How the organ of British propaganda sees us. Interesting to note that Nama was to enable banks to lend. See, it is propaganda!

For the record. I have been advised that:-

Art 28.7.1 of Constitution states that the Taoiseach, the Tanaiste and the member of the Government who is in charge of the Department of Finance must be members of Dail Eireann” hence cannot be Senators from the Senate

No Finance minister then from the Senate then!

I have to draw a line between what i see as the validity of NAMA and those in mortgage arrears, NAMA isn’t about ‘extra’ lending, its about creating liquidity scenarios where ‘normal lending’ can occur. People in serious arrears are quite a separate (albeit very serious) issue, I don’t see them as being the same thing, in that fixing one fixes the other.

Thanks for that.

Yet another that I missed.

Difficult to keep up really.

“Once the ECB slams the window on its fingers, the Government will be forced to borrow at market rates of 5 per cent or more. In the next decade, this will add another €25 billion or so to taxpayers’ losses from Nama.”

Do you have the link to the original Kelly article, or how Kelly has worked out the €25bn. The thing is this will be forgotten as time goes on. The funding cost of Irish debt will be blamed on other factors and the NAMA cost will get lost in the fog of war.

With further “investment” in Anglo, BofI and AIB you should soon be able to change your name to “€100bn bank bailout”.

Greg, thought I was loosing the plot the other day on another thread when I said that NAMA losses would be 31bn. However, you are making me look like I am a profligate optimist, which I probably am. I was working from Peter Mathews papers and the logic behind his approach. I felt Peter was being too conservative because he was hoping against hope that the government might actually listen to him.

Whatever was in our minister for finance’s mind it was game, set and match to nama from day one and when he got the Damascus road conversion of Alan Aherne to bolster him it was a done deal. This is not being anti FF it is what the history books will explicitly say.

“I said there would be a substantial increase in lending. I didn’t say when it would be.”

He held up a sign during the Lisbon 2 campaign (I voted yes) saying
“Yes to jobs”. He issued a press release stressing Lisbon 2’s importance for jobs. Then the day of the result he said there was no promise of new jobs. Went out of his way to state it. Mental Reservation.

FF of course campaigned on the slogan, “Yes to Recovery”. When?
New name, “FF: The Mental Reservation Party”.

When will Lenihan admit NAMA will not result in a material increase in credit? We should take bets.

I’ve a recollection of some government folk claim that because NAMA bonds had low coupons as it would force banks to repo and lend to the private sector. I’d need to see/hear the quote again to figure out the logic.

Anyone else remember if this? Who said it?

“A less futile exercise is to ask how much Nama would have cost at the end of similar credit-fuelled price bubbles. A decade after their peaks, Tokyo land prices had fallen by five-sixths, while Irish farmland, adjusted for inflation, had fallen by three-quarters. Had Brian Lenihan bought €77 billion of either, applying the proposed Nama discount of 30 per cent, he would have lost €35 billion-€40 billion on our behalf, or roughly €20,000 per taxpayer, and that is before adding interest.”
I will take the loss as €35Bn.

“Once the ECB slams the window on its fingers, the Government will be forced to borrow at market rates of 5 per cent or more. In the next decade, this will add another €25 billion or so to taxpayers’ losses from Nama.”

That gets you to €60 Bn. Add on another €5Bn minimum to finish developments which aren’t needed and you get €65 Bn. Then there are the economic costs of propping up the property market which I am not including. Therefore for every €1 we don’t put into NAMA we save €1.20 plus economic costs avoided.

So, we are going to lose €65Bn when, “All that needs to be done is for ownership of Irish banks to be transferred to their bondholders. This process of converting debt into equity occurs sufficiently often in banking to have a name: resolution. Resolution offers a way for Irish banks to be adequately recapitalised at no cost to the taxpayer, and able to manage their business without political interference.”

It is simply astonishing that the the great majority of the establishment of our country are cheering NAMA on while most of the rest pull their punches. This is an outrage.

They explain themselves here:
http://thestory.ie/about/

There is a lot on Anglo but bloggers on this site will see at least one familiar name (clue: tweeting away).

http://www.gavinsblog.com/2009/09/29/anglo-irish-bank-part-1/

http://thestory.ie/2009/10/01/sean-fitzpatricks-loans/

Apply this approach to the following statement by O’Dea:
“This is not a bail-out for the banks, property developers or speculators.”

