Many Questions Remain About NAMA

I know we’re all suffering from NAMA fatigue and I’m not sure I have it in me to write too many more posts on it. Still, I do want to flag that, independent of arguments about the merits of the plan or not, it is extraordinary how little we have been told about how the plan is going to work or about the basis for the estimates released last week. I don’t have time to get into it all but here’s a list of unanswered questions.

1. How were the original LTV estimate of 77%, the figure of €88 billion for asset value at origination, and the figure of €9 billion arrived at in the absence of a detailed loan-by-loan examination?

2. How was the figure of a €47 billion current market value arrived at in the absence of a detailed loan-by-loan examination?

3. How was the figure of a €54 billion long-term economic value (i.e. a fifteen percent premium between current and long-term economic value) arrived at? Is it solely based on the analysis of prime commercial property yields in Section 2 of the supplementary information? If so, why was such a limited (and unrepresentative) amount of information used? Can anyone explain the links between the analysis of commercial property yields presented to us and the fifteen percent gap between current and long-term economic value?

4. Presumably the €54 billion has been arrived at by adding up five figures for the five separate banks. Why can we not be told these five figures? Since the government already owns Anglo, the total figure is of little importance.

5. Can someone definitively explain the formula determining the yield on standard NAMA bonds? Is it the ECB’s main refinancing rate plus a half percent as stated, pretty confidently, by Minister Lenihan? Or does it involve a Euribor rate?

6. If an answer to the previous question is available inside government circles, are they planning to ever explain it to Willie O’Dea?

7. What is the maturity on the main NAMA bonds? Are they six-month bonds to be repeatedly rolled over or are they longer term bonds with interest rate resets? If the latter, what is the maturity?

8. What will be the interest rate on the estimated €2.7 billion in NAMA’s subordinated bonds?

9. What is the maturity for the subordinated bonds and under what terms will the subordinated bonds pay out? The supplementary material (and the general claim that only a ten percent rise in the value of the assets is required for NAMA to break even) suggests that that any losses NAMA makes on an income flow basis (interest paid minus income received from properties owned) will not be factored into the calculation of “whether NAMA broke even.”

10. Does the latter imply that the any future decision in relation to the imposition of a levy will also ignore losses associated with interest payments?

11. Has the government established a position yet on what the post-NAMA capital position of the assisted banks should be? Over what time horizon does the government envisage the banks achieving these positions?

12. Has an explicit decision been taken that the assets acquired by NAMA will have to be managed by the original banks that made the loans? Will there be a role for alternative approaches such getting international property investment funds involved or bundling loans together, securitising and selling them off?

13. Does the government have a strategy for funding the banks after the ECB moves away from unlimited refinancing operations? Might this strategy involve banks selling NAMA bonds?

No doubt some will view the act of asking these questions as disingenuous mischief making. Still, with €54 billion of our money on the line, I feel we’re entitled to know (and note it is our money that’s purchasing the assets and certainly not “Brussels” as Eamon Ryan seems to think.)

Which brings us to the final question: How many of these questions will have been answered by the time the government asks the Dail to vote on this legislation?

90 thoughts on “Many Questions Remain About NAMA”

  1. On point 3)

    From reading the various scraps of information released my guess of where they got the 15% bonus for LTEV is

    40% – performing loans get no LTEV bonus
    60% – non-performing loans get the full 25% LTEV bonus

    60% X 25% = 15% bonus for LTEV

    This 25% was listed in some government NAMA document limiting the LTEV to 25% for any particular asset and 20% for a portfolio of assets.

    Can’t find the document right now but I’ll post the link when I find it.

  2. Found it on the supplementary information page 22.


    Overall limitations.
    7. — Notwithstanding any other provision of these Regulations-
    (a) the long term economic value of a particular parcel of land shall not
    exceed its market value by more than one-quarter,
    (b) the aggregate of the long term economic value of all land valued in
    connection with the acquired portfolio of each participating institution shall
    not exceed the aggregate of the market values of that land by more than one fifth,
    and
    (c) NAMA may determine in respect of a particular parcel of land that no
    adjustment factor is appropriate, having regard to the special circumstances
    relating to the parcel.

  3. @ Karl

    “No doubt some will view the act of asking these questions as disingenuous mischief making.”

    Only the ignorant

    :mrgreen:

  4. @Karl
    Yeah, I reckon is was little more than that.

    What I’d also like to see is where the 47% drop was plucked from.
    It should have been possible for them to give a breakdown of the fall for each type of property and each country.

    The depth and amount of the information released really was terrible in a Bill where the government is planning to spend €54bn.

  5. I was thinking today about some of these questions, the general lack of information provided, and the unsupported assertions such as “a 10% rise in asset values to break even” that you quote.

    It struck me that a possible course of action would be to conduct “stress tests” of various plausible – though possibly less optimistic – scenarios. The government could consititute a panel of experts to do these and publish the results in advance of a Dail debate and vote, without giving up on its insistence on “commercial confidentiality”.

    Shouldn’t need more than 46 or 47 members …

  6. Can we also get a cost of NAMA?

    The information given by proponents of NAMA can be interpreted as saying that NAMA will not cost anything.

    If I understand the arguments for NAMA they are:

    -NAMA will in itself become profitable as property prices have bottomed out and will rise by 1% per year for 10 years.
    -If NAMA isn’t profitable (in an as of yet undefined time of reference) then the banks will have made enough profits to cover the losses incurred by NAMA (and they’ll actually also pay for it (not deducting for taxes paid or any other possible argument))

    I’ve not yet seen convincing arguments to make me believe the property prices will not fall further.

    Nor do I believe the banks will generate sufficient profits to cover a NAMA shortfall while operating in a shrinking market. As far as I know, deleveraging rarely increases profitability but I do believe it does decrease both losses and profitability.

    Could we see business plans for the banks to show that they would be able to pay for a possible shortfall of NAMA?

  7. Every person who has argued against NAMA has in some way been labeled losers by Mr. Lenihan. As far as I am concerned he has stone walled everyone, fooled the Greens up to their eye balls and run circles round them. The assemblage of economists and advisers surrounding him are already on board the biggest gravy train in the history of the state. Forgive me for being cynical but I take their notional theoretical valuation models etc. with a grain of salt. Every single person “on board” will be paid with even more borrowed money how about that for a formulae.

    Those of us who complained about the dangers endemic in NAMA were told we did not understand the big picture or the systemic risk to Irish financial institutions blah, blah. What we obviously did not understand was the systemic risk to their self interest, and just how far they were, and are prepared to go to defend it.

    Sorry, for the “arguments” that follow Karl, but I am not a very “technical” person though I do try and decipher the more technical arguments. The endless technicalities of nama and the deliberate drip feeding of data, is what has led so many of us to NAMA fatigue! Which the government and the Greens are of course depending on.

