Lundgren in Dublin and A Proposal Relating to NAMA

I have written before about the incisive and articulate contributions of Bo Lundgren, the Swedish Finance Minister in charge during their banking crisis of the early 1990s.  Lundgren was in Dublin on Tuesday, giving a talk at the Institute of International and European Affairs and testifying before the Oireachtas Committee on Finance and the Public Service.  A productive guy, he also appeared on Morning Ireland.  Here’s a link to his interview on that show (scroll down to find it) which has lots of interesting material. I will post a link to the transcript of his Oireachtas appearance when it is put up.

I think there are statements in Lundgren’s Morning Ireland interview which could be probably be latched on to by all sides of the debate on banking being played out on this blog.  Rather than attempt to score points on this, I will only note that Lungren argues that a political consensus greatly helps when dealing with a banking crisis (about 7 minutes in).

In the Irish context, perhaps the key issue causing political controversy is the price that NAMA will pay for the assets.  In Sweden this was set by an independent Valuation Committee overseen by a cross-party board. The emerging details suggest that the price that NAMA pays will come from a complex valuation process recommended to the NAMA officials by HSBC (the IT today reported that 370 categories of information must be provided by banks on each developer on the loan books so that HSBC can use this information to develop a valuation mechanism.)

In relation to this, let me put forward a suggestion that could potentially lead to all-party support for the government’s approach, which Lundgren viewed as crucial: Appoint a cross-party board to approve NAMA’s pricing of assets being transferred. I think it might be hard for opposition politicians to turn down an offer like this and it could be a way to address well-founded opposition concerns about potential losses to the taxpayer as well as less well-founded concerns such as the idea that NAMA is a bailout for developers.

If the only solid support for NAMA’s pricing mechanism comes from representatives of an unpopular government, then it’s hard to see how this process will be successfully sold to a public that is already highly concerned (not to mention angry) about the potential costs to the taxpayer of solving the banking crisis.

15 replies on “Lundgren in Dublin and A Proposal Relating to NAMA”

Some interesting ideas there on starting to build ‘governance’/checks and balances into the price NAMA will pay. I’m greatly concerned that another bank (HSBC) is doing it. Do we think these guys don’t all play golf together?

I still think the best strategy for NAMA is to apply a larger than needed discount to all the assets, shareholder equity would be completely absorbed but in return existing shareholder would get shares in NAMA.
The goverment would should then arrange a debt for equity swap with the bank bondholders reducing the need for state recaps.

We end up with private stakes in the banks and in NAMA.
The risk of mispricing the assets is greatly reduced.
The banks balance sheets are completely clean.
The cost to the state would be greatly reduced.


HSBC would still be seen as one of the most respected players, and one of the least tarnished by the last few years, in the banking game at the moment. I also know for a fact that their Irish ops have been given a mandate to poach the best of AIB/BOI/etc’s corporate clients. I wouldn’t be particularly worried about them being in cahoots with the natives, as it were.

“The emerging details suggest that the price that NAMA pays will come from a complex valuation process recommended to the NAMA officials by HSBC (the IT today reported that 370 categories of information must be provided by banks on each developer on the loan books so that HSBC can use this information to develop a valuation mechanism.)”

370!!!! That should speed things up.


The legislation on NAMA will obviously propose mechanisms for political accountability, most likely through laying annual reports before the Houses of the Oireachtas plus regular appearances before the Committee on Finance, PAC or whatever, all of which will be designed to be at arms length from political interference with decision making, and rightly so.

I would argue that direct interference or influence by politicians in NAMA decisions would be a dreadful mistake. In practice, your suggestion of a cross party body to approve each and every Nama asset pricing decision would likely result in no transaction ever being approved.

It’s not just our public finances, banking system or the productive economy that are in crisis; our political system has manifestly failed us too. At the beginning of the crisis, even when the full extent of it appeared much more benign than it has subsequently turned out to be, the political class firmly set their faces against any prospect of co-operation on solutions to our problems. We have an adversarial political culture, they reminded us; and it’s in the best interests of us all that it should be maintained, irrespective of any crisis.

