His speech to the Humbert Summer School is available here.
Month: August 2009
In this blogpost I list the six basic reasons why NAMA might come into existence, and evaluate each of them.
“Incoming students in the 2009/2010 academic year should now be on notice that in the event of a Government decision to introduce a new form of student contribution from a future point in time, any such arrangements are liable to apply, from that time, to students who enter higher education this year.” (Tom Boland quoted in today’s Irish Times)
The reintroduction of college fees has been a feature of the policy landscape for the last year in particular. As yet it is not clear from reading the debate what is likely to be proposed. A number of issues arise from an economics and an education point of view around firstly whether fees should be reintroduced and secondly what type of mechanism should be used if they are to be reintroduced. Proponents of the reintroduction of fees argue that it will increase available finance and perhaps autonomy to the third level system and also that it will remove a subsidy that accrues to a greater extent to the better off (particularly if scholarships based on means-tests are brought forward in parallel). Opponents point to potential discouragement of people in middle-income categories, potential financial hardship for students, and also poor timing in the sense that graduates in the next number of years will face a very depressed labour market.
There are a number of other questions about the details of any reintroduction that haven’t been debated in the media. I’m sure people will have many more issues. But to start with, we do not have a sense yet whether this is being proposed only for the universities or for the IOT’s also. The extent to which a family income threshold will be used has been floated in many articles but what is the appropriate level and does it make sense to tell an 18 year old that their entitlement to state support depends on their household income? The extent to which fees will be used as a replacement for existing college funding sources as opposed to an extension may seem somewhat obvious now but still has not been discussed much in public.
This IFS document analysing the British case is useful background reading for what I’m sure will be a purely evidence-based debate. According to the Times, a 100 page document will be circulated by the Minister for Education to his cabinet colleagues next month. He should make it publicly available also – it really wouldn’t hurt to have a debate about such a deeply important issue.
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.
Page 15 of the draft NAMA legislation tells us that the definition of a “credit facility” includes instruments such as “a hedging or derivative facility.” Section 56, starting on page 46, then defines eligible assets for purchase by NAMA as a range of different types of “credit facilities” as well as “any other class of bank asset the acquisition of which, in the opinion of the Minister, is necessary for the purposes of this Act.”
In theory, this allows NAMA to purchase derivatives from the banks. And indeed, it turns out that they are doing so. Click here to find a tender notice issued yesterday for “a Derivatives Valuation Service Provider to provide valuation services (the “Services”) in respect of derivatives positions which will be transferred to NAMA.”
Part of the work of the service provider will be as follows:
Determine derivatives’ valuations based on market-accepted methodologies and market rates. Valuations will incorporate adjustments which will be based on the creditworthiness of the derivatives’ counterparties and which will be specified in guidelines agreed by NAMA with the service provider.
I’d be interested in knowing how large the purchase of derivatives will be, what types of derivatives they are, what the rationale for their purchase is, and what exactly will be the nature of the “adjustments” incorporated.