    Here are some obvious non technical reasons why NAMA will fail and will become a horror story.

    The valuation process that Lenihan has based his haircut on is deliberately flawed, because, property prices are still falling and he knows it and rents are still falling and he knows that too. He will be unable to prop up rents even if the government joins the “upward only” rent review boys. He has not done any dy/dx on property valuations V rents because it simply did not suit him. Allowing the banks to include rolled up interest, in book values, was a deliberate mistake. A mistake which has seriously skewed the figures in favor of the banks. What do I base my opinion on? Well I own three first class, commercial properties less than 5 minutes walk from Parnell Square, one is mortgage free, and I know that all three are going down in value on a month by month basis. That’s life! But is it happening in a vacuum? I would love to play the fool and say they have bottomed out. Fact is, they will continue to go down in value until the Irish economy corrects its DNA sequence that has given us failed political, regulatory and financial systems.

    Interest rates in Europe will rise over the next few years! How many people on tracker rates believe that those rates will not rise? No serious economist could be wheeled out to assert that this will not happen. They will rise starting in the third or fourth quarter of next year. I have a tracker mortgages so naturally it is in my interest to “know” what is going to happen and not bury my head in the sand. Eamon Ryan, would have the guy in the street, believe that this is money from the ECB that does not have to be paid back! Propaganda plain and simple. It is a tracker, same as my tracker, I am on 1.75 above the MRO and the Irish government have done .5% better. It is still a tracker!

    It has already been flagged that there is another huge layer of defaults waiting to hit the banks in this country, especially in the buy to let mortgage market and residential mortgage market.
    Then there are people who are now unemployed and in negative equity also. Not to mention credit card debt. Who is going to recapitalize them when they have to take these hits?

    How can Lenihan ignore all these factors and keep up the image and the bluster that his NAMA plan will deliver us from evil amen. It is very popular with banks, bond holders, developers, hedge funds it seems the only people who have no faith in it are the Irish tax payer who will be footing the bill.

  8. Alan Sloane Says:
    September 24th, 2009 at 10:26 pm

    “The government could consititute a panel of experts …..”

    Alan,

    “government”?

    Maybe I missed the memo.

    Do we have one?

  9. Your comment about Willie O’Dea robs your, otherwise excellent, piece of impartiality.

    We risk treating politics (and economics) as a form of light entertainment rather than as the only forum where collective decisions for our society can be made.

  10. Would just like to point out that in relation to the Nama debate, a constant argument I have heard in the media from the pro-Nama side is that if we pay market value for loans to be transferred to Nama it will be necessary for the government to recapitalise the banks afterwards and the government does not have the money to do so. Overpayment is, therefore, a necessity if Nama is to work. This argument comes from the mistaken belief that recapitalizing the banks through the subscription for shares by the government can only be done with hard cash. This is not the case, shares can be issued for any consideration.

    Pretending Anglo does not exist for a moment, the correct thing to do is instead of the government paying €54 billion in Nama bonds to the banks at a €7 billion premium above the market value, they pay the market value for the loans (€47 billion) and use the additional €7 billion of Nama bonds or more if necessary to subscribe for ordinary shares in the banks. In this scenario, Nama gets the loans at the correct value, the tax payer gets an appropriate share of the banks and the banks get the recapitalisation they require.

  11. I think the reference to Willie O Dea is fair comment because it is alarming that a member of the cabinet does not seem to understand what is going on at a fairly basic level. Does criticizing the government make one no longer impartial? Yikes. And if the tone here is sometimes slightly jocose, it is no worse than what often occurs in the Dáil; witness Enda Kenny’s comments about the Tánaiste’s choice of clothes yesterday. Frankly, it is not important.

  12. @ Kevin

    No offence, but i’d hope that the level of debate is somewhat higher here than in the Dáil! It’s not exactly the standard we all aspire to…

  13. Robert Browne
    I have seen your letters to the MSM and applaud your industry. You are not cynical enough! 😉

    Cormac Lucey
    If only the decisions were actually taken by the government! We have instead advisors who are on a gravy train as Robert says. Not the permanent ones, but they owe their positions to their ability to please too.
    They clearly do not have voter interests at heart.

    I thought the MountCharles revelations of bacchanalia in Spain to be welcome. The right people are happy.

    Incomes are about to be cut again, and taxes imposed but at least some of the developers are safe!

  14. Following up on Kevin’s comments, I’d point out that underlying the Willie O’Dea comment was a somewhat serious point. Perhaps Cormac may have missed this but in two different RTE appearances last Thursday (Morning Ireland and Prime Time) Minister O’Dea made seriously incorrect statements about the financing of the NAMA asset purchases. The serious point here is that €54 billion in taxpayer obligations are being issued and, as far as I can see, much of the Cabinet authorising this decision do not understand how the plan works. I guess it’s funny at one level but in truth it’s deeply disturbing.

    Beyond that I think it’s worth addressing Cormac’s comment about “impartiality” because accusations of analysis as being “unbalanced” or lacking impartiality come up here quite regularly.

    I think it’s important here to distinguish between two things. An accusation of a failure to be “impartial” can be stretched to imply that one is politically partisan. On this, I can plead complete innocence. I am not a member of a political party nor would I accept a position as an official adviser to one on the grounds that it would prevent me from expressing my opinion freely (note Cormac, this is not a dig at you — governments need to have advisers, it’s a valuable role — I’m just establishing my own position.) For example, on this blog, I have dished out both praise and criticism for various positions of FF, FG and Labour.

    However, an alternative interpretation of the criticism of “lacking impartiality” or being “unbalanced” is that one has expressed an opinion, and that perhaps that opinion disagrees with the government. On this issue, I suppose I am guilty as charged but don’t understand why it’s a crime. I have an opinion on NAMA. It is not a politically partisan opinion. For example, here are two posts by me, written prior to Peter Bacon’s appointment to write a report, in which I opposed the “bad bank” plan and comment on the as-yet-undecided Minister’s public statements about it:

    http://www.irisheconomy.ie/index.php/2009/01/17/bad-bank-bafflement/

    http://www.irisheconomy.ie/index.php/2009/02/11/lenihan-on-insurance-and-bad-bank-proposals/

    So my position has nothing to do with opposing the government or any personal opinion of Minister Lenihan, who in many ways is doing a good job of handling an extraordinarily difficult fiscal crisis.

    However, leaving aside the issue of political partisanship, if by requesting impartial or balanced analysis, people are asking economists to not put forward their own opinions (shades here of Stephen Collins’s disdain for “opinionated economists”) then I can’t understand why we would want to comply. Or what use we would be if we did.

  15. They are all very good questions. Perhaps Deputy Burton would take some of them on (and not be distracted by the nonsense from Frank Fahey and Ned O’Keefe).

