Banking nationalisation back on the agenda here

Type 'Ireland Greece' into Google and the search engine prompts that the most-read item is a famous forecast an analyst made that the countries will leave the euro later this year. The Standard Bank analyst made the prediction before Christmas, just as Greece was entering its bumpiest period in its financial history. But following last week's EU agreement, driven by France and Germany, for the EU and the IMF to lend Athens money, the financial bet looks like a beaten docket. The Standard Bank will now likely lose on the double because Dublin's National Asset Management Agency (Nama), the bad debt agency, starts this week buying its first loans from the taxpayer-funded banks. Nama, though hugely unpopular and controversial among electors, was after all created a year ago to win confidence of the sovereign debt markets. It also attracted EU backing as the best way for the Government to clean up the banks of the billions of euro worth of reckless loans they advanced to a bunch of property developers during a lending frenzy in the recent boom. Minister for Finance Brian Lenihan last spring sanctioned Nama to buy, on behalf of the taxpayer, most of the very distressed and a chunk of still healthy commercial property loans from five banks. A year later, the bad bank is this week ready to buy the first of the biggest loans the lenders gave to now indebted and insolvent property developers. After much delay, the agency may complete its multi-billion euro shopping for the loans by the end of the year, six months later than many Nama officials first envisaged. Because the agency will hold the poisoned loans for many years, it will fail to win the hearts of taxpayers anytime soon. As popularly depicted, Nama will also deal softly with property developers, while rescuing the careers of a clutch of senior bankers who were responsible for the bust. Many fear that the taxpayer will be left with all the risk-taking. The taxpayer is on both sides of an unfortunate bargain: the Government is ready to pay the banks much less than the lenders expected for their €70bn worth of commercial property loans clogging their books. The banks will therefore receive fewer good-as-cash Nama bonds for the loans which, in turn, means that the taxpayer will have to inject more amounts of cash to make up for the bigger holes in the banks' accounts. The taxpayer has nowhere to hide. Brian Cowen's coalition Government, Patrick Honohan's Central Bank and Financial Supervisor Matthew Elderfield have already decided the amounts of incremental cash taxpayers will need to put into the lenders. Taxpayers have already pumped €11bn, or about a third of all annual tax revenues the Government raises, into three of five banks - the nationalised Anglo Irish and the stockmarket-listed AIB and Bank of Ireland. After getting less for their loans, they, with Irish Nationwide and EBS, now need more cash. Bigger-than-expected discounts, of course, implies that the banks will have to surrender bigger and bigger shareholdings for the bigger cash injections they need from the Government. Leading international analysts, including Chris Pryce at Fitch Ratings, say that the Government, through its bond-and-deposit guarantee of September 2008, and now through Nama, already is effectively controlling the banking system. Formal full nationalisation of one or more of the remaining banks is back on the agenda. Docklands scandal points to need for public inquiry Phil Hogan, Fine Gael's environment spokesman, last week sprung a political ambush on John Gormley, the Green Party's leader, ahead of the Greens' national convention, or ard fheis, by leaking the reports Minister Gormley himself had commissioned into the Dublin Docklands Development Authority (DDDA). Four years ago, the DDDA had part purchased almost 25 acres of former industrial lands, known as the Irish Glass Bottle site, tucked away in a far eastern stretch on the south of the Liffey. Hogan's leaked reports confirmed that the DDDA, on behalf of taxpayers, decided to gamble big with taxpayers' cash with private developers without first bothering even to get a valuation on the barren site. The fiasco will cost taxpayers at least €500m, Hogan estimates. The reports also suggest that questionable planning decisions hang over other great swathes of the DDDA's dockland developments. I have written here before that the questions raised about the DDDA getting involved in the Glass Bottle site that before its more recent industrial history had, for decades, served as a methane-producing tiphead for Dublin city's household waste. The site has been expensively cleaned of its industrial pollutants but will continue to emit methane from the rotting wastes below. Even private investors who lost money on the site tell me that little of value can now be built there and the Glass Bottle site is worthless. The Government has sponsored an inquiry into the reasons for the banking bust, which will carry out its initial investigations in private. The leaked reports into the DDDA show that taxpayers deserve a public inquiry into both the banks and the docklands.