And after the Seventh Month the mandarins rested… briefly.
It seemed they had managed to manacle paddy past, present, and future (Paddy) to stump-up the spondulicks to bail out everyone and everything. Hans however, was beginning to smell a rat. The Bonanza would work like so; the ‘Statesmen’ would write the ‘Paper’ and give it to the Banks (via NAMA) in exchange for the Bank’s/developers bad debts, the Bank would then take the ‘Paper’ to the ECB and exchange it for cash. Paddy would be in hock to Hans for 60B (Billion), that is if the write down was a ‘fair’ economic value (30% max.) on the bad loans.

The ’sell’ mantra for the bonamza has clicked into gear.
· It’s good for the banks because it would take bad loans off their books at a good future economic value which means they could make out to be a bank and lend again.
· It’s good for the statesmen because they are in control of NAMA (and the banks because of the Sept ‘08 bailout*) and the stink could be stuck to the developers and the Banks bad loans in the first place.
· It was good for paddy because it would get the banks lending him cash in the present and future, and.
· It was good for Hans because it prevented Eire going (officially) broke and upsetting the Euro (the ECB was also giving the Statesmen enough rope to economically hang Paddy).
· Obviously, it was bad for the developers.

The NAMA controlled loans could then be developed or disposed of (repackaged and sold on) and in due course everything would be OK. The PiNA MAlada’s would flow again.

Hold on a Nano-nama-second, sell on property debt and everything would be OK, paddy and Hans were getting a sense of deja-vu about this, wasn’t this what kicked off the global financial meltdown shuffle in the first place, were the Statesmen and mandarins seriously suggesting this? Yes, but it’s not Hans Mannequin and Paddy Nammaquin’s job, to not see the Emperors repackaged Clothes.

What if the Banks bad debt could be purchased at a much lower level by NAMA, surely that would help?
No, the Statesmen had backed the banks loans in Sept ‘08*, so if NAMA didn’t appear to be paying, the Statesmen would directly to the banks. No, a lower price would probably (officially) bust the Banks and would present the Statesmen with the problem of how to route extra ‘paper’ to the ECB without appearing to. 30% write down on 90B meant routing approx. 60B via NAMA/Banks to the ECB, if the write down was 60% then the routing of paper via NAMA/Banks would be approx. 30B. How would the Statesmen get their hands on the difference of 30B in order to keep the Banks from going (officially) bust, something else would be required to take the hit, NTMA.

Hold on a Nano-nama-second, NTMA issues Government (Statesmen) bonds (paper) in order to assist in financing the country (Statesman). To date (end of July ‘09) NTMA has issued circa 22.7B in Bonds this year with Irish Banks accounting for the purchase of at least one third of this amount, say a minimum of 7.5B (up from 520m or .52B since Oct ‘08). The Banks have been using these bonds as collateral in the ECB to get cash. 7B in 9 months, just how could they get away with a potential extra 30B via this route, best to use NAMA (who work under the auspices of NTMA). Did the Statesmen really want to more then double Eire’s NTMA ’09 Debt to help out the Banks/Developers – regardless, Paddy will be in hock to Hans for 60B.
The Statesmen won’t want to tarnish NTMA, they are the official Bus and will be conducted accordingly down the road, NAMA has the Bad Loans and greedy Developers associated with it (as well as only being around in the short to medium term) in the public mind, line them up for the hit. However, NAMA could not/must not purchased the Banks original bad development loans for less the 70% i.e. a 30% shave.

Hold on a Nano-nama-second, in a recent (July) high court case taken by AIB the valuation on a development property 2.5 years ago was 3.9m, today (according to two separate surveyors) is was in the region of 620k to 650k, this represents approximately an 83% shave. Not the 30% shave the Statesmen have in mind with NAMA.

Think of the whole sordid non-Statesmanlike exercise as an adverse rather than a reverse debt takeover done in our name by our Statesmen; the amplitude of our borrowings/debt is spiralling in the blink of a nano-second. This happened in Sept ’08 and is currently being repackaged and brazenly sold on, the Statesmen are quickly utilising the Bankers old tricks. Eire go (officially) broke , not quite… yet. Eire go “Banama Republic”, you bet.

