Peter Mathews Talk Tonight

I linked a few weeks ago to a video of Peter Mathews discussing NAMA. Peter is a former banker with ICC and currently an independent banking and property consultant (here‘s a link to a full profile). He is giving a public talk tonight at the RDS Concert Hall at 8PM titled “NAMA Will Lose €12 billion: There’s a Sounder Alternative.”  I have spoken with Peter on a number of occasions and have found him to be highly informative on the subject of Irish banking so I recommend attending his talk if you can.

27 thoughts on “Peter Mathews Talk Tonight”

  1. I was there. Constantin Gurdgiev was also on hand to answer questions. it was pretty good. Can’t give an expert breakdown on his analysis but pretty compelling stuff. He answered one question about the possible cost of nationalisation with the suggestion that the gov’t could issue bonds to raise cash to pay for the shares. But I thought this was odd because, presumably, a declaration of intent to nationalise would reduce the share price considerably…no? The only reason they are worth what they are is because of NAMA…..in the first place. It was very good stuff. he is very good at explaining stuff to a largely non-expert audience. Gurdgiev was very good. He said it simply beggered belief that the country was going down this road where the gov’t had inverted the pyramid of entitlement – whereby in the event of default / bankruptcy the shareholders get hit first, then the subordinated bond holders then the senior bond holders….in that order…but that the gov’t had decided to hit the taxpayers and bail out all of the above….

  2. It succeeded very well. That is to say, it scared everyone to death. He estimated that Nama will most probably lose €17.81 Billion over its life. This excludes running costs, and also net interest costs I believe.
    Best case loss on same basis as above: €10.88 Billion.
    Worst case loss on same basis as above: €27.72 Billion.

    And it will still leave the banks woefully undercapitalised. He predicts that they will use all the Nama money to return their interbank loans back to where they were in Dec 08.

    It would have been worth paying €50 for his conclusions on Nama alone.

    His solution:
    Basically he said nationalise, make them recognise the losses and then recapitalise. We would get most of our money back when the banks were sold.

    As well as Peter Mathews, Constantin G. spoke. He utterly castigated the Nama SPV, and was funny as well, if you have been following the debate.

    The meeting was ably chaired by an energy economist, who suggested everyone should see their local FF TD. He did, and was told by the discomfited TD that he wished he had been ready to talk about Nama.

  3. I attended Peter’s talk and considering the atrocious weather it was very well attended. What he had to say was succinct, to the point and delivered with great clarity. What is becoming frighteningly obvious is the tenuous state of democracy in this country which is hanging by a thread.

    NAMA is a bloodless coup and it is a shameful attack on the people of this country. Anyone associated with NAMA has nowhere to hide.

    I think there are enough people starting to get the message that this must be stopped through a constitutional challenge.

  4. I believe the energy economist who, with Peter Mathews, organised the event and rented the hall was Richard O’Rourke. Well done to him.

    @Paul McD
    From the documentation given out it’s clear enough that the 4 worst banks are insolvent. I believe Mathews said this. Any value they have is from the promise of the LTEV.

  5. “Basically he said nationalise, make them recognise the losses and then recapitalise. ”

    This is the option that is still technically open, but fading fast.

    From the first threat (that infamous Sunday night meeting in Merrion St) to the bankning system the government should have prepared emergency legislation to take BoI and AIB into compulsory public administration as and when required with immediate effect.

    Then allowed them to operate until we knew exactly how insolvent they were. Then worked through a recap solution using all levers at their disposal (debt/equity swaps for example) to recap without taxpayer cost.

    We have incurred a lot of cost, but that is sunk cost now. However, we can still save another €10-20bn burden on Irish taxpayers.

  6. Did he say what assumptions about economic/population/employment growth he was making when arriving at the €17.81 Billion loss figure?

    Clearly , it makes a massive difference to Nama which of the following two scenarios (or anything in between) occur over the next decade:

    (a) economy grows by 5%/6% a year, employment increases by 60,000 a year, population grows to 5.1 million by 2021

    (b) economy potters along at 0%/1% growth a year, employment and population fall

    As it happens, this very week ESRI are forecasting scenario (a).

    Whether one is for or against NAMA, no forecast of its likely profit or loss can be taking seriously unless the forecaster specifies what assumptions about economic/population/employment growth he was making when arriving at the forecast. This applies to Brian Lenihan as well as to Peter Mathews.

  7. I also attended last night. I would like to congratulate Peter and Richard and thank them most sincerely for organising the meeting.

    I have just posted a 9 point review of Nama’s business plan at my blog. Its a bit long to post here.

  8. the same Peter Mathews who didn’t know there was an unguaranteed bank issuance when he was on the Vincent Browne show? sure-footed and convincing he was not.

  9. @Pa Bandit
    Mathews knows banking inside out. Any verbal slip-ups he makes should be contrasted with Brian Lenihan’s tawdry, deliberate and never retracted untruths.

