Lenihan: Nama will not pay bubble prices for bad loans

The State’s ’bad bank’ Nama will not pay property bubble prices for toxic loans, Finance Minister Brian Lenihan insisted today.

However, it will give banks more than what he branded “current crisis values” for failed developments and other bad assets to be taken into public ownership.

Mr Lenihan said while a long-term value would be worked out for bad loans, these would not be anywhere near recent boom time prices – because these will not return for some time.

“It will be a long number of years – very long number of years – before the Irish property values return to their peak in 2006 and early 2007,” he said.

Outlining the Government’s defence of its Nama (National Assets Management Agency) plans, Mr Lenihan said values will be struck to balance risks to the taxpayer with support for the banks.

“Let me make it clear that the success of Nama is not based on any assumption of a return to the recent bubble prices for property,” he said.

“It is a myth that has gained some currency during the ’silly season’ that there is some intention that the amount Nama will pay will compensate the banks for a recovery in values back to the unsustainable peak property prices of 2007.

“This is not correct, is nowhere near correct, and has never been proposed by Government – perhaps it is a reflection of wishful thinking among interested parties.”

Independent valuers will strike a price based on official statistics on the history of the housing market, while in some cases only the current market value would be paid, he added.

Again ruling a blanket nationalisation of the banks, the Finance Minister said some of the institutions may need more public money – or recapitalisation – once they’re rid of the toxic debts.

The Government intends to pour more cash into those which need it in exchange for a share in the banks, which may result in a majority shareholding in some cases, he said.

Lenihan, speaking to the Oireachtas Joint Committee on Finance, vowed Nama would go after developers whose loans come under public control for every last cent owed to the taxpayer.