Financial Crisis

[Ringo]

Fine Gael leader Enda Kenny has said his party will be voting against the National Asset Management Agency when it comes before the Dáil next month.

Speaking at the Humbert Summer School in Co Mayo, Deputy Kenny said the Government had refused to consider any alternative to its bad bank solution and described it as a €90bn 'double or quits gamble' with taxpayers. It is the first time the Fine Gael leader confirmed that his party will vote against NAMA, which he called a 'sweetheart deal for the banks'.

However, the Taoiseach said there will be no change to the fundamental thrust of the Government's proposals on the National Asset Management Agency.


The party leader also criticised the McCarthy report's recommendation to cut the number of local authorities from 34 to 22, saying it was 'misguided' and undermined local democracy.

I think there wrong in terms of the local authorities. The 'sweetheart deal for the banks', is playing to the crowd.

[OneRedArmy]

Fine Gael's proposals are light on detail, to say the least. And ref my previous post, someone might want to ask them who would buy all the sovereign debt the country is issuing if they nationalise all the banks.

I still believe NAMA is the least worst option to deal with the bad loans, as the taxpayer will end up paying whatever happens. We seem to be stuck in some kind of perpetual loop of doom where every time we try to deal with the steaming pile of poo, the wailing and gnashing of teeth about why it happened starts again. Limiting the loss to the country from the bad loans should be the number one priority.

What I am worried about(yet not at all surprised), is that the changes to governance and accountability that need to take place in order to limit the likelihood of this happening again, both in the banks and in government (FinReg, Central Bank, Dept of Finance etc.) don't seem to be moving particularly quickly.

But by far and away the worst idea of all is a referendum for NAMA. When half the politicians can't tell the difference between and asset and a liability on a banks balance sheet (the loan is the asset stoopid...) you've got to wonder what hilarity putting it to the people will throw up.

[Macy]

Fine Gael's proposals are light on detail, to say the least. And ref my previous post, someone might want to ask them who would buy all the sovereign debt the country is issuing if they nationalise all the banks.
FG don't want to nationalise the banks, they want to let them fold and let the investors take the hit. It's conjecture how that'd effect sales of bonds, but it would reduce our overall debt levels, by billions.

Labour say nationalise, and so do the IMF as it happens if NAMA is to be the way!


I still believe NAMA is the least worst option to deal with the bad loans, as the taxpayer will end up paying whatever happens. We seem to be stuck in some kind of perpetual loop of doom where every time we try to deal with the steaming pile of poo, the wailing and gnashing of teeth about why it happened starts again. Limiting the loss to the country from the bad loans should be the number one priority.

It's how much the taxpayer will pay that's the problem. Still, I'm pleased you have faith that FF will deal with bankers and developers in a way that is to the benefit (or least damaging) to the taxpayer... I do not. They will overpay and NAMA will be soft on developers, long after Bacon has gone back to being director of various property development companies...


What I am worried about(yet not at all surprised), is that the changes to governance and accountability that need to take place in order to limit the likelihood of this happening again, both in the banks and in government (FinReg, Central Bank, Dept of Finance etc.) don't seem to be moving particularly quickly.
Of course not, as that wouldn't suit the vested interests. But yet you trust them to handle NAMA?


But by far and away the worst idea of all is a referendum for NAMA. When half the politicians can't tell the difference between and asset and a liability on a banks balance sheet (the loan is the asset stoopid...) you've got to wonder what hilarity putting it to the people will throw up.
The dealing with the entire economic fook up and the way out should be put to the country in the form of a general election. Handling the bank clean up should be part of that, along with cuts/ tax increases, stimulus packages etc. NAMA might be the way forward, but the current Government do not have the support or mandate for this or any other proposals.

[OneRedArmy]

FG don't want to nationalise the banks, they want to let them fold and let the investors take the hit. It's conjecture how that'd effect sales of bonds, but it would reduce our overall debt levels, by billions.

Labour say nationalise, and so do the IMF as it happens if NAMA is to be the way!The reaction of debtholders of our sovereign debt to defaulting on bank debt isn't conjecture.

1) There's bucketloads of evidence, over the last decade alone, from Eastern Europe, Latin and Central America and South East Asia about exactly what happens when bank debt is defaulted on. The common denominator is EVERY case is IMF or other NGO involvement.

