Hard to Deny Now that NAMA is a Developer Rescue Plan

I have been publicly critical of the idea of a “bad bank” plan in which the government overpays for bad assets since a number of months prior to the publication of Peter Bacon’s report. I have consistently objected to the plan on the grounds that it is a bailout of bank shareholders by the government, involving a large direct transfer of funds from the taxpayers to shareholders.

However, at no point have I suggested that NAMA would be a bailout for developers. I have always believed the Minister for Finance’s assurances that the developers who owed money to the Irish taxpayer would be followed to the Gates of Hell in order to get the money back. This, from the Minister’s appearance in August at the Oireachtas Committee on Finance and the Public Service, would be a pretty typical assurance:

The draft legislation also contains a number of provisions which will assist NAMA in its dealings with developers and ensure that every last cent due to the taxpayer is pursued vigorously.

Now, however, we find out how vigorous this pursuit will be. In its draft business plan, NAMA has told the public, and thus property developers, that it expects this vigorous pursuit of the €77 billion that NAMA will be owed to yield principal repayments of €1 billion in 2010 and 2011 and €2.5 billion in 2012. Only in 2013 does NAMA expect the vigorous pursuit to start making real inroads because, at that point, as if by magic, €7.5 billion per year in principal repayments start to pour in.

What this draft plan means is that the developers who owe us €77 billion have just been told that we have no plans to recoup this money any time soon. Effectively, the developers have been told that they can start paying back the money in 2013. Now we’ve been told that NAMA will haul in the developers and look for business plans and the like. However, in light of NAMA’s own business plan, it will be pretty hard for them to quibble with a developer who offers them a plan of “I’ll wait until 2013 and sure things will be grand then.”

It is with great reluctance, then, that I have to say that it’s now pretty hard to see this plan as anything other than a deliberate decision to show extreme forbearance to the property developers who got us into this mess in the first place.

Also, the following is now a fact. This government has told developers that as long as its in office (the latest date for an election is 2012) they will barely have to pay back any money. Interpret this fact how you wish.

136 replies on “Hard to Deny Now that NAMA is a Developer Rescue Plan”

I expect many of these loans have LTV covenants, where if the current LTV goes above an agreed level, the borrower has to stump up more cash.

Such covenants would be based on current market value (not LTEV). As Lenihan won’t go easy on developers, this should bring in a lot of cash. I would have expected this to be more than 2bn over the next 2yrs. Any ideas?

@ CM,

So they’ll be forced to default? But NAMA expects very few loans to default 😉

If you actually believed the DoF projections, forcing defaults would be very lucrative.

It is hard to disagree with this assessment Karl. Another win for the cynics, bank shareholders/bond holders, developer kings. Pretty much everyone except those on PAYE at anything above median earnings. The pips are squeeking and we are going to get creamed.

We are going to get cheesed. Terry Pratchett describes this as “like being creamed, but harder, lasts longer and causes nightmares”

I don’t think the depths of this cynical exercise have been plumbed yet, but, given what we now know, a simple question:

Apart from sounding off here – and, for those with access, sounding off on the media platforms, is there anything that can be done, either individually or collectively, to halt or reduce the malign impact?

Yes, write to TDs pointing out that (a) the Nama sh** will be really hitting the fan at around the time of the next election and (b) there will be a new Minister for Finance following the election who will have to clean up the mess.

@ Brina,
That may not work. FF people in unsafe seats are already screwed and those in safe ones dont care…. Collapse NAMA and you collapse the govt. -better to postpone losing your job for 2 years and pray for the best.

Given that €5B is around €3B in today’s money, is the “fact” that NAMA will make a profit not an indication that the government is overpaying? Surely NAMA should be planned to break even or indeed to make a loss relative to the benefits of restoring the banking system.

Why would the government put extra money into NAMA given that it has to find massive cuts and tax increases to restore finances? The PV of the NAMA profit could be better spent today rather than punting it on the property market through NAMA.

Is this too simplistic?

Perhaps this could be dealt with in a blog post.

The discount rate (5%) used in the plan is much too low when account is taken of the risks and uncertainties and optimistic assumptions. If a rate of 10% is used, the NPV declines to €3.5 bn. For a 15% rate the NPV is €2.8 bn. If more realistic assumptions and timings are used then the NPV would go negative.

Point is taken.

But if government’s position is that NAMA will “make a profit” is this not a priori evidence of overpayment?

The Government is only saying it would like to make a profit to appease the electorate. If it really wanted to make a profit, it would seek to hammer the banks and developers.

@Paul Hunt:
“Apart from sounding off here – and, for those with access, sounding off on the media platforms, is there anything that can be done, either individually or collectively, to halt or reduce the malign impact?”

Talk to any army officers you know. Oh, and remind them of the importance of seizing the radio station early on.


I think I previously commented some months back that FF have come to the conclusion that construction is the only viable engine for the economy in the short term. They may give waffley speeches about the “knowledge”, “green” and “smart” economy but they know these are buzz words and little more. They laud a return to competitiveness to entice manufacturing back but politically they know the electorate won’t tolerate reductions in their standard of living.

They have decided that the only way forward is to effectively nationalise the construction sector and send the developers back to work in order to shorten the dole queues in time for the next election. Frightening stuff.

Also the importance of not allowing any deranged Lieutenant-Colonels storm the parliament.

Or if they must do so, at least ensure the TV cameras are switched off straight away, before launching into the demented monologue.

I wrongly thought Tennis season was over but I was wrong. Every NAMA thread is replayed like a tennis match with the same 6-8 players playing the same shots over and over and trying to make the same points in each game.
In the real world key decisions are debated and worked through out of the public glare. As a respected Professional can you not sit down with Alan Ahearne (another respected Professional) behind a closed door and work through your concerns with the aim of finding common ground that can lead to improved solution . I dont think there is any glory in the current Tennis matches.!!

At all stages the Minister has said NAMA would not engage in fire sale. At all stages the Minister has said that NAMA would seek to recover the hold to maturity value of assets. At all stages the Minister has said developers would be pursued. At all stages has it been acknowledged that any recovery on property prices is predicated on a recovery of the economy as property prices are, to use a much loved word, endogenous.

After all that it comes as a massive shock that NAMA will not fire sale assets and recover capital in the next couple of years?
This is even thought the NAMA Bill allows for properties to be seized from developers at a Court determined MV/fire sale price (i.e. as if sold within 3 months) without NAMA having to sell the property?

If the business plan said they were going to recover the billions straight away they would have been laughed out of town. Not only would ithave been a contradiction in terms but they would have indicated that their business plan and hence their market position/bargaining power was extremely weak.

Calling it evidence of a builder bail-out ignores these points imho.

o you REALLY think that thats the issue? The fact that for example the DoF have not made any effort, none, nada, zilch, to seek to meet with KW, myself, any others, that AA and his masters refuse to debate head to head on any medium and on any issue, the fact that the govt spin machine goes t town on any dissenters, does that perhaps suggest that its not Karl being a bit antsy? Im assuming that your suggestion is a joke , as to continue the tennis metaphor “you cannot be serious”.

Nothing to stop NAMA offloading some of the loans (the performing ones, or ones that recover to a performing state) to other institutions is there? Or are they obligated by the business plan to retain them so the blood gushing from the non-perfs is mopped up?

Maybe we could tell any new financial institutions opening in Ireland that they have to take on a chunk of NAMA loans – we could call it “community rating”! 🙂

Say the property bubble started to deflate in Mar07. Lenihan envisages a return to something like normal prices in 2013. So six years from peak to enough of a recovery to start making some small asset sales to generate cash flow. That is a long time for a dead market. The more likely scenario is that the market will have returned to normal long before then, and before the minister leaves office. He just doesn’t want to have to explain losses realised on asset sales before the next election.

The minister was being his usual misleading self by not explaining that although the developers would be pursued to the Gates of Hell…he was going to give them a 3 year head start, six since the bubble began to burst.
We were told on multiple occasions that unlike the banks Nama would be strong enough to go after the developers. Never, Never, did he state, that Nama would give them another 3 years. Shameful.

Make no mistake, if this NAMA thing works most developers will have enjoyed a very lucky escape and will remain very very rich men.

Whilst the rest of us will have had our moment of schadenfreude snatched away from us, the fact is that if we pursue developers to the “Gates of Hell” just for the sport of it, there is no hope of getting out of this mess.

@Brian Woods 2
“if we pursue developers to the “Gates of Hell” just for the sport of it, there is no hope of getting out of this mess”.

Nama as envisaged is taking the developers to the gates of Heaven. It should be possible to do a lot better. The only way to get out of this mess is to give Anglo & Nationwide to the bondholders.


I think you may have missed the points I was making in my post.

In any event, when do you predict the market will “return to normal”?


I agree – foreclosing on developers for the sake of appearances would be pretty stupid. With that said, I do expect one or two to be strung up for public edification. I just don’t think it will be done willy nilly and I don’t anticipate fire sales.

I think it should be pointed out that listening to the Minister at the Finance Committee debate you would think that most of the loans would be off our hands within 4-5years. I don’t know if that should be in the business plan even if it is the aspiration. A business plan based on your best case scenario wouldn’t be too smart.

@ Tadhg o Laighin

“As a respected Professional can you not sit down with Alan Ahearne”

Might be construed as lobbying, large fine & prison term.

“In the real world key decisions are debated and worked through out of the public glare.“

“Real world”? Is that the world where Fianna Fail decide everything in secret and then bailout the bondholders/banks/developers at the expense of the weakest in society?

All this freedom of expression. It really is bad for democracy. Someone should put a stop to it. After all the peasants might start thinking for themselves. Can’t have that now, can we.

You have fallen into the same trap as Eoin Bond: loyalty to party and minister can be taken to absurd levels. You are now arguing that NAMA is a forebearance device for developers: you are explicitly arguing that they should not be asked to pay back their loans until they can afford to do so. Surely you can see that this is not what we were sold?


This gets nuttier and nuttier. I am not arguing that NAMA should be a forebearance device. I am saying NAMA should act in the best interests of the tax payer. I can only assume that you would prefer it didn’t act in the interests of the tax payer but rather that it fire sold everything and bankrupted as many people as quickly as it could.

In the first three years of NAMA operation the “Budget” (Table 7) allows for Interest Income (Accruals Basis) in €Bn.

2010 €2.9
2011 €3.3
2012 €3.7

And Interest Cash Flow (Table 5) of

2010 €1.3
2011 €1.6
2012 €1.6

NAMA intends “rolling-up” interest of €4.9 billion in its first three years of operation.

