The Return of Mr. Lundgren

Everybody’s favourite Swede has weighed in again, this time in an interview with RTE’s Tony Connolly. Morning Ireland had a excerpt from the interview this morning and apparently there will be more on the Six-One TV News tonight.

It is interesting to see Mr. Lundgren make an intervention again on this topic. After his appearences here a few months ago, the government spin was that he was wholly supportive of their approach—see for instance, here. I found that interpretation untenable but the sublety of Mister Lundgren’s words and the effectiveness of the government’s PR approach meant that they got away with it.

I think it’s pretty clear now that Mr. Lundgren does not support the government’s approach and one must wonder whether his intervention was prompted by a discomfort at being misrepresented by the Irish government.

I guess it’s back to the drawing board on international support for NAMA and long-term economic value. Time to fall back to claiming that the IMF fully support this approach. No, wait. we mean the ECB. No, wait, we mean Alan Ahearne. Listen, we’ll get back to you.

40 replies on “The Return of Mr. Lundgren”

Sorry for abusing the actual subject matter of the thread but I am hearing that Patrick Honohan is to be named Governor of the Central Bank? If this is true would that herald a change in attitude towards NAMA along the lines suggested by PH?

There hasn’t been any official announcement of this as of yet. If there is, I will be very happy to write a post and give people their chance to discuss. But, for now, can we leave that subject aside, hopefully to be returned to later?

On the one hand we have GF, and on the other Bo. Both have significant experience of dealing with financial crises that are domestic in origin and propagate in an unfavourable international situation.
I know who my money would be on from the relative experience of the growth and economic paths of the respective interventions….
It would be very interesting to see how the govt spin this one…


To be fair to Garrett, I didn’t actually hear him say in any of his appearences that he was an enthusiastic supporter of the NAMA approach or that it couldn’t be improved. This is because he preferred to spend his time talking about budget deficits and horse scaring and claims that there wasn’t time to put together a detailed alternative. I think that’s a pity.

And since it came up so much yesterday, I might as well point out that I was under the impression that I was going on Newstalk to discuss NAMA with Fintan O’Toole. I only found out that Dr. Fitz would be on about 10 minutes before turning up. Eamon Keane has asked me to come back in again to talk about NAMA and I will take him up on this offer.

Fair enuff. But his attitude is “stick with nurse for fear of nurse” , as I understand it.

Individuals and organisations cited by the authorities in defence of NAMA are subtly distancing themselves. Such distancing can only be done in diplomatic language, which is lost on those who employ a more strident tone. We might complain that those who are defending the indefensible employ unfair/unreasonable/risible tactics but very smart lawyers defend the guilty every day and feel no regrets when they win.
There is, I am told, a gang of 4 who are orchestrating the pro-NAMA PR campaign, including the seeding of articles in leading newspapers by naive/lazy/friendly journalists and pols. Once you have decided that the game must be won,and you also have enough self awareness to know that your ball skills are not up to a fair contest, playing the man first becomes an inevitability. The gang of 4 are not stupid, are self-aware and know they cannot win on the arguments. The debate isn’t going to get any less nasty.

“The gang of 4 are not stupid, are self-aware and know they cannot win on the arguments. The debate isn’t going to get any less nasty.”

Maybe they’ll make a movie about it one day.
“in the Nama of the father”


I doubt you will confirm names but is that gang of four (now where have I heard that phrase before?) made up of two politicians, someone from the DoF and an ‘economics expert’ by any chance?

I am fascinated to hear what Mr Lundgren will have to say on the news this evening – assuming he hasn’t been ‘got at’ over the next six hours.


I have to say, that’s the funniest post I’ve read in days!

I thought Abba was our favourite Swede(s). Remember “Take a chance on me”? Could have been written for certain people..

@ Brian

It is easy to get cranky with ‘insurgents’ on a national level.
But if international voices start getting the same treatment then how will that play out?
It may back fire and attract more attention and presumably with that criticism.


