NAMA Bill Passes

By the government’s own ridiculously conservative estimates, they are deliberately overpaying by €7 bn — and this does not include the frictional costs of all the experts and valuers that have to be paid and the other costs associated with the state micromanaging fields and houses scattered around the country.

Developers will have their debts forgiven, or at least put on the very long finger, to the tune of billions.

Bank bondholders will be made whole.

Bank shareholders will retain their equity stakes and not be wiped out.

So, anyone involved who’s in any way rich will do fine out of this €7 bn-and-counting gift from the Irish taxpayer.

In other news, those evil parasitical public sector workers, some of whom earn as much as €50,000 a year, will get what’s coming to them in the form of punitive levies, wage cuts, pension adjustments, and layoffs. The state needs to cut €4 bn from somewhere, you know, and if you’ve got some better idea as to where the state could avoid needlessly spending billions of Euro we’d like to hear it.

@Ben
Absolutely right. NAMA makes the establishment morally insolvent. But senior public servants could have blown the whistle on this.
Many senior people currently in the Depts of the Taoiseach and Finance and in the regulators are a disgrace to the public service. Vastly bigger than anything shown in the McCarthy report.

The truth will only emerge after the next election.
FF will lose the election after that too, with or without NAMA, unless the opposition are hopeless.
So are they really thinking that ten years from now with new leaders – maybe even Lenihan – NAMA losses will not be a big issue.
So why not bail out their backers now if they won’t return to power for 10 years anyway? Too cynical?

Finally, the NAMA spin machine cannot be overemphasised.
Let us suppose Lenihan’s head valuer sticks with his 50% fall from peak valuation. We will lose €13.5 billion minimum. Lenihan now has parliamentary approval to transfer this vast sum to financial, developer and professional interests from the public.
This would not have been possible without the ruthless, relentless, all media campaign led by him. If he gets the budget through this will be the year of Lenihan. Lisbon, NAMA, budget: he was decisive in all of them, red light sabre striking down all critics.
The PDs are dead? If there are no income tax increases in the budget on the superrich then FF have completely turned into them.
New slogan: The Crony Capitalist Party.

If, in 10 or 15 year’s time, an elder statesman/woman of the current government attempts to suggest that the taxpayer got good value for money because, say €54bn in borrowing became over the long run €60bn in asset disposals, don’t believe a word of it.

While it’s eminently reasonable to doubt whether even the nominal €54bn will be recouped even over the long run, the net present value of €60bn is far less, deflated by the benchmark long-term interest rate.

Practically, think what could be achieved by the same outlays on infrastructure, IT, broadband networks, hi-tech education, green technologies, etc. That’s the potential that is being foregone by a huge transfer of wealth from the poor to the rich.

Why not allow the banks to keep all this on their books, marked under LTEV, and let them enjoy the supposed upside? The taxpayer isn’t greedy. We didn’t work for this. Let them have it.

@ Alan Matthews

So the site is meant to be an academic perusal of all things economic. NAMA, Global recession, Banking crisis etc.

Problem is, nobody is listening. You can debate all you want but the fact is, it is not economic academia that is making the decisions, it is political players.

Wrong I know but fact none the less. There is no point in debating our current woes if your intention is come up with a correct point of view for no other reason than to say I told you so in 5 years time.

I think the time has come for academia to get political with its point of view.

I have lost track of it at this stage with work pressures. I think I will wait for the Act and the Explanatory Memorandum to be published before making my mind up.

Apart from that, I think the process of legislative iteration did not strengthen this bill.

It introduced mission creep with social dividends, it robbed the plan of its coherency, it delayed the process so we missed the golden window for bringing private capital into the banks, it left us with a mass of uncertainties as to how NAMA will work and will be administered, it exposed the DoF as out of their depth, it did not achieve a level of transparency that could be endorsed by the oppostion to help the public buy into the plan, it prolonged and exasperated uncertainty in the banks.

There has been no major concession to opposition proposals to make it look like a somewhat collaborative effort which may have been supported by the people.

If the DoF had been able to come up with a proper plan with acceptable levels of accountability and transparency then we would have been better off if it had been guillotined on day one. Even if their plan was flawed we might have got the proper ECB and Commission input earlier. The Government always said this was all about timing and I reckon the DoF failed when it mattered. Major reform of the Department is needed if this country is going to weather this lengthy storm.

******

[The next thing I am going to read is Maurice McMahon’s new book about his time as a school teacher in St. Benildus College. Maurice (son of the late Bryan McMahon), was an inspirational teacher for many. I am hoping that will put some perspective in things!]

