Nama to spend €54bn on toxic loans
The National Asset Management Agency (Nama) will pay out €54bn to take toxic loans out of Ireland's main banks, it was announced today.
In the biggest financial rescue package in the State’s history, Finance Minister Brian Lenihan said that Nama will issue Government bonds – for the €77bn in borrowings.
Mr Lenihan said the Irish people were understandably angry about the state of the banks and appalled by the details of the reprehensible behaviour of some in the financial system and in the property sector.
“There is now unfortunately a breakdown of trust in the entire system,” he said.
However, the public also knows economic recovery cannot come without fixing the banking system, which should be extremely grateful for the taxpayers’ help, he claimed.
“So we must all now overcome our understandable anger and get on with the business of reform,” he added.
Mr Lenihan revealed that the current market value of the property and other assets for which the loans were taken out was €47bn, which means the taxpayer-backed Nama would be paying €7bn over the odds.
However, the Finance Minister argued that the property market was now “bottoming out” and the value of the toxic assets will begin to rise again, with the risks shared between the taxpayer and the banks.
“We are here to help the economy and people by putting our financial system back on track,” he said.
“We cannot do that by forcing banks to sell assets at below what would be rational prices for them.”
Senior opposition party Fine Gael leader Enda Kenny said the proposed overpayment for the toxic loans was an act of madness.
“This is not the way we should do business,” he said.
“This Bill does not have the support of the people. It amounts to an act of economic madness.”
Labour leader Eamon Gilmore said generations of Irish people may have to pay for the scheme for decades to come, in what was the most serious economic measure brought before the Dáil since independence.
However, Mr Cowen insisted the planned “bad bank” had the support of the International Monetary Fund (IMF) and the European Central Bank (ECB) and was in compliance with European Union state aid rules.
“We believe it is essential as part of the response of this country to the challenges we face today,” he said.
The controversial National Assets Management Agency was designed to take impaired or bad loans out of six Irish banks, so they could start lending as normal again and kickstart the economy.
The toxic debts are mostly owed by speculators who bought big during the Celtic Tiger boom years but who now cannot – or will not – repay them after the property market collapsed.
The banks to be rescued – Bank of Ireland, Allied Irish Bank, EBS building society, Irish Nationwide, Irish Life and Permanent and the now-nationalised Anglo-Irish Bank – were already brought under an emergency €400bn State guarantee last year.
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