No Mr. Noonan, NAMA Does Not Borrow From the ECB

One of the great myths about the Irish economy that has circulated in recent years is the idea that the National Asset Management Agency (NAMA) has borrowed money from the European Central Bank. I tried on various occasions in the past to observe that this is not the case without having any impact. However, I had hoped that the people running Ireland understood how NAMA works. Apparently this was too much to hope for.

Here‘s Minister for Finance, Michael Noonan, in the Dail yesterday (H/T NAMA Wine Lake):

The money which we accessed for bridging finance from NAMA was money which is due to be repaid to the ECB for the loans it gave to NAMA to acquire the impaired assets in the bank. Again, it is ECB money that is providing the bridge. What will happen is that when the circle is completed and the shareholders give their consent, which is my expectation, the NAMA funds will be restored and NAMA will do what it intended to do last month, namely, it will repay another portion of what it owes to the ECB.

Just for the record (and I know now for sure I’m wasting my time) NAMA has issued bonds to the Irish banks in return for property assets. It can redeem those bonds as it acquires cash for the property assets. The bonds can be used by these banks as ECB-eligible collateral. However, NAMA is not a bank. NAMA is not ECB-eligible counterparty. NAMA has never borrowed, and will never borrow, from the ECB.