Is this not “forebearance”? Smells like it to me.


Nope, that’s not what I am assuming at all. I’m saying that builders should be calmly and rationally pursued. Pre-announcing that the first material action will come in 2013 does not exactly fit that definition. It’s more honest and rational to say that we don’t quite know, but they will be pushed at the earliest oppportunity. You have to admit that if you were a developer you will today be feeling slightly better about life? As a taxpayer, Zhou, how do you feel tody compared to yesterday?

Could you at some stage put your final summary of what Nama requires from its property loans to make the projected profit. I found your analysis very useful. I apologise if I missed it.

Regarding the Nama process, to paraphrase an ad for the Da Vinci code:
“Prepare to witness the greatest cover-up in human history… and it’s all taking place in Ireland right now”. I think David Murphy could still give it a positive spin: “Remember, Nama will be the world’s greatest ever cover up. The markets have reacted positively. The ECB…”

“In any event, when do you predict the market will “return to normal”?”
2013 is six years from the trough. The second world war took less time. Perhaps it’s just not a good idea to get masively involved in the property market if normality is so far away? Nama finishes in 2020. 2020 is 14 years after the bust. Nama boosters tell us the property market will be back to normal in a few years. We can’t sell anything for 3. And we are selling the rest over 14 years. Nama’s own plan is a giant declaration that our property market is kaputt.

@ zhou,

But maybe you’re right. Maybe it’s just kicking the can down the road. Brian might have learned that trick from some of his inexpensive American advisers.

Page 13

“Under the provisions of the draft Bill, the Minister and the Comptroller and Auditor General will conduct reviews at the end of 2012 to assess the extent to which NAMA has made progress toward achieving its overall objectives.”

So the Comptroller and Auditor General will not make his first report until after the next general election.

@ Eamonn76

“Could you at some stage put your final summary of what Nama requires from its property loans to make the projected profit. I found your analysis very useful. I apologise if I missed it.”

It would be good to summarise. Which I will try to do.

However the principle thing is that the €43Bn of security underlying the €62Bn ultimate recovery requires a 44% increase in the value of the security.

If anybody disagrees with that let me know.

It is of course worse when you add in the risk of funding an additional €7.5Bn to €10Bn for the currently “known not to be performing loans”.

The whole thing is absolutely shocking.

And remember the Ministers estimate of current market value @ €47Bn is based on a completely flawed yield analysis.

Thanks for that. I will ponder how Nama went from needing 10% to break even to 44% to get a small rate of return as I stick pins in my Lenihan voodoo doll.

“…the Minister and the Comptroller and Auditor General will conduct reviews at the end of 2012 to assess the extent to which NAMA has made progress toward achieving its overall objectives.”
Our hands-off minister couldn’t be spelling it out more clearly. The loot will be trousered and the yachts will have cast anchor long before the CAG tells his successor about Nama’s (dire) overall performance.

Is it not truly amazing that out of a portfolio of 76billion euros in loans spread out over at least 4 institutions in many jurisiduction not one red cent was of principla was scheduled for re-payment until 2013? Is there not one borrower out there meeting the conditions of a standard plain vanilla loan.

@ Eamonn76

The first is fairly easy.

€54 (Amount Payable by NAMA) minus €2.7 (The subordinate debt, which supposedly will not be honoured) = €51.3.

€47 = current market value of security.

€51.3 – €47 = €4.3.

€4.3 as % of €47 is 9.15%.

Call it 10% for rounding.

I think that’s where he gets it from.

If I’m wrong someone will let me know.

I don’t doubt that NAMA may well be the disaster that many on these pages think it will turn out to be. But if Brian Lenihan is heading down a path that is set for catastrophe is it

a) because he is incompetent and doesn’t understand the error of his ways
b) he does see the true picture but is pressing ahead with NAMA because he wants to protect developers and/or bankers
c) some other reason

I would have thought that if there is one politician for whom getting NAMA right is absolutely crucial it is Brian Lenihan. He is a young ambitious poltician from a family that has, whether you admire or loath their political legacies, Irish politics in their marrow. If NAMA fails spectacularly, Lenihan’s political future may well go down with it. If on the other hand it turns out that NAMA furnishes us with a banking system that works and doesn’t cost a fortune, then Lenihan stands to gain immensely. The prime of Lenihan’s political life will be concurrent with NAMA more or less – so it is absolutely vital for him that it is seen to be a success.

Lenihan was new to the job and was badly shaken when the crisis broke. And he probably made mistakes – though admittedly under severe pressure. Having said all of that, he stands out in this government as being the only figure who comes across as commanding, serious, focused and very determined. For me, Brian Cowen has singularly failed to exhibit any leadership qualities throughout this crisis and deserves the epithet he is increasingly getting ‘Cowen the invisible’. On the other hand, Leniham, I guess partly because his brief is in the firing line, has been to the fore. And for me, while I cannot be certain about NAMA, Lenihan at least cuts a figure who has the gravitas and ethic fit for the job he is landed with. Compared with the glum mediocrity of our political life, Lenihan looks like someone that one day could lead his party – if you know what I mean.

If that is realistic – him being a potential Taoiseach – then he has more riding on NAMA than any other politician – by a mile. So if, as these pages have often convincingly argued, he is so wrong, why?

I think Richard is calling it correct in his comments above.

The 4B is designed to get a few lads in vans working again, which will help get NAMA pushed through. Those against it will be branded as elite professors in cushy public sector jobs…anti the working man…. and FF will have the country moving again despite them west brit d4 know it all clowns… F*** the begrudgers!

The developer bailout continues, 3 more years to get stuff in the wife’s name, establish rights of way etc etc etc

All with an agency that is making bigger and bigger losses but covering them up Anglo style…… till the ECB have had enough or something turns up.

@ Garry

Well said.

This is pure Fianna Fail.

They haven’t changed one bit.

This time they will destroy the country for their greedy gombeen ambition.

Having said that Lemass is turning in his grave.


2013 is 6 years from peak not trough. BTW, the plan shows 1bn principal being recovered in year 1, 1bn being recovered in rear 2 and 2.5bn being recovered in year 3. That’s €4,500,000,000 for those of you who like using zeros for emphasis.

@ Chris Johns

I feel better today because we have more information today and the debate is getting more informed and more detailed (even if some of my fellow anonymous posters can’t grasp some basics).


The business plan shows only interest having its face washed by interest. Principal will have to be applied towards expenses in the first year and towards expenses and interest in the subsequent years but there is still enough income in the draft plan to avoid additional exchequer funding according to the figures.

@ Pessimists

Anyone care to comment on Goodbody revised projections for ’10 & ’11. -1.1 and +2.4% respectively.

First question: are these projections credible?
Second: what, if any, are the implications for NAMA?


Ah comon Brian don’t be so modest, come out so we can see you.
Seriously though, Lenihan is a lawyer & like Chuck Prince who brought Citigroup to the brink of disaster. he has no financial training or demonstrated no financial acumen. So far his decision making has been sub optimal.
He took two goes at his first budget
He took the decision to let Anglo plough on regardless under the umbrella of a guarantee.
He did not read the PWC report
He wanted to honour all financial obligations until someowne explained sub debt ot him.
He said NAMA would be cash flow positive now it isn’t.
He said he would pursue developers yet Seanie is not paying and no developer will pay principal until 2013.

He is trained to do three things i) pound the law when the law is on his side ii) pound the facts when the facts are on his side and iii) pound the table when neither. At the moment he is pounding the table and raising a good old dust storm.

Did those who despair still of nama not see this coming? Voting no at Lisbon was the onli chance to stop Nama there ever was or would be. Ha ha sai ff and its mates.

@ jc

I’m not a pessimist.

If the UK and the USA “recover” (this is debatable) by devaluing their currencies against the Euro by 20%. Would you be optimistic about the effect of that on the Irish economy?

but but but

Is there any point pursuing them if the money isn’t there? Perhaps as zhou says a few will be strung up for appearances, but isn’t the whole point of NAMA to let them survive the next few years in the hope that the market will right itself (ok, never to what it was and rightly so – we don’t want it where it was) but at least show some recovery. Isn’t the whole purpose to lay off until there’s hope of getting some money. Pursuing them to the gates of hell in the next 12 months wouldn’t increase the chances of getting any money if they don’t have it.

One thing not to be forgotten, although I fear we veer off topic, is that the stronger the euro gets, the more profitable firms already based in Ireland to their US HQs.
It’s more expensive for new multinationals to buy in, certainly, but it’s also more profitable for those that are in.

Very little of the above applies to the €:£ exchange rate, which really is just bad news for most indigenous exporters. Martina Lawless (I think) at the Central Bank had an interesting paper, outlining the very unimaginative global expansion plans Irish-owned exporters embark upon.

@ Greg

Sterling is certainly a bit of a headache at the moment, but I’d be fairly happy with -1.1 (revised from -3.4) and +2.4%!

@ Ronan L

“One thing not to be forgotten, although I fear we veer off topic, is that the stronger the euro gets, the more profitable firms already based in Ireland to their US HQs.”

Agreed. But I think a competitive devaluation against the Euro (which I think is happening, after all the US can’t devalue against the Yuan) is a double edged sword. And I don’t like the edge I’m looking at.

“It’s more expensive for new multinationals to buy in, certainly, but it’s also more profitable for those that are in.”

By 2013? The same could be said for Poland.

“Very little of the above applies to the €:£ exchange rate, which really is just bad news for most indigenous exporters.”

Farming? How much? 50% to the UK?

I’m not an economist.

Interestingly, €160million is being budgeted for liquidation expenses for each of 2011 and 2012. (Nada in 2010!) That’s a whole lot of liquidations. Perhaps there is none in 2010 becaue they are not going to get the thumbscrews out until they have most or of all the loans transferred.

On table 7, it is interesting that €2.85 bn in interest repayments and €1.0bn capital repayments are forecasted on the assumption (which will not be the case) that all loans will be held for the whole of 2010. Accounting for the staggered transfer of loans, Table 5 only shows €1.3bn in incoming interest. However, it shows the full €1.0bn in capital repayment. This does not make sense assuming repayments are usually applied towards interest first.

BTW – I replied (cattily) to some ove the other posts above. I mis-spelt my email address though so they are awaiting moderation.

@ jc

Less negative growth is certainly preferable to more negative growth.

