Lucey on NAMA Legislation

Today’s Irish Times features a very clear and well-argued op-ed by Brian Lucey on the NAMA legislation. Link here.

37 replies on “Lucey on NAMA Legislation”

thanks Karl for the kind words ; i have to say that without the debate this forum allows it would be much much more difficult for me (and I suspect for others involved in the issues) to get to whatever clarity there is in my thinking .


Many thanks. You have consistently provided the clearest-eyed analysis of this debacle. On top of the enormous fiscal adjustment required, continuing failures in regulation and competition policy and no stimulus to promote the productive capacity of the economy, the debt service on the borrowings arising from this “No Bank Left Behind” Bill will drive the economy into a death spiral. As you have continuously pointed out it is pure fantasy to believe that the assets on which these loans were secured will ever yield a return to match the coupon on the borrowings – not to mind the repayments of principal to redeem the borrowings.

The EU and the ECB seems happy, for the moment, to keep this entire fantasy/zombie system on life support. The penny does not seem to have dropped. We had a banking system. We failed to control and regulate it. It’s now completely bust. A brutal nationalisation with massive write-offs to try and extract of couple of solvent banks or the auctioning off of books of performings loans and the retail deposit bases to the barely competent solvent internationally-organised banks are the only options.

The Government is absolutely determined to ignore these options and there can be no doubt that it will succeed in whipping this lengthy economic suicide note through the Oireachtas. Constitutionally, there is no means of preventing this.

Iceland is better off. At least it had the IMF in to sort things out – painful and all as that might be.

Sayonara, Ireland

@Paul H
We seem, in this country, to have abandoned sinking funds, so we hope to grow our way out of debt. I kinda liked sinking funds. They were very prudent.

I increasingly fail to see (and, it may surprise some, academics do try to see the totality of the arument, thats the job really) why as you say we dont just go for, literally, broke. Clear it all out – take the hits, move on with recapped banks , get Blackstone or someone in to take 25% equity, aim to sell the rest of the banks or such as the state wishes, to the markets in 5 years. Yes, shareholders and bondholders lose. But its done. Over. New balls please…..

Section 5 of the proposed bill is an incredible Section. It allows “The Minister may make regulations to do anything that appears necessary or
expedient for bringing this Act into operation”.

Regulations are meant to be secondary legislation providing rules or a framework for putting the basic legislation into effect. This wording appears to allow the Minister to draw up regulations to do anything.

A few other gems….
11(2) “(2) The Minister may confer on NAMA, by order, such additional functions connected with the functions for the time being of NAMA as he or she thinks fit, subject to such conditions (if any) as may be specified in the order.”
The “do what ever i want” clause

“14.—(1) The Minister may give a direction in writing to NAMA concerning the achievement of the purposes of this Act.
(2) NAMA shall comply with a direction given by the Minister under this section.
(3) In its annual report, NAMA shall report on its compliance with any direction given by the Minister under this section.”
The “this is why we pay 500k pa to the ceo….to be a puppet” clause

“29(6) If the Minister is satisfied that a member of the Board has contravened subsection (1) , the Minister may, if he or she thinks fit, remove that member from office.”
The “ethics is a county in england” clause

“89.—(1) The Minister may appoint a suitably qualified person as the expert reviewer for the purposes of this Chapter who, in the Minister’s opinion, has the experience necessary to perform the functions conferred on the expert reviewer under this Chapter.”
The “ill appoint who i want, the board can take a hike” clause

“90.—Subject to any regulations that the Minister may make, the expert reviewer shall determine, in his or her sole discretion, procedures for..”
The “sole discretion so long as they do what theyre told” clause

“102(4) Subject to subsection (3) , where the Minister’s determination is that the total portfolio acquisition value of the acquired portfolio (as determined by NAMA) should be increased,
the Minister may direct NAMA to compensate the participating institution”
The “anyhow, forget that valuation expert panel, I will decide how much to pay banks” clause

@Brian Lucey.
Completely agree.
I love your summary of the clauses.