I think that is my least constructive post to date!

As a virgin to this website, I posted my first two comments today in Karl Whelans section on NAMA. I am delighted to get a bit of advice from Alan on the direction for future comments. However, I feel that all the previous speakers might be a little annoyed with being told what to do. Maybe the site should set guidelines for commentary, so that it is focused on the commentary and answers the questions asked.

1. I think Parliamentary debate, while long and exhaustive, it provided vital input to the passing of the legislation. However, it did create great doubt and confusion over it possible success. While I beleive that it is the only game in town and i would compliment Brian Lenihan on its delivery, there is little confidence in its possible success.
2. I think the Bill had to change to incorporate some further insurance that the lending institutions would be compelled to lend money back to the sectors that require it most.
3. the passage of this Bill has to stabalise the banking sector. Altjough it is only the first step and further recapitilisation is a certainty. we are only heading to first base and we are a long way from a home run.
4. Although I am a complete optimist, I fear for business in 2010. I believe that the local banking institutions will continue to firm up their own balance sheets and that the SME sectors will have considerably less ability to raise finance in the next 12 months. I believe that the banks will continue to capitalise their business to raise confidence from the foreign markets and ensure that their ability to raise capital in future years is sustainable. This may be prudent practice but the carnage that will occur within the SME sector, as they run out of cash will take a long time to return.

@ Alan Matthews

Also, if you think that this excellent blog is being is being polluted by “views”, particularly those of non-economists, perhaps you could suggest to the moderators a password system whereby only economists be allowed post comment and while doing so should keep their non-economic views to themselves.

Economics was born of political economy was it not?

All economic policy is political whether it originates from the interests of the State, the Community or the Individual.

Alan, this blog is well moderated. If on occasion a commentator takes a swipe at a political figure that is beyond the pale it will not be posted and if missed can always be deleted.

In the case of NAMA I personally believe that a certain licence is necessary given the enormity of the political and economic decisions being taken.

If you wish this blog to stick to a dry exchange of views of pure macroeconomics it will be the worse for it.

Just a view. But then I’m not an economist, much less a macroeconomist.

@ MB

im fairly sure his point was that “pour(ing) out invective and off-the-top-of-the-head opinions on NAMA” and “slag(ging) off the Minister, his advisors or the world in general” is already well covered by the good people over at the likes of Politics.ie, and that this site was supposed to be offering something different to that.

But im sure your right that anyone not involving themsevles in the politics of the matter is in fact doing the equivalent of sniggering in the background. Great comparison.

@ Alan Mathews
“If people have something to offer in response on [Karl Whelan’s] questions, then please feel free to comment.” Otherwise, presumably, shut the hell up, and “perhaps you might consider expressing your views elsewhere”.

Early today (yesterday), as it happens, in the course of my reading, I came upon the stoutly stated opinions of a prominent academic economist (and no, it wasn’t Mr Lucey) – just prior to the economic collapse. Some niggling problems, it seemed, but everything was fine with the Celtic Tiger.

I will spare his blushes . What matters is that when it mattered the experts’ views were of no more value than the views of the average taxi driver.

There is a somewhat tetchy tone to some of the responses from the more learned amongst us. So be it.

Over the past few months I assumed that one of the benefits of this site was that we ignorant-but-concerned folk might learn from the insights of the experts. And they might learn from our more mundane concerns. And that allowances would be made for our undisciplined responses.

Apparently not. Fair enough. It’s a big world. Bye.

Peter you do realise that you’re just arguing by anecdote? One guy called it wrong, ergo no academic economist’s views are of value? Is that what you are trying to say? I know a doctor who drinks, smokes and is quite overweight. I’m still pretty sure the next time I’m sick I won’t shun my GP for a faith healer.

I think Alan Matthews is right. The quality of the comments, particularly on NAMA (whose market share here must be 90%) is often low: lots of heat,little light. This is not about economists vs. others. There have been some fascinating contributions by people who are not economists.
Having conducted a highly detailed econometric analysis of the blog I infer:
That as the number of comments on a particular post rises the quality falls & at an increasing rate. If you see more than about 25 comments forget it.
Blogs attract cranks.
Blogs turn otherwise sensible people into cranks.
For example Zhou En Lai just to be a perfectly normal Chinese apparatchik, complicit in the suppression of millions but thankfully dead. Now look!