Do you think Goodbody are now including a “minor boom” in construction based on NAMA? I think they are.


Like a circle in a spiral, like a wheel within a wheel,
Never ending or beginning on an ever spinning reel,
Like a snowball down a mountain or a carnival balloon
Like a carousel that’s turning running rings around the moon,
Like a clock whose hands are sweeping past the minutes of its face,
And the world is like an apple whirling silently in space,
Like the circles that you find in the windmills of your mind.


If we were buying the stuff at close to market value then stronger economic growth would be positve for NAMA and for the taxpayer. however, we are overpaying by somewhere between 7billion on NAMA’s optimistic forecast to arguably 20billion based on the valuation of the Irish Glass Bottle site or Zoe.

@ All

This is an ECB coup.

They want their €30Bn to €50Bn back.

They can’t get it in cash so they want it in Irish Sovereign Debt.

Paranoia or the absolute truth?

@Zhou (and Sarah)

Prompted by Zhou, Sarah wrote

“Is there any point pursuing them if the money isn’t there? Perhaps as zhou says a few will be strung up for appearances, but isn’t the whole point of NAMA to let them survive the next few years in the hope that the market will right itself (ok, never to what it was and rightly so – we don’t want it where it was) but at least show some recovery. Isn’t the whole purpose to lay off until there’s hope of getting some money. Pursuing them to the gates of hell in the next 12 months wouldn’t increase the chances of getting any money if they don’t have it.”

I’d recommend being careful here about not putting words in my mouth. I never said that the gates of hell philosophy should relate to the next 12 months — clearly that would be silly. I have, as both Zhou and Sarah know, recommended using a NAMA in conjunction with nationalisation, and I would never have recommended that any such agency recover all its funds in 12 months.

Zhou says we shouldn’t be surprised at this document because the Minister has always said there wouldn’t be a firesale. But Zhou, surely you can agree that there is a middle ground between a firesale and recovering 1bn out of 77bn for each of the next two years?

I’d like to add that, while things have been getting a bit too heated here, I think that Zhou has made very important contributions here on this issue — in particular on the issue of valuation of loans versus valuation of assets — and as such has proved his bonafides with me as much as any FFer can.

So, that said, can people not agree that this looks like a desultory attempt to recover funds for the taxpayer?

“Second: what, if any, are the implications for NAMA?”

You would do better to ask what implications NAMA has for growth…

“So, that said, can people not agree that this looks like a desultory attempt to recover funds for the taxpayer?”
No. It looks like a badly run department’s attempt at a business plan that goes into a magic money-defecating maching in 2013 and through the powers of pixie dust everything is okay.

It is, without doubt, the worst business plan I’ve come across in 20 years in the airline IT industry. The two words, airline and IT, and the period spanned should give you some idea of the bad plans I’ve seen. From Hooter’s Air to All Business Class Flights (now in it’s third incarnation), through the dotcom boom and bust, web 2.0, I’ve seen more failures than you’ve marked. And the common theme the failure had was they didn’t spell out how they were going to make money – no method in their madness.

There is no method in this business plan. It is not a plan, it is an aspiration. We might as well stick it in a red envelope and burn it with some joss sticks. We have some gross numbers they hope to achieve and no method or mechanism for achieving them.

Are we really supposed to believe that we Need Another Million Apartments? And that that will save us? Or office blocks? In the same way that you can’t borrow out of debt, you can’t develop out of overcapacity. All you are doing is digging a bigger hole.

NAMA is worse than I imagined a year ago when it became clear there would be an Irish bank failure and a bad bank. It is quite possibly the second worst bad bank there has ever been – I think the Japanese win top spot with a 0.7% return on one of their asset purchase schemes. Let’s hope we don’t go Japanese, eh?

Out of the public glare

@ Tadhg O Laighin

“In the real world key decisions are debated and worked through out of the public glare.“ By Brian Lenihan, Peter Bacon, and some DoF officials who have got absolutely nothing right, even Harry Crosbie said he had a “private” meeting with Lenihan. I would like a full list of all the “private meetings” Who else?

Why were developers begging to be included in NAMA?

Tadgh, just in case it slipped your attention, there is an abject failure of democracy in this country, people no longer want decisions to be arrived at out of the public glare.

We want the decisions out in the open. We want to know the who, the what and the why. Fact is, with NAMA all we are getting is wishful thinking which amounts to a “a pig in a poke” and that is not good enough, it is not democracy, when you end up explaining to your grandchildren that the reason they live in a crap, quango ridden country, with every body blaming a thing called NAMA, is that the same people who ran the economy very, very badly then invented a thing called NAMA which also ended up being very, very, bad!

I would like to see a full expose of Brian Lenihans public and private meetings since the 30th of September last 2008.

It is a great idea to bring the Comptroller and Auditor General into this because he is the one who has signed off on all the squander mania that has taken place and he has got off scott free so far. It is also a good idea that NAMA be subjected to Constitutional challenges. And these should not be delayed until the government have handed over our money.


I fully accept you have never advocated a “gates of hell” approach.

I agree that €4.5bn may seem somewhat unambitious. However, I believe that the draft business plan for NAMA has to be cautious (about when a functional marketplace will resume and when banks operating in the irish market place will start lending again for commercial property) in order to be credible. Optimism or over-ambition as to the amount of principal which can be recovered would damage credibility and would show vulnerability in the market-place.

Furthermore, NAMA is designed so it can take a hard line with developers and crystallise losses on their personal balance sheets without recovering principal. This would allow NAMA to get on with the important task of preparing tranches of land and loans for sale as is its stated intention (as opposed to selling individual sites and being left holding the “dross”). It will also allow NAMA to get on with enforcing personal guarantees (for what they are worth).

@ Karl,

I am reading Richard Tol’s discussion at the moment, but since this discussion is about developers, can I jump in here with one point.

I attended an early morning workshop at the IAVI, where David Duffy spoke of his recent ESRI publication on negative equity. I also read a quite interesting piece by Irish Independent columnist Brendan Keenan this evening, which refers to David’s publication. But getting back to the IAVI event which was well worth attending and also featured an proper economics specialist from Treasury Holdings giving his point of view.

Between the two speakers, they went through about 30-40 slides and both gave great presentations. However, it struck me that both managed to say an awful lot about property in Ireland, the past, present and the future. But none even once mentioned the issue of ‘land’ in any of their slides. I asked this question to them both at the end of the talk, so they can at least explore this issue further if they wish.

The point I made is that over-production of dwelling units, or even commercial space makes complete sense, if you accept the fact that builders/developers overpaid for their land in the first place. In other words, it was simply a matter of re-adjusting the scheme their architect designed, to get greater numbers of units per the acre.

If you read the piece in today’s Independent, John O’Connor, from An Bord Pleannala, he suggests that little favour will be shown to sites in the NAMA portfolio. He also suggested there are too many planning authorities in the country. There are 88 no. in total. I know from talking to architects I know working in some of the largest, it is impossible to hire sufficient numbers of staff in any one authority to undertake major analysis of developments etc. O’Connor suggested it is impossible for these little planning authorities to gain full competence to deal with planning matters in full.

But you can see this is where the loop hole in the system was. Land values in Ireland rose to the degree to which planning permission could be obtained for more units of dwellings, or floor area of commercial space on a given site. It didn’t matter where the site was, or how inappropriate the proposal was. The economic equation of developers competing to out-bid one another for the raw stock material – land – would always add up. Because there seemed to be no rule against over production.

The fact that credit was being pushed at public servants, mechanics, bar tenders and the lord knows who else to buy second homes for investment, ensured that over-production of units would continue. But the point is, about the developer, unfortunately, as a player in the great game can ignore:

The fact he or she is adding to the over production problem.
The fact that he or she has overpaid for land.

As long as we pursued a policy of sustainable, high density development along existing transportation infrastructure, planning permission was almost guaranteed. You look at the properties built by Liam Carroll. You cannot fault them in one sense. They are high density development on existing transportation infrastructure.

In other words, it checked all of the right boxes. I noticed in today’s Irish Independent also, that Liam Carroll’s plans for a new scheme at Cherrywood were refused permission. I worked on that scheme myself while employed by Mr. Carroll. It bothers me intensely when I heard statements like: The planning application is gone in, that will keep the banks off his back.

All I can say is Humpty Dumpty had well and trully fallen off his wall. I was busy picking bits of shells off the ground and trying to glue them together. While the men running the company could not even analyse the problem they seemed to be in. The whole business had run fine on auto-pilot for as long as they had been in it. Their imagination could not reach beyond that.

The fact is, Carroll and many others got involved in bidding wars for the means of production, the land which gave one the bargaining chips. It is like how China are competing to buy all of the energy companies today – the means of production. We can argue that one shouldn’t interfere with the economics of land prices. But that in my opinion is hard not to do.

Because once you make a policy framework to promote something like sustainable high density development along existing public transport corridors – you have already created the very conditions for over-production of residential and commercial space. Thereby that allows the ceiling for land prices in Ireland to spiral up and up and up. That is when we get nose bleeds, that is when it gets dangerous and that is when we need a NAMA.

How David and the other man from Treasury Holdings could present two excellent lectures on property in Ireland, and speak for one hour without saying anything about land, just baffles me.

But let me finish with one more point. Suppose you are a shrewd developer. You purchased your land, beside a railway line or whatever in the year 2000, when land was much cheaper. Then a few years later you submit a planning application. The fact is, that even though you paid a ‘bargain price’ for your land, you are still going to apply for 150 no. residential units to the acre if you can get it.

Why? Because once you have built on your land and you wish to proceed with your profits to the next job, you will still get hit for the current 2006/07 price of land. That means, that regardless of whether you paid 2000 prices per acre, or 2006 prices per acre, as a developer you are still going to build the same project on your land.

That means, that even a developer with a field in Mullingar is going to try and replicate densities of development on his land, as another developer is hoping to achieve on land in Milltown, Dublin city. I am exaggerating slightly of course to make a point. But to be honest, developments in Mullingar and Dundrum became quite comparable to each other, in terms of output of units per acre at one stage in the recent boom.

I only want to emphasise to you wonderful and knowledgeable economists, that over-production problems in property cannot be separated from perceptions of what land, as a raw material for production, is worth.

“Furthermore, NAMA is designed so it can take a hard line with developers and crystallise losses on their personal balance sheets without recovering principal. This would allow NAMA to get on with the important task of preparing tranches of land and loans for sale as is its stated intention (as opposed to selling individual sites and being left holding the “dross”). It will also allow NAMA to get on with enforcing personal guarantees (for what they are worth).”