Defaulting bank debt therefore isn't a realistic option.

2) Irish banks proportional holding of Irish government debt is rocketing. It is highly likely this would be verboten from an EU perspective if the banks were all controlled by Government. So nationalisation isn't a realistic option.

So the level of the haircut then becomes somewhat meaningless as all you are discussing is at what stage Government support is provided.

But the biggest counter argument to nationalisation is Anglo itself. How has nationalisation of Anglo benefited the country? A more basic question, what have the Government done under nationalisation, other than continue to pay ridiculously lossmaking deposit rates and seek a waiver from EU minimum capital rules?

The reality is that the Government has done what it, and successive Governments have done when presented with a tough problem with no "nice solution" (ESB workers in obsolete powerplants, decentralised govt depts, health authority workers with no job to do since the HSE took over.........). Its acquiesced to the unions and stuck its head in the sand.

As someone said on the radio over the weekend, the bankers have made a complete balls of things over the last decade, but why should we entrust the management of the financial system to government/civil service that couldn't organise a driving test.

Nationalisation is a nice buzzword and carries with it a sense of punishing greedy banksters, but when you look into the detail the reality is somewhat different. You can argue that it might be different under a new Government, but
1) Unless the Greens roll back considerably we're stuck with the incumbents for a while longer
2) The civil service is apolitical and has demonstrated its inability to run itself under Governments of various colours

[Macy]

Again, I'll say that Anglo isn't an example of how nationalisation might work. It isn't, wasn't and never will be a bank of systemic importance. It was nationalised to bail out friends of FF. No more, no less.

You have a warpped view of the civil service - Government's make decisions, not civil servants. It's the most basic part of the contract, you do what your minister and the Government want, anything else is a sackable offence. You mention Decentralisation - the Dept of Finance officials recommended not going for that plan, but were overruled. What actual proposals were put to cut numbers in the HSE that were blocked by the unions?

I'd have more faith in the civil service than the same idiots - FF led Government, bankers and developers (wrapped in the remenants of the Galway Tent?) - that got us into the mess to get us out.

[dahamsta]

You have a warpped view of the civil service - Government's make decisions, not civil servants. It's the most basic part of the contract, you do what your minister and the Government want, anything else is a sackable offence.You have to realise that that's an ideal that doesn't happen in reality though Macy? Yes, Minister (http://en.wikipedia.org/wiki/Yes,_Minister) might be a work of fiction, but it's funny because it's so close to reality. I've "worked" with a government department and experienced their little machinations and games once, I hope I never have to do it again.

adam

[OneRedArmy]

Again, I'll say that Anglo isn't an example of how nationalisation might work. It isn't, wasn't and never will be a bank of systemic importance. It was nationalised to bail out friends of FF. No more, no less..So you're saying our only nationalised bank isn't a good example of how a nationalised bank would work? If NAMA is there to bail out the FF cronies (as is alleged), surely there was no need to nationalise Anglo if NAMA was going to be the bailout vehicle?!

I'd have more faith in the civil service than the same idiots - FF led Government, bankers and developers (wrapped in the remenants of the Galway Tent?) - that got us into the mess to get us out.I wouldn't. The civil service (and the quasi-civil service of the Central Bank and Financial Regulator) have proven exactly how much they know about banking and financial services in general over the past decade or so.

Nobody has yet come up with a better plan than NAMA, at the required detailed level of how it would work and who would operate it. If anyone does, it should be discussed. FG's plan involves a significant risk that the country would go bankrupt. Labour's nationalisation plans would send the country back to the 1950's.

It all comes down to ALL politicians (and the meedja) inability and unwillingness to deal with a pretty bad list of options. Everyone is searching for a silver bullet and there isn't one, not even close, but no opposition politician wants to be the one to admit to this, lest it reduce their chance of getting elected. The best case scenario out of this is that it takes one whole generation to clean up the mess and pay down the debt. Hows that for an election slogan?

[Macy]

You have to realise that that's an ideal that doesn't happen in reality though Macy? Yes, Minister (http://en.wikipedia.org/wiki/Yes,_Minister) might be a work of fiction, but it's funny because it's so close to reality. I've "worked" with a government department and experienced their little machinations and games once, I hope I never have to do it again.

adam
I'm well aware of it, and it is a funny programme, but that isn't the reality in Ireland. You can look at countless examples of waste, from decentralisation to evoting, and the civil servants have recommended against. I've said elsewhere, that the reason politicians like the programme so much is because of the impression it gives that lets them off the hook.


