Lundgren in Dublin and A Proposal Relating to NAMA
This post was written by Karl Whelan
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.