The National Asset Management Agency (Nama), which was set up to cleanse the banking system of toxic debts, has been revealed to be solely a bailout for builders and developers.
The stark truth of the agency's core objective emerged this weekend as the Government's banking strategy lurched towards outright nationalisation.
The deepening crisis in European stock and currency markets forced the Educational Building Society (EBS) into state control as it failed to find private investors, and now market analysts say that AIB, the country's largest bank, will be effectively nationalised by the end of the year.
The unravelling of the Government's banking strategy -- which was designed to avoid nationalisation -- came as Frank Daly, the chairman of Nama, announced that its "core objective will be to recover for the taxpayers whatever it has paid for the loans in addition to whatever it has invested to enhance property assets underlying those loans. It is expected that Nama will have a lifespan of seven to ten years and when it has achieved its core objective, it will be wound up".
Nama will buy loans worth €81bn from Ireland's main banks, but will pay just over €43bn for those loans. Mr
Daly's comments suggest that the borrowers -- including the 10 largest property developers who owe a staggering €16bn -- will be expected to repay half of what they owe.
Mr Daly said that due diligence by his staff had discovered remarkable flaws in the legal agreements that developers had signed to secure their loans. He said that "much of this lending was carried out in haste and inadequately secured and documented", making it difficult to pursue developers for the personal guarantees that many had offered to secure their loans.
In effect, Nama has become the bailout for developers that the Government always claimed that it would not be.