Quote from Goldman Sach email re: Irish bank bailout policies

Most of the Irish academic economists contributing this site are anti-NAMA in its current form, and Karl Whelan has expressed an interest in giving more balance to the site by generating some pro-NAMA threads.  Goldman Sachs’ chief European economist was gracious in allowing me to quote his recent email on Irish bank bailout policies including NAMA (the email was mentioned in today’s newspapers).  See below the fold.


Quote (with his generous permission) from email by Erik F. Nielsen, Chief European Economist, Goldman Sachs




Here is what’s on my mind as we head into the last full week of September:


  • Further (good) details on the Irish scheme to clean up their banking system.
  • Croatia and Norway inch closer to EU membership.
  • The US abandoned the planned missiles in Poland and the Czech Republic; good for Europe.
  • G-20 in Pittsburgh coming up at the end of the week; lots of stuff.
  • Just one week to go before the German election; tax cuts seem more and more likely.
  • The very important Eurozone PMIs will be out on Wednesday, and the Ifo on Thursday.
  • UK MPC minutes out on this week; important on several issues including the marginal reserve rate discussion.
  • Switzerland will be relatively quiet; only trade data this week.
  • Norges Bank decides on interest rates on Wednesday; no change but will they alert us to an October hike?
  • Likely drama coming up in the Czech Republic this week over the 2010 budget; and CNB meeting; no change.


1.         This past week delivered one further step in the process of cleaning up the Irish banking system, a process so clearly helped by their membership of the Euro-zone.  On Wednesday Irish finance minister Lenihan provided further details of the “bad bank” operation.  He announced that NAMA (the National Asset Management Agency) will spend EUR54bn buying EUR77bn face value of impaired assets off the Irish banks.  According to Lenihan, this is EUR7bn more than the present market value; a premium he justified by a longer-term valuation.  The treasury will fund NAMA with EUR2.7bn (adding to the government deficit, so that will increase issuance by that amount), while the rest will be in the form of a bond issued by NAMA itself.  The NAMA bond will not be traded in the open market, but used directly as payment to the banks for the assets.  The banks can (and almost certainly will) in turn repo the bond at the ECB to take out the cash.  In my opinion, the NAMA operation is just the latest in a series of impressive steps by the Irish government to clean up the mess, but it is also a reminder of the huge benefit to a small open economy of being inside the Euro-zone when shocks of this magnitude occur.  Incidentally, on Friday (Sept 25), Irish governor Hurley steps down and professor Patrick Honohan takes over as governor of the Central Bank of Ireland, thereby taking his seat at the ECB’s Governing Council.  The appointment of an independent academic to the governorship is a welcome break with Irish tradition of handing the job of central bank governor to a civil servant, and Honohan is indeed – by any yardstick – uniquely qualified.  He is currently economics professor at Trinity College and an advisor to the World Bank, where he worked (among other places) in the past.  He has written extensively on the crisis and – according to finance minister Lenihan – has advised the government in private during the last year’s restructuring efforts.  I like the Irish!


end of quote


57 replies on “Quote from Goldman Sach email re: Irish bank bailout policies”

“In my opinion, the NAMA operation is just the latest in a series of impressive steps by the Irish government to clean up the mess..”

The Chief European Economist of Goldman Sachs would say that, wouldn’t he.

This is the bank that reportedly set aside a £7bn salary and bonus package for its London based bankers… after its £6bn bail-out in 2008 by the US government.


This statement:

“the NAMA operation is just the latest in a series of impressive steps by the Irish government to clean up the mess,”

leads me to queston Erik’s agenda or analysis of the situation or both.

One of these “impressive steps”, the liability guarrantee, could conceivably go down in history as an example of how easily minor players can create massive instability in the global financial system.

I know for a fact that in central bank boards the world over people roll their eyes at the mention of the episode.

In short, the markets want a solution that tidies up the banks with no pain for bondholders. This is one such solution. Hey presto! They are pleased.

It is not for the Chief European Economist of Goldman Sachs to care about the implications of NAMA for the ordinary Irish citizen!

@ Aidan C

not entirely sure what your comment has to do with GS’s analysis of NAMA? They’ve also already repaid in full the $10bn in TARP funds that they recieved from the US Treasury, money that they were essentially ‘forced’ to take by Paulson.

Given how beholden we are to international capital markets due to our dire position, I think we should be extremely pleased that NAMA has received such a favourable response from the likes of The Economist, Goldman Sachs etc.

The analysis above is for the benefit of clients of Goldman Sachs. If the interests of those clients were the same as the interests of the Irish taxpayer, then and only then could this be seen as an endorsement of NAMA.

If one shadow bankster gang will survive, it is GS. Suds may be a protege of Garret?

Surely Rothschild could also speak in favour of Nama? Another likely survivor but with far more class!

Remember that pleasing the wrong people is the very definition of treachery!