So you're saying our only nationalised bank isn't a good example of how a nationalised bank would work? If NAMA is there to bail out the FF cronies (as is alleged), surely there was no need to nationalise Anglo if NAMA was going to be the bailout vehicle
It isn't of systemic importance. It never lent to small businesses or ordinary customers, so it was never going to get things moving in terms of credit and money flow in the economy. There's no contradiction of saying that nationalisation was wrong, and NAMA is also wrong, because they are both intended to protect FF vested interests rather than the tax payer.


I wouldn't. The civil service (and the quasi-civil service of the Central Bank and Financial Regulator) have proven exactly how much they know about banking and financial services in general over the past decade or so.
Political decision of light touch regulation. Lenihan is continuing this by siding with the UK, against the rest of europe, and isn't even showing up at meetings to discuss stronger regulation of the financial sector. You said it yourself earlier - there's no move to increase the regulation. That's Lenihans decision, not some civil servant.


Nobody has yet come up with a better plan than NAMA, at the required detailed level of how it would work and who would operate it. If anyone does, it should be discussed. FG's plan involves a significant risk that the country would go bankrupt. Labour's nationalisation plans would send the country back to the 1950's
Well part of the problem is that the Government won't let others see the figures, including to cost their own scheme. The IMF said nationalisation should happen even with NAMA to make sure there wasn't overpayment. The tax payer is going to pay, it's all about minimising the exposure. Talk of 18-20% write down is not to the tax payers benefit - it's to the bankers, their shareholders and bondholders.

[Fr Damo]

Did anyone hear Alan Ahearn this morning on Morning Ireland? He was defending NAMA against the 30 or so "economists" who have come out with the reasons not go with NAMA over night. He made some excellant points and John Murray, who was playing devils advecate in the discussion was really and truely put in his place. Ahearn's knowledge and expertise was praised in other areas of this forum and I have to say I take his word that NAMA will be revenue Nuetral for every year of the next Ten years, at which point it will shut down and it may even turn a samll profit. Ahearn is far more credible than anyone Kenny or Gilmore has presnted or anyone else on this board (i hope he isn't on here somewhere!) I think the decision to send him on was Lenihan's and an excellant call. Lenihan should also be given some credit now that he is in the job a bit longer and grown with it, than this time last year when I agree he made a public balls of things. Sorry if the reasons I am pro NAMA are none other than I trust Ahearn.

[Macy]

Sorry if the reasons I am pro NAMA are none other than I trust Ahearn.
You do know he's on sabbatical from his "day job" and is a paid special advisor to Lenihan? He is hardly going to come out against his current boss... He was as whooly as Lucey was on actual figures, and he's supposed to be one of those that actually has access to the data.

I also think he's lost credibility by resorting to name calling in the Irish Times.

btw it was 45 economists that signed the letter.

[dahamsta]

I'm well aware of it, and it is a funny programme, but that isn't the reality in Ireland. You can look at countless examples of waste, from decentralisation to evoting, and the civil servants have recommended against.The middle management in the HSE would beg to differ Macy. They love their jobs and they're never going to lose them, despite the fact that they're the biggest single waste of Irish employment money going. They should have been reassigned or sacked years ago. Jobs for the boys.

I'm not saying that the civil service is to blame for all our woes, not for a second, our government ministers haven't made a competent decision in a decade. However the way you're going on, you'd think the sun shone out of the arse of the civil service; and again, having had personal experience of their machinations, it doesn't, not by a long chalk.

adam

[Macy]

I just want responsibility to be allocated (and taken) where it's deserves. Light touch regulation was, and remains, a political decision. It shouldn't be hung at the door of the big bad civil service.

Similarly, The Government took a solo run on the HSE (again to dodge responsibility), and didn't make the efficiency savings. There's been no proposals for the unions/ workers to even block!

There's plenty of genuine things that people could get worked up at with regard to the civil service without taking (due) responsibility from Government.

[OneRedArmy]

You do know he's on sabbatical from his "day job" and is a paid special advisor to Lenihan? He is hardly going to come out against his current boss... He was as whooly as Lucey was on actual figures, and he's supposed to be one of those that actually has access to the data.

