The Garda Fraud Squad or the Director of Corporate Enforcement should investigate whether the banks tried to use disinformation to get billions from the exchequer through the National Asset Management Agency, a Dáil committee heard today.
The committee also heard that an unnamed developer had suggested that he be paid an annual salary of €1.5 million as part of the business plan he submitted to the agency.
Fianna Fáil deputy Michael McGrath mentioned the Garda when responding to a point made by the chief executive of the agency, Brendan McDonagh, who appeared before the Dáil Committee on Public Accounts.
Whereas the Dáil was told in September 2009 that a discount of 30 per cent might be applied to loans of €82 billion that the agency then believed would be transferred from the banks, the actual discount has now risen to 58 per cent.
The difference between the two discounts is equivalent to €22.96 billion based on the original €82 billion in toxic loans that were to be moved.
Mr McDonagh said the 30 per cent discount was based on information from the five participating banks. Specifically, the estimate was based on information provided by the institutions that the average loan to value ratio was 77 per cent. Some of the equity involved in the deals was subsequently eroded by falls in property prices “but that is not the whole story”.
The loan to value ratios were “much closer to 100 per cent than the 77 per cent represented.” If more accurate figures had been disclosed, an estimated discount of 53 per cent would probably been quoted.
Mr McDonagh noted that in the aftermath of the expected 30 per cent discount being disclosed to the Dáil, AIB and Bank of Ireland issued statements to the Stock Exchange saying they expected the discount would be less than 30 per cent. “I think there are questions to be asked and to be answered.”
Mr McGrath said the loan to value ratios suggested by the banks appeared to be wrong across the board and in a systematic way, and if they had not been tested by Nama a huge overpayment of taxpayers’ money to the banks would have occurred. He said he knew he was making a serious charge but “the evidence is overwhelming”.
Mr McDonagh said he did not disagree with what Mr McGrath was saying. Financial Regulator Matthew Elderfield had information on the matter and it was for him to decide what to do with it, he said.
Committee chairman Bernard Durcan said it would write to Mr Elderfield asking him what he was going to do.
Nama chairman Frank Daly said the agency was not allowing developers fund extravagant lifestyles out of their businesses. He said they had found much evidence of people moving assets to third parties, principally family members, to protect them. People were being told to return the assets or the agency would seek to have them returned through the courts. In one case, €50 million in assets had been returned.
Mr Daly said he believed the “collective delusion” which led to the reckless lending practices by the banks in the middle of the past decade was now behind them. The key principle adopted the agency was to pursue all debts and debtors to the “greatest extent possible”.