The negative comments and rebuttals are fine but please no clearly ad hominem attacks on the fellow who was generous enough to let me use his email quote – he was just being nice and got nothing for it. It does not seem fair or in the spirit of the irisheconomy.ie blog site to criticize him in a personal way. Otherwise all positive/negative comments welcome, and the above comments mostly seem fair game (maybe not the last one which strays a bit too close to ad hominem).

Unfortunately the Irish taxpayer is no longer master of his own destiny.

As I see it, we are effectively a hostage to the vagaries of international market sentiment at this point.

On this basis, I welcome the positive commentary from the likes of The Economist and Goldman Sachs because, like it or not, these entities influence global market sentiment.

I would urge anybody who doubts the importance of the above to read the chapter on the Mexican financial crisis in Paul Krugman’s “Return of Depression Economics”

Can somebody explain: “The treasury will fund NAMA with EUR2.7bn (adding to the government deficit, so that will increase issuance by that amount), while the rest will be in the form of a bond issued by NAMA itself”.

Did Mr. Nielsen misunderstand the NAMA bond structure or does the €2.7bn referred to above relate to something other than the risk sharing NAMA bonds?

@ Gregory You say ‘Goldman Sachs’ chief European economist was gracious in allowing me to quote his recent email on Irish bank bailout policies including NAMA (the email was mentioned in today’s newspapers).’

mmmm – I’m all for good manners but you seem genuinely pleased and honoured that he allowed you to quote his email. Later you add that he was ‘…generous enough to let me use his email quote – he was just being nice and got nothing for it.’…..

Ireland’s position – its ‘international brand’ if you will is that it offers low corporate taxes. International capital likes this. It’s important to address this campaign of reporting about ‘Respected International Folk Who Support NAMA’

1. The Economist (though it should know better);
2. the FT (which should also know better);
3. Goldman Sachs (which can’t reasonably be expected to care);
4. The European Commission
5. The ECB

‘support’ NAMA for the following reasons:

1. The Economist (admittedly is not unqualified in its endorsement) likes it because it’s intellectually satisfying and provides what Therapists call ‘closure’. ‘Closure’ is good for international investors and mobile capital. It allows them to know where they stand.

2. The FT likes it for similar reasons.

3. Goldman Sachs represents international capital and hence, the same applies.

4. The Commission likes it because it seems to make the problem go away. The fact that it will impoverish a generation is neither here nor there. The EC can get back to its much more important task of defending the rights of ‘minorities’ and interfering in enterprise. Preserving the latter in some sense gives it something to interfere with.

5. The ECB doesn’t really support NAMA. Or if they do they do in the sense that the US Embassy wouldn’t necessarily pull its diplomatic staff out of an African country on the mere rumour that its President was a practising cannibal. The US doesn’t endorse cannibalism but the cannibal president could claim that they do…

Goldman welcome it in the same sense that a global mining company would welcome professional and transparent management of a major mining contract by a government ‘partner’ whilst ignoring the fact that the same government might be anti-enterprise and even downright kleptocratic in its treatment of its own citizens. Goldman has no opinion about the appropriate levels of personal taxation in Ireland. That’s a ‘matter for the Irish’.

You may think that being mesmerised by the comments of these international bodies is a substitute for proper analysis of the impact of policy on the country itself but in reality its just corporatism..

International bodies have no interest in the expensive dysfunctionality of government in Ireland (just look at any of the posts by Michael Hennigan of Finfacs on this site – he might even be so generous as to allow you to quote from one of these). When one tries to confront people like Goldman Sachs, the FT or the Economist Intelligence Unit one is made to feel like one is nit-picking. I tried this with Dan O’Brien of the EIU and he said ‘We don’t want to return to the days of having an inferiority complex’.

@Paul McDonnell

I think there is a lot of truth in what you are saying.

Certainly your analysis of the rationale for support from these various entities seems reasonably plausible.

However I would be interested to hear your analysis as to whether Ireland’s position would be improved if, for example, the Greens reject NAMA, the government collapses and NAMA is stillborn.

How do you think ‘mobile capital’ would react to this course of destabilising events?

@ Paul

there seems to be a thinly (or not) veiled attack on mobile capital and the market based system in your comments? Would you prefer if this capital didn’t like the NAMA process? Can i just point out, again, that we require somewhere in the region of 100bn of this capital from international investors like GS over the next 18mths or so. Having them onside re NAMA is a necessary requirement of that process…

If you want to know what GS really think, you need to know what positions the various prop desks at GS are doing e.g. the one run by llyod blankfein (now gs CEO) in london for many years.

Research provided to clients is just that; it does not reflect the views of trading desks.

Given the types of risk the irish taxpayer is assuming, prop traders will begin looking for opportunites to short irish government debt vs core europe.

@ Concubhar and Eoin.

It’s the first time I’ve ever been accused of attacking mobile capital – you made me smile.

