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Nama Was An Irish Solution To An Irish Problem

Cranes over sky

The creation of Nama will go down in history as an Irish solution to an Irish problem. A hasty decision which created the National Asset Management Agency and made the Irish taxpayer the reluctant owner of the largest property management company in the world. 

In a desperate attempt to stave off the collapse of the banking system, Nama bought €74M of loans from the banks for €32B. It had one job; to sell of its assets and recover the €32B and more if possible.

The latest figures from Nama indicate that it will have made €3B in profit by 2020. Whether this return could have been higher, as some analyses have argued, is still open to question, but a new book on the property agency that defined Ireland's economy for several years sheds lights on why those questions may always be impossible to answer.

Frank Connolly’s account of Ireland’s super-bad bank — "NAMA Land: The Inside Story of Ireland’s Property Sell-Off and the Creation of a New Elite" — argues its inception and execution was an exercise in poor judgement, and has proved itself to be a Band-Aid on a gaping hole in the Irish economy. 

Connolly argues that from the beginning Nama was an inside job. The  list of appointments was a who's who of industry insiders, many of whom held key roles in banking and property, areas that many Irish people had grievances with. The people who were perceived to have brought the country to its knees were also charged with balancing the books. 

One example cited by Connolly: John Mulcahy, former Irish chief executive of Jones Lang LaSalle, who wrongly predicted a soft landing for the Irish economy before the 2008 crash, was made head of portfolio management.

The Celtic Tiger development rush has left Dublin with a legacy issue.

Connolly’s detailed account shows how it sold off tranches of Irish assets to mostly U.S. based funds like Blackstone, Cerebus, Lone Star, Pimco and Goldman Sachs.

Those private equity buyers quickly sold off the better-quality assets they had bought for substantial profits, and then began to sweat the debts of approximately 90,000 small-business and home owners facing default on their mortgages, many of whom had no idea what financial entity had acquired the deeds and control of their property. Nama was seen to have sold these borrowers down the river.

Among the property community reaction to Nama was a mixed bag, with some developers claiming that favourtism was shown to a few, and other relationships becoming hostile.

Public and political sentiment at the time showed little in the way of sympathy to the developers, with many TD’s seeing it as Nama’s duty to recover as much of the public’s money as possible with little regard for big borrowers.

Local accountancy and law firms advised these U.S. firms and identified existing loopholes which meant they had to pay little or no tax on the already lucrative deals.

It was not just the vulture funds that found Nama's sale of assets lucrative. Along the way it is estimated it will pay the professional services firms that advised it €2.6B.

And as more and more deals went through, talk of corruption began to fly in Leinster House and media circles.

In July 2015, TD and former property developer Mick Wallace told the Dáil that €8.2M was due to be diverted from law firm Tughans to an Isle of Man bank account for the benefit of a Northern Irish politician or party. This money was “intended to facilitate payments to deal-makers involved in the sale”, according to the BBC Spotlight programme.

The deal was called Project Eagle, and saw Nama sell the entirety of its Northern Irish portfolio to Cerberus for €1.5B. Eight people remain under criminal investigation in Northern Ireland, the FBI undertook its own investigation and it provoked the resignation of senior Northern Irish politicians.

There was also the leak of confidential Nama valuations to potential investors by former executive Enda Farrell, who sent 33 emails to his wife, who worked in Deloitte, a company hired by Nama, detailing asset valuations. He also forwarded information to people inside and outside of Nama, believing it was not confidential despite being subject to the Nama Act.

The State will need to decide how much to allocate to real estate.

Material for this in-depth book was gathered from transcripts of the Public Accounts Committee, the Stormont hearings into the Project Eagle investigation, privileged Dáil statements and a lot of original reporting but it would have been greatly helped by access to Nama’s own files as a public agency. However, it was exempt from FOI legislation until 2015, a situation that was changed due to mounting political pressure.

Nama decided to destroy material relating to Project Eagle around the same time it came under the Freedom of Information Act. Nama’s routine destruction of its own email records in 2015 is perhaps yet another indicator of the agency’s belief that because it was set up to help save the system it is somewhat above the system, Connolly argues. 

Nama was set up to repair the damage caused by excessive greed and corruption during the last property boom but Connolly shrewdly points out that Nama ironically enriched many people in the process.