I will get back to you by email.

Is this an appropriate email address.

brian.lucey@tcd.ie

Also interested to know whether Anglo would be in a position to obtain a tax clearance certificate in order to undertake these works.

Really looking forward to seeing the tender on e-tenders.gov.ie!

Sorry to State the obvious but Anglo is now State owned and has a “Public Interest” Director. I’m not sure that there is a definition of “Public Interest” in the companies legistlation.

However, what directors of Anglo have done is sanction €68m of a loan to a failed developer in order to influence the Judiciary in its decision, thereby attempting to stop the “market” determining value in plain sight.

Of course the directors of Anglo have done nothing wrong under company law. After all it is in the interest of Anglo that NAMA go through.

It won’t be a wet day in Ireland before Anglo dump that €68m on NAMA, along with the rest of Carroll’s garbage.

Give matches to a pyromanic and what happens? Give a bank specialising in lending to the property sector to a party dependant for support to that sector & what happens? give them 2 systemically important banks….like giving a warehouse full of matches and petrol to the pyromaic? Maybe we are better off with semi insolvent Zombie banks who serve no useful purpose.

I suppose Zhou will be along soon to defend the reputation of the current administration.

“Where did I say that ‘NAMA is the only possible method of credit creation in the Irish economy’?
I don’t think I said any such thing. I said that Brian Lenihan was claiming that NAMA was the best mechanism for restoring bank lending,…”

My apologies John.

Given that you stated you did not have the technical expertise I should have phrased that as “Do you not think that there might be other ways of getting bank lending on the move again?” Or some such.

John, I’m not an economist or a statistician. But I think there are other ways. I think NAMA is a pig. And putting the lipstick of elaborate valuation methodologies on it won’t change its nature. It is still be a pig.

The reason I believe it is a pig is that it transfers ALL of the risk to the Citizen with none of the reward.

By definition, if implemented in current form, the equity value (and share prices of those publicly quoted) of the failed credit institutions will increase. I would expect the share prices of AIB & BofI to rapidly rise to a range of €7/€10. The reason they will increase is that the risk has passed from their balance sheets. I’m not at all convinced by talk of levies. In ten years from now the banks will be able to make the case that the introduction of levies would damage credit formation and therefore is not in the public interest.

The Citezen, through the State, should share in this upside.

Why? Because if it doesn’t work generations of Citizens will pay.

I’ll get back to you of the stats.

In the meantime and again,

“Can you see anything wrong with the State getting warrants for 40%/50%/60% of the equity of the failed credit institutions as part of the deal?

On additional section added to the bill would cover this.

If the failed credit institutions believe they can raise capital at a competitive rate elsewhere so be it.”

As Leonard Cohen sang “Ah you loved me as a loser, but now you’re worried that I just might win”

1) We are in the deepest crisis in the history of the state.

2) The ‘only game in town’ to solve this is NAMA.

3) If you oppose NAMA then you are guilty of treason.

It’s very hard to win against that kind of argument and whether they admit it or not 1, 2 and 3 are the steel core at the heart of the Pro-NAMA argument. Take them out and all you have are vested interests helping themselves to taxpayers’ money and avoiding the consequences.

It’s like when the young rich kid tries too hard to kiss Marge Simpson - breaking the strap on her dress - and he says ‘Please don’t tell anyone about this. Not for my sake you understand but for the sake of the reputation of the town’.

This, basically, is the logic of the pro-NAMA argument.

Now let’s be honest. NAMA will not fail. Simply because it will be a government enterprise. So a good question to ask is whether we can construct a Popperian falsifiabiilty test for it. Let’s ask all those in favour of NAMA what, in their view, are the criteria for failure - perhaps any or all of the following:

1) Irish goverment debt gets more expensive?

2) Irish banks don’t lend to medium-sized enterprises?

3) Ireland’s economic performance remains below EU trend for 2-5 years?

4) 20% of under 30s emigrate in next 2-5 years.

5) 60% of university graduates emigrate in next 2-5 years.

6) Property values do not recover in NAMA-defined timeframe?

I swear if I hear the phrase “the rate of increase/decrease (depending on the stat being quoted) has slowed,” again I am going to go and live in a cave. It has fast become the cliche of 2009. It is such a typical PR person’s phrase and way of pushing bad news to an easily fooled public.

