Key Audience versus Only Game in Town?

Commenters on another thread have been discussing this story from the Irish Times concerning comments from Frank O’Dwyer of the Irish Association of Investment Managers. Mr O’Dwyer’s comments are reported as follows:

“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.”

Interestingly, while the “key audience” is international financial markets, Mr. O’Dwyer also says:

“The only certain game in town in relation to capital is the State,”

I also liked this comment

The agency’s task is to find a “zone of rightness” for the discount

I can see the zone of rightness catching on as a phrase. It’s kind of like “truthiness“.

36 replies on “Key Audience versus Only Game in Town?”

As I have noted elsewhere, if we dont stick it to the banks we have to stick it to the shareholders. Up to FF/GP to decide which…..

These are only the opening shots. Great play will be made of the threat of national insolvency if NAMA is not accepted in its entirety as international institutions and markets will give Ireland the thumbs down. And anyone who queries NAMA will be labelled as anti-national and a traitor.

It’s interesting that vested interests, including the fund managers who have lost huge amounts in public savings via their investments, did not express publicly any concerns about the bubble.

It takes some cojones but it’s an important issue to note.

As regards trying to keep the proverbial gnomes of Zürich impressed, in the context of the present crisis with for example, the UK government controlling 2 banking groups and having nationalised others, informed investment managers are not going to believe that Ireland is rejecting its current business orientation (ignoring the cronyism in the system).

As O’Dwyer said, the State is the only game in town – – and so it is and IAIM was involved in trying to get capital for BoI late last year.

IAIM brought together a group of existing Irish bank shareholders, including the investment units of Bank of Ireland, AIB, Irish Life & Permanent and UK insurance giant Aviva, which owns Hibernian. The idea was to match any investment by the Government but that didn’t happen.

Great play should also be made of national insolvency IF NAMA overpays. Why pay more?

“The key audience is international financial markets”

This deferential attitude to the financial sector is an inevitable outcome of the financialisation of the Irish Economy, a Fianna Fail project started in the late 1980’s. Ireland followed the example of the UK which killed off its industrial base and built an economy around London as an international financial centre (with the help of North Sea oil & gas of course).

“Ireland’s IFSC – A Story of Global Financial Success” published in 2008 by Fiona Reddan is a superb account of its rise both as a business success and physically in the Customs House Docks area.

The IFSC was set up under the Finance Act of 1987 by CJ Haughey and since then has been actively promoted by government.

This FF led government is not going to stand up to pressure from international financial interests. Far from it. The NAMA proposal is a bailout for some of these interests who made crazy “investments” during the mania phase of the Irish property bubble.

Has the “only certain game in town” (the Irish State) been captured by the “Key Audience ” (International financial interests) ?

@ Aidan C

while i think the IAIM’s fear that NAMA may charge an ‘excessive discount’ is as ridiculous as it is offensive, i assume you’re aware that we’re going to have to borrow around 100bio or so off these “international financial markets”, between the general government deficit, NAMA (in any shape or form) and the recapitalisation of the banking sector (in whatever shape or form), in the coming years? As such, considering at at least some level how things will look in their eyes doesn’t strike me as a particularly bizarre or unacceptable suggestion.

Agree with your points.

The problem is that the present government is compromised by its past actions. It will not even accept its responsibility for the mess we are in. They have broken the trust of the people and should make way for a new approach. THe FF/PD governments since 1997 have delivered economic growth which has been driven by cheap and abundant debt. Wittingly or/and unwittingly they have blown it.

It is said that past behavior is the best predictor of future performance. The PD party is nearly gone .The Green Party have been foolish but may come to their senses. The FF party with its inherited actions, policies and culture has earned itself a period of quiet reflection in opposition. Do you not agree?

There is no doubt there would be some negative consequences from forcing heavy losses on shareholders and bondholders.

But these negative effects will never come close to the €30bn it is going to cost the country by not imposing losses on these investors.

If the government is going to use this reasoning we need to know exactly what the negative consequences are and how they out weigh the €30bn savings.

Mr O’Dwyer was AWOL with his buddy the financial regulator and while they were gone the value of the assets under their combined management shrank, leaving pension funds and other managed funds in tatters and facing calamitous losses.

These guys and their forebears were not petitioning the government from 2002 to 2006 to stop inflating the bubble or shareholder value would be decimated. No, not a pip squeak, because that would have required a modicum of insight into what was really going on in the economy and what was going to happen if the government kept throwing petrol on the flames.

