McArdle: 15% = 0%

Pat McArdle’s review of the economic year contained the following description of the banking crisis:

Nama is the other great issue convulsing the nation. There is grudging acceptance that it is the best or “least worst” option available. Looking back now, it is hard to believe that anybody, apart from the ideologically motivated, could suggest nationalising the entire banking system.

The other strange thing about the Nama debate was the way the Government’s estimates for loans and values were seized upon as “reality”. How many times did we hear the mantra that the Government is going to overpay for the assets transferred?

Claims by Government that there would be a transparent valuation process – and by others that this would be overseen by the EU – were largely ignored. Now, at last, it is becoming clear that the valuation process will be rigorous and that Nama will only pay 15 per cent over the current market value. Moreover, the indications are that the valuations are coming in below earlier estimates for a variety of reasons, which means that the payment will be less than the €54 billion usually bandied about.

The consequence is that the extent of Government recapitalisation and ultimate public ownership of bank equity will be greater. This is as it should be – the taxpayer should benefit from the bailout, something that did not happen in the case of the ICI debacle a quarter of a century ago.

Recent falls in bank share prices are a belated recognition that the Government will not overpay for assets transferred to Nama.

Note the transition from “How many times did we hear the Government would overpay?” to the observation that government will indeed “pay 15 per cent over the current market value” to “the Government will not overpay for assets.”

It strikes me that only in the world of Irish banking alumni can one make the transition from the second statement above (15% overpayment) to the third (no overpayment) without any apparent concerns about internal consistency. The Government will not overpay sounds like something we’d like to be true, so let’s just assert that this is the case.

Continuing in the black is white vein, McArdle also says about the banks:

With a few exceptions, most of the top bankers have been booted out; the second-liners are on the way out; the shareholders have taken massive hits and the unfortunate staff are either losing their jobs or taking pay and pension cuts that would make a public servant blanch.

Pay cuts that would make a public servant blanch? Well McArdle can’t be referring to Bank of Ireland, whose staff received a 3.5% pay rise in February. And it can’t be AIB, whose staff who received a 3% pay rise in October (see here and here.) No, it must be some other bank where staff are taking double digit pay cuts.

On the issue of nationalising the entire banking system, I’m not sure who ever proposed that but I have suggested a temporary nationalisation of AIB and Bank of Ireland, so I’m guessing McArdle reckons I’m one of these “ideologically motivated” people (presumably driven by a desire to seize control of the commanding heights of the economy for the people).

I’ve noticed, however, that I also get accused of being a right-wing ideologue when I say there are limited gains from taxing the rich, when I oppose the introduction of a third higher tax rate and suggest the budget should focus on spending cuts and when I’m critical of ICTU’s plans.

I guess what I’ve learned from this is that it is the most ideologically-motivated individuals who are the quickest to assert that anyone who disagrees with them is an ideologue.

103 replies on “McArdle: 15% = 0%”

Looks like he Irish Times reign as ‘the paper of record’ is coming to an end. Madame Editor needs to get a grip.
As a frequent Irish Times reader I am appalled to see the paper become a shill for an enterprise like NAMA.
Of all the editors who have been at the Times, Ms. Kennedy is the one I would have least suspected of allowing the paper to drift in this fashion.

This is a grossly inaccurate statement;

“There is grudging acceptance that it is the best or “least worst” option available. Looking back now, it is hard to believe that anybody, apart from the ideologically motivated, could suggest nationalising the entire banking system.”

A story in the Irish Times – September 5, 2009 headlined;
‘Only 26% of voters support Nama plan.’

A story in The Irish Times – August 26, 2009 headlined;
‘Economists warn against going ahead with Nama project.’
The story dealt with a group of 46 economists who signed an article in that day’s Irish Times calling on the Government to reconsider the National Asset Management (Nama) project.
All the opposition parties in the Dail oppose NAMA.
Businessmen of the stature of Dermot Desmond PUBLICLY oppose NAMA.
Of all the people I know only one, an auctioneer, has voiced anything but utter contempt for NAMA.
Numerous alternatives to NAMA have been put forward.
I myself think we should rescind the bank guarantee and let the bankers go into liquidation;

It’s bad enough having to counter spurious arguments from ‘dubious’ sources regarding NAMA, but to have a paper like the Irish Times peddling NAMA propaganda is a very bad start to the New Year.

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, in other words monetising your debts and creating ever larger fiscal deficits.
NAMA will end up costing Ireland anywhere from €60 BILLION to €100 BILLION.
Ireland’s current external debt to GDP ratio is 1,267% – the largest in the developed world.

Current Irish National Debt €72 thousand million;
This has risen from €70 thousand million at the end of September.
The rate of borrowing was €298 million PER DAY over the two months Oct. and Nov. 2009.

The proposed billions for NAMA is money which is backed by nothing, producing nothing and simply piling more debt on that which already exists.
NAMA is going to break this country and set us back 20 years.

All the bankers seem to be doing is coming to government with the begging bowl and when it empties they simply come back again for more and the bowl seems to be getting bigger all the time.

But those same bankers will not inform Irish taxpayers, the underwriters of all this debt, as to who the bondholders of the banks are.

Two words are vital to the rebuilding of our economy and the improvement of confidence in our political and financial services sectors and those words are ACCOUNTABILITY and TRANSPARENCY.

Both are lacking in relation to the NAMA projectand this is not a good way to proceed.
It’s time for people to stand up and be counted in relation to what’s going.
We have the newly appointed Governor of the Central Bank calling for an inquiry into what caused the collapse of our banking system and we have the Taoiseach going against the advice his own Governor and openly opposing such an investigation.

Finally, a statement like this;

“Recent falls in bank share prices are a belated recognition that the Government will not overpay for assets transferred to Nama.”

Is plainly rediculous, the shares are falling because the banks are bankrupt and the bankers will not give the Irish taxpayers even the most basic information relating to how all this came about.
But our money is good enough alright.

Is 15% the new 10%? I thought that NAMA was only going to overpay by 10%, hence the rather dubious assertion that ‘prices’ would only need to rise by 1% a year for NAMA to break even in it’s seven year timeframe…

Karl, you’ve submitted a few op-ed’s over the past year I think. Would it be somehow rude or inappropriate for an editor to turn around and say “hey, you’ve contradicted yourself a few times in this piece. Would you mind changing it a little?”
I just can’t understand how the IT sometimes seems to drop its guard like this. They’re ultimately responsible for the coherency of the pieces within the paper.
Re the ideology remark – these kind of remarks highlight the absence of better argumentation.

Pat has made a quick transition from well paid bubble banker to media commentator.

As a commentator, the next step is to claim credit for the rigorous approach of the NAMA folk.

I thought the argument of pro-NAMA people was that it wasn’t possible to determine current market value where there was no market.

Now we have got a formula at least.

As an insider who took the risk-free choice and went with the flow like so many others, no wonder he’s surprised that outsiders would raise questions about the remedy for a self-inflicted economic calamity.

Economic policy is impossible without ideology.

Even Alan Greenspan, a disciple of Ayn Rand, has admitted that his ideology misled him.

Economists who believe they are free of ideology are delusional.

@ Cearbhall

“Current Irish National Debt €72 thousand million;
This has risen from €70 thousand million at the end of September.
The rate of borrowing was €298 million PER DAY over the two months Oct. and Nov. 2009.”

Eh, explain that one to me please? Isn’t it €29.8mio per day??

@ Karl

I assume Pat McA believes their is a key difference in the terminology of “overpaying” versus “paying LTEV”, ie “the government isnt overpaying, its just paying the LTEV”. But its a poorly written couple of paragraphs, and its making just a bit (!) of a leap between the two terms, without really explaining himself.

I personally think the terms “overpaying” and “paying LTEV” are used too much by both sides for what is a far more complex issue than can be explained by one simple term. As we all know, the debate surrounding “overpaying” vs “paying more than current mkt value” vs “paying the LTEV” is shrouded in ideology, politics, technicalities and a little bit of economic flexibility.

The last 2 sentences.

Nama was always a necessary but not a sufficient condition to restore credit.

The Government can prompt and prod as, indeed, it attempted to do in the recent Budget but, ultimately, the market process must be paramount.

The first sentence….. I dont recall those pushing NAMA using such qualified language when pushing this organized theft of public money through, at that stage it’s purpose was to restore credit.

Credit existed before NAMA and will exist again if NAMA was not set up. Solvent banks are a necessary condition for credit, not NAMA. The banks don’t have to be Irish, they do have to be solvent and confident they are operating in an environment where regulation and law is applied consistently.
NAMA with its redefinition of fundamental concepts is not helpful in this regard.