Now if a blog is just to allow random people to sound off without having to go to the pub or become a taxi-driver, thats fine. But I think the idea is that it is more than that. And for those who wish to, say, dismiss the views of NAMA critics, the ranting is playing into their hands.
Alan also touches on an interesting point, the absence of female contributors. A female colleague who also observed this, had an interesting explanation for this: they don’t have the time.

@Kevin Denny
Yes, blogs do display power law decay when quality is plotted versus response time.
However, on the issue of NAMA taking 90% of the airspace – thats supply driven. If people who can initiate new threads wish to initiate new threads they should so do. Also, the fact is that the emergence of the blog here has coincided with the emergence of a massive economic downturn, a massive economic gamble by the government and comes at a time when the public is blog-conscious and economy-conscious. That it hasnt devolved into ranting madness more often than it has is a tribute to self-organization and collective sense.

Ciaran Cuffe is looking for parliamentary questions on Nama’s operation in the future. Any suggestions? I’d be most concerned about transparency issues…Anyone want to suggest questions? I will pass them on to him or you can do it yourself. Might be handy to have one public list though so we don’t duplicate.

I think the announcement of the decision by Dr. Somers to retire as the NAMA Bill proceeds to the Third House of the Oireachtas is an eloquent response to the questions Karl has raised. Obviously it would be unwise to read too much into this. (Presumably there are personal reasons. Dr Somers has provided sterling service and he is at an age when many of his peers are enjoying much less well deserved leisure.) But, none the less, I believe it is significant. Karl has previously commented (can’t find link) on Section 51 of the original draft of the bill, “The though shalt not do a Michael Somers” section, which prevents NAMA board members and senior officials from publicly criticising the Minister or policy in relation to NAMA.

Although the President is empowered to refer this bill via the Council of State to the Supreme Court, I accept this is unlikely. NAMA is an “Irish soultion to an Irish problem”. While not deliberately seeking to provoke the ire of Alan Matthews I think we need to accept that Ireland is a deeply conservative country. Centre-right parties have dominated parliament and government since the foundation of the state. And Irish people seem to be remarkably forgiving of “their own” who engineer spectacular economic, financial or commercial failures.

NAMA is a means of providing some limited absolution to the bankers and developers who created this financial mess. It has little to do with the important questions Karl has raised. The various alternatives to NAMA that have been advanced would, in most instances, have led to significiant external ownership and control of the domestic banking and property sectors. Dsepite the popular revulsion at the limited absolution being granted to the bankers and developers, I suspect extensive external ownership and control would have aroused a more widespread and deeper-seated popular opposition.

However, the challenge remains to enhance democratic scrutiny and accountability in the design and implementation of policy and to de-link consideration of medium to long term economic policy issues from the electoral cycle.

@AM
“I can understand completely the anger and frustration that people feel over the state of the economy, but my view is that this site is not the place to pour out invective and off-the-top-of-the-head opinions on NAMA or any other issue.”

I think that your comment is unfair. There has been about 50 threads about Nama and, assuming 50 comments/thread, about 2500 comments. A small proprotion may have been “heat of the moment” but the balance were IMHO “fair comment” even if not always couched in academic terms.

What do you think of the final bill? Too complicated and lots of wriggle room with serious problems emerging down the line.

Did this process work well? No, as the MforF stuck to his guns and only accepted changes that suited him.

Is the final bill much better than the original draft bill? Obviously, in terms of what the MforF was trying to achieve.

Will the passage of the bill stabilise the banking system? No, as the banks will have to be (effectively) nationalised to address this.

Will it get credit flowing? No more likely in Ireland’s case than in any other country.

Interesting exchanges as usual. NANA is a pig with lipstick! Its the math that is the giveaway (no pun intended!). As for lending: ?how repay? No one has yet answered this nitty question.

In any bureaucratic/political structure the person in authority and with the power to make decisions is the one who dictates to all others – and any attempt at complaint or objection is dismissed with an ad hominem -‘what’s YOUR problem, then?’. This is the low level of meaningful intellectual engagement that some of you are referring to. The initial reaction of dismissed persons is to complain or object somewhat harder, only to be confronted by the next ad hominem – ‘you REALLY DO have a problem, don’t you!’. This begets a furious response ie, anger. [But we MUST NOT show anger – yeah?] So, you have a choice, shut up and clear off, or be branded as a troublemaker. Some choice! You lose: you lose.

The bureaucratic, political and financial elites have erected a defensive barrier between themselves and the citizens. The elites will demand that the citizens pay taxes to ensure the elites can remain secure behind their protection. But, the citizens do not have an inexhaustible supply of money to pay the taxes, and consume, and pay their necessaries: then what? The math says this Reckoning Day ain’t too far distant.

