Indo Op-Ed: There Is No Alternative!

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.

60 replies on “Indo Op-Ed: There Is No Alternative!”

Depressing really that questioning the biggest decision to be made in the history of the state, a solution proposed by the people who got us into this catastrophe, is lightly dismissed as bickering.

There is nothing magical about October 2009.
The guarantee runs until September 2010.

Of course we can afford the time to find the right solution.

And we have the time to have a general election to allow the people of Ireland who they trust to find a solution.


The problem is that voters do not see a credible alternative government-in-waiting with a set of coherent policies to address the financial, economic and fiscal crises- and this implicitly strengthens the Government. FG has its non-NAMA proposal, but it is unlikely that it will get within touching distance of a Dail majority at the next time of asking. It’s not clear whether or not Labour has progressed its thinking much beyond nationalisation. Since most voters see an FG/Lab combo as the most likely alternative they will be offered, what they both have on offer on the banks doesn’t add up to a credible alternative to NAMA – and this is a question a government-in-waiting will, and should, be asked.

Paul, don’t you think that Lab/FG should be given a chance. To dismiss them as just the same is unfair without trying them out. Also, any FG/Lab government will have the advantage of non-incumbency. Something that cannot be underestimated.

Guys can we step away from the politics for a second? The key point here is that this current government can choose from a range of alternative plans to the one that it is currently putting forward. The government has a majority (albeit a slim one) and they can pass any plan that they agree on.

Speculation about elections and FG/Lab negotiations and all that is thinking too many steps ahead to be useful.


I fear you may have misunderstood my point. I happen to believe that we have moved beyond the point where opposition parties behave simply as opposition parties. Irrespective of the fact that this Government techically has almost three years left in office, the importance of the upcoming legislative and policy decisions is so great, and the credibility of the Government so tenuous, voters deserve to see a credible alternative government with clear and implementable policies – particularly in relation to the banks. And we have moved beyond the point where the main opposition parties can say “You can trust us. Just elect us and we’ll sort something out.”

@Andrew McDowell
From your link
“Track 2 – Orderly Retrenchment, Bad Loan Work-Out and Recapitalisation

1. The Government confirms that the Guarantee of liabilities will be withdrawn from covered Banks in Sept. 2010.”

Did The government not pass legistlation extending the length of the guarantee recently?

This was and is a lazy and muddled piece of journalism from Martina Devlin. In summary, she may as well have said;

“we need some kind of thing in place by October, I’am tired of all the arguments so let’s just take a chance and go along with this!” I expect more from a journalist that gave us “Banksters”. This is depressing, fatalistic nonsense which must be music to the ears of Lenihan, Cowen and Bacon!

I actually believe that we are on the verge of succeeding of having NAMA scuppered! The Greens at grass roots level know the score!


I think I understand your frustration – and, factually, you are correct in asserting that the Government can choose from a range of alternative plans, but the reality is that it has chosen one approach, has invested a huge amount of resources and political capital devleoping it, has demonstrated no indication of being prepared to deviate from it and – as you have posted – is working on developing and acquiring the support mechanisms to implement it as specified in the draft legislation.

In my view the only thing that will persuade the Government to contemplate any alternative will be the prospect of a Dail defeat on a key aspect of its plan. It would be characteristic of this Government to preclude this prospect by whipping Committee stages ferociously and requiring an “all-or-nothing” Dail vote on NAMA. I cannot see the Government surviving a defeat, so all bank resolution options would then be back in play – but those most closely aligned with those being advanced currently by the opposition parties would have greater currency.

Fear not.

As long as joe Duffy can find enough punters to pen enough terrible ‘we hate nama’ tunes to the air of Abba’s greatest hits the public will be on your side. 🙂


The legislation gave the Government the power to return to the Oireachtas with new schemes extending the Guarantee, but it has not yet done so. While FG is committed to ending the blanket guarantee next September (2010), selective extensions of the Guarantee to ensure adequate new liquidity and term funding for the banks would also have to be a feature of our own alternative policy.


I might be accused of being a TINA sympathiser.

This is because I see NAMA, subject to modifications to the legislation, as part only of any potential solution. As far as I can see, the NAMA legislation will not of itself determine anything other than how the AMC operates. For instance, I think that the NAMA legislation of itself does not rule out pre-emptive nationalisation or partial nationlisation.

