Article 6 Section 1

“All powers of government, legislative, executive and judicial, derive, under God from the people whose right it is to designate the rulers of the State and, in final appeal, to decide all questions of national policy, according to the requirements of the common good.”

“To decide all questions of national policy, according to the requirements of the common good” And how on in Gods name is NAMA by any stretch of the imagination for the common good?

Article 33 section 1

There shall be a Comptroller and Auditor general to control on behalf of the State all disbursements and to audit all accounts of moneys administered by or under the authority of the Oireachtas

“To control on behalf of the State all disbursements” and how exactly does he intend to fulfill his statutory function in this regard? is he going to control NAMA disbursements as he must and can he sign off on figures which are blatantly wrong or at best mere guesstimates which expose the tax payer to billions of Euro in losses.

Article 45 Section 2 subsection iv

“That in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole”

Not the welfare of bankers, bond holders or developers who have embraced NAMA with religious zeal for obvious reasons.

Article 45 Section 4
“The State pledges itself to safeguard with special care the economic interests of the weaker sections of the community”

This surely is good news for ordinary mortgage holders who, presumably even before the banks are sorted, must according to our constitution be safeguarded “with special care”

Finally, Article 28 states

“The Taoiseach shall keep the president generally informed on matters of domestic and international policy”

And has he bothered to keep her informed? When was the last time he discussed NAMA or SPV’s with her?

I did hear Lenihan say something along the line that “If nothing was done next year the deficit would be €15bn”. Could be wrong.

But if this is the case it seems to me that the €4bn cuts will see us just treading water.

Not a good prognosis.

Personally I think the gap in public finances is so great external intervention is a significant probability.

Don’t know if you’re familiar with Jesse, bit of a goldbug and a chartist (though I find technical analysis difficult to believe in). However, always well written. An antidote to much of the “journalism” on finance.

http://jessescrossroadscafe.blogspot.com/2009/10/when-financial-journalists-were-pimping.html

“Was Minister Lenihan fulminating…”

If he was I didn’t hear him. But with what’s coming down the road he and his class are going to need some whipping boys.

http://en.wikipedia.org/wiki/Whipping_boy

I have a felling in my bones that Lenihan already knows the EU/IMF are saddled up and ready to ride.

Jan/Feb?

Can’t say I disagree with much of what you say.

Most of the NAMA opposition would probably also agree.

NAMA is just “pretend & extend”. However the truth will out. I think you’re right, and most of the culprits will be living in tax havens by then.

NAMA is too difficult for the average citizen to understand.

That leaves the developers and the building industry generally.
The €5 Billion borrowings are for the larger builders, with the promise of more borrowing by Nama and credit from the banks.
The smaller builders whose loans are not going into Nama will presumably benefit as sub-contractors.
Smaller developers will be facing much less desperate banks so they gain, and through land prices being propped up.
So we are left with the big developers. For a time the tough talking of the minister had me fooled. I thought that because of their key role in the economy and their establishment status that the bankers would be bailed out and the builders would be demolished. It was puzzling. Then along came the business plan. No repayment of principal until 2013? That is simply a large gift. And Nama will take its time in making them sell off sites. It is fairly clear now that Nama is a large-developer ICU.

Will the large developers turn €46 Bn into €76 Bn? Their alchemy works in the opposite direction. The taxpayer will lose money through Nama. Even Eoin says €10 BN. Mathews says probably €20 BN and excludes interest. Morgan Kelly is going €35 Bn before interest. We have just lived through a massive property frenzy. The country has multiple crises. There will be no return to boom price levels and no return to 58% of peak. Nothing like the Celtic Tiger is likely to reoccur. We are certain to loss huge monies on these loans and we all know this in our hearts.
It was always a question of who would pay for the huge loan losses?
And in the end it is going to be the taxpayer. The losses faced by members of the interest groups are just vastly greater than what individual taxpayers will face. There was a battle, and civil society fighting for the taxpayers lost. The interest groups wanted it more.