    Personally, I would like some clarity as to the estimates of:
    (i) MV of all real and leasehold property held as security for the loans.
    (ii) MV of loans.
    (iii) LTEV of all real and leasehold property held as security of the loans.
    (iv) LTEV of loans.

    So far we have only two figures for the current position:
    (a) MV of “underlying assets” (?) = €47bn.
    (b) LTEV of loan assets = €54bn.

    To be honest, the poor quality of the supporting documentation was alarming. Was it prepared by the officials working on the solution?

    @KW/DE

    Are we not mixing up Land values and loan values again!

    Isn’t there a possibility of another jump from the LTEV of the property to the LTEV of the loans (i.e., it may be worse than you suggest)?

    Regrettably, I have not examined the regs in detail on that yet. I haven’t seen any analysis of the regs by anyone else either. DE gets a gold star for that.

  16. @Eoin
    No offence, but i’d hope that the level of debate is somewhat higher here than in the Dáil! It’s not exactly the standard we all aspire to

    Totally agreed. What alarms me even more than the current lack of understanding re-Nama by many Ministers and TDs, is that a fair sized proportion of them are qualified as accountants, teachers etc.

    Following on from Farmleigh, I wonder now just how good is the education standard in our third level institutions.

    Politics has always been dirty and brutal. Come up with a policy that asks fellow citizens to act in the best interests of Ireland….oppose it at the risk of being branded un-patriotic.

    From my months on this site, I have probably only come upon a handful of bloggers that are blatantly political.

    @Karl

    I dont think you even need to refute the accusations.

    It all reminds me of the old joke……

    Ask 5 economists for an answer to a problem, and you will get 5 different answers…six if one went to Harvard

  17. On impartiality, BL has often stated he has no political allegiance but has had no problem attributing the bulk of blame to a political party (FF) and imho his comments show contempt for them:
    http://www.irisheconomy.ie/index.php/2009/09/17/the-economist-likes-nama/#comment-16782

    “This is twice in my working life that FF have brought the state to the point of beggary. Twice, and I am only 45. The way its going we are due another just when I retire. So, as to the competence of a man gleefully paying more than he claims something is worth, a value that most every commentator says is itself a great exaggeration, ….it makes me sick and makes me mad.”

    Just because BL does not have allegiance to a political party does not mean he is not political in the sense that he reviles a particularly political party. Furthermore, one might imply that he considers such a party to be untrustworthy and such distruct underlies part of his analysis. For that reason BL is probably viewed by many as having political motivations (against FF rather than for anyone else).

    BTW, I don’t believe BL is scheming or pushing any hidden agenda.

    The Willie O’Dea point was very serious because the lack of clarity from Willie O’Dea and others is the opposite of confidence inspiring. However, the way you said it did make me laugh at a cabinet minister (whom I like). If Willie starts taking off the suit jacket the next time he sees you I suggest you put the dukes up and get ready to rumble :).

  18. @Zhou
    In a sense we are mixing up the values, but that is the path that has been set for us by NAMA. NAMA is looking at performance of underlying assets, not performance/liquidation values of underlying loans.

    So I will repeat my look at loans:
    77 bn loans.
    60% non-performing.
    9 bn rolled-up interest.
    From the Zoe case, it appears that the liquidation value of non-performing loans is 25%.
    77-9=68 – ‘real’ loan value
    68 – (68*0.6) = 27.2 – value of performing loans
    (68*0.6) = 40.8 * 0.25 = 10.2 – liquidation value of non-performing loans

    Assuming none of the performing loans go bad, can be liquidated at 100%, and are at market price, total asset value = 37.4 bn

    Is 25% recovery on non-performing loans in a property bust unreasonable? Probably. But so is 100% recovery on currently performing loans given we are early in the bust (in particular in relation to land and commercial real-estate – land just won’t recover quickly, rents lag prices, so yields will fall and vacancies will stay high).

  19. @zhou_enlai
    I think the government could also be accused of mixing up loan value and property prices.

    They use the 47% fall in property prices on the estimated €88bn of peak property values and assume it falls to €47bn. It then says that the loans are worth €47bn.
    That to me is a most basic mistake.

    The true value of the loans is probably less than the value of the property to account for other costs and to account for the risk that prices will fall further.

  20. Another simple question I have, forgive me if it has been answered – is the rolling up of interest continuing on the non-performing NAMA loans? Has a moratorium been agreed on all the loans or is the €77bn continuing to grow in size as time passes? If so do we know by how much?

    @ Zhou
    If the interest bill is increasing it will make it easy to distinguish land values from loan values. Land values are the ones going down, loan values the ones going up.

  21. @YM & DE

    I agree that it is the NAMA estimates which have created this confusion. I have posted on that a number of times.

    The reason I was questioning DE’s analysis was because I am worried that there may be a further uplift for LTEV in the NAMA analysis.

    @YM

    I don’t think the Zoe case can be used to set the market value of loans. ACC are playing hardball with the other banks and the govt. AFAIK they are appointing receivers not liquidators. We don’t know how much they hope to get out of it.

  22. Should have said: “The reason I was questioning DE’s analysis was because I am worried that there may be a further uplift for LTEV in the NAMA valuation process.”

  23. I wasn’t aware of the “opinionated economists” jibe. But we are usually criticized for not being opinionated enough (cue stupid remarks about one-handed economists, if you laid all the economists end-to-end etc etc). We can’t win, can we? Its not as if newspapers columnists aren’t opinionated from time to time?

  24. @ Karl

    i think you’re being 100% fair in terms of the impartiality, but ill only comment that i don’t really care what Willie O’Dea thinks. As i previously suggested, i doubt if more than 10% of the Dáil understand in any great detail the real mechanics of NAMA, but given the make up of our political system this doesn’t surprise me. What i’d give for an Irish version of Vince Cable, or for politicians in general to have some sort of real life background in business or law. If you look at most of our political elite, the vast majority of them entered politics (national or local) in their twenties or early thirties. As such, i consider them professional politicians rather than accountants, economists, solicitors or teachers.

    It’s quite clear that Lenihan, Cowen and their advisors are calling all the shots at the moment, and i’m fairly confident they understand whats going on and whats required. The Greens seem somewhat iffy on the finer details, but appear to be getting up to speed on the bigger picture stuff (with a helping hand from KW!). For FG, i think Enda Kenny would be dangerous if put in charge of something like NAMA, but Richard Bruton, Leo Varadkar and, obviously, George Lee seem to be quite confident and competent with it all. Joan Burton understands the figures given her accountancy background, but im still not convinced she gets the economics of it all. Outside of this lot, i’ve yet to hear anything even bordering on coherent or insightful in regard to NAMA from our elected politicians. Its distressing at a very broad democratic level that so many of the key decisions of our country are debated and decided by an incredibly small amount of competent politicians.

