Today’s newspapers report (here and here) that control over Sean Dunne’s properties has been transferred to companies whose main shareholders are Ulster Bank, Co-operative Centrale Raiffeisen Boerleen Bank and Kaupthing (Iceland! Iceland!). Personally, I’m relieved that Mr. Dunne’s bankers are not in NAMA, so the Irish taxpayer won’t be at risk of making losses on his loans, either through NAMA overpaying them or through losses generated for state-owned banks.
The fact that these non-NAMA banks have intervened on Mr. Dunne’s business reminded me of comments from Minister Lenihan in his Last Word interview on Monday. About ten minutes in, the Minister said the following:
There’s no one being bailed out here. Builders have to pay. We’ve already begun to see spectacular crashes among developers. They’re not being bailed out. That is another line of rhetoric we had to listen to for about six months last year, that this was all about bailing out builders. It’s not about bailing out builders and it’s very clear again to anyone who’s reading the newspapers now that it’s not about bailing out builders. Builders who are not paying their debts are going to the wall. That’s what NAMA’s all about.
I think what this misses is that all of the spectacular crashes that we’ve seen so far have come from developers who had the misfortune to borrow money from banks who didn’t get into the NAMA scheme. Perhaps I’ve missed them, but I can’t recall any stories about big developers being closed on by AIB or Bank of Ireland. Indeed, the contrary is the case. Instead there have been stories such as NAMA-bound banks lending Liam Carroll money to pay off unsecured creditors and accepting patently unrealistic business plans in order to give bankrupt developers more rope.
In addition, NAMA’s infamous draft business plan also states that eighty percent of the loans due will be repaid in full, though very little of the repayments will appear until 2013. This is essentially an official statement that NAMA’s officials are planning a program of forbearance for bankrupt developers. When one factors in the fact that NAMA will have the power to extend further credit to certain developers, the difference between “extreme forbearance plus additional lending” and “bailout” may appear to be something of a fine line.
All this means that, much as he would like to, it is unlikely that Minister Lenihan will be able to continue dismissing concerns about NAMA’s relationships with developers quite as easily as Matt Cooper allowed him.