Now Mr. O’Dwyer’s answer is that the tax payer should borrow 70 billions and hand it to the shareholders as well as paying interest on it for the next twenty years! Irish Investment Managers? They are certainly not worried about the Irish tax payers investment. To be honest, I don’t think too many people will be rushing to put their money under their management.

“NAMA is the only game in town”….”Key Audience is the Only Game in Town” “Zone of rightness.” Is NAMA is to come with it’s own lexicon too? Why is it that these unicellular approaches try to capture support, not by their logical arguments but by their dull catch phrases?

Most of the shares in these managed funds were in Irish financials or construction related companies, that is one of the reasons why Mr. O’Dwyer wants the government to overpay for the toxic liabilities on the banks books.

The only game in town is to STOP NAMA and prevent the biggest heist in the history of this state. NAMA is dangerous and completely undemocratic and what we need now are people of the calibre of the late Jim Kemmy to stand up and be counted in the Dail. When the rainbow coalition wanted to tax children walking to school he simply said No! So, where are the TD’s who are going to stop this mill stone from being put round our necks?

@ Michael H,

Cronyism is one of the few ways to make sense of what happens in Ireland. Take this Frank O’dwyer chap. His job is partially funded by Irish banks. I wouldn’t be suprised if he’s picking up a little cash from government quangos. I think that’s how things work.

Hi here is a strange thought!
Why not let the AIB & B&I go – push them off the edge of the cliff!
Lets be practical and get real – The shareholders have lost their investment anyway in order for any shareholder to recoup there investment from € 1.20 back to € 22.00 it will need to increase by 1,200% as if that is going to happen within the next 30 years look how long it took the shares to recover after wall street crash 50-60 years !
I lost € 10,000.00 in bank shares, cannot afford it, but I have to get with it!
The Banks made bad commercial decisions and got it wrong, they should pay the price of mismanagement – does anyone know of any businessman who borrowed monies from any of our main banks and was given clemency or dare I say treated fair by the their lender when things did not work out !
The alternative – Instead borrow 40bn, 20bn, invest it in Ireland inc in job creation and business loans only on condition that it all prices in Ireland across the board drop by 25% – which would lower our total cost base by 25%. 20bn into a new national bank (Anglo etc) and loan it out to deserving cases – all to be administered by a new elite of passionate Irish businessmen who have the interests of the country at heart – are they out there, I meet them every day !
Nama is not to help the developer it is to help the banks who give the impression that they will release funds to the business community and private mortgages – how much have they given out since they have received 7.5 billion from us (the taxpayers)
I have been in the construction game for a long time and in the property game for the last 5 years as a coach and consultant doing feasibilities etc, believe me when i say that on a value basis most toxic assets are overvalued by at least 70-80%.
Let me clarify my personal position – I am not in debt to any bank !

@Chris….. As always follow the money….

Theres lots of people whose continued employment depends on the government being flash, naive, stupid or just corrupt with taxpayer’s money.

Well Frank appears as a director for the Investor Compensation Company Limited in 2008 annual report.

Their little biog says: “Frank O’Dwyer Chief Executive of the Irish Association of Investment Managers whose members manage assets of over €250 billion on behalf of Irish and international clients. A fellow of the Institute of Chartered Accountants in Ireland, he has been Finance Director of a number of companies and was an adviser at the Department of Finance.”

Also from the 2008 Annual (I thought a little background): “The number of directors of the ICCL is prescribed by the Minister for Finance. The Chairperson and Deputy Chairperson of the Board are appointed by the Governor of the Central Bank & Financial Services Authority of Ireland. The ten other directors represent either the interests of consumers (5) or the interests of the financial services industry (5) and are prescribed by the Minister for Finance.”

A little bit of google and I get another BIOG from

“Frank O’Dwyer
Chief Executive
Irish Association of Investment Managers
Frank O’Dwyer is Chief Executive of the Irish Association of Investment Managers, whose members manage assets of over Euro 260 billion on behalf of Irish and International clients. He is a member of the Asset Management Task Force and the Investment Funds Committee which operate under the aegis of the Department of an Taoiseach. He is also a member of the Industry Reference Group which supports the Expert Group on Future Skills Needs. A Fellow of the Institute of Chartered Accountants in Ireland, he has worked in merchant banking and has been Finance Director of a number of companies. He also served as an adviser at the Department of Finance.”
So that looks like a couple of other government thingies Frank is helping with (Asset Management Task Force and the Investment Funds Committee).