The only way taxpayers may gain is in the propping up of property prices, if they own property. That could well have been a significant reason, or at least justification for Nama. That is not a permanent gain but it is a gain. But even that will impede competitiveness and impose costs on non-property owners.

So I would say that even many of the developers would privately tell you Nama’s projections are untenable. And I doubt if any of them believe them. For myself, I will keep on opposing Nama until it is probably passed and once it operates I will criticise it to try to minimise its overvaluations.
Sadly, this may well have no effect on the final Nama score which looks like:

Interest Groups 20 Billion (plus interest)
Taxpayers NIL

I’m long torches & pitchforks.

I’m beginning to wonder if it is just arrogance on the part of the bank “leadership”.

It’s a very select club. You don’t ask to join you are invited to.

Have they not been in denial about the state of their balance sheets for the last three or four years?

I think it is possible to view their attitude as similar to that of a cult.

A cult will always deny outside opinion, which most know as truth.

How can they accept it? The cult dies, even if it is just a cult of greed.

Back on topic though,

Had a conversation with zhou, Dreaded_Estate, Ahura on the “undeclared assumption” of the NAMA plan.

Conclusion. Even if you accept the plan as is, 10% washes NAMA’s face etc., there is the fact that the developers haven’t a hope in hell of meeting their side of the bargain. They need to turn €46bn into €74bn.

As a fellow NAMA addict I’m sure you’ve seen it. (In 2020 there’ll be a fully fledged NAMA anonymous, twelve step program and all).

What say you? Can the developers turn a pig’s ear into a silk purse, even if the pig is wearing the latest lipstick?

So far the banks have acted like they have bailed us out, especially AIB.
Commentators talk about public servants sense of entitlement. The French aristocracy did not have AIB’s sense of entitlement. If they keep on insisting on appointing an internal chief executive I will personally wheel down a guillotine to Ballsbridge when the Board next meet. I will use cardboard cut outs the first time, but they better not make me drag it down again for the meeting after that. This crisis has had remarkably little impact on AIB’s view of itself and view of how others see it.
As was said of the Bourbons when they returned to rule France after the revolution:
“They have learned nothing and they have forgotten nothing”.

Yeah, I know the building you were referring to.

But how about this.

Any bank taking NAMA funds has to hans the deeds to all its bricks & mortar to the State until every cent is paid back.

After five years they have to pay rent @ 7% (the Ministers yield) on the LTEV of the property.

After ten years the State owns the property.

That’ll put manners on them.

“Also, there is the small matter of the historic building they own on College Green, which I would have expected they would already have agreed to hand over in gratitude for keeping them afloat. Bankers eh.”

You may be too late there Eamonn. Looks like they’re already selling the bricks & mortar.

http://www.irishtimes.com/newspaper/finance/2009/0822/1224253078563.html

There’ll be nothing letf by the time they have to nationalised.

@Eoin
As a Nama critic I am happy to say what I would like to see changed:
1 Pay no more than market value.
2 The market value should be the real market value, not peak less 47%.
3 If this results in large majority state ownership for AIB so be it. It has bankrupted itself twice, misbehaved between bankruptcies and is still as brazen as ever. I would show more mercy to BOI, but make it clear they wouldn’t get another chance. I would take a 50% stake in them but I would be happy to let it drop to well below that as soon as possible. Also, there is the small matter of the historic building they own on College Green, which I would have expected they would already have agreed to hand over in gratitude for keeping them afloat. Bankers eh.
Finally, like almost everyone in the country, I have no interest in permanent state ownership of the banks. As soon as market conditions make selling advantageous we should start reducing our holdings.

Now that I have outlined how I would like to improve Nama, I would ask you as a Nama supporter to outline how you would recapitalise our banks through increased state ownership.

I believe you are willing to offer the subordinates 30 cents in the euro.
You are also against outright nationalisation of AIB and BOI. Fair enough.
And haircutting Senior Bondholders will, you believe, make us all blond fishermen and cover the land in geysers and volcanoes. Ok. I assume you are happy enough with Nationwide being nationalised.
But, subject to the approval of M, how far would you nationalise AIB and BOI? There are no trick questions, if you only want us to take a 10% stake in return for fully recapitalising them so be it, you are entitled to your opinion. I probably won’t agree but neither I nor I hope anyone else will abuse you for it.

