A senior Irish official told US diplomats that loans being transferred to the Republic’s ‘toxic bank’ could be worth half their stated value — at a time when the government was saying losses should be less than a third.
On the day of the emergency budget, Kevin Cardiff — now Department of Finance secretary general in Dublin — “hinted” loans taken by the agency would be discounted by “around 50%,” according to a leaked US embassy cable.
The word “PROTECT” appeared beside Mr Cardiff's name, meaning his identity and/or his comments were not to be disclosed publicly by US officials.
The final discount imposed on development loans by the National Assets Management Agency (Nama) averaged 50% in the end, meaning a loss of almost €40bn (£35bn) for the banks.
Just three weeks after the briefing to US embassy staff, the Department of Finance said the International Monetary Fund (IMF) was wrong to say in a draft report that the losses at Irish banks could be €24bn (£21bn).
Based on such estimates the Irish government said at the time the banks would need up to €7bn (£6bn) in fresh capital. The final figure is 10 times that.