The Carroll Judgment

I’m not a legal expert so I’ve no great insights into what happens next.  More generally, it’s hard at this stage to know what impact this decision will have on the market for Irish development properties or on the prices that NAMA are likely to pay.  But the Carroll judgment is an interesting document in its own right for the insights it gives into the types of businesses whose loans NAMA is going to acquire.

66 replies on “The Carroll Judgment”

From the judgement:

“In short there is a complete absence of any objective evidence or material in the affidavits filed by the petitioner (again leaving aside for the moment the independent accountant’s report) which could lead the Court to conclude that there were some underlying objective rationale or material supporting the petitioner’s contention that the market conditions would change in the short to medium term so as to permit the properties in question to be disposed of in an orderly manner so as to enable it to benefit from any enhanced value.”

And from the NAMA document:

“a reference to the long-term economic value of the property comprised in the security for a credit facility that is a bank asset is a reference to the value that the property can reasonably be expected to attain in a stable financial system when current crisis conditions are ameliorated and in which a future price or yield of the asset is consistent with reasonable expectations having regard to the long-term historical average,”

Either this means that NAMA is unlikely to pass muster if challenged in the Supreme Court, or NAMA is referring to the same ‘long-term’ as Keynes famously once did.

Perhaps ACC’s counsel said it best when he said “Evidence of future economic development would be necessary.”

The crux of the matter, which Mr. Justice Kelly pointed out was, that;
“the whole exercise seems designed to assist shareholders whose investments have proved to be unsuccessful.” Mr. Carroll was told:- That was not the purpose of the legislation i.e. the companies acts 1963 – 2006.


Allied Irish Banks, which holds some 40.8 per cent of the group debt, and Bank of Scotland Ireland Ltd. which holds 26.8 per cent of the group debt, agreed to provide additional finance to deal with the group’s creditors and so to provide interest roll up net of rental income. Those funds have been used to discharge all of the unsecured creditors with the exception of the revenue commissioners …………………………………………………….. So complex is this structure that in presenting the petition to the Court the number of companies involved in the group was misstated as 49 rather than the 51 companies which are in fact in the group. Indeed, the three directors of the companies in suit — Messieurs Liam Carroll, David Torpey and John Pope — are directors of an enormous number of other companies. In the case of Mr Carroll, he is a director of 203 companies; in the case of Mr Pope he is a director of 166 other companies; and in the case of Mr Torpey, he is a director of 62 other companies. Most of these companies are incorporated in Ireland but some are incorporated in Jersey, Northern Ireland and the Netherlands …..It would have been “NICE” of AIB to have loaned them the Money to pay their ……. Taxes,as Im sure We the Taxpayers would have been “happy” to loan it back to AIB .Zero sum game in the best traditions of NAMA so to speak.

Its very clear that in the eyes of the Supremes there is no real prospect of medium term turnarounds in the markets Carroll was in. How this impacts on the rune-telling that section 58 suggests is hard to see now, but it does undermine the concept.
Mind you , DoF stated “straight ahead, damn the torpedoes”….

Thank heavens that the one remaining (and key) part of the separation of powers remains intact. That the courts – and the Supreme Court ultimately – may provide the only possible barrier to the emergence of a fully-fledged BaNama Republic is convincing and damning evidence that this is a profoundly failed democratic polity.

However, the courts may not intervene unilaterally in the NAMA enactment process; a judgement or considered opinion must be sought in a formal and proper manner or a case of substance and validity must be presented for judgement.

This appears to leave two options: (1) relying on the President to recognise the enormity of the NAMA Bill that will be presented for her signature and to refer it to the Supreme Court for a judgement on its constitutionality; or (2) a challenging action by a citizen as a taxpayer (or a group of citizens – insofar as a “class action” may be brought).

I have no wish to traduce the President, but, given the extent to which the first two Houses of the Oireachtas are in thrall to the Government (and to the “permanent government” and economic power elites behind it), I fear the Third House of the Oireachtas may succumb to the enormous pressure exerted. A continuing public and media debate might be sufficient to convince the President that it would be prudent to clarify the constitutionality of the legislation, but one would have to assign a probabilty to this outcome – and to the subsequent judgement were a referral made.

The second option is certain to force the issue, but the outcome would still be uncertain. We are then relying on the commitment, resources and efforts of a citizen (or group of citizens) to mount a challenge. Were this to happen, I am convinced that the analysis presented and debated on this site could play a crucial role in the deliberations.

