John Murray Brown reviews both sides of the debate, with some interesting scenarios for the scale of re-capitalisation that may be required: you can read it here.

4 replies on “FT on NAMA”

The “appropriate” price argument is redundant. The banks are insolvent. The government is standing squarely behind them ready to put in ordinary share capital. Ergo the government is in negotiation with itself. Nationalise and be done with it.

Valuation of these assets may easily performed on a ‘yield’ basis, as this is the only way to value any asset in a falling market. Accountants define an asset as something that produces a positive stream of income or cashflow. Many of these assets have known cashflows or those than can be estimated such as rent.

Tom Parlon of the CIF recently wrote that Foreign Vulture Funds are waiting in the wings to pick-up some of these assets at distressed or fire-sale prices. Several of these funds are known to me, some are from Eastern Europe where not so long ago the Irish were buying aggressively.

The point in the FT article concerning the doubling of Ireland’s national debt is the worrying part, as this may scare international bond investors.

@Derek Brawn: Well stated and your phrase “nationalize and be done with it” sounds just right. The government could show some sensible decisive action: first nationalize, then isolate the bad loans and transfer them into NAMA at a fair price, and then as soon as market liquidity allows, sell the banks in a public offering or private acquisition. Once they are cleaned up and then offered for sale there could be a reasonable degree on interest in purchasing them by institutional investors, or if the government wants to absolutely maximize revenue then from foreign banks seeking majority control. Meanwhile NAMA works hard to collect as much value as possible from the collection of bad loans. If need be NAMA could sell them on (or the underlying property collateral) as you propose.

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