I also think he's lost credibility by resorting to name calling in the Irish Times.

btw it was 45 economists that signed the letter.Somebody somewhere needs to come up with a viable well thought out alternative, and Lucey hasn't.

He's at the soundbite level along with FG (and Labour's plan is unworkable for reasons around nationalisation that we'll just have to disagree on).

The whole concept of buying the loans at a market value (FG, Lucey et al) is almost as wooly as paying a Long Term Economic Value/Through The Cycle value (NAMA approach). Here's why.

LTEV is supposed to be an average price through a 'normal' economic cycle. This requires an element of crystal ball gazing into the future, as well as taking in past data (whilst ignoring 'bubble' values) to arrive at an average. Obviously there isn't a fullproof 'right' answer and it is open to over or underpaying for loans, depending on how the future economy pans out. The working assumption is that NAMA will pay more than current market value and hope the passage of time allows them to recoup average value, or more (as in the case of Sweden which turned a small profit, after spreading the sales and workouts over a decade).

BUT market value is no easier to estimate! Market value is what someone will pay for an asset at a point in time. But as anyone who has even done basic economics knows, price is a function of supply and demand. Apply this to NAMA and take two extreme examples.
1) NAMA buys 5,000 loans and immediately puts all the empty developments, part built sites and landbanks on the market, all at once.
2) NAMA buys 5,000 loans and puts one on the market in the first year.
Its fairly obvious that under 1) the 'market' value of each asset will be dramatically impacted by oversupply and will require to drop hugely in order to stimulate demand. Vice versa, in case 2) the lack of supply will maintain a relatively higher transaction price for the asset.

Therefore when economists and politicians bandy about the term 'market value' like its a number that everyone agrees and knows, its nothing of the sort and is open to the same level of guesstimation and error as more theoretical valuation philosophies.

Again, nobody likes to say publicly they don't have a simple answer as people don't want to hear that.

[Macy]

Lucey, FG, Labour et al haven't been given access to the data to come up with a costed alternative, or even to allow them verify what The Government and their advisors are saying.

I'd rather a guess on market value which will be more realistic, than an overestimate that lets the banks off the hook. To me it looks like they're kite flying to set the price - leaks about only 18-20%, and now they back away from that...

[dahamsta]

I just want responsibility to be allocated (and taken) where it's deserves. Light touch regulation was, and remains, a political decision. It shouldn't be hung at the door of the big bad civil service.It should be hung at the door of both Macy, since that's where the blame lies. Just because the civil service works in the background, doesn't mean they don't have a part to play in goverment decisions. Your point about the HSE is a good example: goverment ministers don't just pluck proposals out of the air, they come from their spin doctors, lobbyists, (once in a while) the public, and the civil service. In fact one could argue that because the civil service is so close to government, they have undue influence on matters such as civil service employment. Although of course I would never suggest such a thing. :)

Government isn't binary, laying blame at one door or another - or deflecting blame to one door or another - just isn't fixed in reality. Goverment is push and shove, everyone always gets their hands dirty.

adam

[Fr Damo]

You do know he's on sabbatical from his "day job" and is a paid special advisor to Lenihan? He is hardly going to come out against his current boss... He was as whooly as Lucey was on actual figures, and he's supposed to be one of those that actually has access to the data.

I also think he's lost credibility by resorting to name calling in the Irish Times.

btw it was 45 economists that signed the letter.



Yes I did know he is in the camp and that's why I said it was a good stroke of Lenihan's to send on this morning. Also, he was nailing the government prior to his appointment so I believe his assement is honest.
and BTW if there it's 30 45 or 100 economists it doesn't make a difference if they are all wrong. I bet you Ahearn will show you 45 who believe he is right. As ORA said, we haven't heard much else but points scoring.

[Macy]

I'd disagree about them not being just plucked out of the air, but it's with the spin doctors and advisors the power lies rather than Civil Service. The Minister tells the Civil Service what he wants to do, they'll prepare the information usually with the pros and cons and the Minister makes the decision. Or if there's a particular problem, the civil servant will present a range of options, the consequences of them, and then the Minister makes the decision.

You're giving the civil service too much credit in terms of their power, and downplaying the advisors/ lobbyist/ vested interest (i.e. the FF) side of the equation imo.