The adoption of “long term economic values” by Nama as basis for valuing property in order to recapitalise the banks involves a disconnect in logical terms.
We know they need money. They don’t tell us how much.
We know that the “market value” of the loans is not sufficient for their needs.
Why do we pick a laughable fantasy valuation basis for the property upon which the loans are secured to determine the extent to which we will overpay the banks? The two are unrelated, unless the “long term value” is going to be fiddled with to provide the required solution.
When people, or businesses need financial help you first find out exactly how they are fixed; otherwise your best efforts to assist may be no use.
Secondly, you don’t write a blank cheque.
They won’t tell us what they need.
Nor do we know how much of a subsidy the Nama proposal would be giving them because we don’t know how much the loans will realise compared to what we are paying for them.
On first principles this approach is all wrong.

@ simpleton,

I gather the gang of 4 have bought a white hiace van (off Anglo) & are to be scent driving around spying on the 46. The big ariel on the top is a give away. I gather one of the 46 has turned and is now a paid agent of the Nomenklatura.

@ Ramanujohn

It would have been nice to keep the debate focused purely on the economic implications of Nama.

However Brian Cowen has already signalled to the market that the Irish government will write whatever cheques are necessary.

How much? Of no consequence!

Debate now seems futile.

As Brian Lucey said a few days ago, at least we tried.

@BL (and all the other economists, I guess)

If Nama was to just pay ‘market value’, then why woud it need to become involved at all? If there was a discernable market value for these assets, it would imply there was a discernable market for them. If there was a market, then why would the banks not just sell them on the market, as opposed to selling them to Nama. It would achieve the same aim (removing the assets from the banks balance sheets).
I’m not an economist, as you’ve probably guessed, but I would like to know the answer to this question. It has been bugging me for ages now.

Can someone brainy please answer Mr.Cornflake’s question – sounds like an interesting one to me.

“At least we tried”
Lads, its only the 3rd of September….You wouldnt see Cowen and his mates giving up 13 days before an election (well in the past anyway)…in fact even on the morning they would be getting the buses together to bring granny and her pals up to the polling stations….i dont agree with all that is said on this site but I find the debate very interesting and some of the suggestions to modify (at least) the NAMA project insightful….for the want of anything else if some of the suggestions made here make it into the legislation and ease the future burden on us all that will be a success of sorts…keep it up…the debate is never futile…even if it does just turn out that it lets you say “I told you so”in years to come…although I hope it never completely comes to that or we are going to have a lot more to worry about then…

Selling at market prices would reveal a very large gap between those prices and the value of the loans that the banks have made on those properties. Selling or valuing at current market prices is the same thing: it exposes the gap, wipes out any pretence at solvency. Does this help?


I agree, I am just saying that it looks as though it is now a political ideology that has taken over.
Not even an ideology, more of a pig headed attitude by the government.

The whole process seems fraught with the unforeseen.

Has Nama any legal right to override loan agreements or terms of re-payments already in place between banks and developers? I would doubt it.

The Zoe. and other cases indicate that in some instances these can be 3 or more years long.

By now, any major developer will have secured their positions with the banks in anticipation of Nama.

Any legal experts out there to shed some light on this?

@ cornflakes
I think the whole point of a NAMA is that there is no market and there is unlikely to be one for a while, hence LTEV??? Banks stuck with loans secured on property the holders of which cant pay em back now…bank calls in accountants and lawyers….accountants and lawyers sell properties…bank takes hit to capital…at best cant lend anymore to SMEs, ftbs etc..but could possibly (and almost definately in at least two cases) go bankrupt itself…bigger merry go round starts….but government gives banks a better price than they can expect today for these assets….. Longer-term economic value….banks dont take as big a hit…balance sheet is cleaned-up….its off we go again…clean banks…two of which have the country by a certain part of its anatomy anyway…they will make money no problem when they are clean…competition is really going to slow down from what I can see going forward as many of our foreign friends who have been hanging around for the last few years want OUT…essentially for banking services (maybe other than mortgages) we could be back to a duopoly…the days of free banking and cheap deals are gone!!! (sorry went off the point a bit towards the end, but this duopoly concerns me going forward too)

Thanks for that. Yes it does help, but it doesn’t fully explain what has been bugging me. I understand that if they are market valued, then the towel slips and the banks have to face up to the full extent of the losses. I now fully understand that this is the reason why the banks don’t want to ‘mark to market’.