  25. Kevin:
    http://www.irishtimes.com/newspaper/opinion/2009/0911/1224254272287.html

    “Although it may not have been obvious to Green Party members or the public, Eamon Ryan, in particular, has had a very direct role working with Brian Lenihan on the development of the Nama concept.

    For that reason the scale of the negative public reaction to Nama, fuelled by the Opposition and a number of opinionated economics lecturers, came as a shock to the Green leadership.”

  26. @Eoin
    …………What i’d give for an Irish version of Vince Cable

    Dread to think. You need to take a closer look at his overall record.
    Was my Lecturer for a short time, quite like him though.

    On being opinionated….are politicians the only species who are allowed to be?

  27. @ Michael

    how so? He’s always come across as quite impressive to me, and he has an incredibly qualified and varied background.

  28. I agree that personal comments regarding ministers should be avoided but if O’Dea is going on Primetime defending Nama then he should know his stuff and any misleading statements must be pointed out.

    When i discuss Nama with people i keep getting fed the line “Its the only show in town”, when there are many other successful ways of dealing with our banking problems. For months the government told us they were following the swedish model but then ignored the valuation methods done there and the temporary nationalisation.

    The latest line being spun is about “weve the highest yields in europe”. This is comparable to Tom Parlon and his there’s great value out there line in 2007.

    The point im making (just realised its turning into a rant) is that incorrect information can become the “TRUTH” if its not challenged.

  29. There has been something suspicious about the way the government has dealt with the banking crisis since that panic just one year ago. They have often put more effort into spinning some line (which this website quite often has quickly discredited) than in being open and up front.

    Why has the government been totally dismissive of any option other than NAMA? What is their real fear of nationalisation of either/both of the big two banks?

    What interests are calling the shots? The government appears to have gone out of its way to protect bondholders. Given the whole story abnout the merits of the “free market” when times were good most people find it difficult to consider socialising their losses now that their bets have turned sour.

    There may be very good reasons for the government approach but they have never levelled with the people. Maybe they believe they cannot. Maybe they beieve they can get away with the usual bluff in public and buy the votes they need in the Dail to pass NAMA.

    I believe NAMA is the last straw for many Irish citizens. They have largely lost confidence in this government.

  30. @ Aidan C

    “There has been something suspicious about the way the government has dealt with the banking crisis “, “What is their real fear of nationalisation of either/both of the big two banks?”, “What interests are calling the shots?”.

    Well i imagine if you’re asking these questions, you’ve got opinions on to what the answers might be! So spit it out lad…

    I personally believe that the govt thinks the entire banking sector is in technical insolvency, and that a wholesale nationalisation would turn this into a de facto legal position. The follow on from this would be that many people would therefore assume the entire state was in technical insolvency and was essentially bankrupt. At this point there would be a sudden stop of capital flows into the country, and the ECB/EU/IMF would be called in.

    This is what they are trying to avoid, by using the only credible borrower left in the country, the taxpayer/treasury, to stretch the necessary adjustment on wages, debt and asset prices over 10 years, rather than the 2 years which nationalisation and national bankruptcy would cause. This is what the government and many of the pro-NAMA supporters believe, but which could never be publicly used as the underlying reason for NAMA. In essence, via NAMA we are forced to subsidise private capital already in the banking sector, in order to retain existing and attract future capital for both the banking sector and sovereign deficit. As previously stated on these pages, it is the government deficit as much as the banking sector that is driving the need for NAMA. As such, a review and adjustment to public sector expenditure is just as important as any root and branch changes to the financial regulatory system.

  31. @Eoin

    Eoin said:

    It’s quite clear that Lenihan, Cowen and their advisors are calling all the shots at the moment, and i’m fairly confident they understand whats going on and whats required.

    i think Enda Kenny would be dangerous if put in charge of something like NAMA

    Richard Bruton, Leo Varadkar and, obviously, George Lee seem to be quite confident and competent with it all.

    Joan Burton understands the figures given her accountancy background, but im still not convinced she gets the economics of it all.

    Its distressing at a very broad democratic level that so many of the key decisions of our country are debated and decided by an incredibly small amount of competent politicians.

    ================================================

    Just wondering here, which of the above mentioned cohort from your post, would you include in the “small amount of competent politicians” ?

    Would Enda, as the probable next Taoiseach, for example, be any less competent or any more dangerous than the current and previous Taoisigh?

    Would RB be any less competent than the current MoF?

    What makes you say that Joan does not get the Economics of NAMA?

    Does anyone get the Economics of NAMA, or is NAMA itself VooDoo Economics, to coin a phrase?

    A lot of very distinguished Economists here don’t seem to get the Economics NAMA, hence KW’s post.

  32. As far as I am aware this is an independent blog and K Whelan is a free person . Why should he not ask questions ?
    If K Whelan was a fully paid up member of FG , Lab , the Communist party or the Iron Maiden fan club . It does that mean he can not take ask questions or express opinions .

    Willie O ‘ Dea is paid by the people of Ireland to run the country . If he is to go on national TV to defend spending over 50 billion of taxpayers money he should at least know what he is talking about . There is nothing wrong with bringing him to task over this . Humour is a legitimate avenue .

    Now where’s the Kool Aid ?

  33. @ Irish Pancake

    I thought it was fairly obvious who i was referring to – “Outside of this lot…”, “Richard Bruton, Leo Varadkar and, obviously, George Lee seem to be quite confident and competent with it all”?

    As such, i consider all of those mentioned as competent, with the exception of Enda Kenny. My issue with Joan Burton would be that she generally addresses the issue of NAMA as if the only problem was the accountancy and oversight of it (given that she’s an accountant, this makes sense). I reckon she’d do a great job in helping to make sure NAMA was run correctly and transperently and that we got a good idea of how its performing, but i have yet to hear her address anything insightful in terms of the economics at play. Thats not a criticism, more an observation. As for Enda, i’ve yet to hear him say anything insightful about anything. Even Vincent Browne thinks he’s incredibly lacking in matters economic.

  34. @Robert Brown – “It has already been flagged that there is another huge layer of defaults waiting to hit the banks in this country, especially in the buy to let mortgage market and residential mortgage market. Then there are people who are now unemployed and in negative equity also. Not to mention credit card debt. Who is going to recapitalize them when they have to take these hits? “.

    I tend to believe that too and will be making a programme on that by December (not sure if it will be for radio or TV yet). When you say it has ‘already been flagged’, could you point me at any specific (reliable!) sources of data/information you have for my pre-production research?

  35. @Eoin:
    You consider Brian Cowen competent given that he landed us in the biggest hole for a long time? As MoF he did zilch to cool down the overheated property market.

  36. @ Garo

    you’re confusing policy choices with competency. Given that no one ever really tried to cool down the property market (the policy mistake) i can hardly attribute this to incompetency. A huge amount of very smart people never complained all that loudly about rising property prices until the bubble was just about to pop. If you do want to go down this road though, i’ll only note that FG were very much in favour of abolishing stamp duty for houses under 450k back in 2007. Not entirely sure that a property stimulus was required back then.