Please keep the comments going, its one of several places that I can expect to get meaningful explanations.

B Peter

@ margaret

On the transparency issue Ciaran could ask that considering most of our property players were investment syndicates what provisions are there in the bill that no member or group of members are allowed to purchase assets they previously owned at a lower price.

A suggestion would to be to preclude any individual with an involvement in properties or investments that end up in NAMA from having any involvement in property investment for a period of 10 years.

@Karl Whelan
Well done to you for your persistent questioning of the whole NAMA plan on this site, on radio and TV from the beginning.

Of course there were many others who questioned the wisdom of a state run asset management agency paying over the odds to pay for the reckless gambling of bankers. And yes, Alan Matthews, the FF/PD governments were cheerleaders for this crazy debt driven economic “miracle”.

The passing of the Bill in the face of so much legitimate concerns is more a reflection of the way bills are passed in the Dail than on the actual merits of the case.

Well done again on your contribution to this critical public debate on NAMA.

Folks,

I agree strongly with Alan Matthews.

I think http://www.irisheconomy.ie is potentially a very rich resource for students, economists, journalists and anyone else interested in the debate on the Irish economy. While there are advantages to having it as an open forum, the weight of gibberish which has appeared since the summer is hard to get through. I also sense that serious academic comment has declined as a direct result – a sort of greshams law for blogs.

I think that the future of the site would best be served purely as a place for comment from the academic economists listed in the column on the right, even if this means that many genuine, non-academic posters such as myself get cut off. There are other fora for the rest of us. The comparative advantage of http://www.irisheconomy.ie is in academic comment, so the site should focus on that.

As an academic (and not an economist) I have to disagree strongly with Alan Matthews and Ronnie O’Toole. A blog is a blog. If you don’t want a free expression of opinions, don’t allow comments. If you do allow comments, do not censor anything that is not abusive or threatening.

Well done Karl for keeping the NAMA issue alive, day after day, in the face of so much opposition and criticism from the PTB.

@Alan

I do not think that the NAMA conept or bill was improved by the Dail.
My answer is No to all questions.

The only comment I make is to post this extract from Sean Barrett’s article in the Irish Times on Fri 26th June last

“The success of Irish aviation in international markets over the last 20 years contrasts with much of the subsidy-guzzling quango-based waffle that passes for industrial policy here.

The Irish parliamentary revolt of June 27th, 1984, was essential to ending the cartel domination of international aviation and is admired internationally. The change in parliamentary opinion in Ireland in one afternoon contrasts with several years of congressional hearings in the United States as presidents Ford and Carter, Senator Edward Kennedy and Professor Alfred Kahn took on the incumbent protected airlines.

Ireland needs more parliamentary revolts. Secret deals with bankers, builders and religious orders should be no more acceptable now than deals with cartel airlines then. There should be less parliamentary whipping of divergent opinions in our rigid party system.

A proud tradition of parliamentary oratory from Grattan, Flood, O’Connell and Parnell was revived briefly on June 27th, 1984. We hear it seldom today.

As Ireland returns to rates of unemployment, tax and public debt of the 1980s, a reformed parliament might again lead the way out of our crisis.

The best way to celebrate the 25th anniversary of a remarkable day in parliamentary democracy is to have a lot more of them.”

http://www.irishtimes.com/newspaper/opinion/2009/0626/1224249574742_pf.html

It seems to me that Sean’s phrase “subsidy-guzzling quango-based waffle that passes for industrial policy here” is an apt comment on NAMA, once slightly edited.

On your other points regarding the content/motivation of postings/posters, the site is called Irish ECONOMY (ie. not economics as a profession or as practised in academies). IMO, it is political economy and thus can be party political.

Surely you have enough faith in the readers of this site to make their own judgement on the quality and content of postings?

This site is contributing to rational debate, in the ways intended by the promoters along with unintended consequences. C’est la vie!

It is an example of freedom of expression, about which Rosa Luxembourg made some pertinent points when talking of the Russian Revolution.

http://www.marxists.org/archive/luxemburg/1918/russian-revolution/ch06.htm

I think her comments apply to all forms of autocracy, whether authoritarianism is based on ideology, religion, power, money, position, race, control of mass media, knowledge etc.