Whatever the ‘it’ is, it is still increasing/decreasing.

Do you think the 5,914 made redundant last month care about the selected use of statistics and language?

Tell me about some of your other economic indicators as you seem happy to use them. Is government debt increasing at a slower rate? Are the number of jobs actually being created increasing? Are the number of longer term unemployed decreasing? Is the tax take increasing? Is the social welfare bill coming decreasing? And so on.

A Eurobarometer survey or the ESRI Consumer Sentiment Index are not hard data. They are not much more than opinions.

I think your take on things is a little ‘rose tinted’ at best.

@John

Your question about will NAMA work in getting lending going again is a good one and you’re right that it probably hasn’t been debated enough here. Indeed you’re right that I suspect it won’t. I don’t have time to get into this a bit more but my reasoning is still pretty much the same as this passage from the old 20 guys piece back in April (remember the 20 guys? Ahh, the good old days. Compared with the national traitors that are the 46 guys, the 20 guys were patriotic warriors.)

Quote below:

There is thus a fundamental internal contradiction in the Government’s current position. The Government is claiming that it can simultaneously: (a) purchase the bad loans at a discount reflecting their true market value; (b) keep the banks well or adequately capitalised; and (c) keep them out of State ownership.

These three outcomes are simply mutually incompatible, and we are greatly concerned that the Nama process may operate to maintain the appearance that all three objectives have been achieved by failing to meet the first requirement. This would arise if Nama purchases the bad loans at a discount – but still well above market value ….

With the Nama process charged with meeting the three mutually contradictory objectives above, it is also possible that objective (b), recapitalising, will not be fully met. In other words, a Government that needs to be seen to purchase the bad assets at a reasonable discount and that does not want to take too high an ownership share may end up skimping on the size of the recapitalisation programme. Thus, rather than create fully healthy banks capable of functioning without help from the State, this process may continue to leave us with zombie banks that still require the State-sponsored life-support machine that is the liability guarantee.

Garret likes NAMA for no other reason than that it enhances the role of government which, in principle, he supports. Fine Gael oppose NAMA for no other reason than that it has been proposed by Fianna Fail. Their morality is opportunistic. Garret has zero faith in markets and would not understand the moral hazard argument. He suffers from the same confirmation-bias that afflicts all those who propose state solutions.

The commentariat in the papers and a few bloggers - even some here - stand by as slack-jawed yokels, too easily impressed with the fact that he sounds posh and is called ‘Dr’ Fitzgerald.

Just as the slack-jawed yokel in a Hollywood block-buster would say when their hero kills the villain / wins the court case / gets the girl something like ‘He has made us believe in ourselves’. So upon reading Garret’s articles on NAMA the slack-jawed pundits say ‘We are where we are. Garret is right’. It’s a statement you hear a lot of these days. It’s designed to simulate and convey informed realism, sober assessment with a touch of gritty optimism. What it really means is ‘I’m a member of my local golf club, can’t be bothered to read too much into the analysis of NAMA and, because I’m not an extremist, I don’t believe in confrontational politics.. but I want to fit in.’ For example. Look at the comments on the Irish Times site today in response to Sean Barret’s excellent article on NAMA.. Someone called Ned O’Keefe writes ‘…We are where we are and now well down the NAMA road. Sean Barrett should stick to teaching and leave governing to Government.’ I mean is that it? Aren’t NAMA supporters not embarrassed by such dodgy support? It’s a rehash of the old 1930s engineer / expert-led economy argument. And so the peasants all nod in agreement, tug their forelocks and get back to toiling in the fields whilst the expert from the Big House / University decides what’s best.

The approach of all those who support NAMA, as with Zhou_Enlai here, is to keep setting up strawmen, answering questions that only they and no one else cares to ask. It becomes easy - having thus set up such straw men to knock them down and ‘win’ the argument.

