But perhaps mine is an extreme view and you are right, there are good business lending departments that aren’t replicated in any other bank in the country.

In which case, the carrot is that the government provides cheap funding to those departments to provide business loans on a profit share basis. This is the model that has worked so well for the property market after all… I don’t think the EU will have a problem with this, given the 500 mn in first time buyers loans that the government funded in the last bailout.

What level of loans do you reckon is required for the business sector anyway? (Excluding property and development companies).

I assume you are saying we have time to try other solutions because AIB and BoI are useless anyway.

I don’t agree that AIB/BoI are not interested in or experienced in provising credit to the productive sectors of the real economy. I would not be giving them any medals either, but I think writing them off as not having a role in the recovery is unwise.

Even if one does not think they will do the right thing then shouldn’t one’s position be that they need to be motivated by carrot and stick to lend to viable businesses? Otherwise you are throwing the baby out with the bathwater.

You would have to try to set up a new credit institution and would rely on the AIB and BoI to do outsourced work. The net effect would be that the new institution would take all the risk for AIB/BoI at the crucial period at the start of the upturn. I don’t like the sound of that.

FF are also human but they have sold out. To rescue the party, they must now abandon cheque book politics. There are no incentives for them to do this in the absence of police activity into corruption. So how is this to happen? There has to be an awareness of what is going to happen. Time will show that, possibly in the next few weeks. Otherwise, we need a Ben Dunne! A developer who has lost everything, but who has the goods on the pollies and uses it. Who is so exposed? Who knows them? Who is sick of the lies and realizes what Naama will do to the country when the depression continues?

September 30th, 2009 at 4:21 pm

“If people want FF out then surely the best way for it to happen is for the Greens to reject the new program for Govt rather than the NAMA or Lisbon hitting the wall now.”

Will the Greens not be offered both NAMA and the new program at the same meeting?

If they accept NAMA and reject the program the result will be the same, non NAMA.

NAMA aside I think a great deal of time has been wasted. You may disagree but I think it was because Cowen & Lenihan were in denial, and maybe still are.

We could miss the boat of a wider recovery because businesses are dying every day and starting again may not be an option for many.

However, I think the recovery may be more anemic that is hoped for.

The IMF seems to think that banks are far from out of the woods.

http://www.ft.com/cms/s/0/3d7b9bde-ad44-11de-9caf-00144feabdc0.html?nclick_check=1

Sadly, I think the clock is ticking for the solvency of the state a position that NAMA makes worse (and nationalising the banks would make, eh, worser still!).

In that case do you agree with Garret FitzGerald that bringing down the Govt and stymying NAMA now could do untold damage?

If people want FF out then surely the best way for it to happen is for the Greens to reject the new program for Govt rather than the NAMA or Lisbon hitting the wall now.

I absolutely agree with you there, and I think NAMA is probably a done deal, requiring only the Greens to sign up now.

But there is also the reality of “events dear boy”, to paraphrase another Great Leader, almost as venerable as yourself.

Lisbon, the GP upcoming meeting, Budget, etc

I most earnestly hope for a Global Recovery, and I am sure there is evidence out there to support this.

I also hope that Ireland will be in a position to take advantage of this recovery, but I have my doubts, given our current dire situation, with the huge Property overhang of overpriced property, which will be underpinned by NAMA “going forward” (sorry), increasing emigration, very little funding for job-creating business, increasing long-term unemployment, despite emigration, PS union sabre-rattling, strikes, etc. etc.

I better stop, as I’m depressing my self now.

For the sake of my two sons, and my little grandchild, I hope the Banks get fixed, but I am not optimistic.

NAMA is a bet that property values have bottomed out and will increase by 10% in 10 years.

This bet has been hedged by also betting on that the banks can cover any losses in 10 years time. The banks make a significant part of their business in property related areas.

So, if NAMA loses money from a property market falling further, how will the banks, whose profits are also reliant on a recovery on the property market, be able to pay up?

Or maybe the banks have started to reduce their reliance on the property related loans by offering more loans for other type of businesses? If not, then the hedge might not be as good as it has been implied.

Do any of you agree that time is rapidly running out for Ireland to come up with a solution to its banking system problems if we are to take advantage of the anticipated EU and world economic recovery?

“We should now try to stop it. Discuss!”

Persuade The Green Party?

Surely well-disposed GP activists are on this Blog and P.ie, to name but two.

Are they persuaded by the arguments put forward by the economists here?

If the Greens were in opposition, does anyone doubt which side of the NAMA argument they would be on?

Do GP members and delegates not anticipate opposition politics in the near future, and the need to rebuild their shattered Party, based on moral principles and decisions?

Pitchforks? Torches?

We should now try to stop it. Discuss!

I would disagree with this statement.

The bubble is still deflating. It is very possible, I would say probable, that property prices will decline by 40% from current market values over the next 3 years. This is mainly due to the vast oversupply in both the commercial and residential sectors.

