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Ireland's political and cultural magazine
— village November - December
Nama
I young to remember Jack Lynch. But
I can recall my father recounting tales in the
late s of Lynch’s profligacy a decade ear-
lier. Lynch abolished motor tax for it only to
be re-introduced a few years later. He ditched
domestic rates, a decision which will in effect
be reversed over the next few years. The Lynch
era was also the time Ireland began borrowing
heavily, feeding a burgeoning national debt.
Fast forward to , and Ireland’s
national debt, allowance being made for the
National Pension Reserve Fund, stands at
roughly € billion, a figure worth keeping
in mind.
On Saturday October, those in the
Green Party opposed to NAMA, of which I
am one, lost the debate. Those arguing for a
re-think pointed to the enormous amount of
debt to be taken on, asking why specific insti-
tutions such as Anglo-Irish and Nationwide
warranted rescue, why alternative remedies
are not being pursued, and why such debt is
being assumed by the State for the benefit of
banks and institutions that remain in pri-
vate hands.
The argument, as I say, was lost, and the
NAMA Bill is set to become the NAMA Act. I
acknowledge the result and I accept it but let’s
recap on what has occurred since NAMA was
first mooted in February, and let’s be clear
about the implications for ourselves and
future generations.
Because of the borrowing since the foun-
dation of the State, and particularly since the
Lynch era, Ireland’s national debt stands at
€, for every man, woman and child in
the country. In the weeks and months after
the NAMA Bill is passed, the figure for debt
per capita will double to €,.
So what are we borrowing for? Even
before the ink is dry on a final version of the
NAMA bill, the data behind the scheme has
crumbled. Here’s what Minister for Finance,
Brian Lenihan, said on February :
“We are at a great advantage that many of the
larger [European] states have very extensive
loan books, and it is very difficult for them to
do the type of comprehensive trawl through
their banking system that we have been able
to do”. Hmmm. Yet the number of loans des-
tined for NAMA has gone
from , to ,.
Judged on the figures
released in July, and
again in October, some
, additional loans
have been discovered
every week. If this rate of
discovery is maintained,
there will be ,
loans going into NAMA
by Christmas.
More troubling still, there has been no
increase in the value of the loan book. So the
, additional loans discovered since July
appear to be even dodgier than the ,
originally admitted: the ‘newly discovered’
,
(i.e. bullshit)
There are more commercial/
property loans and they are
dodgier than Brian Lenihan told us.
j a m e s n i x
“After the NAMA bill is passed
the figure for debt per capita
will double to €25,714”
Brian Lenihan
PHOTO: PHOTOCALL IRELAND
village_oct_09.indd 26 27/10/2009 15:38:06
loans appear to have been given out not for
property itself, but on the basis of the ‘rise’ in
property; so-called “associated loans”. We’ll
get back to associated loans in a moment.
Dipping into the archive, economist
Professor Morgan Kelly has found Brian
Lenihan to be a master of what Princeton phi-
losopher Harry Frankfurt defined succinctly
in his paper, On Bullshit. Kelly plucks a
few Lenihan utterances from late : “Our
banks uniquely have weathered this storm .
. . We are in a zone of financial stability in a
very troubled financial world” (mid-Septem-
ber), “the cheapest bailout in the world so far”
(describing the Government Guarantee at the
end of September), and “it is not the func-
tion of the Government to fund or bail out the
banks” (mid-November, ).
Lenihan has a comprehensively ambiva-
lent relationship with the facts but it is hard
to tell whether it is deliberate or accidental.
His reaction to Joseph Stigliz calling NAMA
“criminal” was that the Nobel prize-winning
economist had “made the same criticism of
the US bank package, which has proved to be
a tremendous success”. This actually is bulls-
hit – but, to readers who haven’t been follow-
ing the story, it has the makings of a coherent
defence. In fact the US plan, known as the
Troubled Assets Relief Programme, or TARP,
did start out like NAMA. But politicians in
the US roundly rejected the $ billion plan,
which became known as “cash for trash”, and
instead TARP was transformed into a vehicle
for purchasing equity in banks. In its latter
guise, it has had some success.
