NAMA - mooted on April 6th 2009 to put Irelands finances back on trackYOU all remember April 6, 2009. Just three years ago. It almost coincided with centenary of the date the Titanic sank. It was the date that NAMA was mooted to save Ireland and put our finances back on track. It was set up to clean up and repair the Irish banks balance sheets. The problem then was we didn’t know how many Brillo pads and scrubbing brushes would be needed to do the cleanup job or how many screws and bolts would be needed to do the repair work. When all the nuts and bolts were put in place there was a figure of between €80 billion and €90 billion worth of bad debts hanging around that NAMA would buy up at the reduced rate of €55 billion. They would sell these assets on at a price of around €65 billion i.e. a profit of €10 billion. The plan looked good but paper never refuses ink.

When this plan was announced I suggested in this column that it looked like ‘The Fairytale of Leinster House’ because if anyone believed that things would eventually pan out like that they were for the fairies or living in cuckoo land. My suggestion at the time was that after all the cost incurred with the running of NAMA, paying high powered solicitors, economists, spin doctors and accountants the return would be somewhere in the region of €10 billion with a loss of €55 billion. The reason I felt this might be the case was that at the time we knew the price of everything and the value of nothing. The people given the job to sell off all these assets knew very little about the workings of golf clubs and country house hotels, saunas or jacuzzis, tower blocks in Warsaw or car parks in Dubai. They didn’t know how to handle development sites that were flooded for six months each year or ghost estates that county councils couldn’t afford to supply public lighting, roads or water too.

So who was in a position to put a value on these assets or who were they going to sell them to and make a profit. It’s back to the people who got us into the mess being asked to get us out of the mess.

The original plan was simple, NAMA would sell the said property, maybe at a loss of 40 per cent of what they had paid for the debt and pursue the developer for the balance and make a 10 per cent profit. Simple enough plan but it didn’t work or won’t work. Maybe I was a bit unfair to suggest that most of these guys and dolls running NAMA hadn’t much of a clue how to sell off properties at a profit. The profit wasn’t the real issue. Getting their house in order was the real issue. You cannot sell on assets unless you have proper title to it and you cannot get proper title to it unless you work with the person you are seizing the property from on day one. This is where the real costs are incurred in legal fees with NAMA heading for the high courts every week to fight off injunctions by developers who felt hard done by.

So NAMA found a solution by bringing the developers whose properties they seized back on board at huge salaries to help them sort out the mess and get some return for the taxpayers of Ireland. It must have been a bitter pill for those running NAMA to swallow. Those were the boys who were out to save us from the reckless developers having to do a U-turn. So last week the chairman of NAMA, Frank Daly, accepted “there is a real value from keeping the developers on board.

“He is the person who accumulated the profile, he’s the person who knows the assets and he is, at the end of the day, the person who has a personnel vested interest in working this out.”

All this sounds very professional. In other words they are stuck in a rut, they probably cannot handle the situation without bringing back the professionals, who they seized the property from, to advise them.

Maybe this is a good move if it salvages some value for the banks. The only people who may be in a position to buy these deserted half built developments are banks and they don’t need anymore high-rise, fancy office blocks. The builders who developed them have no interest in getting involved in the madness again. The operator who may be in a position to make the business work again would have no access to finance. So why not call in the IMF and put a proposal to them. To pay them back with bricks and mortar, exchange €65 billion worth of NAMA assets for the €65 billion we owe to IMF. It seems a simple enough solution to a problem that may stay with us for years.

We could have pulled the same stroke with the bond holders, for every €10 billion worth of bonds we owed for, give them €20 billion worth of Irish property. If they don’t fall for that, go for the ‘buy one get one free’. Since NAMA was set up almost €30 million has been gobbled up in legal fees. As and from now very few expenses injunctions or legal cases have gone to court so watch out over the next 10 years for the final breakdown of costs. We can then evaluate what return the taxpayers get out of this process. It could drive us to drink as the results may be staggering.