The establishment of the National Asset Management Agency is “not something to be rushed into”, Minister for Finance Brian Lenihan said this morning.
The reason the Government was taking its time was to ensure legislation underpinning Nama was "robust" and able to "resist legal challenge", he said on RTÉ's Morning Ireland.
“We can’t have a lawyers’ bonanza and that is another good reason why we have to get this right. [We] need to ensure that whatever legal arrangements are put in place here are robust and sturdy and will resist legal challenge.”
Mr Lenihan said he had received a warm reception from investors during recent trips to Paris and London to try and counter the impact of negative news about the Irish economy and its banks.
Those investors had been “very impressed” by the action taken by the Government's action, including the removal of 5 per cent of GDP, he said.
Mr Lenihan also sought to play down the significance of comments last week by Dr Michael Somers, chief executive of the National Treasury Management Agency (NTMA), who said he did not know how Nama would be set up or operated.
“I am still not sure how Nama will interact with the NTMA,” Mr Somers told the Dáil Committee of Public Accounts last week, adding that his agency had not been adequately staffed to operate the new body.
This morning Mr Lenihan moved to narrow the distance between Mr Somers and the Government saying that “the precise corporate structure of Nama” had yet to be decided; “something I have discussed directly with Dr Somers myself since the Government decision and another point he acknowledged at the Committee very freely”.
“There is absolutely no disagreement between Dr Somers and myself about the need to establish Nama, but what Dr Somers was pointing to was that despite the enormous media speculation there is an awful lot of practical work to be done here.”
Mr Lenihan also noted the head of the NTMA had been “very closely involved in the decision” to set up the Nama and had also contacted the European Central Bank to ensure the funding base for such a plan was available.
“Dr Somers of course appeared on the platform of the presentation of the decision and has made it very clear to me and indeed on many other occasions that in principle he believes this is the only way to go."
“What we are doing is putting together a high-level technical group to work out the final details of this proposal arrived at in principle by the Government, put those details together and transmute it into legislation.”
Outlining the structure of the Nama, Mr Lenihan said it was likely to have a small staff and outsource much of its work. Proposals for tenders for legal advice, valuations and property management expertise will be received next week, he said.
One option for Nama is to directly manage the loans of a small group of the largest developers, although Mr Lenihan refused to comment on the size of this group: “I am not saying 20, it could be 30, 40, 50."
“Clearly the high exposures will have to be managed on a centralised basis because many of their exposures . . . go right across the banking sector and are not restricted to one particular bank.”
The Minister also moved to clarify his stance on bank nationalisation, saying that he is not opposed to it.
“What I have said is that I am opposed to wholesale nationalisation, that means you nationalise 100 per cent of your banking sector.” Mr Lenihan said he was against this because “your capacity to attract funds from other countries is diminished and that will not be good for Ireland”.
The State has already nationalised Anglo Irish Bank and taken a 25 per cent stake in Bank of Ireland and AIB as part of a €7 billion recapitalisation.
Mr Lenihan said if “if there are further losses the State may have to take additional stakes in these banks . . .”
“I do really want to scotch the idea that there are huge risks to the taxpayer in the valuation process because we are not nationalising these institutions."
If as a consequence of implementing Nama there are substantial losses in the banks and additional capital is required then the State will clearly have to socialise potential gains as well as the loses . . .” he said.
Deputy leader of the Labour Party and spokeswoman on finance Joan Burton said the government was intent on ignoring the warnings from Dr Sommers and others on the “ill-fated Nama proposal”.
“It is incredible that the Minister for Finance could so casually dismiss the very serious reservations expressed at the Public Accounts Committee last week by one of Ireland’s most distinguished public servants,” she said in a statement.
“Six weeks after the Minister first announced plans for the establishment of Nama, we have not yet seen any legislation to establish it, and the public is no clearer as to how it will work,” she said.
“There was nothing in Minister Lenihan’s interview this morning to suggest that he is prepared to adopt a robust approach to the 100 developers who are responsible for the core of the bad debts that has brought our economy to its needs.
“I fear that if the government proceeds with the Nama plan, the developers will use the very considerable wealth they still have to mount a legal challenge to the plan and that the state will become involved in a legal battle that will rival the tribunals in terms of timeframe and costs.”