From my reading of the business plan it would appear that NAMA doesn’t see itself going into the liquidation business.

NAMA is projecting only €15bn of the loans will default and need to reposed.
At the end of the 10 years NAMA is only expecting to have €4bn in asset recoveries.

The point I made is that over-production of dwelling units, or even commercial space makes complete sense, if you accept the fact that builders/developers overpaid for their land in the first place.

I meant to add there – that from the point that developers had overpaid for land, as a raw material for production, they began to feel hard done by. They began to feel as if they were victims. They began to believe, they were doing society a service in some way, having off-loaded their last brass penny into their business in order to purchase the raw materials for production.

I heard this point expressed several times in the closing, desparate days in Zoe developments. Almost as if we had been nailed to a cross and deserved some form of sympathy, were hard done by in everything. I find it strange. But what it meant is that a ‘constructive relationship’ which John O’Connor, John Gormley and many other middle class do-good-er’s aspire to have with builders, is impossible.

The builders having been ‘robbed’ or fleeced in some way themselves, and asked to pay further dues in terms of charges and what not, feel sure that producing way beyond demand is their just and fair right. It is like a whole load of farmers getting together and deciding to produce more potatoes than Ireland can consume, because the price of seed potatoes to buy was so expensive. It was called the Irish famine.

I also like to compare it with China and the pursuit of energy companies. The notion that they will be ‘starved’ of their energy requirements, so they go on a buying spree and hoard as much energy producing capability as they can get.

Greg Says:

October 15th, 2009 at 9:59 pm
@ All

This is an ECB coup.

They want their €30Bn to €50Bn back.

They can’t get it in cash so they want it in Irish Sovereign Debt.

Paranoia or the absolute truth?

One other thing I remembers on the subject of over-production. Bertie Ahern gave an interview with Pat Kenny the other day, which is worth a listen via podcast. Bertie noted that Ireland experienced a population jump of 10% early in the Celtic Tiger. But that Ireland was still only producing 30k dwelling units per annum.

In other words, the context which created Zoe developments and others, was a context of under-production. I can well vouch for the culture within Zoe, was a culture intensely focussed on the problems of gaining rates of production at high levels, even if it meant compromising on aesthetic beauty or what not. The pent up demand for living space was there. One is obviously constrained as a young company, by how much ‘land’ one can acquire in one go.

In particular, as ‘land’ in the right location for ‘sustainable’ development, may involve the purchase of several sites to integrate them. So in other words, having gone to the considerable time, effort and expense of acquiring a site and planning permission in a city centre, one obviously wants to make the best of the opportunity and get maximum number of units per the acre. Remember, we were dealing within an Irish context of rising population and under production of dwelling units.

Many of these developers had never done much training in design or planning as I have done. If they grew up in a time of under-production, that is all they knew about, that was their world. When the equation flipped at some stage around 2005/06 to over-production – they simply didn’t know how to analyse that new context and that new problem. The policy makers were lagging too far behind also. They had no brilliant ideas of what to do when the context changed to one of over-production. How do you ramp onto a different kind of development or strategy?

I only describe these scenarios here to try and relate the experience of building and construction, in some way, back to the principles of basic economics and production.

Thanks all for bearing with me. B.

2013 will be six years since the bubble started deflating. Surely we should be seeing asset disposals before, say, the next general election in June 2012? Nama is being sold to us on the basis that it will hold the developers to their obligations, not out of vengefulness (Nama is forbidden to go after their family residence) but because that is what commercial undertakings do – they maximise their returns. Do you think the developers are so kind to their own debtors as you want us to be to them? How many times did we hear about possible lawsuits from developers if a rezoning “decision” was overturned? They were quite happy to bribe our rulers and bully the rest of us for many years. All that will happen as a result of Nama is that many developers will no longer be super rich. But they will not be thrown on to the road, not even on to Ailesbury Road. After Nama they will still own houses in Ailesbury Road, which I would define as rich. If they lose more then you should be blaming the banks who may take their houses, not Nama.

Nama, if it goes ahead will be about loss minimisation. Why anyone would want to subsidise property developers and bankers after what they have done to the country I do not know. There has been no punishment, and under the current government I doubt there will be, but already there are demands for clemency. Save your compassion for the unemployed, the emigrants and those who will lose their homes, whose marriages will break up and whose families will fracture, not those who have ruined them.

What you say makes a lot of sense. It would be nice to think that after the dust clears the establishment will make sure another massive bubble will never re-occur. But builders overbuilding and banks overlending and regulators underregulating and politicians making everything worse – it will all probably happen again. With Nama the politicians making things worse element is still very present.

Nobody can accuse FF of not knowing which side its bread was buttered on or who was doing the buttering. Propped up by the Greens FF can return favours until 2012. Nama is primarily a gift to Developers with the banks as secondary beneficiaries. Not only the taxpayers will be carrying the freight but the unemployed and people entering the work force will pay a high price for FF largesse. Propping up the price of developable land keeps us uncompetitive and simply prolongs the recession.

@ Brian O Hanlon

Builders apply for planning permission for as many apartments as they possibly can get away with building on a particular site. That is the simple rule! When the resident complain you bring in the “experts” and ride over them. Ballsbridge was the exception because all the barristers live their and nobody was going to do a number on them.

The waffle about public transport nodes, railway lines, QBC.s Tram lines, Luas lines, Metro’s, Hot air balloon transport coming soon was and is just waffle for planners ears. The fact, that the planners kept falling for these box ticking exercises was to so with sucking up contribution fees and feeling very important people.

They started off letting developers slap up multitudes of one bed apartments some as small as 300sq feet. Then they left them move on to 500Sq feet apartments eventually 10 years into the boom they realised than all these were apartments that nobody could bring up a family in. Nobody! Then city hall planners started pushing the high rise agenda with vigor even though it was not in the development plan. Planners to my mind, must take a huge responsibility for what happened because their ego’s were out of control. They thought that they were not important people not “real” planners unless they were pushing the high rise agendas. Those of us who begged to differ were considered philistines or Luddites.

Unsustainable development needed to be redefined. If a building is built but there is no demand for any of the units then it is unsustainable development. Even if it is finished, it will turn into an eyesore a blot on the landscape. It does not matter if it built next to a QBC or not if it is empty and there is no demand for the units it will have to be practically given away or recycled as scrap buildings into NAMA you cannot get away from the reality that it is a demand problem which stems from oversupply.

The planners created the problem they decided what the definition of sustainability meant if they wanted high rise, high density then that is what they got. if 100 units can be built over 10 stories on a small site, fine, now the plot next door and the one down the road increases in value by the new planning reality. Board Pleanala were not as bad as the others but they were still pretty adept at driving the bubble onwards and John O’Connor is talking tuf now but only after the horse has well and truly bolted and at the end of the day I doubt if they will stand up to their political masters.

Ordinary people did not realise that ‘ experts in transport’ were lining up with dodgy reports talking about all of the above to provide the planners with “excuses” to put a coach and four through development plans ergo oversupply coming to a street near you!

This was not just a credit driven bubble it was a planning driven bubble and when
NAMA (and I still hope against hope) happens this is where the real battle ground is going to be. Sites will be put back to agriculture use triggering huge tax payer losses. Buildings will lie idle for years because there will be no tenants and if there are they won’t be able to pay rent for various reasons. Most of these people will need to be subsidised, by the state, in various ways before they can occupy the overproduced assets. How will the state make profits when they are on both sides of the equation! These NAMA idiots cannot see what is going to happen next, it is unbelievable.

@ This thread,

Apologies. Wrong thread.

“Greg Says:

October 15th, 2009 at 11:48 pm
“Bond. Eoin Bond… Says: “

Sorry posted the below in the wrong thread (the problems of blackberries and sleeping when all you guys are gunning at each other). Bottom line I totally agree with KW that this is now also a developer bail-out.

@Zhou (from earlier thread)

“The idea that NAMA was going to become primarily a massive land owner is misplaced. There is a huge cost in managing and maintaning property. Who are NAMA to employ to do it and what kind of asymmetries of information would exist?

NAMA will foreclose where the developer is unlikely to be able to pay off his debts. If the developer can make the assets pay off then it is in the taxpayer’s interest to let him do so”

Zhou it may be misplaced as I am now seeing but what is now being delivered is plain wrong.

If NAMA will foreclose where the developer “is unlikely to be able to pay off his debt”, then NAMA will foreclose on everything apart from the performing loans. However, from what I have read on here, the criterion of “likelihood” will be extended to allow for some years to see if the market turns – a one way bet or to use the catchphrase of the month, an asymmetric wager for the developer.

And please don’t use the excuse that it is a huge expense and difficulty to manage these properties. With fees of €264 million per annum, there could be a lot of management paid for and at least then the state would have the upside as well as being able to control the supply side of the market.

If the developers are allowed to wait for their one way bet to come good, as soon as the market turns sufficiently their decent loans will be repaid/refinanced meaning that the state gets no upside on that portion and is still left with the dross. So they don’t go bankrupt even though in a normal functioning banking/legal system they would all be bankrupt by now.

It’s simple Zhou. If the state takes the risk, it should buy/transfer the loans, call them, take possession of the security and wait for the bet to come good with the state retaining the upside. Anything else is a developers’ bailout..

pa bandit Says:
October 16th, 2009 at 1:41 am

“Bottom line I totally agree with KW that this is now also a developer bail-out.”

@ pa

I’m tired now. I have to go to bed. But I was not asleep.

What is it you think they will not do to serve interest?

Do you think they consider not treason?


“I’m tired now. I have to go to bed. But I was not asleep.”

don’t follow you but I said I was asleep, not you.

@Robert Browne,

Well said and so true. It should also be stressed that local authorities’ funding was hugely dependant on granting planning permission for unsustainable developments. For every new residential unit they would receive a lump sum development contribution. In addition they receive all the motor tax for car owners in their areas as well as parking charges in large towns.

I live in a small enough village which badly needs to be bypassed due to the huge over development in the areas. Went to the local authority with the numbers and a projections.

Area manager without any sense of irony says you’ll need to accept 5000 houses to build a bypass.

I’m listening but —–you know about the Camel that was designed by committee;!! what kind of an “animal” one would get if designed by 100 or more economists I dread to imagine.

@Karl Whelan

You were clear and lucid on Prime Time last night, congrats and thanks from Irish taxpayers everywhere. The latest chapter in the NAMA saga, this wildly optimistic Draft Business Plan, seems outrageous. Who wrote it?

