Nama must earn our confidence quickly if it is ever going to work

Suspicion and mistrust still poison the bad bank’s relationship with the Government, writes Daniel Mcconnell

THE brilliant Bruce Springsteen famously once said: “Blind faith in your leaders, or in anything, will get you killed.”

Since its inception in April 2009, the Irish people have had no choice but to have blind faith in the most unique, most costly, omnipresent, grotesque construction ever to be visited upon this country — the National Asset Management Agency (Nama).

Three years on, the sums of money involved in Nama are simply staggering — now costing more than €1m per working day to run, with €27.5m going on highly paid lawyers alone since it began — yet it remains shrouded in mystery.

Conceived by a desperate, incompetent government in a panic to suck all the bad loans from Ireland’s reckless distressed banks, Nama was the supposed saviour to all of our property-related hubris.

Amid countless promises from the then Finance Minister, the late Brian Lenihan, and his Taoiseach, Brian Cowen, that Nama would allow credit to flow freely again, Nama would pay €30.5bn to take control of €74bn worth of toxic loans from the banks and work them out over time.

On its announcement, Nama was greeted with much confusion, suspicion and dread.

Its sheer size and complexity, coupled with its highly secretive culture, only added to such suspicions.

It was derided by the then opposition Fine Gael and Labour, branded as “unworkable” and a bailout for developers and highly paid professionals. Even up to the general election of last year, the two parties were doing plenty of Nama-bashing.

The constant narrative was that Nama was too secretive and, given the numbers involved and ever worsening outlooks, the government-inwaiting didn't hold back.

Both Labour and Fine Gael rejected the calls from Nama to commit our blind faith to it, and said they would pry the organisation open and reveal all details once elected.

In the last frenetic days of the campaign, FG'S finance spokesman Michael Noonan compared changing Nama with unscrambling an egg. Enda Kenny denounced it as a “secret society” bordering on incompetent, which needed an injection of openness and transparency.

“A Fine Gael government will strengthen the transparency of Nama's operations and its management of the assets paid for by the taxpayer.

“The details of all non-performing loans acquired will be available for scrutiny on a public register, including the names of creditors, price paid by the taxpayer for loans and the actions taken by Nama,” the manifesto said.

On winning the election, FG and Labour promised in their Programme for Government to break down the culture of secrecy, reduce the gravy train to the professionals and restore the Irish property market, yet in far more measured tones.

“We will insist on the highest standards of transparency in the operation of Nama, on reduction in the costs associated with the operation of Nama, and that decision-making in Nama does not delay the restoration of the Irish property market,” the Programme for Government said.

The tone of the language may have softened but, throughout 2011, the level of suspicion within the Government about Nama remained acute. Misgivings continued within Michael Noonan's Department of Finance and with the minister himself.

Such was the level of suspicion, Nama chairman Frank Daly's and chief executive Brendan Mcdonagh's jobs were thought to be in jeopardy.

‘Criticisms began to rain down on Nama, including from Dr Peter Bacon’

A rare appearance by the duo before the Public Accounts Committee (PAC) in October shed some light on the agency's modus operandi. The details were shocking. The average salary for Nama staff is about €100,000; more than 120 developers are now being paid salaries of between €70,000 and €100,000, with two being paid up to €200,000; and all of this with less than a quarter of all loans performing.

PAC chairman John Mcguinness said it was totally unacceptable that elected officials had to drag information out of State employees who were in charge of so much of taxpayers' money.

“They can't continue to hide behind commercial confidentiality for everything. All of this looks like this is special treatment being afforded with the use of taxpayers' money,” he told me at the weekend.

PAC member and government TD Paschal Donohoe strongly concurred and has given voice to the unease within FG at how Nama continues to operate.

“Nama can't exist in a parallel universe where the Oireachtas doesn't wield enough power to hold them to account.

“My main areas of concern are legal costs, the cost of Nama itself, the relationship between the agency and developers and the potential for a form of social dividend,” he said.

Criticisms began to rain down on Nama from all sides, including from the architect Dr Peter Bacon and developers who have fallen foul of the agency.

Bankrupted Glenkerrin Homes chief Ray Grehan said of Nama: “Nobody knows what the game is in Nama — I don't think they know themselves.

“They have buried themselves in paperwork. As a result, they're very slow with their decisions and I don't think they're able to keep up.”

Ahead of the Budget, Noonan ordered a high-level review of Nama operations by former global HSBC boss Michael Geoghegan.

The multi-millionaire banker went into Nama headquarters for about 14 days in September and October and interviewed 36 key people.

Despite claims by some Nama cheerleaders in the media to the contrary, Geoghegan was savage in his criticism of Nama on several fronts. In his recommendations, Geoghegan argued Nama needed to be more “entrepreneurial”, saying there was a deficit of sufficient skills at the board to ensure its future success.

In his most crucial recommendation, Geoghegan recommended that smaller loans that have remained under the control of the banks should be brought in-house to ensure a better return for the taxpayer.

He said Nama should spend €25m extra to hire an additional 200 staff, given that Nama was paying €75m a year to the banks to manage these loans.

“Failure to bring these assets on to Nama's book in the next six months may increase the risk of Nama failing to meet its bond repayments,” Geoghegan warned.

It has been made clear that Nama, as of this weekend, has no intention of following Geoghegan's advice.

It doesn't want the hassle of looking after these smaller loans and looks set to resist all attempts to force it to take on such loans.

But it was Noonan's Budget-day announcement that he was establishing a Super Advisory Group to work alongside the existing board that led many to question, who exactly is running Nama?

To have a review done makes sense. But the retention of a permanent advisory committee alongside Nama's board was Noonan's decision and the clearest indication of his unhappiness at how things are progressing.

We still don't know what the advisory group's powers will be. Will the Nama board have to accept and implement directions given by this group?

If the board doesn't take the advice, what happens then?

Given the size of Nama and the monies involved, such ambiguity is deeply unhealthy.

If Noonan feels the board of Nama is not up to the job, he should tell them or replace them, as is his privilege.

This Geoghegan group could lead to the scenario of the board and the management second-guessing themselves.

Speaking to me in recent days, Noonan clearly signalled the future of Nama would depend greatly on the advice given to him by Geoghegan.

“I am not an expert in property, that is why I am getting advice. I have the Geoghegan report and its recommendations and I am moving to appoint a new advisory board and that will conclude shortly. But we have to work together,” he said. Given the critical comments made by him and his Taoiseach this time last year, I asked him how he felt the relationship with Nama was now. Gone was the deeply critical language and “professional and workmanlike” was the response.

When I asked him about the Taoiseach's description of Nama being a secret society, he responded: “Well, we can excuse a little bit of hyperbole during elections, can’t we?”

Ultimately, for Nama to work, it must sooner rather than later garner the confidence and trust of the Irish people and the Government. When developers are getting €200,000 salaries, when lawyers are getting €27m, when Nama staff are getting €100,000 each on average, appealing for the public to put its blind faith in it is not good enough.

Not when they are supposed to be operating on our behalf.