Whether or not such a citizen (or group of citizens) will emerge will present a defining judgement on modern Ireland and its future prospects.

@PAul Hunt

I fear Paul, on the recent evidence of the Criminal Justice and Blasphemy BIlls that the High Priestess in the Park will do nothing to upset FF.

With the chilling rationality of the Supreme Court, the great NAMA unraveling has begun …

re. Mind you , DoF stated “straight ahead, damn the torpedoes”….

As I could not find any Press Statement on the Dept of Finance web-site, what is the the basis for this?
Have I missed it?


This is from the IT today:
“The Department of Finance rejected any suggestion that the Government’s plans for Nama were affected by the court ruling. “It makes no difference – Nama will proceed as planned,” said a spokesman for the Minister for Finance. “We’ve always made clear that Nama will operate in line with EU Commission guidelines, which set out the use of the long-term economic value measurement.”

“The Department of Finance rejected any suggestion that the Government’s plans for Nama were affected by the court ruling. “It makes no difference – Nama will proceed as planned,” said a spokesman for the Minister for Finance. “We’ve always made clear that Nama will operate in line with EU Commission guidelines, which set out the use of the long-term economic value measurement.””

So…hubris or wha? “sod you supreme court, were going to go ahead anyhow and do 90 Vandives….whatcha gonna do then, eh?”

@Donal O’B
The Department of Finance rejected any suggestion that the Government’s plans for Nama were affected by the court ruling. “It makes no difference – Nama will proceed as planned,” said a spokesman for the Minister for Finance. “We’ve always made clear that Nama will operate in line with EU Commission guidelines, which set out the use of the long-term economic value measurement.”


The rejection of the Emperor of Shoeboxonia’s request for protection was based on the recognition that his companies did not have a reasonable prospect of success. This test is explicitly written into the legislation as amended and the court put strong emphasis on this amended test as it reflected the will of the Dail when amending the legislation.

Sadly, the reasonable prospect of success test will not be applicable to NAMA in any constitutional action. They will look at it in the light of the constitution, natural justice and maybe precedents in other similar jurisdictions.

I doubt if they will be able to rule that it is unconstitutional because it explicitly says that it will pay far too much to people who have destroyed our future and from whom we haven’t a hope in hell of ever getting our money back.

After all, on that basis, what action over the last 10 or 12 years would be constitutional starting ?

NAMA isn’t meant to be an insurance of guaranteed survival, Carrolls companies are folding and that is down to their decisions and how things have worked out with various creditors. He is only one of many, and in the scheme of 90bn (factoring in discounts) he makes ripples but not waves.

Economic value is assumed over time – it seems he won’t get the benefit of time and in fact, it may work out for the best as a better floor can be set on prices if there are a few more fire-sales, i think it will result in more mortgage transactions which would please the likes of me [but not in the schadenfreude sense].

it doesn’t write off the whole concept of NAMA, as much as the present administration are guilty of their share of spin, it seems they have an equal and opposite passenger with a few posters here. ‘one swallow does not a summer make’, equally one developer going belly up doesn’t spell the end of the nation.

@Maurice O’Leary,

You may well be correct. The possibly relevant provisions of Bunreacht na hEireann:

“Art. 43 (2) 1° The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice.
2° The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.
Art. 45 (2) (iv) That in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole.”

are nebulous in the extreme.

I think we can be pretty sure that the drafters of the NAMA Bill strained every sinew to ensure that its provisions would not be vulnerable to challenge on these grounds.

Furthemore, we can also be pretty confident that the European Commission and the ECB, within the limits of what is politcally palatable to the major member-states, will provide whatever support the Government requires in the run-up to Lisbon II.

Outside of the US, the relationship between law and economics (and, more widely, that between the exercise of democratic governance and the design and implementation of economic policy) rarely receives the attention from economists that it deserves. This may have something to do with preserving the purity of economics as a discipline, but, given the depth and breadth of analysis of NAMA on this site, it may be time to engage the legal fraternity.

Given the huge transfer of resources from citizens to shareholders and private developers that NAMA will entail, it would be useful to have the Supreme Court make a judgement on how this may be aligned with “the principles of social justice”, “the exigencies of the common good” and “the welfare of the people as whole”.

@ Karl Deeter,

Truly Zoe is a ripple and not a wave, but what is interesting about the case is what it indicates in terms of the wider game. My personal take so far:

1) There is a consipiracy among the property development interests (developers and their financial backers) to keep assets off the market right now. Zoe shows this clear as a bell. If it weren’t for the involvement of ACC (clearly outside the loop) the debt on Zoe would have just been rolled over by complicit AIB et al and the underlying assets would have been kept off the market.