[Macy]

I bet you Ahearn will show you 45 who believe he is right.
He didn't seem to get much support when he sent around the email looking for it when he heard about Lucey's article!

Getting 5 economists to agree on something is some going, so I wouldn't discount the significance of 46 agreeing.

[John83]

... Also, he was nailing the government prior to his appointment so I believe his assement is honest...
Yes, who pays him couldn't possibly influence what he says.

[dahamsta]

The Minister tells the Civil Service what he wants to do, they'll prepare the information usually with the pros and cons and the Minister makes the decision.Macy, I have a lot of respect for you, but that's a very naive view of how government operates, and it's not based in reality. You have your opinion and it's obvious I'm not going to change that so I won't go on about it any more. But you're wrong. ;)

[OneRedArmy]

He didn't seem to get much support when he sent around the email looking for it when he heard about Lucey's article!

Getting 5 economists to agree on something is some going, so I wouldn't discount the significance of 46 agreeing.Economists as a profession (whether in the public, private or academic sectors) aren't exactly basking in a warm glow of a job well done at the minute, having, by and large, completely failed to see what was happening in front of their noses (Aherne and Lucey are two of the notable exceptions).

I'm not sure why their views are any less discredited that the public servants and bankers who have borne the brunt of criticism?

[Fr Damo]

[

QUOTE=John83;1219584]Yes, who pays him couldn't possibly influence what he says.

[/QUOTE]

What he getting 3 maybe 400K? this will seem like chicken feed to him because if and I hope when this thing comes to pass he will get that a month on the US lecture circut. He would have been on 250k down in galway plus tv and radio on top of that, so if doesn't believe it I don't think he would say it. I maybe a bit childish about this but we are damned if we do and more damned if we don't, NAMA is the only good thing to happen to the ISEQ in the last 12 months, pensiors feel better, jobs look safer etc etc the wheels start moving again and we gradually get back to where we were less 20% per acre!

[John83]

What he getting 3 maybe 400K? this will seem like chicken feed to him because if and I hope when this thing comes to pass he will get that a month on the US lecture circut.
I'm sorry, are you really trying to argue that he has a major financial incentive to push NAMA through, and therefore couldn't possibly be biased in favour of it? Really?

I'm not debating NAMA here - I haven't the knowledge of the subject to do it justice - but your arguments for Ahearn's credibility have been utterly laughable.

[Macy]

You have your opinion and it's obvious I'm not going to change that so I won't go on about it any more. But you're wrong. ;)
I'll agree to disagree, but I am basing it on my experience from working in the sector (11 years). Maybe I am naive, but I think you're buying into a cliche, and a UK one at that!


I'm not sure why their views are any less discredited that the public servants and bankers who have borne the brunt of criticism?
With economists, he who pays the piper calls the tune. Hence, I'd have more faith in independent economists than those with a vested interest.

[Ringo]

FINANCE Minister Brian Lenihan is considering a major change to NAMA by holding back some of the cash to be given to the banks in return for their bad loans.

Government sources also indicated last night that Mr Lenihan will give more information on the NAMA purchases than had been expected, when he provides details to the Dail next month.

Mr Lenihan is examining a number of ways to put further safeguards in place to protect the taxpayer, including delaying part of the payments.

The move would go some way to addressing the concerns being expressed, particularly from the Green Party, about the values of the loans being taken on by the State.

Rather than giving the entire lump sum up front to the banks for the loans, part of the payment would be held back and only paid if NAMA's assets were giving a return. This system would somewhat avoid overpaying for the assets, while still recognising the post-property bubble value of the loans.

http://www.independent.ie/national-news/lenihan-plan-to-hold-back-badloan-cash-from-banks-1870800.html


Getting the Greens on board !

[dahamsta]

I'll agree to disagree, but I am basing it on my experience from working in the sector (11 years).You've worked in the sector, I've worked outside the sector, banging my head against the wall. I'd argue that I'm more qualified to comment.

[OneRedArmy]

Garrett Fitzgerald's comments re NAMA are interesting. I'm not sure Enda or Richard Bruton will thank him too much, but I would agree with what he said.

Will be interesting to see how well Lenihan does in the Oireachtas committee thats on now. The main problem is that everyone wants to know the result of the haircut now, but that won't be known until the valuation exercise is complete. Somewhat chicken and egg.

