As Nama looks to the end of its original projected lifespan and its legacy will be examined, it must start being honest with itself and the public about the basic facts of its existence, writes Daniel McConnell

It happened again this week.

Once again we heard the nonsense suggestion that Nama, the State’s bad bank, will deliver a profit by the time it is due to finish up.

Please, can we once and for all put an end to this Nama-profit myth?

It won’t.

It will crystalise losses of almost €40bn from the 2008 financial crash.

That is right, a loss. And a bloody great big one at that.

And nobody bats an eyelid.

We get all riled up over tiny minuscule amounts of money but seem perfectly happy to sit as we say goodbye to billions and billions of euro.

Earlier this week, the Comptroller and Auditor General published a new report into the progress of Nama.

In the C&AG’s report, there was a most interesting paragraph: “Nama reported a cumulative gain of just over €3bn to the end of 2016. Subsequently, the Nama board announced that it expects to return a surplus of €3bn to €3.5bn to the exchequer upon completion of the agency’s work, assuming market conditions remain favourable.”

The Nama board is spinning that it hopes to deliver a surplus — or profit — of €3.5bn.

Such spin made it into a statement from the chairman of the Dáil Public Accounts Committee, Seán Fleming, who said: “The C&AG report outlines that they are on target to achieve a surplus of approximately of €3.5bn.”

At the time of the publication of Nama’s latest annual report, its chairman, Frank Daly, was to the fore in pushing the profit myth.

“Let’s talk about 2017, and the high point is that we delivered a profit of €481m,” he said in a propaganda-type video issued by Nama which is now available on YouTube. “That is, every year except the first one of operation we have delivered a profit in each of those years.

“Today, we are announcing an increase in our lifetime surplus or profit from €3bn, we have been guiding that up to now, to €3.5bn.”

Established in April 2009 by the late Brian Lenihan as a means of stripping all of the bad debts from the bailed-out banks and restoring credit back into the system, Nama has been engulfed in mystery and treated with suspicion from many quarters.

When Nama was set up, it paid a highly discounted rate of about €32bn for loans that were previously worth €74bn.

Back then, Mr Daly and CEO Brendan McDonagh said they would pursue developers “to the end of the earth” for all of the money they owed.

Along the way, the story mysteriously changed — and changed dramatically.

It emerged that Nama was no longer chasing the full €74bn but rather only the €32bn it paid for it.

We started hearing the profit word being used and, initially, then finance minister Michael Noonan — who had demonised Nama in opposition for ‘destroying the property market’ — claimed a “profit” of €1bn was likely.

This was then, and remains, outrageous horse manure.

At Mr Noonan’s level, in reality we are talking about a loss to the taxpayer of €41bn.

Based on Nama’s latest figures, far from being a profit of €3.5bn, when taken in the round, it is a loss of €38.5bn.

This very topic was the subject of pertinent questioning by Fine Gael’s Michael D’arcy of NUI Galway economics professor Alan Ahearne at the Oireachtas banking inquiry in 2015.

As Mr Lenihan’s special adviser from March 2009, Dr Ahearne was a key player in Nama’s development.

Here is how the exchange proceeded.

Mr D’Arcy: “Would it be fair, then, to say, according to the Nama numbers, that there’ll be a loss of €41bn in the entire figure, on the €74bn?”

Dr Ahearne: “The banks would have lost €41bn on the loans that they made during the bubble, yes… on those particular loans.”

Mr D’Arcy: “Yeah. So the conversation about Nama making a €1bn loss… can I ask you your view on that? Is it a €1m — sorry, a €1bn profit, or is it a €41bn loss?”

Dr Ahearne: “The banks have made losses of €40bn off it — on those particular loans.”

Mr D’Arcy: “Which is the fairest? Is it Nama making a €1bn profit or the banks losing €41bn?”

Dr Ahearne: “Well, you can say both of them.”

Mr D’Arcy: “Well, I’m asking you.”

Dr Ahearne: “Because they’ll both be true.”

Mr D’Arcy: “I’m asking you which is yours.”

Dr Ahearne: “I’d say both.”

Meanwhile, Mr Noonan in recent times has reflected on this question, saying the chance to recover the full €74bn was lost at the time of the crash.

“Unfortunately, in the context of the financial crisis, the fact that the amount owed on those loans was €74bn really has no direct bearing on their value. The chance of recovering €74bn on these loans was lost in the financial crisis,” he said.

Well, that is that then.

Well, no it is not.

When and where was the Government decision to say Nama would only seek to cover its costs and a little beyond that?

Why has this elephant in the room gone unnoticed or unremarked upon for so long?

As Nama looks to the end of its original projected lifespan and its legacy will be examined, it must start being honest with itself and the public about the basic facts of its existence.

I am not saying it lost this money. The idiot greedy bankers along with their Fianna Fáil cheer leaders and their developer clients did the damage.

Its job was to clean up the mess and has managed to make progress.

Given how secretive Nama is about its dealings, it is difficult to make a considered judgement on its work as of now.

Attention now also focuses on the overall operating costs of Nama since its inception, as Mr Fleming pointed out.

These costs may top €1bn by 2020, and €741m has been incurred in costs up to the end of 2016.

“Substantial costs will inevitably be incurred from 2017 to 2020.

“Staff costs may reach approximately €250m (€231m incurred up to the end of 2016) and legal fees could well exceed €50m.

“In addition to this, Nama has paid vast sums to other organisations who service the loans and debtors,” Mr Fleming pointed out correctly.

The deafening silence from most TDs around the continuing operations of Nama is alarming.

The PAC did fine work on the Project Eagle investigation and did not pull its punches in its conclusions, including some damning ones relating to Mr Noonan in his former role as finance minister.

Ultimately, given the delicate nature of its work, Nama has struggled to gain public confidence and its given the sheer size of its land portfolio, it clearly has had an impact in the current housing crisis.

At the end of the day, Nama must learn that the peddling of cheap myths about profits does little to instil confidence in it.


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