@ zhou_enlai, re your initial post on this topic above – it is disheartening, to say the least, to hear what will be the FF spin from the inception of the NAMA operation to its end – one, NAMA did not work because it was required to undergo due parliamentary process, (“mission creep” “delay” etc.) and two, because of the inherent failings of the Department of Finance. Whether or not you intend to speak for FF on this, you already are. Regardless of the legislative process, regardless of the weakness of the DoF, the overwhelming blame (and it will be blame) for NAMA must, and will be, placed at the feet of this Government. The NAMA concept, by its very nature, was destined to fail – nothing could have substantially weakened it more than the fact of its original conception.

@All those who commented on my suggestion on comments

There was nothing in my comment above to suggest that this site should only be restricted to economists, and I would not support Ronnie’s suggestion that only named economists should be allowed to post comments. I think getting the involvement of a wider public in debating our economic challenges is potentially a great strength of the blog.

But for it to serve this purpose, we need to encourage contributors to debate the issues and to contribute ideas, evidence, questions and experiences from whatever background they come from. If too high a proportion of the comments have zero information content and just allow somone to sound off, then the value of the site is undermined.

I agree it might be useful to give some guidance for comments on the front page of the site, in addition to the earlier standards agreed to avoide abusive and personalised posts.

Guys, can I suggest that we lighten up a little? If people don’t like the comments from the great unwashed, there’s nobody compelling you to hit the comments button. Similarly, it seems that some people really didn’t like what Alan wrote but it was intended as constructive criticism.

The reality is the following: Posters can turn off the comments feature if they want (though I suspect most don’t know how to do it.) Nobody has done so yet to my knowledge. But I don’t think there’s any way, with the current software we’re using to only allow comments from people considered genetically superior. So absent some major effort to switch blog software — not my job — things will remain as they are, which is either good or bad depending on your point of view.

@Alan Mathews

For support for my views on Brian Lenihan just read this.

http://www.irishtimes.com/newspaper/opinion/2009/1013/1224256508947.html

Now Morgan Kelly is undoubtedly a male. But, leaving this aside, I am sure you would agree he is not the sort to just “pour out invective and off-the-top-of-the-head opinions on NAMA or any other issue”.

“WHILE MOST economists by now simply dismiss Brian Lenihan’s utterances on the economy as “not even wrong”, this is to miss the Minister’s almost eerie ability to predict exactly the opposite of what is going to happen”.

“Who else, as Irish bank shares plunged 13 months ago, could conclude: “Our banks uniquely have weathered this storm . . . We are in a zone of financial stability in a very troubled financial world.”? Two weeks later, having been panicked into his catastrophic bank liability guarantee, the Minister assured us that we had “the cheapest bailout in the world so far”, and six weeks later averred that: “It is not the function of the Government to fund or bail out the banks.”

“The effortless miscalculations, the assured non sequiturs, the lofty indifference to facts”.

Morgan describes Brian Lenihan as a master of misleading nonsense.
Steaming misleading nonsense.

“The Nama legislation, as expected, piles up this material on an Augean scale.”

“To subject these almost poetic flights of ministerial imagination to any sort of rational analysis will seem to many like vandalism, but that is what God made economists for”.

“At a quarter of national income, Nama would dwarf the cost of previous bank bailouts, which varied from about 3 per cent of GDP in Sweden to 14 per cent in Finland and Japan”.

“Brian Lenihan assures us that Fianna Fáil’s monument to a decade of waste, corruption, and ultimate ruin will not be wasteful, corrupt, and ultimately ruinous.

Let us hope that, for once, he is not wrong”.

Now Mr Mathews, if Morgan Kelly expresses similar sentiments on this site would you criticise him? Or would it be ok because he is an economist?

I just hope you didn’t read his article about the serial incompetence of Brian Lenihan and the inevitable disaster of NAMA and the only reaction you had was, “nothing justifies the use of a rude word by an economist in a national newspaper”!

Anyone else think that the reactions to Alan Mathews comments have done nothing but re-inforce his original point?

@ E20Bn plus interest

Usually a dire crisis is necessary to effect change in a society.

In Ireland, sadly it appears that the comfortable have escaped the grim existence and the pervasive fear that is the lot of people who are unlucky to be out of work in the modern money economy.

What was striking about the NAMA debate, was how little had changed in the old conservative ways of doing things.

The Opposition had nothing of novelty to say and blather pours forth on competitiveness, but is the State helpless as the biggest purchaser of goods and services in the economy.

So NAMA, provides for almost €2.5bn in fees for professional services, and the same old system of Victorian secrecy protecting the insiders, prevails.

The comfortable with their guaranteed pensions haven’t much to worry about.

In the US in the early 1930s, the International Apple Shippers Association, faced with a surplus of apples, decided to sell them on credit to jobless men for resale at a nickel each. Overnight there were shivering apple sellers everywhere.