2) In this way, the entire property market in Ireland is artificial, because the supply side is being propped up by a cartel of developers who refuse to let land onto the market. I know of at least three cases, personally, of private mortgage holders in default, but the banks just keep rolling the payments over – no attempt is being made to foreclose.

3) The Irish Government is clearly in on the game. Nama is not just about bailing out shareholders, but also about keeping this artificial property bubble halfway inflated by keeping the market as far away from these weedy development sites and half built housing estates as possible.

4) So how many ‘performing’ loans are there out there right now, which are not really performing at all? The point is we don’t know, because – even though this is essential knowledge before paying a red cent for bailouts – no one in the Financial Regulator or the Irish government has seen fit to demand this information. They are STILL just going on what the banks tell them.

5) AND YET Artificially high property prices in Ireland will kill off any hope of medium term recovery. Prices still have to fall another 30% before we can restore competitiveness to the economy, but this just isn’t happening, at least not fast enough.

6) In sum, we need to take control of these banks, fire all the idiots who ran them into the ground and revalue the entire portfolios. Once current shareholder value is wiped out, the Irish taxpayer needs to pay to clean up the remaining mess. Then the new banks need to be floated on the market.

@Graham Stull: I wouldn’t say ‘conspiracy’ I’d say ‘outright above board effort!’ i just posted elsewhere that sweden’s largest bad bank ‘securum’ posted a profit after several years by avoiding fire sales in a depressed market. and that is the fundamental difference between economic and market value, is it better for a bank to go in, repo now, force a sale and crystallise losses or to roll up interest over the course of a few years and sell at a higher price over time when the crisis is over? and this crisis, like every crisis, will end eventually, its just a matter of time.

Sadly, ANY solution will take one common ingredient, that of time, and no amount of rationalising the ‘best’ answer or why some are ‘wrong’ or ‘more fair’ is going to get around the fact that time is a vital component to things turning around.

You mentioned people you know – do they plan on never working again? if they were forced to sell now and made to carry out the loss on their home as well as having ruined credit, would that be a better solution than rolling up interest on the basis that they will work again in the future and pay down the debt?

everybody seems to be conservative in general but liberal in particular – ‘developers should be shut down/made pay/we are being taxed too much to save banks’ but at the same time they wouldn’t be able to cope if the bank demanded their debt in full from them as an individual and that would be ‘wrong’. keeping money in a bank still remains more popular than holding everything in cash on your person.

the prices drops are showing up, every property report agrees on that fact, regarding how much the prices have dropped is an open question, this country is in the mid 1900’s in terms of market transparency when it comes to property, but then again, ireland is a small country with a small economy on the edge of western europe and to expect it to be world class in that respect might be asking a bit much.

@ BL

Brian, the SC did not conclude that there was no prospect of a turnaround in the medium term.

They concluded that the paucity of supporting evidence (including not presenting valuations to support the statement of affairs and lack of evidence regarding the banks’ willingness to continue funding the group etc.) presented with the petition meant that they were unable to conclude that the company had a reasonable prospect of survival as a going concern.

This is distinctly different.

@Graham Stull

I was looking at the details of the appeal and must admit I was thinking ‘conspiracy?’ because it doesn’t look to me like Zoe/Carroll really put up much of a fight or enough ‘evidence’ before their worshipfulnesses. Did Mr Carroll fall….. or was he pushed? Thanks for your post. Agree with you on what we should do.

@Karl Deeter,

On the Sweden Ireland comparison, I’m not the best person to answer that one but people who have studied both cases seem to say there are substantial differences (extent of public ownership of banks, profile of shareholders, scale of the problem etc.) which defy direct comparison.

Whether the people in question will work again or not is not the issue. The issue is they cannot afford the mortgages they are carrying and the wages they would need to be earning in order to afford them imply a wage level at which Ireland is just not competitive.

In terms of being individually liberal and generally conservative, I wholly agree that I (and everyone else) am like that. That is the nature of policymaking – you must abstract from the individual cases (in which emotions distort judgement) in order to make judgements that apply generally.

Of course it is hard on individual shareholders to take a hit. Of course bank execs have families too. But the question is who has to hold the bag, those who took the risks and would have stood to gain the profits, or the taxpayer?

