De Burca Reveals Emails to Minister Gormley about DDDA

The Green Party continues to move from one pot-hole to the next. This evening Deirdre De Burca is backing up her concerns about the DDDA, which she says she raised with the minister, with personal e-mails released on her website tonight. The email to Minister Gormley in August 2009. The DDDA report is going to be a massive headache for government once published, all indications are the contents are toxic.

De Burca has released a copy of an e mail (see below) that she claims she sent to Minister Gormley and Party Chairman Dan Boyle in August 2009 outlining a range of public concerns about the Dublin Docklands Development Authority.

“This e mail was sent to John Gormley’s private e mail address to ensure that it received his immediate and personal attention” says de Burca. “I had a brief verbal discussion with him about the issue and he encouraged me to send the e mail to his private e mail address. I had several further discussions with the Minister about the DDDA issue over subsequent months”.

The full e-mail is below the fold. I have removed Dan and John’s personal emails from my pasting below but they remain on Deirdre’s own site.

The Green Party had their response out on Twitter earlier.

Forwarding an anti-Nama email rant with a 33 word comment is hardly a smoking gun. @lexia @damienmulley @ChristineBohan @electionie

COPY OF EMAIL SENT BY FORMER SENATOR DEIRDRE DE BURCA TO MINISTER JOHN GORMLEY IN AUGUST 2009

To: Dan Boyle Personal Email
CC: John Gormely Personal Email
Subject: Fw: I believe that these are valid questions and deserve public discussion and definite answers.
From: deirdre.deburca@oireachtas.ie
Date: Wed, 12 Aug 2009 20:57:45 +0100

Dan and John,
As well as the many other e mails I have received pleading with me not to support NAMA, I also received the one below. It is particularly relevant to John and his Dept.

Regards
Deirdre

Subject: RE: I believe that these are valid questions and deserve public discussion and definite answers.

“Current market price” is the nub of the question. Who sets this and what method do they use to set the valuation? Re the “who”, government, banks, developers and auctioneers all have a vested interest.

The key issue here from the economy’s perspective is to pay a fair price as otherwise we take on more debt than is needed which will divert resources from the productive part of the economy.

An example to put John Gormley on the spot relates to the DDDA (Dublin Docklands Development Authority) which falls within his ministerial remit.

Why has the DDDA been unable to publish its 2008 accounts yet?

In February 2009: DDDA promised the Oireachtas Committee on Environment it would publish the 2008 annual accounts by the end of June “at the latest”.
In August 2009: DDDA now says the 2008 Accounts “won’t be published until the autumn” of 2009. Coincidentally, NAMA and the Lisbon treaty will be done by then.

Why has the DDDA been unable to set a value on its Irish Glass Bottle site investment?

(The DDDA formed 26% of a consortium (Becbay) which bought the former Irish Glass Bottle site in Ringsend in 2007 for €412 million. Another partner in the consortium (Davy stockbroker’s private client investment) has already written down the valuation of this site to 60%. The loan to Becbay (from Anglo and AIB) was €293 million.)

Davy’s valued the site at €164 million in 2008.

What value would the DDDA’s books show for the investment at end of 2008?

How will NAMA (with a 30% haircut) value the site today?
at €287 million (70% of purchase price)
at €205 million (70% of outstanding loan)
at 70% of some arbitrary future valuation which assumes that the Environmental Protection Agency (also John’s responsibility) gives the site a clean bill of health, that the DDDA (also John’s responsibility) grants planning permission, that development of the site takes place and that the property constructed there actually sells.

It will be difficult to explain to the taxpayer why they have paid way in excess of the December 2008 valuation to buy up this toxic asset should the DDDA accounts be published before the NAMA valuation.

It will be interesting to see if the DDDA accounts are published after the NAMA valuation whether the NAMA 2009 valuation will be retrospectively applied to the 2008 accounts or whether a “true” 2008 valuation will be shown.

The ACC-triggered High Court examinership of Liam Carroll’s Zoe Group is also very helpful in giving a specific example to discuss. In Monday’s Irish Times, John McManus reported the following:

Applying for court protection Zoe said that if the group of six companies, which have total debts of €1.2 billion, was liquidated, they would have a deficit of €900 million. Based on this writedown value, properties on which it has borrowed €1.1 billion from eight banks would fetch €275 million if they went on sale this morning.
That means a 75 per cent writedown for the banks.

So how can the government justify valuing these properties at €737 million (one third discount relative to €1.1 billion)

I would dearly love to see Mr Gormley’s answers to these questions !

Maurice

What evidence does NAMA have that the current market price of property, land etc is in fact the incorrect price to pay?
What evidence does NAMA have that the current market price of these is not in fact going to decline for a number of years, as would be the case if Ireland were to follow the common experience of previous property crashes?
Why would a temporary nationalisation of the banks be a bad thing, given that this would provide the taxpayer with a valuable asset which could be sold in future years?
Why does no independent analyst support the governments view on NAMA? This includes the Swedish finance minister who ran their bad bank system, who said to the Irish Times that he “favours the more severe mark-to-market write-down of assets rather than a ‘through the cycle’ valuation.”, and that “it (NAMA) does not sound like the right solution to buy assets from private banks.” It also includes the IMF who said ” Insolvent institutions (with insufficient cash flows) should be closed, merged, or temporarily placed in public ownership until private sector solutions can be developed … there have been numerous instances (for example, Japan, Sweden and the United States),
where a period of public ownership has been used to cleanse balance sheets and pave the way to sales back to the private sector”, in the context of saying that the likely losses for Irish banks were such as to render them insolvent.
Why not force the equity and bond holders in Irish banks to take the first place in the queue to absorb the losses that the banks would have to book were current market prices to be paid for the loans made. After all, that’s what risk capital is for?
If the state overpays for the loans relative to current market prices, what, apart from a functioning banking system, does the taxpayer gain?
What percentage of book value of the loans should NAMA pay, given that current market prices for land and development properties are somewhere around 30% or less of book value?
If NAMA were to pay say €60b for loans that are worth only €30b, how can this transfer of a full years tax revenue to private speculators be justified in this economic time?
If, as is entirely possible, the loans transferred to NAMA do not provide sufficient income to meet the coupon payments of the bonds issues by NAMA, will the taxpayer, at least in the short term, not have to meet these payments?

Senator Deirdre de Búrca

Green Party/Comhaontas Glas

Spokesperson on European Affairs, Health & Children, Defence and the Gaeltacht

www.senatordeirdredeburca.blogspot.com

M: 086 8061450

T: +353 1 6183513

E: deirdredeburca@oireachtas.ie

E: deburcaoffice@yahoo.ie

W: www.deirdredeburca.ie

T: www.twitter.com/deirdredeburca

F: http://tinyurl.com/cqbo2w