Banks have been misleading regulators! Shocked!
We will find that the land secured for loans is worthless. No demand even over 10 years, as more development if any, is done on newly designated lands. Brown bags must flow.

“This is a must do for the Greens - at the very least. However, having watched the straw poll on Pat Kenny last night i am afraid that these guys want to cling onto power at all costs.”

I’ve done my good deed for the day podubhlain. I have to say what I really think.

“Honest” Greens are being hoodwinked by their leadership.

If the Green Party were not in Government the leadership would be screaming from the rooftops about how bad NAMA really is. And they would be right.

My comment on the Pat Fitzpatrick (October 5th, 2009 at 2:12 pm) interview makes it clear that the leadership are manipulating the outcome of the meeting in a most cynical fashion.

The only ethical thing for any Green Party member to do is to vote against the New PFG.

Gormley, Ryan et al will insist that they get cart blanch on amendments to NAMA. Then they will do next to nothing.

To be clear I am not a member of any political party and am what might be called a floating voter. But I generally don’t float in the direction of Fianna Fail.

jc,

Probably repeating what others have said but here’s five bullet points you might consider.

1 Seek the Honohan recommendation on risk sharing. It is actually risk/reward sharing.

2 Pay only the market value of the security for the loans. Any other NAMA payments form part of the “sharing”.

3 Limit the sharing element to 15% of the market value of the security.

4 Any additional monies required is provided in the form of Convertible Preference Shares carrying an interest rate of ECB base rate + 3%.

5 Seek a change in the existing Warrants attached to the Preference Shares issued by AIB & BOI. The Warrants should be exercisable at any time and would have a lifespan of three years following the repayment of the repurchase of the Preference Share by AIB & BOI.

I’m not an economist.

Hope that helps.

Increasing the risk sharing element is the simplest solution for the really toxic stuff. This is a must do for the Greens - at the very least. However, having watched the straw poll on Pat Kenny last night i am afraid that these guys want to cling onto power at all costs. Some good suggestions there Zhou.

I agree that increasing the risk sharing seems obvious and most simple. Was surprised it was such small proportion in first place. Lenihan has posited all sorts of esoteric reasons why risk sharing can’t be increased. Cn you think of any legit ones?

@Zhou

I need to think about your comments a bit more. Some really good stuff in there.

Really appreciated folks - just trying to myself for Saturday:)

I would change the oversight and transparency for the valuation process. The actual valuations will trump the estimates. However, I would ensure that the Minister remains politically responsible and keep it away from quangos.

I would demand that NAMA only offers new loans provided the borrower agrees that generic information can be made public, e.g. Developer A etc. I think this is not possible at the moment.

I would get rid of the stupid proposal for 80% windfall tax on zoned land as if will mitigate the cross collateralisation.

I would resist the decoupling of NAMA and Nationalisation at all costs. I would ensure that the State has a right to recapitalise any bank that signs up to NAMA if it so wishes in the future, i.e., an option on ordinary equity. I would want a process for future Nationalisation which caps the liability of the taxpayer to that which it would have been if there no NAMA.

I would ask for greater risk sharing a la NAMA 2.0 if at all possible. I believe less than the market value (e.g. -15%) of the loans should be paid for in interest bearing government guaranteed bonds and subordinated bonds up to a maximum value of the LTEV should be issued to an SPE owned by existing shareholders. If this is not do-able (and I accept it may not be do-able) then I would want a satisfactory explanation why such is the case.

****************************************

Other brainwaves:

I would demand that detailed criteria of institution specific information be reported quarterly.

I would demand that the NAMA process values loans as of the date of transfer and the Minister can halt any transfer at any time. If a loan is particularly risky or uncertain then I suggest that a limited NAMA 2.0 approach should be taken in relation to such loans, i.e. pay less than MV fo those loans and put subbie bonds into an SPV for shareholders.

I would require that the Minister agree to bring in legislation for the orderly winding up of banks within 6 months of NAMA coming in.

I would require that none of a borrower’s loans are transferred until all of a borrower’s loans are transferred.

++++++++++++++++++++++++++

I would cap bonuses.

I would cap bankers borrowings from their own institutions. I would ask for delarations of interest re borrowings from other institutions.