But let’s say they did mark to market. Then they could just sell them on the market and we wouldn’t need Nama. The state would only need to step in after the assets were sold to plug the capital gap (probably with help from private investors, seeing as the banks would be insolvent, but clean and therefore attractive to investors).

The crux of my confusion is this: if the assets were valued at market value, we would not need Nama at all. We’d only need the market. The fact that the state need to step in as buyer denotes that there is in fact no market at all, so there can’t be a market value. So we need Nama.

This is why I am inclined to support Nama (from what little I know) and am prepared to accept the state paying over the odds. Because the alternative doesn’t exist. There is no market, therefore there can be no market value and no other buyer exists.


we posted simultaneously. But you’ve bulls-eyed my point. Thanks you.

The fact that there is no market (or market value) means the state must pay LTEV to get them off the balance sheets.

I think it’s more complex than that. If I understand correctly, NAMA seems to be working on the basis that the market value of commercial property has fallen by about 50% from peak. There is some sort of independent corroboration of this in the last couple of years of quarterly SCS-IPD data. I don’t know whether the market is close to bottoming out yet, as per the Minister for Finance, but the rate of decline has certainly moderated greatly as shown by the SCS-IPD data.

However, if the banks took possession of the properties securing distressed loans, and sold them on the open market in significant volumes, prices would certainly fall further, and could fall quite a lot further. The banks would get much less than the pre-firesale market price, which represents the floor on what they expect to get from NAMA. The market value of the property securing their outstanding loans would fall too, reducing the fair value of these loans.

You’re almost there. If there was a market, the proeprties could be valued and/or sold. The losses are marked/realised. Banks then need recapitalisation. No NAMA needed. But there isn’t a market. Somebody needs to make one. Enter NAMA. Karl Whelan, and others, have led the charge that we are all agreed up to this point. But where the argument goes from here is in very different directions.
First, NAMA takes the assets (‘cleans’ the banks) and takes (nationalises) the banks. Pricing not an issue cos the State owns both sides of the balanace sheet. State sells the banks as soon as normal service resotored. Taxpayer is on the hook, but for no more than necessary
OR, the government approach. Try and figure out the price we pay for the loans that means we don’t have to nationalise. Taxpayer? Who cares. It’s called reverse engineering. Amongst other things.

Thank you, this is helping me understand.
But once the assets are gotten rid of at market value, why do we have to automatically assume they would need to be nationalised? Surely the private sector would be falling over themselves to recapitalise clean banks? On KW and BL’s theory, the government is overpaying to avoid a scenario (nationalisation) that probably wouldnt transpire? That’s my problem with KW and BL’s argument..

Listen to Bo Lungren this evening. I heard some part of his interview today..Essentially he says:
Nationalise the banks – that gets rid of all the valuation issues and LTEV nonsense, and any long term upside will be to the States advantage – not shareholders.
He made it sound so simple, even I thought I could understand it. Mind you it was nothing that the gang of 20 had not recommended some time back.
BTW I think the interview is already done – and this mornings item was just an extract.

Indeed…part of the problem is that we dont know. Part of the problem is that we dont want to know (we the government). Lets say that we did let the market work, and then the banks went poof. Two scenarios emerge
a) there is a buyer (lets call it First Canuck Bank of the North). They swoop in, purchase the banks and recapitalise them from their existing assets/credit lines etc. Result – a working banking system but one that has in all likelihood a much smaller empoyment and domestic footprint.
b) The Mounties dont ride in and save us. Then if we want a banking system the state comes in and does its “buyer and recapitalizer of last resort” act. Result, much the same as above but over a slower period.

Now, there are intermediate scenarios – FCBN buy 25% of the system by agreement agreed on nationalization/towel-slip-day.

Part of the problem is that we are still in a very fragile world economic situation actually and prospectivly. So FCBN would probably want to just dip its toe in, at best. Who knows what the crazy micks will do – best play safe. So the state is the last resort, but one that I think we have all ASSUMED would be needed, without articulating it.