*The Government has decided to put in place with immediate effect a guarantee arrangement to safeguard all deposits (retail, commercial, institutional and interbank), covered bonds, senior debt and dated subordinated debt (lower tier II)

As a complete layperson in economic matters, may I please ask the opinion of others what may seem a naive question. Following the success of the SSIA savings incentivising scheme - would the government not be able to directly incentivise lending AND long-term bank recapitalisation (in the form of future interest repayments) by setting up a scheme to pay, say, 25% of the repayments on loans to small companies and sole traders for a period of, say, five years, to be reviewed in light of the state of the economy at that time? This might not add up to the total support the banks need, but it would certainly provide a stimulus to economic players with a potential to maintain employment and keep taxes flowing into state coffers…

On a lighter note- googled NAMA and got
Nama (folklore), a hero in Altaic folklore who built an ark to save his family from a flood
Nama (crater), a crater on Callisto, one of the many moons of Jupiter

Take your pick - the crater seems appropriate for the toxic trash

A bad bank is a deferral of consequences and a juggling of who will pay for the disaster.

This is so bad that the bad news will still be coming in in 3 three years time! There is no way that any ANY capital should be wasted on malinvestments like this in view of what is going to happen. When you are in a lifeboat and the food has run out and the lots have been cast, you just get on with it. You do not have a funeral service and you do not throw the food overboard, people!

This tantamount to exempting, from the lot, the biggest of the passengers, on some principle. As a result, more must die before the boat is eventually found.

Yes it is really unthinkably bad. Deckchairs, Titanic. Academic economists. In the real world, survival is for those who have power and use it. NaMa is making choices that will be regarded as highly wasteful and you all know it. Shame.

As CM points out there is every chance that the market still has some way to fall and the real economic value may be less than market value.

The suggestion that NAMA could not make a lower offer than current market value is based on confused logic. If this is a voluntary proces then we do not need to protect the banks’ property rights and should be able to acquire at less than market value (subject perhaps to the relevant bank’s consent in that case). This facility would be an important element to facilitate effective oversight.

1) There doesn’t seem to be any comments that paying current market
prices for NAMA assets would be an overpayment in itself. Do people
really believe that even the limited transactions that take place
currently are reflective of the bottom of the market? The Japanese
property bubble resulted in an 80% decline peak to trough and lasted
over 15 years. I wish the government were debating discounts vs
current market prices rather than the current market vs overpayment
debate. (Scrapping the government guarantee lest we bankrupt the
nation of course).

2) NAMA may pay administration fees to the banks for administering the
loans on their behalf? Are you kidding me?

3) @ Bill. Unfortunately we have to deleverage our economy so
stimulating the flow of credit is unworkable. Credit growth is falling as
demand for credit falls as deleveraging occurs but also as asset
purchases and business plans are uneconomic in a deflationary
economy like ours. The “vicious self-fulfilling cycle” theory of
decreasing credit availability misses the point that it is a return to
normal conditions. A painful return no doubt but an inevitable one.

As regards foisting the issue of recapping the sytem on the senior bond holders. My understaing is that this is currently against the law as depositors rand equal with senior debt holders. You can change the law or can you?
Secondly, when the loan book exceeds the core deposit book and you want to keep lending growing, you are going to need bond holders in the brave new world. will they turn around & lend you money if you default.
Clue, try missing a payment on your car loan and then look fora mortgage.

fair enough. My point is really that the share price movements of AIB/BOI are still somewhat meaningless in the grander scheme of things. Its still pittence compared to just how big NAMA is going to be. Some fairly moderate changes to the underlying assumptions over the €60bio value of NAMA could easily wipe out the €3.5bio equity value of the combined banks. There’s a lot more relevance in the value of the outstanding bonds and how they are reacting.

“(2) Without prejudice to the generality of subsection (1), NAMA may—
(a) provide equity capital and credit facilities on such terms and conditions as NAMA thinks fit,
(b) borrow or raise or secure the payment of money in any manner, including by issuing debentures, debenture stocks, bonds, obligations and debt securities of
any kind, and charge and secure any instrument so issued by trust deed or
otherwise—
(i) on the undertaking of NAMA or on any particular property and rights,
present or future, of NAMA, or
(ii) in any other manner,”

Does “provide equity capital and credit facilities on such terms and conditions as NAMA thinks fit” mean we’re looking at Anglo 2.0?
Does this mean that NAMA might pay coupons with more bonds?
How much more than the 90bn are we looking at?

This Bill seems to seek a blank cheque.

