Madam, – A number of points arise in relation to the appearance of the Minister for Finance before the Joint Committee on Finance and the Public Service (Home News, September 1st). First, it is reported the Minister stated that there would be measures to prevent developers who defaulted on loans from re-entering the construction business. The content of section 148 of the National Asset Management Bill 2009 appears to envisage a completely different situation. Section 148 provides that Nama “may enter into an agreement (including an agreement with the person who was the debtor in relation to the asset concerned) for the purpose of developing the land.” If this section were to come into force it appears that Nama can do the exact opposite to what the Minister has stated and employ the developer to develop the land in question. This section makes no provision that the “person” with whom Nama has reached the agreement must not have defaulted on a loan. Contrary to what the Minister states, this seems like a recipe to bail out developers. – Yours, etc,
Madam, – Seán Barrett makes a convincing argument against going ahead with Nama (Opinion, September 2nd). May I add a further thought on this? The Minister of Finance is on record as saying that if, after buying the toxic assets from the banks they still require further capital, he will put in more taxpayers’ money to ensure their survival. This may be necessary, and the logic of the exercise he is currently undertaking would seem to indicate that course of action.
The question is, if that is the case, why go ahead with Nama in the first instance?
Why not let the banks muddle through as best they can and if and when a bank requires capitalisation, let it have a rights issue followed by a public share offering if necessary? This public offering could be underwritten by the Government. In the meantime, the Government should concentrate on developing legislation which would regulate “old-style banking” as Mr Barrett puts it, and ringfence such corporations from the casino banks which have caused such havoc to our economy. These casino banks would never receive deposit guarantees from the State and should be entirely separate corporate entities from “old style” banks.
This may be a better option than the setting up of a semi-state “bank” run, largely, by civil servants from the Department of Finance, whose record to date in economics and forecasting is at best, poor. We will also save on the running costs of such an agency, and the interest costs of funding the purchases of the toxic assets.
The banks themselves are probably the best vehicles for unloading the toxic assets, over time, at what will be market values. Also, knowing the banks, they will pursue any personal guarantees outstanding on the loans, something Nama would probably not do, given the connections between the political parties and the developers. – Yours, etc,
Madam, – The European Central Bank rightly urges careful consideration by Nama when valuing developers’ assets (Home News, September 1st).
However, there is one area where particular care needs to be taken and where the valuation expertise of the estate agency sector may not be appropriate.
There is anecdotal evidence that many Irish developers hold substantial assets in overseas markets such as Bulgaria and Dubai. In the case of Bulgaria in particular, these assets may appear to be performing well and producing rental returns.
The reality, however, is that in many cases these “rents” have been achieved by increasing the purchase price, so that investors are simply getting back their own money for the duration of the guaranteed rental period. A mere book valuation of these assets will show them as having substantial value, whereas the true picture might place their real value close to zero.
Nama needs to tread very carefully when valuing overseas assets, for all our sakes. – Yours etc,