Cuirim fáilte roimh na finnithe. Tá cúpla ceist agam don NTMA ar dtús. I wish to direct a few questions to Mr. John Corrigan and the NTMA and to refer briefly to some of the earlier comments. Mr. Corrigan went to great lengths to defend the type of business model within the NTMA which is based on bonuses. In reality they are not just bonuses but performance related bonuses. It is a valid business model which applies in much of the private sector. The bonuses paid for 2010 must be performance related.
In his opening statement Mr. Corrigan said the remit of the NTMA is to manage the national debt and to access funds for the Exchequer through the international markets. In 2010 we were locked out of the international markets. I am not blaming the NTMA for that but in terms of its primary remit there was a complete failure in that it could not get access to the international markets. The national debt doubled from 2008 to 2010 and we were not able to manage it without entering an EU-IMF programme. There are many other factors involved. Does Mr. Corrigan believe it was appropriate that performance related bonuses were paid at a time when our national debt doubled within a period of 24 months, that we were not able to manage the national debt without assistance from the EU-IMF and that access to the markets was shut down for the second half of 2010? I appreciate that the NTMA very successfully sold bonds at the earlier part and funded the State during 2010 and half of 2011. However, the overall performance was not good and, therefore, bonuses should not be paid. That is separate from the type of business model in place. I have no problem with bonuses being paid if performance is good and the environment is right but in this case I have major problems with it. Perhaps Mr. Corrigan will outline the highest bonus that was paid in 2011 for 2010?
I refer to a point made by the Minister for Finance at the committee last week. He said, and Mr. Corrigan has repeated it here, that the savings over the lifetime of the loans would be €8.5 billion as a result of the reduction in the interest rate as agreed by the eurozone leaders in July. I question those figures from the NTMA. My understanding - correct me if I am wrong - is that the €8.5 billion figure was calculated based on the assumption that the life span of the loan would be seven and a half years. However, under the agreement in July, the loan has been extended to a minimum of 15 years. Thus, when we consider the overall net effect, there will be no saving because of the extension of maturity; and, because we will pay a lower interest rate but over a longer period, the net effect will be an increase in the amount. I do not disagree with the decision that was taken; I welcome it. I believe an extension of maturity is right and that the reduction in the interest rate was long overdue - we argued for it beforehand - but it is important to point out that it is wrong to say we will save €8.5 billion as a result of the reduced interest rate over the lifetime of the loan, because Mr. Corrigan did not factor in the extension of the maturity. I ask him to either correct me or correct the record in this regard.
In an extension of that point, can the NTMA now provide us with the figure for the actual saving for 2011, 2012 and 2013 as a result of the reduction in the interest rate, based on the assumption that the interest rate will be 3.5%? Can that be furnished to the committee?
What strategy does the NTMA have for re-entering the bond market? Mr. Corrigan touched on this here, but he was not providing a direct answer to one of the previous questioners. I have the NTMA's press release stating that Ireland is fully funded to the end of 2013, although there are caveats. It is fully funded up to the end of 2013 but we will have to go to the market within that time for a small portion of money, so the headline was a bit misleading. However, the general public was misled in an even bigger way. People may accept that the State is alright up to 31 December 2013, but are forgetting that two weeks later we will owe €12 billion on a bond. Does Mr. Corrigan agree with my view that this State will need to have accessed around €15 billion of market funding by late autumn 2013, otherwise we will need to either engage in a second programme or receive additional funding from the EFSF? The reason I have come up with that conclusion is that we will need to pay the €12 billion, and we will also have ongoing costs in the first quarter of 2014. Would Mr. Corrigan agree with that sentiment? Whether we get it from short-term loans, long-term loans or wherever, it will be additional to the EU-IMF bailout package and the reserves we have at this point. There will be a need, by autumn 2013, for us to secure €15 billion of market funding.