I would require that all bank promotions and appointments be assessed by an independent board of international financial experts and that this be paid for by the banks at a set cost or a set percentage of any dividend, whichever is the higher. I would require that the assessment should be public so that there is full transparency for shareholders.

I would require that the Minister agree to bring in legislation for improved bankruptcy legislation within 6 months of NAMA coming in.

I would require that the Minister have the option to terminate the NAMA arrangement at any time.

This is the sort of scheme the Bank Of England are putting in place.

If you must keep the toxic loan purchase, then dramatically increase the risk-sharing. Pay market value (47 bn) with 23 bn in subordinate bonds.

If NAMA really was the only alternative, and you were in a position to amend it, what would you change?

Genuine question. Please help.

My view: the reality is that we really can’t know whether NAMA will work or not, just like the eminent economists on this thread who bought Anglo shares didn’t foresee the bank’s collapse. I don’t mean this as a dig, it’s just a reality.

NAMA seems to me to have a reasonable chance of success.

“If the State has to clean up the mess then it should do so with the least exposure as possible.”

I would add also, with an upside reward for the exposure taken.

“I noted some forecast the weekend that debt to gdp would reach 200% by 2020.”

We won’t be allowed to get that far.

“We should focus on reducing NAMA as is if the Greens don’t blow it out of the water.”

Got to admire your tenacity, podubhlain, but the way I read the Green NEC action it has become a binary decision. The new PFG & NAMA or nothing.

If the Green membership go for the new PFG then NAMA will go through with very little amendment. I have no faith in Dail process to achieve changes. Fianna Fail & the Green leadership have already made it clear that they intend putting it through as is. A little lipstick here or there (some talking points for the media & blogosphere to be forgotten in days) but nothing fundamental.

@ 03:40 Endeavour to persevere….

http://www.youtube.com/watch?v=s54nIhRd8CE

“We know that all the ‘goodies’ promised in the renegotiated programme for government will never make NAMA acceptable. We know that all the promises will never materialise because NAMA will rob us of our ability to implement them. Brian Cowen knows that too. But it will not matter to the leader of popular politics. He deals in opinion polls and spin. The Greens should not join him in this deception. We should return to principle led decision making. The members can make that decision on the 10th and our electorate will thank us for it.”

We know that all the promises will never materialise because NAMA will rob us of our ability to implement them.

Well at least somebody gets it.

From the interview with Pat Fitzpatrick on RTE’s News At One.

Q…Are you not satisfied that there may be some amendments that will cater for your concerns?”

PF “dissenting groups put forward motion B….”

@ 01:49

PF “That motion has now been taken off the table by the NEC the National Executive Committee”

PF “…being given NAMA as it is….”

PF “….cannot get away from the fact that the flip side of the renegotiated PFG is NAMA”

PF “….by voting for the PFG we’re voting for NAMA”

Gormley, Ryan and Boyle are now holding a gun to the membership saying vote for NAMA.

NAMA is now not just disastrous for the country it has corrupted the Green Party to its core.

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

PAY NO ATTENTION TO THE MAN BEHIND THE CURTAIN.

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

“It might not be binding on shareholders but its approval would surely have an influence on any future assessment of share values.”

Well argued zhou. Obviously I am totally against NAMA (as it stands).

On the shareholder point. It can be put to a vote of shareholders. If they accept it fine. It not then no NAMA funds for you.

They have issued a press release, shown here:

http://www.politics.ie/2163598-post31.html

Also, spokesperson has been on RTE 1 News at One today.

So, this is what it comes down to.

The GP are in an immensely powerful position.

We were always going to have a Political solution to an Economic problem.

Of course, this is in response to the Voodoo Economics, Smoke and Mirrors of Brian Lenihan and Co, which is an Irish Political Solution to an Economic problem.

One problem with TARP (as implemented) in the Irish situation is that Anglo will never fully repay its allocation.

It seems to me that NAMA (amended for upside) / Resolution Trust or Securum is fine for AIB or BOI.

But Anglo & Nationwide (getting more than half of the €47Bn) are guaranteed to make a loss.

For the €2.7Bn “risk shared” , how is that to be split between AIB/BOI and Anglo/Nationwide. It seems to me that Anglo itself could eat the whole lot.

NAMA (as it stands) is not about using LTEV as a means of getting over a liquidity crisis in the banks. It is primarily about bailing out the creditors of Anglo & Nationwide.

