Ex government advisor says NAMA should be more focused on making money for Ireland

Dr Peter Bacon
Dr Peter Bacon

A former Government adviser considered to be the architect of the State's bad-bank has told the banking inquiry it should be more focused on making money for Ireland.

Dr Peter Bacon, economic consultant and former stockbroker, has told the Oireachtas committee he sees a conflict in the work of the National Asset Management Agency (Nama) between debt collection and value for the taxpayer.

He told the inquiry that the agency had been forced to accelerate the sale of assets under pressure from the country's bailout masters in the Troika, the European Central Bank, the International Monetary Fund and the European Union.

Dr Bacon said he would criticise aspects of the agency's ethos on debt collection but that it was only an impression he drew from its work.

"It is acting more as a debt collection agency than as a property value maximising entity," he told the inquiry.

Dr Bacon said he would still back the foundation of Nama over the nationalisation of Bank of Ireland and Allied Irish Banks as it was a way of drilling into their books to discover the true extent of potential losses on bad development loans.

"(Nama) has got the biggest property portfolio under one roof, certainly in Europe," he told TDs and Senators at the committee.

"It has acquired that at rock bottom prices.

"We all know what's happening in the markets.

"It's going through cycles."

The banking inquiry is holding a module into early warnings, divergent and contrarian views during the run-up to the crisis.

"All things being equal, it's not optimal that (Nama portfolio) realisations have been accelerated to a greater degree," he said.

"I was careful to say all things being equal, but they weren't.

"The bailout programme was to accelerate disposals.

"Ireland needed that bailout programme."

Dr Bacon said it would have been a "bad decision" if the Government of 2010 had rejected the bailout offer because it did not support the idea of a quick sale of Nama assets.

The economic adviser wrote a report for Government before the Nama scheme was put in place which estimated the losses in the six banks protected by the 440 billion euro 2008 bank guarantee scheme was about 34 billion euro.

He said his figure was based on numbers publicly available and not from an audit of the banks.

Dr Bacon, who made recommendations in reports to dampen house price rises in the late 90s and early 2000s, told the committee in Leinster House that if he was asked to write another report it would bemoan the lack of action to deal with the mortgage arrears crisis up to eight years since the crisis hit.

"To be fair to government, they took a calculated risk with Nama," he said.

"The principle had been applied but never on a scale which Nama had done - that problem was removed and wisely so but on a basis that the arrears problem has not been."

Dr Bacon revealed he was asked to attend a meeting with the late finance minister Brian Lenihan and one of his senior civil servants at Government Buildings as ideas were being floated on how to handle the crippling bank crisis.

The adviser said he had been called privately to the meeting rather than answering an ad for consultants and that he walked away "scratching my head".

"When I was sitting there, there was already in place an international investment bank opining and giving advice on the same subject - that was Merrill Lynch," he said.

"I don't remember seeing the ad for that one either."

The adviser also hit out at the make-up of property speculators and developers in Ireland.

Dr Bacon said none of them, either before or after the economic collapse of 2008, were publicly quoted companies with the ability to raise funds to beef up long-term investment strategies compared to in London where a number were established.