Legislation for the establishment of the National Asset Management Agency is published.
NAMA, based in the National Treasury Management Agency, is expected to begin operating in October. It will have new legal powers to compulsorily obtain property and other interests such as shares from developers. The legislation allows NAMA to proceed without being unduly obstructed by legal challenges.
NAMA will take over the properties of the top fifty developers by Christmas and ten thousand loans by next June.
At a press conference to announce the new legislation, Minister for Finance Brian Lenihan TD said,
In some cases, long term economic value will be significantly less than the outstanding loan extended to the borrower. Each loan will have to be valued separately and therefore there won't be a uniform reduction across all the loans in all the institutions.
Reacting to the legislation economist Pat McArdle predicts a small profit for NAMA in the first year of operations.
Reporter David Murphy explains how NAMA will work.
In the case of a bank owed €100m by a developer, the bank will sell the loan to NAMA. The new agency will buy it at a discount. For example, paying €60m by way of government bonds. That money allows the bank to restart lending but the borrower will continue to owe €100m. But it now owes it to NAMA. NAMA will be able to sell, retain or develop properties. The project could last for seven to ten years.
An RTÉ News report broadcast on 30 July 2009. The reporter is David Murphy.