As concerns the price drops – I logged on the other day and I was truly shocked at some of the new entries on in terms of prices. Frozen in time. It seems to me there was precious little evidence of reality having bitten there at all. But do correct me if I’m wrong.

@Paul Hunt

I am not a lawyer, but I think that, unless perverse intention or corruption was blatantly obvious, the SC would have to leave the judgement of the common good to the Oireachtas.

@Richard K

You are hardly suggesting that Mr. Carroll’s legal team was negligent in presenting it’s case, that there was evidence that could have been presented to support the assertion that there was a reasonable prospect of a work out in three years.

For the biggest case in the history of the state, with billions at stake (makes Fyffes vs. DCC look like an argument over pocket money), surely the plaintill and his legal team did their absolute best.

The standard of proof required was not even very high.
A reasonable prospect, not even the balance of probabilities.

If there was any evidence of a turnaround in the medium term, don’t you agree they would have presented it?

@Paul Hunt and Vincent Byrne

“You may be correct. If so, we are relying on my second option.”

With regard to this point I was thinking who apart from ACC could take up this poisoned chalice.

One group came to mind.

Perhaps the self employed individuals and companies who supplied the developers with materials and labour that have not yet been paid?
Much Like ACC they have an interest in getting to what ever money/assets they can before the National banks get it through Nama.
Or are they better off waiting for Nama in the hope they are more likely to get more of their money?

I don’t think anyone disagrees that time is required to resolve this mess. “Shock therapy” is not really an option. For me, the key question is: is the commitment to a future (potentially unlimited) stream of payments that the Government is imposing on citizens excessive (and therefore not in the interests of citizens)? Most of the posts on this site (in line with the position expressed by the now infamous “Gang of 20” in April) argue that it is.

My contention is that the Supreme Court is the only body with authority remaining which may deliver a definitive judgement on this question and force a revision of NAMA – and that it should be engaged to do so.

@BL, Paul, Michael
Thanks for the source.
Let us see what emerges during the Dail debate on NAMA. Perhaps Patrick Honohan’s NAMA2 thinking will lead to changes! It was “only” an anonymous spokesperson’s statement!

“Furthemore, we can also be pretty confident that the European Commission and the ECB, within the limits of what is politcally palatable to the major member-states, will provide whatever support the Government requires in the run-up to Lisbon II.”
How long before this line is used by anti-Lisbon campaigners to assert that the EU supports crony-capitalism in Ireland – the very thing that has brought us to where we are?

Given the initiative of ACC/Rabo on Zoe, is there discussion at EU-levels (or even at Member-state level) on the capabililty of our government to manage its response to this crisis in a way that does not threaten a Yes vote to Lisbon2?

@ Maurice O’Leary

From the judgement regarding the accountants report “The opinion of the independent accountant is explicitly based on a number of assumptions, which are not verified by evidence. The accountant himself refrains from expressing any opinion about them. Those, such as valuers, who have made the assumptions, have not given evidence; nor have their reports been put in evidence. The report of the independent accountant is not based on evidence. Thus it cannot be of any value in assisting the court to determine whether the companies have a reasonable prospect of survival. ”

Re the banking “The relevant fact is that the basis on which the banks support the petitioner’s application has not been articulated to the Court and no opinion has been expressed on their behalf that the appointment of an examiner could reasonably be expected to result in the survival of the company as a going concern.”

Interesting judgement. I would never suggest anything about the efforts of the legal advisors!

I do believe that overall this is a very satisfactory outcome for business generally in clearly defining the evidentiary requirements of the examinership process.

@Maurice O’Leary,

I am not a lawyer either and that’s why I would like to see some input from m’learned friends. Again, I think you may be correct. The Constitution simply provides guidance to the Oireachtas in these matters and leaves it up to them to define these nebulous concepts as they debate and enact legislation.

The bringing of a case, however, would compel more transparency on the assumptions and calculations the DoF is using than is likely to be presented in the Oireachtas debates. There is a possibility that the whole farrago could collapse under the weight of public ridicule and incredulity without the Supreme Court making a judgement.

@Richard K

Surely Mr. Justice Kelly’s judgement in the HC makes it almost impossible for any property company without its own contracting arm to succeed in gaining the protection of examination.