I think at this stage ‘ the zone of rightness ‘ would be for everybody to just come clean and admit to the true level of bad debts in the banks and the Irish state . The banks have to be nationalised if only to get to the bottom of the whole mess . Banks drip feed bad news and never tell the truth .
Banks are like very spoilt children of rich parents . They know that the economy depends on them but at the same time will take all kinds of risks in the pursuit of profit and give in easily to peer pressure . If it goes belly up and somebody loses an eye the parents bail them out .
I am in Australia and the government here have a 4 pillar policy on the 4 big banks . Don’t ask me how it works but it prevents them from being stupid and as a result we have 4 healthy banks and a good economy . Before the GFC the 4 banks hated this policy and lobbied aggressively against it but when the GFC hit they were as proud as punch . One chairman was on TV like a peacock praising the 4 pillar policy . And now months later the banks are against it again as ” it limits them “


Yes, I saw that video too. Very interesting. What made you come up with September/October as when the brown stuff might hit the fan? I was thinking they might keep the wraps/sticking plaster on it until the end of the year/early next…. but that was just a guess.

@Ahura Mazda

Crikey Ahura – did you spot that their assets under management went up by 10 billion in the space of one google search? How did they do that then? I wonder how close it is to 260 billion at the moment?

Anyway, the point you are making is a valid one – someone who clearly knows which side his bread is buttered. I’ve no doubt the whole FF spin machine will kick into gear soon when people get back from their holidays and before the Dail debate begins.

Why are we so concerned about impressing ‘ international markets ‘ ? Its not like they have anything to be proud of considering their performance over the last couple of years . As for fund managers , I once had one tell me that he did not want my money to invest as I was ” the type of person who would be ringing him evey week checking on my investment ”
Anyway if by some miricle NAMA works , will that be the end of it ? What about bad credit cards , car loans , mortgages , negitive equity etc etc . People are losing their jobs and will not be repaying these loans .
And what kind of bank is going to lend money to a failing business ? Given that banks have been burnt by risky lending they are hardly going to lend to risky business . And waht business is not risky considering we had a consumer spending boom ?
We need to stop and just get to the bottom of our problems . Not only is the government getting into the property business a bad idea , squanding billions on denile is even worse . Did anybody really need The Supreme Court to reveal how crazy the prospect of an upturn in the property market is ? NAMA will be our downfall and if not Anglo will put the boot in .

@ Ahura Mazda

Seems these guys are involved with so many quangos that they have precious little time to do even ONE job properly. That is a symptom of how the whole country tried to operate. He is simply a mouthpiece for the various vested interest.

I have said before that there is an unfortunate line between practitioner and academic, I was told this didn’t exist but clearly it does, every time an industry person says anything they are accused of ‘vested interest’, ‘galway races tent’ or some other allusion to their implicit collusion with what is then stated as being an inherently corrupt government.

all that tells me, if it is true, is that voters in this country are idiots.

why is everybody so sure of our importance to think that international investors will ride it out with ireland if we start to make decisions on a national level that will hurt them? markets barely acknowledge us, we are a small island economy. O’Dwyer might have told you something you didn’t want to hear, or that you find unpalatable, but it doesn’t make it wrong and it definitely doesn’t mean he is on any side other than that of Ireland.

People are entitled to their opinion but people are also entitled to question the validity or bona fides of a source.
This particular source on this particular issue is very questionable.

Perhaps if more industry experts spoke out about things that were against their self/company interest as publicly as things that are for their self/company interest people would stop being so cynical.
But untill that day comes…
However the fact of the matter is that the public at large dont question the sources of headlines enough.

The way it appears to me is that there are two prominent arguments re NAMA: Underpay for the assets (which is encouraged more often here) at market value and recapitalise if necessary; or, overpay for the assets so as to avoid recapitalisation through (part/ temporary) nationalisation.

The arguments for underpaying are both logical and (as far as I can see) both academically and economically sound.

What I cannot understand is the forecasted antipathy of investment markets to the latter option (paying market value with possible part-nationalisation). If the overall purpose is to cleanse banks of toxic debt and bring them back to ‘Year Zero’, surely investors will appreciate, and encourage, simultaneous actions to do the best for Ireland (as a community of banking customers for them)? In this respect will investors not eventually respond positively to a re-charge of capital from the State?

