What Is The Alternative To NAMA?

The Fine Gael Party has firmly outlined that it will vote against the National Asset Management Agency (NAMA) legislation in the Dáil next month.

Speaking to today, Deputy Noel Coonan explains what Fine Gael would alternatively do in power to tackle this banking crisis.

Deputy Coonan stated:

“This Government has walked us into an enormous mess and cannot be relied on to pull us out. Our Finance spokesperson Richard Bruton TD has written to the Minister for Finance with detailed observations on how the draft NAMA Bill might be overhauled to become more consistent with our principles. If the Government agrees to implement Fine Gael’s proposals, only then will it have the party’s support. The Fine Gael approach would protect the taxpayer first and foremost by leaving distressed, developer-related loans with those responsible for creating them”.

Deputy Coonan went on to explain:

Under Track 1: Fine Gael proposes to ensure improved credit availability for businesses by the establishment a wholesale ‘Good Bank’, or National Recovery Bank, capitalised by the State and further leveraged by the ECB and funding markets using the ‘asset covered bond’ model that is well-established in other EU countries.

In parallel, under Track 2: The banks would be given until the end of the Guarantee period in September 2010 to pass a rigorous ‘stress test’ to show that they had repaired their own balance sheets by selling assets (such as foreign subsidiaries), raising more deposits and negotiating down their own liabilities to long-term providers of risk capital and funding.

In the event that the banks cannot pass such a stress Test by the end of the Guarantee period, Fine Gael’s proposal is to split each failed bank into two, leaving the assets with the most uncertain values (the developer loans) in legacy property management companies owned largely by the shareholders and other classes of risk investors.

Deposits, other short-term liabilities, easy-to-value loans like mortgages and business overdrafts, the branch networks and the vast majority of the staff would all move safely and seamlessly into a new, going concern ‘clean bank’, initially owned and guaranteed by the taxpayer. These new ‘clean banks’ would be well capitalised with a clean balance sheet and fully open to resume lending.

The Fine Gael TD believes the advantage of this model over the current NAMA proposal is that the risks and responsibilities associated with working out distressed developer-related loans would remain with those professional bankers and investors that funded the loans and that are best placed to recover them.

The Fine Gael TD believes we have no guarantee that prices for commercial property and development land will bounce back to near boom-time prices. This Government is foolishly basing the price of land on an estimation of the value of lands in five to ten years time.

“In the upcoming debate on NAMA, Fine Gael will ask all the probing questions that need to be answered, as this Government gambles taxpayers’ money. It’s grossly unfair and irresponsible to expect taxpayers to bail out banks when it is the banks themselves who created these toxic loans”, concluded Deputy Coonan.


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