Unbelievable. Well, almost unbelievable. Though perhaps it is naive to find anything done by this government at all believable. But almost unbelievable is what Brian Lenihan has done this last few days on NAMA, the bank rescue agency. It is certainly unbelievable that other members of the cabinet knew what he was doing or if they did that they understood it. There is no way the Green Ministers could have approved of what happened, if they knew. Fianna Fail backbenchers never know what the government is up to so what’s new there? But did Brian Cowen know? Or was it just the frolic of Brian Lenihan?
NAMA the agency that we have debated endlessly for months now, on which the Dáil has spent hours of its unprecious time (until nearly 6.00am on Friday morning), now sidelined by a casual sleight of hand, without warning, without prior explanation, without subsequent intelligible explanation. NAMA is of no consequence now. It is to be a Special Purpose Vehicle (SPV).
And the justification for this sudden, unannounced change is that the government, or rather Brian Lenihan, doesn’t want the indebtedness (€54 billion) arising from NAMA to appear in the State’s accounts. Instead, through a ruse that someone in the EU and/or the Department of Finance, nobody considering lending the Irish State a few billion will be a bit concerned that on top of its other debts the Irish state is also exposed to the tune of €54 billion over the bank rescue, because the €54 billion exposure doesn’t appear in the official accounts!
This seems precisely like the accountancy “creativity” that caused the financial collapse her and otherwise. But who cares?
It is not the accountancy bit that is of primary concern however. This SPV, not NAMA, is now going to take over all the bad loans and their accompanying asset from the bank and the SPV will dispose of the assets in time and recover as much of the loans as it can. Precisely what we were told NAMA was going to do. And the big difference is that while NAMA was entirely a State agency, this SPV will have a majority of private owners. Private investors will have 51 per cent of the equity of this SPV and the State, via the hapless NAMA, will have just 49 per cent. The 51 per cent owners will call the shots, decide what is to be done with the assets for which we, Irish citizens, are harrowing €54 billion.
The minority State directors will be able to veto decisions by the SPV board that they don’t like but otherwise have no control at all. The head of the SPV will be the head of NAMA but he will have to do what the majority of the SPV board tells him to do.
And as for accountability?
All sorts of guarantees were given about how NAMA would be accountable to a committee of the Dáil and otherwise. But this SPV? How could a privately controlled company be accountable to anybody other than its shareholders, the majority of whom will be private investors?
Why did they bother with NAMA at all? Why the tortuous hours of debate in the Dáil over the massive Bill of 231 sections? How come in the accompanying explanatory memorandum there was no mention of this SPV. How come in the Bill itself there is no mention of SPV?
Maybe there was some point to the NAMA Bill, for it told us a bit about what is to happen. For starters, solicitors, barristers, bankers, accountants, estate agents, and liquidators are to be €240 million per year over 11 years. Yes, €2.64 billion. And they want to cut public service pay, while giving €2.64 billion to solicitors, barristers, bankers, barristers, accountants, estate agents and liquidators?
This NAMA Bill is astonishing in many other respects as well, although you continue to wonder what the point of it is. Apparently the SPV will be established under a section of this Bill, This is Section 12, which begins: “NAMA has all powers necessary or expedient for or incidental to the achievement of its purposes and performance of its functions”. It goes on: "without prejudice to the generality (of the above bit) NAMA may..." and it then lists 31 things which NAMA specifically may do (but remember this is without prejudice to other matters NAMA might think up). And item 16 (it is called sub-subsection “n”) states innocently: “(NAMA may) form a NAMA group entity for the purpose of performing any of its functions”. And, incidentally, nowhere in the definitions section of the Bill is “group entity” defined. And, as far as I can see, nowhere in the Bill is it stated that NAMA can off-load all or most of its functions to an entity that it itself does not control.
Section 5 however might come to the rescue here and I have never heard of any piece of legislation ever giving a Minister or an agency the kind of powers its bestows. It states: “Where any provision of this Act requires or authorises the Minister (for Finance) or NAMA to make regulations, such regulations (a) may make different provision for different circumstances or cases, classes or types; and may contain such incidental, consequential or transitional provisions as the Minister or NAMA, as the case may be, considers necessary or expedient for the purposes of this Act”.
How this could be constitutional is beyond me.
And then there is in Section 56 an exquisite gagging clause. No criticism of government policy or of the Ministers will be permitted by officials of NAMA.
Euripides used be attributed the authorship of the quotation: “Those whom the gods wish to destroy they first make mad." It wasn’t he. Perhaps it was Brian Lenihan?