“The whole exercise seems designed to assist shareholders whose investment has proved to be unsuccessful. As Mr Justice Clarke has already said in the case which I have quoted from, that is not the purpose for which the legislation was intended. “


These are valid queries, but are probably taking us off the track. The EU really has no option except to put all its money on the horse that’s running. There is a core anti-EU vote in every country and Ireland is no expection, but there is little now for the disparate elements to coalesce around. The big unknown is the extent anger with the Government will turn lukewarm yes votes into no votes or leave potential yes voters sitting on their hands.

@Paul Hunt

You have hit the nail on the head.
The injection of reality – the exposure of the immodesty of the appearance of the Emperor of Shoeboxonia – is the crucial aspect of the Zoe case.

How can Minister Lenihan now stand up in the Dail in mid September and tell us that we will pay 65 billion for the 90 billion of loans that NAMA will take on?

Surely the level of public ridicule will be such that even someone with his genetic immunity to shame or acknowledging the blindingly obvious can hardly defy public opinion.

@Maurice O’Leary,

I would love to share your belief that the Oireachtas may be able to channel the weight of public ridicule and incredulity required to force a comprehensive revision of the NAMA Bill, but all the forces that exercise serious power in this country (with the exception of the courts) are four-square behind it and there is no Plan B or consideration of any deviation from the full thrust of what is being presented.

I accept that we will have to await the outcome of the Dail debate and vote, but it would be prudent to begin considering the basis for a citizen’s action before the Supreme Court.

Karl Deeter you said

“You mentioned people you know – do they plan on never working again? if they were forced to sell now and made to carry out the loss on their home as well as having ruined credit, would that be a better solution than rolling up interest on the basis that they will work again in the future and pay down the debt?”

It seems the legal system is “capable of catching the weak and poor but easily broken by the powerful and rich.” You can be sure none of the heroes who splased tens of millions againt the wall to prop up the Anglo share price will be affected under the longtime economic value horse manure which NAMA will operate under.

How many lifetimes would the developer who stooped down to pick up a coin (according to the NT Times) have to live to pay off his debt?

@Maurice O’Leary

A key issue regarding the evidence was that the accountant made assertations in relation to valuations and finance without providing evidentiary support for those. An accountant is not qualified to make assumptions outside of the scope of his profession. A statement re value must be supported by a valuation from an valuer etc etc.

Sure it makes it difficult for a property company to get into examinership but so what? Without fixing the core problems that most property companies face – too much debt – how is the process useful except to the shareholders and secured lenders?

@Richard K.

I am delighted that the court denied Zoe its protection.

The point about the evidence of the viability of the work-out plan is not so much that it was not presented. The key point is that Carroll’s legal team must have decided that any such evidence, even if presented, could not be accepted.

@Brian Lucey, Paul Hunt
“It makes no difference – Nama will proceed as planned,” said a spokesman for the Minister for Finance. “We’ve always made clear that Nama will operate in line with EU Commission guidelines, which set out the use of the long-term economic value measurement.”
In the words of someone “they would say that, would’nt they”. The reliance on the long-term economic value measurement guidelines as the basis for overpaying for toxic assets is telling. Guidelines have no legal force and are but one of many factors that can be taken into account. It seems that undue reliance is being placed on these guidelines by the DoF.

On the issue of legal challenge: if it is voted through in September then it will enjoy a presumption of constitutionality which will be very difficult to displace. The key, as I see it, is to convince the members of the Oireachtas that the present proposal is not in the best interests of the citizens and that an alternative proposal, such as that of Prof. Honohan’s NAMA2, is preferable to the deeply flawed current NAMA proposal.

As I write it has been announced that ACC has secured the appointment of a provisional liquidator to two Zoe companies. This may be the beginning of the unravelling of NAMA despite the DoF stance last night.


For the Government NAMA = TINA (There Is No Alternative). This will be an exercise in naked, brutal political power ramming the NAMA Bill through the two lower houses of the Oireachtas. If this bill falls, the Government falls since it is a money bill squared. There isn’t one single TD on the Government side (detached, semi-detached, independent or otherwise) who will vote for early retirement – irrespective of the amount of constituent pressure exerted. Despite the superior qualities of Prof. Honohan’s NAMA 2.0 proposal there is no consensus forming in support of it on the opposition benches – nor is there likely to be one. And, even if there were, it would fail to attract the support of a single TD from the Government side.

And the bill needs to be signed into law by the President (as the third house of the Oireachtas) before it has a presumption of constitutionality. Given the doubt that has been raised about the President’s willingness to refer this bill to the Supreme Court, any action needs to take place between its formal enactment and the appointed day when its provisions start to kick in.

