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IMF vindicates Social Justice Ireland claim that NAMA will not increase bank lending
It isn't often that we cite the International Monetary Fund (IMF) as vindicating our position but information revealed by the Department of Finance in response to a freedom of information request does exactly that. The IMF concluded that the establishment of the National Asset Management Agency (NAMA) will do nothing to increase bank lending. This was exactly the claim made by Social Justice Ireland several months ago when it published a statement on NAMA and related issues.
The whole €80 billion-plus project has been promoted by the Government on the basis that, once the banks have been rescued from their troubled land and development assets, they will start lending. Social Justice Ireland's position was stated as follows:
"Government is rightly concerned with the lack of credit being made available for small businesses across the country. In devising a strategy to address this problem Government is simply relying on Ireland’s two largest banks to give priority to supplying credit to businesses rather than seeking to improve their own balance sheets. This reliance is misplaced. Government’s proposals place no obligation on the banks to provide loans to small businesses once they are rescued at tax-payers expense.
An effective way of ensuring credit was made available for small businesses would be for Government to buy back the ICC Bank it sold to Bank of Scotland (Ireland) some years ago. This was a bank focused specifically on providing credit to small businesses and it had a long track record of doing this successfully. Buying it back, which would cost the Government a very small percentage of what it is proposing to spend on NAMA, would provide Government with the required mechanism to address the credit problem being experienced by small and medium businesses."
The IMF views were provided to the Department of Finance in April 2009 but were not published until 2010.