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For Nothing

Sean Byrne

NAMA Land: The Inside Story of Ireland’s Property Sell-Off and the Creation of a New Elite, by Frank Connolly, Gill Books, 320 pp, €16.99, ISBN: 978-0717175475

In a boggy field in Westmeath, on the county’s border with Longford, stands a crumbling block of apartments, a pathetic monument to the mania for building anything anywhere that gripped Ireland between the years 2000 and 2008. The builder paid a local farmer a handsome price for the field but was advised that the land was not suitable for building. He ignored the advice and built the apartments, which immediately began to subside into the boggy soil. The builder paid for expensive work to shore up the apartments but by the time this was done, the property bubble had burst, and the apartments were never “launched”.

The Westmeath apartments were perhaps the most absurd example of building houses and apartments without apparently considering whether anybody would wish to live in them. All over rural Ireland “estates” of badly designed, poorly insulated houses were built far from any employment opportunities and served by no public transport. Many of these ghost estates had been built on land rezoned for housing by local politicians, some of whom accepted bribes for the rezonings.

After seventy years of economic stagnation the Irish economy began to grow spectacularly in the mid-1990s. Ireland, as a member of the EU Single Market, became an attractive location for US multinational companies exporting into the EU and export-led growth, which is the only sustainable growth option for a small open economy, led to a rate of growth only previously seen in postwar Germany. A global recession in the early 2000s caused growth to falter in Ireland and in response the government introduced a set of tax incentives for property development. The building industry, which accounts for about five per cent of GDP in most developed countries, grew to an astounding thirteen per cent in Ireland. This grotesque expansion was funded by the Irish banks, who were able to borrow at low interest rates from banks in other EU countries with no exchange rate risk due to Ireland’s having adopted the euro.

One of the aspects of banking which most people do not understand is that a bank’s deposits are liabilities while its main asset is its outstanding loans. But unlike the physical assets of a firm such as Cement Roadstone Holdings or the intangible intellectual property of a pharmaceutical company like Pfizer, the bank’s assets can evaporate instantly if it emerges that borrowers cannot repay. By 2007 the Irish banks’ loans to property developers were greater than their deposits, a fact highlighted by Prof Morgan Kelly, the first Irish economist to warn of the inevitability of a banking crisis in an Irish Times article in November 2007. While the sub-prime mortgage crisis in the USA and the failure of Lehmann Brothers precipitated the Irish banking crisis, the collapse would have happened eventually, as by September 2008 the Irish banks were insolvent because it had become clear that most of the developers to whom they had lent could not repay. The Irish government decided that the losses of the banks must be socialised by providing them with €70 billion of taxpayers’ money. As the Nobel Prize-winning economist Joseph Stiglitz pointed out in relation to the government rescue of US banks, this was an example of socialism for the rich and capitalism for the poor.

The banks, though now stuffed with taxpayers’ money, still had the problem of the huge “nonperforming loans” to developers. The government sought the advice of Dr Peter Bacon, former economic adviser to Bertie Ahern, on what to do about the loans. Bacon recommended that an agency be set up which would buy the loans from the banks at a discount and pay for them with government-issued bonds. This agency or “bad bank” would then try to recover what they could of the loans by selling off whatever assets the developers had and then repay the bonds. Bacon’s recommendations were accepted, and the National Asset Management Agency was born.

NAMA acquired €78 billion of loans from the banks for €39 billion. In addition to non-performing loans by developers it also acquired loans which were being repaid and their underlying assets. Acquiring the “performing” loans would enable NAMA to sell the underlying assets. Several developers argued that this was a confiscation of their assets and given time they could repay all their loans. Some mounted legal challenges to NAMA. The first successful challenge was by the Cork developer Michael O’Flynn, whose loans NAMA sold to US vulture fund Blackstone. O’Flynn succeeded in buying back the loans and regained control of his business. While Blackstone did not profit much from O Flynn’s loans it made a handsome profit on an office building in Ballsbridge, Hume House, which had been bought in 2006 by Sean Dunne, the loan on which was sold by NAMA to Blackstone. Blackstone and other vulture funds made profits of up to fifty per cent on some of the properties acquired from NAMA. They also exploited a loophole in tax law to establish themselves as charities and paid hardly any tax on their enormous profits. NAMA could not explain why it did not wait and sell the properties itself, which would have reduced the cost to the taxpayer of rescuing the banks. A report commissioned by developer David Daly from economist Jim Power in 2017, and based on a limited number of NAMA sales, estimated that the agency had lost up to €18 billion in public monies due to the way it disposed of properties to the vultures.