[OneRedArmy]

Just watched some of the Committee hearing.

Not Richard Bruton's finest day, to say the least. His retraction on debt default was simply embarrassing. Combined with Garrett Fitzgerald's article, FG have probably missed an opportunity.

Joan Burton fared better, whilst I disagree with the Labour plan at least it's coherent.

[Ringo]

ECB President Jean Claude Trichet has suggested that the beginning of the end of the recession is now in sight.

Mr Trichet said there were indications that 'the significant contraction in economic activity has come to an end.'

Despite the crisis in the credit markets, shrinking economies and rising unemployment, he foresees a period of stabilisation and gradual recovery.
http://www.rte.ie/news/2009/0903/ecb.html

We have increased interest rates to look forward to.:rolleyes:

[OneRedArmy]

http://www.rte.ie/news/2009/0903/ecb.html

We have increased interest rates to look forward to.:rolleyes:
Hardly a surprise? They are historically low and can't go any lower. Rising interest rates will actually be a good sign as they will reflect the brakes needing to be applied to economic growth.

Put it another way, if interest rates stay at current levels its a sign that the economy is going nowhere.

[ruben_sosa]

they will reflect the brakes needing to be applied to economic growth.


...in Germany and France, while we stay stagnant but still have higher rates to absorb.

[OneRedArmy]

...in Germany and France, while we stay stagnant but still have higher rates to absorb.To a certain extent, but broadly our only chance of recovery is in export led industries like IT and pharma. Property and construction crowded out other investments during the last 5 years and we need export industries to take up as much of the slack as possible.

[John83]

...in Germany and France, while we stay stagnant but still have higher rates to absorb.
Artificially low rates drove the boom too. It's a price of being in the Euro. It probably saved us considerable pain with rampant currency devaluation in the last year or so too.

[OneRedArmy]

FG's bumbling around NAMA continues. Dr Dopey (Leo Varadkar) demands that NAMA "publish a list of the 1,500 developers being bailed out"......

Err, keep up Leo, its the banks that are being bailed out. NAMA will actually lessen the chance of the developers being bailed out.

[Ringo]

The Government has published revised legislation establishing the National Asset Management Agency.

Read the draft NAMA legislation and the Explanatory Memo

The Bill includes a series of amendments that were outlined in a statement by the Green Party yesterday evening.

AdvertisementIt is very unusual for a junior party in a coalition to release a series of changes to legislation, while also taking credit for them.

However, the Cabinet has put getting political backing from the Green Party for NAMA as a top priority.

Among the changes is a risk-sharing arrangement between the banks and NAMA. This means, in the case of a small proportion of the loans, the banks will not get all the money immediately.

Whether they receive further payment depends on whether NAMA is successful.

It will be a criminal offence to lobby new agency.

A tax of 80% on developers' profits will be imposed in cases where they gain from land that is rezoned.

The new agency will be obliged to report to the Minister of Finance every three months instead of every year.

Bank directors appointed before 2008 will be required to stand down over the coming two years.

Chief executives of banks will not be allowed become chairmen as happened in the case of Anglo Irish Bank.
http://www.rte.ie/news/2009/0910/banks.html

[John83]

FG's bumbling around NAMA continues. Dr Dopey (Leo Varadkar) demands that NAMA "publish a list of the 1,500 developers being bailed out"......

Err, keep up Leo, its the banks that are being bailed out. NAMA will actually lessen the chance of the developers being bailed out.
Hypothetical situation: I'm a developer. My business is in bad shape. I'm probably going to default on my bank loans. NAMA buy my loans and decline to foreclose on them for a period of some years. Now, you can weasel with words all you can like, but I'm getting government help here.

[OneRedArmy]

Hypothetical situation: I'm a developer. My business is in bad shape. I'm probably going to default on my bank loans. NAMA buy my loans and decline to foreclose on them for a period of some years. Now, you can weasel with words all you can like, but I'm getting government help here.Real situation. You've likely defaulted already. The banks are rolling up interest, may have been for a period of years and haven't done one thing to pursue you.

It really can't get any worse?

[John83]

And the bank stays afloat how? Government money.

Most of the people complaining that NAMA should do this or that have just been renaming money.