Well bear with me on this and if I’m wrong in my logic or facts then maybe you and others can point out where but –

If the Government had

1) Used, say, a nationalised bank or even An Post or some such to take over all deposits and domestic payments system etc..

2) Nationalised the banks and wound them down at the expense of shareholders and bond holders then the national debt would not be as badly (to the tune of 50%?)

(Probably 2 should come before 1..but you catch my drift..)

and was decisive in its actions then the international markets would be even more favourable. Remember other than the expiring guarantees the state has little obligation to the bondholders and none to the shareholders. So it’s not the same as a default on sovereign debt.

Hence international investors might complain but if you lend money to a private business in Ireland and it goes bust then you can’t complain to the government.

Hence international markets would be OK with it. Remember it’s not international investors who are lending us this money anyway – it’s the ECB, right?

McWilliams wrote about this recently and he summed it up pretty well. He argued that those who think that our government’s credit rating would be hurt by private banks defaulting on private contracts (bonds) don’t understand how international finance works.

Remember the international bodies want ‘closure’ and a clear plan. This delivers these…..but not at the expense of tax payers.

Where am I going wrong??

One more thing. Taking what international bodies say at face value is just way of trying to seem posh – short cutting the need to think for yourself and show real class – if you will. The real ‘inferiority complex’ – cf my comment on Dan O’Brien above – is in thinking that other, grander folk are right – merely because they are grander folk and belong to a categorised reality called: ‘Authoritative International commentators’.

Those who support international commentators because their view is ‘authoritative’ don’t have to think about things. They make the same mistake that those people who took Credit Ratings Agencies valuations at – well – face value.

The only reason to cite an authority is not because you believe THEY know what they are talking about but becacause YOU know what they are talking about – and that includes taking into account their organisation’s objectives and frame of reference. The Irish government is raising taxes on the poor and indebted to pay the highest salaries for the worst performing bureaucracy in Europe. The EIU, the FT, Alan Ahearne and, sadly, some of the economists on this forum, are simply agnostic about this kind of policy. It doesn’t fit the model or frame of reference so it doesn’t count.

@ Paul

nationalise and wind down the banking system? Eh, how do you think the financial system is going to work without there being actual banks to provide and maintain credit? Are you suggesting that An Post take on all the roles currently provided to day-to-day customers of the banks? Credit cards, insurance policies, foreign currency, trade finance, online banking, share trading, mortgages, overdrafts, personal loans, wealth management etc etc etc? Your local post office is going to be offering these?

Moreover, having just left a lot of bondholders with huge losses, we’re then going to ask them to fund our now even bigger budget deficit (lets assume a rather large drop off in economic activity due to the lack of the above!)??? Do you not think that some of these investors may ask themselves about the sanity of lending to a nation that just let their entire financial system go into liquidiation?

This is without a doubt the most extreme proposal i have read anywhere on how to ‘solve’ the banking crisis. It is in my mind bonkers.

There appears to be a number of posters here who are against anything that takes the side of NAMA. There has been a fair bit of personal stuff on the motives of respected figures like Dr Garret Fitzgerald (more here) and now Mr Nielsen. Anybody that argues for NAMA is implied as being a FF supporter or in favour of a bailout for Bankers,Bondholders and Devolopers. This is not correct but if there is to be balance to the debate then as Karl Whelan suggests there must be more than one side projected here. There are more issues to be dealt with by Government to restore our economy which at times I feel some people here do not care about. Confidence is the key ingredient now missing in Ireland and if we want to make matters worse well just keep being against everything and everyone.

@Eoin – well I think it would take some time and I’m not, by any means, as expert in this as others on this site but put it this way. If I were Taoiseach I would call in the the banking experts and economists and I would say that I want to perform euthanasia on the banks, I want the sharehholders wiped out completely I want the bond holders who lent to THEM not to the ‘nation’ as you put it (whoever they are) wiped out if possible, I want 99.9% of the employees laid off and I want a replacement system – either through nationalising one bank to temporarily provide a system – and / or inviting foreign banks in to take the accounts over – the latter would re-hire bank employees as needed – and I want to spend very, very little, – if possible nothing at all – on the whole thing.

You might say ‘You will bring the wrath of God down on this nation’ and I would reply ‘I AM the wrath of God’.

One more thing. I would say to them ‘I want these things and you are here to help me engineer it’. It would be a kind of revolution. $*@”! the bondholders. Bank debt is no more sovereign debt than my overdraft.

Even depositors would be asked to take a 5-10% hit. If they are innocent then the future taxpayer in the womb of a pregnant woman is even more innocent. I would point to the statue of Edmund Burke at the front of TCD and tell them we were governing for those who are dead (our heritage), those who are alive (our current reputation) and those who are yet to be born (our future).

@TRP ‘..personal stuff on the motives of respected figures like Dr Garret Fitzgerald’?

