‘No additional powers to compel repayments’
The state agency will have the same powers as banks to compel developers to pay back debts, meaning the taxpayer could be left with thousands of properties which some analysts believe have very little value, in place of the multi-million sums owed to NAMA. Taoiseach Brian Cowen said in relation to the developers who took out development loans that will now be taken over by NAMA, “the agency will continue to treat them as borrowers who continue to owe the full amount of their loan”.
He said: “Under the bill, the agency will have a duty to maximise taxpayers’ returns and the Government expects the agency will use the range of powers available to it under the bill to meet that objective.” Mr Cowen added that “anyone whose bank loan is purchased by this agency will have to repay NAMA just the same as he or she would have had to repay the bank originally”.
But economist, David McWilliams, said: “The reality is that most of the builders will walk away. Let’s get real here. That’s what happens in Irish recessions, people emigrate. People say: ‘I can’t pay, I’m gone’.”
He said while it might look good on paper, it is not the way this country works: “People will walk away from it and ultimately what you will have is an arrangement between the banks and the state and the only person who is going to bail out both of those and the only person who is going to write the cheque is the taxpayer.” It is believed a small number of developers have loans in excess of €1 billion which will now be owed to NAMA instead of the bank.
A further 10 developers have loans of more than €500 million while at least 1,000 owe sums greater than €10m to the banks, which will pass “toxic assets” on to the state. Mike Soden, former Bank of Ireland chief executive said: “If developers are not tied in fully on the legal side, they can walk away, so the property then falls in due course to the banks and in turn to NAMA. And at some stage you are going to have to find investors who will buy those properties and it is then determined at what price will they buy them.”
He said: “If you want to sell them tomorrow... you are not going to get very much money for them. But the proposal of looking at a five or ten-year time frame is something that can allow us to moderate our way out of a very difficult situation.”
With NAMA expected to take over hundreds of properties and sites, there are concerns that officials could be open to bribes by those wishing to buy them. This is why the legislation has provisions to ensure lobbying will not be allowed in relation to NAMA.
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