  37. @Zhou
    Bang on. That I revile (the economic mismanagement of) FF is surely nothig more than a professional shaking his head in disbelief? Is my contempt for their “economic” management any more or less wrong than, say, an epidemiologist wondering as to the competence of a government that suggests eating onions is a good cure for a viral infection?
    I dont have any agenda other than the taxpayer not paying a cent more than they have to – the observed behaviour of the FF party has to be factored into any analysis of an action which they will undertake. That doesnt mean that I think they are ill motivated – the vast preponderance of FF members in and out of power are doing what they think is best.

    If cabinet members come on the media and find themselves saying palpable nonsense (a regular event) then they must be and I suspect do expect to be called on it.

  38. @Eoin
    Setting bad policy is incompetency. There are two aspects to competence: making decisions and executing them. There were many many people who were talking about the property bubble but weren’t they told to go commit suicide?
    Property is not the only aspect of incompetency. The bloated public sector is a big aspect. The lack of regulation in the financial sector. Failure to set or enforce corporate governance standards. The mayhem in Fas. I mean c’mon bowing to molloy’s threats without so much as checking with a lawyer is gross incompetency.

  39. @Garo

    couldn’t agree more re: Mary Coughlan

    Biffo is a disgrace for putting his personal allegiance with her ahead of the welfare of the State.

    However have been very impressed by Lenihan as MoF. He was one of my lecturers in college and was very unprofessional- generally 45 minutes late for lectures. He really seems to have pulled up his socks of late 🙂

  40. Concubhar: He lectured my wife in college as well. I think his execution has been competent but policy incompetent. That is the only rational explanation I can come up with for his actions and the missing 13 items. That and maybe his innumeracy according to my wife.

  41. What stupid questions. Here are the answers:
    #1. Back of envelope (BOE).
    #2. Best guess.
    #3. BOE, maybe, easy peasy, no.
    #4. Confidential.
    #5. No, maybe, maybe.
    #6. No.
    #7. Soon, both, don’t know.
    #8. Confidential.
    #9. See #7.
    #10. Maybe.
    #11. No, long.
    #12. Probably, no.
    #13. No, maybe.

  42. @Eoin,

    “I personally believe that the govt thinks the entire banking sector is in technical insolvency, and that a wholesale nationalisation would turn this into a de facto legal position. The follow on from this would be that many people would therefore assume the entire state was in technical insolvency and was essentially bankrupt. At this point there would be a sudden stop of capital flows into the country, and the ECB/EU/IMF would be called in.

    This is what they are trying to avoid, by using the only credible borrower left in the country, the taxpayer/treasury, to stretch the necessary adjustment on wages, debt and asset prices over 10 years, rather than the 2 years which nationalisation and national bankruptcy would cause.”

    I think you have succinctly and eloquently identified the key divide between the NAMAphiles and the NAMAphobes. If, and this is a big if, both rapid adjustment and adjustment over an extended period are equally feasible, then there is a body of theory and an amount of relevant empirical evidence that those with the appropriate competence may deploy to identify the better option.

    As an economist, but one without the necesary skills and experience in this area, it appears to me that those advocating a more rapid adjustment are having the better of the argument, even if those who favour extended adjustment will make the decision.

  43. @ Paul

    if our own economic adjustment was occurring when the rest of the world was fairly buoyant, i’d see a rapid adjustment as being feasible. But at a time when the rest of the world, though in recovery, is still rapdily deflating and deleveraging, i don’t think we could handle a rapid adjustment.

    Burst a balloon in the middle of a party and everyone laughs at it. Do it the next morning when everyone has got a headache and is hungover, and its not considered as much fun or as humourous.

  44. @Eoin
    What you are suggesting is the exact same approach the Japanese took. Them through their banks us through NAMA.

    A long slow painful decade of stagnation and poor allocation of more capital as everyone pretends property is worth far more than it really is.

    It is the textbook way of how NOT to handle a property bust.

  45. @DE

    I’ve been mulling over your suggestion about how the LTEV 15% was arrived at and I’ve thought of a problem with it.

    You’re assuming a valuation process of
    (a) Pay full price for performing loans (you’ve assumed 40% — more on this below)
    (b) Pay market value for non-performing loans.
    (c) Adjust non-performing loans up by 25%.

    Now here’s how that would work.

    1. Full price would be paid for .4*77 = 30.8
    2. Market value of collateral would be paid for non-performing loans .53*.6*.77 = 24.5
    3. Then we’d adjust 24.5 upwards by one-quarter to get an LTEV of 30.6.

    That would imply a market value of 55.3bn and an LTEV of 61.4, whereas in fact we are paying 47bn and 54bn.

    I think the key incorrect assumption here is probably that 40% “cash-flow producing” means 40% performing.

    In fact, by saying that the market value of the assets is 47bn (discounting the original value of the assets of 88 by 47%) the underlying assumption is effectively that all NAMA loans will end up being defaulted on and collateral seized.

    In that case, we need to apply an LTEV adjustment upwards to all the loans and we’re back to the question of where the 15% comes from.

  46. @ DE

    i’m fairly sure i’ve gone on record, on multiple occasions, as saying this is a situation requiring a non-textbook answer.

  47. @Eoin
    I’d agree the solution may not be textbook.
    But the best course of action is hardly to follow the solution to a property bubble that was a complete disaster, ala Japan.

  48. @Karl
    By using the 77 bn figure, you are including 9 bn of rolled up interest…

    One question – the 40%/60% – are we sure this is the loan value and not the number of loans? (i.e. the loan value could be something different – better or worse?).

  49. @Karl Whelan

    hmmm….. that makes more sense.
    I was doing
    €88bn original property value
    X 60% non-performing
    X 53% to account for fall in value
    X 25% uplit for LTEV
    =€7bn

    We could really do with far more information on what the government is doing.

    So many assumptions yet so little justification or explanation for the basis behind any of them.

  50. @ DE

    well i wouldnt say we’re following the same course of action so far. For starters, we’ve already suffered a much quicker adjustment in terms of property prices – two and a half years for a 50% drop, it took almost a decade for a similar one in Japan. Secondly, we’re already trying to purge the bank balance sheets of the bad loans, in an attempt to clean them up and get them lending productively again. The key to this will be making sure that they are adequately capitalised, so its hugely important that we attract in new capital to that end, which is again one of the reasons behind why i believe we have to maintain some material form of private ownership and participation in the banking sector.

  51. I’ve said it before and I’ll say it again.

    Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people

  52. “I’ve said it before and I’ll say it again.

    Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people”

    … but reward financial industry vested interests with billions and billions of miserable taxpayers cash ..

    really we are deep in George Orwell territory with NAMA at this stage ..