Actually no one mentioned Garret in this thread…but since you do then i can’t resist…..(Sorry Karl you may want to remove what follows!!!)

Garret’s motives are only relevant in so far as, like so many people with a ‘conscience’ – from Peter Sutherland to Alan Ahearne – he finds the detailed reality of government policy as it affects individuals and families, easy to ignore. Not only does it not fit the socialist or (in Sutherland’s and Ahearne’s case) corporatist model but such disdain – for that is what it is – for the individual or family in the private sector who are taking all the risk in the economy can be passed off as ‘seeing the big picture’ and ‘showing vision’.

Charles Haughey was sent to Ireland by God in the 1980s to destroy the country. Then God sent Garret Fitzgerald to make sure. That sums up Fitzgerald’s legacy. Yes he can use a knife and fork and he’s respectable but he’s just a papist version of Mansergh (I have an earlier post on Mansergh on this site somewhere…) Garret Fitzgerald doubled our national debt for no reason other than that he was a study in political cowardice wrapped in transcendental disdain for the common man. His sole achievement was to make Haughey look good. And, by God, that took a certain kind of talent. Garret Fitzgerald was much worse than Haughey because Garret masqueraded as the cure when, in fact, his took Ireland to the same place as Haughey but via a kind of awful, cloying, social democratic, sanctimony.

Like all socialists and those who profess to ‘care’ about the poor people like Garret and Sutherland (Sutherland once told me that he supported the CAP because he ‘believe[d]’ in the right of European peasants (sic) to earn a living.’ He and Garret are European Princes. Their social conscience is a sort of medieval Royal laying of hands on the poor to ‘cure’ them of disease. The purpose of this medieval custom was not to cure the peasants but to emphasise the divine status of the king as Christ’s successor on earth. That’s why Posh folk are left-wing.

They see the poor as victims – not as sovereign economic actors with the same rights as Goldman Sachs’ executives. All this talk about NAMA being necessary is the necessary theology that supports the transferring of risk from the rich to the poor because, for example, the ‘views’ of Irish people and the reputation of the government in their eyes doesn’t count. Citing ‘Authoritative Sources’ – to return to the topic of the thread – is like citing the Medieval Pope on a dispute the impact of which will affect large numbers of people. We are being told to take seriously the opinions of those who don’t really count as a way of making those who do count – the Irish taxpayers – irrelevant. It’s a way of legitimising the discount applied not just to the opinions of Irish people but to their RIGHTS. The absence of curiosity by pro-NAMA people about the alternatives has been very telling.

@Jan I reckon that true justice would be for everyone to vote against Lisbon and then emigrate and leave the public sector to stew – an Atlas Shrugs moment.

I was at the launch of Transparency International a few years ago and got into an argument with Garret about tax evasion in the 1980s. I said that the rates were so high and the government so venal that tax evasion could be characterised as ‘direct action’ – rather like Nell McCafferty going to Belfast to get condoms. Garret was outraged and said he found it sickening that anyone could ever try to justify tax evasion. I replied ‘Yes – but what if the rate of income tax were to go to 90% would you be justified in evading tax then’. He replied ‘you should pay that much if the democratic will of the people says you should through the government’ I replied ‘Dr. Fitzgerald, you clearly do not know the difference between democracy and liberty’. We left it there. Garret was always utterly unfit to govern.

@Concubhar O’Caolai…actually I would say Bring it On. Let’s do it. We need a revolution. It would be a bit like the Russian revolutionary state pulling out of WWI. I would even take the pain..If it meant destroying much of the privilege and patronage that blight the country then it would be worth doing.

The bad news is that Ireland is not that important.

(a fact relied upon by pro NAMA supporters and the why Goldman Sachs etc…’like’ NAMA.. – the stakes are too low.)

BUT The good news is also…..that Ireland is not that important. Hence we can do some real capitalist stuff and frighten the horses…..and – well – the stakes are still too low.

I think what I’m suggesting is more pro-capitalist than any of the internaitional markets would expect. It would take them a few weeks or months to figure that out. It would be fun and it would be the best path to prosperity. As it is we are being turned into a giant Japanese zombie bank.

Paul: “Ireland is not that important. Hence we can do some real capitalist stuff and frighten the horses….”

Ye have been doing some real capitalist stuff for some time now, and the horses are well and truly petrified.

@Karl..got that. I think the question of the role of ‘International Authorities’ and the citing of them to justify policy in Ireland is interesting. Economists – like all scientists – will have a series of validation buttons which if pressed can persuade them of one policy or another. They can suffer from confirmation bias.

I think that they can also, in so far as they are close to policy-making, become infected with group think. Certainly I get the feeling that Alan Ahearne and a few other economists are like pilots flying through high winds, much too close to the ground yet refusing to look out the window – relying solely on their instruments or data. It would make an interesting study to ask what it is they think they are doing and how it relates to the real world.