KW has brought me around to his way of thinking that the debate is becoming confused by people misrepresenting the position of critics of NAMA. I would like to see the criticisms addressed individually and for the NAMA proponents to highlight where the NAMA legislation does or doesn’t cut across such criticisms.

For example, there is debate as to when the State should take a majority shareholding in the banks, i.e. before or after nationalisation. The NAMA legislation does not deal with this issue wither way and it will be a matter for the Minister to decide wholly apart from what the legislation says. However this issue needs to be highlighted now as it is a live issue.

A contrasting example is the valuation method. This is impacted by the legislation. If one desires legislative framework that sacrifices flexibility for a guarantee against over-valuation then amendments must be made.

Another example may be that you might want the Minister to have more discretion to protect the taxpayer. Currently the legislation allows for “economic value” to mean anything but the overall implementation of the definition is not necessarily within the Minister’s control. That may be dangerous as the Minister may need to revise values donwards across the board without having to deal with individual assets.

Ideally, we would have a matrix of issues to be addressed in the NAMA legislation and a matrix of issues to be dealt with outside of NAMA!! Perhaps somebody will deploy a Web 2.0 tool to this end and we will witness the beginning of a paradigm shift in public debate takes place in a technocratic society!!

Unfortunately the reality is that this will be played out in the newspapers. I worry that (not that rigorous) anti-NAMA public sentiment could destroy the political wherewithal to take action and could even prompt a backlash against Lisbon. I suspect that fear is what is leading to the mischaracterisation of NAMA criticisms. Regrettably, the NAMA debate is taking on the characteristics of a political debate as the stakes steadily rise.

@ Eamon

their was an amendment made that allows the MoF to extend the bank guarantee by an indefinite period, but this power has not been used yet, so the guarantee still matures as of 30/9/2010, as things stand right now.

@ Robert
“The Greens at grass roots level know the score!”

That whole thing has gone very quiet.
It seems like the leaders have pulled rank (no doubt using some Green Armagedon threats)


You decribe Nama as “part of any potential solution”.
You didn’t say “small part”, but most readers would agree that you implied small.

The Minister in the draft legislation has the discretion to pay even more than the “economic” value – as defined no doubt by estate agents who are valuing the Shoeboxonia Empire – not pay less.

The decision as to how the AMC operates is the biggest decision we will ever make. Of course the debate is political. Or do you think we should restrict politics to beauty contests?

@ Eoin


So The minister has the power to extend the Guarantee when ever he wishes.

Surely nobody in FG believes that he would not use this power if the government was in danger of falling?

Its an insurance policy for the bond holders.

Therefore surely track 2 of the FG plan is redundent.

Many actions the government have taken in this crises have been to protect bond holders (perhaps at the behest of the ECB?). I think they will be sheltered from burden at all cost.

Why if all you very smart people are against NAMA and have proposed alternatives are the government proceeding with NAMA with a ‘ come hell of high water attitude ‘ ? Why are they so against nationalisation ?
Is NAMA going to used to help developers fight another day ? I don’t mean it as a bail out for their ‘ friends ‘ but they seem to think that developers are a cornerstone of our economy . Is the plan for future growth in the economy based on everybody buying and selling houses again ?

The NAMA pushers are at it again. Goodbody (owned by AIB) is reported in the Indo as saying “Banks must raise rates to improve the economy
AIB to suffer 20pc ‘haircut’ on loans transferred to NAMA –”

The intriguing part of the article reads-
“A detailed review of Allied Irish Banks and Bank of Ireland loan books carried out by Goodbody, which is itself owned by AIB, concluded that AIB will suffer a “haircut” or discount of 20pc on the loans transferred to the toxic loan National Asset Management Agency (NAMA). This means it will secure 80pc of the value of the loans destined for transfer to the new state agency.”

Since when were stockbrokers allowed to undertake a detailed review of Bank loan books. As to the conclusion – they would say that.

More spin- to be expected Karl – it is the silly season.


In considering the future of the Guarantee, it is vital to distinguish between the new funding that will be necessary to allow the banks to remain liquid and meet their obligations, and “locked-in” funding and capital that will remain tied into the banks at the expiration of the Guarantee. The capital (equity and sub-debt) and certain types of unsecured funding (long-term senior debt) that cannot escape the banks by September 2010 should be available to absorb losses at that time, and in ther interim the owners of such instruments must be given the incentives to agree a major write-off of the banks’ obligations to them (discounted debt buy-backs) before September 2010 in order to avoid a bank resolution and break-up that might be even worse for them. This is the essence of Strand 2 of the FG policy.

