NAMA
Redquartz presented NAMA with outline business plans for 80 loans, totaling approximately 2 billion. Collaborating constructively with account managers, they actively engaged in evolving solutions. However, the abrupt service of receivership letters, devoid of any prior notice, caught them off guard. This unexpected turn of events seemed disconnected from their established relationship, leaving them with the impression that it might be influenced by internal or external political decisions, with no reasons provided for the receivership.
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The history and formation of Nama is well analysed and documented, and below of some of my reflections with the benefit of almost 15 years of time passed.
Put simply, the Irish Banks could not have survived and continued to operate if the distressed and bad loans remained on their balance sheets. All of the banks who were taken into Nama were insolvent in 2009, and the retail depositors of these banks were at significant risk. The bank run risk had been mitigated by the government guarantee, but this had increased the risk to a run on the whole Irish economy - and massive economic destruction. Central Banks and banking regulators can never allow retail banks to be insolvent because of this risk of contagious bank runs - so they have to be dealt with quickly and Nama was the solution in Ireland. By way of a more recent example the First Republic and Silicon Valley banks in the USA were both swiftly closed in early 2023 (over weekends) - to again protect depositors and prevent further bank runs. Contagion is the big fear that central banks never talk about. In 2009, there was a legitimate global fear of bank runs, and Ireland was at the epicentre of this.
The other fact that needs to be understood and accepted is the size and scale of the Irish property bubble - which was essentially a credit bubble of domestic participants. The bubble was very large and it ultimately swamped the Irish economy and government which ultimately resulted in an IMF bailout (subsequent to Nama). The scale of this Irish and global financial crisis needs to be remembered.
The scenario in 2009, and the massive liquidity and confidence crisis in the Irish banks makes it easy for me to see Nama as the logical conclusion. The property loans had to be divided into good and bad, and this division inevitably became messing - like drawing a line on a map. The value of the loans transferred to Nama was very generous to the banks to prevent them failing, and this meant that Nama was always going to struggle to fully recover the €30b plus a commercial return.
Once Nama was formed, it had to follow the roadmap of previous bad banks in the USA and Sweden. Borrowers had to be forced to cooperate and return secured and unsecured assets, and Nama had to pick and choose asset managers from the list of borrowers (because there was nobody else who could offer this role). This ultimately led to accusations of preferential treatment, but its my belief that these are only the edge cases and that Nama was essentially fair to the borrowers. Very few were forced through formal bankruptcy, and the teeth that the Nama had been given was rarely used against borrowers. Edges cases clearly exist and completely fairness is an impossible ask of any large organisation.
By 2013/2014 Nama realised that the large-scale sale of loan books at a discount was easier than working out individual assets and loans, and this became the ultimate end game for most Nama loans. They were sold to US based private credit institutions which became know as the vulture funds and these form the basis of all commercial credit today. Global banks have never recovered from the 2009 financial crisis, the credit markets have fundamentally become more expensive because retail deposits are now essentially guaranteed by various governments.
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c170k people left the industry in Ireland from 2009 and many of them left the country in seek of work.