  53. Look, we had 3 choices:

    1) Let the banking system collapse and with it the economy

    2) Nationalise the whole banking system in a unique (for the Western World) declaration of economic emergency

    3) NAMA as presented

    (3) is the lessor (or is it lessest) of evils. All this whinging about where did the figures come from is irrelevant. Even if the MV was 30Bn (most pessimistic as per BL) (3) would still be the least worst option.

    As to points 9 & 10 of OP, we are told that NAMA will “wash its face” so far as cash flow goes.

  54. @All

    Can anyone tell me the historical origin of the face washing metaphor? Is this actually a term used in financial markets or was it made up by some Irish governmental wag?

  55. @Homer
    Wow, we’ve gone from nationalise or NAMA to nationalise or bust or NAMA. No shades of grey there…

    What about equity stakes? (recapitalisation). What about bond replacement (investment rather than bailout)? What about providing repo through the NPRF commercial program? Bung the 54 bn in the NPRF and repo it out to the banks?

    Don’t like any of those?

    What about splitting up the banks, separating their life and pensions businesses and floating them as separate companies for capital raising purposes? What about doing the same with their wealth management business? Selling off non-core assets? Do all that and then see where they are.

    What about firing the existing senior management and boards instead of promoting them and retiring them?

    What about selling the distressed assets off and recapitalising the banks through equity stakes? Much simpler, no admin charges. Just the cost of the NAMA bonds that will surely be recouped with dividends…

    What about an SLS like in the UK where the banks can park their assets and get bonds in return? But they retain ownership of them, they have to work them out, they have to take the losses on them and they pay for using the scheme?

  56. Just got this off Bloomy:
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aILmsUcUeuqE

    On Oct. 2, 2008, the Irish government guaranteed all deposits and borrowings at six of its biggest banks to assure customers they could withdraw their money and avoid a bank run. The decision rattled other European governments because it encouraged depositors to move their holdings to Ireland.

    Irish Finance Minister Brian Lenihan told the BBC that there was no other choice because of the risk of panic.

    “We were anxious to avoid that at all costs,” Lenihan was quoted as saying. “The policy options available to us were to immediately nationalize an institution. If we immediately nationalized that institution the risk was that it could lead to a systemic collapse of all the other institutions.”

    French Finance Minister Christine Lagarde said the decision was “a bit of a shock,” the BBC said. Darling told the program that “the lesson that you draw here is you can’t do these things on your own.”
    ————————

    So much for international support for the Irish move.

  57. Karl,
    No, an Irish Government wag did not coin this phrase. I have heard it before in connection with a business or property not requiring ongoing subsidy by the owner as (in the case of a property) the tenant’s rent pays off the mortgage, after the investment has been set-up with due attention – like a child who no longer needs a parent to wash its face after initial period of appropriate care.

    Here’s a 2 year old post on an English personal-finance site called “an investment property should ‘wash its face’ “, where he writes:

    “However, renting out a property you own becomes very risky if the property doesn’t ‘wash its face’, which is to say that the rental income should cover the costs. And for a lot of people who’ve bought recently, it doesn’t.”

    http://plonkee.com/2007/10/31/an-investment-property-should-wash-its-face/

    Some believe it to originate in the North of England or Scotland.

    For future reference this is an interesing etymological website, though I didn’t find this particular phrase here:

    http://www.etymonline.com

  58. Karl,
    I’ll boldly suggest the following
    14. What are the criteria used to define a performing loan? What is the discount applied to performing loans? What is the maturity of these loans? What is to stop good loans refinancing/prepaying. (in summary, firstly you want to assess the default probability and then figure out future cashflows).
    15. How will nama acquire the property assets backing the loans and additional recoveries? I’m not familiar enough with irish law, but I see the following problem: how will nama go after additional collateral or guarantees without establishing the loss on a loan? Can nama chase additional recoveries without proof of a loss? (this is important as it might be necessary for “firesale” auctions to establish a loss in order to get additional recoveries. It’s an area that might be considered to be a developer bailout.)
    16. How will nama fund the 5bn project completion fund? Will this facility only be available to nama owned property or will developers be able to borrow from this? (if memory serves, this fund was 10bn but got reduced to 5bn. I might be wrong but if lenihan thought 10bn was a runner, there’s a possible 5bn of recap that was available. All you have to do is apply more realistic haircuts).

    There’s also a pile of questions around transparancy and reporting. I’ll leave that aside for the moment.

  59. @Y
    You are mentioning a variety of technical devices. In the end of the day we either leave our existing banks hopelessly undercapitalised (insolvent) and so let them go bust or nationalise them. OR we revitalise the existing banks through a mix of NAMA cleansing and recapitalisation.

    IMHO this last is the least risky choice. It still leaves a big call on the optimal mix of cleansing and recap. I agree that it would be extremely coincidental if LTEV happened to provide that optimal mix and I am assuming that all this MV/LTEV pallaver is just a fig leaf to justify getting to the optimal solution. It does make it rather easy for the likes of OP to poke fun at the calculus. It’s rather as if the Gardai justified forcible intervention in an armed robbery by saying that they had weighed up scientifically the probabilities of civilian injuries. That would leave them an easy target for critics to demand to see the sums.

    So it is with NAMA. The LTEV/MV figures don’t really matter. The argument is should we have let the banks go bust, nationalised them or chosen a better mix of cleansing/recap.

  60. @Homer
    You are setting up a dichotomy that doesn’t exist. Recapitalisation doesn’t equal nationalisation.

    AIB has a market cap of 2.86 bn as of COB on friday. An 80% recapitalisation would inject 11.4 bn in new fresh shiny capital. AIB would then be free to write down its loan book to levels that make it attractive for repo. If that’s not enough, a 90% recap would inject 25.74 bn.

    I don’t see any block in the EU guidelines to the government swapping treasuries for equity.

    It is simple, it will work, and it immediately solves the problem. It provides unlimited upside for the state.

    There are more than two choices. Some of the choices are much simpler than NAMA.

  61. @Homer
    Oh and on technical devices – these are the way banks work. These are the things they do for funding. They are mechanisms that exist and that are used both by other banks and by other bailouts of banking systems.

    The historical basis for a bad bank is bad. They always lose money. Sometimes they lose a lot of money (Securum in Sweden, for example, lost 60% in constant money terms. We in the eurozone live in a world of constant money).

  62. NAMA involves bank resolution for all covered banks over an extended period. The policy decision has been made; all that remains is the politcial rubber-stamp in the Oireachtas. The arguments in favour of comprehensive resolution over an extended period come in three flavours:
    1. We couldn’t opt for a rapid resolution; the blanket guarantee prevents it.
    2. We shouldn’t opt for a rapid resolution: the sky would fall in.
    3. We shouldn’t opt for a rapid resolution: The existing extent of Irish control over the banking system – and possibly major swathes of the property market – would be diluted and possibly eliminated. And any remaining support of the existibng governing coalition would evaporate.