Might not be a bad idea. Maybe we can start a campaign to get Karl D. made a senator?

http://www.irisheconomy.ie/index.php/2009/09/16/nama-from-heaven/

FF TD and accountant Sean Fleming, on the Six-One News:
“There’s a lot of confusion on this. NAMA … The banks … This money is being borrowed from the European Central Bank. The taxpayer is not contributing any of this money tomorrow. The European Central Bank is providing all the money and all that has to happen is that during the ten years of NAMA or thereabouts, they will repay those loans back.”

Wille O’Dea, accountant, on Morning Ireland:
“The ECB has agreed to give NAMA money … If the ECB disagreed so fundamentally, as George Lee suggested, with the plan, then they wouldn’t be prepared to come up with the money.”

The media allowed them to get away with this outrageous spoofing. But now the outrageous spoofing has just got more outragier. Now we learn that this €54Bn going to the banks from the taxpayer is not being lent out.
THIS IS AMAZING! The banks are NOT going anywhere near the ECB. The mention of the ECB was a total red herring. Surely the media should be outraged at this? Surely George Lee and Richard Bruton should be?

I am having trouble accessing his website (?) but thankfully he supplied his thoughts to The Sunday Independent for posterity.
http://www.independent.ie/national-news/call-spade-a-spade-and-bury-the-myths-1885338.html

You will remember that the media and the opposition by and large agreed with the government that the Lisbon No campaign had been guilty of making wrong and misleading claims. So where was the outrage at this claim in a national newspaper:

“The Government will not pay anything to the banks. It will issue them with IOUs they can use to get funds from the European Central Bank (ECB).”

How can they continue to allow the NAMA lobby to get away with it?

It has just been made law! Who is going to scrap it? Minister for Finance Karl Deeter?

“…The Government will not pay anything to the banks. Instead, it will issue them with IOUs that they can use to get funds from the European Central Bank.
This will enable the Banks to get working properly again and provide money for responsible lending to hard pressed families and businesses. NAMA will relieve the Banks of billions of largely distressed loans that cannot be used as collateral to borrow in the money markets or from the European Central Bank.
The probability is that NAMA is likely to make a profit, or at least break even. This is because NAMA will be taking on many good performing loans as well as the bad ones. The potential income NAMA will make on the loans it takes over will be higher than the 1.5% rate it will pay on the IOUs.
The legislation guarantees this further by providing additional risk sharing safeguards to ensure that the Banks will be liable for any shortfalls, if they arise.
There has been much speculation in recent weeks on the valuation of loans. A lot of this has focussed on specific figures plucked out of the air. This has only served to skew the debate into a misleading “one size fits all” approach to valuing the loans. The Labour Party appears to have fallen into this trap.
Each loan will be analysed and scrutinised one by one over coming months to give us a realistic appraisal. The European Commission will send in independent valuers to verify that these values are realistic. The EU’s State Aid rules will not allow NAMA to overpay for the loans. Doing it the other way around by setting an average and working backwards makes no sense whatsoever.
On Wednesday, Finance Minister, Brian Lenihan will announce estimates of the values. What he announces will be just that – an estimate. Only after each loan, including the collateral and securities attached to it, has been scrutinised and audited will an IOU be issued for that loan. The first batch of IOUs are expected to be issued and cashed at the ECB within months, giving the country a much needed cash injection in the run-up to Christmas.”

http://willieodea.net/index.php?option=com_content&task=view&id=134&Itemid=1

I’ve opted for a longer than usual quote as he touches on a number of important issues.

http://www.irishtimes.com/newspaper/finance/2009/1204/1224260038293.html

collateral can be managed, generally it is via margin accounts, the issue of non-market securities (such as properties that don’t trade on an exchange) fudges the boundaries, but that can happen on traded securities as well: take a CDS - on one hand you have the risk of the underlying not working out, and even if you win your bet you have a counterparty risk - AIG is the greatest example of this. but regulating derivatives won’t autofix anything, there are some that cannot be easily standardized but that still have a place, the issue perhaps should be one of standalone liquidity or capital requirements outside of pooled minimum reserves, so that every contract or potential liability has a specific portion of its own non-core capital as a protective measure, leverage of itself only magnifies results.