The Indo last Sunday was a disgrace in this regard and also today. The argument has been reduced to winning the argument and not the substance. It’s as if the 46 economists are engaging in a debate about - well - nothing. There is a nihilism at the heart of Irish public life and those who embrace it, turning a blind eye to the carnival of institutionalised corruption that NAMA represents, cast themselves as realists and patriots. Hence we get Zhou_Enlai’s comment ‘…in particular they [market's judgement] complicate the post-nationalisation valuation of any bank assets and assessing what the long term values of bank shares would have been.’ - pseudo observations of unreal things - subtle questions that seem designed to cast light on important detail that nobody else would ask. But the truth is no one else would ask because the questions have no relevant or even interesting answers outside the closed-system group-think that NAMA proponents live in. Their real purpose, as with much of the discourse on NAMA, is to provide corollaries to the invalid syllogism that lies at its heart thus they are the raw material out of which the a Potemkin Financial ‘debate’ is constructed and out of which the Potemkin financial system that is NAMA will be constructed - a system whose only real purpose is to defraud the citizens.

I fully agree. The arguments against NAMA are so strong that the only risk of NAMA actually happening is if those that oppose and are being heard cannot get the message across clearly. As is, the opposition is a bit on the defensive and distracted by calls from NAMA supporters to provide an alternative.

Agree on the arguments against and then it should be easier to see the alternatives. My personal preference is to nationalise. There is no need to make it more complicated by introducing NAMA 2.0 or the FG alternative.

As for the comments from the Minister, I hope that the Zoe case will give a clear answer as to exactly what the value is of the loans and consequently an indication of the value of the banks.

According to the Zoe defense team, Zoe can’t make their interest payments. From that it is possible to assume they can’t make capital repayments either. They state that the rents & dividends are expected to increase of the next couple of years. I’m a tenant in one of the concerned properties, my lease expires at the end of October. I’ve spoken with their representatives, almost 20% reduction in rent would be the result today (their initial guess last week). I’ll be asking for more than 20% when the discussions start. I believe other tenants and commercial lease holders will do the same. Maybe the decrease in yield can be compensated by increased volume but then the value of the property should decrease.

The interest rates might go up, down or stay the same. If there is a risk premium I expect the rates to go up for Zoe.

The banks might be about to crystallise losses because of the Zoe case. If Zoe loses then I believe massive revaluations of property might be necessary in Ireland. Some more developers might become insolvent. The banks may or may not be solvent if that were to happen. If the banks were to become insolvent, then someone willing to take over all their assets and liabilities should be able to do so on the cheap.

Proponents of NAMA says that the losses expected are to be larger than the banks current capitalisation. The losses might be unevenly spread leaving some banks still standing. Reject NAMA, then the true price of nationalisation (insertion of equity) will come to light.

Ministers use outlets where there is minimum scrutiny to make a case to the public.

The Dáil format is useless in forensically pinning down ministers who usually have the protection of the ceann comhairle.

Most of the members of the Oireachtas committee on Monday would be incapable of dealing with an issue that is outside their regular messenger role, while the small number who were competent, had limited time to probe the subject.

To ministers, RTÉ Television is their main media outlet but it’s rare or never that a minister is available for a long forensic interview. The politicians call the tune despite what RTÉ staff would like to believe.

Ministers are also aided by journalists who outside of the business/finance area, have no interest or knowledge in the detail of such issues as NAMA.
So it’s the theatrics rather than the detail the engages the likes of Fionnan Sheehan.

As regards, Garret FitzGerald and the fear of the IMF arriving, it would likely have been a good thing, if it had happened during his own administration - - while acknowledging that it was FF who had put the economy on the road to ruin, in human terms, having responsibility for destroying people’s lives.

“First there was the dead-cat bounce — and now there’s the Dick Fuld bounce.

Nearly a year after its spectacular collapse, trading activity in the now-defunct Lehman Brothers has begun spiking, with volume surging to 50 times its normal levels over the past few days.

On Monday, some 125 million shares in Lehman Holdings, as the bankrupt company is now called, changed hands, compared with a meager 2.5 million shares that traded last Thursday.

Meanwhile, the stock, which is traded on the over-the-counter market, has seen its price go as high as 32 cents. It bounced between 3 cents and 5 cents in the month leading up to the surge. It closed yesterday at 15.5 cents.

Traders speculate that the run-up is fueled by a belief that the bank, which still houses billions in soured mortgage assets and esoteric derivatives, may have enough juice left in it to return at least some money to shareholders”

“what you [KW] are suggesting could be taken to suggest that
- the Minister and/or his agents have decided that they are going to skew the valuations to achieve the result of no nationalisation come what may”.

B Lenihan: “the Government is determined to avoid nationalisation at all costs”

There’s an awful lot of intense, complex analysis going on - but, I’m afraid, it really is that simple.