 Vincent Browne | |
| About the author: | |
Vincent has worked in journalism and broadcasting since 1968. Currently he is a columnist with the Irish Times and the Sunday Business Post. He presents Tonight with Vincent Browne on TV3 and is writing a biography of Charles Haughey. He was Northern News Editor of The Irish Press Group 1970 - 72, with Independent Newspapers from 1973 - 77. He founded and launched Magill magazine in 1977 (archives here), and was Editor of the Sunday Tribune from 1983 - 94. Vincent broadcast on RTE radio from 1996 - 2007. He was editor and publisher of Village magazine (archives here).  Vincent is co-founder of Politico.ie. | |
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commentators are banging on about why we need NAMA and questioning its purpose as everyone knows about the 54 billion.this is not the point rather it that we are obliged under the EU stability pact to have a debt/GDP ratio of 60% or less.Already we are heading for a figure of 59% this year and 73 % by end 2010. We have already been given 5(2 more than normal) years to get our ratio down to the 60% target.If theNAMA monies were added to our debt we would be way off ,hence the SPV.
I came across this yesterday and it sumed up perfectly for me the state of play in the country, not just at the present time but over the last number of generations. Truths need to be hammered home .
When trading is done, not by consent, but by compulsion - when you see that in order to produce, you need permission from men who produce nothing, when you see money flowing to those who deal, not in goods, but in favors - and your laws don’t protect you against them, but protect them against you, when you see corruption being rewarded and honesty becoming a self-sacrifice, you may know that your society is doomed. ~ Ayn Rand.
Do we want our society to be doomed. It's on the verge and we stand aside and do little. Where are the people and the ideals to take us forward.
When trading is done, not by consent, but by compulsion - when you see that in order to produce, you need permission from men who produce nothing, when you see money flowing to those who deal, not in goods, but in favors - and your laws don’t protect you against them, but protect them against you, when you see corruption being rewarded and honesty becoming a self-sacrifice, you may know that your society is doomed. Ayn Rand
The text you quote from the NAMA Bill is reminiscent of Clause 10 of the Special Powers Act Northern Ireland and the SPV should really be called a Special Powers Veto.
The whole thing is ridiculous. Surely the President will question its validity? The Government cannot be allowed to sell the country from under us.
Hiding 54 billion in plain sight, whether to keep it off balance sheet or conform to the growth and stability pact just shows how infantile the European Union is.
They dress their childishness up in complex language and we are meant to think their clever. No wonder the world economy is in such a mess.
What is this SPV meant to achieve? It pays 51 million to take control of 54 billion worth of so called assets that we paid for.
Only a fool believes that these assets are worth 54 billion, a figure of 27- 30 billion being more realistic, so manage and sell over a 10 year period and total profit to SPV investors for 51% stake roughly 12- 14 billion.
Not bad work if you can get it.
Who will the investors be? Will it be transparent? Will it be their own money or will they just borrow from Anglo?
Someone should tell the Government that SPV's were the brainchild of Ivar Kreuger in the 1920's and led directly to the establishment of the Glass-Stegall Act in 1932. Other "innovations" that Mr Kreugar pioneered that this government has followed include: mark-to-market accountancy (which led to the establishment of GAAP in the US in the 1930s) pyramid company holding patterns and ponzi financing. The origin of SPV's is historically fraudulent. Off-balance sheet vehicles are repeatedly cited as a cause of the crisis because they obscure the transparent nature of true liability. This not only leads to problems of complexity but allows systemic risk to grow and fosters crises in confidence.
Despite the lessons of history, this government has transferred the problems of procyclicality onto a nation. Policy is now the progeny of a self-interest that enjoys the greatest degree of regulatory insulation. Every lesson learned in relation to systemic risk, the dangers posed by a fragmented banking system, the absence of effective regulatory oversight, regulatory capture, capital requirements, moral hazard and adverse selection have been abandoned.
John Kenneth Galbraith was right: "There can be few fields of human endeavor in which history counts for so little as in the world of finance".
Nama was the wrong way to go . It is predicted by some formidable economists that we will be worse off than Iceland.
What if the banks for example cash in the bonds given to them by the government to draw in foreign investment , - invest in these bonds with the money given to them to bail them out. Then sit tight . Lend nothing and cash in the bonds at 10 % or whatever,
Besides , suppose the banks decided to up the interest rates to say double the ECB rate .. winners again.
This was too ill thought out and too few consrtaints put on these disreputable institutions to foist on a generation or possibly two to come .
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