    Argument 1. raises legal contraints, but if it extremely unlikely that the holders of bank bond at the end of September last year are still holding them today. And there seems to be no reason why a reasonable settlement could not be achieved with these bond holders.

    Argument 2. is in the realm of positive economics and, imo, those advocating rapid adjustment have won the argument. But Argument 1. is usually deployed to trump it.

    Argument 3 is comprised of value judgments, sanguine, but blurred, visions of the future structure of the banking industry and the property market, wonderful notions of a social and planning dividend (bribing citizens with their own money) and some over-riding political considerations.

    All these arguments have been combined to generate a post hoc justification of NAMA. And the numbers and analysis (such as it is) have been retro-fitted – and are being retro-fitted – to justify the policy decision. This has evaded and frustrated any attempt to apply the kind of forensic scrutiny required – this links back to Karl W’s initial post.

    My sense is that the delay in presenting the data and information that would be necessary to answer Karl’s questions is occasioned by a couple of pressure points that have emerged. One may be the nature of future ECB support as it seeks to wind down its support of the Eurozone banking system. It may be balking at the size of the NAMA bond issue that will be coming its direction. In addition I would be surprised if the NTMA does not have major concerns.

    The second could be the comprehensive nature of the resolution proposed.
    For the Government is has to be all or nothing. Initiating a process of winding up Anglo and Nationwide (the most likely candidates) would reveal immediate market values for the properties behind all the loans being bought by NAMA. Similar to the bursting of all bubbles the prices would overshoot on the down side. But how bad a thing would this be.

    In addition, instead of overpaying for all the loans, NAMA would end up paying much less to the three remaining banks. The Government would have to step in with some recap, but fewer cleaner banks – and a cleaner banking system – would allow them to offload these shares most likely at a profit. And the recap might need to cover some relief on the more recent mortgages taken out by housebuyers caught up in the irrational exuberance.

    Anyone for a slimmed down NAMA?

  63. @Y

    There is an element of circularity in playing with these numbers. The market cap of the banks is a function of the 54Bn to be used in NAMA cleansing and the cost of subsequent recap is a function of market cap.

    I don’t think we are a milllion miles apart. The banks need, say, a total of 60Bn to replace the 77Bn being taken off their balance sheets. The split of this 60Bn between “cleansing” and recap determines the ultimate state ownership (presuming no other source of funds). If the cleansing had been done at 30Bn (per BL) we would in effect have nationalisation. It is being done at 54Bn. I agree with OP that it would have been nice to know how the Government expects this to pan out in terms of ultimate state ownership after the required equity ratios have been reinstated through recap.

    I do think you must be wrong about the government being able to purchase equity with these 1.5%ers. Surely there would have to be a market test that these 1.5%ers are worth their face value, otherwise why not issue equity for 0%ers? The key concession is that the ECB will allow the 1.5%ers to be repoed PROVIDED they were only used to buy NAMA assets.

  64. @Homer
    To take your last point first. No, there is no limitation on use that I can see. The only limitation is that a market price is paid (whether for loans or equity). There is no particular concession for Ireland. Yes, zero coupon bonds could be issued. They attract a higher haircut for ECB repo, so they are less valuable (more would need to be issued to provide the same ‘value’), but at least the interest rate risk would be removed.

    So if the banks need 60 bn in assets to replace 77 bn, actually what they need is 17 bn. An equity recapitalisation of 17 bn across the banking system is not really that much. On the other hand, if the loans aren’t worth 54 bn, the banks really need more than 17 bn and the state is buying overvalued, overpriced assets.

  65. @Y

    We agree on your point 1. But my argument is that ECB+50bp medium term floaters would not command a market value of par.

    I think you are missing my main point.

    77Bn is being removed from the banks’ balance sheets, agreed?

    This hole is made up by:

    Already written downs, internal capital generation and existing capital, let’s say 17Bn in total.

    Still 60Bn to find and presuming this comes from the State the only question is how much of it will be used to acquire equity. Note that this 60Bn total requirement is quite indepentent of MVs or LTEVs. What the LTEV mullarkey decides is how much of the 60Bn injection will not be entitled to equity. We are told that this figure will be 54Bn so that would mean that 6Bn will be used to acquire equity. Where will that leave State ownership? This is one of OP’s more relevant questions.

    If, as per BL, half of the 60Bn should be entitled to equity then in the first place, the shares would be practically worthless (with only 30Bn being used to purchase the 77Bn toxics) and so the State would finish up with 99.9% ownership – i.e. Nationalisation.

    We are haggling about how much of that required 60Bn should be directed towards the State buying equity. It seems to me there must be an optimal level of State ownership to balance all interests. The LTEV is really a red herring, hopefully chosen to arrive at the optimal final balance.

  66. @Homer
    Yes, I agree with you that ECB+ commands a lower repo value for interbank. I presume! I suppose there could be times where euribor is lower than the main refinancing rate, but it is probably unlikely to continue that way (as it would mean too much liquidity sloshing around, so the ECB would start to drain). No?

    I also agree that the NAMA number has been reached by setting a target (how much do we need) rather than by setting a ‘worth’.

    I disagree with you that 30 bn would leave the state owning 99.7% of the banks. A third of the loans are from Anglo, leaving 52 bn from INBS, EBS, AIB and BoI. INBS is hopelessly insolvent, so the 8 bn or so from there might as well just be nationalised. So we are down to 44 bn. There’s a billion from EBS which should probably be dealt with by a 500 mn recapitalisation (assume a 50% loss on it).

    So NAMA Anglo and a nationalised INBS.

    That leaves us with 43 bn from BoI and AIB. The writedown indicated by the preliminary valuation is 20%, so something about 9 bn of new money is required. Even assuming it is split evenly between the two would see the state taking less than 60% ownership of each of them.

    But as I say, the discount of 20% is bogus. The recoverable value (whether long-term or liquidation) of the loans is way less than this, IMO. Which is why we have NAMA subsidising the banks at taxpayer’s expense.

  67. One additonal point I forgot to make – we are supposing that the state is the only entity willing to invest in equity stakes. With a return of confidence to the equity markets, I don’t see that this is the case…

  68. @YM

    You make a very important point.

    There were and still are a large number of choices, tailored to the individual circumstance of each institution, including cutting some of them loose post-guarantee, taking majority ownership in some via an a NAMA-style mechanism, breakup, nationalising, new good banks etc etc.

    The assertion that “we had 3 choices” based on the concept of a “national banking system” that must be treated as a monolith is wholly bogus. Realistically there were hundreds of choices, not three.

    To identify the best strategy mix, you need a clear idea of financial services requirements on a five year horizon. That includes foreign banks by the way. Trying to fix it so it can be like before is wrong. It won’t be like before, so why try.

