Today’s op-ed column in the Irish Independent by Martina Devlin (or perhaps that should be MarTINA Devlin) is worth commenting on because it’s essentially a one-stop-shop for all the arguments we will be hearing over the next few weeks about the need to pass the NAMA legislation and to do so quickly. The article features a host of misleading arguments.
Let’s start with this.
NAMA, with a remit to remove up to €90bn of mainly compromised loans from the banks, has been fingered as the bailout mechanism for the discredited face of capitalism. This gives citizens a focus for their anger.
But what viable solution has been put forward by the protesters agitating against cuts and shouting down the proposed agency?
Perhaps Ms. Devlin’s point here is that the street protestors shouting down the agency (have there been any street protests yet?) haven’t stopped to outline detailed alternative legislative plans. But then street protestors—whether real or mythical—don’t tend to do that, do they?
The purpose of this argument appears to be to suggest to the Indo’s readers that there is no other “viable solution” than something of the form of the current NAMA plan. But of course this is simply not the case. Plans such this, this, this, and this have been put forward and widely debated over the past few months.
Then we get this:
The International Monetary Fund, which bails out countries when they can’t make their own tough decisions, has also backed NAMA.
The IMF “backing” for the government’s plan is a Media Truth but, in the real world, it is essentially false. As has been discussed a few times on this site, yes the IMF has backed the use of an asset management agency but a consistent interpretation of their recommendations is that this be done in conjunction with nationalisation, which would be a very different plan to the route the government is going down.
Then we have my favourite pro-NAMA canard
Of course, much depends on how NAMA is implemented. Pay too much for property developers’ assets and the taxpayer gets fleeced; pay too little and weaker banks emerge from the wreckage — and the economy gets fleeced.
Just who does Ms. Devlin think is recommending the approach of leaving weak undercapitalised banks that will further damage the economy? The correct phrasing of this argument should be “Pay too much for property developers’ assets and the taxpayer gets fleeced; pay an appropriate price and the state can use the money saved to recapitalise the banks and obtain an equity stake for the taxpayer.” This point is so basic that one has to wonder whether supposedly informed op-ed writers really don’t understand it.
Then we get the scaremongering:
If legislation to establish the new agency is not passed next month, our situation will deteriorate more rapidly than we have witnessed. There is no problem with making amendments to NAMA, but a solution to the banking crisis must be up and running by October.
If we fail to meet that deadline, the international markets — the people we borrow from to pay our nurses, guards and teachers — will conclude that lending to Ireland is no longer a safe bet. In future they may no longer advance us money, or do so with penal interest rates attached.
No evidence is produced to back up this assertion. Nor is any mention made of the fact that the potential cost of the banking bailout is one the major reasons behind Ireland’s high sovereign debt costs. Those who are concerned with minimising the cost to the taxpayer of resolving the banking crisis are very conscious of the positive effect this would have on the perception of sovereign default risk.
Then we have the Green-dissing:
Meanwhile, the Green Party is planning a special conference to discuss NAMA. We are on a knife-edge, and the Greens — who went into partnership with FF with their eyes open — need to stop playing politics and start paying attention to the consequences of their actions.
The “eyes open” business interesting—Is Ms. Devlin really suggesting that back in 2007, the Green Party membership’s vote for entering coalition was also a vote to overpay for billions of euros worth of developer loans? “Playing politics” is used here, as always, as a pejorative term. But if members of political parties shouldn’t take an interest in discussing and amending the most important economic policy decision in the history of the state, then why should they bother participating in the political process at all?
Then we have the misleading conspiracy theorising:
This is dangerous territory. Especially as the money for NAMA is coming from Europe, and a second Lisbon referendum is scheduled for October. Strictly speaking the two matters are not linked — but, everyone knows they are.
The linking of ECB funding with the Lisbon referendum illustrates a complete lack of understanding of how the ECB operates. The money for NAMA is not “coming from Europe.” It is coming from bonds issued by the Irish government and this is real borrowing that Irish taxpayers will have to pay back. However, the banks will not have to sell all the bonds at once to get cash. Instead, they can borrow money from the ECB in repo operations, using the NAMA bonds as collateral.
Crucially, the decision to allow the Irish banks to use these NAMA bonds as collateral, is not a political decision. The ECB is a politically independent institution and has a fixed set of guidelines as to what constitutes eligible collateral. As long as the government designs the NAMA bonds to meet with these guidelines, then the bonds can be used to obtain ECB loans. Lisbon has nothing to do with, nor will it have in the future.
And finally, the rousing ending:
With international eyes fixed on Ireland, wondering whether we can implement our own solutions, we do not have time for politicians to bicker and to raise the possibility of an alternative to NAMA. It is too late for that now — unless we want the country to go to the dogs.
A passionate call to arms. Time for a NAMA counter-insurgency movement. I can just see crowds now at the TINA march: “There Is No Alternative! There Is No Alternative!” “What Do We Want? NAMA? When Do We Want It? Now!”
Other than that stuff, I liked the article.