http://www.sbpost.ie/themarket/central-bank-role-fuelled-property-bubble-45607.html

http://www.tribune.ie/business/news/article/2009/nov/15/a-yard-stick-for-working-out-property-taxes/

I don’t understand your point.

For what it’s worth, I’m the retired actuary of a bank life assurance company. I’m not a banker nor do I have any conflicts of interest. I was just saying that, despite the name, NAMA SPV is light years distant from a typical securitisation SPV.

I agree with you that sub pime SPVs got us into this mess and that gives them a bit of a bad name. I think if NAMA employed PR agents they might have come up with something with less of a bad reputation, but let’s be thankful that they avoided that waste of money.

I think the comparison beween the NAMA SPV and a typical sub-prime securitisation is a bit stretched.

The return on 95% of the bonds in the SPV will be quite independent of the performance of its assets. 5Only 5% of the bonds will be similar to toxic bonds in a normal securitisation.

When it comes to the equityholders, the majority 51% seem to have got an awful deal. Topside they will earn government bond yields plus a 10% bonus, depending on the performance of the SPV’s assets.

The 49% equityholders have a fantastic deal qua shareholders. For a mere €49M they will get all the residual profit of the SPV, conservatively estimated at over €4Bn according to the SPV’s business plans.

Of course this fantastic deal is to compensate them for guaranteeing the bonds, but even so if they lose out of this whole NAMA experience they can go after the bondholders’ profits in all future years.

Clever stuff, Mr. Lenehan.

Originally I heard the Finance Minister say that the SPV was formed to keep the NAMA borrowings off-balance-sheet and thereby protect our credit rating and keep down our borrowing rates. But I watched that idea bomb spectacularly as within days of the SPV announcement the ratings agency Fitch cut Ireland’s credit rating by two notches, reducing our sovereign rating to AA-, from AA+, skipping the AA rating.

Next the Finance Minister gave the following explanation for setting up the SPV; — private investors will own 51 per cent of the SPV in return for a €51 million investment. NAMA will own the remaining 49 per cent in return for investing €49 million, giving the SPV €100 million in capital. The mechanism will allow the Government to exclude NAMA’s €50 billion-plus liability from the national debt, and avoid a serious breach of the EU’s stability and growth pact, which limits the amounts that euro-zone states can borrow relative to the size of their economies –.
That’s total nonsense. How can an entity with finance of €100 million take on €50 billion of debt?
SPV’s are normally formed to ‘package’ income producing assets and shares in this ‘package’ are then sold to investors for a specified yield calculated on the cash-flow.
This is sometimes called securitisation and the name originated in America where shares are called securities. This is at the root cause of the current international financial crisis.

Bankers sold mortgages to people who had no hope of repaying them, on properties which were grossly overvalued (sub-prime mortgages), they then dropped these toxic loans into an SPV. But in order to get people to buy the shares they needed to have a good credit rating attached. Next the banks got AIG to ‘insure’ the debt by what became known as a Credit Default Swap (CDS). Once the CDS was in place the ratings agencies were able to give them a AAA rating. The investors then bought the shares based on the AAA rating.
But the whole house of cards came tumbling down when it was discovered that AIG had no money to pay-out on the ‘insurance’ policies when the debts defaulted and they should never have been allowed to insure this toxic waste in the first place.
The biggest problem with securitisation is no one has a vested interest in performing due diligence on the borrowers. This was the main cause of the current crisis in the banking system.

But that’s not the only problem our bankers created. In addition to the problems with securitisation the banks also have another major problem: paying off billions of debt coming due. At issue are so-called ‘floating-rate notes’ – these are securities used heavily by banks to borrow money. A large amount of those notes, which typically mature in two years, will come due over the next year or so, at a time when the banks are struggling to raise fresh funds. That is going to force the banks to issue expensive new debt.
The debts of the builders and property speculators are only a portion of the problem.

The whole thing is a total and unmitigated disaster.
I’m not seeking to promote my book here, but if you want to see astronomical debt figures which attached to Anglo Irish bank AFTER the government takeover, it’s all in there (I’m talking billions).

I don’t have any time for these people in the public sector who are now going to begin going out on strike, but it’s very easy to see why they feel aggrieved at having to pay for this incredible mess and nobody is being held accountable.

http://www.irisheconomy.ie/index.php/2009/11/12/report-on-hotel-sector/

It underlines what I referred to above, that it is about building solutions for the future. The challenge facing us, because those solutions may not be anything like what we were familiar with in the past. I propose a ‘hybrid’ concept, somewhere between a hotel and an office building.

Getting ready for much more important things like will we be going to SA?

But I just can’t believe that NAMA could have been pushed through without the acquiescence of the ECB, but we will just have to differ on that one.