Unfortunately, as evidenced by Irish Nationwide’s attempts to buy back its debt at a discount earlier this month, debt holders seem to believe that NAMA is coming to their rescue and do not have sufficient incentive to share losses with shreholders and the taxpayer by selling cheaply.


Notwithstanding the Devlin piece, it has surely now become clear:

1) Carroll court case just got too much coverage for the status quo NAMA proposal to hold.
2) Leak on Canadian interest in AIB served to highlight the potential ‘value’ in cleaned-up/post-NAMA banks.
3) Greens need a ‘biggie’ for relevance – channging NAMA is it.
4) Very hard in practice (despite EU Commission ‘get-out’ on valuation) to envisage a reputation-focused civil servant in NAMA ever signing-off on the kind of minimal ‘haircuts’ needed to keep the banks out of State hands.
5) Lenihan (cleverly?) has never ruled out the ‘possibility’ that Nationalisation might result from the NAMA process.

Result: NAMA+Nationalisation – pity it took/is taking so long!

Here’s an alternative: provide money to reduce everyone’s mortgage by 20%. That will provide money to the banks and it will increase the disposable income of Irish families.


I was more focussed on the fact that NAMA will be a part of “any” solution.

Of course valuation methods an oversight provisions should be extensively debated in the Dail and elsewhere. The operation of the AMC is crucial. That is why the Bill is published in plenty of time for the issues to be debated.

The debate is of course political. However, I think we would all agree that it is too important to be made into a political football as that will lead to issues being obscured. It seems this is already happening.

Are we fully in agreement?

I’ve always been amazed at the level of poor economic commentary in our media and how the commentaria are collectively hyped up among themselves.

Straight from Ms. Devlin’s own website: “Ship of Dreams by Martina Devlin is a gripping read inspired by the turn of events following one of the world’s most horrific tragedies, the sinking of the Titanic.” It seems Ms. Devlin wishes to over-dramatise another tragedy, albeit one with more profound consequences!

I am getting worried. Some people here think that there is no hurry to sort out the banks. For those who run their own businesses the reality is that they cannot get paid because there is a complete lack of new credit. I have spoken to bankers in commercial lending who confirm that they have not lent any new money in the last “year”. Why – because they have not got it. This applies to UK Bank subsidiaries as well as Irish Banks. They are in fact reducing credit facilities to businesses. Is this blog populated by only employed people who clearly do not understand how business works ? You cannot pay “debtors” to your employees or for that matter eat them……..

@ all economists

“pay an appropriate price” yes, please.

OK, I know the perceived wisdom is that we have no idea what this might be, but doesn’t the phalanx of banks supporting Carrol’s examinership lead us to the view (apart from the more realistic Dutch) that NAMA will (pro TINA or should it be Carey, it doesn’t seem to matter) be paying to keep them alive as shareholder owned entities, even if the biggest shareholder is us?

Carey’s argument for the Dept of Finance funk in the face of the problem is just as likely as the other reasons she puts forward, but doesn’t she leave out the main reason? the ECB cannot let a € member go bust??

Is there an economic argument for letting Carrol and/or others go and thereby get a realistic value for so-called assets? The result could/should be a more reasonable spend on NAMA/banks, less borrowing, more cred, less cutbacks, a more secure future for our kids and grandkids?

I know this blog has flogged some of these things to death, but isn’t the Rabobank move the only game in town??

Bye, Barry

Wouldn’t it be much more fun if we could have another conference? Like a debate on the legislation sortof what a Dail debate should be if it functioned properly? See if you could get some of the relevant politicians and journalists to go. But do it before the 16th 🙂 There’s a deadline now to get the right people on board!

I know this is the wrong place but…

Please consider the following simplified scenarios and set me straight if needs be:

Scenario 1:
NAMA pays €50 bonds/cash,
Govt Re-caps Bank for €50 bonds/cash,
NAMA sells for €40 cash
Result – net loss to NAMA of €10, Bank gets capital gift of €10

Scenario 2:
NAMA 2.0 pays €20 bonds/cash + €30 contingent claim,
Govt Recaps Bank for €80 bonds/cash,
NAMA sells for €40 cash
NAMA pays €20 to shareholders in cash (i.e., does not form part of bank capital)
Result – net loss to NAMA of €0, Bank gets capital gift of €0
– State now has €30 investment in bank shares instead of NAMA having €40 cash.