Surely Browne & Darling are happy to let the Pound devaluae in order to make British goods and services cheaper.

There are limits of course but I don’t see tham using every available opportunity to talk about a strong Pound.

well Sterling started to tumble a month or so after the Northern Rock debacle, and its gotten steadily worse as the QE has been rolled out. If they decide to increase the QE beyond £175bn, then it’s only likely to get worse for the Pound. You cant rule out a run at parity (though unlikely) this side of Christmas, which is only going to make the shopping season even worse here.

A lot of the customers of my bank are exporters to the UK, and they’re bleeding at the moment. Anecdotally, 90p seems to be the highest threshold most of them can take, though some of them have started to re-focus their sales into the EU successfully.

the baking system? Ah give Brennan’s a break man….

More seriously, i simply think there’s a difference between a technical insolvency and an actual one. Given the recent ung’teed bond issuances by AIB and BOI, its arguable that everyone else sees the irish banking system as completly broken or failed. I’d put it in a ’severly distressed’ category. I suppose the problem is that there’s very few examples of entire national banking systems going bust or being nationalised. The only one i know of is the small island in the North Atlantic that i am not allowed refer to. I think given our truly enourmous short-to-medium term funding requirements, simply nationalising without considering the dangers of a capital/funding freeze is just as much of a gamble as NAMA itself.

I also think this is where the NAMA debate has blinded us to what the real long term problem is - the budget deficit. If we weren’t running an enourmous medium term deficit, then i think we’d be in a much more flexible position vis-a-vis negotiating with bond holders and maintaining our funding requirements.

“debased their currency by around 40% against the Euro”

40% ! Was this all due to the banking crisis?

Not looking good for Irish exports to Britain then.

Very little can be gained by pretending it hasn’t.

QE?

Have you worked out what that is?

Is NAMA a form of QE?

no problem with us taking majority ownership in the banks, and have never claimed such. Have been dead set against outright overnight nationalisation of AIB and BOI, as this would be more or less de facto nationalisation of the banking system.

Nationalised financial system = failed financial system = failed state

Thats the equation im trying to avoid.

It’s also debatable what the long term impact of QE is. It certainly isn’t cost free.

“Britain cleaned their banks and moved on”

This is a joke right? They’ve had to rely on almost 15% of GDP being injected into the economy via QE and they’ve debased their currency by around 40% against the Euro. The net wealth of the UK in foreign currency terms has fallen by around 25% in the last two years.

They’ve done this because they’re running the biggest budget deficit in the developed world (bigger than ours!), and because the only way their investments in the banks won’t go sour is by creating another asset bubble to get them out of the current one. The US is essentially doing something similar.

Trust me, if we had the option of QE, we’d be doing the same thing.

Then, Nama tells the CSO it’s creating an SPV. Nothing about this in the business plan of a week before and, from nowhere, that the SPV Nama is acting through is majority privately owned. You say, don’t worry! This is really cunning, all governments do this! No, it’s not the same. Nama is the equivalent of the US adding €4,000 Billion, €4 Trillion, to it’s national debt.
This is huge. Just because governments have never counted future pension liabilites does not excuse this. It is like leaving the debts from the Iraq war ($3 Trillion) off the government balance sheet.

http://www.reuters.com/article/topNews/idUSN2921527420080302?feedType=RSS&feedName=topNews&sp=true

Gordon Browne took stakes in the UK banks in return for recapitalising them. Britain cleaned their banks and moved on. We have, after many months more delay, created a Nama monster to avoid taking large stakes in our banks. Even Brian Lenihan is conceding it won’t recapitalise them and the process of setting up Nama looks like being a long drawn out nightmare. Nama is a giant mistake. Our leaders should stop trying to book us onto this banking Titanic, and instead, by nationalising and recapitalising the banks, fly us safely with maximum speed and maximum effectiveness to our destination of cleaned up banks.