The story of NAMA is narrated by Frank Connolly in NAMA Land, a book of exceptionally thorough research and analysis. Connolly’s achievement is particularly impressive in that NAMA is a very secretive organisation and tried to ensure that it would not be subject to the Freedom of Information Act. While this attempt was rejected by the High Court, NAMA releases only heavily redacted files and since 2015 has permitted the destruction of emails from and to staff for over a year after they have left the organisation.

The first issue in setting up NAMA was who would direct it. Astonishingly, Minister for Finance Brian Lenihan suggested that Michael McDowell, former leader of the by then defunct Progressive Democrats, should be made chairman of the board of NAMA. As it was a committee chaired by McDowell that recommended separating the role of Financial Regulator away from the Central Bank, a move which was a major contributor to the banking crisis, McDowell would have been an ironic appointment. The government instead appointed as chairman of the board of NAMA Frank Daly, former chairman of the Revenue Commissioners, with Brendan McDonagh, an accountant with the National Treasury Management Agency (NTMA), as chief executive. Neither Daly nor McDonagh had ever worked in the private sector, had any experience of the property market or taken any decision that involved the evaluation of risky investments. Johnny Ronan, a developer whose loans were taken over by NAMA but who escaped its clutches, commented that the appointment of Daly and McDonagh was “akin to asking an accountant to fly an airplane or a butcher to perform heart surgery”. Ronan’s comment was made in connection with NAMA’s decision to sell Battersea Power Station in London, the most valuable asset of Ronan’s Treasury Holdings, for €600 million to a group of Malaysian investors who subsequently sold it for €1.6 billion. In response to queries about this deal, Frank Daly said NAMA had got a “good deal” and had “no regrets”.

Though the chairman and CEO of NAMA were bureaucrats with little knowledge or experience of property markets, the agency had to employ people with actual experience of property transactions to do its work. The most important operating role of head of portfolio management was gifted to John Mulcahy, former managing director and chairman of the Irish branch of the estate agents Jones Lang Lasalle, who had predicted a “soft landing” for the Irish property market and who had been involved in selling many of the properties whose buyers’ loans had to be taken over by NAMA. Robbie Hanna, a former executive of AIB who dealt with property lending in the bank, was made head of credit risk and Kevin Nowlan, who had worked for Treasury Holdings (whose loans NAMA took over), was employed to handle the distressed assets of Sean Dunne, one of NAMA’s biggest debtors. Mulcahy subsequently left NAMA to advise Denis O’Brien on his global property portfolio. Graham Emmett, NAMA’s head of lending, who had dealt with the loans of Ballymore Properties, was offered the job of head of Ballymore’s UK operations but left NAMA for a more lucrative post with Cheyne Capital, one of the companies involved in the sale of Clery’s and the letting go of its employees with four hours’ notice and no redundancy payments. Within three years of its establishment, fifty NAMA staff members had left, most to work for firms with whom they had been dealing while employed by NAMA.

NAMA proved a godsend for many surveyors and valuers who had lost their jobs due to the collapse of the building industry. Two thousand applied for the two hundred jobs available at NAMA, so the agency had a very good selection of poachers from whom to choose its gamekeepers. Other groups who benefited hugely from NAMA were the lawyers, accountants, estate agents and surveyors whose businesses had been badly hit by the bursting of the property bubble. At a time when the government was cutting allowances for carers and depriving the chronically sick of medical cards, it set aside €2.6 billion for professional fees. The law firm of Arthur Cox alone has so far been paid €40 million in fees.

From its inception, NAMA, which for a time was the biggest property management company in the world, operated according to conflicting objectives. Its ostensible aim was to obtain the best value it could for the taxpayer. This would have required waiting until the property market in the world recovered, gradually selling off properties and allowing developers to finish developments and sell them for a profit. But NAMA was also under pressure from government to bring in money quickly and wind itself up so that government could portray it as “successful”. This, as the economist Peter Bacon, whose brainchild NAMA was, pointed out had led it to become merely a debt collection agency. In this role, it was willing to sell debts to whomever would buy them at whatever price they were willing to pay. Those most eager to buy were US vulture funds, who acquired a huge number of apartments and offices in Dublin at bargain-basement prices, some of which they quickly resold at substantial profits while “managing” others by raising both residential and commercial rents to levels which have made Dublin one of the most expensive cities in the world in which to rent.