The second sentence…. paramount ….. maybe he should add ….. well for everyone except failed banks and protected insiders.

“Looks like he Irish Times reign as ‘the paper of record’ is coming to an end. Madame Editor needs to get a grip.
As a frequent Irish Times reader I am appalled to see the paper become a shill for an enterprise like NAMA.”

Lots of useful factual content from staff journalists but very little critical comment other than from some contributors to this blog. However, most people appear to formed their own sensible opinions on Nama despite the IT’s line.

“Pat has made a quick transition from well paid bubble banker to media commentator.” Once a banker always a banker.

What’s really remarkable about this article is the manner in which the spin-machine is slowly (but obviously) shifting, from TOGIT territory, repeat-it-until-its-right argumentation, towards the obvious next move of ‘sure, NAMA was never going to be the final solution-let’s nationalise AIB’.

Minister Lenihan’s post-budget interview on RTE began the turn. Now people like Mr McArdle will perform the yeoman work of turning it so that 15% does indeed become 0%, nationalisation before Paddy’s day becomes TOGIT, and NAMA 2.0 gets mooted. Government Ministers with ‘walls of cash’, etc, etc.

And, each time the spin machine shifts, it will be justified in the nation’s interests, and those who oppose wherever the spin-machine happens to be taking us will be branded as a result.

Which is why Prof. Whelan, that lefty-righty pinko chickenhawk, gets a kicking from all sides occasionally.

But I know he’s secretly an anarcho-communist with liberalist socialist leanings. So there.

@ Eoin

Perhaps that’s what McArdle was attempting to say, though the phrase Long-Term Economic Value is nowhere to be seen in the piece.

Of course, this point doesn’t in any way validate Pat’s belief that somehow he is scoring a slamdunk against NAMA’s opponents. When he says “How many times did we hear the mantra that the Government is going to overpay for the assets transferred?” the mantra clearly related to the fact that NAMA was going to overpay relative to any reasonable estimate of what this stuff is currently worth. And even McArdle concedes this is happening.

The idea that the people who pointed out overpayment as a central feature of NAMA somehow got things wrong is very strange but that’s what McArdle is suggesting to the readers of the Irish Times.


How do you explain Deputy Editor Fintan O’Toole then?

I have been critical of some of the muck the Times has allowed through its comment department, but it’s definitely equal-opportunity muck. O’Toole and Browne have come up with plenty of nonsense themselves on the populist end of the spectrum.

The assets are ‘worth’ what the market will pay for them. This amount is unsatisfactory to those with economic and political power. The massive market failure has given rise to NAMA.

LTEV is a metaphysical notion. The whole debate is riddled with obfuscation which has the ideological function of cloaking the reality that the ‘value’ of the assets will be fixed at a rate by those with the political power to do so in their own interest, and to the detriment of society generally.


O’Toole and Browne are not on the “populist” end of anything. The “populist” point of view is and always will be incarnated by Fianna Fail. What am I talking about? What could be more “populist” than telling people for months that the budget was going to be the toughest in living memory because the situation was so grave and then sparing 80% of the population any costs whatever?

Is that what you think O’Toole and Browne were advocating?

@Karl Whelan
It would be worthwhile having a thread on the specific issue of the cuts in disability and carers allowance. There was an earlier thread on social welfare cuts but I believe these specific cuts merit a thread of their own.

You wrote that while the, “cuts in unemployment benefits may unfortunately be a necessary part of any policy mix aimed at limiting unemployment over the next few years. (This particular argument does not apply, however, to disability or carer’s allowances).”

You also highlighted the, “measures not taken (whatever legal reasons there may be) such as the failure to cut pensions for retired public sector workers (traditionally linked to pay levels which have now been cut) and the failure to freeze public sector increments, as well as measures taken such as the VAT and excise cuts (costing €257 million on a full year basis) and the range of dubious so-called stimulus measures (vouchers for cheap rail travel for senior citizens visiting Ireland from abroad?) one could conclude that these cuts were avoidable. ”

There is also the failure to implement many of the McCarthy report’s recommendations:

“During Dáil Leaders’ Questions, Mr Kenny reiterated his criticism of the €108 million in cuts for carers, those on blind pensions and the disabled. He added that the allowance for training guide dogs was also being cut…
He said the Government had set up the McCarthy group to determine where cuts could be made in the public sector…
Cuts totalling €184 million in the five Government departments he mentioned were recommended from a total of €600 million. “The Taoiseach could have quadrupled the savings in respect of what is required for the disabled, the carers and the blind but he didn’t.”

The minister herself explained it as follows:

“Pensioners were exempt from the welfare cuts and public service pensioners decoupled from the cuts in pay, a fact that drew criticism from some commentators.

“I had my father at home telling me all the time, ‘Don’t cut the pension, whatever you do don’t cut the pension’ . . . he was coming from the political perspective,” she said.

“It’s not so much to do with the medical card of last year, but when you hurt . . . when you take from an old person, you take from their whole family.

“And whole families will react for their parents.”

The Minister said there were “very valid arguments” against cutting disability payments, but other groups, such as carers, had equally valid arguments.

“It was difficult to cut all of them, but once you started to distinguish between groups of the under-66s, that’s when you were going to be making decisions that were based on emotion, rather than the actual finances of it.”

Before the Budget, she visited residents at a Salvation Army hostel where a man in receipt of disability benefit asked her: “Will you be cutting us in the Budget?”

“I said, I’d love to be able to tell you I’m not, but I can’t. ‘Ah well sure’, he said, ‘We all have to do our bit’.

“I was really taken aback by it, because here’s a man who doesn’t even have his own bed.””

The specific cuts are as follows:

“The sick and disabled – and those who care for them – did not escape Minister for Finance Brian Lenihan’s axe on Wednesday. Rates for carers under 66 years of age will be cut by between 3.7 per cent and 3.9 per cent next year. Carer’s benefit is set to fall from €221.20 to €213 a week, while carer’s allowance will drop from €220.50 to €212.”
The invalidity pension will shrink from €209.80 to €201.50, while the blind person’s pension is being brought down from €204.30 per week to €196, as is the disability allowance.

The Rehab Group expressed deep concern about the effect that the cut to the disability allowance will have, as evidence shows that individuals with disabilities face an additional living cost estimated at €40 per week.

“In general, people in receipt of disability allowance spend that money on necessities, not luxuries,” Rehab said. “This cut of €8.30 per week will affect the ability of the nearly 96,000 people on disability allowance to buy basic necessities such as food and clothing.”

They won’t be helped either because:
“The cost of accessing medicine is set to rise considerably for many people. Those using a medical card will face a 50 cent charge for every item on prescription, while the monthly threshold for the drugs payment scheme (whereby individuals or families only pay up to a certain maximum monthly for all prescribed drugs and medicines) is being increased from €100 to €120.”

Isn’t this the sort of thing we are supposed to be keeping the IMF out to avoid? This doesn’t look too good either:

“… although the widow’s pension was cut.”

Contrast the cut of €108 million for the blind and the disabled with the €6 BILLION and growing to be incinerated on Anglo/Nationwide to save the Golden Circle.

Contrast the man in the Salvation Army Hostel with Pat McCardle, who thinks it outrageous that we would not transfer billions to the shareholders of AIB and BOI to avoid temporarily nationalising them. If we want private ownership fine. Once they are nationalised immediately issue all the shares to the citizens of the country. Instant total private ownership. It would be some compensation to the citizens for paying the vast costs of the banking clean-up, especially to the blind, the disabled, the carers and the widows who are all having their benefits cut.

Finally, remember that the head of BOI is making €500,000 plus €120,000 pension. Remember too that – as we learned from the Sheehy replacement saga – the salary “cap” doesn’t even apply to the chief executives’ subordinates in our banks.

The blind get cut €8.30 to €196 per week, while the top bankers get €11,923 a week – and think they are being persecuted. Meanwhile, their subordinates in the institutions that bankrupted themselves and ruined the country are pulling in even more.

This is all utterly corrupt, rotten and immoral.

“LTEV is a metaphysical notion. The whole debate is riddled with obfuscation which has the ideological function of cloaking the reality that the ‘value’ of the assets will be fixed at a rate by those with the political power to do so in their own interest, and to the detriment of society generally.”

This is close to what Steven Seelig said about the definition of “long-term economic value” on bank loans: “sufficiently vague” to allow “appropriate flexibility”. He will be appointed to the board of Nama in May 2010, when he retires from the IMF. God help us!