My own view is that if Ireland needs 100 poilcy initiatives right now the first 99 of them have to do with cost of government / competition issues. Mabe no. 100 is about ‘Developing a Knowledge Economy’ or ‘Using the Diaspora for Ideas’ (or as I put it to McWilliams a couple of weeks ago – giving visas to Gauchos with hurleys).

Jan Golden above is not an economist but has the real relevant data. Bloated Dublin City Council soaking businesses for rates.

Why aren’t Alan Ahearne, David McWilliams etc..talking about this? This is the relevant stuff.

Quaffing champagne with Peter Sutherland and Garret and Geldof and witternig on about the Knowledge Economy is nonesensical.

The fact is Michael O’Leary is right and I think sound economic analysis would bear him out.

Here is another prestigious international financial organisation that is backing NAMA:


INVESTMENT GIANT SAYS NAMA PLAN A ‘ROADMAP FOR EUROPE’- US investment giant Bridgewater Associates, which also runs the world’s largest hedge fund, has described the NAMA project as “clever” and says it may provide a roadmap for the pumping of cheap funding into other struggling European economies, writes the Irish Independent. The firm gained huge respect among central banks and governments globally after predicting in July of last year – two months before the financial system went into meltdown – that bank losses from the US subprime-induced credit crisis may reach $1.6 trillion. The tally currently stands at $1.62 trillion, according to Bloomberg data. In a note issued to clients this week, the firm said the Irish Government “seemingly couldn’t handle” the situation earlier this year as banks’ loan losses spiralled, and it appeared that it would need to borrow the equivalent of 46% of economic output “to get the banking system out of a tailspin”. Rather than borrowing €54 billion in the global market to pay banks for €77 billion of risky property loans, NAMA will pay the institutions in government-backed bonds which can be cashed in with the European Central Bank. The bonds will carry a coupon, or interest rate, of just 0.5 percentage points above the key ECB rate.

I do not generally post on NAMA as it is not my area of expertise. Those on both sides of the argument here know infinitely more about it than me.
But, its starting to look to me as if the breakdown against and for NAMA is along the following lines. Opposition to NAMA (not just on this site, but in the wider world) comes mainly from academics, media people and political activists of one kind or another (to clarify: I’m not suggesting these three groups are the same or that the academics posting here in opposition to NAMA are political activists). While, support for NAMA appears to be very strong among the business community, financial and investment organisations, both national and international. Surely this tells us something and surely, with all due respect, its the latter we should be listening to?

@Paul McDonnell

Is there no way you could set up your own blog for all this “Stream of Consciousness” type stuff.

I know you are extremely exercised by the NAMA proposed solution, but it is rather difficult to trawl through all your off-topic meanderings, posting whenever the muse takes you, ranting on and on.

I usually don’t post unless I have something to say relevant to the OP, so apologies for this one, but such a constant stream derails the thread from serious discussion, and all the Ad Hominem stuff is simply unworthy.

@Irish Pancake ..[Is there no way you could set up your own blog for all this “Stream of Consciousness” type stuff.]

Not really.

I’m interested in the psychology of why ‘Authoritative Sources’ or ‘respected figures’ (Garret etc..) or per John above ‘the business community’ are regarded as reliable – which I take as a legimate extension of the discussion of the thread.

The question is why do people defer to others and does deferring create risks of its own.

I’m not an economist, but I’m in the FS industry, have got an MBA (somewhere) and so I know a little more than most people.

For example John above implies that we should rely on the views of business people. But business people (well IBEC anyway) signed up to social partnership which has bankrupted the State. They weren’t reliable then. Why should we consider them reliable now?

What you call ‘stream of consciousness’ is simply:

1) my highilghting the role of group think.
2) skewering (I’d like to think) the past and current role (in this crisis) of Authoritative Figures from Ireland’s recent past and present
3) The motives and methods of why people like Goldman, Sutherland etc… speak as they do and
4) The motives and methods of why people (you? John above?) accept what they say.

– as per the thread topic.

Perhaps you haven’t read very widely and this is all a bit confusing or perhaps you have and you are taking a more asbergers approach – regarding the rest as ‘noise’. Or perhaps your a Garret fan.

But I can assure you that Garret’s failings as a leader and commentator are absolutely fair game in my view.

Your post is just a little pompous though. It made me laugh.

@Peter Maguire [Ye have been doing some real capitalist stuff for some time now, and the horses are well and truly petrified.]

oh I don’t know…we aren’t capitalist. We’re corporatist. Social Partnership and all that. Dr. Gurdgiev, Moore McDowell and I tried to get business support for a pro-market think-tank – the Open Republic Institute and businesses didn’t want to know – seeing it as a risk to their reputation / brand vis-a-vis government. The head of marketing at BoI phoned me up when we were looking for support for a previous think-tank in the 1990s and he said ‘Paul the BoI agrees with your aims (free markets, open economy etc…) but you see we have large trades union customers and they would not be happy if we gave you any money so we can’t help you’.