NAMA’s main merit to politicians is that it appears to have little or no immediate costs. They don’t care a twopenny damn that we are burdening ourselves with a collection of semi derelict building sites, most of whom should be reclaimed by nature over time, wrapped in ivy and twisted vines, for say a €60,000,000,000.00 price tag (maybe I should write €59,999,999,999.99).

The income stream is meant, so we are told, to cover the funding and other costs.
With one leap we are all free and SuperLenihan becomes the toast of EcoFin.

It is all a delusion.
Mr. Justice Kelly pointed out yesterday that the Emperor of Shoeboxonia was telling porkies and wearing no clothes.

NAMA as it will doubtlessly operate, valuing the gently disintegrating partly finished constructions at just enough to keep share and bondholders in the game(to whom they are completely in thrall though the other pole of the FF tent – the stockbroking/finance community and their clients), will give us with the worlds biggest property portfolio.

Now consider what this portfolio will contain.
The detritus of the Celtic Tiger.

Now is the time for realism.
Get the pain over.


What do make of FG’s reaction so far? Personally, I’ve been disappointed. All this stuff about how it’s a big gamble with the taxpayers money is very weak—even the government will admit it’s a gamble. I haven’t gotten much sense either that they’ll be pressurising the government on the getting the valuations down. I think it’s time to drop the National Recovery Bank codology and put maximum pressure on the government to act in the interest of the taxpayer.

Another awful rant from Brian “Subprime” Lucey. This reference to Zoe Developments has to be the biggest red herring of all time. All the good Judge said about Zoe is that it is bankrupt and can’t pay back the one billion in loans. He said nothing about how much the properties would fetch. The 400 million and 1.3 billion figure came from the lawyers who have incentives to submit exteme numbers to the courts.

Lucey’s “analysis” of the OECD and property prices made me laugh. Prof Subprime’s analysis of the irish market for a UK subprime company tells everything we need to know about his skills in this regard:

Would u mind posting this report on this site so other bloggers can compare your valuation method to the NAMA one?

Another hilarous section is 183

NAMA not to be taken to be carrying on banking business, etc.

I speak here only for myself, but I do have a definite FG perspective.

I agree with you that the response of both FG and the LP has been anaemic, a resigned acceptance that this awful government has the votes to push through NAMA. FG fought valiantly to have the remaining banks divided into legacy and NewBankCompanies. I only came to this website about two months ago, so I don’t know what happened here, but on (which is not an ideal forum for reasoned debate) I seemed to be the only poster pushing the idea. The idea has been represented since then, but in the face of a government who are determined to do their own thing, it is very hard for FG to stop them.

The timing of the publishing of the NAMA draft legislation is a repeat of the McCarthy exercise – quelle surprise. Thursday before the August Bank holiday. I know that their principal spokesman went on a brief family holiday on Friday to Sweden of all places.

But happily events sometimes work in your favour, though not if your name is Brian Cowen.

Mr. Justice Peter Kelly has done the state enormous service by exposing the Emperor of Shoeboxonia. Hopefully, the Supreme Court won’t knife us all in the back by overruling him.

Sadly the GP has been bought off with a piece of paper about proper planning and NAMA – Chamberlain arriving in Croydon in September 1938 is the most charitable allusion (I could have referred to the toilet roll in the Cowen caricature being – recycled of course).

Hopefully, the Dail will hold public committee sessions on this bill in the manner of the US Congress. I can only hope that the collapse of the Carroll empire will create an atmosphere where the government policy overpaying on these rubbish assets will be discredited.

@Eoghan M
Old news dude….try harder next time with the smears. Tell me, whats your pecuniary interest in this area.
Now that my retaliation is in, what, exactly, in my analysis today (1/aug/2009) do you disagree with?

@ Eoghan

God man, play the man not the ball in an ungainly manner that would not make the grade in Kilkenny Junior Football.

