Lenihan: No role in Anglo decision to loan Carroll €68m
Speaking on RTÉ’s Prime Time, the finance minister said he understood public anger that the bank, which is now fully owned by the taxpayer, was willing to advance such a large amount of money to the developer when banks were refusing to lend to many small businesses and other borrowers.
However, he said it was not a decision made by him but rather one which the bank made before it was nationalised in January of this year.
Mr Lenihan said he was confident the banks would start lending again once the NAMA had restored their balance sheets to good levels to free up money for lending.
However, it was pointed out that there is nothing in the proposed NAMA legislation that requires banks to start lending again once it has taken over.
Meanwhile, one of the country’s leading stockbrokers has described the proposed National Asset Management Agency (NAMA) as the best response to the current banking crisis and warned that the nationalisation of the banks “would be a disaster for the economy”.
The report from Bloxham Stockbrokers went on to suggest that nationalisation would also push up the cost of borrowing as overseas bankers lose confidence in the Irish banking system.
The report’s author, Kevin McConnell, warned that loss of confidence could add a massive €20 billion to the cost of borrowing in the years ahead.
Mr McConnell went on to point out that theNational Treasury Management Agency (NTMA) had already successfully raised more than €20bn this year at “good” rates on the basis that NAMA will be established in the months ahead and any reversal of that decision could see the cost of borrowing “soar”.
Mr McConnell said a 23% discount or “haircut” on the lending book of €90bn to be transferred to NAMA would in effect represent a cut of 42% in the value of the loans from their peak at the height of the property boom. Critically, he suggested, that kind of discount would result in NAMA pushing between €60bn to €65bn into the Irish banking system in the period ahead. That was a huge issue for the economy currently suffering from “a starvation of liquidity” as international lenders pull back on overseas lending to support their own struggling economies, he said.
His stance brings him into conflict with nearly all of the major political parties except Fianna Fáil.
He denied having a vested interest in the bad bank solution, however, and pointed out that Bloxham “does not act for any of the banks and has no government contracts”.
His 23% suggested discount or “haircut” for the two big banks contrasts starkly with the 50% being demanded by the Green Party’s spokesman on finance, Dan Boyle, but is in line with estimates put forward by other Irish brokers such as Davy.
Mr McConnell also warned nationalisation would have the opposite effect to what is being claimed and said such a move would expose the taxpayer to far greater risk.
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