PS Here is a list of over 50 “namas”. I particularly like Camp Nama in Bagdad and the National Anger Management Association.

@Ernie Ball

Well there are competing visions of populism – by definition, it’s not a concrete ideology of any sort.

I’m not sure if you’re arguing that FF’s NAMA is a vehicle for populism, but I reckon most Irish people probably disagree with you.

Here is an idea from Derek Brawn about how we might save some money instead of cutting the blind and the disabled (about a quarter of one per cent of our total national spending. There must be alternatives):
stop building additional homes. We are funding the banks and the banks are funding the developers to add even more to the unsold home mountain. When they are built the taxpayer will buy them at a 15% premium through NAMA. This year we have built three times more than we sold. It’s insane.

Brawn’s estimate of the number of unsold homes is 160,000. The geographers believe it is over 200,000. Whatever it is, it’s ginormous.
And we’re adding to it through our funding of the banks and then buying it through NAMA? Demented.

McArdle says “ultimately the market process must be paramount”. I presume he means paramount ‘after’ the banks including the one he previously worked for, have been well and truly rescued from the wickedness of the market process.

The mortgage interest rates in 2009 were lowered to a level that was not “prudential”. Where was all this prudential stuff when he worked for Ulster Bank before it had to be nationalised? He knows all too well, that interest rates were lowered to try and save banks not to save borrowers, if borrowers beneffited that was only by accident.

@E65bn plus
The planning authorities need income in the form of development fees so they will look after themselves and continue to give out planning permissions for everything. Complain, as I have done and they will tell you that economics or financial considerations are not part of their planning permission brief. It defies common sense. The current Dublin City Development Plan is still all about favourite high rise developments and zones blotting the landscape even further. The NAMA to them, is a tribe in Africa.

We should absolutely stop all further developments of houses and apartments for the next 5 years and it will be sheer folly to develop any of these green field sites especially by NAMA. Local authorities will be in the market for the excess on top of the excess they are sponsoring. They require houses and apartments for ‘social housing’ so it may be in their interest to drive down prices even more. When NAMA stockpiles cannot be held any longer and must be depleted they will get them for next to nothing, probably below the cost of production.

We need to divert builders away from building more houses and apartments towards building infrastructural projects such as the underground Dart which should be ‘fast tracked’ maybe Metro North also. NAMA deprives us of funds for projects that are needed and puts the ‘stimulus’ into creating more surpluses of all that we don’t need houses, hotels, apartments and retail.

NAMA’s plan to finish off buildings will simply increase supply and drive down prices of assets being held outside the dangerous NAMA monopoly. Whatever clients move in to rent or buy these selected developments means that these potential clients are no longer in the market for other developments making these developments and developers outside the NAMA process even more insolvent.

Robert: I’m just wondering..before we spill a billion on an underground DART, Metro North and, who knows a mission to Mars, has there been any remotely serious Cost Benefit Analysis of these projects? And no, I don’t mean some half-assed back of the envelope calculations by some engineers designed to justify a decision that has already been made.

Regarding The Irish Times:

The constitution of the paper commits it to the following:

“The Memorandum and Articles of Association of the (Irish Times’s) Trust:

2: The progressive achievement of social justice between people and the discouragement of discrimination of all kinds;

3: The promotion of a friendly society where the quality of life is enriched by the standards of its education, its art, its culture and its recreational facilities, and where the quality of spirit is instinct with Christian values, but free from all religious bias and discrimination;”

Were any of these aims furthered by the most recent budget?
Is cutting benefits to the blind and the disabled consistent with progressively achieving social justice and in accordance with Christian values? The papers editorial was laudatory:

“The Irish Times – Thursday, December 10, 2009

A time to grin and bear it

There will be many editorials written about the harshest budget in the history of the State. Suffice to say, on first reading, that the decisions taken rise up to the occasion financially. They were courageous, bold, above party politics, above sectional interest and they appear to have put the country first.”

Extremely supportive.

“The high-earners were affected proportionately.”
Were they, even in percentage terms?

“The public service pay cuts were scaled.”
Wrong again.

“The welfare reductions will make life miserable for those in need. But public opposition may be muted because of the balanced manner in which income cuts have been made.”
i.e. mute your reactions blind, disabled and widows, let alone the truly evil like low paid public sector workers, because the cuts have been balanced.
But if you get really upset I’ll jump on the band wagon.

“Mr Lenihan invoked the concept of fairness in justifying cuts and charges. Top earners using tax shelters will now pay a minimum rate of 30 per cent. A levy of €200,000 will be imposed on wealthy tax exiles.”
Those who can afford to use tax shelters will now be paying a punitive 30%. Social justice achieved.

“The Taoiseach and Ministers will contribute more than other public servants, who will pay according to a sliding scale.”
The ministers took a 5% cut in this budget – the same as the lowest paid public servants. And as regards to pay cuts we know what the senior civil servants have taken (the biscuit).

“There will be new medical charges and cuts in welfare payments. But old age pensioners and child benefits for low-income mothers will be protected. As a package, it is as tough as people had been led to expect.”
i.e. tough…but good.

“Mr Lenihan’s declaration that “the worst is over” was designed to enhance public confidence and encourage spending But, should this be treated as a mental reservation?”
She got that one right but..
“The tax base will, as the Minister acknowledged, have to be broadened.”
And as we know, tax shelter users are already doing their bit. So it will have to be lower earners.

“But, equally important, the detail of the cuts for people on disability, carers, medical card holders and others will have to be unveiled before a final judgment can be made on this Budget.”
The details were announced in the budget. It was a 4% cut. This is mental reservation/backside covering.

The editor and most of the paper’s coverage over the last 8 months – reportage, commentary and opinion alike – have lauded Brian Lenihan, the government, the most recent budget (a deeply unfair one) and NAMA, a bailout for the Golden Circle. Much of the business coverage on NAMA and the banks has been poor. It looked to be improving but the end of year supplement witnessed a terrible relapse. Most strikingly of all, how do the editorials and McArdle’s articles as the paper’s official commentator on the budget and de facto official commentator on NAMA comply with these parts of its constitution?

“C: In pursuance of the foregoing and to enable readers of The Irish Times to reach informed and independent judgements and to contribute more effectively to the life of the community to ensure that the following principles govern the publication of The Irish Times:

1: that news shall be as accurate and as comprehensive as is practicable and be presented fairly;

2: that comment and opinion shall be informed and responsible, and shall be identifiable from fact;

3: that special consideration shall be given to the reasonable representation of minority interests and divergent views.”

I don’t want The Irish Times turned into an overwhelmingly left-wing, anti-FF paper. I enjoy and appreciate the contributions of Sarah Carey, who writes what she believes – this should not be taken for granted – and has a pure heart (although it’s blue). But, given the make up of our media, The Irish Times’s current right-wing, pro-establishment stance has deformed our public debate. The country is in crisis and even “non-socialists” like David McWilliams are outraged at how the elite are stuffing everyone else.

The paper needs to make some drastic changes.

The reason we have a crisis in our economy is because of too much borrowing.
The notion that you can solve that problem with more borrowing is not going to work. You can’t end the problem without pain.
Somebody’s got to suffer and it should not be innocent Irish taxpayers and their children.

The bank bondholders will have to take the hit.
They went into this with their eyes open, they knew the risks AND their returns were priced accordingly.
The shareholders have already been wiped out and now it’s the bondholders turn.

But first we need to know who these people are AND we need to know the true level of debts on the banker’s books.
All attempts to avoid such disclosure will further fuel suspicion that there is a cover-up going on and that there may be high-level political involvement.
People who may be engaged in such activities should be aware that in the digital age it is virtually impossible to hide anything from determined snoops;

Instead of NAMA, let’s use the billions on public works programmes, which will IMMEDIATELY begin to take people off the unemployment lines and restart our economy.
We could begin by giving Ireland the most up to date, high-speed, internet broadband network in the world.
Next we could begin to fix-up all our secondary roads.
Get rid of Port-a-Cabin class rooms in schools around the country.
Fire Mary Harney and Prof. Drumm and eliminate procedure waiting lists all over the country.
Get stuck-in to decarbonising our energy supply and fostering the growth of the Green-Tech economy.

Save billions, every year, by eliminating a great majority of the 100 or so quangos which exist.
For example, have a look at the staffing levels at the DDDA which is currently bankrupt and haemorrhaging cash at an enormous rate;

The only people currently required there are investigators from a new Office of the Special Prosecutor.

And so on …..

Can you imagine how the country would be transformed with an immediate investment of €50 THOUSAND MILLION?