Despite this the I believe that some major Irish banks have given money to Sinn fein. Go figure.

No. We’re not capitalist. Never were.

@ Paul

the difference is that you’re quite clearly a strong Libertarian Free Market Economist (let business succeed and fail on their own merits), while many on this site would be more Social Democracy Free Market Economists (businesses and society have to co-exist). Many others are somewhere in between, where in theory we’re of the Libertarian ilk, in practise we accept that real world practicalities often prevent this in its true-est form (ie we don’t believe you can just let the banks go under). The reality is that there is no nation on earth that is currently a true Libertarian economy, and as such the only question is to just how much support each nation should decide to give to its financial system.

@Paul McD

I’m sorry I did not mean to come accross as pompous, but it’s good that I made you laugh.

I do not have your extensive qualifications and experience, and would not dream of entering into serious debate with you or Constanin G et al. on matters Economic. I would not be equipped to have that debate.

It’s just that, for a layman such as me, on a steep learning curve, seeing about one third of the posts on this topic have come from you, it’s hard to see the wood for the trees.

Your message could well be getting lost.

Did you not have your own web-site “openrepublic institute” or something?

I would be more than interested in that, as there is probably a great need for independent thought and analysis offering real atternatives to this NAMA such as that coming from Dr. Constantin G. at trueeconomics.

Cheers, and chill 🙂

@Eoin. Very reasonable. Of course you’re right. Though remember it’s the ‘practical’ people who’ve got us into this mess. It was ‘practical’ tokeep interest rates so low for so long. It was ‘practical’ to agree to benchmarking – buying industrial peace don’t you know – and NAMA is ‘practical’. What good economists shoould be concerned about are moral hazard and unintended consequences.

@Irish Pancake. I’m not an expert on the technology of what the solution should be. In so far as I understand it I’d rely on Karl W. Dr. G. etc….Doubtless I’ve been simplistic and more than a little rhetorical. This thread was really abuot the Goldman Sachs comment. You will notice that there is a stream of reports of a similar nature. I’m expecting the Irish Times to report tomorrow.


We have closed our think-tank down for lack of money. But that’s OK. I will defend the right of BoI or whoever to refuse to give us money but I suspect the reason is that people value their ‘relationships’ with government.

in a sort of political campaign in favour.

@Paul. You said earlier “The absence of curiosity by pro-NAMA people about the alternatives has been very telling”. It has, and it’s been like this from the off. I couldn’t have been more angered than when at the start of the NAMA proposal / debate Peter Bacon said on Prime Time that there was only one show in town (sitting back in his chair like an arrogant fool). It laid down from the start how the government had strategized the entire NAMA process. Very telling indeed. Regarding GS I would have no doubt that there has been a considerable amount of “smooching” by government behind the scenes with GS and other such institutions. But these words from GS do not mean that NAMA is right, makes sense, is in the interests of Irish citizens or their progeny. And yet it is always the case that politicians claim this is for the benefit of the people without one scintilla of legislative proposal to increase bank lending – the often spoken about purpose of why this is being done. Shame on the lot of them.

@Eoin. Sure will. And what do you think about there ever having been more than one show in town?

@ Henry

the govt of the day always gets the box seat in terms of setting forth legislation. It’s up to the opposition, inside and outside the Dail, to come up with an alternative. No one ever explained to me, in at least a decent level of detail, a politically viable, publically supported, workable and coherent alternative to NAMA.

Labour wanted to Nationalise for the sake of it. FG had some fanciful Good Bank idea which even they don’t seem to support anymore. SF did what they do best and did nothing except complain.

Meanwhile, NAMA-as-is got more discussion, both pro and con, and more acceptability by the markets. It’s simplicity, workability and presumptability are major strengths for me. It was at that point, probably in early summer that it became the OGIT for me. Some stability, after two years of chaos, is badly needed, regardless of some of the plan’s inherent flaws. No plan was ever going to be easy or cheap or anywhere near perfect, the risk of the plan was always going to fall to at least a large degree on the taxpayer, as they always do in financial crises. To suggest otherwise is to ignore reality.

@ Eoin

NAMA got more discussion because that was the culmination of the government strategy – OGIT. I have to conclude that the fact that only one solution was being advanced is the reason behind the economists speaking up when they did. Rather than putting the onus on the opposition to come up with alternatives to any propopsed piece of legislation surely it is the responsibility of good governance to be reasoned and wise (and in this case timeous) in their choice of legislation in the first place. Obviously we agree to differ on NAMA as a reasoned and wise proposition. I believe that most of the government’s reasoning is worthless and they not shares their detailed analysis with us. Judging by the more recent yield argument fiasco from the government (viz. Ronan Lyons “Do The NAMA Figures Add Up”) I have grave doubts that their detailed analysis would stand up to scutiny anyway.