I presume you have nearly worked out that the properties on Zoes books are unlikely to fetch enough to pay back the debts. Although perhaps you have a different method of valuation. Perhaps you would share it with us.

@Brian Lucey.

In the spirit of ad hominem attacks, maybe Eoghan M. is Eoghan Harris redux.

Ad hominems (and patriotism) are the last refuge of a scoundrel.

I can’t claim any special knowledge of commercial/development property. But comparing rents and prices here and abroad tells me that as far as residential property is concerned, the bubble is still slowly deflating, as these bubbles tend to do.

@ Eoghan M

Great reference, Bandwagon Brian has rode into town again!

@ All others

Criticism is great if you can offer a structured solution. No one really has, nationalisation still costs the tax payer a fortune. There is a sunk cost here that the Irish taxpayer has to absorb for the state to remain solvent. Regarding the argument for nationalisation, we’ve seen how bad a job the government is doing running the country, don’t you think the opportunity cost of giving them the banking system to run as well will be higher than if we leave the banks running independently (ref: their currency equity valuations)? All I’m saying is lads, we all have to roll up our sleeves and grin and bare it …. The Irish people are resilient and adaptable, and the harder we work the luckier we will get

The elephant in the room is the lack of credibility of the Gov’t and the Banks. Is Matthew Barret past President and CEO of Bank of Montreal in Canada and Barclays Bank in London. Matthew retired from Barclays in 2006. The man is credibility personified and could hold his weight against any Frankfurt/London/Zurich bankers. He shoud be approached and offered his pick of whatever authority and position he should be given to mitigate the damage to the country. He was brought up in Tralee and behind that charismatic exterior is a man with a razor sharp mind who is hard bitten enough to do what is good for the country as opposed to what is politically expedient. There may be others interested such as Tony O”Reilly who is wealthy enough that he does not have to Kow Tow to the Lord Faunterloys on Kildare St.

Why is it so difficult for our government politicians to comprehend a simple business truth?

“The value any something is what someone else will pay for it.”

Eventually, those shoebox apartments that Liam Carroll built will again sell for €400 thou, but then a loaf of Pat the Baker’s pan will be €15, and a toast to Arthur will be almost €50.

I have been told by a good source of an estate of 350+ units in south Co. Dublin wherein the builder used substandard concrete in the foundations; many if not all of the units are now crumbling. Cracks are appearing throughout the buildings. They may have to be labeled unfit for habitation. They are not at all sellable as no engineer’s report would approve the houses for mortgages.

I’m sure that there are many other estates throughout the country which were very badly built. There are some houses near Longford town which have never been lived in and are now in need of repair.

Will the State inherit these units through NAMA — and the inherent liabilities arising from lawsuits against the builders and the banks?

Brian, thanks again! You are putting your words onto the MSM. And predictably the claque, look it up, not you Brian!, has come out to play.

What would happen if a gang of terrorist thugs ever got control of a sweet little country? Would they use the banks to swindle all the sweet little inhabitants out of three generations of wealth?
No, too absurd even for a novel!


I have an alternative solution for you. Let the banks fail and go bust (should have done this last year). The dust will have settled and the shouting will all be over in a years time and we will have been forced to find a solution. NAMA on the other hand will drag out for a lot more than a year and cost a lot more.

It seems like NAMA is the only game in town. As Karl Whelan said, people need to move on to ensuring proper oversight of NAMA from within the Dail, to ensure that the taxpayer is not completely fleeced.

Welcome to ; a brief use of the search or indeed a click on the tag function where “NAMA” or “banking crisis” will show, oh, a couple or three posts with the odd halfbaked idea.
As for me riding into anything – those who know me would pity the poor ole horsie!

A very clear article which gets to the nub of the problem with NAMA….

One other question on this “long term value” concept..

