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Irish president agrees to bad loans plan to bail out banks

City A.M. Reporter
IRISH President Mary McAleese has signed the legislation establishing the National Asset Management Agency (NAMA); a &ldquo;bad bank&rdquo;, allowing the government to start cleaning up banks&rsquo; balance sheets.<br /><br />The government, which has already been recruiting staff for NAMA, can now formally launch the agency that will pay &euro;54 bn (&pound;49 bn) to cleanse banks of risky commercial property loans.<br /><br />Ireland&rsquo;s parliament approved the legislation 10 days ago after a protracted debate whose sluggishness contributed to repeated selloffs in the shares of top lenders Allied Irish Banks and Bank of Ireland.<br /><br />McAleese still had the option to send the bill to the courts to check its constitutionality, which would have caused further delays. Her office confirmed she had signed the law, without giving any details about her decision.<br /><br />Finance Minister Brian Lenihan has indicated NAMA would start taking the biggest loans from banks in January, clearing the way for them to raise fresh capital to plug the hole after the transfers, from a variety of potential sources including state injections.<br />&nbsp;<br />Lenihan claims the &ldquo;bad bank&rdquo; will make a &euro;5bn profit because only 20 per cent of NAMA loans will default.