Even Fianna Fail must see that they could have a chance of swinging the next election if they went down that road.
Rather than the road they are currently on which will see them wiped out.

@ Robert Browne,

quite good observations and good analsysis there. I would encourage you to read some of my own waffle, which I published on a nearby address on the web not so long ago, to look at potential development sites – sites which are convenient to the main drag, as it stands, but could also strategically alter the dynamic of how our cities operate. By placing accomodation for startup and fluid type companies in the right place. Putting larger institutional and more ‘static’ entreprise a little further away.

For instance, I would argue that Anglo Irish bank’s headquarters in St. Stephen’s Green represents an excellent location to offer flexible lease office space to new entreprise. With the bulk of Anglo’s new operations being accomodated at some other location.

The basic trouble with how we operated, in my experience working for Liam Carroll the developer – was our potential tenants were two main categories: (A) State, semi-state, quango or (B) Banking institutions, mainly large floorplate back office accomdation.

Nowhere in that business plan, did there exist any plan to accomodate what we now refer to as a ‘smart’ economy. It is quite funny, because with all of the incentives we managed to dish out for all kinds of building types and functions down through the years of the buildings boom – the one policy which the government is pursuing today, the smart economy, is the one type of building function it created no real incentive to accomodate!

How is that for joined up thinking? That is why I appreciated what George Lee said some time ago. Our government commissions consultants to write up separate reports. But there is no one looking carefully at how the entire strategy should fit together. Indeed, Ed Walsh’s article in the Sunday Business Post also described the un-likelihood of creative policy management by 166 Oireachtas house members, 80% of whom are drawn from a pool of approx. 1,000 local authority councillors.

If one has to draw one’s entire knowledge resources from such a pool, then it is un-surprising if they resort to ‘expert reports’ compiled by consultants and have little or no sense of the bigger picture, and how it should all fit together. That is my question really, how does Taoiseach Cowen intend to proceed with the roll-out of the new ‘Smart’ economy, when he has previously wasted all of the incentives to build empty hotels and heavens knows what other nonsense?

@Kevin Denny
” has there been any remotely serious Cost Benefit Analysis of these projects? ”
That woud be an ecumenical matter…

New Knowledge Campus for Custom House Docks.

Brief summary: I suggest that when we gain substantial control of AIB that we kick them out of the IFSC buildings completely. Furthermore, we boot Irish Life and Permanent from their accomodation at Abbey Street, to somewhere further down the docklands into a new project. We do the very same with Anglo Irish and possibly even Irish Nationwide beside the LUAS/grand canal.

I could not envisage a more suitable collection of office accomodations, than the said buildings, which could be managed so as to offer very good accomodation to young start up businesses in Dublin City.

Ditto, for many other cities and towns around Ireland, subject to further feasibility analysis etc.

“how does Taoiseach Cowen intend to proceed with the roll-out of the new ‘Smart’ economy”

“going forward, the process will be to access and ensure that government policy is committed to incentivising a radical reappraisal of the existing knowledge base to ensure that the skillsets required to stretch the envelope of innovation are embedded in the mindset, which itself must be changed. This will require a commitment to excellence and a realization that, going forward is the only alternative to going backwards. People say “the best way to predict the future is to invent it” so we must invest now to prevent that future from slipping forward. we must foster incubation while not preventing the cold wind of competition which is the key to a domestic demand driven export led innovative smart green knowledge economy based on fdi led indigenous enterprise. “

All of these are mad-cap ideas though. The one idea, which isn’t mad-cap, and is more like basic fundamental first principles, is the need of the first ever ‘stay-in-ireland’ generation, to look carefully now at how it wants to build a society.

Eddie Hobbs’s TV programs struck some kind of chord here I believe. Do we want the United States model, or what do we want. It is all there, to be created. One thing is certain, the existing generation of politicians will not have much impact on this development.

Cearbhall O’Dalaigh

Geraldine K was targetted by surveillance by the GS. Why? Perhaps she has moved on from there and now enjoys insider status? As a msm editor, she is wedded to the consume and borrow economy. She knows what she is doing, but does not care that her paper prints lies.

“….too much borrowing.”

Correct. But there are excessive deflationary forces at work. Not only is the economy damaged by the overbuilding and over developing, the credit drug is now withdrawn and cold turkey is in full effect. There is therefore an overshoot. I see no way out of it, but I wish to emphasise that the borrowing was encouraged by the government not using the necessary countervailing fiscal policy. They therefore do it now making it worse. And instead of borrowing for investment purposes, they throw good money after bad, 20 years of 5,000,000,000 euro a year, averaged, repayments of interest and capital! Kathleen Ni Houlihan has just been raped twice by the same gang!


“Economic policy is impossible without ideology. ”
Excellent point! Clearly I have a viewpoint and so does anyone who opines publicly. The good thing about free speech is that one can judge who is lying. Sadly, there are many tricks to raise one side above another. Censorship, FOI gaps, Official Secrets etc. Is the IT not obliged to allow another view of NAMA?


Do you mean “they are stealing via NAMA”?

For all the above, McArdle is a disgrace and the IT is likewise condemned. It is not enough to say that it is a broad church.

@ Pat D

“Is the IT not obliged to allow another view of NAMA?”

….such as contributions against NAMA from Karl, Brian, Morgan Kelly, Deputy Editor Fintan O’Toole, Vincent Browne, Sean Barrett….?

The critisism of the IT is getting just a tad ott here.

The problem for you lot isn’t that the IT is supposedly pro-NAMA, its that you’re all shocked that its giving a balanced view on NAMA from both sides. Some of you seem to think that it has ‘betrayed’ liberal Ireland by not coming out explicitly AGAINST NAMA. You’re basically complaining that the IT is doing its job correctly by presenting both sides. You’re no more in favour of balanced reporting than FF, FG or any political party is.

@ kevin denny
It will increase capacity of Dart from 33 milion passangers annually to 100 million trips/capacity. It will link the disparate transport modes of Dart, Intercity, Luas, Metro and of course Bus corridors.

During the ‘boom’ years people were priced out of the Dublin property market. The Dart Underground will enable these people to reach employment, education jobs or prospects by linking the Maynooth and Kildare lines with the city centre. It will seriously help with the grid lock caused by cars pouring into Dublin city centre every day. Who in the private sector, with no access to free car parks can afford to pay 3 to 4 Euro an hour to park? And what about the people who shop in Dublin and keep it alive? These serious costs of time and money wasted are killing and driving jobs out of Dublin every day.

It will also provide an average of between 6,000 and 7,000 jobs for every single year of construction.

It is a common sense moral boosting project that will be there after the recession passes. A project that pays for itself. The tragedy is, that there are plenty of Spanish or Japaneese companies that will build it for us if we are unable to help ourselves. And so be it, if that is the case! The same with the banks as Greg says somewhere above, it is not written in stone that the baking system of this country has to be Irish we need a parallel banking system to be put in place as qickly as possible.

I will contact Iarnroid Eireann for the “real” cost benefit analysis and post them on this site.

@ Brian
Thanks, I always try to mine your contributions here and elsewhere for those gems you come up with. Happy new year All!

@Pat Donnelly

“Geraldine K was targetted by surveillance by the GS. Why? Perhaps she has moved on from there and now enjoys insider status?”

That’s as wild an inference as I’ve seen in quite some time.

I am stunned by the criticisms being levelled against the Times. It’s an awful article by McArdle, but it is one pro-NAMA article among dozens of anti-NAMA columns from both economists (including this blog’s writers) and non-economists (Vincent Browne, as a rule, attacks everything the government does, no matter how inoffensive it is.) I cannot understand how anybody could think a newspaper that’s dominated by Fintan O’Toole is pro-Fianna Fail. The mind boggles.

I might as well throw the hammer after the hatchet, as I am at it.

There is no way in the world, Niamh Brennan, a straight-talking accountancy professional and teacher from University College Dublin – with the best will in the world, could ever see constructive relationships between different state owned entreprises like Dublin Docklands Authority and Dublin Airport Authority.

Worse than that I fear, if professor Niamh Brennan wanted to study their relationship, it would more than likely be deemed outside of her remit or brief.

Despite the fact that both public entreprises adopted the same business model. It worked in one case and failed catastrophically in the other.

“Some of you seem to think that it has ‘betrayed’ liberal Ireland by not coming out explicitly AGAINST NAMA. You’re basically complaining that the IT is doing its job correctly by presenting both sides.”
My sincere view is that overall The Irish Times has been pro-NAMA. It has not even been balanced – it’s been pro-NAMA. But why should it have been balanced?

