NAMA: The €90bn gamble
Sweeping powers for 'bad bank'
1,400 loans from 50 top developers
THE Government last night gave its 'bad bank' sweeping powers over developers and judges as it unleashed a €90bn plan to rescue banks and kickstart the economy.
But Finance Minister Brian Lenihan admitted it could take up to 30 years for the new National Asset Management Agency (NAMA) to sort out the toxic bank assets.
The State will effectively become one of the biggest property owners in the world as NAMA is granted extensive powers to take over land and development projects from borrowers who are not keeping up with their repayments.
Among the more controversial provisions in the proposed new legislation -- described by Fine Gael as a massive gamble -- is a radical series of rules and procedures to ward off legal attacks that could be disastrous for taxpayers.
But the plans, which include limited appeals to the Supreme Court and a clampdown on injunction proceedings, have alarmed lawyers. They claim that the proposals trample on judicial rights.
Under the new legislation:
* NAMA will take over up to €90bn in risky loans. As the current market value of these loans is far less, NAMA will pay well below this figure.
* The Government will take over 1,400 loans by the end of next June. The top 50 developers will be brought into NAMA before Christmas.
* NAMA will have the power to borrow up to €10bn to help complete projects it takes over -- but only if that development further enhances their value.
* Developers who are in default and whose property has been seized by NAMA will not be allowed to buy back their assets at a later stage.
* builders will not automatically lose their primary homes if they cannot repay their loans.
However, the proposed new legislation does not outline what the full cost of taking over the impaired loans will be.
It will not be possible to work out the full extent of the writedowns until all the €90bn loans have been transferred to NAMA.
The European Commission is expected to rubber-stamp the formula the Government hopes to use to value the loans ahead of the crucial Dail debate on the legislation in early September. Shortly after this, Mr Lenihan then hopes to be able to give an estimate of the discount that the banks will have to take on the loans.
Mr Lenihan unveiled the proposed legislation yesterday, and signalled that it could take 30 years for NAMA to sort out toxic bank assets.
Bulk
He said he expected the bulk of NAMA's work to be done in seven to 10 years, but admitted that some would go on a long time beyond this.
He claimed there was nothing in the proposed bill that would provide a "bail-out" for builders or developers. "Anyone who owes money before NAMA continues to owe it, and is expected to repay the full amount of that debt," he said.
However, the Government now faces a political dogfight to set up the agency as opposition parties highlighted the serious potential pitfalls facing NAMA.
Fine Gael deputy leader and finance spokesman Richard Bruton described NAMA as a "major gamble" that was effectively asking taxpayers to sign a blank cheque.
"The Government are saying 'trust me' on this. I think many people would feel that they don't deserve that." He said that the developers would be left in their "palatial homes", no matter what happened.
Labour's Ruairi Quinn said the Government was asking taxpayers to foot the bill and bear all the risk.
"Despite a figure of €90bn being bandied about, there is nothing in the bill to prevent it going even higher," he said.
The leader of the country's biggest union also declared his opposition to the new agency.
"The bill shows no evidence of new thinking, no willingness to learn from past mistakes and every intention of making ordinary people pay for the squandermania of the rich and powerful," SIPTU's Jack O'Connor said.
Report by Joe Brennan, Senan Molony and Dearbhail McDonald - Irish Independent
Sweeping powers for 'bad bank'
1,400 loans from 50 top developers
THE Government last night gave its 'bad bank' sweeping powers over developers and judges as it unleashed a €90bn plan to rescue banks and kickstart the economy.
But Finance Minister Brian Lenihan admitted it could take up to 30 years for the new National Asset Management Agency (NAMA) to sort out the toxic bank assets.
The State will effectively become one of the biggest property owners in the world as NAMA is granted extensive powers to take over land and development projects from borrowers who are not keeping up with their repayments.
Among the more controversial provisions in the proposed new legislation -- described by Fine Gael as a massive gamble -- is a radical series of rules and procedures to ward off legal attacks that could be disastrous for taxpayers.
But the plans, which include limited appeals to the Supreme Court and a clampdown on injunction proceedings, have alarmed lawyers. They claim that the proposals trample on judicial rights.
Under the new legislation:
* NAMA will take over up to €90bn in risky loans. As the current market value of these loans is far less, NAMA will pay well below this figure.
* The Government will take over 1,400 loans by the end of next June. The top 50 developers will be brought into NAMA before Christmas.
* NAMA will have the power to borrow up to €10bn to help complete projects it takes over -- but only if that development further enhances their value.
* Developers who are in default and whose property has been seized by NAMA will not be allowed to buy back their assets at a later stage.
* builders will not automatically lose their primary homes if they cannot repay their loans.
However, the proposed new legislation does not outline what the full cost of taking over the impaired loans will be.
It will not be possible to work out the full extent of the writedowns until all the €90bn loans have been transferred to NAMA.
The European Commission is expected to rubber-stamp the formula the Government hopes to use to value the loans ahead of the crucial Dail debate on the legislation in early September. Shortly after this, Mr Lenihan then hopes to be able to give an estimate of the discount that the banks will have to take on the loans.
Mr Lenihan unveiled the proposed legislation yesterday, and signalled that it could take 30 years for NAMA to sort out toxic bank assets.
Bulk
He said he expected the bulk of NAMA's work to be done in seven to 10 years, but admitted that some would go on a long time beyond this.
He claimed there was nothing in the proposed bill that would provide a "bail-out" for builders or developers. "Anyone who owes money before NAMA continues to owe it, and is expected to repay the full amount of that debt," he said.
However, the Government now faces a political dogfight to set up the agency as opposition parties highlighted the serious potential pitfalls facing NAMA.
Fine Gael deputy leader and finance spokesman Richard Bruton described NAMA as a "major gamble" that was effectively asking taxpayers to sign a blank cheque.
"The Government are saying 'trust me' on this. I think many people would feel that they don't deserve that." He said that the developers would be left in their "palatial homes", no matter what happened.
Labour's Ruairi Quinn said the Government was asking taxpayers to foot the bill and bear all the risk.
"Despite a figure of €90bn being bandied about, there is nothing in the bill to prevent it going even higher," he said.
The leader of the country's biggest union also declared his opposition to the new agency.
"The bill shows no evidence of new thinking, no willingness to learn from past mistakes and every intention of making ordinary people pay for the squandermania of the rich and powerful," SIPTU's Jack O'Connor said.
Report by Joe Brennan, Senan Molony and Dearbhail McDonald - Irish Independent