Who can argue with the final para:

“We therefore urge the Government to reconsider its approach to payment for loans to be taken into Nama, to pay no more than current market value – which can be ascertained even in these times – and to require the investors in the banks to bear some of the cost of restructuring the system. Moreover, we also argue that the Government should not burden the State with more debt than is absolutely required.”

Well done!

Btw it is 0546am and my newly born daughter just woke me up. A different kind of WUME involved there!

Anybody that writes 5 negative posts here at times ranging from 6.22 am to 7.02 am has to be in the business of WUMING

The government cannot fix the banks. No one can.

We can find out how bad things are and trade from there. But NaMa will make things worse. The banks very likely will not be able to trade into profit taking into account the lack of worth in their securities.

They perform a useful function, that is of clearing payments. That should be safe guarded as strike action, lockouts and insolvent liquidations will take their toll.

But government cannot make a market. They can lend money, just look at FannyMae. This federal lender is now insolvent due to Bush stuffing! Now that is an example of government help. They were making an ownership society. Yeah! Good, huh!? Huh?

I agree and have asked for responsible non warners to put up their hands so we can stone them, but they all say privately to me that they had no duty to warn people. Which is true. And that the cheerleaders of the bubble would target them. Elliot Spitzer was Governor of NY and drew peoples attention to George Bushes personal involvement in trying to diminish state as opposed to federal safeguards on loans made to people. Predatory lending. Spitzer was one of the straightest american prosecutors, not that that is much of a compliment, but for his action he was outed as a user of a jewish brothel. As a result, he resigned.
All the cheerleaders of the bubble made fun of him. On TV and in print. But he was trying to show what was going on in the states. This entire thing was predicted and many managed it to arrange to take out capital before the peak. They know that as assets fall, that capital has doubled in worth. Tax free. Quite a temptation! Allowing people to be greedy and ignorant is not morally wrong. But encouraging as Bush and others did, while knowing how it would end, as in Katrina, is a tremendous moral evil. But they are wealthy and if you ask nicely, they may give you a job, at mexican wage rates.

Pretty soon, Ireland may be competetive with these rates if capital is destroyed in NaMa.

They cannot lend for mortgages except where the borrower has an existing mortgage with them that has a smaller safety margin.

Please put yourself into the position of being a banker. You are facing an economy where asset values decline by 10 to 20% annually. Unemployment is increasing bythousands every week. Banks are insolvent and will soon “let staff go” even if they want to take a pay cut to stay on. Who better to know that than you, a banker? You simply cannot lend except by wasting capital.

And I say, well done thou true and faithful servant! You have protected what has been given to you in trust.

I notice that many commentators are not bewailing the lack of bank action. They know what I have said is true. They know that things are worse than they have said. But they wisely leave it to others to say what they think but politically, cannot say. The banks are liquid but insolvent and cannot lend except for the exceptional guaranteed pay back. Deflationary spiral, people, look it up! I’ve explained it elsewhere. It may last a few more years or a few decades! It has happened before. History trumps economic theory!

I just wish to congratulate Karl Deeter and Chow and Lie on their forthcoming nuptials! May they provide many happy small but perfectly formed mortgages! We need more credit

Bloody well done lads and lasses!

To get the executive to say they will alter their valuation method is a reward for sticking out your necks! Thanks!

It also demonstrates ol’ Biffo has some integrity too. Did I say my folks are from the faithful county?

I agree with you about Bank lending and their unwillingness to lend. They say that they cannot find punters to lend to and there is no problem on credit availability. They were saying for a year that they had no problem with bad debts and eventually we got the “goods” on that story. So does anyone think that there is no problem on the availability of credit particularly to business customers. I know from someone in the garage business that 9 out of every 10 car loan applications are rejected by the Banks in that sector. So they are saying if we line up 10 people looking for a €10 -20,000 for a car that 9 are likely to default. The reality is that they have no cash to lend because of non-performing loans and as a result are constricting the entire economy from getting out of recession. NAMA needs to be installed to sort them out yesterday. Tweak the legislation in whatever way necessary to protect the taxpayerover it’s life but for God’s sake get on with it.

I sent off an email to info@mortgagebrokers.ie. It is the only address I could find.

I don’t think there will be any shortage of “creative destruction” unless we set up a state owned “good bank” or nationalise 100%. If we do then I suppose it will be hard to rule out political interference (and it be impossible to avoid a perception of political interference even if there is none!).