The country had been destroyed by a crony capitalist lending bubble.
Then NAMA was proposed by the crony capitalist government which presided over the bubble. On the one side were the government, the bankers, the builders, the developers and the stockbrokers – the arsonists. On the other were an unprecedented number of independent academic economists and the entire opposition – the fire crew.
Why should The Irish Times have been neutral as between the arsonists and the fire crew? Shouldn’t it at least have shown traditional journalistic scepticism to what was acknowledged by all to be a gigantically risky proposal? Nobel winner and independent academic economist Paul Krugman described the paying of an LTEV as criminal. Former Ulster bank economist Pat McArdle think it’s great. Any unbiased but sceptical journalist would side with Krugman. Instead, The Irish Times made Pat McArdle its offical budget and de facto official NAMA commentator.
That’s not even neutal, let alone sceptical – that’s outright pro-NAMA and consistent with it’s overall stance.

I think criticism of the Irish Times is over the top.. they are just another newspaper; they are not the paper of record, whatever that means…

Certainly, the few times I have had the real inside track, its coverage is laughably inaccurate and simplistic.

I expect their coverage of NAMA to be of a similarly low standard and so am never disappointed.

The Irish Times is a major investor in the Irish property market. It spent 50M on a web site at the peak of the bubble, which is probably right up there with some of the stupidest purchases during that era. But I’m sure the people behind that decision are still there rationalizing it etc.

So while they do try to put a balanced view forward but are hindered by the laws of libel, their own lack of expertise and their history.

I think they, at a high level, decided some time ago that a NAMA like “fix” for the property market is the way forward. Because its the best solution for everyone who works there, the alternative is the “appalling vista” which is most sensationally spelled out by Morgan Kelly.

Just like most other stories, the NAMA story is multi faceted. As usual they miss the real essence but give 2 ladybird book like versions for ‘balance’.

So they give Mr. Kelly some space and balance it with Mr. McArdle. At least they give 2 sides…

The cold hard truth is thats all most people want to hear.

But though I am on the outside on this one, Ive read enough to know the real story of NAMA has not been presented properly in any newspaper yet.

@ E65bn

1. Stiglitz said LTEV was “criminal”, not Krugman.

2. how many less people (to the nearest million) would have heard the opinions of Morgan Kelly (and Lucey & Whelan to an extent) if it wasn’t for the opinion pages of the IT?

3. how many people wouldn’t have heard of this website if it wasn’t for the IT (by virtue of giving Karl W and Phillip L a wider forum to air their views)?

Your strange vendetta against the IT is based more on your personal disapproval with NAMA, your personal belief that the IT has betrayed you, and it is not based on any fact-based conclusions. At worst the IT has decided that there are some necessary evils in NAMA which are at least worthy of positive debate. Fairly sure a large section of the broader public are also of this mindset.

@ Kevin
I am glad you pulled up Robert regarding cost-benefit analysis. I had a look at that for Metro-North (there is an ESRI working paper). Given the passenger projections Metro North would pass a cost-benefit analysis, but I have seen no evidence supporting those projections. Furthermore, these projections will be widely off the mark at this point, and probably for a very very long time. An alternative evaluation methodology would not pass Metro-North. This is why I called for a re-evaluation of such projects last March (on Primetime).

Of course the fiscal situation is also a lot worse – while some of these projects are PPPs and as such do not appear in the public borrowing, they still constitute a liability that the market is likely to factor in.

While there is no doubt that we will need to improve some of our infrastructure, I think it would be considerably better to divert unemployed builders to other sectors via effective training rather than having the sector depend on open-ended handouts from government which are going to cost the hard pressed tax payers dearly (maybe the lessons have still not been learned).

@ Garry & E65Bn plus economic costs & NO extra lending!

The State broadcaster RTÉ, is the main influencer on issues such as NAMA and it has difficulty in handling a complicated issue such as this.

The combination of poorly briefed interviewers, the “I didn’t interrupt you” type interviewees and ministers who call the tune, more often than not, results in a Tower of Babel confusion.

As for the Irish Times Trust, keep in mind that most countries and organisations are organised hypocrisies.

The genesis of the Irish Times governance system, was the announcement of the plan to introduce a capital gains tax in 1974.

The cashouts by five shareholders coincident with the slump triggered by the first Arab oil embargo, almost bankrupted the company.

@ Brian O’ Hanlon

“Eddie Hobbs’s TV programs struck some kind of chord here I believe.”


Eddie joined the 14-person board of the National Consumer Agency, which was a response to concerns about what was termed “rip-off Ireland” and the NCA itself became a symbol of “rip-off Ireland”.

Oh that one quarter of the energy expended excoriating the reporting and post-hoc justification of NAMA were applied to reforming the system of democratic governance to minimise the possibility of the enactment of the policies that led to the blanket bank guarantee and the requirement for something like NAMA.

I wonder would it work if someone such as Ed Walsh ran for president of Ireland. If Mr. Walsh has ideas about altering the constitution and so on – bearing in mind that Mr. Walsh, like Eddie Hobbs and some more, seem very in touch with the younger generations – is there any law to say that a future president of Ireland could not intervene into a discussion regarding alterations to the constitution of Ireland?

Or does such a figure have to stay removed from discussion and merely sign the dotted line?

I mean, someone such as Mr. Walsh as a viable alterative to someone like Bertie Ahern.

You are quite right. The report on Stiglitz’s damning comments is here.

John McManus of The Irish Times has had some excellent articles. He has Krugman’s views here:

From McManus’s blog:
“The last line of Krugman’s column should probably be pinned on all the noticeboards in the Central Bank and the Department of Finance:

“And the lesson of Ireland is that you really, really don’t want to put yourself in a position where you have to punish your economy in order to save your banks.””

@Brian Lucey
I was only sure you weren’t quoting the man himself when I got to this line:
“This will require a commitment to excellence and a realization that, going forward is the only alternative to going backwards.”

“But though I am on the outside on this one, Ive read enough to know the real story of NAMA has not been presented properly in any newspaper yet.”
There is no secret, Dan Browne explanation – NAMA is exactly what Morgan Kelly says it is: massive theft by a crony capitalist elite. The bubble destroyed their fortunes and NAMA as is was created to restore them. Socialism for the rich, cuts for the blind and the disabled.

My short version is as follows:
Bubble collapses.
Personal fortunes of elite destroyed and fiscal position of country wrecked.
Elite convince former FG leaders and most of media that NAMA as is (to save them) and tight budget (to save country) are both equally essential.
Most of media fooled as are some academics.
Government deliver on tight budget – media applaud. (I agree the budget had to be tight, and with all the pork & tax breaks left untouched it could have been a lot tighter).

But now NAMA looks more and more like a ginormous bailout for the elite and a giant establishment cover up. Many NAMA backers now see: mass appointment of insiders & preservation of existing bank boards; together with glacial pace of investigations; with no investigations into our two main banks or the foreign banks here; and no inquiry a year and three months after guarantee (after 2 years if you realise Anglo was known to be in trouble in 2007). Many NAMA backers now think:
1. Are the government taking us for a ride? Answer: Yes.
2. If NAMA smells so bad can it possibly be good? Answer: No, not as it currently is.

McArdle did make one good observation I haven’t seen often:

“Institutionally, it is the watchdog, namely the combined central bank and regulator, which has most to lose from such an inquiry. In this respect, it is odd that the Central Bank board, arguably the most culpable of any bank board, is still in situ.”

Does the board still include David Begg, who is currently at war with the establishment?
Note that this and the cross-over in membership with the financial regulator were discussed on the above forum in….Feb 09!

When even Pat McArdle is critical it must be really bad.

@Michael Thanks, I wasn’t aware of the history of the ITT, and most organisations are organised hypocrisies is a pretty good way to describe things. There are always truths in organizations that are best adhered to.

On NAMA, I think even with all the analysis here, its essence has yet to be captured. I think the views of economists are welcome but I believe the views of legal and accounting experts would be even more valuable in describing the philosophy and approach behind NAMA.

Some prediction for the new year.

1) After NAMA has been running, the pro NAMA commentators will immediately begin distancing themselves from it. Those who were plugging it as the only game in town will begin expressing reservations etc.

2) Towards the end of 2010/early 2011 a fall guy will be needed for NAMA. No prizes for guessing who now.

I’m disappointed that no academics with commercial legal expertise have gave an opinion on NAMA. I suspect thats where the ultimate truth is, specifically the differences between whats legal inside NAMAland and what applies to entities outside NAMAland but who interface with NAMA. I expect plenty of hay to be made on these interfaces. But for it not to become apparent for quite some time. But once it becomes apparent, it will be as blindingly obvious as the unsustainable nature of funding an economy with stamp duty from a property boom.

