Fair enough. Let’s wait ’till Wednesday.

By generally understood, I mean that a number of the media outlets have repeated the “small percentage” report and, yes, I have spoken with various people who would generally be reliable. So I don’t really know what you mean by “what we are hearing from senior cabinet figures” unless you are using the Royal We.

But look rather than play the your sources versus mine game or waste lots of time and effort on new mass signature letters, how about we wait until Wednesday and see what happens?

Does anyone have a link to Justice Clark’s written judgment? Tried searching can’t find anything.

As for whether they would pay or not, given that the state are unwilling to ask private entities to default or restucure on junior debt, what chance that they will so do themselves?

Do you have any evidence to support your first assertion that: “it is generally understood that the payment of these subordinated bonds will only account for a small minority of the overall payment”. Generally understands by who? It is certainly not my understanding. I know economists are fond of assumptions, but really?

Your second criticism is also pure conjecture - you consider it unlikely that a NAMA bond would not be paid out. This demonstrates an unwillingness to accept to bona fides of those trying to work the NAMA proposal out, justified in the case of FF I’ll admit.

It is not inconceivable that the loans on some of the properties might be sold on at a profit in the future. Also, it is not inconceivable that a performing loan might recover more than if it were foreclosed and might exceed its designated LTEV at the moment.

I don’t think NAMA might stike gold but if you have the strength to buy at the bottom of the market you should have a good chance of making money. For that reason I think gains should be socialised as well as losses.

Also, if Prof. Honohan’s original formula were to be used the banks/shareholders would only get a share of the uplift from fire sale to LTEV and NAMA would get a share too. That of course is a better socialisation of gains.

“(i) it caps the gain for the banks if asset prices recover meaning gains are socialised as well as losses”

It’s important to remember that the assets are loans. Unless NAMA forecloses and takes possession of the property, the ‘upside’ is limited to the principal and interest owed. If the loan is purchased below par then there would be a gain getting the principal back. I’m a little wary that some folk (not you) may think that if property prices shoot up, that NAMA will strike gold.

I agree with the sentiment expressed. Interesting to see the view of a trader a bit removed from the local scene-” “The publication of a bill to set up the National Asset Management Agency (NAMA) is “not good” for holders of Ireland’s bonds, according to Societe Generale SA….That is good for investors in Irish banks. That is not so good at all, both for the taxpayer and holders of Irish sovereign debt.”

we’re ridiculously off topic at this stage, but possibly i can bring it back around somewhat.

I’m by no means a radical libertarian, but i don’t see why their concept of individual responsibility shouldn’t be more widely adhered to. In a progressive tax economy with generous social wealth transfers, people are ‘bailed out’ everyday, so i don’t see why this shouldn’t eventually naturally lead onto to one involving the banking sector. Society scultped a financial system which supplied cheap credit to be used for the never ending demand for consumer products and investment assets. I don’t see it as being bizarre to suggest that society should therefore be involved in the bailout of it when it gets into trouble (we can argue about the levels that this bailout should require from society). Ergo NAMA.

Unfortunately, those are the only positives I can take based on what we have heard so far.

Fundamentally, nobody in the public or in the markets trusts the banks. The suggestion is that NAMA will resurrect that trust by clearing up their balance sheets by removing all the toxic debt. This will work whether or not the banks hoodwink the state. The state is taking the risk of bank mala fides, not the market.

If we leave the banks holding the most toxic part of their toxic loan book after a write down to LTEV only then who in the market is going to trust them?? We could well have to recapitalise them again a couple of months later. And, if they did hoodwinked us in the NAMA process and they knew it then they would take all the stringent measures to improve their capital position which we want to avoid.

If we gave the assets to the shareholders and some bondholders then we would be giving an incentive to those shareholders and bondholders to invest further in the cleaned up banks to incentivise them to recover asset values. This benefit is also lost.

It is regrettable that the risk sharing mechanism has been announced by cabinet members but no clear technical description of how it will work has been published. This is not conducive to proper debate which the Government has promised us.

