In a year-end interview with Jody Corcoran in the Sunday Independent, the Taoiseach answered questions about NAMA. The relevant passage is below the fold.
JC: “A lot of people are still confused about Nama. The bottom line, from the beginning, was that it would get credit flowing again. When will credit start to flow, that’s what people want to know?”
BC: “Credit flows again when we take the distressed assets off the books of the banks so that they concentrate on the loan book that is viable and is productive. That will bring more international confidence, the banks being able to do the job, and that’ll bring more capital into the system.
“So we also have in our various acts and legislation passed to ensure that viable business propositions are supported. That’s a case-by-case basis. But the important point is this: if we didn’t legislate for Nama, and we don’t implement what has to be done, the availability of credit to the system will continue to decrease because the banks wouldn’t have the capacity to lend. So you’re asking for the black-and-white answer to that question: until you put in the new structures, and you take the problem out of the system, you’re not in a position to resolve the problem.”
JC: “When will it be? Will it be March, April, February?”
BC: “Well the answer is that Nama will be operationalised in the new year. The transfer of assets begins then. During the course of the six months you’re going to see the main part of that process implemented and arising out of that then you have the prospect of increased credit available . . . so during the course of 2010 we expect to see an improvement in the situation.”
JC: “So it’ll be the latter half of 2010 that credit begins to flow?”
BC: “Well, during the course of 2010, and in the meantime we have a system in place that seeks to ensure that banks are supporting viable business propositions.”
I think it is interesting that despite the point-blank refusal of the bank executives to agree with these claims (see here and here) Mr. Cowen is still maintaining that NAMA will get credit flowing, though not any time soon.
I suspect now that I’ll get the usual set of comments that I shouldn’t expect an undercapitalised banking system to supply large amounts of new credit to an economy undergoing a severe recession or that it’s too much to expect any strategy to deal with our banking problems to be judged on that basis. These points are correct and I have made them myself, for instance here.
The reason this stuff is worth noting is that it shows that the government has not yet moved on from a political strategy aimed at promoting NAMA by claiming that it’s going to do stuff that it won’t actually do. The government is being supported in this by those opinion writers who continue to write (some of them every week) that the passage of the NAMA bill involved the government “winning the argument” about NAMA being the best way to “fix the banks.”
This strikes me as a very backward-looking political strategy, focused on justifying past decisions rather than dealing with what’s to come. A public that has been lead to believe that NAMA was the final solution may not be in any mood to support future plans, no matter how necessary they may be.