I think I understand where MK gets the 2004 prices from - the estimates are suggesting an aggregate property LTEV of 30% below the aggregate nominal loan values drop so, assuming the real LTV is circa 100%, this means LTEV property = 2004 prices. However, in saying this he assumes that the estimate of 30% applies whether or not the LTV is 77%. This is despite the Minister’s comments to the opposite effect. The Minister has specifically said that if the real LTV is different or the real security and collateral is less valuable the NAMA process will ascertain this. Once again, a core part of an anti-NAMA piece seems to be that the Minister is wholly untrustworthy and that the NAMA valuation process will be artificially skewed to achieve approximately the figures set out in the estimates process.

This lack of bone fides on the Minister’s and the Department’s part appears to be an article of faith for many. While such sceptisism may be healthy and indeed crucial to keeping us on the right path, it would be nice to see moe of the reasoning behind it (assuming that it goes beyond attributing base motives to the amorphous “Fianna Fail”).

I was just dreaming of this crazy scenario where Anglo ended up much healthier than the other banks and with state backing. The other banks allegedly piled in to the property market because Anglo was gaining market share. UBS behaved similarly with sub-prime mortgages in the US and I’ve read came off worse than some of those who were in from the start. Furthermore, it sounds like this levy will hit all banks equally.
AIB recovered unexpectedly well from their insurance corporation debacle. Since then, like the villains in horror movies, their top management have survived ordeals that would kill off any ordinary management team: DIRT, Rusnak, Tax Evasion and our current crisis.
Also, the better Anglo does, the better the compensation case of its (politically well connected) shareholders. This zombie isn’t finished yet.

This is the reason why private capital may baulk at providing new equity to the banks. However, the wording of the following para is so vague as to make you think that no levy will ever see the light of day.
“Any such levy would arise only if NAMA has made a loss on its eventual wind-up or after 10 years, and would be carefully judged so as not to disrupt the stability and sustainability of the banking system”

We can’t nationalise the banks for their current mistakes but we can tax future shareholders/customers for mistakes 10 years past. How does that make sense?

“A meltdown in the financial markets tomorrow morning may have been averted following the Green party’s decision to back the National Asset Management Agency (Nama).
If the party leadership had lost the vote, the share prices of Irish banks and other stocks would probably have fallen dramatically, as rejection of the new agency would have undermined the government’s €54 billion plan to rescue the banking system.
Yesterday’s vote was secured following a commitment in the new Programme for Government that the banks will have a statutory obligation to make up any shortfall that may arise when the agency is wound up in 10 years’ time.
While this was always the government’s intention, a failure to spell it out in the draft Nama legislation was one of the reasons why Green party members opposed the proposed state agency.
Banking sources say that the legislation’s new wording will require careful consideration. Forcing banks to take on a potential multibillion-euro liability could affect their ability to raise funds.”
Sorry… forgot to say great post - can’t wait to read your next one!

“A meltdown in the financial markets tomorrow morning may have been averted following the Green party’s decision to back the National Asset Management Agency (Nama).
If the party leadership had lost the vote, the share prices of Irish banks and other stocks would probably have fallen dramatically, as rejection of the new agency would have undermined the government’s €54 billion plan to rescue the banking system.
Yesterday’s vote was secured following a commitment in the new Programme for Government that the banks will have a statutory obligation to make up any shortfall that may arise when the agency is wound up in 10 years’ time.
While this was always the government’s intention, a failure to spell it out in the draft Nama legislation was one of the reasons why Green party members opposed the proposed state agency.
Banking sources say that the legislation’s new wording will require careful consideration. Forcing banks to take on a potential multibillion-euro liability could affect their ability to raise funds.”

prone to future lobbying? than ban all lobbyng on behalf of regulated business’s in the state.( the green can suggest it along with a ban on poltical donations.)

if we took every part of the IRELAND INC balance sheet (and indeed the balance sheet of many countrys) and tried to account for every true asset and liability in a market based actuarial fashion, we’d leave the country and turn off the lights now. - ever seen a footnote to the country accounts with respect to public sector pension provision?

ps. on a related note, did anybody read the piece in the indo yesterday ”We cant believe you pay us so much”. its looks like a mock article that you would read in the daily onion but its actually real. classic.

If it was (eg take x% of future profits until any NAMA losses are covered), then it presumably would affect the banks ability to raise future equity capital due to lower future net profits, but not (directly at least) their ability to raise capital through issuing bonds, the coupons on which are paid before the levy or other taxes are charged. The levy would probably not appear on their balance sheets either.

The overall effect of NAMA plus an actuarially fair levy in that case might then be to improve balance sheets at the expense of equity holders, which would be similar to forcing banks to raise capital by issuing equity.

“We need to scrap Amhran na bhFianna and adopt this as our new national anthem”



And it just got €25bn more tight. Black hole Anglo & Nationwide.

God save us all from people who love small furry animals with teeth enough to eat your grandchild’s brain for breakfast and leave the body for you to dispose of.

http://www.youtube.com/watch?v=kaH3rxay7dY

Apologies for the imagery, but if the core structure of NAMA is misconceived, no amount of tinkering with the details is going to change that.

And Dunphy going on about Trap just like he was Jack Charlton.

Great excitement and a welcome relief from the GP PfG stuff.

Just a small quote from the said document:

“Any such levy would arise only if NAMA has made a loss on its eventual wind-up or after 10 years, and would be carefully judged so as not to disrupt the stability and sustainability of the banking system.”

Mmmm,

“carefully judged”

“stability and sustainability of the banking system”

Levy my ass.

Both the government & the banking academics (including Karl) favored a single, central assets management agency which was advisable due to:
1) systemic nature & large size of problem
2) a specialist agency should perform better
but probably mandatory due to
3) Cross collateralization: if the problem had been left to the banks to fix they’d have been fighting for years, at great cost, in the Chancery Courts over who had better charge on common assets (especially personal guarantees)

The disagreement was over pricing / risk sharing. The banking academics thought it would take more time to figure out and so 100% state ownership was the best way to avoid risk of over/under-paying.

The government seemed to think it could get it right at the start… or else the ECB (+EC) warned them that they wouldn’t be allowed to own the banks

Whatever flaws the government’s approach had… have now been added to. Clearly the levy creates a Sword of Damocles hanging over the banks. It will be interesting to see what international investors will want to go near the Irish banks now … and if they do, due to their factoring in the above risk, they’ll pay less for larger stakes….

Also one point to Karl: I don’t think it is helpful to call for nationalisation unless you mean full state management, 100% ownership covers risk sharing and affords independent executive management.

Also I think a 90% stake would be preferable and ask the ISE to amend its rule book to keep the banks trading. A continuing secondary market affords the advantages of :

1) Independent market pricing & oversight
2) A venue to dispose of the government’s stake in a gradual manner (rather than via a costly IPO)

This in itself is not a problem, but it does need to be recognised. And as you say, the payback to the state should be in the form of equity, which may return some of the losses over time.