    Mathews outlined the facts and his analysis and solution made total sense.
    He gave three scenarios, most likely and best and worst. The only one given by Nama shows a profit of €5 Billion.
    Why don’t you call on them to give us their worst case scenario?
    And, for humourous value, their best case scenario. I assume they are being conservative with the profit of €5 Billion?

    @John
    The economic growth we have over the next few years will just return us to where we were, but several years after, while other countries have been growing in real terms every year. We have a banking crisis, a fiscal crisis, an employment crisis and a confidence crisis. Our mature economy cannot grow at 5% to 6% for ever. Not even the Germans and the Japanese managed that, and they had had devastating wars.
    The export-led Celtic Tiger petered out in about 2002. We cannot have another credit bubble. In the long-run any prudent person would assume growth of about 2.5%.

    Ireland is not densely populated, and with 5 million still won’t be. The Greens have promised land taxes and proper planning. In the long-run Irish property values will return to were they should be: low by West European standards. We are not Holland or South East England or the Ruhr.

  10. @Eamonn76 He was answering a question which was (I paraphrase): Is the Gov’t against nationalisation because it hasn’t got the cash to buy the banks out now at the current share price? To which he answered ‘If they were to use bonds……’ My point is that He ought to have pointed that any decision to nationalise would collapse the share price….and make it more affordable.

  11. @Paul MacDonnell
    I agree. The market valued AIB at 27 cents and BOI at 12.5 cents. Without the promise of LTEV they are pretty worthless.

  12. Guys you mistake my lack of adoration for PBM Mathews (one “t”) as agreement with Nama as is.

    In
    fact I agree with the broad thrust of the KW/BL thesis. However, I disagree that PBM Mathews is the white knight and in fact based on expwreince including the VB show, oi would caution against using PBM as the new caped crusader.

    Trust me!

  13. @Eamonn76

    “In the long-run any prudent person would assume growth of about 2.5%.”

    I don’t see why that should be assumed. Of course, it is a possibility, but it certainly should not be assumed. Since 1958, average annual economic growth in Ireland has been 4.6%. That’s the average – obviously some years it has been higher, and other years lower. ESRI are now forecasting average annual growth of 5.6% from 2011 to 2015 (subject to wage restraint and moderate public expenditure cuts).

    However, my point isn’t really to get into a debate about likely future growth. Such a debate could not be resolved now. We just have to wait and see, and we’ll know in a decade’s time.

    My point was to try and find out what economic/demographic assumptions Pether Mathews made when he forecast a NAMA loss of €17.81. If he is reading this thread, perhaps he could tell use. You (Eamonn76) are at least to be congratulated in that you have spelled out your assumptions. But, unless you are Peter Mathews, I’d really like to know what his are, as he was the one giving the presentation and the one making the forecast of a NAMA loss of €17.81.

    Any emperor can pluck a figure out of the air and predict it will be the NAMA profit/loss but, unless he specifies the economic/demographic assumptions that underpin it, he has no clothes on.

  14. @John

    Up to 1958 Ireland was achieving a considerable portion of its increase in per capita income through mass emigration. From memory the population had dropped from about 3.2 million to 2.8 million since independence. Like Germany and Japan after WW 2 it experienced significant growth thereafter. Followed by stagnation in the mid-eighties. Then further huge growth. We caught and then passed out other European countries.
    Now we are one of the world’s richest. Our growth will now return to that of other mature advanced countries. It would be silly to base economic policy on any other assumption. If we would do end up as a giant Monaco then great – but it would be utterly reckless to depend on that. I assume that Peter Mathews is looking 10 years ahead. I would be surprised if the next five get us much beyond where we were in 2007. The five after that would have to be spectacular to invalidate his analysis. And we won’t be borrowing again like crazy and putting it all into property, I presume, so it will have to be exports.

  15. http://www.independent.ie/business/irish/aldi-ms–to-start-selling-apartments-1920899.html

    AS I predicted, no great feat, more development, on non-Nama land, presumably as Nama land is all tied up, ie a zombie asset. Nama land is falling faster than ever in value.

    President McAleese has constitutional power to dissolve the Dail, causing an election. If that does not work, she can then refer the Bill to the Supreme Court. A constitutional action against the Act based on manifest conlicts of interest, might be possible before the loans are drawn down. Even if drawn down the y might be reversed if action is swiftly taken.

    The fight has only just begun.

  16. @ Pat Donnelly

    “President McAleese has constitutional power to dissolve the Dail, causing an election.”

    Are you referring to Article 13 Section 2?

    I don’t see that the President has the power to unilaterally dissolve the Dail.

  17. @Pat Donnelly
    She will not dissolve the Dail over this. No chance. But given the scale of Nama if she has any doubts over the quality of the drafting she not only can but should refer it to the Supreme Court.

  18. @Eamonn 76,

    My understanding is that she would only refer to the Supreme Court if after consultation with the CoS, she thought the Bill was unconstitutional. The bill may be may things but I doubt it nfringes the constitution Perhaps you could enlighten me.

  19. @jl
    To be honest I don’t know. But governments themselves have requested her to refer bills to ensure that they stand up. We will see if they do so in this case.

  20. NAMA and the constitution!

    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 with her?

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