Getting back to the topic, Bill is right in substance, NAMA is borrowing from the ECB to get the cash to buy their dodgy loans.

NAMA is borrowing €54bn from somebody. It is not the private sector. Formally it is the banks, but it’s a nonsense to suggest that bankrupt banks can lend money to save them from bankruptcy!!

Ultimately the reality is that NAMA is borrowing cash from the ECB which is channeled back to the banks in return for their toxics.

Just say your comment appear there a second ago. I must have missed it between refreshing the browser or something. There is something I would like to ask Cearbhall, or people in general in fact.

To be honest, listening to much discussion at the Irish economy or elsewhere, I wonder what kind of involvement system we need to work on, going forward in Ireland. Norman Bodek makes the point that a Japanese company gets on average 20 no. implemented ideas per worker per year. In the United States, the average is around 1 no. implemented idea per worker every 7 no. years. Albeit, in the Japanese company the ideas are many small, simple and easy ideas. In terms of NAMA or anything else for that matter in Ireland, I do wonder what kind of involvement system we will hope to achieve.

“Why do Namaphobes continually argue that we are entirely within our rights to have these bonds accepted by the ECB for repo?”

Because we are (if by we you mean the banks.) Government-backed bonds are eligible collateral for ECB repo operations. Really, it’s true. It’s not even an “argument”, it’s a fact.

What’s the NAMA guarantee?

It is absolutely clear that the ECB is totally key to this whole arrangement. Why to Namaphobes continually argue that we are entirely within our rights to have these bonds accepted by the ECB for repo?

If substantial amounts of NAMA bonds are indeed repo-ed by the ECB, then the ECB is only doing this because of the NAMA guarantee. NAMA is in substance borrowing from the ECB using the banks as an intermediary. I can excuse Bill for not going into detail in his piece but the substance of what he says is correct.

Managerial Engineering: Techniques for Improving Quality and Productivity in the Workplace

Ryuji Fukuda (Author)

Fukuda was chief executive of the Japanese equivalent of General Electric.

It is worth bearing in mind the following. A worker on a Japanese production line may stumble across a defect in a product. That worker immediately stops working and a team is assembled to look at the problem and to find a solution. The interesting thing in the Japanese approach, is that the worker who finds the defect gets to lead the investigation. It is never the case, the supervisor takes over in charge.

The idea being in that philosophy, the supervisor’s job is to develop people. People will get the work out, not the management. The job of management is to open people to their creative potential.

What I have observed in the Irish construction industry is the opposite unfortunately. The youngest and brightest are thrown out. The management takes over the investigation process.

The workforce is supposed to keep their mouths shut and not be seen to speak negatively of management in any way. The whole process is basically driven by some system of obedience and imposed fear. Presumably these brilliant managers are going to solve everything and we should all be glad to go back working for them, some day, if we are lucky and say enough prayers at night.

The NAMA project appears to be deep in the ‘red zone’ and as far as the country is concerned it’s all for the best. If you have a problem which arose as a result of excessive credit growth and excessive debt levels you cannot solve the problem by piling up even more debts, which is what was going to happen with the NAMA bonds..
The day is finally approaching when these toxic debts will have to written down and in many cases written off, something which should have happened a year ago.
If the government invested the €7 billion which has already been wasted on the main banks, on a new debt free bank we would be in much better shape right now. The problem with Irish banks is not one of liquidity, but insolvency and the sooner the government recognises this, the better for all of us.
Drastically reducing the face value of residential mortgage debt is where the focus should be and not on dead parrots like Anglo (and maybe AIB). Professor Joe Stiglitz hit the nail on the head when he said “the government has mistaken bailing out the banks with bailing out the bankers.”
After the Wall Street Crash the US created the Home Owners Loan Corporation that reduced the face value of residential mortgage debt and refinanced home owners into longer term fixed rate mortgages that they could afford.
If we don’t do something similar, consumption is going to keep on falling, the recession is going to become ever more severe and foreclosures will keep on mounting. The commercial retail sector will begin to implode after the Christmas period and the government has painted itself into a corner by swallowing the bankers line that ‘there is no option to NAMA,’ of course there are options to NAMA. Dermot Desmond put forward one, Richard Bruton put forward another and good old Michael O’Leary of Ryanair told the government exactly how to handle the bankers.

A few weeks back I bumped into a very well know big-deal builder in a hotel in Kinsale and after the usual “are all you guys really broke” I asked him where did he see things going and he replied “this crowd (the government) don’t have the balls to do what needs to be done and the IMF will be here in the New Year to do their dirty work for them.”
It’s certainly starting to look very much like that now.