I agree that stability is needed, but not regardless of flaws. I also agree that the taxpayer is bound to be burdened with a considerable amount of cost, but should only be so after risk takers suffer the consequences of taking those risks first. They would have happily taken the profit.

Finally, I sadly have to accept the reality that the government have achieved their OGIT goal, but it is to their shame and our cost.

@Eoin – the key to the reason why NAMA is a mistake is in your own words: ‘..No one ever explained to me, in at least a decent level of detail, a politically viable, publically supported, workable and coherent alternative to NAMA’.

Break it down:

1. Politically viable – mmmmm. The Greens and FF are going to be nuked at the next election. If NAMA were put to a referendum it would be vapourized by the electorate. If by ‘politically viable’ you mean that FF and the Greens support it then well that’s tautologous. The fact that the government supports a piece of legislation it’s proposing is not an argument in its favour.

2. Publically supported – NAMA probably has about 20% support in the country.

3. Workable / Coherent: – see the analysis of the 46 including KW and Dr. Gurdgiev. Between them they have nuked the concept, principle and numbers down to a forensic level. The only bits they haven’t killed are the bits the state is hiding.

Labour are right on NAMA – there was a funny piece in Gene Kerrigan’s column in the Sunday Indo where he said that FF won’t nationalise the banks because they are ideologically committed to Free Markets – which is quite funny.

@ Paul

by politically viable i mean that it won’t be still born in the Dail. We need a solution of some sort in order to regain stability. To let things continue as is, which seems to be where your leaning, would see the country suffer a depression lasting a decade while we try to piecemeal rebuild our financial system. FG and Labour are still very much at different ends of the solution and spectrum and do not seem able to jointly get something passed. I suggested (here, not in the Dail!) a govt of national unity way back in the spring to get a consensus solution passed, but no one seemed to want to back down from their ego.

In terms of workable/coherent, I’d suggest reading Donal O’Mahonys piece from the other day.

Again, all of your suggestions are related to what you don’t like about NAMA, and not what we could have as an alternative, other than letting the whole thing go up in smoke and seeing what rises out of the ashes, if anything. I consider your idea to be a non-proposal.

@Eoin Thanks. I will read O’Mahony as you suggest.

I believe that all this ‘We need a national gov’t lark’ is just more group-think. What got us here was, ultimately social partnership which is ‘national unity gov’t’ in all but name. Actually what we need is political conflict which one side – preferably the left / unions – will lose decisively – a la Thatcher. Then the adults can run the country. There is no ‘We’. Those who are broke need to know it and be unprotected from the pain. I have outlined alternatives…also look at Gurdgiev and Whelan…I am against NAMA because I favour alternatives..

@David O’Donnell David I’ll take your post according to its assertions and answer each…

You say: that I ‘blame ’social partnership’ for Seanie’s Folly and Michael’s Manky Mountain …… BOI/AIB following follies ……]

I don’t. I blame it for the state of the public finances even before the global crisis.

You say that I blame Social Partnership for [‘…- the “shit” that Irish citizen/taxpayers are expected to clean up for decades …..]

Yes I do. I suppose. All this collectivism / group think – this ‘We decided to have a property bubble’ is really the result of corporatist thinking. The trouble with corporatism is that it treats as the basic moral unit of society and political economy the group / union / IBEC / Farmers and not the individual. As such it is morally repugnant – even when it appears to ‘work’ as in Sweden or Nordic countries.

You say [Germany and some Scandinavian were corporatist and pretty successful at it]

Well I’m not sure. Sweden stayed out of WWII but made loads of money providing iron ore to help Germany re-arm. Also its wealth is built on a 19th century industrial base that was aggressively laissez-faire. Since it went social-democratic in the 1930s Sweden has, relative to other countries in Europe, declined. But I’ll grant you it has done OK. That’s because it doesn’t have an aristocracy, is traditionally homogeneous, and has Protestant honesty..

My contention is that Ireland was corporatist from the 1930s (it’s in our Constitution) and that this consensus was shattered in the 1980s as public sector unions became infected with Scargillite socialism and wrecked the economy. The ‘social partnership’ that came after was a rescue operation for the old order which worked.

[..and you appear to be a fan of the ‘OpenRepublic’ ideology and a close sibling of the neo-cons and the Atlas Shrugged brigade]

Well I co-founded the Open Republic Institute so I suppose that’s true.

[…which is precisely the ideology that gets us into the present mess due to severe lack of oversight and regulation]

Nope. We were pointing out to everybody who wouldn’t listen for years that public spending was rising to dangerous levels and that the coalition were using benchmarking to loot the treasury.

You have a point about deregulation – but even there – you have government failure: money too cheap and lack of appreciation for systemic risk. Everyone was caught off guard on that one and it’s true – North Korea hasn’t suffered in the credit crunch.