There can be no doubt that the most comprehensive and sustained analysis and critique of NAMA has taken place on this site. All that is required now is an actor – and not, necessarily, of the Thespian persuasion.

Are we the only victims of a bubble who are attempting to reinflate the bubble to get out of trouble ?

@Paul Hunt,

Sadly, your analysis of the situation in the Oireachtas rings true to me. But is it not possible that one or two FF TDs might want to see the govt fall sooner rather than later, given the declining FF support?

After all, it would only take one or two at this stage…

The Irish Times website has the following report this afternoon: (extract)
“Ireland should resist political pressure to underpay for the €90 billion of property loans it’s seeking to purge from banks, according to the head of the country’s fund management industry group”.
“I strongly believe that the Department of Finance and agency understand that while they have to be fair to the taxpayer, the key audience is international financial markets,” said Frank O’Dwyer, who heads the Irish Association of Investment Managers in Dublin.

“An excessive haircut, with any taint of political motivation, any sense of ‘let’s stick it to these guys,’ would erode confidence.”

Are the battle lines been drawn?

Vincent Byrne

I liked ‘ zone of rightness ‘ Maybe NAMA will have its own language .

@Graham Stull,

Getting through the next Dail session is the priority. NAMA will kick a number of problems into the long grass. Do you envisage detailed and sustained public, media and parliamentary scrutiny of the workings of NAMA over the next 3 years? Attention spans seem to be getting shorter.

The hope is that things will look better next summer. The international economy is showing signs of picking up and this will release the time-hallowed emigration safety valve.

So, no. I don’t foresee any defections on the Government side.

Considering they’ve paid off the creditors, I wonder if the other banks will also offer to buy out ACC’s loans to prevent liquidation. It may have been ACC’s intention to negotiate a deal on favourable terms with the other banks all along.

Another thought – The Supreme Court may have been more inclined to grant protection to Carroll’s companies if it the possibility of appealing to the European Court of Justice were not available.

@ Vincent Byrne

” ..the key audience is international financial markets”

The battle line has been drawn for some time – International Financiers vs the Plain People of Ireland.

Do government backbenchers (FF,Green & others) realise which side they are on?

Something else that is quite fascinating about all this is that when NAMA take on all these half build estates and unsold units they will have to take over the payment of the Management Charges on the unsold units as it has been the practice of many developers to ‘hand over’ the estate to a Management Company (themselves/or their agent) even through the estate is unfinished.
It has been a trick that the developers have used so as to negate their responsibilities to maintaining the development before it is finished. In the Development I live in this amounts to roughly 40,000.00 Euro a year.
It’s much cheaper this way because you get the new residents to cough up from the start for poor quality workmanship and your obligations under the planning permission and if you’re lucky make a little or a lot extra off the back of the units you have already sold.
Looking forward to that mess! NAMA in court for unpaid Management Charges, now that would be the funniest thing since the whole idea fell out of BL’s Mouth.

@ Aidan C

“Do government backbenchers (FF,Green & others) realise which side they are on?”

Unfortunately the opposition do not seem to be too clear about whose side that they are on either!

I find it interesting that it actually does make financial sense for the banks to not follow up on borrowers that can’t pay.

In this case, if they were to liquidate Zoe they would incurr losses of about 50% (estimate) of the outstanding loans to Zoe. What they would get would be cash they could use to issue loans and reduce the liquidity crisis. However, the return they can get from lending out the recovered amount again would not (in the short term) cover the loss in issuing the loans to Zoe.

Simply put, the banks can’t recognise the losses because it is more profitable (in the short term) to hope that the situation will improve. They can’t issue more loans because they have to much tied up into similar loans, this is the liquidity crisis.

The banks managers are hired to generate shareholder value, if they were to recognise the losses they might wipe out all shareholders. The liquidity crisis will continue until the losses are recognised and I don’t think they will be recognise the losses until the banks are legally obliged to do so.

If more liquidity is to come into the market, either the banks have to realise the losses and put the recovered cash out into the market, another bank has to bypass the current banks and provide liquidity directly or someone has to take the losses away from the banks. The only way I can see NAMA doing anything to provide liquidity is if NAMA takes the losses.

@james gilmartin I agree, the small are crushed in comparison but is there any facet of life where the weakest win out? fairness doesn’t really come into it, just being pragmatic.

on the overpayment side: frank o’dwyer is merely stating what many here have failed to grasp – the wet rock off the west of europe which we call home has to pay the piper of the markets, fairness to the taxpayer is secondary, i’ve said from the start that NAMA will likely overpay and i still believe the same thing now.

i don’t think fairness really has much to do with it frankly, and even if it did and the taxpayer made a windfall, i doubt that the state would be issuing cheques to every taxpayer or doling out a ‘social dividend’ or managing affairs any better than they did in the past.