The best combination of all, is that of youth and age working together. The thing with property, is that in general terms, the older guys come up with the ‘bigger picture’ and then farm out the work to young people who have the energy to do the stuff. This is all backways in my opinion as far as urban development is concerned.

What I find is that the experienced people in property development are afraid to chance something in their mature years, which is different for them. They prefer to stick to what they know. This disables the process to begin with. A lot of developments are built which do not address the needs of today’s society and economy, never mind those of the next generation or the generation after that.

Nick Tyler came over to a conference at Trinity college last year and gave an absolutely awesome lecture about the difficulties in designing transportation systems for the future. Because the needs of society change so much through the years, in terms of how cities are used and function.

http://www2.cege.ucl.ac.uk/staff/staffpage.asp?StaffID=21

If I was given any control whatsoever of project vision scoping in property in Ireland, I would put the younger brains at the front end of the process and allow them do what they do best. Then we get to the backend of the process, the execution of the plan. This is an area in my opinion where young engineers and designers are let loose. That is a grave error on the part of the property development industry. Because the young people are simply too naive about how to go about construction.

That is where the experience comes in useful. That is the time in the development process when you need people in charge, who will not depart radically from what is known and proven. Before the angry young men or women rant off and tell me they know how to build - you don’t. I am talking about sequence, I am talking about organisation of the program and health and safety of workers. The younger designer or engineering simply has not had the time, opportunities or responsibility to learn that stuff. The older guys have that under their belt and it should be used.

But the big problem in the property development industry, is that the logical way to proceed has been turned backways. Society suffers, building quality suffers. But most of all the transfer of knowledge and understanding that should occur from age to youth, and from youth to age, simply doesn’t happen. I specifically blame all of the prominent architects, engineers and builders in this country for creating that awful mess.

Brian O’ Hanlon

thanks for the feedback. I wasn’t too sure about other sectors of employment. I had a feeling, what I referred to might only be specific to the building game.

On a positive side, I suppose in politics we do have a couple of younger elected Dail members. Maybe that is something positive. I had to laugh at the story in the papers recently, about Sean Dunne’s wife offering the youngest Dail member, a job stacking shelves at D4 supermarket.

It is symbolic really, of a kind of anti-youth culture in the property industry in Ireland.

@Margaret E Ward
Ask Brian Lenihan who are the fourty academic economists he claims told him they back NAMA but won’t go public? Tell us if you believe his answer.

@Karl Whelan
The pro-NAMA campaign involved more deception than the invasion of Iraq. On Iraq Bush and Blair genuinely believed there were WMDs.
Lenihan and his backers know that NAMA will lose €13.5 Bn to €29 Bn.
They just want to shove the problem on to future taxpayers.

Unless of course there is massive Lenimandering/Greenmandering of the property market…
Would even that be enough?

Even if I am wrong why would you buy property loans before market has reached bottom?

way back when i said that 95% of the Dail didn’t have a clue what was going with the structure of NAMA, and you all scoffed at me….

Yep, that just about sums it up. Even the fellas who think they’re the smart guys have no clue.

There’s an interesting counter intuitive thing happening here. Often with economics, there is some complex thing going on and politicians misinterpret things by simplifying them. In this case, however, what’s really going on with the plan is quite simple and could be understood by anyone but pretty much everyone has been convinced that something else, something more complicated, is going on.

And, of course, this can only happen if there’s a concerted campaign to mislead people.

http://www.twitter.com/sendboyle

a recent NAMA tweet reply states : “We borrow at over 5%. ECB is making NAMA bonds available at 1.5%”

It is good news for NAMA that UK property is in demand as loans backed by UK property account for 20.7% of the €77bn book. Let’s hope that the NAMA loans are backed by “quality”. Has something to do with the fall in Sterling over the last year I suspect. The demand seems to be from abroad.

If this is a temporary bubble due to a lack of quality elsewhere let’s hope NAMA moves faster than our health service or they might miss the boat.

Northern Ireland accounts for 6.2% of the proposed NAMA book. Any news from our Northern brethren on the matter?

It’s possible that credit will flow to Lawyers, Chartered Surveyors, Estate Agents, Accountants and the restaurants they eat in as they’re in for quite a bonanza in the coming years.

When you are next in contact with Joan Burton, would you be kind enough to ask her if she is still sticking to her forecast that the population of Ireland will fall by 500,000 in the next year? She made this forecast to the Sunday Independent back in July. I challenged her here on her prediction at the time, but she didn’t respond. I wouldn’t normally trouble someone in this way. But, as you say you are a journalist, I’m sure that you are as curious as I am to know. Some may say that this is not relevant to NAMA and is a distraction from the main thrust of the thread, but I’d say its very relevant to NAMA.