It more regrettable how this has been “stage managed” with the Greens being seen to force changes for politically expedient reasons. Either we have a clear banking sector recuperation strategy or we don’t. Mixing and matching with politcally popular but vague amendments is the very opposite of a clear strategy to rescue banks. Hard cases make bad law and political expediency makes for flawed strategies.

Eoin,

Followed the link. Seems to be some sort of a search engine. Maybe that is appropriate to “Irish Morality”.

However, the economists are probably awake now.

What you seem to believe in is some sort of radical Libertarianism close to anarchy.

I’ll leave the last word to you.

“Greed is one of the seven deadly sins. And it has nothing whatsoever to do with enterprise. Progress is a double edged sword. Greed is always bad. It just takes people time to work that out.”

Greg, from an economic point of view this is, in my view, utter tosh. If this was http://www.irishmorality.ie you’d probably have a point, but its not.

If there are any members of the Green Party reading this look away now.

PAY NO ATTENTION TO THE MAN BEHIND THE CURTAIN.

http://www.youtube.com/watch?v=YWyCCJ6B2WE

“if MLK could’ve patented peace and love he’d have been a billionaire.”

Eoin,

Martin Luther King Jr. did not want to be a billionaire. He did not want to patent love.

He knew that love was love.

He also knew that greed and the desire for power over others is part of the human.

Eoin,

The people who invented the nuclear bomb, by innovation, could yet destroy the entire human race.

Greed is one of the seven deadly sins. And it has nothing whatsoever to do with enterprise.

Progress is a double edged sword. Greed is always bad. It just takes people time to work that out.
And because we are not immortals we have to work it out at each generation. Greed and lying are joined at the hip.

And now, the Green Party is joined at the hip with Fianna Fail.

It’s a good job all the economists are asleep at the moment. Otherwise they might have moderated Political Economy to mere Economy. 

if MLK could’ve patented peace and love he’d have been a billionaire. But he cant. As such its up to the other aggressive innovators in our world to come up with the new ideas for tomorrow to make the world a better place. MLK no doubt would have disproved of the atomic bomb. But the research from that will one day lead us on to totally clean, cheap and renewable energy. MLK could never have done that, but a ‘greedy’ corporation or scientist no doubt one day will. Without greed there is little or no risk taking (what’d be the point?) or innovation. Without these there is no progress.

i went in to the bank and said i wanted a mortgage. They didn’t doorstep me. Nor did they force or ask most other people if they wanted one.

As for the Chinese reserves and the Arab petrol Dollars, well i view it as the US consumer demanding cheap credit AND cheap goods, and everybody else complying with them. We’re all too scared (economically speaking) to say no. You’re right in that this fundamentally undermines our long term economic interests in having a stable and sustinable economy, but then this comes back around to my greed theory where we’re too greedy to look at the long term.

@ Greg

“greed is the pre-eminent human condition. We’ve always wanted more food, more wives, a bigger cave, whatever…”

Eoin,

I will grant you that greed is an element of the human condition. I must disagree with you that t it is “the pre-eminent” condition. In fact I have proof.

http://www.youtube.com/watch?v=o0FiCxZKuv8

I don’t think he worked for Lehman Brothers.

you should read the piece about Iceland by Michael Lewis in Vanity Fair, its excellent

http://www.vanityfair.com/politics/features/2009/04/iceland200904

Iceland spent 100’s of years (1000’s even) becoming master fishermen, they have universities, degrees in it etc, made it the lifeblood of the economy. Then in the space of a few years they thought they could do an equal job at corporate finance and banking, cos it seemed sexier and more interesting.

Switch agriculture for fishing, and property buying for banking, and what do you end up with….?

Eoin,

I do hope you do not think me snappy either. We do however seem to disagree. This for instance….

“We demand cheaper and easier access to credit, we demand that policies are enacted to enable us to buy more and bigger houses, and we demand tax breaks to help us reach our goals.”

You say potatoes I say potatos.

You say demand I say supply.

I and I dare say you did not “demand” credit.

I, and you may disagree with me, say that credit was supplied as a means of recirculation dollars made necessary by the Communist Party of the Peoples Republic of China keeping the Yuan pegged to the Dollar.

Eoin, we were all conned.

