The questions raised by the High Court and the Supreme Court concerning the application for examinership by the Liam Carroll group of companies has identified the issues and concerns central to the Nama project.
The public is sceptical that it is a process to benefit the bankers and builders who are responsible for the economic crisis. The purported justification for Nama is to secure the national financial system and the banks and, under scrutiny, it may not be sufficiently persuasive for the public. Is Nama really an artificial support mechanism for grossly over-valued property or the means of securing the banking system for the citizens of this State?
The Nama project is now engaging the public and has become the subject of dinner table conversations. It is increasingly clear that draft Nama legislation, published some weeks ago by the Government, will have to be substantially altered if it is to gain Oireachtas approval and acceptance by voters. Green Party chairman Dan Boyle sought to reduce the risk to taxpayers even before party members demanded that a special conference be held. The Labour Party spokeswoman on finance Joan Burton identified that section of the Bill under which property will be acquired at “long term economic value” as anathema to the public interest. And, somewhat surprisingly, Fine Gael will oppose the Bill in favour of a quite different, national recovery bank, approach.
Minister for Finance Brian Lenihan has insisted that he and the Government are open to persuasion concerning the final form of legislation. But comments made by Taoiseach Brian Cowen and other Fianna Fáil Ministers have indicated a lack of flexibility in that regard and a determination to insulate existing banking structures from radical reform. Public concern that ordinary taxpayers will be asked to shoulder the burden of speculative failures has been sharpened by the continuation in office of many board members and banking executives who presided over the current shambles. And the spectacle of the main financial institutions combining to support the tottering edifice of the Zoe Group in the courts, so that real market values are disguised and toxic assets are foisted on Nama, has become a source of quiet rage.
Alarm over the Government’s intentions is not confined to political parties. More than 40 economists express concern in today’s edition about a lack of clarity in the draft legislation and, in particular, about the price that Nama will pay for distressed assets. They make the point that, in order to avoid an effective nationalisation of the banks, the Government is preparing to pay a price for land and speculative developments that is greatly in excess of the market-clearing price. Such assets – they say – are closer to one-third, rather than two-thirds of their book values.
Mr Lenihan has indicated that a formula based on appreciating property values over a number of years, excluding the high point of the bubble, will be used to value assets under Nama. He needs to convince the public.