‘No idea’ on toxic loans scheme, says chief

GOVERNMENT plans to clean up the banking system by buying up to €90 billion worth of toxic property loans have been thrown into disarray, with the man overseeing the scheme stating he had “no idea how this will work”.

National Treasury Management Agency (NTMA) chief executive, Micheal Somers, has admitted:

nThe agency has no experience of bank reconstruction.

nIt does not have the staff to oversee the creation of the National Assets Management Agency (NAMA), which will fall under the NTMA’s aegis.

nThe people in the courts were lining up for a “bonanza” because the proposal was “extremely controversial”.

Addressing the Dáil’s Public Accounts Committee, Mr Somers said there would be “eating and drinking” at committee hearings for years to come on how NAMA is set up. Asked how NAMA will be able to value property loans “when there is no market”, Mr Somers said this was a “great dilemma” and although he had “attempted to think these things through... had found no solution”.

He added that he envisaged “great potential for court actions” over this issue.

Outlining the problems facing the NTMA in fulfilling its current role as the State’s borrowing agency and managing the National Pension Reserve Fund, Mr Somers said that the biggest issue was the “big unknown” of “the level of debt from NAMA”.

He added that Ireland would be lucky to hold onto its sole remaining AAA credit rating from Moody’s.

Opposition TDs grilled Mr Somers over the Government’s handling of the banking crisis and the international credit crunch. He was “aghast at the size of loans” the Irish banks had forwarded to a relatively small group of property developers, he said.

It emerged the NTMA’s hiring of Merrill Lynch to analyse banks’ loan books will eventually cost the State €6 million. Attempts to borrow €12.5bn this year to cover state expenditure will be difficult, with Mr Somers saying Ireland is viewed as “bad news” internationally.

Taoiseach Brian Cowen refused to be drawn on Mr Somers’s comments, stating that issues around NAMA still had to be worked out by the Department of Finance.