Thursday, 15 October 2009
NAMA: trick or treat?
Slí Eile: I see that over on irisheconomy.ie Karl Whelan is doing overtime churning out one blog after another on the NAMA business plan. His latest Hard to Deny Now that NAMA is a Developer Rescue Plan is generating a lot of discussion. I am not a fan of NAMA. Prevous blog here Different views emerge about just how dangerous NAMA is as well as on tactics about where we go from here. Is it too late now that the Government have secured their position?
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2 comments:
It is difficult not to be swayed by the concerns of Karl Whelan and his colleagues. This however does not imply that the Minister, his economic advisor and department are explicitly bailing out developer friends through NAMA. There are far less transparent ways of achieving this – nationalisation for instance! The continued problems at Anglo suggest that neither NAMA nor nationalisation will in the long term solve severe institutional problems in the banking sector.
It is clear that prior to the crisis many economists never had a firm understanding on the severe problems in Ireland’s institutional structures or the poor standards of banker behaviour. Now faced with these issues for the first time, the automatic assumption is that the government will behave in a corrupt manner.
It is worth pointing out that asset management agencies such as NAMA are not unusual. Neither is state-ownership of commercial banks. What is unusual in Ireland is the level of public distrust in the institutions of government. Put another way, if the government were to nationalise the banking system as suggested by the “gang of economists” would this immediately restore public trust in the banking system? One only has to think of the government’s past relations with AIB or the continued problems at Anglo to see that this is not clear cut. Nationalisation would present the same credibility issues for the government – though they would have little difficulty selling the opportunity to profit from a stock market sale to Karl and his colleagues – without any improvement in the underlying institutions and practices. Neither option is pretty, but both require a vigilant public.
@Damian Agreed. Of itself, nationalisation or majority ownership of a bank does not guarantee such outcomes as restoration of trust, credit and socially responsible lending and investment. Ownership of a bank or banks needs to be coupled with a change in governance, in ethics and in accountability. Given the implosion of banking there is, I contend, an urgent need to rebuild trust and social responsibility through public ownership and appropriate control mechanisms. A mix of ownership models could provide a basis for greater consumer choice, different models of social economy and banking closer to the community and the real economy of SMEs than the false economy of FIRE. The command and control model characteristic of much of public administration is not the way to proceed. The powers invested in the Minister of Finance (=Department of Finance) indicates a mentality and view of administration based on low trust, secrecy, rigid and conservative views of spending. That is not the type of publicly owned banking we need here.
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