Economists warn against Nama

www.irishtimes.com

A group of 46 economists has signed an article in today’s Irish Times calling on the Government to reconsider the National Asset Management (Nama) project.

They argue that Nama should pay the banks only the current market value for the loans it will assume.

In response, economist Alan Ahearne, special adviser to Minster for Finance Brian Lenihan, said last night that a number of claims in the article were incorrect. He added that most of the economists in the country had not signed the article drafted by Prof Brian Lucey of Trinity College.

Prof Lucey said he had contacted about 250 lecturers in economics and not one had come back to say they disagreed with the views expressed in his draft. He said a number did not sign because they did not want to get involved in a round-robin exercise.

In the article, the economists say the Government will pay significantly above market value for the bad loans advanced by the banks.

“The key difficulty facing the Government is that to pay prices now prevailing would leave the banks sitting on losses sufficiently large as to effectively bankrupt them, which would then require the State to invest capital sufficiently large as to in effect nationalise the banks,” the economists argue.

“It is thus clear that the Government are determined to pay a price for land and speculative developments greatly in excess of the market clearing price.”

The economists say that by overpaying, the State would wind up transferring to private individuals a sum close to exchequer’s entire annual tax-take.

The economists went on to urge the Government to reconsider its approach to payment for loans to be taken into Nama and to pay no more than current market value, which they said could be ascertained even in these straitened times. Read full article…

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