What are the views of the NTMA on the ESRI's proposal - with which I completely and utterly disagree - that it use some of its reserves to pay down the national debt? That is one of the conclusions of the paper released by the ESRI this week. Some economists in Sinn Féin have argued that we should use some of these reserves to stimulate the economy through a job creation stimulus. I ask Mr. Corrigan to outline how much of the €10 billion in directed EU-IMF programme funds from the National Pensions Reserve Fund were used in the recapitalisation of the banks in July. How much of the €16.4 billion came from the NPRF, and how much of the NPRF is left at the disposal of the Government to use, if it so wishes, in the form of a stimulus?
I may be paraphrasing Mr. Corrigan, but he said in his speech that a line had been drawn under Exchequer funding of the banks. This was stated by previous Ministers for Finance and the Governor of the Central Bank and a number of months later they were embarrassed by what they had said. Is Mr. Corrigan completely confident that the line has been drawn?
I will discuss this matter with our guests from NAMA a little later in the meeting. I have been pursuing for some time the question of upward-only rent reviews, to which a direct answer had not been forthcoming until recently. If Mr. McDonagh's comments to the effect that such reviews will result in a reduction of at least 20% - the estimate is for a reduction of between 20% and 30% - in respect of commercial property are borne out, this will put the relevant section of the stress tests on the banks beyond the adverse scenario. As a result, losses additional to those estimated in the latter scenario will be imposed on the banks. Given that more stress tests will be carried out next year, how confident is Mr. Corrigan regarding his earlier assertion? We all hope it is accurate, but is he in a position to be completely confident about it?
I wish to put a number of questions to the representatives from NAMA. The most notable matter to which reference has been made at this meeting is that NAMA is involved in debt forgiveness for property developers and speculators. It is appalling that this is happening. It goes beyond the remit of NAMA and runs contrary to the spirit in which the agency was established. How many developers have been offered the 10% model of forgiveness? What is the total value of the debt that has already been or which may be extended by NAMA - that is, the State - to these developers? Do our guests have a view on an arm of the State providing for such debt forgiveness when 95,000 people are in mortgage arrears as a result of buying homes from the developers in question?
In its annual report for 2010, NAMA indicated that it had made a €1.1 billion loss for that year. The agency also indicated that it was able to absorb that loss as a result of the 5% subordinate debt which it has classified as capital. The value of commercial property in Ireland has fallen by 7% - I again refer to the comments to the effect that, as is the intention of the Government and on foot of changes which are imminent, a further 20% of upward-only rent reviews will be abolished - while the value of residential property is down by 9%. In addition, there has been no recovery in the residential property market in Britain. In that jurisdiction the value of commercial property has risen by just 1% and residential property by 2%. In the light of these figures, do the representatives from NAMA share the view expressed by others that the agency will probably make a loss of at least €1 billion in 2011? Will it be the case that as a result of its capital being depleted - this was 5% of the consideration or approximately €1.5 billion - NAMA will be required to ask the State for more funds at the end of the year?
In the context of the mortgage property to which NAMA and the media have referred, the agency has signalled its intention to introduce a mortgage product. Mr. McDonagh indicated that NAMA was in discussions with a number of Ministers on this matter. When will people be informed about the actual nature of the product to which I refer? Media reports have indicated that it is a type of insurance clause which relates to the possibility of a property decreasing in value over a number of years. What impact will this product have on the property market? Will it stifle the market in finding its floor? What impact will it have on those who might wish to sell properties which are situated adjacent to NAMA properties and who will not have access to the same type of insurance clause which the agency can offer?
Another issue to which I wish to refer is the level of transparency relating to NAMA. Our guests referred to the constraints they were operating under in this regard. A number of people have been appointed to positions by NAMA to carry out its functions but these positions have not been tendered. Do the delegates believe that is good practice and that it represents best value for money for the organisation and for the State? When did this practice begin within NAMA?