I suppose another point to consider is the export sector given that international recovery will probably (hah!) precede domestic recovery. If banks are assessing based on domestic businesses, they will be reluctant to lend to international businesses whatever their prospects.

However, my fear is that we will have zombie companies propped up with unsustainably high cost bases and the ‘creative destruction’ will not take place…

Just asking again what the expected timeframe would be for your nationalisation proposal - how long would you expect the banks to be nationalised?

There was criticism in the opinion piece that the timeframe of NAMA was uncertain - with Minister O’Dea saying 7 to 10 years - do you think that the nationalisation proposal would have less of a timeframe than NAMA?

If, for argument’s sake, the timeframe for your nationalisation proposal is 10 years (before re-flotation) - how will that affect shareholders?

They have been getting people ready for serious cuts for a long time. I don’t think they are. They also showed their mettle when they screwed everybody with a tax hike the weekend before the local elections. I don’t think it is question of “do they have the bottle”. People want to know if they have the brains.

“I see no credit-worthy borrowers who want credit.”

You should get out and about. The banks’ line is that they have no (nada, zero) money to lend. They are telling people that if they had money they would loan facilities but not now. Some customers are being told to keep their heads down about problems they may have in the hope that those higher up in the bank won’t notice because if they do it will mean liquidation of all facilities.

It is a clear risk in exiting recessions that banks lag behind the real economy in recovery, i.e. they are still applying the hairshirt when times have improved. This slows recovery as does too much austerity in bad times. That is what we are up against now and that is what we are fighting. NAMA isn’t a panacea for credit flow but it or another credible banking solution is a prerequisite for getting credit going as soon as possible.

No I was not expecting to get the email from you. I do not doubt your bone fides. But what I do believe is the fact that 46 people signed up to a letter having been asked to do so does not necessarily really mean anything but that. My real concern is that academic commentators and probably most of those that signed that letter/article have no hands on experience of business and in particular just cannot understand what is going on at present for the average business in Ireland.The damage being done is enormous due to the lack of definite direction in dealing with the real issues for the economy. Personally I do not favour NAMA but just now it is the only deal out there and bickering by economists about it is causing a greater lack of Confidence in the Irish economy because the Irish Media latch on to anything and make a meal out of it. Witness Yates, Duffy, Browne, O”Toole,Keane etc etc on a daily basis. I sign contracts on a weekly basis and I can assure you that I could draft a few sections for the NAMA Bill to protect the taxpayer and make the Banks pay for their mistakes down the line. In the short term there might be deficits from the NAMA approach but over medium term these deficits can be paid for by the Banks that caused them. The worst case scenario is that the NAMA Bill is abandoned because the Politicians loose their nerve. The second worst scenario is that Lisbon Treaty is rejected. Not implementing the Mc Carthy Report will be the final nail in the coffin for the Irish economy.

More fool the economist community for treating every economy as an island. We see a continuation of that to some degree today with the idea that China (and everyone else) can export their way to recovery when the consumers of the world are over-indebted and not buying…

In a globalised economy, no economy is an island. Recovery in France and Germany may well lead to higher interest rates in the medium term. What is that going to do for the debt situation in Ireland? Or indeed for the NAMA floating rate notes?

Apologies. I meant to say that we must socialise gains as well as losses. Why should the State guarantee a private SPC bad bank and let private investors make a profit off it? That sounds like taking all the pain but getting no gain!

I don’t think I changed the rules. The issue I was focussing on was difficulty in raising funds for banks under NAMA -vs- under Nationalisation. I think Anglo -vs- Nationlised Anglo sent us off in different directions. We shouldn’t fret though - we wouldn’t be human if we didn’t think we had two different conversations!

I agree we desperately need an orderly wind-up mechanism though I don’t know if now is the best time to publish the legislation. Maybe when we are approaching the guarantee deadline moght be better. The banks and bondholders would really have to take us seriously then.

A European wide mechanism would be good. However, one wonders would we have been told that we had to let all the Irish banks go wallop and depend on foreign banks to support the Irish economy? The truth is that nobody is going to bother their b_llocks about Ireland but us. We may well deserve it but self-flagellation isn’t going to put the bread on the table!

I don’t think that a majority state stake will hamper the banks too much as the bankers will work like 10,000 Daley Thompsons (the fact he was a great decathlete is the point before anyone gets stupid) to get to a position where the state can sell off its shares at a profit.

I agree with your relationship, though.