The document reminds me of the misinformation campaign when George Bush Jr wanted to invade Iraq, with the US troops already shipped into the region at great cost, and producing bogus documents on WMD.

@gregory connor

“The document reminds me of the misinformation campaign when George Bush Jr wanted to invade Iraq, with the US troops already shipped into the region at great cost, and producing bogus documents on WMD.”

We should remember too that the campaign to give away taxpayers money is itself funded by taxpayers money. It is regrettable but hardly surprising that attacks on individuals and reputations is part of the campaign. But somewhere along the line it has become an all out attack on numeracy and logic.

We have Greens in government who think the laws of physics are some kind of criminal conspiracy. And FF who think arithmetic is unpatriotic. And meanwhile they lecture about the “smart economy”? You could not make it up.

@ Tadgh o Laighin

Craig Venter, one of the greatest microbiologists in the world today, is going to splice genetic material from a multiplicity of organisms to create “new life”. One of his goals is, to create a microbe that will use co2 as its “food” and nullify global warming or at least help to prevent more of the same.

In the minister for children’s world, you deliberately work off a gene pool of one or two microbes to cobble together a thing called NAMA .

Once, it is let out of his laboratory by the “Greens” and let loose on the rest of us, they will discover that there are a number of genetic sequences that will lead to grotesque malformations of this quango. It may survive but how much damage will it have done by year 1, year 2, ….15 etc.

The Greens will be aghast as they survey the “unintended” consequences of this genetically modified Quango for which they have given the all clear. They broke their own promise to keep Ireland GM free before the ink was even dry on the Program for government.

Page 32, point 4 of key risks:
“If economic conditions do not improve, there may be some public pressure on NAMA to begin
disposing of assets and start the process of reducing its debt earlier than currently envisaged.”

With NAMA, the taxpayers interests are suddenly perfectly aligned with the property developers interests.

Without a deadline for winding up of NAMA, it is always going to be a complete bailout for the developers.

I’m guessing the proponents of NAMA will, when it turns sour, start saying “No point in wasting energy by playing the blame game, we have to look for a way forward out of the crisis”. Privatise the gains & socialise the losses is the name of the game.

@ Greg

“Less negative growth is certainly preferable to more negative growth.

Do you think Goodbody are now including a “minor boom” in construction based on NAMA? I think they are.”

Eh, no don’t be silly. I seriously doubt it. If fact I’d be prepared to be my negative equity house on it:)

@ yoganmahew

“Second: what, if any, are the implications for NAMA?”

You would do better to ask what implications NAMA has for growth…”

Very clever – I see what you’ve done there:) Clearly Goodbody have thought about this and drastically revised our growth prospects upwards…..

My point is this (and sorry for dragging the very informative and interesting debate down from it’s lofty heights, no sarcasm intended) – in 2004/05 when I was studying MSc, everyone was going on like Ireland was an actual bona fides miracle, probably the most significant since the resurrection. I was busy telling anyone that would listen that the celtic tiger was long dead (including my dad who was planing to building houses at that stage – he didn’t get them finished on time) and that we were at that stage just storing up pain for the future.

There wasn’t a peep out of the economists in the country, sure if you read footnote 43 the were risks on the downside related to an overexposure to construction etc, but basically we were going to grow at 4% minimum for the rest of eternity, and we were destined to become the biggest economy in the world by 2073.

Now we are in the depths – a very serious situation to be sure. We are walking a knife edge with IMF on one side and ten years stagnation on the other. But I believe that if we get our public finances in order, the economy will recover. Good public policy is the key. Our destiny is in our own hands, and for a change, I’m actually optimistic. Yes, in principle NAMA is wrong, but it just might work.

Prospects of oil price spike would be the biggest danger for me on the downside.. we need five years of global growth to get out of this, to get our house in order before facing next crisis.

@ Sarah

Hope is not a stratagy.

“but isn’t the whole point of NAMA to let them survive the next few years in the hope that the market will right itself (ok, never to what it was and rightly so – we don’t want it where it was) but at least show some recovery.”

I know that you qualified your comment but it still seems to me that many poeple including yourself dont get the extent of the problem.

In fairness to Cowan after Lehman Brothers Collapsed he talked about the prospect of future generations not having the same standard of living as we enjoy, Brian lenihan again hinted at it in his speech to the chamber of Commerce last night.

This prospect of Property Recovery is just not realistic, and everything in nama is dependent on a massive propery recovery some time between Dec 31 2012 and Jan 1 2013.

I think what the business plans lays out in a clear numeric way is that Nama, much like fed injections in America and Bank of England injections in England are a deferal and exaserbation of the huge financial problematic mess caused by easy credit that, still no one is actually attempting to tackle. This attempt to save the idea that we can return to the unsustainable madness is making our problems so much worse.
Grossly endebting the citizens of a country to subsidise the original instigators of the crusade and return to good old days is madness.

Lenihan is kicking the can down the road so FF can blame the next government and return to power as soon as possible. The ECB are allowing us do it to protect the Euro. The citizens who do go along with it do so in the misplaced hope that we can return to the madness we called normal everyday life.

I think Peter Shiff says it best when he says, what we are experiencing now is not a crises, its the solution.

its a cashflow analysis, that deals wit cash projections, most of you are reading this as some kind of forensic P&L – which it isn’t.

The absence of inroads for several years is common sense – if they foreclose on people now why sell the underlying straight away? the whole benefit of an AMC is that it has the timeline to wait. Action taken near term, cash realised in the future. In the real world things take time, repo’s and sales are on that list.

The talk of interest rip’s is a sham too, there are contractual roll ups included in the principle payments, they work like a zero-bond, the interest is inherent in the principle.

the figures stack, if you don’t believe them then we have the following scenarios.

worse than 20% default – o.k. it can go to 31% and still work

worse than 31% – sub-ord debt wiped – which gives scope of up to c. 40ish%

worse than 40% – banks will be levied but at the same time the forbearance would give them an operational chance to have their house in order, and if not then it will be an ongoing interest charge.

@Karl Deeter
It is a business plan. It should contain a P&L estimate and a method for achieving the same. If we are not to read the cash-flow analysis bottom line figures as a P&L estimate, then the business plan fails on both those grounds.

Hope is not a business plan.

NAMA needs to generate 72.64 bn in cash (Outlay, interest and admin) to pay back the banks. 70 bn if you take the subordinate bonds into account.

It will do this from 77 bn of loans of which it reckons 20% will default leading to recoveries of 4 bn while the remainder will, it reckons, pay 12 bn in interest. So the most it can recover is 61.6 bn (principal repayments) + 12 bn + 4 bn = 77.6 bn. That’s the absolute max that the cash-flow reckons is recoverable.

To do that, 30.8 bn of loans that are currently non-performing have to become completely performing. 30.8 bn of loans that are currently performing have to stay completely performing.

The 31% figure includes not paying the subordinate bonds, so it is the absolute maximum that NAMA can afford to lose (actually, I make it 30%).

The problem is that we are not paying 51.3 bn for the loan. We are paying 69.94 bn spread over ten years.

@Karl Deeter
Sorry Karl the business plan just doesn’t stack up to any scrutiny.

They are expecting developers to repay €74bn in interest and capital over the next 10 years.
The only way they are going to be able to do that is through sales of their property assets.

Right now the government is estimating that the property is worth €47bn. How is it going to be worth €74bn over the next 10 years? A 57% increase.

@YM ‘draft business plan’ and ‘cashflow’ are not a P&L, granted figures in one may rely upon the other but they are not the same thing no matter what way you cut it. your figures fall down after 77.6bn

@dreaded estate – interest

It seems we are nearing the point where all passion has been spent. The outlines of this NAMA fait accompli are becoming clearer. With the wonderful vision of hindsight I think the inevitability of NAMA – and the unwillingness of Government to consider alternatives or significantly different variants – derives directly from the blanket guarantee. And the post-hoc justifications – both publicised and unpublicised – have multiplied.

These include points frequently raised on this blog such as the need to resolve the banking crisis over time (a short sharp shock would be excessively disruptive), to manage the portfolio of dodgy loans (and the underlying assets) over time and to secure private sector financing of the banks (even if that involved taxpayer subsidisation of private financing).

The ability to use NAMA bonds to secure liquidity from the ECB (and, possibly, the wider market) – even if the precise mechanism has not been specified – has emerged as a significant factor. The use of this liquidity by the banks to purchase government bonds, not surprisingly, has not been highlighted as a feature to sell NAMA, but it must be seen as an advantage by DoF/NTMA. And retaining the covered banks in (broadly) Irish control presumably is seen as a bonus by the Government – as is the intended effect of putting a floor under the property and construction sectors. There is no doubt that a steady, gradual, collaborative resolution is in the interests of the three architects (Government, banks, developers) of this disaster. Any precipitate action by one could cause untold damage to the other two.

As has been frequently pointed out on this blog, political considerations have always been to the fore and the precise alignment of the phasing of NAMA’s activities with the political time-frame cannot have been entirely unintended, even if reasonably credible arguments may be advanced to defend the proposed scheduling of NAMA’s activities.

Despite this it still stinks, but I suppose we should be relieved that it isn’t worse than it is.

Just to add one other often touted reason – increased credit to SME’s etc. From today’s Independent (written by Brendan Keenan http://www.independent.ie/business/irish/success-of-bad-bank-could-cut-cost-of-the-crisis-to-just-83642bn-1915643.html) regarding a Goodbody report on NAMA “The report warns of the credit squeeze if banks seek to reduce their loans to historical percentages of deposits.”.

This was discussed also last night on TV3 Vincent Browne show by Peter Matthews when discussing fractional reserving.


Take a look if you’re interested from approx 9mins into the clip.

These observations show up another fallacious economic justification for NAMA – and as with so many aspects the legislation fails to stand up to scrutiny. As is mentioned in the show, we have arrived at a fork in the road and it is time the government started listening and engaging with those who take sensible alternate views and begin to head in the right direction.

@brian o hanlon

“The policy makers were lagging too far behind also. They had no brilliant ideas of what to do when the context changed to one of over-production.”

Not least because their economic model was over-geared to land speculation and development every bit as much as the developers and bankers. Lots of scope to boost vote buying public expenditure at national and local level when you have stamp duty and development levies coming in hand over fist.

Lucky Lenny has discovered the secret of hoodwinking the country.

