As reported in The Irish Times on Wednesday and on NAMAWineLake it seems there might have been a fundamental change in the extent to which NAMA will pursue developers for repayment of loans.  As Vincent Browne noted, in the NAMA debate in the Dail the then Minister for Finance, Brian Lenihan, stated:

Let me be clear – Nama is not designed to be and will not be permitted to operate in practice as a bailout mechanism for developers who have operated irresponsibly.  The amount a borrower owes will not change because of the transfer of a loan from his bank to Nama. The agency will have a statutory duty to maximise the taxpayers’ return and will therefore be expected to use its entire means to this end. The Bill also provides the agency with the wide range of powers it needs to pursue borrowers and enforce security.

However, on Saturday Night Show on RTE1 (clip below), the developer Harry Crosbie stated:

HC: “The money we’re going to pay back is what they [Nama] paid.  That’s the only money.”


BOC: So the amount that was taken off on the haircut that we [the taxpayers] paid through recapitalising the banks effectively …

[HC] That’s correct, I will pay that back

[BOC]… that money’s gone?’

[HC] ‘Over above the haircut is gone.’


[BOC] ‘I paid crazy money for a house, but I have to pay back every penny of that. And I have to face those consequences.  Do you get that people might be looking and thinking, so he’s going to pay back, whatever, half the money, what NAMA paid for it, and we pay back the rest of it and Harry is laughing like.’

[HC] ‘I’m not saying it’s going to happen [but]  there’s no other way it can be fixed.


[BOC] ‘So we all just have to accept there is a lot of money gone?’

[HC] ‘Correct, correct.’


In other words, if a developer borrowed €100 million from Anglo for a failing development, and the loan was transferred to NAMA with the average haircut of 58%, then he expects to only pay back €42 million.   Now, not only has the developer been saved from going bust, which he would have done without NAMA stepping in to take on the loan, but he’s also had his debt radically reduced, and the €58m loss to the banks is being picked up in part or full by the state.  This distinctly sounds like a bailout for developers at the citizens expense.  As Vincent Browne notes, however we look at this it is not maximizing the return to the taxpayer.


NAMA’s response so far: “The priority of Nama is to recover the amount Nama paid for the loans Nama would pursue the full amount in many cases, depending on the level of co-operation they had received from the borrower but often there was no point.”   That’s it.  It seems to me that there is a point in pursuing Harry Crosbie given his confidence as to how his developments will turn out.  At least he should fail a whole series of stress tests before the pursuit is abandoned, or the debt repayments restructured over a much longer period, or the asset be transferred either in part or full back to the loan holder as happens when a home owner fails to pay back a mortgage on a house.

NAMA has been critiqued by both the Right and the Left.  For those on the Right, NAMA represents state interference in the logic of the free market, disrupting its ‘natural’ recovery by artificially controlling large elements of the property market and protecting failed developers and speculators in the short term who otherwise would have gone bust, thus blocking the growth of more resilient players or new start-ups.  For those on the Left it protects those who created the crisis but it does nothing to protect home owners and tenants struggling to pay mortgages and rent and who are also underwriting NAMA’s costs (and do not have access to debt forgiveness).  It seems that both of them are correct.

What NAMA is up to on behalf of the nation clearly needs to be more fully explained.  These kinds of relevations should not come out through a chat show.  Are decisions about debt forgiveness being decided by NAMA alone on behalf of the nation or have the government made this decision?  In either case, where is the public debate on the issue?  It is after all a state investment on behalf of citizens.  A key priority it seems is for NAMA to be opened up to freedom of information and the rationale for their strategy and decision making made much more transparent.  There is a lot to learn here from the Resolution Trust Corporation in the US who were much more open and clear about what they were doing and why.  They understood that good communications builds understanding and trust.  We deserve the same.

Rob Kitchin