In the run up to the April Budget the Opposition demanded and the Minister for Finance agreed that the government would take their suggestions into account in framing Budget measures. Brian Lenihan gave an illustration of what subsequently happened in his speech on the Dail Confidence Motion in June:

“Deputy Bruton referred earlier to his party’s suggestions on how to respond to the economic crisis which he said were, by definition rejected by this government. That is not the case. I welcomed his documents at the time of their publication and indeed I agreed with many of his suggestions and they formed part of the Supplementary Budget. But the problem is, some of his suggestions were subsequently opposed by his own colleagues. Deputy Bruton proposed the emergency suspension of non-priority capital projects in the areas of local roads and social housing. In our Supplementary Budget, we duly made the savings and in no time, we have two outraged press releases from Deputy O’Dowd, the Transport spokesman and Deputy Terence Flanagan on the social housing issue. And all, of course, just in time for the Local Elections. So Deputy Bruton proposes cuts, we agree and subsequently introduce those cuts and they, in turn are opposed by two of his party colleagues. It is a farce and it really gives the lie to the notion that, in most cases, the Opposition want to do anything other than make political hay out of this economic crisis. And fine, if that is what they want to do but please, be honest enough to admit it. ”

In a ideal world perhaps, your idea might work. But, sadly,Irish politics is far removed from the real world, never mind any idealised version of it

Whatever mechanisms are set in place for the operation of NAMA, a prerequisite is that they must be at arms length from the political process. And that’s the unfortunate reality of it.


Two points.

First, I did not write that the cross-party board should “approve each and every Nama asset pricing decision.” There is a difference between governance and oversight, on the one hand, and implementation on the other. The Minister for Finance sets a budget each year — does he approve each and every item of expenditure from motorways to paper clips?

Second, you apparently believe that the NAMA process in train is “at arm’s length from the political process”? I do not believe this to be correct and I’m not sure it would be desirable in any case. There are fundamental political decisions to be made here. Pretending these problems can be solved by some technocrat from HSBC is wishful thinking.

Argumentation by (a) caricature and (b) accusation of naivety, are common blogging debating tactics. But (a) isn’t helpful and as for (b) I wonder which of us is being naive here.


I obviously misunderstood what you meant by “appoint a cross-party board to approve NAMA’s pricing of assets being transferred”. I assumed that since NAMA would price various assets differently, in that some loans/assets would be worth more than others, the cross party board would have a lot of separate approvals to make.

If what you meant was that parliamentary parties would nominate members to a board – a bit like the old Forum on Northern Ireland (?) – based on the strength of their Oireachtas representation and that this board would then act as an oversight body on NAMA, that’s a different thing. But maybe I’m just confusing myself more than ever!

And speaking of confusion, I’m not engaging in any ‘common blogging debating tactics’ nor did I accuse anyone of being naive either. The point of my response is that our main political parties are not prepared to co-operate at any level in the resolution of the present crisis and their preference is to continue with the old adversarial knock about stuff that produces excellent catchphrases for the media, but doesn’t really get us very far otherwise. Given the debate that has been aroused about how our political system needs to be transformed, I hardly think I’m alone in my dismay and concern about how badly we’re all being let down due to the propensity of the present generation of parliamentarians to approach everything negatively and their seeming inability, individually and collectively, (with a few notable exceptions) to rise above that.


Apologies for coming across as cranky. Indeed, I have in mind a high-level body to oversee the pricing with parties nominating representatives. The body would just be to approve the pricing process. Once we’ve bought the assets, I would be inclined to proceed as you’ve recommend — let the NAMA people do their best to get as much for the assets without too much interference.

On our political system, I agree it has failed us in lots of ways. But, even from a cynical political viewpoint, there are some reasons to think that something like this could actually work. The government may benefit from being bipartisan on this (getting the opposition to share the blame for an exercise that will proabbly be unpopular no matter how well designed) and the opposition may find it hard to walk away from what is after all (to borrow from Mr. Begg) the only show in town.

Ok, now that I’ve written that and read it back, maybe I am being naive after all!


Thanks for explaining the idea – I now understand and it makes a lot of sense. The NAMA draft legislation will be published in the coming weeks and if it doesn’t contain your idea or something similar then it might be well worth trying to push it?

Your second paragraph is an accurate description of what’s really going on in the so-called strategic thinking of our political parties, that is apart from those among them who prefer to cling to the life raft of elaborate conspiracy theories, which at least spares them the problem and responsibility of having to think.

I don’t think you’re being naive at all. I think you’re right! The challenge is for the politicians to recognise that this is what they must do; but that’s hardly your responsibility.

Mr. Lundgren says that toxic assets going on to NAMA’s books should be valued at current market prices. Really?

He also maintains the government “must restore confidence”. Well, how many people are running out today to purchase property? Hardly anyone! The reason is that asset prices are still falling like stones. Why should NAMA put current valuations and a floor under these assets when these “current valuations” will look positively silly twelve months from now. Why should the taxpayer be force fed a diet of assets that are falling in value, when there is no way he or she would go out and buy these assets if left to his own devices. Why should the government “force” the tax payer to make bad decisions while simultaneously making them assume responsibility for the compound rate of interest applied to the bonds used to finance these assets? 75 billion Euro borrowed @ 5% after 5 years accrues to 96 billion Euro assuming the “assets” are held in order to unwind! It amounts to another huge stealth tax to be placed around the tax payers neck.

