed the Government’s plan to recapitalise banks and to clean up their balance sheets through the establishment of NAMA.
But its senior official, Steven Seelig, who will sit on the board of the agency, expressed reservations at a meeting with Finance Minister, Brian Lenihan, on April 29, 2009.
The minutes of the meeting state that the “IMF (Mr Seelig) do not believe that NAMA will result in significant increase in bank lending in Ireland”.
Mr Cowen pointed out that this meeting took place 10 months ago: “People should contemplate what sort of credit accessibility we would have in this economy without NAMA,” he said.
“NAMA is absolutely vital and necessary, it’s not just sufficient in itself for credit flow, but it’s certainly an important and necessary part of restructuring our banking system, of that there is no doubt,” he said.
Fine Gael said the IMF concerns confirm the party was right to oppose the NAMA plan from the start.
Finance spokesperson, Richard Bruton, said: “NAMA is incredibly expensive and will be a burden on taxpayers for years to come but is unlikely to achieve its primary goal of getting credit flowing again.”
“Banks are still not lending to consumers and businesses. Although NAMA will give banks access to extra funding from the European Central Bank, they are largely using it to pay down their own debts instead of boosting lending,” he said.
Fine Gael’s idea of establishing a national recovery bank would get credit flowing “in a short space of time” said Mr Bruton.
“It would stimulate the economy and help job creation by opening up new lines of funding to the banks themselves,” he said.
The process of transferring toxic loans from banks to NAMA was due to begin this week but has been put back until the end of the month because it has not received clearance from the European Commission.
Mr Bruton said the agency is “by no means a foregone conclusion”.
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