THE FUNDAMENTAL issue about Nama was “the bottle we show” in making sure that whatever deal is done, the pricing does not jeopardise the taxpayer, director of the ESRI Prof Frances Ruane has said.
Speaking at a symposium on the economy at the Merriman Summer School on Saturday, she said that what she saw coming from the Minister and officials in the Department of Finance was that they were “scared about Ireland having state-owned banks”.
“I think there is a worry about the ability to not have the banks politicised and I think actually that politicians almost seem to me to recognise this. Maybe the experience of the health boards in Ireland made them realise how hard it is to keep politics out of delivery of different decisions and giving credit is certainly one of those.”
The Nama issue was one of enormous complexity, she said, representing different strands of economic thinking coming together in a way that had not been done before.
John McHale, professor of economics at NUI Galway, expressed concern over the burden Nama would put on taxpayers. “There is this concept of paying long-term value instead of market value. I think there is a basis for that but it is also extremely risky and I think it is very important that the losses in the banking system are properly shared with the people who invested in the banks and they don’t get a free ride.”
Equally, he said, it was important that the banking system should not be politicised by putting politicians in charge. “This is a major mark against the main alternative to Nama which is a full-scale nationalisation.”
He said the US model, involving detailed stress testing to get the true state of the banks and then having capital injections, was not a perfect solution but gave clarity on the state of the banks, provided a working system and allowed the maximum loss possible to be borne by the bank investors.
Asked her opinion about the appropriateness of having a lawyer as minister for finance, Prof Ruane said that “at this juncture” it was important to have someone who was intellectually open and capable.
“We have had him into the institute to meet some of the economists for discussions on a number of occasions and everybody came away very struck by how he was getting on top of the brief.
“I think you would not have put him in probably if you knew what he was about to head into. So he had the steepest learning curve imaginable.”
But she said that every single economist in the country would have said that former minister for finance Charlie McCreevy’s economic philosophy of “when I have it, I spend it” ran counter to every economic instinct.