AGENCY SUPPORT:ECONOMIST Dr Peter Bacon, architect of the Nama bad bank plan, has said the project has the support of the Central Bank, the Financial Regulator and the National Treasury Management Agency.
Top officials from each of these bodies were present at a meeting in Government Buildings on April 3rd at which the Taoiseach, Brian Cowen, canvassed views of the Cabinet’s intention to proceed with the project. Opinion in support of the plan was “unanimous”, he told the Joint Oireachtas Committee on Finance and the Public Service.
“There are huge losses facing developers and banks, and there is only one picker-up of the bill and that is the taxpayer,” he said.
Dr Bacon repeatedly said the Nama plan was superior to a risk insurance scheme because lending institutions would have to take their losses upfront. The alternative would leave big contingent liabilities on bank balance sheets, constraining their ability to extend credit into the wider economy.
Appointed in February by the Government to develop a plan to resolve difficulties presented by huge impairments on property loans in the Irish banks, Dr Bacon said his proposal was grounded in the need to take the approach that offered the best prospect of stabilising the economy and supporting future credit growth.
The Government embarked on the project against the backdrop of new constraints on the public finances, contingent liabilities on the Exchequer in respect of deposit liabilities, and instability in market liquidity for property assets. He said another factor was the intertwining of sovereign risk with banking risk, resulting in an escalation of the cost of Exchequer debt funding.
Dr Bacon said he had provided consultancy services to five of the leading property developers in the last 10 years. While stating that he had executive functions and sat on the board of one property business, he did not name the firm in question. However, he is widely known to be a former director of Ballymore, the commercial vehicle of developer Seán Mulryan.
On any suggestion that he was in some way “tainted” by this “practical experience” with developers, Dr Bacon said “if you believe that I’m sorry that you do so”. He added: “Any relationship I’ve had with any property developer has been professional.”
Having read some of what the Construction Industry Federation has had to say about the plan, he believed some of its members were not happy with the plan.
