Readers of this blog may recall a Freedom of Information request to the Taoiseach and the Minister for Finance for details of the discussion between the Government and the EU Commission relating to the price at which Irish bank assets would transfer into NAMA. That information was never furnished.
It is no surprise, therefore that NAMA has claimed exemption from complying with any Freedom of Information requests.
There is a possibility for some information leakage, however. J K Galbraith records, of German hyperinflation of the early 1920s, in Money: Whence it Came, Where it Went, (A. Deutsch, London, 1975, p. 157):-

“’Zero stroke’ or ‘cipher stroke’ is the name created by German physicians for a prevelent nervous malady brought about by the present fantastic currency figures. Scores of cases of the ‘stroke’ are reported among men and women of all classes, who have been prostrated by their efforts to figure in thousands of millions. Many of these persons apparently are normal except for a desire to write endless rows of ciphers.”

“Ciphers”, here, are zeros.
Now, if we camp outside NAMA HQ, we can check for sick people staggering from the office and possibly relate the number of the sick to the destruction of the Irish economy.

We learn from the Sunday Business Post that NAMA may pay less than it previously indicated for the Irish Banks’ loans to be handed over to it (starting this very month, reputedly). We do not know anything further about this. We do not know if the report is accurate. We do not know if the report is a malicious falsehood leaked to the SBP to mislead critics of NAMA.

NAMA is a scandal. It is a scheme to transfer taxpayers’ money to private institutions without a rational justification. The irrational justification (“long-term economic value”) was mooted by the EU Commission, but it hedged it about with many conditions. We have no idea if the Irish Government and the Irish Banks have complied with those conditions. The EU did not mandate secrecy like this.

That the SBP can publish its, presumably, bona fide report and miss the real story; that its sources are unreliable and clearly manipulative of public opinion; that NAMA clearly thinks it is acceptable in this polity to behave in such a fashion and is to be condemned for it (rather than facilitated) and that covert administration is Wednesbury irrationality and a basis for Judicial Review of NAMA is a howler of a journalistic error.

The government’s draft NAMA Bill is intended to assist Ireland’s banks in the financial crisis.

The government’s NAMA scheme is itself a form of State Aid and is in breach of Article 87 (3) (b) of the EU Treaty. In principle it is, therefore illegal. The scheme is not currently activated but the effects of the government’s disclosed intentions are manifest in the economy. The Commission has previously found a declaration by a government, to advance State Aid, is a form of State Aid. Complaints about the current consequences of the NAMA plan have been voiced publicly by;

a. The manager of the Park Hotel, Kenmare, Co. Kerry;
b. The Chief Financial officer of ACC Bank;

The government has claimed the origins of the NAMA scheme lie in “advice” from international institutions including the EU Commission, the International Monetary Fund and the European Central Bank.

The attribution of credit to the EU Commission for NAMA is presumed to be a reference to Commission Communication 2009/C 72/01. This Communication was an “easing” of State Aid regulation as applied to bank restructuring.

In fact, the government’s scheme is not in conformity with Commission Communication 2009/C 72/01.

The NAMA scheme is of such a scale as to raise concern about the sustainability of public finances by over-indebtedness. The EU Commission expresses concern that asset relief should not undermine public debt capacity.

The NAMA scheme, far from being limited to the minimum necessary, is extended to the maximum, limited only by the creative skill of the government. Government spokespersons have given indications that the “transfer value” is intended to lie in a range of 66% to 75% of bank book value. The EU Commission mandates that the bank must bear the maximum level of loss. NAMA, as “floated” by government, seeks to reverse this principle.

The government has failed to make public the impact on the [public] balance sheet. No information has emerged from government to show the impact, on public debt, of NAMA.

The government has failed to make public the disclosure of impairments and assessment of eligible banks. This requirement is mandated by the Commission.

The government has disclosed its intention to avoid imposing on the banks the losses associated with impaired assets to the maximum extent. The full measure of bank loss is the difference between current market value and bank book value. The government’s indicated “transfer value” is much closer to book value than market value.

Only Anglo Irish Bank has been wound up or nationalised. The government has failed to evaluate losses or correctly identify losses, as evidenced by the absence of adminstration or nationalisation of any other bank. There is good reason to think some, at least, Irish commercial banks are insolvent. That there is uncertainty on the point is evidence of government default.

The government has failed to disclose details of the daily portfolio values presumably received by the government from the banks. Alternatively, the banks have failed to make such values or disclose them to the government. The Commission mandated this daily exercise for participating banks.

The government has maximised uncertainty about the proper value of of the banks’ assets. The government has consistently refused to declare the “transfer value” it has in mind; it cites the mantra “case by case” to justify this. The Commission expressed the need to make public disclosure of asset values by [the government].

The government has conflated “complex assets” with the impaired assets of Irish banks (the outcome of a real property bubble). The Commission identifies “toxic assets” as the source of most bank asset impairment. Irish banks did not suffer to any appreciable extent from such assets; Irish impaired assets are in the real estate category. These latter are not “complex”. Their values are low due to the bubble bursting and the effects of recession.

The government has ignored the necessity to secure adequate remuneration for the Irish state. The NAMA scheme has no chance of recovering, for the Irish state, the cost of taking the impaired assets from the banks. The Commission mandated the recovery of all losses by the State from the participating banks.

