Monday, February 8, 2010

Economics 08/02/2010: Nama v IMF revelations

Fair play to the Irish Times' Simon Carswell (here) for unearthing through FOI request that IMF note which back in April last year told the Irish Government that Nama will not restore lending in the economy.

This, of course, is the old news to many of us. You can search this blog for 'restore credit' and other key words and see posts going back to April 2009 with exactly the same analysis. Outside of this blog, I warned on the matter in my columns in Business & Finance and in the Sunday Times, in articles in Irish Mail, Irish Independent, Irish Times, in numerous appearances on BBC, Bloomberg, RTE, TV3, Newstalk, TodayFM and so on. Even in the likes of Wall Street Journal and numerous international print outfits. Several other analysts - namely Professors Brian Lucey and Karl Whelan, banking specialist Peter Mathews, economist Ronan Lyons and others - all have done so as well.

But what is new is the fact that this IMF opinion was known to the Government and its advisers who, having buried it from public view, have gone out on a prolonged PR campaign, in effect liberally treating the truth about Nama. Ditto for NTMA and Nama officials. That public representatives and officials engaged in such an act is a betrayal of public trust. It is, simply put, a deception of public opinion.

Quote from Irish Times: "Speaking at the publication of the Nama legislation last September, Mr Lenihan said Nama would “strengthen and improve” the funding positions of the banks “so that they can lend to viable businesses and households”. Taoiseach Brian Cowen had said the Government’s objective in restructuring the banks was to generate “more access to credit for Irish business at this critical time”"

But there is more to Simon's article (my emphasis):

"In an internal e-mail dated June 6th, 2009, ...senior department [of Finance] official Kevin Cardiff warned against making public any official estimate for the losses faced by the banks, saying that the department had not made this information public. “We naturally shared with the IMF team our informal views on the range of possibilities, but would be uneasy about seeing these formalised,” said Mr Cardiff, who has since been appointed secretary general of the department."

This is uncomfortably close to an admission that the DofF willingly withheld crucial information about Nama from the official communications in order to avoid this information being disclosed publicly through future FOI requests. Again, I am not a conspiracy theorist, but what else does one need in terms of proof that the Government and its officials knowingly engaged in acts of public deception when they were making claims about
  • Nama's expected impact on credit supply;
  • Nama's expected costs and losses.
Tellingly, IMF estimated that Irish banks will face losses of up to €35 billion and that the DofF was informed by them of this figure. If you look at my posts on Nama Trust, expected Nama losses and the cost of nationalizing the banks - my estimates from early 2009 on consistently show that the at risk assets of Irish banks covered by Nama are around €32-37 billion - bang on in line with IMF's estimate. Again, I wasn't the only person providing these estimates.

The Government, Nama, NTMA, DofF and the Central Bank - all have elected to completely ignore all independent analysis that has been performed by myself, Brian Lucey, Karl Whelan, Peter Mathews and others. And yet, not a week goes by since September 2009 in which the Government is forced to admit that we were right in our estimates and forecasts.

While the Government continues to spend hundreds of thousands of our euros on PR spin doctors and 'advisers'. At the same time, the entire staff and executive structure of Nama have been loaded with either 'quiet men' of 'I have no interest in defending taxpayers' type or outright 'yes men' for the Government.

Let me reproduce here few quotes that a reader posted in his reply to one of my earlier blog posts:

"The government did an "A1" job in their spin on NAMA, they persuaded the shareholders into voting for NAMA so that the banks would avoid nationalisation. Blindfold nationalisation is inevitable. Memorable brainwashing quotes:
  • "NAMA is the only game in town"
  • "there is no easy way out"
  • "We need NAMA to get credit flowing into the economy"
  • "Ireland is getting "NAMA Money" from the EU"
  • "There will be no more 100% nationalisations"
And so on...

Disgraceful, really!

Do send me other quotes from public officials that you feel might have been outright deceiving in nature and I will post them on the blog!
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