Where did I say that ‘NAMA is the only possible method of credit creation in the Irish economy’?

I don’t think I said any such thing. I said that Brian Lenihan was claiming that NAMA was the best mechanism for restoring bank lending, but that I lacked the technical expertise to know whether or not he was correct, and I requested opponents of NAMA to say whether their alternative proposals would do the job better and, if so, to explain why. I’m a statistician, not an economist, and I freely admit to knowing very little about how NAMA works or whether it is the best mechanism for restoring bank lending.

Despite this, as of now, I’d vote for NAMA, for the following reason:

Prior to the announcement of NAMA, all the economic indicators were getting worse. Since the announcement of NAMA, most of the economic indicators are getting better. In particular:

(a) Since March, the ISEQ is up 60 per cent.
(b) All the PMIs are up from the range 30-35 in March to 40-45 now.
(c) The Eurobarometer Survey (out today) shows confidence in the economy increasing.
(d) The ESRI Consumer Confidence Index is well up since its low in March.
(e) Consumer spending has stabilised, albeit at low levels, but much better than the precipitate falls that were occurring up to around Easter this year.
(f) Economists’ forecasts for the fall in GDP in 2009 are being revised down almost weekly. Back in March, the consensus forecast was around 9.5 per cent. Now its in the range 7 to 7.5 per cent. BOI today forecast 7.0 per cent, the lowest yet. I’m sure in the next few weeks the consensus forecast will fall to around 6.5 per cent, and continue falling.
(g) Merchandise exports increased by 10 per cent in volume between 2008 Q4 and 2009 Q2.
(h) Manufacturing output hit a 15-month high in June.
(i) The number of monthly redundancies has fallen for 3 straight months, down from 8,010 in May to 5,914 in August
(j) NTMA bond sales have gone exceptionally well and confounded gloomy forecasts.
(k) The gap between yields on Irish bonds and German bonds has narrowed dramatically since March, just prior to the announcement of NAMA.
(l) Most important of all: the rate of increase in the number on the Live Register is slowing dramatically. The August figures (just out this morning) show the smallest monthly increase for nearly 2 years (a seasonally-adjusted increase of just 5,400 in August compared with 30,000 a month at the start of 2009). According to Ronnie O’Toole, who often posts here, the average number on the Live Register in 2009 will now be nearly 10 per cent lower than even the Government forecast in April.

http://www.rte.ie/business/2009/0902/jobless.html

It may be that you will say this is entirely co-incidental and nothing to do with NAMA. I don’t know enough about NAMA to say otherwise. But, if you bring down NAMA, can you be sure you won’t bring the situation back to what it was in March, just prior to the announcement of NAMA? Why take the risk?

“Unfortunately, it is becoming apparent that the credibility problem of the banks which the bad bank is supposed to solve is now being projected as a credibility problem for Government and the bad bank process. This leaves us in an endless loop.”

The credibility problem for the government is of their own making. By consistently making statements that they will not nationalise, the government appears to have prejudged the process.

Moreover, by inserting LTEV into the valuation process, we end up with a situation similar to the benchmarking process - in fact the NAMA process has alot in common with benchmarking. We all know that LTEV will not lead to paying less than market value!

The NAMA plan appears to have at least two underlying assumptions. First, property prices, particularly development land prices, are currently affected by liquidity/ crisis conditions and will recover/stabilse. Secondly, that nationalisation will have funding effects on the banks and/or state.

Are FF acting in bad faith? I think it is difficult to put a motivation, such as bad faith, on a group as large and diverse as FF. However, it might be the case that some people in FF think that nationalisation is a reckless risk and they think it is better to overpay for assets then risk a funding crisis. This is a difficult message to sell, so instead they just argue that they arent ovepaying.

I have posted on a previous thread that a vehicle of some sort is required.

I oppose NAMA not because it is a vehicle. You could call it Securum or Resolution Trust. It makes no difference.

I oppose NAMA because the vehicle is being used to transfer all of the risk to the citizen.

Can you see anything wrong with the State getting warrants for 40%/50%/60% of the equity of the failed credit institutions as part of the deal?

On additional section added to the bill would cover this.

If the failed credit institutions believe they can raise capital at a competitive rate elsewhere so be it.