NAMA (as it stands) is an abomination and adding windmills to it would just make it worse. More misallocation of capital.

If the Green Party membership approve it they may as well approve a change of name while they’re at it. Maybe “Fianna Green”.

I agree with you that we will be in a slow growth environment. I don’t believe we are at the trough (the bubble workout has some way to go). And I agree that net emigration will become a factor until the economy has started to grow. With the powers that wannabe now looking at seven or more years to reduce the deficit to growth-conducive levels, I can’t see any of this happening soon in Ireland. I am hopeful it will happen elsewhere…

love and kisses
Pat

http://www.tribune.ie/news/article/2009/oct/04/four-years-worth-of-planning-files-missing-in-fing/

This suggests that a mere 4,000,000,000 euro development is planned for Dublin airport. Now like many, I doubt, ahem, it will ever get off the ground, but it does suggest a mismatch between government policy on Nama pricing and public developments?

I wonder how many other job creation and stimulus packages will refuse to use Nama sites? Once they are safely in the hands of cronies, they may then get a green light? Oh what a lovely Republic?!

“At the moment the debt is owed by poor countries to banks, and if the poor countries had to, they could default on that. The bank debt is going to be replaced by debt that’s owed to the IMF, which for very good strategic reasons the poor countries will always service. . . . The rich countries have made this $500 billion available to stimulate their own banks, and the IMF is a wonderful party to put in between the countries and the debtors and the banks.”

Or as you imply,

At the moment the debt formerly owed by the banks (domestic to foreign) is now owed by Ireland, having given the guarantee, and is about to be owed to the ECB following NAMA.

The foreign banks get paid in full and the (Irish) State transfers the debt to its citizens.

But Ireland is different. We can inflate asset values, it is different this time.
Anyone see the problem?

Interesting article with parallel for Ireland and the ECB instead of the IMF.

Great posts!

That is precisely what the government should be trying to do. NAMA really needs private capital to give it any chance of working.

And the more you consider Patrick Hohnhan’s original plan the more you realise how clever it was and the complete pointlessness of €2.7bn in subordinated bonds.

I would much rather see the government putting funding into several semi-private institutions to bid for assets from the banks rather than the government set the price that suits the banks…

We can either talk about loans or underlying liquidation values. We can only talk about underlying liquidation values as a proportion of the collateral that the loan holds. So if we talk about a 10% rise in prices, we are talking about a 10% rise in the the underlying liquidation values. If we were at the trough, it would be a mad understatement of likely uplift. But the key point is that loans don’t increase in value over time, indeed with performing borrowers, loans should decrease in value over time. So the minister is clearly talking about liquidation values and when he (or the DoF more precisely) talk about assets, they are talking about the underlying properties, but giving no indication as to the proportion of those underlying properties that they own.

well, my first issue re the workability of your plan is who buys the bonds? At the moment the people selling us the assets are being forced to buy the bonds. Essentially, aren’t we forcing the bond/equity holders of the banks to exchange private sector risk for sovereign risk, crstyalising large losses, but also receiving a large government subsidy. However, the subsidy is essentially being funded by the banks themselves, and at a likely fairly low rate, so its simple for the government to ‘create’ this subsidy without affecting general debt issuance needed for the deficit. Yes, it adds to the overall credit obligations of the country, but we need to remember that credit is no longer anywhere near as easy or cheap to access as before.

If we were to go the TARP route of direct equity infusion, we’d have the problem of a huge debt general debt issuance to raise the necessary funds (10-15bn?) in the open market, and its debateable how we’d actually go about doing this. But in theory i’m not against such a plan, provided we figured out a way to raise the necessary funding in a stable manner. I suppose we could raid the NPRF, but there’s big downsides to this as well obviously.

As i’ve previously commented, i feel the best way to restore the stability, solvency and liquidity of both the banking sector and the soveriegn state itself is to maintain a material level of private sector involvement in the financial system while we work out the neccessary adjustments required in our economy, and this is best done by (a) not wiping out whats left of the existing private capital therein and (b) encouraging new inflows of private funding and capital. I feel that NAMA works to this end, but i’d be willing to look at any other workable and realistic plans that achieve the same ends. I’ll note that one of the major issues i have with most of the alternative plans is that “(a)” above is not part of them.