Scenario 3:
NAMA pays €50 bonds/cash,
Govt Re-caps Bank for €50 bonds/cash,
NAMA sells for €80 cash
Result – net gain for NAMA of €30, net free capital to bank of -€30

Scenario 4:
NAMA 2.0 pays €20 bonds/cash + €30 contingent claim,
Govt Recaps Bank for €80 bonds/cash,
NAMA sells for €80 cash
NAMA pays €30 to shareholders in cash (i.e., does not form part of bank capital)
Result – net gain to NAMA of €30, net free capital of -€60
– State now has €30 investment in bank shares and NAMA has €50 in cash instead of NAMA having €80 in cash.

Does this mean that the success of NAMA 2.0 is based on the assumption that bank shares will substantially retain their value after recapitalisation? Is that a valid assumption? How long would it take the state to convert shares into cash? Would this likely involve tha banks fleecing customers to buy the State’s shares back, i.e. would it exacerbate the lack of credit?

When I started doing my examples I expected the money paid back to shareholders to be money taken out of bank capital and therefore money wasted as far as the country is concerned. The examples didn’t bear this out though! How did I end up with the extra cash?? Am I missing the cost of a balance sheet deficiency somewhere??

Are journalists getting private briefings by pro-TINA lobbies? Eg presentations by stockbrokers. There seems to be a consistent (and in my opinion flawed) analysis in their articles. Just wondering if we’re missing out on a well organised PR offensive.

I suppose if Martina Devlin wrote a book on Titanic she’d know all about re-arranging deckchairs while ships are sinking.

@Sarah Carey – a conference sure, but a public debate would be good too. Not Questions and Answers-type media-directed crap but a forum where people on both sides of NAMA could present an accessible precis of why NAMA is the better of the options available to the Irish government right now.

I bet any number of university debating societies in Dublin, Cork, Limerick or Galway would be delighted to host 3-5 credible people on each side and give them 7-10 uninterrupted minutes to put their case. If there was interest in that I doubt it would take more than a few days to ping the Societies in question.

@ Andrew
As a taxpayer, I can understand the political desire to impose losses on the providers of risk capital to banks: large shareholders and investors in sub debt.
In your reply to Eoin you raise the issue of imposing losses on senior as well as sub debt. Imposing losses on senior debt means forcibly restructuring debt, this is also known as a default. This would ultimately worsen the funding situation of banks.
While there are good intentions with your plan, it lacks an overarching framework for the various transfers of assets etc and the bridge bank you propose.
Other people have both commented and posted on this. Basically what is needed is an FDIC/Resolution mechanism.
Look at chapter 4.
The reason why INBS exchange did not go so well was two fold
(i)they were exchanging a variety of bonds in their capital structure including bonds lower down the structure, i.e., those with more layers to absorb losses. For the most part, this was unlike the other Irish banks exchanges.
(ii) the investor base for some of these bonds may have changed from real money like MMF’s, PFs to high yield investors. This seems to be the case for other european banks.

In scenario 2 where are you getting the “instead of Nama having 40bn cash”? Is it in comparison to scenario 1? (in scenario 1, are the nama bonds not repaid)

Anyone looking for new credit should have clued themselves into what is meant by a deflationary spiral. Credit has been and is being destroyed. Governments can postpone it for some of their followers but not all. Businesses that do not generate positive cash flow will not get credit.
Cutting back may be the only way to enable many businesses to survive especially as the extent of the deflation may be 19 years and counting. Depressions are littered with comments that an upturn is just around the corner. While everyone else looks for it, others steal the silver and head for Paraguay. History trumps economics!

Ahura Mazda
Yes of course they are! There is money to be made! Just not by you or me …. The lobby crowd like the Praetorian Guard run the country by deciding whom is the recipient of their patrons’ largesse. PR = ex-journo.
The msm is opart of the glee club behind a FIRE “industry” that was 30% of the NYSE. Finance actually produces nothing. All services. And fees and …. money trails.
But don’t worry there will be no disquieting investigations! Maybe a PAC hearing to silence the dogs in the street!

