THE NATIONAL Asset Management Agency was a child of the banking crisis; conceived in a hurry it was gestated at great length and is destined to live a long life. It is only now, some 18 months on from its establishment, that the extent to which its activities will influence the economy and arguably wider society is truly becoming apparent.
It was set up to buy the land and development loans of the five Irish banks which the State stood over in the wake of the global credit crisis. But in the execution of its mandate, it has become many things and has the potential to be many more.
Intentionally or otherwise, it has been cast as a class of vigilante, appearing to hold property developers to account for their excesses and by extension the misery inflicted on others by the property crash. It has also consciously decided to be both an economic and social actor by intervening directly in the property market.
The initiatives announced yesterday to help first time buyers deserve a cautious welcome. Like any other intervention in the market, no matter how well-intended, they could have unforeseen consequences. They are a confirmation also that Nama has failed in what was its avowed purpose, to get credit flowing in the economy – though all involved have long since admitted this was never really on the cards.
Nama's real raison d'etrewas always to save the banking system at an acceptable cost to the taxpayer. There is a danger that as its role expands, the focus will shift away from whether it is successfully fulfilling that task. It is arguably too early to say if its management of its €72.3 billion loan portfolio is going to result in a net gain to the taxpayer or even a tolerable loss. Even then, any analysis of its performance must take into account the €70 billion in capital that has been pumped into the banking system, in part to allow the banks meet the losses forced on them by the transfer of their land and property loans to Nama.
On the positive side, the agency made an operating profit of €305 million in its first year and has more than €1 billion in cash. Nama is also steadily working its way through the 177 large borrowers it will directly manage. On the other hand, it has had to write down the value of the loans it holds by another €1.5 billion, despite having taken them from the banks at an average discount of 58 per cent. At a very fundamental level, this indicates the property market is not yet going Nama and the taxpayer’s way.