The Comptroller and Auditor General (C&AG) should be asked to examine the business plan for the National Assets Management Agency (Nama) before any money is handed over to acquire impaired development loans, Opposition parties have said today.
Meanwhile, Fine Gael is to seek 99 amendments to the Nama Bill, the party said today.
The Minister for Finance published a draft business plan yesterday showing the projections on the cost of running the loans agency and how it will be set up and operated. The Government predicts Nama will give a return to the taxpayer of €4.8 billion when the "bad bank" is wound up in 2020.
In the Dáil this morning Fine Gael, Labour and Sinn Féin raised questions about the status of the business plan for the agency.
Fine Gael finance spokesman Richard Bruton said the C&AG’s office should provide its assessment of the Nama plan “before one cent of taxpayers’ money” was spent. His party has also tabled 99 amendments to the Nama legislation, including a proposal for a "home-owner support scheme" to help protect those facing home repossessions.
“This plan has made massive assumptions in order to deliver a projection that Nama will make a profit. The taxpayer is entitled to know whether these assumptions are robust enough to justify a €54,000 million investment by the taxpayer, and the huge sacrifice in other service delivery needs that this will involve," the Fine Gael deputy leader said in a statement.
Mr Bruton said among the assumptions to be considered were projection that 80 per cent of developers will pay up on their loans in full. "We know that the courts threw out calculations by one prominent developer to support his claims that he could make full repayment. We know too that 36 per cent of the assets being acquired are undeveloped land whose value has collapsed by up to 75 per cent."
Mr Bruton also raised the expectation that the loss provision for default on the loan book in the hands of Nama will be just €1 billion per year, "whereas in the past 12 months alone, the banks have made a loss provision of €7.3 billion on this same loan book".
"What is the basis for the Government’s optimism that the day of big loss provisions is now over? What magic does it believe Nama can work on this loan book that has eluded the banks? More fundamentally, why would we bother taking the loan book off the banks at all, if the prospects of losses are so modest?
The Fine Gael deputy leader also said the choice of the risk discount to apply to these “highly risky” forecasts was “extraordinarily low” at just 5 per cent.
“The stakes are too high in this decision to pretend that neat columns of numbers presented in smart spread sheets represent unquestionable truth," Mr Bruton said.
He noted Minister for Finance Brian Lenihan’s statement that he would accept reasonable suggestions from the Opposition. “If so, he should accept our perfectly reasonable suggestion of getting the constitutionally independent auditor to run his slide rule across these numbers on behalf of taxpayers.”
Sinn Féin TD Arthur Morgan said the Nama plan revealed last night is "grossly over ambitious".
"A business plan for Nama from the same Government that year after year failed to predict the economic crisis that was coming, and in fact stoked it, is useless. They are heading towards further economic melt-down, again because of construction and the banks, only this time the instrument they are using is Nama.”
The Opposition expressed concern in the Dáil today the Nama Bill would not be debated at committee stage in the full House. Mr Morgan also questioned whether the document was a Fianna Fail plan or a Department of Finance plan.
Ceann Comhairle Seamus Kirk and Tánaiste Mary Coughlan said it had been circulated by the Department of Finance, and that the party whips who organise Dáil business could meet to agree arrangements for the committee stage.
The debate will take place on Wednesday and Thursday next week and for four days the following week.
Investors today gave a qualified welcome to news the Government wants the banks to try and raise privately any additional capital they will need, though it stood ready for more injections if needed after already piling €11 billion into the sector and taking Anglo Irish Bank into public ownership. "[Further] nationalisation is pretty much gone in terms of a threat for the Irish banks," one Dublin-based trader said.
Others noted the banks will retain much of the daily management of the loans, without the prospect of earning a fee for the task, which could be a drag on their earnings."That's a bit disappointing," said Ciaran Callaghan at NCB Stockbrokers.
Earlier, speaking on RTÉ's Morning Ireland, Fianna Fáil TD Frank Fahey said the Nama draft plan held assumptions that were "conservative, prudent and carefully worked out".
"We have here a clear set of projections that are based on conservative assumptions, and I'm quite confident . . . that Nama will make a profit," he said.
Mr Fahey said he was "absolutely satisfied" that the banks had all the incentives to start lending to business. He said that there would be €64 million cost to the taxpayer immediately if Anglo Irish was killed off, "therefore there is a systemic importance about Anglo, and while Anglo is a basket case, I have no doubt it will come through and be a good bank in the future".
But Labour finance spokeswoman Joan Burton said the Nama business plan showed Christmas had come early for developers and their bankers. "The unseemly rush to complete the Nama deal appears to mean that Brian Lenihan’s mind is set on completing the deal as soon as possible, regardless of taxpayers’ interests," she said.
The Government plans to buy loans of €77 billion from five lenders through Nama at a price of €54 billion in a bid to unclog the banks of their most toxic assets and free up the flow of credit into the economy.
The plan anticipates borrowers owing €15 billion to Nama to default on the loans over the projected 10-year lifespan of the agency. Nama expects to be able to recover €4 billion of these loans by selling assets, mostly properties, backing the loans over four years from 2014 to 2017.
The Government expects the remaining €62 billion owing by borrowers to be repaid over the 10 years, primarily between 2013 and 2020 at about €7 billion a year.
Mr Lenihan last night again ruled out full nationalisation of the banks. Speaking as Nama passed its first parliamentary hurdle at the end of the second stage vote on the Bill by 77 votes to 73, he said that full nationalisation posed risks to the funding of the banks and the State. "Total nationalisation is not the panacea that its supporters claim it to be."