What about the foreign debt, the debt secured on foreign assets?
Is an Irish government going to sit in judgment on the long term prospects for house and land prices in Hungary, Bulgaria, the US, South Africa, the UK and the hundreds of other locations around the world where we have toxic assets?

Clearly that is madness, but once a fiction of “long term economic value/pricing” is invented, it must be maintained…we get this kind of blowback.

Note that in the draft of NAMA there is only potential for the long term value to exceed the current value; All the countries listed above must be reassured that the Paddies have done a thorough analysis on their prospects and see the only way is up!!!

This is fraud… Irelands Enron, but with immunity from prosecution drafted into law at the start.

“Is an Irish government going to sit in judgment on the long term prospects for house and land prices in Hungary, Bulgaria, the US, South Africa, the UK and the hundreds of other locations around the world where we have toxic assets?”
Yeppidedoody it is.

@ Joseph

I wouldn’t disagree, but I’m not sure if even the caped crusader would be able to fight anarchy !

@ Brian Lucey

You are always a very healthy contributor to a debate, chapeau (or in this case, masque!)

@ Brian,
I’ve heard you mention the run-up of the bubble was 4/4.5yrs in the context of when we reach a trough. I’m also aware of a graph you recommended showing japan and ireland real estate bubbles which shows a longer run-up. Why are you suggesting such a short run up? Is the best yet to come?

@Ahura Mazda
Actually, im basically an optimist – i think we were in a housing boom till 2002-3 or so. It then began to bubble, its now clear as a bell. ..but I guess im trying to make the point that we are almost sure not to be at the trough now.

I think we’ve had enough moaning and groaning and it is time for some direct action. I propose that a website be set up providing information to concerned citizens about how to contact their TDs as well as a form letter. I think we could model this on the unsuccessful attempt in the US to block TARP.

The message should be simple. If you vote yes to NAMA you don’t get my vote in the next election. This is the most effective grassroots way to get our message across. Imagine every TD and senator getting 10,000 letters expressing this sentiment. Thoughts?

For the less technically aware, pyrite is popularly known as fools gold.

@Frank Galton
You may not have noticed but there are a number of court actions involving builders who used hardcore with pryite in it from a quarry supplying Dublin’s north side – the pyrite expands after contact with air and water and causes concrete floors to crack.

If it were not so serious, it would be hilarious.

@ Brian,

I accept it’s part of a wider point that you’re making. For what it’s worth I’d say 1998. Then again, I prefer to describe what we’ve gone through as a credit bubble rather than a property bubble. Property prices were a function of credit being extended to individuals rather than demographics etc. If mortgages had been capped at 3times main earner, would prices have climbed to the same degree?

The credit bubble is a good point, and given our obsessive love affair with “real” property it would have to have manifested into a property bubble. As to when it started/ended theres several phds in that.

@ Garo
Brian has done his bit, as has Karl Whelan. I live in Brisbane, thank GOD! But I do have ammunition I did not expend in relation to the PAC DIRT enquiry. A whitewash of government policy. But these boyos are brazen. They will respect numbers so yours is a good idea! All we need now is a patsy with half a brain and a website…..

I wouldn’t call someone a patsy if we are wanting them to put their website to probably the best cause for Irish people in a decade. I was hoping that one of the more established bloggers/irish fin sites can take up the cause. Someone like or Ronan Lyons or other good sites that I am not aware of. In fact if a substantial proportion of the bloggers get behind it, it could actually attract some MSM attention. It would be worth to if only to see the two Brians piss in their pants when they realize their scheme to rob the Irish people is encountering serious resistance.
Heck you know what, why not create a domain I just checked and it is available.

Hi Brian L., the thought did cross my mind. I’m not that active in Facebook but you are welcome to start a “cause” invitation 🙂 I seriously doubt if we will reach that many potential voters this way though.

Facebook and web2.0 is fantastic to reach the “why be ar$ed” generation. Answer – its your future as well.
Start a group – invite your friends
“join the dont overpay for nama group”

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