Even if property starts to increase after that it would need to increase by 83% over the next 7 years for the NAMA to break even.
Highly unlikely I would say.

Hurrah for higher taxes. If they keep going up, we’ll be booming…

Thanks for raising this again, the 10% in 10 years soundbite seems to have gone down without a fight. For those who missed it last Friday, the line on which 10%-in-10-years is just one point is on the graph here:
http://www.ronanlyons.com/2009/09/25/the-importance-of-getting-namas-core-assumptions-right/

It will be treated at par under Eurostat rules on the government’s side. From the recipient banks’ point of view they would, in the first period of ownership, have no incentive to test the open market to determine a price, if that price were to result in the ECB imposing a haircut on repo.

Self-interest (with apologies to Greenspan) should ensure that in the early stages that the bond(s) issued be priced at par by all the three parties concerned.

No doubt some of the stock will in time leak into the marketplace, and a true, or at least different to par, price then established.

cheers for that, was wondering if there was any comparable floaters out there.

Ok, so this thing has a coupon of 6mth bills+30bps, but its trading slightly below par, so its real yield is more like 6mth bills+70bps (Italy 6mth bill @ 0.46% today).

Further, Italian 10yr debt trades at 4.00% at the moment, while Irish debt yields 4.66%.

As such, wouldn’t a 10yr Irish floater NAMA bond likely trade at 6mth bill+70bps+66bps? ie 6mth bill +136bps or there abouts.

Irish 6mth bills are roughly 60bps, so the initial coupon would need to be 1.96% to trade at par. Obviously some Ireland/Italy 10yr basis adjustments might shift this a bit lower, but it still seems to me that an ECB+0.5% coupon is worth less than par. Any thoughts?

As such, we haven’t “really” given the banks 51.3bn in bonds in terms of there inherent value.

The issue size is now €8.25bn.

For anyone looking for details on the bond its ISIN code is IT0004518715.

There were areas where employment grew. The most notable to my mind were public administration and defence, health and social services (by a stonking 5,500) and financial, insurance and real estate activities (2,900). I found this surprising, given the hiring restrictions that are in place in the public service, and the business difficulties facing much of the financial sector.

The main State-dominated sectors of public admin/defence, education and health/social services employed 24.9% of those in work in Q2, up 2.8% on Q2 2008.

Data from QNHS.

It’s only one quarter, but it looks to me like we may be experiencing the effects of a subtle stimulus package.

There is indeed an important relationship between Nama, property prices and the real economy, but I think you are missing the causality.

Property prices are not a result of economic growth, they are much more a causal factor.

This is because we are a small open economy and when you boil it down, property prices are about the only element of our cost base over which we have control.

What Nama proposes to do is prop those prices up and pin our hopes on them staying high (they are currently high, make no mistake!).

This of course will impede whatever hope for recovery we might otherwise have.

This is what ought to be given more weight in the NAMA debate.

“The problem with the Irish figures is that they are insanely volatile and even in the good times of 2003-2007 there was always at least one negative q/q reading a year.”

So I would be very wary of attaching too much importance to one quarterly reading.

Ok. you lost me there. I mean c’mon! I think the rest of your post is just as pie in the sky. This is a false growth we are witnessing due to massive government backstops. But the piper will have to be paid and I expect 2010 will turn out much worse than you expect.

(a) The latest GDP figures for 2009 Q2 were published last Thursday. These were much better than expected. They showed that the fall in GDP came to an end in Q2. Ireland recorded 0.0% growth in GDP in Q2, which is worse than in a few countries like France and Germany, but better than in most (including U. Kingdom, Spain, Italy, Netherlands).

(b) As a result of this development, the leading economic forecasters are now busily tearing up their previous forecasts. Davy published their new forecasts this morning (link below). Previously, they forecast a fall in GNP of 3% in 2010. They’ve now changed this to a rise of 0.5% in 2010. That is a massive revision. They now forecast the end of the recession in 2010 Q1, which (tempus fugit) is only 3 months away. More importantly, they now forecast that GNP will rise by 4% in 2011. I wonder if ESRI will follow suit when they publish their next forecasts. Their forecasts are usually quite similar to Davy’s.

http://www.finfacts.ie/irishfinancenews/article_1018000.shtml

This (4%) might not seem fantastic by Celtic Tiger standards, but, in any other country, it would be called a boom. Moreover, as Davy themselves point out, to achieve 4% growth in calendar year 2011, the economy will be growing at close to that rate by mid-2010. In other words, by the time the Irish soccer team (hopefully) fly off to South Africa for the World Cup in just 8 months time, the economy will be allready growing at a rapid rate. Should Ireland win the World Cup, of course, add another 2% to the Davy forecast.

I’m no financial expert or NAMA expert, but I feel that these developments in the real economy ought to be given more weight in the NAMA debate.