Asked about them, President Hoover replied: “Many people have left their jobs for the more profitable one of selling apples.”

Life is more humane these days but in conservative Ireland, the lack of interest in reform and change is deeply dispiriting.

What does it require if not something resembling the echo of the rumble of the tumbrils, on the cobblestones of Paris’ Place de Grève.

Alan, if all this sounds too subversive, maybe you should come down from the ivory tower!!

@ Margaret E. Ward

“Ciaran Cuffe is looking for parliamentary questions on Nama’s operation in the future.”

Shouldn’t he and his party not have thought that through before voting NAMA into existence (twice)?

@Margaret Ward

“Ciaran Cuffe is looking for parliamentary questions on Nama’s operation in the future.”

Several come to mind but this will do for starters:

Why has Nama written down its loan portfolio by 40% ?

Part of the reason for the increasing bad-temper on the site is the preponderance of NAMA-related threads. While these are important, and I wouldn’t want to suppress them, although I rarely contribute to them, threads relating to the wider economy are much less frequent now than in the early days of the site. For example, this week alone there have been lots of important data published on the wider economy. The latest industrial production figures were published on Tuesday, the latest inflation figures were published on Thursday, and the latest retail sales figures were published today. All of them support the more optimistic view of the economy that a few of us have. In the early days of the site, threads would probably have been opened on all these. But, this week, nothing. There is now very little debate on the site about how the wider economy is actually faring and how soon the recession will end. For the record, I think its allready over, but this isn’t the thread to say why I think that.

@Johntheoptimist
Of the last 24 threads my quick count found only 5 about NAMA.
Given that the legislation on the €54 Bn gamble has been finalised this week one would expect a lot of threads on NAMA. But only 5 of the last 12 have been. There were 12 threads in a row not about NAMA this month.
To refer to the “preponderance of NAMA-related threads” is simply misleading. I have seen this argument advanced on this site before always by NAMA supporters.
I can’t help feeling it is a symptom of a resentment widely felt among NAMA backers I have described before.
“And we would have gotten away with it (much more easily), if it hadn’t have been for those pesky academic economists”.
Well done to all the 46.

@John the Optimist

I’ve pointed out before that, as best I can recall, there has never been a post on this site about industrial production figures.

As for the other releases, I guess you view -6.6% deflation as consistent with “an optimistic view of the economy” on the grounds that falling prices boost real spending. Others will view it as a sign of an incredibly depressed economy.

@JohnTheOptimist

On industrial production figures, would you go AWOL in a bad month?

Monthly: Down 16% in August; up 11.2% in September.
Annual: Down 12.9% in August; Down 0.7% in September

Batch chemical production can be puzzling!

Wonder how much added value materialises?

No big changes in employment or reports of new facilities with all that added output in 2009.

@Karl Whelan
Did this process work well? No – for a decision of such magnitude the quality of discourse was inadequate – the inability of the political opposition to think and promote a strong alternative did not help.
Is the final bill much better than the original draft bill? In key areas of substance – No – and in some ways worse as SPV enters the cute hoor lexicon on governance shuffles and international reputation takes another hit.
Will the passage of the bill stabilise the banking system? I do not know. Gut states probably but without any significant change to the nature of the system that got all into this quagmire..
Will it get credit flowing? I do not know – but without it productive value creating activity will dry up ………. probably an error of massive proportions not to nationalise the lot of them in September 2008.

@protectionists and genuflectionists
Minor point: economics is not the sole preserve of economists – welcome to the public sphere!

I had suggested earlier that it might be usefull to give some guidelines to on the front page of the site. I might be a novice contributor to the site but should there not be an option to return to a home page. It just seems a little confined once your are in one debate.
I am really impressed by the standard of commentary on the site and while I hope to add to this content over time, I am also here to learn from those that are more knowledgeable in these area. Although I know karl and Alan are economists, I would like to know, who is an economist before I read the commentary. I think it might help.
Thanks,
Tommy C

@ James Conran

Can I “submit” this as an analogy for NAMA?

Yes I did think James. 😎

Karl,

Any Minister charged with responsibility to devise a scheme to stabilise the banking system faced huge political risks to their own reputation and to the survival of their administration. Thus from the outset, politics had level pegging with any economic rationale. The process of getting NAMA from proposal to fully fledged legislation must be viewed in that context.