Eoin, I fear that you will still be supporting Nama well after we have hit the iceberg and even after most of us have frozen to death in the North Atlantic.

it would appear that the Ecostat is not considered just ‘cosmetic’ by some in the markets. It’s worth the efforts by the govt for this reason alone if true.

http://www.independent.ie/business/irish/ireland-may-avoid-further-ratings-downgrades-1921853.html

As a coincidental aside, Greece actually just got downgraded by Fitch.

As for the banks controlling NAMA i really don’t see that being the situation. I think the set up was purely a legal issue, and the actual appointed board will be working for the benefit of NAMA and the State as a whole, with the ‘private’ investors purely incentivised by the performance mgt fee/dividend. As much as anyone might question BL’s motives or competency etc, i really dont think he has set up NAMA to actually be controlled by the banks themselves.

okay, thanks, that was a useful explanation - though not one I would agree with. Clearly the relative scale of FR or DE off-balance sheet fudges pales in comparison and the last time Greece was a model of good public policy Athena was flying around Olympus in the form of an owl.

So the lack of transparency this nominal private sector involvement has the potential to create does not worry you at all? I mean, let’s just imagine this SPV is controlled by the banks themselves. Then we have:

1) Banks control Nama via the SPV

2) Gov’t is represented in this cozy backroom office, but cannot provide transparent accountability due to commercial confidentiality considerations.

3) Billions of euros disappear into hole

4) A by now noticably greying Fintan O’Toole writes a scathing IT article condemning the findings of the McDowell Tribunal (ca. 2015)

as an example (from the US):

“When the government calculates its debt and deficit it does so on a cash basis. This means that deficit accounting does not take into account the cost of future promises until the money goes out the door. According to shadowstats.com, if the federal government counted the cost of its future promises, the 2008 deficit was over $5 trillion and total obligations are over $60 trillion. And that was before the crisis.”

Thats vs an official deficit of 700bn or so in 2008 right? And an official debt:gdp ratio of 70% for the US (as opposed to a obligations:gdp ratio of 425%).

its no 1 basically. But i think you’re being harsh on it being an “Irish” problem. Everyone is at this, and everyone always has been. We keep lots of our obligations off balance sheet (public sector pension liabilities of €105bn anyone?). The German and French ‘bad bank’ solutions are off balance sheet. The SPV means we get to remain at least semi-compliant with the SGP for another year or so, and it means we won’t pop up on those comparison presentations as right down towards the bottom of the debt:gdp league within the Eurozone/OECD. In terms of the Eurozone rules, Greece has been lying about its deficit levels for years, and lots of EU countries breached the annual deficit levels per SGP in even the good years without any major punative actions being brought against them.

I know everyone thinks investor decisions come down to pure cold hearted facts in term of Irish debt and at what levels we are funding ourselves, but sometimes there’s an underlying theme or story that is also helping to drive the general perception - is Ireland past the worst and entering consolidation and recovery mode, or is it about to take another huge lunge lower in terms of its banks and its property market?

This is why, i think, most of the supporters of NAMA are still behind the process, albeit with some serious misgivings about the risk sharing element and the lack of clarity on many many of the details and assumptions. The NAMA process, if presented correctly, shows an Ireland that is stabilising its banking sector and supporting its property market, at the same time as passing the Lisbon Treaty and effecting budgetary adjustments that no developed country has ever enacted outside of an IMF enforced agreement. It shows we’re serious in terms of scale and substance in trying to restore stability (key for bond buyers) and allow a recovery (key for investment). These provide the basis for renewed confidence and positive expectations (key for consumer). The SPV is part of this overall process as it means we don’t see an explosion in our debt:gdp ratio and we get to remain within the SGP thresholds. Ultimately we all know that whether there’s an SPV or an on-balance sheet liability, the net outcome will ultimately be the same in terms of who picks up the tab. But at least via the SPV it won’t generate the negative statistics and perceptions that an on-balance sheet liability would.