I’m worried that in an effort to allay the concerns of investors in the short term, we are ignoring our initial goal for the long term – cleansing the banks and starting ‘afresh’.

@Karl D,
“I have said before that there is an unfortunate line between practitioner and academic, I was told this didn’t exist but clearly it does, every time an industry person says anything they are accused of ‘vested interest’, ‘galway races tent’ or some other allusion to their implicit collusion with what is then stated as being an inherently corrupt government.”

I work in the private sector in structured finance. I do not share your opinion on International Investors.

If someone offered to pay my losses, I’d thank them. But I’d be under no obligation to do further business with them. In Ireland’s case, I’d invest elsewhere.

@Karl D
I work in the private sector in wealth management right now and I have previously worked as a trader and before that in derivatives.
I don’t share your opinions on international investors and no person I have spoken with at my work place or ex colleagues shares your views.

I do accept that their would be some negative consequences but they won’t come close to outweighing the €30bn costs of overpaying for the loans through NAMA.

Can you please spell out what you think the negative consequences would be and how this would amount to more than €30bn.


what is market value when there is no market-zero?

What other country has resolved this current crisis by transferring assets at distressed market prices? It seems the whole point everywhere, especially in the US has been the encouragement of liquidity to prevent this. Why would you advocate this policy in Ireland?

why should an owner of an illiquid asset set at a valuation that he deems inappropriate? Do the banks really have a strong card in the pack. Let me go and the guarantee is triggered.

“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.

The so called key audience have given their verdict as reported by Bloomberg-
Ireland’s banks are in a “vegetative state,” surviving on European Central Bank (ECB) “life support,” according to analysts at RBC Capital in London.
” Liquidity generated by turning to the government’s so-called bad bank, the National Asset Management Agency, may be used to repay the ECB rather than for lending, making full nationalization a more attractive option to help the economy, the analysts wrote.”

Indeed and one could argue that the state of the economy is what will inspire lending into it rather than the state of share-holders’ funds in the banks…

@ Karl Deeter
Karl, you seem to imply that investors will run away, “if we start to make decisions at a national level that will hurt them, we are a small island economy.” Does this mean that our democratically elected government are no longer able to make decisions at a national level in the interest of the tax payer in fear of upsetting international investors? Is this why we have NAMA in its current form?

If I were an international investor that had invested in government bonds I would be very, very worried about my investment in a country that is no longer autonomous in its decision making. A country that has become a mere marionette whose strings are pulled by funds and fund of funds! I most definitely would run away!

What are the investors in government bonds to think of your hypothesis? They thought they were investing in a country, albeit a small one, only to discover that, that they had put their money instead into a fund, the management of which is dictated by fear and intimidation from their own peers.

It’s quite interesting now that an external bank has expressed an interest in the post-NAMA AIB, and this is being put as being a reason to go ahead with the NAMA project as-is.

In fact, it means the opposite. In the light of this offer, the best thing to do would be for the State to nationalize AIB, transfer the bad loans to NAMA at a reasonable price, and then sell AIB to the Canadians. That way, the Canadians get a better deal, and the Irish taxpayer gets a better deal. AIB stays in the private sector and continues to be subject to market disciplines, in accordance with government policy. Everyone wins (well almost everyone).

@podubhlain you’ll find that bailout money is often hoarded initially, why lend out to a decreasingly creditworthy society, credit demand decreased in the nordic countries during their banking/property collapse and I don’t suspect it will be any different here.

@robert browne: actually, if you are an international investor who knows that a country is terrified of upsetting the markets it makes it even more attractive. the inverse holds true.

I’d agree with him in that NAMA is the only game in town to save the shareholders.

As for the various risk sharing schemes: The risk will be held by someone. Leave the risk with the banks and NAMA accomplishes nothing.
Take the risk and then the taxpayer will take the loss.

NAMA is an insurance scheme, the strange thing about this scheme is that the insured doesn’t have to pay anything up front for the insurance.

I believe the banks who want the insurance of NAMA should pay for the insurance of NAMA. I also believe that the insurance should be paid for by equity stakes in the participating banks. The size of the equity share should depend on the size of the risk being taken over. This might result in a 100% stake.

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