Describe everything as draft – not daft.
Ridicule everyone else for using makey up numbers while using the most ridiculous makey up numbers yourself.
Claim to be open to amendments while saying NAMA is the only game in town.
Do what you were always going to do from when you were told what to do by the people with money.

Repeat ad nauseam as the mugs fall for it everytime.

The media applaud his assured touch.
Big money through their stockbroker mouthpieces say they are reassured by Lucky Lennys soothing words.
Of course they are, they write the script.

Meanwhile anyone with any understanding of the scam contemplates exile in Canada where they do things differently.

karl deeter Says:
October 16th, 2009 at 11:25 am

@ karl

“its a cashflow analysis, that deals wit cash projections, most of you are reading this as some kind of forensic P&L – which it isn’t.”

@ Greg

“Greg Says:
October 16th, 2009 at 2:50 am”

“Look at the time of posting.”

You do realize that this should actually be “3:50 am” until DST finishes?

Like it’s 17:43 now, but blog time will show 16:43.

You insomniac?

KW said,
“I’d like to add that, while things have been getting a bit too heated here, I think that Zhou has made very important contributions here on this issue — in particular on the issue of valuation of loans versus valuation of assets — and as such has proved his bonafides with me as much as any FFer can.”

Just looking at the last line of the above quote, would it be safe to say that “FF’ers” are not your favourite political animal, Karl?


Given that FFers have lined up uniformly to back a plan I strongly disagree with, what would you expect my current opinion of them to be?

That said, I don’t have any political affiliation and don’t have any tribal dislike for FF or any other Irish political party, so the quote above was poorly worded. It was intended to mean that I accept Zhou’s opinions on the NAMA plan to be honest and well-intentioned, not as the back-handed compliment that I now see it reads like. Apologies to Zhou for not wording that very well.

“I’m guessing the proponents of NAMA will, when it turns sour, start saying “No point in wasting energy by playing the blame game, we have to look for a way forward out of the crisis”.”

You forgot that they will add “We are where we are.” And “There is only one game in town.”


@ Mark Dowling,

back when I had energy to blog, I wrote up something, based on having to listen to Richard Douthwaite at Feasta give his opinions on the whole matter.

His crucial insight was that the Irish government manages to borrow for its own purposes vicariously through our population. I went off into a tangent about supply chains and going to the source of the supply, in my blog post.

Google for: designcomment elephants


The point I wished to make is that we produce a lot of one trick pony kinds of companies in Ireland. A company such as Zoe which is built around solving a problem of production, isn’t going to be a very smart company, when the nature of its problem changes. It is the same I guess with government.

I recommend Amory Lovins book Natural Capital to all here. I was reading Chapter Four this evening, and on page 73, it notes:

As Benyus notes, an ecologically redesigned economy
will work less like an aggressive, early-colonizer sort of ecosystem
and more like a mature one. Instead of a high-throughput, relatively
wasteful and undiversified ecosystem, it will resemble what ecologists
call a Type Three ecosystem, like a stable oak-hickory forest.

I spent a lot of my time in the habitat of the Ireland economy in the past number of years. I think we only produced some agressive, early-colonizer kind of mould growth, and not much else. Now we hope to go from that condition of ‘sound fundamental mould growth’ to growing a ‘smarter economy’? ? ? ?


Another good quote on page 68 of Natural Capital is as follows:

A business that functions as a learning organization—rewarding measurement, monitoring, critical thought, and continuous improvement—
will always outpace a corporate culture peopled by dial-watchers and

Tom Boland of the HEA expressed a concern at the Dublin Innovation week event the other evening, that the new smarter economy might only favour the Phd’s with the big blunging brains. I know it is a very difficult balance to get right.

On the one hand, we can make very good education schemes for button pushers to use. There is nothing wrong with creating a stepping stone employment for the many. I often end up in those roles myself. However, it is not right to take away the ladder to something higher also. There must be a loophole left I humbly suggest, so that when guys like myself don’t want to push buttons any longer, I can negotiate my way upwards and onwards.

Just some random thoughts. Thanks. B.


My point was not so much about hoping for a recovery as querying the sense in pursuing the developers in the short term to pay back the money. If it’s not there, what’s the point, other than public humiliation and the “punishment” someone referred to earlier. I’d prefer to hang on and see if we can get anything back later rather than indulging in the public humiliation of developers now. It’ll appease the mob, but do nothing to get us back some of this money.

I’m officially on the Nama + nationalisation (or at least significant shareholding) side, but we’re not getting that, so time to move on and play the hand we’ve been dealt as best we can.

[…] Yesturday, the Nama Business Plan was revealed in the Dail.  We have to say that we underestimated the sheer bravado and the Nama scam.  In the words of Karl Whelan … It is with great reluctance, then, that I have to say that it’s now pretty hard to see this plan as anything other than a deliberate decision to show extreme forbearance to the property developers who got us into this mess in the first place. Also, the following is now a fact. This government has told developers that as long as its in office (the latest date for an election is 2012) they will barely have to pay back any money. Interpret this fact how you wish.” (link to article) […]

@ Greg Says:

The opposition need to create a Constitutional crisis.

@ bjg
Talk to any army officers you know. Oh, and remind them of the importance of seizing the radio station early on.

The President ……….. so why the need for such extreme measures? Revolt is possible. But only in five years or so and on the worst of outcomes.

If Nama had a hope of working, then bank shares would not be rising.

Nama means a loss of capital at a time when true capital not debt, is scarce. That is why it is such a poor solution. Developers are good for the economy. They improve buildings and cities. Maybe this is not the case in Ireland but that is the fault of regulators, not workers and clever wealthy organizers. Using labels like developer has become, can obscure the true meanings of words.

Money will not be made by lending until the depression is over. Nama will extend the depression and will retard lending and wealth creation at a huge cost to boot!

Even many developers may be able to see that and be concerned.

Brian Lenihan has a career in Europe, not Ireland.

Maurice O’Leary

True! Canada is also good, but Australia is where the Canucks want to go. The wait for most migration to Oz is now two to three years, unless you are on the priority demand lists. While record numbers entered last year, the brakes are being slowly applied, but age structure here demands more young workers. NZ is a backdoor.

@Henry Withinshaw

Thanks for link to VB show. One thing Peter Mathews said was that the banks will use the NAMA “money” to reduce their loan/deposit ratio and not to fund credit. I’m looking for genuine clarification (no agenda) from the many economists on this site. According to Wiki a Repo is a collateralised loan arrangement. How can repoing the NAMA Bonds to the ECB be used to reduce the loan to deposit ratio? (I presume we include ECB loans in that ratio)

@ All,

There is one thought I might leave you people to turn over in your brains.

It appeared to me as Ireland as a nation gained some wealth, wealth we had never really been used to as a nation ever, rather much the opposite, we behaved rather like people who weren’t used to possessing wealth.

I have listened to a lot of debate and supposed motivations for the greed and popularity of the one party system in Ireland.

All I can conclude now, is Ireland as a nation, or rather it’s population managed to collude so well in some grand property investment pyramid scheme for one simple reason.

They were looking for a way to ‘stash’ this wealth, in a way that made it like a fortress.

I have attended quite a number of seminars on Ireland making use of it’s wind resources in the future to generate energy in its purest most distilled form, electrical power.

There is quite a bit of research going on into ways to store that electrical power in various kinds of large scale storage devices. One ideas seems more whacky than the next to be honest. They are the kinds of things you see on some childish TV program on the Discovery channel.

I have no doubt in my mind now, that Ireland as a nation found itself in the middle of a hurricane of financial credit. The property bubble was motivated by some deep, ancient impulse that we as a small population of a few million people might manage to store some of that international credit flow in bricks and concrete here in Ireland, if we built enough of it fast enough.

In other words, this rush of financial wealth has come upon us unexpectedly and we rushed to create primitive ‘storage devices’ for the same wealth in the hopes we might extend the life span of this credit flow into the future, before it vanished and our experience of wealth along with it.

One could compare it in sophistication to the earliest steam engine design, which was about half a percent efficient. But surely, as a nation we would be better off keeping half a percent of this wealth than nothing whatsoever.

We marshalled the greater part of the fit, energetic and ambitious working population towards the project of storing elusive global financial wealth rivers and pouring it into concrete. When I was a young man growing up, I talked with my friends about heros like Eric Cantona.

By 2006, I heard young students in Dublin chatting amongst themselves about their heros, who were mostly Irish property developers.

We basically became distracted from any forward momentum in the development of politics and society. Instead we put that project on hold, and we voted in the kind of leadership we deserved. Leadership being too fine a word to describe the man, I would call him a show off who likes himself far too much.

You see, we have no real justification in blaming property developers today. They ran with the best plan the nation could design for itself at the time, to use buildings as battery storage for financial wealth, to be used on a rainy day. We captured what solar power there was available during the Celtic Tiger and try to put it in jam jars.

The people who I worked with at Zoe developments were very efficient and skilled engineers at trying to develop what was a technology of ‘wealth storage’ that is still primitive. They were the pioneer characters in Ireland’s 21st century industrial revolution. No more and no less.

But we got exactly the politicians and the investment of our wealth that we deserved as a nation. There can be no doubt about that. Having invested so much into that mad project for the last ten years, the minister for Finance, Brian Lenehan is left with no choice but to try and attach some piece of contraption onto a behemoth that has already been built.

Simply so we can extract the half a percent of wealth that is ultimately available from the ‘machine’ that we built in such extravagance and waste as a whole nation.

I heard a story when I was a young kid about the war years in Ireland when supplies of basic commodities were scarce. This old man died next store to us, and when they went about cleaning up the old house, they opened one wardrobe to find it packed with supplies of tea.

Apparently the Irish nation had gone through such supply shortages during the war years of basic things such as tea to drink, that many people stock piled those items for many years after the war. The war had left such a deep impression upon them, they always suspected that the shortages might return.

In the same way, during the Celtic Tiger in Ireland which followed the dark recessions of earlier years, Ireland simply trying to pile as many tea leafs into its wardrobe as would physically fit.

I’ve trawled the net looking for an explanation of NAMA which a pleb like me can understand. I’m literate, I’m numerate, and I’m of average intelligence… but I have no background in economics. I still don’t understand it – and I haven’t found a site that explains even the basic theory of it in a way I can understand.