But why are you guys advocating that we nationalise first, before cleaning up? Why not put a gun to AIB, BOI et al’s heads and say “mark to market and sell em off” (to Nama or the market or whoever). If they mark to market, there is no need to nationalise first, as the taxpayer can’t be screwed if it pays market value.

So the bank becomes insolvent. We look around to see if FCBN is interested. If it is, great. If it isn’t, state steps in only if absolutely necessary.

You say the state is the funder, via nationalisation, of ‘last resort’. But you want them to nationalise as first resort, as per the 46 letter….

I understand and wholeheartedly agree that Nama is likely to overpay with LTEV and commend you for shining a light on this. But I don’t see why we should nationalise first without knowing whether we need to.

i am sure you have all been through this countless times but it seems to me whathever guise a solution to this takes, Joe on the street ends up taking a good portion of the tab. The only softener I can see to this is the state takes a greater equity portion in the now (given NAMA goes through in some shape or form) clean banks. I dont mean full nationalisation as I fear local councillors and TDs becoming bank managers at their Saturday clinics. But a substantial stake,then we can get exposure to some of the upside if equity prices in our clean banks begin to rise.

I dont think we are suggesting that you nationalise first. We state, maybe not clearly enough, that as a consequence of forcing the banks to take the losses then they need to be recapped, and that is in all likelihood the state (aka nationalization) .
Its therefore an outcome, not a solution


I hate to rain on everybodies parade but nationalising the banks and taking the bad assets away is a bit like GWB foray into Iraq to find the WMD. How do you run the place when you own it in a manner that is fair to all. That loan of 60m to Carroll isa salutory reminder of what happens when you do go in. How do you win the trust of stakeholders-bond investors, depositors etc. Personally I would run a mile from a nationalised bank ….back to Carroll again.

Finally,how do you get out. I can see a govt falling apart in two years time over the decision to sell out. I can just see the rage when the govt proposes sellling to the Mounties or tha Spanish or …”how dare that lot sell out at bargain basement prices”

I am not a fan of NAMA but I do see a point in Lenihan’s travails. He is clearly floundering for a compramise that mitigates the damage to the taxpayer and keeps the fiction that the banking sector is in private hands.

I finally downloaded the ECB opinion document on NAMA. I am concerned about a specific statement in that document:

“To this end, the draft law provides for the establishment of a corporate body, the National Asset Management Agency (NAMA), to acquire eligible bank assets from participating institutions, expeditiously deal with the assets acquired by it and protect or otherwise enhance the long-term economic value of those assets, in the interests of the Irish State.”

Is that not stating that they are trying to keep untenably inflated values intact? If we know from previous bubbles that true market values will not recover for 8-18 years, how can they deal “expeditiously” without unreasonably inflated valuations? And who would be ignorant enough to buy them without some non-transparent quid pro quo or even baksheesh? Do we all trust Lenihan and FF to be immune from this?


Nationalised banks are open to political influence, cronyism and nepotism?

Does this hold in advanced societies with their legal, regulatory and political oversight systems?

It this based on any research that has demonstrated that either ICC, ACC, or TSB were anymore exposed to external influence than say AIB with it’s write off’s of politicians personal bad debts.

In reverse, the state becomes captive of private banking…ICI & NAMA.

The largest Non-Resident abusers were AIB (Private) and ACC (Semi-State). Ownership status aside.

To what extent did private bankers learn from ICI and adopt TBTF risk taking behaviours?

Bill Hobbs

I don’t think Ireland neccessarily constitutes an advanced nation when it comes to the business of Government.

It’s all well and good for the Swedes to advocate nationalisation of the banking system because they know how to govern themselves.

Remember Michael Lowery is still an elected representative in this country.

Admittedly Irish bankers haven’t covered themselves in glory but neither have bankers in most countries….

@Bill Hobbs

Maybe we should put a NAMA branded condom beside every place setting in the Directors Dining Room in BoI and AIB to discourage high risk behaviour.

The only taxes I will have to pay on this NaMa is on my income, the RollsRoyce pension? You lot have to pay proprty taxes and VAT.

I tried my best to help you see what you are going to end up as, but I want to be the first to laugh at the Irish, the laughing stock of Easter Island, Iceland, and Estonia!


Sounds hollow

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