Although the delegates refuse to divulge any private, sensitive and confidential information as a result of the Act, which is understandable, will they advise how many bonuses in excess of €50,000 NAMA paid out? What was the highest bonus paid by NAMA in 2010? I am not asking for the names of the individuals, but if the delegates could give them, that information would be deeply appreciated, although I do not expect to get it. However, the taxpayer has the expectation and the right to know the amount of the largest bonus paid out.
Under section 2 of Part 8 of the Act that set up NAMA, there is a requirement to contribute to the social and economic development of the State. Many of us who would like to see such a contribution made by NAMA have been waiting a long time to see how it would come to pass. To what extent has this element of the organisation's legislative responsibility featured in its work over the last 18 months? Has it actively explored the possibility of such transfers of houses under NAMA stock to local authorities? Will the delegates outline their interpretation of this section of the Act and what NAMA is currently doing to meet this aspect of its legislative remit?
My next question relates to Irish Government bonds and the fact that in February 2011 NAMA bought €50 million worth of Irish Government bonds. This was at a time when there was huge volatility within the Irish bond market. What conclusions did the delegates come to or what prodded them to enter the bond market and buy up Irish Government bonds? It was a gamble, as other investors are not buying Irish Government bonds because of the overall debt burden within the State. Is it the intention of NAMA to buy further government bonds of other sovereign states or other products such as gold?
The annual report of NAMA refers to one of its board directors, Stephen Seelig, a former board member of the IMF. He ran up expenses of €35,915 in 2010 for attending meetings. I understand NAMA paid him his expenses directly. Instead of NAMA booking flights and directly incurring the charges, it paid the cost involved to the board member on top of his remuneration. The annual report states that he attended 21 board meetings, nine audit committee meetings and five risk management meetings. Can the delegates confirm that all those meetings required his physical presence or were they meetings that were held via teleconferencing or other IT facilities?
In regard to comments that the developers will not be able to buy back their properties at haircut prices, what is the policy within NAMA to ensure that this happens? Will NAMA reject an offer for an asset if it is not the highest offer? If a developer who has loans with NAMA made the highest offer, would NAMA reject it because its stated position is that it will not allow developers to buy back assets at reduced costs? I would like clarification on that issue.
What was the legal bill picked up by NAMA in the Paddy McKillen case? How much did that case cost NAMA? I want the cost involved including the amounts paid to advisers and experts, the division of employee time, and the amount that NAMA contributed to Paddy McKillen's costs. Who is responsible in the delegates' view for NAMA losing the case? Who was responsible for taking the view that a decision had been made validly at NAMA on the transfer to NAMA of Mr. Paddy McKillen's loans before the agency had even been incorporated? Has anyone at NAMA or any of its advisers faced penalties as a result of the losses incurred in the Mr. Paddy McKillen case which it has been speculated cost between €2 million and €4 million?
In 2010 the late Minister for Finance responded to a parliamentary question pertaining to a major issue within NAMA, namely, the valuation date of 30 November 2009 set by the agency. At the time the question was what would be the cost of changing the valuation date to June 2010. Advice was given to the late Minister for Finance in 2009 that the property sector had reached rock bottom. I believe this advice was given by someone who is now involved with NAMA but who at the time was involved with Jones Lang LaSalle. However, the value of commercial property has fallen by 20% since that advice was given. Nevertheless, in 2010, in response to a question, the late Minister for Finance stated in the Dáil that changing the valuation date from November 2009 to June 2010 would have a broadly neutral effect, as the losses being suffered in Ireland in the commercial and domestic property sector were being nullified by increases in value in Britain. While I am open to correction, I presume this advice was given to him by NAMA at the time. Obviously, it was completely off the mark and the representatives from NAMA should elaborate on the matter. I have mentioned the issue pertaining to tenders.
Although NAMA publishes a monthly enforcement properties list, it excludes non-real estate assets such as art, helicopters, speed boats, cars, jewellery and wine collections. Mr. Daly has expressed NAMA's desire to be as transparent as possible. In the interests of transparency, will NAMA include these items in future lists to be published? Will it retrospectively include them in the lists already published?