THE PURPOSE of Nama, we are repeatedly told, is to allow the banks to get back to lending money to the real Irish economy. This is unquestionably a vital aim. There is one glaring problem, however, writes FINTAN O'TOOLE

Almost half of the toxic loans we’re buying through Nama are held by banks who didn’t lend much money to the real economy in the first place. Of the €77 billion in loans that Nama is to take on, €36 billion is held by Anglo Irish Bank and Irish Nationwide Building Society.

These institutions have damn all to do with the small and medium Irish enterprises that are supposed to be saved by Nama. This is the absurdity at the heart of the whole enterprise: we are putting up staggering amounts of money to encourage banks to get “back” to where they never were.

The big lie in the entire Government response to the banking crisis is that we had to save Anglo Irish and Nationwide (which is to say, Seanie and Fingers) because they are of “systemic importance” to the Irish economy. You only have to look at the documents released last week by the Department of Finance as part of the Nama proposal to know that this is patently untrue. In the case of Anglo Irish, just 11 per cent of its loan book is categorised as “business banking”. Almost all of the rest relates to the property and construction sectors – which is to say to the bubble economy that was parasitic on the real one.

Irish Nationwide, as a mutual building society, was supposed to be in the business of giving mortgages to people to buy houses. In fact, just 22 per cent of its loan book relates to residential property. In September last year, the month in which the crisis came to a head, Irish Nationwide approved precisely zero home loans for first-time buyers.

It is thus quite easy to “get back” to where Irish Nationwide was. Even without Nama, it could surely manage a return to zero.

There’s a huge con job going on here. (I don’t mean to suggest that members of the Government are deliberately misleading the public. Things are much worse than that – they actually believe this stuff.) We’re doubling the national debt in large measure to prop up institutions that had no real and sustainable function in any economy except the Bermuda Triangle of Fianna Fáil, the developers and the banks.

What we’re doing with Anglo Irish is particularly demented. We know that this was a systemically anarchic and amoral institution. We know that it engaged in reckless lending, that it manipulated its share price through the Golden Circle caper, that it cooked its books by playing games with Irish Nationwide and Irish Life, and that, as The Irish Timesrevealed yesterday, some of its current executives had huge loans from their own bank. We know that its overall contribution to the real economy was like that of the Huns to the Roman Empire.

And yet, knowing all of this, we are feeding vast amounts of public money into this thoroughly rotten institution. If we assume a 30 per cent discount on the €28 billion of Anglo Irish loans that Nama is to take over, that’s the guts of €20 billion. Alongside the almost €4 billion we’ve already put in directly and the €6 billion plus we’re being told we’ll have to cough up as part of the Nama process, that’s an astonishing €30 billion of public resources. To call this madness would be insulting to psychotics everywhere.

Let’s put this €30 billion into context. The real economy in Ireland is being crippled by the appalling failure to create a proper broadband infrastructure. The cost of building a world class, high-speed national network was estimated at the height of the boom to be €4 billion.

With the €25 billion or so left over, we could actually invest in all those “green economy” and “smart economy” companies we keep hearing about.

I find it simply incomprehensible that anyone intelligent enough to have joined the Green Party in the first place can believe that it is a better use of public resources to pump €30 billion into the corpse of a dead casino bank than to actually invest in tangible, and economically transformative, infrastructure.

In his speech last week, Brian Lenihan told us that “Nama will ensure that we avoid the Japanese outcome of ‘zombie banks’ that are just ticking over and not making a vibrant contribution to economic growth”. But we already have, in Anglo Irish, an institution that’s so zombie it should be renamed the Hiberno-Haitian Bank.

The proposition at the heart of Nama is that the way to get money to Irish businesses is to give it to a putrid, artificially animated corpse. Even at this late stage, is there any chance that someone in the Government might wake up in the middle of the night with a brilliant brainwave: the way to put money into the real economy is to put money into the real economy?