Plenty of things we don't know about NAMA

The government agency, the National Asset Management Agency (Nama), that plans to take €90bn of distressed loans from five Irish banks has entered the everyday vocabulary. To be Nama-ed will mean different things to different people: it may mean that property developers and banks get off the hook or it could be the cheapest way for the taxpayer to clean up the economic mess the lenders left behind. By buying property sites in Ireland and Britain at the bottom of the market, Nama may turn a profit for the taxpayer when it starts selling them off again in better times. Or, it could mean the State carries a serious debt burden for generations to come. In short, few know for certain how Nama will pan out. However, there are a few things have become clearer in recent days. Here's a list of eight things we now know and remain in the dark about: 1. A billion euro may not be what it once was but €90bn is still a lot of money: Nama plans to buy loans, at a discount, from five banks that amount to about half the annual output of the economy. Now, that is still a lot of money. During these deflationary times, the banks continue to run up an inflationary tab for the taxpayer. AIB, Bank of Ireland and Anglo Irish will soon have gobbled up €11bn in taxpayers' cash between them. And that's just to ensure they are able to open the doors in the morning. After selling off their commercial property loans to Nama, the banks will likely need to tap taxpayers for another €6bn - spilt between €3bn for AIB and Bank of Ireland and €3bn for a, possibly, newly merged Anglo Irish, Irish Nationwide and EBS. That will bring the running total to €17bn. But there's more. Add in the write-offs the banks made in recent times from their own reserves, and an extra €1bn here and there they save from buying back some of their own sickly bond debt, and the total recapitalisation bill rises to a mighty €26bn. That's about five times the cuts in public spending recommended by Colm McCarthy's An Bord Snip. 2. Dublin, Belfast, Cork and Britain, too: Continuing the theme of big numbers, the soured property loans Nama plans to buy at a discount from the banks will make the Government one of the largest managers of real estate in the world. Nama will make Minister for Finance Brian Lenihan the landlord of huge tracts of the good, bad and ugly development land, shopping centres and office and apartment blocks in Dublin, Belfast, Cork and in downtown London, too. Over two-thirds of the €90bn in bad loans were given by banks for projects across Ireland, with up to €25bn, or about a quarter of all loans, advanced into the south east of England, including some prime property sites in central London. Under Nama, the Government effectively nationalises property projects sites across Ireland, London and English provincial cities. 3. Never in the history of the world has so much been owed by so few: Bombarded by big numbers, there are still a few questions that need answering. Like, how did regulators allow five Dublin lenders, including two building societies - the EBS and Irish Nationwide - lend so much to so few people. Unlike elsewhere, the banking crisis here was because huge amounts of money were loaned to a small band of property developers. Surprisingly, the banks' loan books to home borrowers are in comparative good shape. That's why, despite making losses, Permanent TSB, the largest mortgage lender, will not need to participate in Nama, while the EBS mortgage lender, which did loan to property developers, will need Nama to stay in business. Some numbers remain startling: only 50 property developers make up the first €20bn of loans that Nama will take off the five banks. Together, the 100 people who borrowed the most will account for €40bn. That amounts to about half the revenues the Government raised last year. 4. A haircut these days costs €30bn: Nama will likely pay the five banks €30bn less for their €90bn of distressed loans, if the government agency applies an average discount (or so-called 'haircut' of 30 per cent). Of course, the property sites and office blocks are still worth nowhere near €60bn if dumped this year on the market. The Nama process is all about the State placing a (maybe reasonable) bet that the property sites will be worth more in future years, be that in five, 10 or 15 years. The Government probably had in mind for some time to pay out a larger-than-expected average discount of 30 per cent, not the 20 per cent haircut many analysts, who are close to the banks, and lenders such as EBS, say will likely apply. By tackling the perception that it is being soft on bankers and property developers, a larger discount will help the Government sell the Nama process to a sceptical electorate. 5. An unlikely people's champion: Mr Justice Peter Kelly is an unlikely folk hero of the Nama saga. While debate rages on the airwaves about the workings of Nama, the High Court judge had to decide whether to grant creditor protection to a significant part of Liam Carroll's property empire. ACC, a Dublin bank owned by the Dutch Rabobank, which had no interest in participating in Nama, wanted the immediate repayment of €136m, a small sum in the context of Carroll's debts. Carroll is probably the largest property developer in Ireland: international projects may make others bigger but Carroll's Zoe group of companies alone owes €1.2bn to a few banks. Including his Daninger Developments and Dunloe companies, the empire altogether owes €2.8bn, mostly to AIB and Bank of Scotland, now part of the LloydsHBOS group. Meanwhile, in the Commercial Court last week, Justice Kelly said Carroll's survival plan as "lacking in reality". The judge was scathing on two sets of figures submitted to his court by a Carroll adviser. The adviser claimed the developer could trade out of difficulties in three years. "This degree of optimism borders if not trespasses on the fanciful," remarked the judge because the companies did not have a reasonable prospect of survival. Carroll's lenders had shown "extraordinary" forbearance by freezing interest payments for two years, he noted, when such understanding was "remarkably absent" in their dealings with smaller borrowers. However, "with misgivings", he allowed the company to buy time by appealing his ruling to the Supreme Court. If only Government ministers would talk as plainly, the Nama project could even win over a few friends. 6. An academic debate?: Leading Dublin academics say that taxpayers will get a better deal if the Government were to nationalise AIB and Bank of Ireland. When recovery comes, taxpayers will get the best deal when the State starts selling them off again, they say. Minister for Finance Brian Lenihan responds that the State will own more of the stock market-listed banks if the Government gives them more cash. The debate will unlikely end this side of Nama's debut. 7. Whisper it - the European Central Bank is bankrolling the banks: It's rarely said, but Nama could not work if the ECB in Frankfurt was not bankrolling the scheme by giving what is close to cash to the Irish banks in return for their Nama-discounted loans, at a low interest rate. The Government appears oddly reluctant to point to the role that the ECB is playing as anchor tenant of the Nama's property scheme. 8. Wanted - a banking regulator for Nama: They're advertising in the papers for regulators to regulate the shrunken banks. Meanwhile, Nama - which looks a lot like a bank and will make big economic decisions - will have no banking regulator.