It’s very unusual, here or anywhere else in the EU, to have a public debate of the kind that took place about NAMA. Even more unusual, to find such a debate encouraged by the Minister sponsoring a financial proposal of this kind. If the political strategy was to draw all strands of opinion, particularly those opposed to the entire concept, into the public arena, and then pick them off, one by one, it worked like a charm. The Minister and his team could cherrypick good ideas from wherever they were coming, digest them and then include them in the legislative package without being accused of that most damning of political charges, the ‘u-turn’. As for their diehard opponents, all they had to do was wait for the mistakes.

Arguably, the Fine Gael leader blew his own party’s ‘good bank’ proposal by announcing it prematurely and then demonstrating on the national airwaves that he didn’t really understand it very well himself. The Labour Party’s ideologically inspired and populist demand for pre-emptive nationalisation; first for all the guaranteed financial institutions but later whittled down to just the two main banks, was also easily blown out of the water on grounds of costs. Even the challenge on the specifics of the NAMA proposal from the academic economists foundered on the unfortunate ‘46’ letter.

NAMA might not be popular, but neither FG’s ‘good bank’ nor Labour’s pre-emptive nationalisation plan were presented with sufficient coherence or authority to inspire any public confidence that they would be any more likely to work. The plain truth is that the general public resent the idea of any form of bank-bailout, but however angry they may have been, they could still recognise that something had to be done. Once it became obvious that NAMA would go through, the media lost interest and so did the public.

Along the way, good and bad ideas have become incorporated in the actual legislation. But the final Bill is arguably much better than the original draft. Despite some dubious new provisions, like the SPV accountancy trick, several significant amendments have also been included that will improve oversight of NAMA’s operations.

If the highlight of the parliamentary process was the Minister’s appearance before the Oireacthas Committee on Finance; the low point was the extended Dail debate on the Bill itself. One might reasonably argue that the political debate on NAMA ended following the first day of Second Stage in the Dail. For much of the rest of it, there were frequently less than a dozen deputies in the chamber for the debate. Moving the Committee Stage to the Dail Chamber turned into a fiasco.

A lot of parliamentary time was wasted on trivialities and repeating the same points ad nauseum. Our legislators appeared focused on the substance of the Bill for only about 20% of the many long hours that went into debating its nuts and bolts. For instance, in the final debate before Thursday’s vote about one and a half hours was wasted in discussion on a minor technical amendment; a tedious interlude in which the usual conspiracy theories about NAMA were trotted out amidst irrelevant references to photographs in hotels and bank accounts in Switzerland, Bermuda and the Isle of Man. It was poor stuff indeed.

Will NAMA stabilise the banking system? Possibly. As an ordinary citizen, I certainly hope it does, whatever its flaws. Will it get credit flowing again? Maybe, though there will be a lot of complaints that the banks aren’t lending or they’re being too tight about business overdrafts and so on. There are still plenty of people out there who have not recognised that the world has changed and that banks will not lend money as freely again as they did in the boom years. There are others who may believe that political lobbying should allow them to secure loans that might otherwise be sensibly rejected by any financial institution. One thing is sure, there’ll be lots more drama about NAMA in the months and years to come.

@ All

by the by (again), while there might be a lot of posts about different topics on this site, there is a clear correlation between ‘comments’ and NAMA threads. Also, many commenters would appear to only be interested in talking about NAMA and have no interaction with the other posts. I think that was what some people on this post were trying to suggest.

@ M.B.

“The end of recession is nigh? You really are of the glass is half full brigade.”

I never said that the end of the recession is nigh. I said that it most likely is allready over. However, I must clarify, as the media tend to make fun of such statements. The end of the recession does not mean that everything is back to normal again. It simply means that it is the first quarter in which the economy stops contracting and starts growing again. Thus, Germany, France, the US and a few others are allready out of recession, but GDP is still well below its pre-recession peak in all of them. If you compare a recession with a bad does of swine flu. Then, the ‘end of the recession’ would correspond to the first day in which your condition stops getting worse and starts to improve, not the day on which you are restored to full health.

Regarding your other points. You say that the private sector has cut costs but the government hasn’t, at least not to any great extent yet. I would probably agree, and I would tend to support the cuts the government is proposing for 2010. However, as Garret Fitzgerald wrote in the Irish Times this morning, there is a likelihood (not a certainty) of the economy growing rapidly from 2011 on and, if this happens, (he says) there will be less need to have further cuts after the ones proposed for this year. Bear in mind, also, that most countries haven’t cut costs at all, either in the private sector or the public sector. As far as I know, Ireland is the only country in the EU in which the fall in employment is greater than the fall in output, and our HICP inflation rate is now 4% to 5% below the EU average.

