The worst possible dilemma.

13th April, 2009

The legislation on the new National Asset Management Agency will be debated with great heat and passion in the Oireachtas. I hope that this casts light on the many dilemmas facing our country as opposed to generating heat for heat’s sake.

One thing appear essential to me. The pricing of the bad debt appears to me to be the key point in all of this. It is crucial that these items be priced as low as possible to ensure the tax payer gets the best possible

But. There is always a but. In this case the but is pretty terrible. The lower this debt is priced the bigger hit on the balance sheet of banks. The worse their capital position becomes. This puts further pressure on the tax payer, who will be called upon to provide further capital.

This means, I think, that the liability for the tax payer is just moved from the NAMA to the balance sheet of the bank. This is why I struggle to see how this agency can move ahead without, at least, the partial
nationalisation of AIB and Bank of Ireland.

I hope that I am wrong. I really do. I could well have misunderstood how the agency will operate and how it will price so called ‘national assets’. I will try to get a good answer to this question in the run up to the
debate on this legislation.