The ‘zone of rightness’ may be the start of a whole new slew of ‘NAMA-speak’. 2 legs good, 4 legs bad. No doubt we will hear a lot more of these soundbites when the debate proper begins in September.

On an entirely related subject, I’m thinking of running a book on whether the other banks might just put up some money to make ACC go away. I’m sure it’s no more of a gamble than NAMA in its present form is (my book that is).

As for the fairness of it all, sure hasn’t it always (since Chile, Uruguay, Brazil, etc. anyway) been about how much money the private sector (banks and the international financiers) can move out of the public purse and into their own area. ‘Bail-out’ is just another way of saying the same thing.

I think it bears noting here that Frank O’Dwyer is a “man of interest” to use Janet Tavakoli’s term. Overpayment by NAMA will benefit him personally through increased bonuses for the gains investments he manages will see. So of course he is going to use whatever ruse including the international markets to push his case forward.

KarlDeeter: We were told a year ago that international markets need the bank guarantee and that would solve all the problems of liquidity and so on and so forth. Overpayment by NAMA promises to do the same but there is no evidence it will actually prove to be any better than the guarantee. The piper of the markets has to be paid but you haven’t made any convincing argument why the Irish taxpayer should pay and not the shareholders and bondholders. You have called yourself a capitalist many times. Doesn’t the market require that risk and reward be aligned? A bailout at an enormous expense to the taxpayer will create a massive moral hazard. What is more it will significantly delay any recovery through the avoidance of Schumpeterian creative destruction.

There is a lot of self righteousness going on here. In fact I would say that the Supreme Court Judgement when studied by the cuter people (I was going to use another word) down in the Four Courts will have the documentary “proofs” to deal with the next large devoloper under attack from ACC and whoever. This was a technical defeat for Examiners. BTW the SC do go on a lot with the “learned Judge” stuff, for God’s sake we are in the 21st Century !!!!!!!!

@Eamonn Moran

Eamonn – – You ask: What is quantitive easing, if not reinflating the bubble?

The FT has a letter today giving a simple explanation of quantitive easing!!

Sir, In a sleepy European holiday resort town in a depressed economy and therefore no visitors, there is great excitement when a wealthy Russian guest appears in the local hotel reception, announces that he intends to stay for an extended period and places a €100 note on the counter as surety while he demands to be shown the available rooms.

While he is being shown the room, the hotelier takes the €100 note round to his butcher, who is pressing for payment. The butcher in turn pays his wholesaler who, in turn, pays his farmer supplier.

The farmer takes the note round to his favourite “good time girl” to whom he owes €100 for services rendered. She, in turn, rushes round to the hotel to settle her bill for rooms provided on credit.

In the meantime, the Russian returns to the lobby, announces that no rooms are satisfactory, takes back his €100 note and leaves, never to be seen again.

No new money has been introduced into the local economy, but everyone’s debts have been settled. Is this “quantitative easing”?

Eric Keetch,
London W4, UK


There is a false notion abroad that the ECJ is supreme in all matters.

I am fairly sure that the examinorship could not be appealed to the ECJ as it is a piece of 100% domestic legislation.
If it were an ECJ matter, it would have been refered to the ECJ to adjudicate on the relevant point of law.


I am sure that Carroll hd the best legal advice available and they knew exactly what they were doing. This was afterall the biggest case in the history of the state not some two-bit company hiding from a few trade creditors.

If the necessary proofs were available, they would have provided the evidence.

But it is self-evident that any genuine expert evidence would have had to admit that the entire plan belonged in cloud cuckooland or wherever the Emperor of Shoeboxonia dreamt up his 1 page survival plan.


There is a glaring flaw in that popular example; I’m going to leave it up to you to find it!

(google will help if stuck..)

@Garo actually when anglo was going down the tubes I was fairly alone in publicly saying they should be allowed to close and that any guarantees should only go to viable institutions that might suffer an unfair knock on effect. That’s on the public record, but I don’t set policy obviously so I have to change my view with the facts as they unwind.

if a bank is guaranteed and you nationalise it then it kind of undoes the rationale of the ‘guarantee’ and it eradicates the market process of allowing it to close – the calls for nationalisation have nothing to do with the markets and everything to do with ‘taxpayer fairness’ which i have always maintained is basically a secondary concern, we are an island economy that cannot afford to burn lots of investors all at once.