[OneRedArmy]

And the bank stays afloat how? Government money.

Most of the people complaining that NAMA should do this or that have just been renaming money.But that Government money has to be paid one way or t'other. And its not paid by bailing out developers.

Its two separate issues and for the umpteenth time, Bruton is in a muddle. I don't follow either FG's or your logic.

As an aside, I've just finished reading the Oireachtas Committee transcript from last week and broadly Joan Burton comes out as being best in control of her brief (spoilt slightly by repeated banging of the nationalisation drum without even high level costs) but she asked a couple of great questions. Arthur Morgan :eek: also asked a lot of good questions, but Bruton wasn't even at the races. From a man of his background I'm genuinely suprised.

[John83]

But that Government money has to be paid one way or t'other. And its not paid by bailing out developers.
I don't follow. You mean paid back? Some of it will, some of it won't, with the NAMA route. It's essentially life support for some businesses, an economic stimulus package in disguise (albeit not the most convincingly directed one I think). Dumping it into the banks for shares probably gets it all back eventually, but that route has its own costs - every bank charge you pay will be partly a stealth tax paying for the foreclosed loans anyway.

I've not followed FG on this much. Anything I've read seems more like electioneering than insightful analysis.

[Macy]

Real situation. You've likely defaulted already. The banks are rolling up interest, may have been for a period of years and haven't done one thing to pursue you.

The banks are rolling up the interest because of NAMA. Why foreclose when you can get the Government to overpay to protect you and your shareholders?


NAMA will actually lessen the chance of the developers being bailed out.

Can't say I trust FF to put in place any organisation that puts the citizen ahead of the developer - no evidence they've ever done so in the past. They fuelled the boom, and therefore the (now offshore untouchable) profits for those self same developers that aren't getting bailed out by NAMA?

[OneRedArmy]

I don't follow. You mean paid back? Some of it will, some of it won't, with the NAMA route. Whatever the haircut paid to the banks, the borrower still remains liable for the full amount borrowed, including rolled up interest. Nothing is being written off at this stage (Zoe will be the first big one). Whether its NAMA or the banks responsible, what you want to do is maximise how much of the borrowing that you can recover.


The banks are rolling up the interest because of NAMA. Why foreclose when you can get the Government to overpay to protect you and your shareholders?The banks have rolled up interest for years. The reason they won't foreclose is that a firesale of assets would crystalise immense losses by driving down values even further.


Can't say I trust FF to put in place any organisation that puts the citizen ahead of the developer - no evidence they've ever done so in the past. They fuelled the boom, and therefore the (now offshore untouchable) profits for those self same developers that aren't getting bailed out by NAMA?If I read you right Macy you seem to think that bailing the developers out and doing the best thing for the taxpayer are aligned. Nothing could be further from the truth.

If you want to give the developers what they deserve, you'd call all the loans now, force liquidation and call personal guarantees and sell the collateral (i.e. do what ACC are doing now). This firesale would bankrupt the developers (which they deserve) and because of the low values that would be recovered on the land and developments, almost certainly bankrupt the banks (which they also deserve). So you'd teach the developers and bankers a lesson, BUT at huge cost to the taxpayer.

The alternative is the NAMA approach, spread the asset sales over 5 or 10 years and get a better return and try to minimise the costs to the taxpayer(a la Sweden). But to do this you can't stick it to the developers and the banks.

[Macy]

But to do this you can't stick it to the developers and the banks.
Of course you can. You pay the banks market value, and the recapitalise, or you nationalise first, then whatever's paid doesn't really matter as the tax payer is both sides of the equation. Either way, the banks take the hit and the tax payer has an upside.

Foreclosing on Developers doesn't necessarilty mean a firesale, especially with the land in state control. I don't expect NAMA to foreclose on any of the developers, or any personal guarantee's to be called in - it's not in FF's interest.

There's going to be a hit for the citizen, it's about making it the smallest hit possible. The way the bill is constructed, and the clear ideological position of Lenihan to keep as much of the banks in private control whatever the cost, is about giving as much as hit to the taxpayer as they can get away with...

[OneRedArmy]

Of course you can. You pay the banks market value, and the recapitalise, or you nationalise first, then whatever's paid doesn't really matter as the tax payer is both sides of the equation. Either way, the banks take the hit and the tax payer has an upside.This has a huge potential upfront cost to the taxpayer in terms of recapitalisation. This is Labour's proposed approach, and they can't even cost it to the nearest billion.