[…this ideology of non-intervention adopted by PDs and key FF’ers for a decade ……….]

Very silly statement. Let me put it this way. Gordon Brown of the UK is, in economic terms, to the right of every single member of the Oireachtas – including Michael McDowell.

I see where your problem is. You have a cartoonish / children’s pantomime idea about the free-market. If you think that what Ireland had since 1987 was the free market then you are not living on planet earth.

The Celtic Tiger was a state-led experiment in low corporate taxes. What followed was an explosion of debt and an orgy of greed (AT LEAST HALF OF IT GOVERNMENT GREED) which resulted in the current mess.

I’m a capitalist and in opposing NAMA I’m walking the talk. The government has no business using tax payers money bailing out failed businesses.

[‘ ……… and perhaps drawing on post 1929 etc advocate a third world war against corporatists, just society Garrets and their ilk, and of course the concentration camps in Cuba for socialists, deviant heterodox economists, those misguided sould who think they see a society as well as an economy]

Well the core philosophy of the above was pretty similar to the core philosophy of the 3rd Reich and Mussolini’s Italy – so, actually, it’s not a bad idea.

[….and everbody who has ever worn spectacles or read more than two books in the past year. Seanie Shrugged!]

Read more than two books? Which two books have you read?

@Paul McDonnell Sept 24 7.32

Hi Paul. Be very glad to respond to your somewhat ‘more’ reasoned, and less personalised, comment on my post – which was mainly motivated by my perception that you were losing the run of yourself ……. BUT WHERE IS MY ORIGINAL POST? To simply address snippets within yours would not be very ‘OPEN’republic-ish, or indeed fair to either of us.

@David O’Donnell. David..I’ve no idea where your post has gone. I can’t think it was deleted because it was deemed offensive or libellous…usually the reason. Gregory is the man to ask.

Anything that seems un-gentlemanly I hit the delete button, but I am very busy and do not keep records of that. If it is not there probably I deleted it.

@Gregory Connor

Gregory – I do not for one nano-second accept your implied ‘ungentlemanly’ – but you do get a 1st as first time I’ve had a post deleted anywhere in the known universe. I too am busy and certainly do not ‘save’ the posts I bother to find the time to address ….. to err is human etc (and all those cowboys getting massively rewarded for it ………)

@ Paul McDonnell
Hi Paul – we have different views on reality and are in agreement, prob for different reasons, on some issues [Naa-Maa]. Hence substantive if contentious debate possible (if a little too hot for other more serene surroundings) – corporatism, morality, ‘unfettered’ free-market etc In this case, due to system constraints {unless Gregory has an un-delete button} into my original post it makes no sense for me to accept an abridged version of meself within this thread! Gotta be 2 sides to the table – and I’m left with a chair with two legs and a skelp of my side of the table truncated – no way to conduct deliberations. Might meet up again on another one ……………… I assume you are not going away either (-;

@Gregory. I wouldn’t worry too much about it. My view of Irish economic history since the 1930s as follows:

1) De Valera’s autarky experiment – economic war with Britain – policy of cultural autism (the latter is now called ‘promoting native culture’) causes catastrophic economic / and cultural (censorship etc.) failure.

2) Followed by Lemass state-enterprise experiment – moderately successful but with the awful side effect of convincing everyone that Gov’t is the real source of enterprise.

3) Corporatist / social partnership culture entrenched since 1937 as the medium for all discourse on economic matters.

4) This culture is shattered in the 1980s as Irish public sector unions become infected with Scargillite militancy.

5) Rescue operation for economy / and just as importantly for the social partnership / corporatist culture by Haughey and Co.


6) Social partnership agreement is that public sector unions refrain from destroying the economy in return for unspecified benefits later on.

7) These benefits come in general improvement of economy and increased employment and so are in line with union goals


8) There’s got to be a specific win for the unions themselves. And so we have the motif of ‘sharing’ the wealth. Remember the teachers unions argued that because ‘education’ was ‘vital’ for economic success then they were therefore ‘entitled’ to their share for ‘creating’ it through their hard work.

9) Benchmarking I and II – an entirely opaque / backroom deal to transfer wealth from the private sector to the public sector.

10) In the meantime much of the so-called economic prosperity was really a debt bubble. Productivity in the domestic economy was going backwards. The GDP growth rate was artificially boosted by US corporations booking profits through Ireland.

11) Notwithstanding official policy was to ‘share’ this GDP with the public sector unions.

12) So here we are again. Like illiterate peasants living on a volcano that erupts with devastating results we have failed to write down our history and hence have failed to learn from it and, hence, we are now repeating it.

The reason why we needed a Thatcher moment was to break the public sector unions and, hence, to break this cycle.

1 – 12 is – in a nutshell – the history of Ireland’s political economy.

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