From Karl Whelans Post September Post “Will NAMA get credit flowing again?”

“The short answer is that “NO” NAMA will not get credit flowing. The long answer is, these banks are going to spend years repairing their balance sheets. The liquidity injection they receive from their NAMA bonds has to go to finance their own debts. After borrowing left, right and centre, they even sold off their own headquarters to pump money into property, they are going to be concerned about their own survival for years to come. They are going to be much smaller entities. Their operations will shrink their traditional methods of making money are destroyed. They will have to find new ways of making money. Also, they are operating in a country that is, to use McCarthys recent expression, “bust”. Hardly a good environment for a banks that are trying to survive. They will follow the money trail and the money trail is outside of Ireland for the next ten years minimum.

The problem with NAMA is, that it was presented as an economic stimulus package, when, in fact, it is the opposite. It eliminates any possibility of the real economy getting stimulus now or any time soon. By choosing NAMA the government have made stimulus contingent on a broken banking sector with a defunct business model. The government believes that it will repair itself and making loans to businesses. It is not going to work. Alternatively, it will be so slow that it will be less than useless to stem the tide of business closures and unemployment.”

As you can see from my post earlier I have become even more pessimistic!

In reality, Irelands shrunken economy will be unable to keep both BoI and AIB going. That is the answer to those that think lending will re-commence. Lending will not re-commence post nama because it simply cannot.

Lenihan repeatedly told us the following:
The banks were chronically short of funds. As a result they had slashed lending. NAMA would give them a huge €54Bn of short-term variable rate Irish government bonds (currently 1.5% rate) in exchange for property loans. They would then sell these bonds and boost their cash deposits against which they lend out. Or they would take them to the ECB and borrow against them at 1%. This gave them a subsidy of .5% on this lending. Either way they would lend out this cash at much higher interest to the consumer. NAMA would directly result in so much extra lending that it was like quantitative easing i.e. where central banks in other countries e.g., UK, printed money and lodged it with their banks. With these extra deposits the UK banks were able to greatly increase their lending.
Some questioned if the extra lending would be cheaper but media commentators and ordinary people (and me) took it for granted that lending would rise hugely.

Only a few experts like yourself and Peter Mathews suggested the banks would take all the NAMA bonds and put them in their safes. It just didn’t make sense. But now we have been told by the banks themselves, without hardly any public controversy except on here, that none of this is true.
Both of our major banks have already said that they are lending out all they intend to. As Boucher of BOI said, they were already giving, “absolute access to funding. We provided funding into this market when we had much more straitened liquidity circumstances than today”.

As Sheehy of AIB said, “In regard to whether the banks will offer more money to a customer who enters one of our branches the day after NAMA is established, that will not happen.”

The claim of a special deal from the ECB never made sense. The banks were free to buy Irish bonds at 1.5% and borrow at 1% at any time. So perhaps more people should have been wary about Lenihan’s credibility.
NAMA’s benefit was that it exchanged a large amount of these bonds for toxic assets. This would allow for huge extra lending, as Lenihan repeatedly told us. What Lenihan didn’t tell us was that the banks never wanted to lend any more.

This revelation is simply shocking. We have been outrageously deceived. In a mature democracy this fib would be Lenihan’s last.

yeah, it is a nice little 1 hour brisk talk. Quite polite etc. Search for Geanakoplos and Shiller on You Tube. I am sure there is extended versions of either economist’s talk available on the web too.

I think we did “nationalise” the banks in all but name 30th of September ‘08 . Sooner rather than later we will have to put the signage up. But not until the last of the nama bonds have been exchanged for real money.

In our society banks are profit making institutions.

They make their profits in the main from two sources:

1) Margins on deposits

2) Margins on lending

Banks lend not as a social obligation but to make profits.

The problem is that without NAMA they would have nothing to lend. With NAMA they will have the funding. They WANT to lend to make a profit, and now they have the funding to do so.

All this about requiring them to lend or making it a condition of taxpayer support just seems so illogical. We have a capitalist system, profit is the motive and the discipline.

Without NAMA we have zombie banks who despite their desire to lend profitably haven’t got the funds.

With NAMA they have the funds, but hey they are only going to lend profitably, we hope, don’t we?!