We were at cross purposes so. I did not intend my comment as a comparison between NAMA and nationalisation. I was thinking of NAMA -vs- banks muddling along on their own to clean things up and eventually requiring recapitalisation. I note that the Lex Column in the FT today recommends the mother of all stress tests and then recapitalisation with no AMC and no nationalisation.

I do not see those three issues as being advantages for NAMA over Nationalisation. The NAMA -v- Nationalisation debate is a different kettle of fish.

I agree that shareholder compensation is not a major issue.

I do not think re-nationalised banks would solve the problem overnight and there would still be a long drawn out process to write down loans. It is not clear just how much quicker nationalisation would be in that regard or how motivated staff would be.

As for breaking relationships, the banks move personnel for this purpose already (for example, the guy in Ulster Bank who advised me to fix interest rates a year ago is nowhere to be seen!). NAMA can easily require the bank to break relationships on their behalf. Historically, bankers haven’t had any compunction about screwing delinquent borrowers to the wall in any event.

Indeed, the ministerial discretion embedded in this legislation is huge. Won’t it be fascinating to watch what happens when FF are out of power? My personal train-wreck fantasy involves a) Nama legislation passes in September b) the extremely aggravated people of Ireland vote NO on Lisbon c) Government collapses d) nuclear codes pass to Richard Bruton and George Lee.

Cmon dude, play fair here. €280m would just be the incremental effect on the overpayment number gleaned from yesterday’s events.

Tracing the potential transfer from the taxpayer to the shareholders back from early Feb (pre-Nama annoucement) to now, off the top of my head I think the estimated transfer is about €3 billion. And frankly, to limit state ownership to 80% of AIB and 50% of BOI (as the stockbrokers are hoping) it’s going to have to be quite a bit larger than that.

the gross value added to AIB/BOI this morning was €280mio give or take. If thats the cost of the overpaying on NAMA, then i dont think anyone here is going to complain too much.

Indeed, I’m comparing Nama with, as its opponents like to call it, pre-emptive nationalisation, as indeed it appeared that you were.

Let’s compare on the aspects you mentioned:

1. Speed: Nationalisation happens overnight (could have happened over the long weekend if they’d been willing). Nama purchases drip on and on into next Summer at least and who knows when the banks are properly re-capitalised and working without a guarantee.

2. Admin and Legal Difficulties: I’ve never stressed this as my main reason for opposition to Nama but, yes it is an admin and legal quagmire, surely you can see that by now? As for “leveraging the bank personnel” as an advantage of Nama remember that

(a) An AMC can get whomever it wants to manage the assets, so even under nationalisation, an AMC could choose to employ the banks to do this.

(b) It’s not really such a great idea anyway for lots of reasons that I’ve discussed before (lack of expertise, need to break existing relationships.)

In relation to nationalisation, the shareholder property rights issue can be dealt with in lots of ways (the tough NR route, paying share value on some date, providing pieces of paper that pay off in case the assets turn out to be worth more) but it would be separate and away from the main issue of sorting out or banks. For example, I haven’t seen many stories about potential compensation of Anglo shareholders being a key problem preventing us from sorting out the banking crisis.

Give the opposition a chance! Even the Minister agreed on radio this morning that the oversight and transparency provisions are too weak as they are.

Yes I am sure.

It is quicker because the Government is forcing the pace on write-downs and balance sheet clean up.
It is administratively less of a burden because one can leverage the bank’s personnel in administering the assets acquired by NAMA.
It is less legally fraught because it is a voluntary commercial process so questions of infringing the banks’ property rights do not occur.

I really don’t understand your point.

I note most of the same benefits would accrue from nationalisation save that the shareholders property rights would have to be vindicated. Is that what you are getting at?

Theft from the taxpayer is obviously no longer theft. Economic necessity to have banks that are rich. Because they were so rich before and that turned out well didn’t it! We are stoking them full, so that they can be raped again!

The state bears the risk in NAMA for €90bn. The state is to be the employer of CEO and Chair of NAMA to manage that risk. The CEO and Chair are in the first instance accountable to the state.

Fianna Fail is signalling here that its own political reasons will govern its administration of NAMA in respect of its developer friends.

What’s even worse is the opposition’s pathetic failure to challenge this.

As karl mentioned, the fact the share prices of BOI and AIB have gone up this morning would indicate that the markets liked the wording and that the taxpayer subsidy is likely to be large.
However the information that Nama will pay market prices for some of the property contradicts this assumption.
?????
It all seems diliberitely elusive