Our entire banking system is smaller in assets than the assets the FDIC nationalised in the US last year. In terms of the eurozone, it is negligible (not that the rest of the eurozone is free of insolvent zombies either!). The difference is the FDIC has the method and the power to turn around banks quickly, selling them in whole or in pieces and swallowing the bad bits. I put it to you that a eurozone-wide version of the FDIC is required?

As for the guarantee, the liability we have already taken on has affected our creditworthiness. It has been centrally mentioned by the rating agencies in downgrades. Are the banks effectively nationalised by this? At the moment, yes. NAMA will undo that if it does not result in majority equity stakes to dilute existing shareholders (whether the state or other private capital).

But we don’t want to do that. At least, I don’t. Anglo clearly needs a bad bank if there is to be any return on its assets and on the physical infrastructure of the bank itself. The other banks also clearly need a bad bank. But I don’t see any reason why this should be a state bad bank. Let the banks put their toxic debt into a SPV with the state acting as guarantor for bonds issued on that debt and losses recognised over time. Let the banks recapitalise through equity placements. Let them eat cake, so we can continue to look for bread…

I see no contradiction. If banks are struggling to get finance then of course nationalisation will help them get finance. However, that doesn’t mean that they will find it as easy to get finance as they would if they were still part owned and their loan book had been cleared up, i.e. in terms of ability to get funds the relationship could still be as follows:

NAME+Recap+Part Private > Nationalised > Pariah Private Bank

On your last point, are you suggesting that a private guaranteed bank is the same as a nationalised bank? It isn’t. The issue is not whether a state guarantee helps. Of course it does. The issue is whether the potential negative effects that 100% nationalisation may have on banks ability and determination to act along commercial lines will outweigh the benefit of that guarantee.

Ireland actually is different to the USA, UK et al in this regard because we would of course have to nationalise our entire banking system. The liability that the state would be taking on, which you and I correctly fear, would also be feared by the market and would affect our credit-worthiness.

I share your reluctance about nationalisation as I too want to see an end to this guarantee and a limit on State liability. The analogy that keeps springing to mind is that Nationalisation is akin to the USA invading Iraq: once you own it you are responsible for it - you can’t just walk away when you discover that things aren’t quite as you expected and people won’t behave as you want them too. Is Brian Lenihan to Brian Lucey what Colin Powell was to George Bush ?

everyone knows we cannot renege on the guarantee. but bond cashflows occurring after sep 2010 can be renegotiated to limit taxpayers losses.

after the trauma of russian default in 1998, investors were piling back in two years later.

“They have many years experience steering the country’s course in the financial markets and have been very successful through both good times and bad.”

fatuous rhetoric about irelands reputation is fine. it only becomes a problem people start wasting billions of taxpayers’ euros because of some sacred cow.

ecb will have effective control over what’s left of the irish banking system for the foreseeable future. in the sense that frankfurt determines haircuts on 60Bn refi, draining or adding liquidity as they see fit.

You don’t see any contradiction in your dismissing my point about it being easier to get funds as a nationalised bank than as a struggling private one? If it was not easier, why would we nationalise?

Psst. I think nationalisation in full would be a bad idea. Because I don’t want to expose the state to any further balance sheet risks. Never mind to the risks of incompetent management.

But that doesn’t mean that the banks wouldn’t temporarily find it easier with what would in effect be a long-term guarantee…. tell me any senior debt the banks have managed to issue beyond September 2010 and then tell me that private sector funding is easier and cheaper…

Irrational fear of financial markets in govvie circles or not these senior bondholders have been guaranteed by the state until September 2010. No matter what way you carve it up, defaulting on this debt now represents an event of default to the state which I cant see being a good thing when we are borrowing a couple of hundred million euro a week just to kept the place running. below is the link to the guarantee FAQs:

http://www.finance.gov.ie/documents/publications/other/faqbankguar.pdf

I am assuming BLenihan is taking a certain amount of his advice from the NTMA and not solely from Department Officials and fellow TDs?????? My view of the NTMA and their head man, Dr Somers, is that they are a long way from being “financially illiterate”. They have many years experience steering the country’s course in the financial markets and have been very successful through both good times and bad.

Besides all of the above, would we not have to cannibalise our own pension reserve fund to really get at any of these bondholders whether Senior or Sub. Do we not have a couple of billion in pref shares in BOI and AIB that would have to take the hit first? Could someone clarify the position on this for me please?