Financial Crisis

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10/09/2009, 9:23 PM
Macy

Quote:

Originally Posted by OneRedArmy

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?

Quote:

Originally Posted by OneRedArmy

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?
14/09/2009, 9:00 PM
OneRedArmy

Quote:

Originally Posted by John83

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.

Quote:

Originally Posted by Macy

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.

Quote:

Originally Posted by Macy

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.
15/09/2009, 9:05 AM
Macy

Quote:

Originally Posted by OneRedArmy

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...
15/09/2009, 11:30 AM
OneRedArmy

Quote:

Originally Posted by Macy

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.

Quote:

Originally Posted by Macy

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?

Quote:

Originally Posted by Macy

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.
15/09/2009, 12:26 PM
Macy

Quote:

Originally Posted by OneRedArmy

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.

Quote:

Originally Posted by OneRedArmy

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.

Quote:

Originally Posted by OneRedArmy

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.
15/09/2009, 12:48 PM
OneRedArmy

Quote:

Originally Posted by Macy

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.

Quote:

Originally Posted by Macy

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.
15/09/2009, 1:54 PM
Macy

Quote:

Originally Posted by OneRedArmy

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.

Quote:

Originally Posted by OneRedArmy

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.
16/09/2009, 3:56 PM
Mr A

Nama to buy €77bn in loans at 30% discount - Lenihan
17/09/2009, 7:45 AM
Macy

Quote:

Originally Posted by Mr A

Nama to buy �77bn in loans at 30% discount - Lenihan

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...
17/09/2009, 10:33 AM
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.
17/09/2009, 10:59 AM
Macy

If they have to be recapitalised, then the tax payer gets a stake in return. By paying over the odds, the shareholders get a return, the tax payer gets vague promises about lending to SME's.
17/09/2009, 12:50 PM
OneRedArmy

Quote:

Originally Posted by Macy

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...

Given the Government owns a stake in the two banks in question from the recapitalisation earlier in the year then, yes, this is to the financial benefit of the taxpayer.

Quote:

Originally Posted by Macy

If they have to be recapitalised, then the tax payer gets a stake in return. By paying over the odds, the shareholders get a return, the tax payer gets vague promises about lending to SME's.

And vice versa if NAMA can recover more than the haircut value (per the Swedish example), the NAMA, and ultimately the taxpayer takes the difference.
17/09/2009, 1:20 PM
Macy

Quote:

Originally Posted by OneRedArmy

And vice versa if NAMA can recover more than the haircut value (per the Swedish example), the NAMA, and ultimately the taxpayer takes the difference.

Did the Swedish haircut also include rolled up interest that accounts for 10% of the valuation? The actual haircut on the top whack prices is only 20%.
17/09/2009, 1:26 PM
OneRedArmy

Quote:

Originally Posted by Macy

Did the Swedish haircut also include rolled up interest that accounts for 10% of the valuation? The actual haircut on the top whack prices is only 20%.

The 30% is the difference between the current book value and the estimated, average haircut. You're forgetting the amount that the banks have already written down the loans by.

Also, the Minister was working with very broad estimates. The reality is the data collection is nowhere near completion.
17/09/2009, 4:11 PM
MariborKev

Quote:

Originally Posted by OneRedArmy

Also, the Minister was working with very broad estimates. The reality is the data collection is nowhere near completion.

Thought he was less than convincing on RTE radio on this very subject this morning. If the data collection isn't complete, why even estimate the figures?
17/09/2009, 5:01 PM
OneRedArmy

Quote:

Originally Posted by MariborKev

Thought he was less than convincing on RTE radio on this very subject this morning. If the data collection isn't complete, why even estimate the figures?

To get the legislation passed...
21/09/2009, 9:58 PM
monutdfc

Quote:

Originally Posted by OneRedArmy

Given the Government owns a stake in the two banks in question from the recapitalisation earlier in the year then, yes, this is to the financial benefit of the taxpayer.

The stake consists of preference shares with a a fixed coupon and a warrant that is very unlikely to be exercised - thus the value of the government stake benefits very little from the increase in the share price.
21/09/2009, 10:07 PM
OneRedArmy

Quote:

Originally Posted by monutdfc

The stake consists of preference shares with a a fixed coupon and a warrant that is very unlikely to be exercised - thus the value of the government stake benefits very little from the increase in the share price.

I'd say it's getting more likely by the day that the warrants will be exercised. I can't see where the private money for recap is going to come from, despite what AIB and BOI are saying.

Anyway the shares are way overvalued IMO, particularly with no good news on unemployment on the horizon. NAMA won't sort out the mortgage and personal debt losses which are starting to climb alarmingly.
22/09/2009, 7:46 AM
Macy

"This is not a bailout of developers"....

Quote:

He said that a close friend overheard a group of Irish developers and builders in a restaurant in Puerta Banus, near Marbella, earlier this month, singing about the National Asset Management Agency (NAMA) and toasting Finance Minister Brian Lenihan.

Read more: http://www.irishexaminer.com/ireland...#ixzz0Rora1KRT
22/09/2009, 8:02 AM
OneRedArmy

Quote:

Originally Posted by Macy

"This is not a bailout of developers"....

Read more: http://www.irishexaminer.com/ireland...#ixzz0Rora1KRT

Hilarious.

But seriously, what does that prove?

Not one developer has been contacted by a bank about NAMA and legally, can't be until the legislation is passed (per AG advice). The loans haven't been valued. They can sing away but the proof of the pudding will be in the eating and we'll see in the New Year how it all plays out.

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