Throughout July and August, Lenihan
secured support for NAMA on the basis that
the loans it will purchase are secured against
property of one sort or another, with one
third secured against fully finished buildings,
one third against partly-finished develop-
ment, and the final third against undeveloped
land. Now it turns out that per cent are
“development”, per cent are “land”, and
the balance of per cent are “associated
loans”. When Brian Lenihan speaks in his
decisive Cambridge-graduate-out-of-Trinity
tones, there is a human urge to believe him.
But, if it’s like his original loan data, it’s just
more garbage.
Presumably the , extra loans seep-
ing out weekly forced a re-think on the cat-
egorisation. And now this per cent of
“associated loans” is not really ‘secured’
against anything except once-rising
property values which have since fallen.
Secured, in other words, against the very
buildings and land that aren’t now valua-
ble enough to support their own loans - not
to mind associated loans. To draw a house-
hold analogy, it’s like €, in credit
card-debt being whacked on top of a mort-
gage, but now the mortgage is in negative
equity, and this is so even without counting
the additional €, in credit-card debt
which was whacked on top.
So, of the € billion Ireland is to borrow,
€. billion consists of “associated loans”,
money borrowed not for property itself, but
loans heaped on to the supposed rise in the
value of properties. Of course, this amount in
unsecured loans will completely destroy the
per cent loan-to-value figure that Brian
Lenihan gave the Dáil on September. So
that will transpire to be
garbage too.
As it turns out then,
Lenihan’s misinforma-
tion over the summer
means up to €. billion
is secured against noth-
ing more than his gar-
bage. Yes, there may be
some recourse to horses
that can still run, helicop-
ters which have not been
flown away, Iberian hide-aways not signed
into friends’ names, and yachts that have
sailed, but it won’t be much. Don’t expect
the €. billion in “associated loans” to get
much attention this side of the passage of the
legislation. When asked a Lenihan question
a trademark response is to say it is a “very
sensitive matter”. The Irish taxpayers pain
from repaying associated loans will be pain-
ful indeed.
Another central tenet of the scheme was
Lenihan’s conclusion that values have just
fallen per cent. Then the Irish Glass Bottle
site was re-valued down from its €m pur-
chase price to €m, an -per-cent collapse.
And while it’s not the politest term, the most
honest term for Lenihan’s per cent figure
is, again, what our academic friend called
bullshit.
By mid-September, there were per
cent fewer performing loans than in early
September, with the number of performing
loans falling from to per cent. Is the
rate of fall in performing loans really falling
that fast? Again, at that rate, there will be few
or none by Christmas. Over that same two-
week period, the number of developers rose
by one-third, jumping from , to , –
at the same time as all developers under €m
were apparently excluded!
Prior to NAMA day, the Government was
intending to re-finance Nama bonds every
months; since then we have learnt Nama
bonds are to be financed every six months.
Originally, we were told the money is being
loaned to Ireland by the ECB; now it’s differ-
ent: Ireland will borrow money on its own
back using bonds, transfer it to banks, and
then it gets a bit hazy. In a scheme specialis-
ing in garbage, information regarding bonds
has a particularly suspect whiff.
Basically, the Government overpays the
banks for property loans using six-month
bonds. As the term suggests, such bonds fall
due every six months – so twice a year the
borrower, in this case the Irish Government,
has to re-negotiate with the bondholder.
So, with in or around € billion worth
of bonds in their pockets, the banks have a
few options. They may use the bonds as col-
lateral to borrow money, or – and this is the
real risk – they may sell them on. With the
Irish Government forced to re-finance these
bonds every six months, the bondholders will
be in a strong position to push interest rates
higher, and effectively they have us taxpay-
ers in a pressure-point headlock. Is it worth
exposing taxpayers to this for the sake of
Anglo-Irish and Nationwide?
Since the Minister can’t - or doesn’t -
give honest answers regarding the extent of
the fall in values, the number of loans, the
number of developers, the number of non-
performing loans, or what is happening in
other countries, asking further questions is
a waste of time, for all of us.
Our fathers told us stories of fecklessness.
We will pass our old ages telling our children
stories of fabrication and lies.
“Don’t expect the €19.4 billion
in “associated loans” to get
much attention this side of the
passage of the legislation”
PHOTO: PHOTOCALL IRELAND
village_oct_09.indd 27 27/10/2009 15:38:06