One thing we fully recognise about the editor of the Irish Times is that on the 31st of July 2009 she won a landmark decision in the Supreme Court. In doing so she showed significant courage in steadfastly supporting her journalist Colm Keena who was coming under substantial pressure from the Mahon Tribunal to disclose his sources.

By unanimous decision of the Supreme Court, the IT gained legal recognition of the right of journalists to protect their sources.
This was a Supreme Court appeal against a High Court order requiring the IT to reveal to the Mahon tribunal the source of a 2006 article by Keena.

The case related to an article by Keena which relied on a copy of a confidential letter, regarding payments made to Bertie Ahern while he was minister for finance. The tribunal made an order requiring the IT to produce the letter, but Ms. Kennedy instead instructed Mr. Kenna to destroy it (if you don’t have it you can’t hand it over).

The Supreme Court decision was delivered by Mr Justice Niall Fennelly.
In it he set out and applied the terms of the European Convention on Human Rights (ECHR) Act 2003, governing the principles of freedom of expression, including protection of journalists’ sources and incorporated these into Irish law “subject to the Constitution”.

On the question of the destruction of documents, Justice Fennelly did not disagree with the High Court’s condemnation of it, but the issue to be decided, he said, was not whether that act was a wrongful one (for example, in relation to contempt of court) but the narrower question of whether in circumstances where the documents no longer existed, there was an overriding requirement in the public interest. The Court could not discern any clear benefit to the tribunal to justify making the order for source disclosure and so allowed the appeal.

This landmark decision was only possible because of Ms. Kennedy’s courage and duty. It was a very important milestone in securing the democratic functioning of the press, something which had been absent in Ireland up to then.
For this landmark judgement we are all eternally grateful to Madame Editor.

I suppose what riled me most about the IT article was the presumptive nature of “There is grudging acceptance that it is the best or “least worst” option available.”
It’s bad enough that we are being herded blindndfold into a situation against our wishes, but to be told that we actually ‘accept’ that this is really for our own good is a bit too high-handed for me.
The author is so obviously bereft of any sound argument to support NAMA that he has to resort to the insinuation that those opposing this reviled piece of legislation have now “grudgingly accepted” that his argument is superior.

I have no problem with the IT putting both sides of the case but I totally reject propoganda of that nature.
If Mr. McArdle is so sure that there is universal “grudging acceptance” that NAMA is the “best option available” why not put it to a referendum.
But the bankers don’t want that.
No, they’ll let FF get that trashing on their own at the next general election on their own, long after the bankers and bondholders have tiptoed away with the loot.

Pat McArdle writes as an insider and is unfortunately typical of the type of commentator we now need less of. Remember his comments about Morgan Kelly earlier this year? He carries little credibility but should be read as a reminder of the damage that ‘insiders’ have caused to this economy and broader society. Of course the banks should be temporarily nationalised, in order to start the process of restructuring. His comments regarding the removal of senior management etc are delusional as none have been fired. The NAMA issue has been well ventilated, but it is certainly not the least worse option, it is the worst by a distance as we will discover to our cost.

@ Garry,

quite interesting contribution, thanks.

If you have time ever, you should check out a book by Daniel Okrent, Great Fortune which is a historical account of the construction of the Rockefeller Centre on Fifth/Sixth Avenue in NYC.

As an aside to Cearbhaill’s last post, the Irish Times is the only Irish newspaper (online at least) to report on Atheist Ireland’s challenge to the new Defamation Bill blasphemy provision, and even so it took them until 9pm. It’s been on CNN and international news the whole day.

From poster Cassandra Syndrome on

“2 Bedroom Apartment in Bundoran, Donegal going for 45,000 Euro.”

He also says the following:
“There was a place in Laois a couple of weeks ago advertised for 35,000 Euro. There are quite a few properties in the 5 figure amounts now.”

@Edgar I am glad someone is doing some serious CB analysis of projects like this. It is more difficult when the macro’ environment is like it is. In the presence of involuntary unemployment, for example, its not clear what the shadow price of labour is and how you are going to price land these days is anyone’s guess. Still one has to start somewhere.
If memory serves me right, there was a CB Analysis of De Bertie Bowl at a time when it was expected to go ahead. The geniuses behind it didn’t factor in the cost of the land at Abbotstown on the basis that shure didn’t the government owned that already.

Economists who believe they are free of ideology are delusional.

Seconded on that. From the outside looking in (as a layman), it seems that there’s rather too much philosophy involved, which can lead to the temptation to cook the numbers to fit in with the ideology.

As an aside, the most revealing comment I’ve seen recently on ‘ideology’ has been Sarah Carey’s, incidentally in the IT:

“Moore McDowell, who sports an actual beard though not an ideological one”

This would be the Moore McDowell who was one of the trio behind the so-called Open Republic Institute a few years ago, an organisation which had ties to a variety of interesting right-wing think-tanks.

(And for those who aren’t aware, yes, McArdle has a beard too)

That non-ideological Sarah and Mr. McArdle have been brought in as regular columnists by Madam Editor (who also recruited the odious Steyn and Krauthammer) says a lot more the new direction of the paper than O’Toole’s status as one of the few remaining lefties there.

On the subject of the ORI, anyone looking for a trip down memory lane can use the Wayback Machine to revisit the now-deleted ORI website:*/

(Discover the benefits of a flat tax for Ireland! Find out how Gaelic Ireland was a “pseudo-aboriginal ethnicity” which five hundred years of strapping Anglo-Saxon Protestantism freed us from! Read about how Fianna Fáil- not the Blueshirts – were the real Irish fascists!)

@ kevin denny
Given that the shadow price is the value of the Lagrange multiplier at the optimal solution, it’s implied that the optimal solution gradient of the objective function would be a linear combination of the constraint function gradients. Weights being set equal to the Lagrange multipliers. Each constraint becomes an optimization problem which will yield your “shadow price”.

If labour were to be constrained (there is an abundance) our shadow price would indeed inform our CB analysis as to how much we should be willing to fork out for additional hourly units of labour.

These projects can be analysed from all kinds of perspectives but sometimes when you look at the minutiae of problems and judge things only from a mathematical perspective the result becomes… inaction.

Can anyone explain to me how our banking sector has evolved into the mess it is in? Was there nobody doing the number crunching? And with NAMA we have people crunching numbers for targets such as LTEV? In short, someone is aiming for a target but the target in time and space, is some years ahead! Small wonder failure is guaranteed.

Geanakoplos in the US, an economist, asked the question – if there are existing infrastructural projects which currently are program-ed to finish in 10 years. Why not throw multiple contractors at the job?

Why not finish the job in 3-4 years instead?

The situation, for instance, in the United Kingdom at the moment, being – the large contractors have a lot of plant which would only be getting rusty and sieze if it isn’t used. Hence, in order to keep teams and equipment working they are taking on contracts at a loss. It is easier to do that, than the alternative, which is to try and re-start again following economic recovery.

We seem to have a number of threads going here:

1. Comment on the IT reporting and comment on NAMA which has morphed into the usual argy-bargy on NAMA. NAMA seems to have filled in for the absence of Charlie Haughey with the usual love or loath default switches.

2. A subterranean thread on “how did we get into this mess and how can we get out?”

3. Some discussion of infrastructure investment that might provide an economic stimulus.

What seems to be missing is a recognition that:
(a) NAMA is now an institutional reality and we should be looking at its implications – to coin a phrase, going forward. The IT is a multi-headed beast that, however, imperfectly, seeks to reflect and record this reality – going forward;
(b) current indictaions are that the transfer values of the dodgy loans porltfolios may be with a deeper haircut than orginally considered. Ergo a demand for an even larger bank recap – and the cupboard is looking very bare;
(c) even if multiple “shovel-ready” infrastructure projects existed the Government’s ability, given the bank recap, to finance them is non-existent. In addition to the (curtailed) projects in the Capital Programme the only projects that are likely to go ahead are utility projects where consumers are locked in both to pay for them over time and to part-finance them up-front.

We need to look at financing options (e.g., releasing some of the equity in the semi-states) not only to finance investment, but also to diminish the State’s reliance on the international bond market. Policy and regulatory failure to examine the nature of financing of investment and trading contributed to the current global financial and economic crisis. This is particularly the case for the Irish banks since 2003 with their massively increased reliance on short-term international money-market financing. Macroeconomists also paid little attention to financing. A renewed focus on financing has to be part of the solution.