I’d also be less worried than you about a one-day strike by the public sector. I’m sure that, if Kieran Allen leads the UCD Department of Sociology out on a one-day strike, we can survive. Talking of which, a thought has just occurred to me. Will the academic lecturers who run this site be supporting the strike? Stranger things have happened.

@Veronica

I like the way you summed it all up – even though your analysis of NAMA showed that there is little opportunity of funding being available to the SME sector, you did it in a positive way – Well written

@ Joseph & Veronia

as one of the most vocal pro-NAMA supporters on this site, i would like to remind people that one of the main reasons behind my support, which i frequently mentioned here, was the lack of a viable political alternative put forward by the Oppositon, as opposed to a theorethical alternative suggested on this site. A potentially great idea with no chance of becoming a political reality is, unfortunately, just an idea and not a plan.

@ Karl

FG had an idea (which changed a lot over time), and Labour had another idea (which amounted to nationalising first and asking questions later). Neither were remotely close to each other. I always said the lack of a “politically viable alternative” (ie something which could actually be enacted) was a major issue for me, in that i felt something HAD to be done to stabilise the perception of the economy.

This issue goes even further – if we had an election tomorrow the likelihood is that we’d end up with a FG/Labour coalition. Does anyone think that the two of them are going to be able to agree on any substantive changes to our economic policy? This is another reason why i said we needed FF to stay in government for the moment and wait to boot them out until next year sometime – at least they’re actually willing and able to cut government expenditure this year. FG (per George Lee this week) are unwilling to even cut child benefit on someone with a million Euro mortgage and a relatively large income.

@ johntheoptimist

I agree that the economy has stopped falling and is starting to bottom out but my worry is that public sector disruption might hinder any recovery.

I believe that Britain has also taken measures to cut public sector jobs and freeze pay and as our nearest and biggest trading partner as well as the only country in Europe with whom we have a land border it is the country against whom we should benchmark out rates of pay and our cost competitiveness.

This leads me to another question and it is probably one already asked and answered on this site but if the economists on site would please indulge.

Having a different currency to our neighbours is not an ideal situation. My business deals a lot with the British market and to say we are considered an expensive market to trade with is an understatement. I know that currency fluctuation is a big issue especially at the moment but was entry into the single currency without the Brits a good idea or has it contributed to our woes.

I remember when I started my business I straddled the punt and the euro and found by the time I was trading with the euro some costs had jumped by as much as 25% in a 6 month period.The 3 months before entry seeing the biggest increase.

dratted lack of edit function….. the unfortunate 46 letter…

@Bian Lucey,

Brian, I will be happy to elaborate on the ’46 letter’ and related points. Today, however, I have to work for a living so I will have to leave it over until tomorrow when I will have more time. I hope you will excuse the delay, but there’s not much I can do about it since ‘putting bread on the table’ must take priority, alas, for the moment anyway.

To give thanks to the govt for actualli publishing a bill months before it is enacted is preposterous: it is becoming extremeli rare for example for the UK govt to enact an bill which has not had a formal consultation process/green papers/white papers etc. Veronica – ur post is equall preposterous as is the idea that commenting on this site should be better controlled (as distinct from making posts). I actualli onl read posts with lots of comments – I trust in the market and i’m not even an economist.

Brian,

Any public affairs consultant worth their salt will tell you that most policy announcements are initially greeted with apathy by the general public and largely go unchallenged except by vocal groups with a strong vested interest. Apathy only transforms into general public concern when risks and costs (social, environmental, health or economic) contingent on the policy are identified by authoritative sources. In most cases, the risks are exaggerated for campaigning purposes. The media play along, and exaggerate further to increase the dramatic potential of the story. What they’re after is ‘David and Goliath’, ‘heroes and villains’ type conflict scenarios because that’s how we tell our stories to one another. Players who get bumped to the sideline during this process lose credibility. If you no longer have any influence on how events will play out, the media reduce your status in the public debate accordingly. The final stage is that the policy is either accepted or rejected. However passionately they may have espoused either side of the argument whilst the outcome was uncertain the media and the public then quickly lose interest and move on to something else.

I described the 46 economists’ letter as ‘unfortunate’ because, in my professional opinion, irrespective of whether or not the facts were on your side, it was misdirected and tactically wrong in a political sense and made it all too easy for the policy formers to take you out.

This is just my opinion, however, and no disrespect is intended to two brave professors who did a lot to highlight the risks relating to NAMA and promote public understanding of the issues, for which we all owe you a debt of gratitude.