What I HAVE found is that e v e r y – s i n g l e site I’ve visited has explained how bad an idea it is. (I’m not including the FF or GP sites, obviously, since I’m not sure I could stop myself from throwing the laptop through the window)

Maybe there’s a Developers Association or Banksters United site which could tell me what a good idea it is somewhere. Anyone? Anyone?

@ Brian O’Hanlon

If Brian, as you say 99.5% of this wealth stored in the contraption or behemoth has all but evaporated and was, to all intents and purposes “Like the pearls of morning dew, neer to seen again” then, as they say, I think it is time for me to consider my position!

@Brian O’Hanlon

Interesting metaphor, but I fear the reality is even cruder.

The vast bulk of this property binge was fuelled by credit. Borrowing to invest is not really a wealth preservation device, it is a greedy South Sea Bubble stampede to extract wealth out of nothing.

If only those property assets had been built out of accumulated savings/, then we would genuinely have a store of wealth. Instead we have a store off assets which are starting to smell backed by a store of borrowings which we can’t even devalue (ala sterling).

@ Robert Browne,

If we are to use the energy analogy, then we have to realise that energy is converted into one form or another, rather than disappearing into thin air. If the flows of credit weren’t of real substance to begin with, then we have a much more serious problem on our hands. It means that we didn’t fail to store or capture the wealth that had been available over a period of a decade or so, but that we were fooled into thinking there was a resource available for capture at all, and that we side tracked vast resources into trying to catch something that wasn’t there to capture.

@ Brian Woods,

Brian, you managed to puncture my argument above very easily. So lets look at it a different way. Lets ignore for the sake of argument that the property binge was fuelled by credit. Lets pertend for the sake of argument, we can tie some of this madness back to something real, somewhere in the globe.

If the Chinese exposed the savings of millions of labourers and workers to the international financial system, to fuel the huge expansion of credit in the past ten years – I am wondering, would the Chinese feel a lot better if Ireland and other countries had converted that credit efficiently into something of value? Are the Chinese equally as pissed off as we are, that the opportunity to make some use of this available pool of wealth was purely utilised by the first world?

I am not sure how to answer the question.

Having worked for one of the largest consumers of ‘credit’ in the entire country, Zoe developments. Having seen the story of such a company exposed through the media this summer, it does leave me with some questions. Given the binge was fuelled by credit and so on, was there a better way to use the credit?

I am only spit balling here, but I wonder how one such company managed to spend so much, and divert so little of its cash into its employees training and development. Would it not have made sense to offer some kind of scholarship to a percentage of company employees, to do an advanced degree or something?

I mean, would a social gain such as that have managed to capture wealth for the nation of Ireland to benefit from today? Maybe it is a daft notion, I don’t know.

If the aim of the stampede was to create wealth out of nothing, then it makes the problem serious indeed. It ensures that Ireland devoted the bulk of its useful efforts and resources over the past number of decades to building a fantasy project, which was trying to capture something non-existent, a Jack-the-Lantern. If that is the case, it is very serious indeed.

I tried to argue there was something substantial blowing in the winds of international finance, to try and infer some degree of value onto our efforts over the last decade. In the sense, with the steam age, it began by capturing a very small slice of the potential energy and work rate of that resource. That in the future, our engineers can continue to work and find a better design. In other words, I was trying to be positive about things, by being a little negative. I was attempting to over an explanation to give ourselves some hope for the future. That our mistake might have proven something.

Look at what we are doing at the moment, we are about to embark upon another huge capital investment program to move our national grid towards renewable energy supply. James Lovelock would argue that wind generation technology as it currently exists is a complete waste of effort. It doesn’t offer nearly enough of a reliable energy supply. We would be better off building a cable underneath the Irish sea and buying our energy from France. Ireland should be very careful before it embarks on huge expensive projects to enhance energy independence. Our success in terms of spending capital in the recent decade has not been good at all.

It was interesting listening to James Lovelock’s interview on RTE television aired this morning. James Lovelock spoke of how his parents had been very poor and Lovelock went through the process of getting an apprenticeship over a number of years in all things to do with chemicals and photography. The one point that was reinforced to Lovelock during this apprenticeship process, was the need to get his measurements correct. Otherwise, the livelihood of some other photographer, and indeed the future of his own company might be threatened.

On the other hand, Lovelock argued that in Universities for the sake of the examination process, accuracy of measurements are not crucial. Knowing the basic principles is deemed to be important. Lovelock goes on to make an argument, the fostering of that culture for humanity is going to be deadly as we go forward.

There is something in the story of architectural design which might be interesting. Many international architectural firms do understand the flaws and shortcomings of their own designs. But it is interesting, how they will continue to sell and promote a product long after they become aware of the limitations in its effectiveness.

It is funny sometimes to listen to critics of the LEED program in the US, which claims to ensure environmental friendliness of building projects. How the ideas developed in the LEED program, many of which do not make sense, have found their way into projects built in such places as the Middle East etc.

The parallels with the global financial system are unavoidable unfortunately. As a project is stamped with some sort of ‘seal of quality’ in one part of the world, it is sold by international consultants throughout the globe in developing nations, because they feel if the US approved this, it must be right. Without getting too emotionally wrapped up in some grand conspiracy theory of the universe, I might point out that a reading of Joseph Stiglitz’s writing might shed some light on how global architectural design works.

When I look at a design in Ireland for instance, costing €750 million, such as the Mater Hospital new project, I am again reminded of the above. I know the designers of the said project, know instinctively themselves there is seriously problems with it, and many of the details in the visualisations I have seen. But they still persist to play the game as it was for the last couple of decades. That game which has landed us in such difficulties. There is no root and branch review of anything.

It is sad really, that Ireland and one political is prepared to pay that amount of money. We do not have the excuse that land is cheap or unavailable to the government anymore. We could do all kinds of things with regards to site procurement now. But instead we choose to squander money like it was going out of fashion.

My own instinct would be to move Irish Life and Permant operations to the Anglo Irish headquarters site in the Docklands and free up some existing land in Abbey Street for building of hospital infrastructure.

Which would still be close to the Mater centre of gravity. But Abbey Street might be more accessible for people using or working at the hospital with various means of transport. The Mater site could still be used, but we could put a cheaper building on the site, and do everything for much less money.

The point is, even with the Mater project we are still behaving as if our hands were tied, and it was still the middle of the Celtic Tiger. We are not reviewing our options properly.

@Bond Eoin

Indeed! Told you there was a private sector solution waiting to happen. Offload the dodgy loans to them for as much as required. Loan them the money if you have to. Then recapitalise the banks. Make multiple ones so that there is competition.

Jeepers, it’s a sad state of affairs when PPIP looks a better idea than NAMA! Sadly, It would probably fail too as in the US, the expectation is that PPIP will overpay (i.e. pay LTEV). The takeup so far has been pathetic.

One mistake Ireland makes and it is totally deliberate is, that it keeps comparing itself with world powers! Yes! World powers, no less.

We may be a near bankrupt island of 5 million people sitting in the Atlantic on the edge of Europe, but by God, when it comes to egotistical people we are without equal.

Just look at our salaries, TV presenters earning more than Barak Obama or Angela Merkel our head of the NCA (national consumer association) a little government quango earning more than the head of the US Treasury, and our head of the armed forces earning more than their British counterpart fronting a population of 80 million a country that owns nuclear powered submarines and weapons systems. We are totally deluded, disgracefully deluded and, if we don’t come back down to earth we will quite literally become an endangered species on our own little island before very long.

There are great opportunities for people to come here and literally buy up the island. To have it handed to them on a plate! That is how small, in reality this country is! Everyone in this country from the above mentioned down to 30% of people who absolutely refused to work when there was full employment are at fault.

The country has sold out on that values our real leaders, real men aspired to. Yes, I am saying that this lot are not real men! We are a great people when it comes to writing books but it seems we are even better at robbing the eye out of your head and coming back under cover of darkness for the other one. Even the sparse number of wind turbines built off our coast cannot get their power to the grid because of our quango systems.

Even as I write this, there are plenty of people out there, telling me, that they would have done the same as O’Donoghue given the chance and I have no reason to doubt them or believe otherwise.

This is an Economic blog, which we like to see filled with facts, figures, and charts. However, as a blog we have not targeted enough, the corruption now endemic in Irish public life. We are afraid to stand out from the crowd and say that is corrupt, that is not good enough, that is why you need to be fired and we are just not going to tolerate incompetence, posing as political expediency any longer. Believe me, we all have a vested interest in taking this course of action because our own economic survival depends on it.

Everything, that has happened. in the last year has been politics as usual. The politics of expediency, of fudge and of self delusion, if they, and we know who I am referring to, continue they will bring the house of cards that they are building down on their own heads. Our spiraling debt levels which have to be serviced off smaller and smaller levela of GDP spells major trouble ahead. We need to find our moral compass nama is a magnet
which is already distorting magnetic north and Stiglitz is correct in his assertion that the international money interests praising our crazy nama ( because it suits their own players), will, within 2 to 3 years (and that’s optimistic) be refusing us any more credit.

The difference between them and us is that this is supposed to be a country and not a hedge fund and most of us have no place to run and hide from the economic ruin that these unimaginative and morally decrepit policies will deliver. We are stuck with Ireland and Ireland is stuck with us, for the moment.

@ Robert Browne,

I have to say I know the people involved with the Mater Hospital project, and world powers doesn’t even do it justice.

But we have to distinguish between world powers and world class. They are not the same thing at all. I know a lot of people in our building projects like to thing of themselves behaving like world powers, but I really wish people who were world class were around to talk some sense the odd time.

Because, that is exactly what guys like James Lovelock do when they come to Ireland, they try to talk some bleeding sense into us. I never works, but it is always a breath of fresh air when it happens.

The actor, Gabriel Byrne made some comments about architecture in Ireland not so long ago. He tried to talk some sense, not that anyone on these shores, in general knows how to listen to it. But I did appreciate Gabriel’s efforts on our behalf.

@Brian, Robert
By putting Nama under the NTMA we are preparing for failure again. They know nothing about property, or property loans. What we should have done is hired those who ran the Swedish Nama, and as many of their staff as we could get. But our failed technocracy’s unfounded confidence in its own abilities would never allow this. And FF couldn’t cope.
The business plan is just the opening act of this tragi-comic €59 Billion opera.
Nama is doomed at birth.

@ Brian O’ Hanlon

They rebuilt Croke Park and have to put a ring of steel around it every time there is a match on residents have to operate behind the barricades.

