Calls for NAMA to take 50% discount on loans

THE Government should take at least a 50% discount on the €90bn of property loans it plans to buy from the banks, the Labour Party has said.

The loans will be purchased by the National Asset Management Agency (NAMA) in a bid to cleanse the banks’ balance sheets of risky debt and return them to health.

But Labour says there are “fundamental problems” with the draft NAMA legislation, not least the risk that the Government will overpay for the loans.

The Government has said it will purchase the loans at prices reflecting the “long-term economic value” – rather than the current market value – of the properties underpinning them.

This has led to fears that the Government will insist on too small a discount from the banks, resulting in huge losses to the taxpayer over time.

Launching a detailed critique of NAMA yesterday, Labour leader Eamon Gilmore likened the situation to meeting a person who could no longer afford to repay a €500,000 mortgage on a house now worth only €200,000.

“Would you take the mortgage off them for €400,000? You would in your eye,” he said.

The Government was leaving all the risk with the taxpayer and taking a “gamble with the future of the country”, he argued.

Reiterating Labour’s opposition to NAMA, he said the Government should instead nationalise the main banks.

This would remove the risk of overvaluation, as the State would own both the banks and the loans. Once cleaned up, the banks could be removed from temporary nationalisation and sold, raising money for the taxpayer.

Mr Gilmore conceded that, while nationalised, the banks would require injections of taxpayer funds until such time as they were returned to health. But he pointed out that, under the Government plan, the State would probably still have to do likewise even after buying the loans.

Finance Minister Brian Lenihan has already admitted the banks may need further recapitalisation even after NAMA takes away the property loans.

Labour finance spokeswoman Joan Burton said that if the Government proceeded with NAMA, it should insist on a 50% discount on the loans – meaning a purchase price of roughly €45bn.

She also said citizens were entitled to a “clear statement” of the State’s potential exposure under NAMA.

“We need a consolidated statement of the position of each of the top 100 developers whose loans are proposed for transfer to NAMA. While the identities of the individuals need not be revealed, we need a clear picture of the State’s potential exposure,” she said.

Ms Burton also called for the Government to use the Valuation Office – the State property valuation agency – rather than private advisors when evaluating the loans.

“The Valuation Office has access to all property transactions in the State and would be in a far better position to advise on valuation issues than any other expert,” she said.