Thursday, July 30, 2009

Economics 31/07/2009: NAMA legislation Part 1

Over the next few days I will be posting my thoughts on NAMA legislation. But here is a quick first installment:

A search of PDF document reveals that:
  1. The word 'taxpayer' appears in the entire legislation only once. Despite the taxpayers being the sole payee for the scheme;
  2. Words 'Taxpayers representation' do not appear in the document at all;
  3. Words 'Taxpayers interest' do not appear in the document at all;
  4. Words 'stop-loss' do not appear in the document at all;
  5. Words 'transparency', 'public interest' (outside the scope of court decisions) and 'public information' do not appear at all;
  6. 'Public disclosure' only applies to restricting such in the cases of expert opinions;
  7. Word 'loss' appears in the legislation only in the areas of:
  • Giving NAMA power to issue complex derivative instruments to hedge against "the risk of loss arising from changes in interest rates, currency exchange rates or other factors of a similar nature, to eliminate or reduce the costs of raising funds or borrowing or the cost
    of other transactions carried out in the ordinary course of business, or increasing return on investment. No stop-loss rules on these derivatives are envisioned, as if they are risk free;
  • In making sure that "participating institutions to indemnify NAMA. 111.—(1) If NAMA or a NAMA group entity so directs, a participating institution shall indemnify NAMA or the NAMA group entity and its officers against any liability or loss..." In other words, the Government employees and NAMA will be protected from any loss claims, but not the taxpayers. Minister Leniham did his job of shielding his cronies well.
6. "30.—(1) As soon as practicable after the establishment day, the Board shall establish 3 committees, and appoint members to them, as follows: (a) an audit committee; (b) a credit committee; (c) a risk committee." There is no independent committee membership requirements, with all, save two members of each committee appointable by the Board of NAMA, and the remaining two - by the Minister.

Actually, worse that that: "(5) The members of the credit committee and the risk committee shall be members of the Board or officers of NAMA. At least 2 members of each of those committees shall be members of the Board." Thus, there will be no independent oversight over risk and credit decisions by NAMA. Not even in theory.

"31.—(1) The Board may establish such advisory committees as it considers necessary or desirable to advise it in the performance of its functions. ...(4) The Board shall determine the terms of reference and procedures of an advisory committee." There will be no statutory requirement for independent oversight of NAMA - cronies run cronies' loans.

7. "Indemnification of members of Board and officers of NAMA, etc. 32.—(1) This section applies to the following: (a) each member of the Board; (b) each officer of NAMA; (c) a director of a NAMA wholly owned subsidiary; (d) a director of a NAMA group entity; (e) a member of the staff of the NTMA. (2) A person to whom this section applies is indemnified in relation to anything done or omitted in the performance or purported performance or exercise of any of NAMA’s functions or powers under this Act, unless it is proved that the act or omission was in bad faith." So the incompetence can never be penalised - a standard practice for Mr Leniham's pets in the public sector.

And a succinct summary of the legislation (hat tip to Richard W):

More to come, so stay tuned, but this already bad enough...


Garry said...

This corresponds with my impressions from glancing that bits of the document.... The whole tone of the document is wrong, its about protecting insiders. No regard for the interest of taxpayers....

Given our experience with the guarantee, where it emerged that corruption and fraud was rife in Irish banking....Of course it emerged when it was too late to do anything about the guarantee...but whole institutions should have been thrown out of the scheme.

It appears the establishment are hell bent on making the same 'mistake' twice... I bet corruption and fraud will be uncovered after NAMA is setup but by then it will be 'too late to change'...'Nobody saw it coming'

K to the B said...

A: Does the government expect to see property prices back up to levels seen from 2002-2007 (another bubbles) in 15 years time?

B: Does the government expect fields with half built developments / ghost estates in Roscommon, Longford, Cavan to generate an income in 15 years time?