State may be forced to take control of banks

BANK of Ireland and AIB could be taken into majority state ownership if their toxic debts are revealed to be greater than feared, Finance Minister Brian Lenihan signalled last night.

The strongest indication yet that the taxpayer may end up being forced to seize controlling shares in either or both institutions came as Mr Lenihan revealed the new holding agency created to absorb land loans of up to e90 billion would take good as well as bad properties from exposed banks.

The remit of the National Asset Management Agency (NAMA) provoked fierce clashes in the Dáil yesterday as it emerged a third of the assets it will buy from the banks are abroad, with half of those in the North.

Opposition leaders accused Brian Cowen of “screwing” taxpayers in order to bail out banks from “dodgy developer debts” via NAMA.

However, Mr Lenihan insisted NAMA did not amount to a bailout and that he did not want the State to take a majority holding in either AIB or Bank of Ireland, but if it did it would not be strict nationalisation as the banks would remain listed on the stock exchange.

Fine Gael leader Enda Kenny accused the Government of acting in bad faith over NAMA.

“We are being asked to give another blank cheque to Fianna Fáil to bail out the banks. You are lumping this on the back of Irish taxpayers who were screwed down to the wall in the budget,” he told the Taoiseach in rowdy Dáil exchanges.

Labour leader Eamon Gilmore attacked the Government for “protecting and cosseting friends who brought down the Irish economy”.

“This is the property bought by speculators with borrowed money that the Government is now going to buy back at taxpayers’ expense — and businesses going under must wonder what developers have that they don’t have, that the Government will come and relieve them of their bad debt,” said Mr Gilmore.

“They are now going to use the Irish taxpayer to bail out their foreign investments,” he said.

The Taoiseach angrily rejected Mr Gilmore’s accusations “with contempt”.

“I will not accept from any deputy any suggestion that we are doing anything but seeking to protect the interests of the country... I hold no brief for any individual inside or outside this House,” he stated as he warned such “innuendo” damaged the country as a whole.

Mr Lenihan stressed NAMA would pay significantly less than the e90bn headline price for the land involved as values had fallen so sharply.

He also insisted the speculators who initially took out loans on the sites would be strongly pursued for the original amount they borrowed, not the lower value for which the property was transferred to NAMA.

The minister added “tough negotiations” would decide the price NAMA will pay.

Mr Lenihan said if Bank of Ireland or AIB encountered bigger losses than feared the State may have to increase its planned 25% stake in both. “If that leads to a majority share holding in the institutions concerned, so be it.”

Despite the launch of NAMA, Irish banks took another hammering on the stock markets after international credit rating agency Moody’s downgraded rankings on 12 Irish banks.

Meanwhile, National Treasury Management Agency chief executive Michael Somers dismissed “off-the-wall” speculation about the State’s overall indebtedness and said it was of the order of 20% of GNP.


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