Paul Hunt
You may recall that governments that retained their sovereignty have the ability to print notes that reflect the value of infrastructure projects. The printing is only inflationary, if that be a bad thing these days, if they are wildly over optimistic about the value. This influx of new money provides profit to the developers and wages to the employees. There is only a practical limit on what can be done this way: when the kleptocracy catch on to the increase in asset values debying them the chance to buy on the downswing!
It was adopted by free governments in the 1930s


History lesson noted, but the printing press is in Frankfurt. Following on from the CSO’s recent publication on the national capital stock I would dearly love to see some work on the State’s balance sheet which might be aligned with the “tennis club” accounts the Government uses and projected forward on a pro forma basis for a number of scenarios. It has always struck me as strange that, when examining a business one looks at the income statement, funds flow and balance sheet – going forward, but weighty pontifications and decisions are made on gloriously inadequate “national accounts”.

@ All,

There is one important factor we should not neglect in discussion of infrastructural projects. What David Wetzel from the UK and his movement, people such as Bill Nowlan, Tom Dunne in the chartered surveyor fields are thinking about. This idea, of building a public infrastructure project and not being able to tax the gains to private lands adjoining the property.

I know that some of the folk at Feasta have thought about this also – I have a very illuminating conversation with one of them this summer – she outlined to me the plethora of reasons why the famous ‘Kenny Report’ of the 1970s was nice in concept, but difficult in implementation.

Namely, that local authorities can get badly burned as a result of the Kenny idea, at various stages in the cycle of infrastructural improvement, land taxation and what have you. I believe that Bill Nowlan and Tom Dunne have both published articles this year to examine the sheer distinction between ‘property’ taxation and ‘land value’ taxation. Tom Dunne in particular wrote about the difficulties of implementation of any scheme – many other countries around the world having tried.

What I mean is, we could get this cost-benefit arrangement for PPP contracts all nicely secured and buttoned down. But even a successful implementation and completion of such large scale projects would merely set off the old im-balances again – whereby much of the windfall in terms of profits acrues to a small portion of society.

I guess this is where the discussion about society has to come back into the mix, between the economics, the taxation discussion, the infrastructural work and everything else. I think that what Garry pointed out above in his posts above is important also. The economics perspective is a very important one, but one that shouldn’t be allowed to over-shadow it all. The legal, commercial and accountancy perspective is required in all of this.

I will end with one last thought on the matter. David Wetzel, thinks it is fairly silly for a modern society to try to pay for transport infrastructure using fares alone. It is fairly silly, when you compare that revenue stream to the gigantic one which usually acrues to those persons who are clever enough to lock in the profits captured by land along the infrastructure.

Harsh words from Professor Joseph Stiglitz;

“The justification was that bailing out the banks, however messily, would enable a resumption of lending. That has not happened. All that happened was that average taxpayers gave money to the very institutions that had been gouging them for years – through predatory lending, usurious credit-card interest rates, and non-transparent fees.

The bailout exposed deep hypocrisy all around. Those who had preached fiscal restraint when it came to small welfare programs for the poor now clamored for the world’s largest welfare program. Those who had argued for free market’s virtue of “transparency” ended up creating financial systems so opaque that banks could not make sense of their own balance sheets. And then the government, too, was induced to engage in decreasingly transparent forms of bailout to cover up its largesse to the banks.
Those who had argued for “accountability” and “responsibility” now sought debt forgiveness for the financial sector.

@ Paul Hunt,

again Paul, to draw a parallel with your points about profit and loss accounting with something else – just in passing.

Elizabeth Warren’s research into middle class families in the US, was informed by her experience in commercial law and bankruptcy cases. She took a hypothetical middle class family in the United States and applied her usual logic to do with businesses to the family unit, and drew some interesting conclusions from that research.

Her lecture on the collapse of the middle class is available on YouTube.

I think Garry is correct above when he said:

“On NAMA, I think even with all the analysis here, its essence has yet to be captured. I think the views of economists are welcome but I believe the views of legal and accounting experts would be even more valuable in describing the philosophy and approach behind NAMA.”

The trouble of course, if one follows the vicious cycle, as described by senator Shane Ross and so forth – infrastructural projects set into motion this cycle, whereby banking institutions are in a position to lend to ‘borrowers’, to lock down all of the land available, which has gained new strategic importance due to the infrastructural improvement.

In other words, one way or another, a major windfall from the project finds its way on to the balance sheet of the financial institution. But we should try to view national-isation, or part national-isation of the Irish banks through this lense. If Ireland does take a large portion of ownership in our banks, why waste the opportunity, by not investing in infrastructure?

My logic being, that any money invested by the state into infrastructure, would ultimately be reflected in improvements of the balance sheet of our part-nationalised banks, regarding the assets or loans which relate to land adjoining the new project. We have an opportunity to create a virtuous cycle for real social gain. Granted we do not want public owned banks forever, but for that brief window of opportunity, we could certainly make it work to our advantage.

I mean, the ‘private’ element in the private-public-partnership (PPP) is going to have to obtain finance from somewhere. I.e. Loans from part-nationalised banks.

The point is – while the banks are part-nationalised, we don’t require a formal setup for the taxation of land or worse, a rushed-through, botched-up taxation on property.

While the banks are part-nationalised, we can work on implementation of taxation policies for windfall gain. But that will only be required at a later stage, when the banking institutions are finally floated back into the private sector of our economy again.

@ Kevin & Robert

The point about labour abundance and the shadow wage is well taken – the current Department of Finance manual on CB parameters does not take into account the new envionment. However, I don’t believe that anyone is planning to re-evaluate the big projects.

I have made the point elsewhere that it is not good enough to simply say this project creates so many jobs – other projects/prgrammes may be considerably better value for money. Indeed I have pointed out that IDA created jobs come at a much lower price than construction jobs. Furthermore, these are often self-sustaining whereas the construction jobs are only there as long as the money keeps flowing.

The government can do all sorts of things with our money thyat will have some positive effect but surely as tax payers we should be concerned about value for money and opportunity cost.

@ Edgar,

I always get back to John Fitzgerald’s comment piece in the Sunday Tribune.

It is one thing to talk about creating jobs. But if we stand back from that for a moment. We had jobs in Ireland not so long ago. But then what happened, due to un-even allocations of wealth acruing out of land assets, we got a rush by private enterprise to encircle as much capital as possible as quick as possible.

When that capital wealth was up for grabs, it created a condition in which construction activities competed on price, with those very thrifty IDA-created jobs, to ‘steal’ as Fitzgerald calls it, labour from industry to give to construction and development.

The root of that though was an intricate scheme of incentives, whereby wealth in its various manifestations was moved around, and captured one way or another through ownership of land and so forth. Indeed, the property owning class became so invested in land assets, it became more expensive for them not to build – they needed to steal labour from somewhere, anywhere.

This is essentially what happened to John D. Rockefeller (Junior) in 1929. His initial strategy had been to lease 3 no. blocks of land at mid-town Manhattan owned by the trustees of Columbia university.

Having secured this lease and options for 3 no. extension periods from the university, Rockefeller had intended to offer the land resource to private development firms to build on, to add value so as to obtain higher rental income. John D. agreed to pay over $3.0 million dollars per year (in 1929) to obtain the lease and assumed this would be more than covered by income through private development companies who would earn rents and manage the building stock.

Unfortunately, after the stock market crash, there were no private development companies left with an appetite for such a deal. In other words, John D. was stuck between a rock and a hard place. His situation had altered radically. He was committed to paying the university over $3.0 million per year and currently only had $300k in rents from the various brothels, speak easies and boarding houses between fifth and sixth avenues.

It boiled down to one thing. John D. could not afford not to build what became known as the Rockefeller centre by himself. Furthermore, he had to invest further millions of his own money to buy out the 1,000 odd speak easies and various other un-desire-able sub-leases as part of the existing 3 no. blocks worth of land!

That is kind of the position that many of Ireland’s largest property companies were in too, as the Celtic Tiger progressed. The further time went on, the more and more they had to build to keep their heads above water, to avoid going completely broke. Look at Sean Dunne at Ballsbridge as a prime example, but he is not alone.

But given the fact the Irish state has had Sean Dunne x 10 running around the place – to whom, not building was a more expensive option – they had no option except to stomach construction inflation, because not build-ing was not an option. The word got out, and every skilled tradesperson or craftsperson, and many professionals in Ireland and much of western/eastern Europe got wise to the fact, Ireland’s builders were in a complete bind.

