One of the really strange things about economics reporting in Ireland is that once a politician has said something with enough authority, it becomes repeated as truth time and again by our financial journalists, no matter how untrue. An incredible example of this is the idea that NAMA borrows money from the ECB.
During the long tedious NAMA debates of 2009, every government politician was sent out with a spin line about NAMA involving the government getting cheap money from the ECB. Even though it was untrue then, the idea has remained amazingly popular. Now, as rumours of some form of NAMA 2 (perhaps for mortgages) start to circulate, our financial journalists are still busy misrepresenting the basic transactions at the heart of the original NAMA.
Today’s Sunday Times (not on the web as far as I know and I don’t think it would be free even if it was) contains the following two examples. First, we have Brian Carey and Tom Lyons:
The difficulty is who will fund the establishment of Nama 2. Nama is current funded by the European Central Bank.
Then we have Damien Kiberd:
The Irish state has accepted responsibility for both sides of the several banks’ balance sheets. It has done this by providing guarantees that cannot, in extremis, be honoured and by purchasing distressed bank assets using money from the European Central Bank.
Unfortunately, this is not at all how the government, in the form of NAMA, purchased distressed bank assets. The reality is that NAMA purchased the assets by swapping them in exchange for Irish government-backed bonds. There – that’s how it was done. Not so hard to understand really. In fact’s it’s hard to misunderstand. NAMA is funded by you and me.
Of course, one can – if you want – discuss the idea that NAMA bonds can be repo’d with the ECB, if the mood is on them. (And indeed, from the last time we discussed this, I know there are people who comment on this site who have the ability to twist words in such a way that they can satisfy themselves that somehow saying “the ECB funds NAMA” makes sense – but frankly I think those folk are having a laugh.) But that doesn’t change the basic reality of the NAMA transactions.
Given the importance of NAMA as well as the important role the ECB is playing in propping up the Irish banking system, it is really unfortunate to see the roles played by these organisations being misrepresented in this fashion.