A have said to Mary Harney a hundred times “give us small centres of excellence”. Sure we want everything to be a centre of excellence, but in her head, only super hospitals can be centres of excellence. Even though 10,000 sick days were clocked up by staff in Tallaght last year. She acts like she never heard of microelectronics, nano technology gene therapy or guys like Craig Venter. Again, they act like they are living on a different reality to the rest of us. I love all the hanging gardens and lawns on top of the new hospital. How many microbes and super bugs will be hiding out there?

The new patriotism is to try and talk some “Bleeding sense” into this lot, but I am afraid we are just practical people who would not be on their level, if you get my drift. Then the day arrives, it is the disaster and they will look at at you and I sheepishly and say, “what will we do now lads?” I know the answer I will give them!

@ Robert Browne,

I love all the hanging gardens and lawns on top of the new hospital. How many microbes and super bugs will be hiding out there?

Well, lets pretend for a second it wasn’t a hospital at all. Lets pretend it was a whole pile of super trendy ‘pads’ for testosterone fuelled bachelors, you know the kind who go for morning gallops to build up a sweat and then drink straight out of the carton of orange juice.

Even if those were my eventual users, I would still consider the scheme as illustrated in the newspapers to be extremely risky to build in the Irish climate. I would say it is stretching the technological limits of what is capable with mere building materials, even in this day and age, to make that building fabric work and provide safe environments for occupants.

Take this point for instance. When the days get really warm in summer time and therefore you need air conditioning to work on the interior environment, what happens to plastic vapour control layer they have sealed the hospital with? Think about it. The interior will be cooler than the exterior. Then you have the equivalent of a condom that is put on backways. You will get condensation forming on the plastic, as sure as be damned.

Search for Joseph Lstiburek, on building science magazine, where he talks about the problems with hotels in the United States. I sure hope we don’t build this Mater hospital project. Because we are hoping to draw patients from far and wide across the world to Ireland as a centre of medical excellence. They sure will not thank us to invite them to a centre of excellence, which is the equivalent of a poorly constructed hotel.

The trouble is that we build using lots of layers in today’s construction techniques, with all kinds of complicated air flows happening within the building fabric itself. The Lord himself only knows where the air is going to come and go through. Because the designers have chosen to go down this extremely risky path, there is going to be huge solar gain on those hospital spaces at certain times of the years, requiring the kind of expertise in building shells that we don’t have in the modern world yet.

In other words, this whole design is a bit of a pipe dream, and consultant designers keep on getting away with it, because there is no post-occupancy analysis done of any buildings procured by the public sector, by independent critics who interview and observe what goes on. The famous physicist Richard Feynman once explained the stupidity of the space shuttle design following the Challenger disaster in the US.

He explained his theories with with a aid of a glass of water, on which droplets of condensation were forming on the outside. His essay, an appendix to a larger book – Personal observations on
the reliability of the Shuttle – is available if you simply search online.

But in short, there is no Richard Feynman type of character who will step in to point out the stupidity of what we are doing at the Mater hospital site. We are going forward to build something like a space shuttle, without the real skills in design to do so. I heard today from someone, that ‘X’ number of Irish architects are unemployed and we should give them something to do. I would argue, it would be cheaper to put them to work in some capacity that they could learn about the stupidity of their own designs, instead of simply patron-ising them to give us more problems to load ontop of those we already have.

I wouldn’t trust the technological know-how of the Irish architect as far as I could throw one. We need to learn how to design safe and energy efficient internal environments for healthy occupants. To find out where the mistakes are made. Before we embark on some crazy plan to build a hospital design, which is beyond our capability.

Having said that, I am sure the consultant designers involved worried about saving their own asses will pull a report from somewhere, carried out by some other consultant who will tell us everything is okay. Rubbish. I only need to know at the images in the papers, to know that nothing will ever be okay if they proceed with this.

Nama: rescuer to the bank bond holders, the shareholders or the banks themselves? They are my choices. I don’t think the developers matter. Most of them are hopelessly broke. They don’t have any assets other than largely worthless property. A few cashed in but they are offshore by now if they think there is any chance of their cash piles being got at.

By rough calculation there is at least 50bn of bonds of AIB and B of I redeemable after the expiry of the guarantee period in Sept 2010. (Somebody please supply the correct figure). The current proposal seems to be to pay them off in full. Even a 20% hit would save us 10bn.

In any event, propping up the banks with Nama bonds before giving the bond holders a short back and sides is like delivering a case of whiskey to an alcoholic and then calling round and telling him to give up the drink.

As regards the shareholders they should only have value if the Nama scheme works. Otherwise we should have the right to swamp any value they have by virtue of warrants or some other straightforward mechanism. (In part compensation for whatever Nama costs us)

We should also consider putting a percentage of the larger deposit holders’ funds into some kind of limbo in case things turn really bad.
Why are we all borrowing to pay off all these people, most of whom have far more money than the rest of us economists?
One of the consequences of unrealistically optimistic assumptions about Nama is that they help to avoid considering what trouble we may be in if more probable and much worse losses accrue.
Here’s me bus.

RTE News just now (21.15 on 22nd Oct) interviewing who they describe as “leading developer Noel Smyth” (who is a solicitor as well) this is what he has to say..”I was approached by a government minister….to come up with some ideas as to how the problems in the property market might be resolved”.

So they are happy to ask property developers how to resolve this crisis but won’t ask economists beyond their bubble thinking acolytes.

I shouldn’t be surprised but I am.

@ Henry,

Thanks for that Henry, I must check it out. Noel Symth has been quite busy trying out some new options vis-a-vis finance and development. I read an article or two in the Sunday Tribune earlier in the year. To give him credit, he has been thinking out some of the procedures and financial models beyond what we were used to doing in property.

While there is no doubt that economists should be included more in the process, the thing from an economists point of view, is property is a steep learning curve in itself. I do recommend listening to Hernando de Soto some time. De Soto has a quite interesting theory about land and property rights as a legal basis for capitalism. I heard him speak the other day at Trinity college in Dublin.

To many economists here in Ireland at the moment, manage to produce whole reports about the financial situation with regards to property in Ireland, without mentioning land in their studies at all. I did mention this to David Duffy of the ERSI, at a recent seminar about property. In fairness to the Green party, they are liasing with some economics and sustainability bodies about future structures regarding land in this country.

I think economists need to peel things right back to the bare bones, back to where it all starts with land and wealth. That is my sense of things anyhow. At the moment, there is money in the country, but it is standing on the sidelines waiting for bargain basement opportunities regarding land and site purchases around Ireland. The minister for Finance is doing his best to try and avert such a feeding frenzy on land as a future wealth. Perhaps if the ‘smart money’ was less inclined to wait for land bargains, it would be more inclined to spend elsewhere on viable projects.

What I mean is, if the price of land is held up in some fashion, it might result in capital flowing into other sectors and being put to more productive use. On the other hand, if land hits the floor completely, and an over supply suddenly hits the market, then outside capital will swoop in very quickly and snap it all up, from under our noses. One thing is for sure, not Irish man or woman will get a smell of it. It will simply get sold on international markets in huge tranches at a time and used for wholly speculative purposes.

Years ago in Ireland, there were almost 170 no. cooperatives I believe. Then someone got the bright idea to amalgamate them, and there were only 10 to 15. The someone else found a way to convert them into PLC’s.

In other words, you had something which was very local and owned by communities, is now owned by financial markets, with very little else except for bare minimum wage jobs flowing back to communities.


Many thanks for the heads up on Hernando de Soto and I read your coments on land with interest. I have no problem with Mr. Smyth giving his ideas, or anyone for that matter, who has knowledge, skill and ideas which are not self-serving. What I take issue with is government ministers asking property developers and not asking economists who may also have good ideas.

Now for a rant;

I personally think NAMA is a fudge and has been since it was born (and born strategically as one game in town). I think it is based on assumptions which cannot be substantiated and that they hope to pass it without ever being called to provide the figures. By the time it is passed we’ll be told that maybe the assumptions are wrong but we just have to get on with it. There are, in my view, better and more logical ways of sorting this mess. The government have procrastinated as well so that they can argue that there is now an urgency to the legislation. This is all gross deception, which is why I should not be surprised that they have never seriously engaged with finding the best and most logical economic solution.

I hate the cronyism of the process as well and was galled to hear that there is still this cuddling up to the developers. Finally, the vitriolic tone which Mr. Smyth took when speaking about the economists once again showed the disgraceful “us and them” approach that has been taken. The governement should havbe been looking to find a decent, fair and workable solution. This is not what they have done, as this thread confirmsd.

I don’t exepect it ever to be perfect, but do expect it to be fair. To the taxpayers it is anything but.

Here endeth the rant.

[…] extreme forbearance to the property developers who got us into this mess in the first place". The Irish Economy Blog Archive Hard to Deny Now that NAMA is a Developer Rescue Plan As I said HBAP, no FG supporter should have anything to do with this. Did you join FG to bail out […]

If someone asked you to sum up the working of NAMA so far (January 2010) in short statements, what you say?

Today’s Independent (see link below) outlines the plans of both building trade representative bodies to approach all banks in Ireland and have them write down their member’s liabilities. The argument is that these builders are the most skilled people to complete and build projects, so don’t let them go bust.

This is the Stage 2 to the Stage 1 of what is “The Big Plan”.

Stage 1. Save the banks and bondholders. It doesn’t matter if you are a small bank or a big bank. It doesn’t matter whether or not a bank is key to the system. It is important “for credibility of Ireland” to save them all. When this is completed and the taxpayer has picked up the tab that shareholders and bondholders should have taken on board, then move to stage 2. In the meantime it must be made clear across all media that this is a good thing and there is no personal or political self-interest in the result. Reasons such as “get credit flowing again” to be used a lot.

Stage 2. Let off the developers. It will be hard for the banks to turn down developer requests for a bailout if banks have been bailed out themselves. It can be demonstrated that these are the experts.

The result. They, like the bankers and the board members of the banks, get to keep their big homes and big cars. They continue to get paid well and can be shown to be good taxpayers. They will help support the FF party when everything has quietened down. If the banks let these guys off then NAMA cannot be blamed for not pursuing them to the ends of the earth for their debts.

Could there be an alternative? Certainly. Bust the builders and let them work for somebody else to finish off the projects with all of their building expertise. There are plenty of solvent and trading companies outside Ireland who can and would do the job. There are also some inside Ireland (SISK for example) that would also do it. Why should anyone be let off their debts. They took massive gambles and to let them off means, like the Golden Circle, that it was a one way bet.


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