Alternatively we could have ‘fairness’ to the taxpayer and burn all of the investors and bond holders, but if there was a major fallout – which i suspect there would be and it would ultimately hurt everybody more – then would that be fair? fairness is relative and the majority of comment fails to mention where we might go if we get out of the ‘pot’ of unfairness to taxpayers, namely, into the ‘fire’ of the IMF. One way or another, the taxpayer is going to foot the bill i suggest you get used to that idea.

at this stage its about the lesser evil.

Locus standi.
That might be a group of locusts standing around but it may also be the courts’ way of telling busybodies to “sod orf!” by saying that they have no standing to even sue.
It has been used in Ireland to stop contentious political issues from being examined by the courts. Google it for more relevant examples. Who would be able to sue and whom would they sue? A taxpayer may not have a sufficient interest to sue when governments take action that s/he disagrees with. And that is what this boils down to.
Losses are likely to arise from competition for loans by the government trying to fund NaMa. The investments may be difficult to value (!) and the courts typically do not want to take over executive functions as they specialize merely in detecting what may be unfair. It is far harder to actually make things happen. Juduciary vs Executive in a nutshell! Even assuming the judges are sympathetic as taxpayers they have a similar position to everyone else who will have to pay for this for the foreseeable if it costs so muc. How do we convince the judge in the High Court, full original jurisdiction etc, that he should risk not being referred to as a learned judge but merely as that oik, that NaMa does not know hwat it is doing? Meet my friend the expert witness. Meet Mr Somers …..!


Funniest thing I think I’ve ever read in the FT or on this site. Given the obvious flaw, shall we substitute the hotelier with the taxpayer?

“we are an island economy that cannot afford to burn lots of investors all at once.

Alternatively we could have ‘fairness’ to the taxpayer and burn all of the investors and bond holders, but if there was a major fallout – which i suspect there would be and it would ultimately hurt everybody more – ”

These claims are unsubstantiated. Anglo bought off some bond without all hell breaking loose. Has the government even tried to lean on the bondholders for a debt equity swap? At the very least this should have been attempted. In my opinion, the current strategy is just delaying the day of reckoning and making the eventual fallout much much worse. I would again recommend to all those interested to read “A Quiet Coup” by Simon Johnson. Unlike most of us here, he knows what he is talking about.


NAMA and participating banks will be under heavy scrutiny by the European Commission to prevent illegal state subsidies and breaches of competition law. Although examinership does not fall under ECJ jurisdiction, a discriminatory application of national law in the context of possible state subsides and anti-competitive practices does.

I’m not a legal expert so I look forward to your corrections and comments. Here are more details:

@Michael, Eamonn, Joseph et al,

Here’s a better anecdote for credit expansion à l’Irlandaise:

On a sleepy European island, a man named Liam decides to make money. He asks the bank to lend him €200 to buy a field and a pile of bricks, promising to sell houses on the field worth €300 and pay the bank back €200. The bank agrees and make him a loan worth €200. In order to get paid back this money, the bank knows it will have to lend the punters €300 to buy the houses, so it borrows this from abroad.

But the punters can only pay on the borrowed money if they get jobs, so Liam offers to build more houses, employing the punters. For this he needs more money, which the bank realises it will have to lend Liam. So they lend him another €200 and he sells the next batch of houses to new Polish punters, who are employed building the next batch of houses and so forth…

Eventually, Liam runs out of punters, squirrels all the hundred euros’s he’s been earning away in the Cayman Islands and defaults on his final batch of loans. The banks are left with some weedy fields, empty promises from the difficult-to-pin-down Liam, and a bunch of residential mortgages to punters who used to work in construction.

So they lean on the Minister to pass a new law which forces the punters to borrow against their grandchildren’s incomes, in order to give – for free – to the banks the money they need to make up for their losses.

Some of punters eventually emigrate, but the rest just pay up, because they stopped reading this anecdote paragraphs ago.

Liam & the bank execs lives happily ever after.

As you know I am deeply cynical of the executive and propose that enquiring minds may wish to consider that the Lisbon Referndum will be used by the voting public as a referendum on NaMa.
NaMa makes so little actual sense, that it is merely a way of manipulating the ISEQ and continuing with the Lisbon negotiations. Cute hoors the lot of em!

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