Yes the point is that NaMa may be a ‘”success” yet we may still end up without banks of any sort. Well done! And don’t forget that we are still so heavily borrowed to fund NaMa that we cannot now fund new good banks! And it is 5 or 10 years down the line! How many small businesses have to go to the wall before we actually have good banks?

Capital is being destroyed people, tick tock! Tghe sooner this option of NaMa is put away the sooner we can concentrate on a VIABLE BANKING SYSTEM!

VBS not NaMa!

@ RV
What is needed is liquidation of grandiose schemes and the restoration of use of the actual assets. Not a bizarre money losing, interest aggregating, limbo where they will prevent further construction for decades! Just look at the jobs lost as a result of NaMa.

I predict the formation of a new class of travellers, who search Europe for a job. Gis a job. I could do da. Dragging their kids with them. Fascinating. Who was Cromwell?

Yes. I think that you aree right. But that does not mean it will come to pass. I think there will be finance problems internationally by mid October. The government contain some young people who will wnat to keep their jobs. But NaMa may still come to be. Destroying more scarce capital. Making those who already have capital that much richer.
Game that!

Voting against Lisbon is one way to register a protest against the government.
Discuss ……

@TRP I feel your pain on the credit front…. My customers are taking many months to pay……. and may not even pay….. They are international, and I believe I will eventually get paid….. and am lucky enough not to have to go to the bank yet. I have a deadline after which things will be wound down.

But I don’t believe NAMA will restore credit; though it may ease credit marginally.

Here goes my theory.

NAMA is giving the banks taxpayer’s money. The difference between the actual asset value and this long term bullshit is a gift from the taxpayer to the banks.

There are no strings attached with this gift or no comebacks.

So don’t be surprised when the banks take the money and use it to pay back their own debt to bondholders or simply invest it where they believe they will get better value… In my view probably shorting the taxpayers that rescued them. After all, they know just how fragile the whole system is and they are the boys with the cash.

Not what you want to hear.


I agree about what the Banks may do post getting money from NAMA and if there was one clause the Government needs in it’s NAMA legislation is that 90% of the funds generated by NAMA must be relent within 1 Year or else they will be Nationalised. There is no liquidity in the Banking system at present and this is putting the economy into a further downward spiral so less taxes,employment etc. This point is being missed completely here by academic arguments about haircuts etc etc.

@Ahura Mazda

I was comparing Scenario 1 with Scenario 2.

In both I am leaving aside the repayment of the bonds so we can take it there is €100 outstanding in bonds in each case. (BTW, I wasn’t talking in billions! Just using notional values for each indivdual asset and the effect that asset’s price has on the recapitalisation required.)

In scenario 1, NAMA is left with a €40 in cash (representing a €10 shortfall) and the State is left with €50 in shares. This leave’s the State having a total exposure of €60 backed by bank shares acquired for €50. (Of course, this assumes that the €40 will be applied towards the State’s exposure to the bonds. Should this be copperfastened by the NAMA legislation?)

In scenario 2 NAMA is left with no cash and no loss but the State has paid out €80 for shares. This leaves the States position as a having a total exposure of €80 backed by bank shares for €80.

It occurred to me last night that once the shareholders rather than the banks are involved then individual shareholders’ personal property rights come into play. This could cause serious legal difficulties in the administration of NAMA down the line. That issue would need to be resolved for NAMA.


I agree that new statutory FDIC-type bank resolution powers are required by the FG plan, but I do not see this as being as a major impediment (we do only need them in place by September 2010 when the Guarantee expires).

Your observations regarding the factors affecting the INBS senior debt buy-back are helpful. Do you have suggestions for increasing the changes of success of future schemes?



Instead of your scenarios, which frankly I find confusing, why not concentrate on the real problem. What are the losses and who wll bear them?

You have the state “investing” in banks, but while it is getting a shareholding, is it getting any value or just filling a hole?

Why would you pay 20 billion directly to shareholders whose equity at the moment is valued at 4 billion?

There is a role for financial engineering, but we need to decide the basics first.
Who is paying for the clean-up after the coke driven property party?


Isn’t the question “who is going to pay?” a little disingenous at this stage. Across the globe, the citizenry of capitalist countries and of other countries are being told that they have to pay for the mess we are in because the alternative is ruin. We all know the answer.