I don't expect NAMA to foreclose on any of the developers, or any personal guarantee's to be called in - it's not in FF's interest.I expect them to wind up companies and to the extent assets are personally guaranteed, pursue individuals. If its guaranteed, they will pursue, if it isn't they can't touch it. Surely you're not naive enough to expect them to seize assets outside of the powers contained in companies acts and bankruptcy laws that have evolved over centuries?


There's going to be a hit for the citizen, it's about making it the smallest hit possible. The way the bill is constructed, and the clear ideological position of Lenihan to keep as much of the banks in private control whatever the cost, is about giving as much as hit to the taxpayer as they can get away with...I agree that there is an ideological goal to keep the banks in private interests, I've given my views on the reasons for this in previous pages (so the Govt can place lots of soveriegn bonds in the Irish banks to fund the deficit that they otherwise couldn't sell to foreign banks). Linking this to maximising the hit to the taxpayer is a non-sequitur IMO.

[Macy]

This has a huge potential upfront cost to the taxpayer in terms of recapitalisation. This is Labour's proposed approach, and they can't even cost it to the nearest billion.
Anything else than paying the realistic market price is a straight transfer of money from the state to shareholders of the banks. Some people may not have a problem with that, but pro the FF version of NAMA people should at least be honest about what it is.


I expect them to wind up companies and to the extent assets are personally guaranteed, pursue individuals. If its guaranteed, they will pursue, if it isn't they can't touch it. Surely you're not naive enough to expect them to seize assets outside of the powers contained in companies acts and bankruptcy laws that have evolved over centuries?
Well there are in a position to seize assets - they could change the law afterall, but I have zero faith that it will even do the former. The policy will be to roll up the interest whilst they try and create another bubble.


I agree that there is an ideological goal to keep the banks in private interests, I've given my views on the reasons for this in previous pages (so the Govt can place lots of soveriegn bonds in the Irish banks to fund the deficit that they otherwise couldn't sell to foreign banks). Linking this to maximising the hit to the taxpayer is a non-sequitur IMO.
They keep getting the bonds away, and surely they'd be downgraded significantly further if the only buyers were Irish Banks. But again, they should at least be honest if that is the logic. Given Lenihan's disinterest in proper regulation of the financial sector, I still think it's ideology ahead of citizen.

[OneRedArmy]

Anything else than paying the realistic market price is a straight transfer of money from the state to shareholders of the banks. Some people may not have a problem with that, but pro the FF version of NAMA people should at least be honest about what it is..Why have NAMA if you are going to pay market price? Its only an unnecessary middleman.



Well there are in a position to seize assets - they could change the law afterall, but I have zero faith that it will even do the former. The policy will be to roll up the interest whilst they try and create another bubble...No offence but this is pie in the sky. Retrospectively ending the concept of limited liability and the body corporate as a distinct legal person?! I'd say the Supreme Court might have something to say about it.

[Macy]

Why have NAMA if you are going to pay market price? Its only an unnecessary middleman.
I agree, that's why it's the wrong approach.


No offence but this is pie in the sky. Retrospectively ending the concept of limited liability and the body corporate as a distinct legal person?! I'd say the Supreme Court might have something to say about it.
I should've ignored you comment, as it distracts from the fact that I don't believe NAMA will even go after them to the extent current rules allow. I actually wouldn't be surprised if there's some loophole that will let developers completely off the hook tbh. We'll know if they ever try and foreclose, but don't be surprised if no developer has their personal garantee's called in and handed over.

[Mr A]

Nama to buy €77bn in loans at 30% discount - Lenihan (http://www.irishtimes.com/newspaper/breaking/2009/0916/breaking4.htm)

[Macy]

Nama to buy €77bn in loans at 30% discount - Lenihan (http://www.irishtimes.com/newspaper/breaking/2009/0916/breaking4.htm)
Irish bank shares up this morning, AIB up 27% so far. NCB has AIB and BoI as buys. But of course this is to the benefit to the ordinary citizen...

[Mr A]

But surely the better the banks do the less they'll need in recapitalisation from the taxpayer?

At this stage whatever happens is going to be unpalatable one way or the other.