A legal question. What exactly is the Minister’s role in the NAMA valuation process?
My reading of the draft legislation (sections 76 and 98-102) suggests that NAMA first comes up with valuations in an independent manner. These can then be appealed to a valuation panel whose recommendations then go to the Minister, who becomes the final arbitrer or The Decider, as George W Bush used to put it.
However, my reading of the discussion below from the Oireachtas Committee transcript suggests however that the NAMA valuations are not independent and that the Minister can redirect them on valuations even without an appeal process. Am I reading this right? Answers on a postcard.
Deputy Brian Lenihan: I am trying to get through Deputy Bruton’s 14 questions first. Then I will deal with the questions Deputy Burton raised.
With regard to the concerns expressed about the dangers of political involvement in NAMA, I agree it is something we must examine very carefully in the analysis of the legislation. Regarding the cost to the taxpayer, I indicated an estimate will be provided on 16 September. That estimate will be backed up with information on how it was arrived at. With regard to the valuation procedure, it must be independent and transparent. The reason the Minister has been given a role in this is to ensure the full protection of the taxpayer and to ensure that if the Minister is of the view that the valuations are excessive, he or she can have them reconsidered. That is important from the point of view of the protection of the taxpayer.
Deputy Richard Bruton: Where is that in the legislation?
Deputy Brian Lenihan: In section 100.
Deputy Richard Bruton: That is only in the event the banks challenge it as being under value. I cannot see in the legislation where the Minister can challenge a simple decision to over-value by NAMA.
Deputy Brian Lenihan: I can give directions to NAMA to have a valuation reconsidered.
10 replies on “Ministerial Role in Valuations”
“Minister’s powers of direction.
14.—(1) The Minister may give a direction in writing to NAMA concerning the achievement of the purposes of this Act.
(2) NAMA shall comply with a direction given by the Minister under this section.
(3) In its annual report, NAMA shall report on its compliance with any direction given by the Minister under this section.”
The reference may be to proposed s.102 (1) (b):
102.—(1) The Minister shall consider the advice of the valuation panel under section 101 in relation to the portfolio concerned and shall, no later than 28 days after receipt of that advice—
(a) confirm the total portfolio acquisition value of the acquired portfolio as advised by the valuation panel, or
(b) if he or she considers that the advice of the valuation panel is wrong in a
material respect, remit the matter to the valuation panel for reconsideration
Even if it is not, clearly the Minister plans to have that power, whether the draughtsman managed to include it in the draft for public discussion or not. It will be added if necessary.
Con’s answer also works
Both answers are correct and the two provisions could work in tandem. One should note that the draft s.14 (power to give directions) is much wider than the power to give directions in most other regulatory statutes. For example, the Health Act 2004 (s.10) gives a power to give general — as opposed to specific — directions to the HSE, with specific directions being confined to certain named matters. The Aviation Regulation Act 2001 (s.10) is the same. The Competition Act 2002 does not allow any directions whatever. Note that what we are discussing here are directions, rather than vaguer guidelines (e.g. draft s.13) which must only be taken into account rather than followed.
I think that something should be inserted in the proposed Act requiring a Central Bank letter of support or non-support regarding NAMA valuations, signed by the governor of the Irish Central Bank. NAMA is an enormously important asset transfer for the Irish banking system and the main banking regulatory authority should approve the pricing of the purchased assets. In particular assuring that the banks have not been overpaid for the assets.
@Gregory Connor
What you are suggesting sounds reasonable. Imagine the levels of sign-off, approvals and agreement you would have to go through in any corporation where these sorts of sums (or even smaller ones) were involved. It would be a lot (lot) tighter.
@Gregory
Excellent idea. Maybe a triumverate – the Minister, the Governor and the Comptroller and Auditor General? the C&AG has a solid reputation of at the very least pointing out foolish expenditure by the state.
The banking/financial crisis will take some time to sort out and is likely to span a number of governments which could include all of the main political parties in the state.
In line with what they have done in the USA, I would suggest that the Oireachtas set up an Oireachtas Oversight Panel like the Congressional Oversight Panel (COP) http://cop.senate.gov/ which was set up to “review the current state of financial markets and the regulatory system.”
In the US this panel ” is empowered to hold hearings, review official data, and write reports on actions taken by Treasury and financial institutions and their effect on the economy.
Through regular reports, COP must:
■Oversee Treasury’s actions
■Assess the impact of spending to stabilize the economy
■Evaluate market transparency,
■Ensure effective foreclosure mitigation efforts
■And guarantee that Treasury’s actions are in the best interest of the American people.
Lastly, Congress has instructed COP to produce a special report on regulatory reform that will analyze “the current state of the regulatory system and its effectiveness at overseeing the participants in the financial system and protecting consumers.”
Using this template the Oireachtas could set up its own oversight panel to oversee whatever plan is passed to deal with the immediate banking crisis and any future regulatory reforms .
This 3/4 person panel could include one or more people from outside the country with experience of dealing with a banking crisis.
This power of direction is nothing more than a recipe for whimsical and arbitrary interference by the Minister/Departmental officials. This is the default mode of Irish government. Couple that with secrecy and you have fertile conditions for bad management, inefficiency and corruption.
The powers that be do not value independence or oversight by outsiders.
@Aidan C.
An Oireachtas Oversight Panel will not have the same kind of teeth as a similar body in the US.
Unlike the US, there is no separation of powers between the legislature and the executive in this republic.
All members of the our Cabinets must be members of the Oireachtas ( see Art 28.7.2 of the Constitution (http://www.taoiseach.gov.ie/eng/Youth_Zone/About_the_Constitution,_Flag,_Anthem_Harp/Constitution_of_IrelandNov2004.pdf)
The Government completely dominates the Oireachtas, as it is always drawn from the majority grouping.
In the US, members of the Senate or Congress must resign on taking up executive office eg. Hilary Clinton is no longer a Senator.
There is a world of difference between the kind of oversight that is hard-wired into the US way of government and what happens here.
For a 1980s critique of our system and a move to a separation of powers see http://193.120.95.144/politics/design-for-democracy.pdf
In the UK, a former Cabinet Secretary and Head of the UK Civil Service has recently called for a separation of powers.
http://www.ft.com/cms/s/73f524ca-4faa-11de-a692-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F73f524ca-4faa-11de-a692-00144feabdc0.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3D%2522Andrew%2BTurnbull%2522%26x%3D15%26y%3D5%26aje%3Dtrue%26dse%3D%26dsz%3D
Brian Lucey
Your pretended naievete is a red flag ….! BUT I can resist anything but temptation.
The C&AG is human and can suppress information when he thinks it appropriate. He decided not to draw attention to the written memo to all inspectors of taxes to leave DIRT alone, pending further instructions. I testified that i existed. Revenue Comissioners al said it was news to them. They wouldn’t lie either, not on oath?
Sounds like a similar situation to me!
Govt has no business in business. Let the banks deal with banking.
But when NaMa is passed, I expect lots of rezonings of land to help to create jobs and spur an active economy. Yes! That is the way to go!
More REZONING!