The real question now is how do we minimise the cost to the country of this mess so that ordinary citizens’ suffer as little as possible. All the political parties have the same professed goal at this stage. The debate is about method rather than the desired end-result. In other countries more hawkish free marketeers might say slash welfare, burn the banks and let those who fail starve. Nobody is saying that here.

(With that said, it is clear that there are many supporters of opposition parties who have demonised FF in their own minds over a long period of being frustrated with their own electoral failures. Such people are capable of ascribing any base motive to any act by FF. I would not make this criticism of 90% of actual opposition politicians who are smarter and more serious than that.)


I went a bit poltical there myself! I guess it is hard not to.

You might look at my reply to Ahura Mazda. I wasn’t talking about billions. I was just using simplified models with abstract amounts to try and tease out how Honohan’s NAMA 2.0 would work as an alternative. I wanted to ask if I was missing something important.

Further details of the fraud in Anglo are emerging…. Not surprisingly these are only being disclosed because Anglo has no choice…. its looking to raise up to 30B in a bond auction….and has to disclose what for…


“Anglo achieved that ratio on August 6th when it received €827.72 million from the Government, a payment that followed a €3 billion injection in June.

Anglo incurred a pretax loss of €4.1 billion in the six months to March as the value of land and development assets plummeted. While taking a €4.1 billion impairment charge, Anglo said that the level of “past due” and “impaired” loans had risen to €23.6 billion from €2.5 billion in six months.”


ok millions 🙂

In your example in scenario 2, there would be 20m cash? Also, lets consider the ownership of banks. Say scenario 1 results in 50% state ownership and 90% in scenario 2.

Then looking at what the government owns at end

Scenario 1: 40m recoveries (cash), 50m bank shares.

Scenario 2: 20m (net) recoveries (cash), 80m bank shares, 18m (“to shareholders in cash”).

Scenario 2 looks better. I think the recoveries in scenarios 3&4 trespass in to the fanciful. Once you get into high recovery rates, the greater the likelihood that the loan doesn’t default. If a loan performs to maturity, NAMA’s upside is capped at principal plus interest.

Now that Fine Gael Have announced that they will oppose the NAMA legislation in the Dail and have denounced it as a bailout for banks, is it time for a review of the alternatives.
As one of your contributors pointed out, the efforts of our economists without major political support. were unlikely to succeed.
Now that a political alternative can gain widespread publicity it seems that a credible alternative banking resolution trust scheme that encompasses the Fine Gael proposal with that of our economists could gain public support.

It’s certainly time to look at FG’s proposal carefully. NAMA could well brin down the Government. If so FG’s proposal becomes a reality.

Does this mean FG will not propose amendments to NAMA but rather will oppose the legislation altogether? I hope not.

Best international advice is “Pay up Paddy”

NAMA is not about recovery; its payback time.


The question as to who pays is not disingenuous -it is central.

FG policy is unambiguous – shareholders and bondholders lose all their money before taxpayers pay out a red cent.

LP policy on nationalisation is ambiguous as they never say what compensation existing shareholders receive or what happens to bondholders. If the FF nationalisation of Anglo is anything to go by, the bondholders are bailed out.

FF policy is that the taxpayer pays for everything by makinga free gift of about 30 billion to the banks.

GP policy is to save the planet by changing light bulbs and cycle to work schemes while FF bankrupt the nation.

@zhou_enlai (“Does this mean FG will not propose amendments to NAMA but rather will oppose the legislation altogether? I hope not.”).

I strongly suspect we may see some ‘realpolitiks’ in action over this. Better to oppose the legislation and lose than have to deliver the next budget yourself? Why not let FF stew in it a bit longer and really wipe them out, etc. ??

It’s pretty sad if politics takes precedence over what’s best for the country. But hey, nothing new there the world over then.


Noted that FG are suggesting that we can push losses onto the senior bondholders and have an effective banking system. I am not confident that this is realistic but I am not going to dismiss it out of hand until I have had time to examine it in more detail. I am finding it difficult to get a grip on the mechanics of the FG proposal so far.


It is to be welcomed that FG will comment on the NAMA legislation as per Richard Bruton’s radio comments yesterday which I referenced in the discussion on the Minister’s comments. If FG are playing politics then they are entitled to do so. It is not as if making proposals is risk free so one has to give them the benefit of the doubt as to bone fides. Opposing the NAMA legislation and stirring up discontent which might spill into Lisbon (through no fault of FG) is the one course of action that could lead to FG delivering the next budget.

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