NAMA’s eagerness to sell its assets at a great loss to Irish taxpayers was exposed when it came to sell a portfolio of property in Northern Ireland. So many of the loans of Irish developers were secured on properties in Northern Ireland that NAMA appointed a Northern Ireland Advisory Committee. One member of this committee was Frank Cushnahan, a business consultant in Belfast. As soon as he was appointed, Cushnahan began to seek buyers for NAMA’s Northern Irish properties, codenamed Project Eagle. Cushnahan focused on the giant US fund PIMCO, introducing its executives to members of the Northern Ireland executive, including First Minister Peter Robinson. But Cushnahan was also hoping that when the loans were sold, some Northern Ireland developers could be allowed to refinance them. One of those developers, Peter Miskelly, taped Cushnahan accepting £40,000 in cash from Miskelly in return for assistance. Cushnahan was later arrested, as was solicitor Ian Coulter, when it was revealed that Coulter’s firm had placed £7.5 million in an Isle of Man bank account in 2014. It was alleged that some of this money was earmarked to make payments to Cushnahan and to Peter Robinson, then first minister in the Northern Ireland Executive, for their assistance in the sale of NAMA’s Northern Ireland loan book at low prices. While Robinson denied any wrongdoing, revelations relating to Cushnahan’s machinations were a factor in his subsequent resignation and the collapse of the Northern Ireland executive. Cushnahan is being investigated by the UK’s National Crime Agency.

The revelations relating to Cushnahan and the disposal of the Northern Ireland properties is a very damaging insight into NAMA’s modus operandi of selling of assets to whomever would buy them at whatever price they would pay. The disposal of the Northern Ireland assets to US fund Cerberus has led to investigations by the FBI and the Securities and Exchange Commission and has involved former US vice-president Dan Quayle and former treasury secretary John Snow, who worked with Cerberus Capital Management, which acquired the Northern Ireland loans. The ultimate outcome of the Project Eagle debacle was the sale of loans of €6 billion and the assets underlying those loans, ultimately owned by the Irish taxpayer, for €1.8 billion to a vulture fund whose subsidiary, Promontoria, was described by a High Court judge as “ruthless” and “greedy”.

The most enthusiastic supporter of selling off NAMA’s assets at bargain basement prices was minister for finance Michael Noonan. Noonan and the secretary general of his department, John Moran, assiduously courted the vulture funds to entice them to buy NAMA assets. Noonan strongly resisted the holding of an inquiry into the disposal of the Northern Ireland NAMA assets but eventually yielded to political pressure to do so. An inquiry was set up in May 2017 and is still under way. The Public Accounts Committee described Michael Noonan’s meetings with Cerberus as “inappropriate” and the Comptroller and Auditor General concluded that NAMA lost at least €220 million on the sale. Michael Noonan also capitulated to a demand by the European Central Bank that NAMA repay €7.5 billion in bonds, which the banks used as collateral to obtain funds from the ECB, by the end of 2013 – seven years before it was due to be finished its work. This put pressure on NAMA to sell off assets at fire-sale prices to raise the money demanded by the ECB.

Much of what we know of NAMA’s operations is due to the questions posed to it by independent TD and former property developer Mick Wallace. Wallace is not a disinterested critic of NAMA as his loans were taken over by the agency, but without his relentless questioning of its modus operandi the public would not be aware of how NAMA has been selling at low prices assets which ultimately belong to taxpayers.

NAMA claims that when it winds up its operations it will have made a profit. By this it means it will have sold the assets backing the loans it took over from the banks for more than the value of those loans. But it is now clear that in many cases it could have sold the assets for much more than it did. It is also misleading to use the term “profit” since the loans taken over by NAMA had already been substantially written down. NAMA acquired loans worth €78 billion from the banks for €38.4 billion, leaving the taxpayer to fund the €39.6 billion hole this left on the banks’ balance sheets.

Frank Connolly’s extensive and thorough research shows that while NAMA has helped save Irish banks it has given very poor value to the taxpayer who ultimately paid for the bank bailout. When NAMA was being established Stiglitz stated of Ireland’s bailout:

This bank bailout is a simple transfer from taxpayers to bondholders, and it will saddle generations to come. The only thing that might give you solace is that, as chief economist of the World Bank, I saw this type of thing happening in banana republics all over the world. Whenever a banking crisis happens, the financial sector uses the turmoil as a mechanism to transfer wealth from the general population to themselves. I’ve been very disappointed to see that it has happened, not only in banana republics, but in advanced industrialised countries.

NAMA Land is a detailed and compelling account of how NAMA has been a very effective agent in the transfer of wealth from the public to the financial sector, the greatest transfer of property ownership in Ireland since Cromwell’s confiscations.


Sean Byrne lectures in economics at the Dublin Institute of Technology. His main areas of interest are international economics and globalisation.



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