Yes Iceland is interesting. A couple of basis points here, a couple of basis points there, and soon your nation is bankrupt.

Or I’m I missing something about the global ponzi scheme that is excess savings from a mercantilist China and the petro dollar states flooding the western world and undermining the idea of saving and investing?

Of course it’s possible that everyone in Iceland knew what was happening but decided to vote for greed nevertheless.

http://www.youtube.com/watch?v=JjglR2KYz5o&feature=fvw

greed is the pre-eminent human condition. We’ve always wanted more food, more wives, a bigger cave, whatever. Always have and always will. I’m not saying this is a ‘bad’ thing, its helped us evolve to where we are, but at least i’m being honest about what we are! If believing that evil Ponzi salesmen were the sole cause of the housing bubble helps you sleep better, than thats your choice.

Clinton cutting massively (to $500k i think) in 1997 the threshold on capital gains tax on real estate gains, which many point to as instigating the 1997-2007 property market bubble (there was lots of other factors too, but it was undoubtedly a contributory factor).

I wasn’t trying to be snappy with my posts above. I’m simply trying to point that, like it or not, nations almost always bail out their financial systems when they get into trouble. We demand cheaper and easier access to credit, we demand that policies are enacted to enable us to buy more and bigger houses, and we demand tax breaks to help us reach our goals. We then act surprised when a property bubble forms and the banks get into trouble, and whats our response? Make the banks keep granting cheaper and easier access to credit! We reap what we sow.

“RE societies implicitly g’tee-ing their financial systems: look what happened when Iceland didn’t. Your textbook version of capitalism will never mention it, but then we don’t live in a textbook capitalist society.”

I glad there are no textbooks that say

“Capitalist societies implicitly g’tee their largest financial enterprises and systems.”

You have saved me some useless reading.

Jeez Louise, Eoin.

You mean NAMA is not the GSE. It was AIB, BofI, Anglo …. all along.

“And when Irish society continually voted for economic…..”

No being picky here but “society” doesn’t vote. Citizens over the age of 18 vote.

Are they responsible for their vote? Yes, of course they are. But, you seem to be placing greed at the forefront of each vote. I think that is a dismal view of the world, and indeed of Ireland. Is it not possible that they were conned by Ponzi Scheme salesmen?

from Nobel Laureate Vernon L Smith in the WSJ in 2007 (via Wiki):

“…it set the stage for housing bubbles by creating those implicitly taxpayer-backed agencies, Fannie Mae and Freddie Mac, as housing lenders of last resort.”

Thanks for that, obviously I have some reading to do.

By the way, what was the “it” that set the stage?

from Nobel Laureate Vernon L Smith in the WSJ in 2007 (via Wiki):

“…it set the stage for housing bubbles by creating those implicitly taxpayer-backed agencies, Fannie Mae and Freddie Mac, as housing lenders of last resort.”

You’ll never find this in the loan documentation simply because the g’tee was implicit rather than explicit. As such, it could never be formally stated. The premium that GSE debt carried over Treasuries was always minimal, but existed for this reason, and the GSE debt should have yielded far far higher if they were truly stand-alone and independent. However many people bought the GSE debt, sold the Treasuries and pocketed the difference in what they considered to be ‘risk free arbitrage’. The Congressional Budget Office estimated that this provided an annual subsidy to the GSE’s of as much as $6.5bn as long ago as 1996. Also they were allowed hold lower capital reserves than privately owned institutions of a similar nature, they were presented with housing mandate goals from the government, and they had direct lines of credit to the US Treasury.

RE societies implicitly g’tee-ing their financial systems: look what happened when Iceland didn’t. Your textbook version of capitalism will never mention it, but then we don’t live in a textbook capitalist society.

And when Irish society continually voted for economic policies which rewarded the taking out of loans and the purchasing of housing assets via the banks (tax reliefs on mortgages, room rentals, investor loans etc), then in many ways people were indeed voting for the likes of AIB, BoI and Anglo. Until we realise that we can’t just blame politicians, developers and bankers for this nations problems, instead of accepting much of it ourselves, then we will be bound to repeat the same mistakes again at a later date.