It is losses on all sides for the tax payer as he is signed up to legislation he has not even seen, while the bond holders of banks scoff and the developers walk away shrugging their shoulders at their “losses” while leaving the tax payer and their children to pick up the tab.

How, is any of the following going to instill the confidence Mr. Lundgren talks about. Firstly, the governments refusal to publish the proposed legislative proposals for NAMA while still expecting the tax payer to swallow the losses. Secondly, the noises being made about refusing to publish the report of An Board Snip Nua. This is politics NK style, it is another stunning error of judgment, as for going off on holidays while all this is going on…. all this is unpatriotic, undemocratic and not a good omen for the Lisbon vote in october!

On the legal side of NAMA how is it possible or even cognitively imaginable for one legal firm, Arthur Cox, who advised developers, who advised banks, who now advise NAMA, to be seen as ‘independent’ from a process in which it, along with its previous and present clients have played and continues to play an integral role? The short answer is, it is not possible! Just one more reason for the countless legal challenges both tactical and real that will beset the NAMA process. Has anyone told Mr. Lungdren about our crony capitalist system? Seems not.

Bo Lundgren told the Oireachtais Committee on Finance that the biggest problem faced was lack of Confidence by investors and in banks management. I would add to that Politicians.

In yesterday’s PQs, Richard Bruton raised the question of political oversight of NAMA with the Minister for Finance:

“What will be the role of the political process in approving and scrutinising the decisions of NAMA? Yesterday we heard that political consensus and buy-in across the spectrum was an important factor in gaining confidence in Sweden. Will the political process have a role in overseeing price setting and the markdowns? Will there be a system where there can be transparency and political accountability for this body, which looks as if it will be divorced from the political area?”

In response to this point the Minsiter stated that the legislation will be published later this month to give deputies a chance to evaluate the proposed legal framework for NAMA over the summer.

“Regarding the question of whether there should be cross-party participation in the oversight of the NAMA structure, I am open to constructive suggestions in that regard,” he concluded.

The Bill will most likely deal with all matters relating to oversight of valuation. The Ministers fob off indicates that this has not been considered. This is disappointing.

Bo Lundgren’s point that the valuation process is politically significant and fraught is well made. It would be better if the Minister could confirm that this is being actively addressed with the intention of different options being put to the Minister for consideration.

The Minister should also confirm that here will be provision for political oversight. The abdication of responsibility that was the Tribunals of Enquiry must not be repeated. If the Minister and the Government seek to distance themselves from the valuation then we can be sure that this is for their own protection and not for the protection of the Irish people. The Government must not hobble itself because it fears that Joan Burton’s slurs of a builder bail-out may gain traction if the Govt takes action in relation to valuations. If they are so scared of being painted as builders buddies then bring the oppostion on board in the oversight function.

It appears the concept of political oversight only exists in peoples minds. In reality, it simply does not exist. If it did, we would have had a raft of ministerial resignations, for e-voting, Pphars, HSE mismanagement, schools mismanagement, tax incentives for property bubbles, economic mismanagement etc., etc Why does anyone still want to believe that NAMA will, or even could be, any different to any of the other scandals?

Its architecture is already seriously flawed. NAMA was conceived, by an individual, Peter Bacon, who sat on boards that were paid for by one of the biggest property developers in Ireland. Hardly, the person you would come to for advise on how to resolve the problems?

NAMA is currently being presided over by a legal firm that has had client relationships with several of the principal parties (developers, builders, banks).

If I was a practicing professional and a previous client (developer or bank) was embroiled in a scandal (the property bubble, bankrupt banks) I would have to disqualify myself from the formation of the body (NAMA) purporting to deal with my previous clients travails. What about my firms ‘insider’ knowledge of previous clients, who paid me extremely well? Not suggesting for a minute that that such payments, in the past would distort their professionalism! But the degree of separation required (above and beyond any reasonable doubt), is patently not happening here. This knowledge of clients, is not something that can simply be erased, hence, the process can be seen to be entirely flawed to begin with.

Best thing, Richard Bruton and all the opposition parties could do, when this is being pushed through, is to boycott the entire process in protest. This quasimoda of a disaster called NAMA is currently being readied to be handed over to Mr. Bruton and the opposition. FF know they are not going to be around after the next election. They i.e. the opposition, will be unable to cope with all the “unintended consequences” of NAMA and we all know what will happen after that.

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