The government has failed to ensure the beneficiary banks bear the losses incurred in the transfer of assets. The Commission’s requirement on the point is expressed in different ways; it says the banks must bear the losses to the maximum and that the State should secure adequate remuneration.

The government has denied the relevance of “market values” for impaired assets and asserts its intention to value impaired assets on a “case by case” basis, without distinguishing between market value and tranfer value and without assigning assets to “baskets”(as explained in Communication 2009/C 72/01). The government has failed to properly examine the value of impaired assets. By deferring the valuation exercise and avoiding transparency it is evading the Commission’s requirements.

The government is intent on setting impaired asset values at too high a level. The assets are predominently real estate assets and the effect of the government action will be similar to the negative experience produced in Japan from a similar cause. The Commission noted the Japanese example in requiring States to avoid such an effect, a frozen real estate market a decade long.

The government has attributed the Irish financial crisis to the collapse of Lehman Bros., rather than to a property bubble. This prevents any proper remedy being applied to Ireland’s public debt and banking crisis.

The government’s NAMA plan exposes Ireland to proceedings by the EU Commission and/or non-participating banks and to claims for damages by those banks and the claw -back of Aid from the participating banks.

At a time when the finances of the State are so badly stretched, Ireland cannot afford this.

The following letter has been sent to the Taoiseach.
****

Our Ref; EMcG/ Your Ref; 25th August 2009

Taoiseach Brian Cowen TD
Department of the Taoiseach
Government Buildings
Upper Merrion St.
Dublin 2

Re: NAMA

Dear Taoiseach,

I acknowledge receipt of the letter of 20th August 2009, from your Dept. requesting €15.00 from me.

I will send that under separate cover.

However, I protest at the demand; given the documentation I am requesting from you I believe the information in the documentation should have been put into the public domain long ago.

You are reported in the Irish Times as having cited the European Commission, the International Monetary Fund and, possibly, the European Central Bank as having advised the Government (i.e., you) to adopt the NAMA solution to Ireland’s financial woes.

The first intimation of such a claim came from the Department of Finance and referred only to the European Commission.

Those EU “consents” are, ostensibly, in accordance with the “three ts” — “temporary, timely and targeted”, all of which are a requirement of the EU for State Aid to financial institutions currently in trouble. Your NAMA plan is not, I believe, in conformity with those requirements.

The Commission has disclosed elements of its dealings with you (and others) on its website.

1. On 25th February 2009 the Commission issued guidelines to States on handling impaired assets of banks. http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/322&format=HTML&aged=0&language=EN&guiLanguage=en

The guidelines of 25th February 2009 provide for “full transparency and disclosure of impairments, [which] has to be done prior to government intervention”. And again, require “… full ex ante transparency and disclosure of impairments and an upfront assessment of eligible banks”

To date, here in Ireland, this has not happened. Nevertheless the Government’s aid has already commenced. The mere declaration of an intention to grant aid, is aid, and the publication of the National Asset Management Agency Bill is aid par excellence.

The guidelines also confirm that “In general, any transfer of assets covered by a scheme at a valuation in excess of the market price will constitute State aid” [and, is therefore, illegal in principle].

A number of points arise from the foregoing;

1. The Commission does not appear to mandate values based on “real economic value”.

2. Additionally, the Commission emphasizes that “In general, all schemes must ensure that the beneficiary banks bear the losses incurred in the transfer of assets”.

3. The guidelines provide for review by the Commission of asset relief schemes [particularly the “valuation process”].

I need hardly point out to you that these issues are surely relevant to the Lisbon Treaty debate.

I urge you to seek Commission guidance on the Government’s NAMA scheme.

Perhaps you would emphasize to the Commission that;

a) the bad assets of the Irish banks are not “complex”(being, principally, land and buildings);

b) The Irish High Court has established a discount on the value of such assets of 50% (relative to the recent past) in Collins & Anor v Duffy & Anor [2009] IEHC http://www.bailii.org/ie/cases/IEHC/2009/H290.html

Yours Faithfully,

____________________
Edward McGarr
McGarr Solicitors

The following letter is going to Taoiseach Brian Cowen TD, from this office.

Our Ref; EMcG/ Your Ref; 13th August 2009

Taoiseach Brian Cowen TD
C/O Freedom of Information Section
Department of the Taoiseach
Government Buildings
Upper Merrion St.
Dublin 2

Re: NAMA

Dear Taoiseach,

I hereby request disclosure, within the prescribed time of the information set out below. The request is made pursuant to: Directive 95/46/EEC; Regulation 1367/2006; Directive 2003/4 and The Freedom of Information Acts.

All reports (including draft or interim reports), correspondence, findings, conclusions, statements, memoranda, notes, records, report books or report forms or any other documentation arising out of or in connection with the consultations of the State with the European Union Commission relating to the establishment of the National Asset Management Agency (“NAMA”) and particularly, without prejudice to the generality of the foregoing, pertaining to the price or value whereunder the State may (or might) pay for assets taken, or to be taken, into NAMA.

I enclose a copy of a request to Brian Lenihan, Minister for Fianance, in the same terms. I do this to avoid duplication of effort by your respective Departments. Please liaise with him and let me have on foot of this request those documents not sent by him (in timely fashion or otherwise).

Yours Faithfully,

____________________
Edward McGarr
McGarr Solicitors