    NAMA has locked frightened policy-makers into an untenable position. That explains the face-saving mathematical absurdities taxpayers are constantly being invited to swallow.

  69. @bg & Homer
    Indeed, I would like to see the state underwrite an equity placement by PTSB, for example, because even though they don’t require capital yet, they will. In addition it would free up lending to some degree if they could be more confident about their capital position. In a sense, it would create a ‘not-quite-so-bad’ bank rather than a ‘good’ bank. It would leave at least one bank in a position that it could supply credit to credit-worthy borrowers if there was a demand for it.

    I suppose what underpins my search for alternatives is that I would rather see a zombie banking sector than a zombie public sector. We had that in the ‘eighties and the country wasn’t a pretty place. Why is my preference this way round? Because I believe that the private sector will find ways to overcome a zombie banking system, but there is little that is going to overcome a zombie public sector (social net, health, mass education) without damaging the rest of the economy (i.e. pulling more money out of consumers’ pockets).

  70. @ YM

    PTSB has probably a bit of a capital requirement, but what it really needs is a new funding model. If they boosted up their capital levels they’d probably be able to borrow more cheaply on the interbank market (bonds or depos), but this is also at the same time what they’re trying to move away from. Long term they probably need to either deleverage significantly, or else try and move more into the business banking world in order to gain more ‘customer’ deposits. This would be a shame in some ways, as at the moment they have a very simple product offering, which is in many ways a good thing given the currently messed up financial system. Hence the reason why we’re seeing the first moves on some serious consolidation with INBS and EBS (and maybe BOSI) set for a merger with a spun off PTSB. I think from the figures i’ve heard, PTSB has a loan:deposit ratio of 300%, but a merger with INBS and EBS would bring this down to 200% (assuming all customers remain, which is debateable in INBS’s case given that their depositors are to a large degree their owners as well – will they stay afterwards?)

  71. @Eoin
    If PTSB were desperate for depositors, they would be offerring the same deposit rates that Anglo and INBS are offerring. They are not, ergo…

    It is instructive to look back at the banks that were in danger of collapse. AIB, BoI, Anglo, INBS. The common factor? C&D and Commercial. Why? Because they are largely non-recourse? Because the rise in default rates is likely to be higher than in residential? (even where house prices are falling, borrowers don’t/can’t walk away… whether this will change is another matter, but for the moment it is the case – the price of credit card repo’s in the US rose once credit card debt became recourse, default rates dropped sharply… they rose again recently to high levels as won’t pay has become can’t pay).

    As far as the state is concerned, a high loan to deposit ratio is desirable. Borrowing short is to be encouraged. It is unsecured, unguaranteed credit. Once the ECB stepped in to fill the liquidity gaps, borrowing short became safe again. One could argue that the failure of the BoE to provide liquidity to Northern Rock was a terrible mistake (although given their default rates, they were probably dead anyway). Anyway, now that this particular moral hazard has been introduced, a short-term liquidity shock is less likely to be a danger than a run on deposits (as in large corporate deposits)…

  72. Karl,

    If you are genuinely looking for answers why didn’t you just ask Alan Ahearne. You have his email address I’m sure.

  73. That’s right jms. Why didn’t I think of that? Just email Alan, he can reply and then all that information that DoF hasn’t yet revealed (or hasn’t yet decided on) can be revealed to the public by me via Alan’s email.

    Brilliant. What could possibly go wrong with that plan?

    And of course indeed, this point proves that I’m not “genuinely” looking for answers.

    As always, keep up the good work.

  74. I am not aware of any questions asked of the minister on NAMA that he has refused to answer. If you feel you are short of important information maybe you should look to those who have so far asked the questions or ask the questions yourself directly.

    All you had to do at any stage was ask Alan, if he had the information but refused to reveal it or he confirmed that those decisions had not been made yet, then at least you’d know where you stood.

    You are a citizen, you are entitled to ask questions, I just wondered why, given that you are in a position to, you didn’t ask those questions directly rather than choose the sideways route of your blog.

    I’m sorry if my posts upset you, as they seem to, but if you are going to put yourself & your views out in public as you do, I think you might expect some questions.

  75. @jms

    You appear to be confusing the issue of whether I could, via informal “back channel” contacts attempt get some answers to some of these questions—-answers that could not at all be considered to represent the official viewpoint of the Minister and which I could not post on this blog as representing such—with the issue of whether the Minister for Finance has explained adequately to the Irish public a plan in which he plans to issue fifty something billion of debts in the name of Irish taxpayers.

    I am pointing out a series of important aspects of the NAMA plan that the Minister, in a series of long and carefully considered statements, has not chosen to reveal to the Irish public.

    Your attempt to personalise this issue as being about whether I could have called an adviser to the Minister seems to completely miss that there is a far bigger picture here relating to the information that the government has been willing to reveal to the public.

    And, as a final thought, what exactly is wrong with using a blog to ask relevant questions about a key public policy issue?

  76. @ jms
    Are you are being deliberately provocative and disingenuous. Ask Alan you say. Do you honestly think that, even for one brief moment in time, that the same Alan would waver and actually give an answer which conflicted with his political pay masters?

    Every economist in the country has tried to drag facts from the government and it’s advisors. The answers given are invariably of the “to the best of our knowledge” and the “as far as we can ascertain” variety.

    They have extrapolated their nama plan from examining a tiny percentage of the loan books not to mention their underlying false assumptions about property values, rents, and assumed near static interest rates A little knowledge but above all wishful thinking, will prove to be a disaster by the ex minister for children.

  77. Robert,

    “Are you are being deliberately provocative and disingenuous”

    Not true. I’m in a position to know, you’re not, so we need say no more.

    “Ask Alan you say. Do you honestly think that, even for one brief moment in time, that the same Alan would waver and actually give an answer which conflicted with his political pay masters?”

    Why would the answers have to be in conflict with his “pay masters”. Do you know something the rest of us don’t or are you just jumping to conclusions. For the moment I’ll put it down to jumping.

    “Every economist in the country has tried to drag facts from the government and it’s advisors. The answers given are invariably of the “to the best of our knowledge” and the “as far as we can ascertain” variety.”

    I know of no questions asked directly that haven’t been answered directly, if you do, let’s have them.

    “They have extrapolated their nama plan from examining a tiny percentage of the loan books not to mention their underlying false assumptions about property values, rents, and assumed near static interest rates A little knowledge but above all wishful thinking, will prove to be a disaster by the ex minister for children.”

    I would suggest to you that you don’t know what they have examined or whether their assumptions on property values, rents or interest rates are false or not. You are looking into the future, making a guess and deciding your guess is the way to go.

    Finally, your jibe at the “ex minister for children” doesn’t need any comment from me, it should be let stand only as testimony to how highly you value your own opinion.

Comments are closed.