@Paul Hunt
“(b) current indictaions are that the transfer values of the dodgy loans porltfolios may be with a deeper haircut than orginally considered. Ergo a demand for an even larger bank recap – and the cupboard is looking very bare;”
Paul, you are totally, utterly and completely wrong.
The overall cost of the bailout is reduced by fully nationalising the banks.
We then have more shares to sell after fixing them. The better the shareholders do the worse the country does – it’s as simple as that.
We will be issuing the same amount of bonds – whether we issue them as NAMA bonds (legislatively fully equivalent to government bonds) or as government bonds. There is NO extra borrowing through fully nationalising and there never has been.

Many people make the error of “Baconian Equivalence”, most because they are victims of spin – consciously or unconciously – and some because they are deliberately uttering misleading spin to the media.

People who wish to research how the NAMA spin machine operated over the course of this debate will find it very valuable to look back at old blogs on

Anyone who can’t get enough of NAMA or the property market will find more discussion here:

The economy forum on is also good.

Edgar. Totally agree. Indeed as economists we should be particularly concerned about value for money and opportunity cost.

@E65Bn plus economic costs & NO extra lending!

You certainly have a way with words. On that fateful night in Sep. 2008 the Government blinked. Unlike Britain the five “domestic” banks were variations of Northern Rock. There was no appropriate legislation governing funeral plans for banks. The scale of the liabilities that it would underwrite were beyond the State’s immediate financing ability. Immediate external ownership would be difficult to arrange and it would blow whatever remained of FF’s credibility on economic matters out of the water. I doubt they were unaware of the impact the UK’s expulsion from in EMU in Sep. ’92 had on the Tory Party. The blanket guarantee bought it time, but, even if the bank financing requirement has been diminished, it has not gone away.

There is only so much scope to raid the NPRF to recapitalise the banks. Anything more has to be borrowed and the markets have factored in the NAMA €54 billion to the national debt. Yes, if the supply of external finance were perfectly elastic, it would make sense to borrow, and to borrow again, to fully recap the banks and to get them providing the necessary services to the economy – rather than being leeches – but there are real increasing costs and constraints on significant increases in borrowing.

I’m focusing on the financing issue – and this has implications throughout the economy.

@Paul Hunt
I accept that the banks will need additional financing. I assume you do agree though that what Karl Whelan calls Baconian Equivalence (after its major proponent Peter Bacon) is false?

It really does matter how many shares in the banks we get in return for the property loans. The less we get the more the cost to the taxpayer. For a minister for finance to basically egg on his valuers to produce the highest possible valuation – and therefore the lowest possible state ownership – is to me deeply immoral. It is a direct transfer of wealth from the citizens of the state to the shareholders of the banks.

I noticed yesterday that Brendan Keenan, the economics editor of The Irish Independent, said that talk of the IMF since the April budget (let alone after the most recent one) was scaremongering. But Deaglan de Breadun, the political correspondent for The Irish Times, had been convinced – presumably by the government’s spinners – that Greece’s difficulties mean Ireland is still right on the brink.
If Ireland is on the brink, why have ministers and higher civil servants only taken an additional paycut of 5% this year (and remain vastly better paid than comparable countries)? Remember, they said the 10% cut earlier this year was a pension levy.
Why did they leave the billions of pork identified by McCarthy virtually untouched, let alone have the superrich who use tax shelters only pay 30% income tax?
Commentators need to realise that we are not on the brink of default and they are the only people who are acting like we are. Meanwhile, the government and most of the establishment are mounting a massive cover-up, bailing themselves out at taxpayer expense and feathering their own nests.

@ All,

I can see, reading some of the contributions above why Joseph Stiglitz’s writing has been so successful in shining a light onto problems with the IMF and world bank interventions. The think is, back when I read some Joseph Stiglitz, it was always ‘safe’ because I was reading about some far away African nation or somewhere that was in difficulty.

It is a whole other ball game now though. I am reluctant to pick up any Joseph Stiglitz writing of late, as it would only remind me of the reality of our own predicament in Ireland.

A book I will mention though, because it deals with a lot of the same material that Stiglitz does in his writings – is another book, by famous author on cities and urbanism, Mike Davies, Planet of Slums. I merely mention the book, for those of you who may enjoy a take on IMF intervention etc, but one which is slightly different in its point of view from Stiglitz’s one.

BTW, Mike Davis’s book looks quite a lot at the after effects in countrys where the state funded departments and associated employment in those departments disappeared altogether. Davies looks at the absolute extreme condition, not only where state employment is restricted or curtailed, but is eliminated altogether. Mike Davis’s book will certainly open one’s eyes.

Brendan Keenan appears to believe that governments don’t have to pay debt back (according to his comments on RTE radio on Sunday), so you’ll forgive me if I take anything he says with a pinch of salt… a slice of lime and a stiff shot of tequila.

Well, regardless of Keenan’s views, the point of his column is that Stiglitz has an agenda too. He might be right – but this specific views on Ireland should be viewed in context.

Oh, don’t worry, I no more hold a candle for Mr. Stiglitz than I do for Mr. Wolfowitz or indeed Mr. Krugman. Like our own Mr. McWilliams, they are far stronger on criticism than they are on solutions. And it is solutions we need. My point is that Mr. Keenan offers no workable solutions either.

In a eurozone bent on avoiding inflation, indebting yourself out of debt is not a solution.

There is a couple of things in Brendan Keenan’s Indo article from last October.

I commented very recently at IE, that the British and US banking problems were dealt with in different ways.

I think I was watching the British documentary series The Love of Money which seemed to allude to Gordon Brown and Allistair Darling’s version of events. Namely, that Britain in the end decided it best to take a different tack, to that in the US.

Keenan says:

“There has, of course, been a bit more plain speaking over there. Several analysts said the fall of such banks would have halted the financial system.”

Stuck in the middle of that in Keenan’s article is a suggestion to the collapsitarian meme, which Mick Costigan noted in a recent comment here at IE.

Keenan says:

“People would not have been able to buy bread, said one. Troops would have had to be deployed, said another.”

Mick’s comment is here:

The collapsitarian meme, has gained huge popularity here, everywhere in fact. Stewart Brand even has delivered a very good public speak on behave of the nuclear industry, what happens if the gulf stream turns off and Northern European countries turn into Canada over night.

But because this collapsitarian-ism has been embraced by the environmentalists and financial theories of today, doesn’t mean it is new.

Bill Moyers of PBS did 2 no. excellent programs for his TV show, where he uses the actual recordings of Lyndon B. Johnson, Robert McNamara, Bobby Kennedy and others discussing the situation in South East Asia in the early 1960s. A phrase often used is this one the dominoes might fall. To describe a delicate geo-political stability, the US were keen to preserve.

To get back again to minister for Finance Brian Lenehan and September 2008. Luckily enough, between the books published to date, the news reporting, the discussion and the analysis it is finally becoming somewhat clearer what exactly happened. It is sobering to note today, how scattered, disorganised and vague things were in September 2008 for all of us. We simply didn’t know what was happening around us in Ireland.

A theory that people may not be able to buy bread might have seemed as good a theory as any, at that time. Maybe even still today.

But to take a long view on things. Minister for Finance, Brian Lenehan I do think genuinely believed the country of Ireland was in danger of going down along with Iceland. I believe that is how minister Lenehan would testify in an inquiry if it were staged today or at any time.

But what would the long term consequences of that be? Would the civil service of the Irish nation completely collapse? No money to pay salaries for basic public services. How would that play out?

This is why I offered the example of Mike Davis’s book Planet of Slums, because unlike Stiglitz who has studied situations in many countries, Davis has looked a little bit more into society in countries affected by financial collapse. Davis has looked at cities where no civil service exists anymore. Teachers etc are job-less, the same with doctors and nurses.

To give credit to minister Lenehan, maybe he was looking at this wider picture. It is one thing to win academic arguments here at IE blog, to do with bondholders, shareholders, risk-takers and so forth. It is quite another thing to contemplate a reality for Ireland where minister Lenehan may not even have a canic treatment facility to benefit from in this country. He may have to fly to the UK or somewhere else for basic treatments.

Davis has looked at that sort of reality and described it better in its small tomb referred to above. Much better than Stiglitz ever has. Stiglitz’s focus is on the over-arching mechanisms of globalisation and economic day-to-day systems. The abstract if you will. Davis tells a different story, like what happens to a few remaining middle class employed in certain African cities, when they are forced to stop at traffic lights.

Oooh new word 🙂 “collapsitarian”. Thanks Brian 🙂

And well observed. Someone said to me recently on Iceland – the worst happened, they’ll owe a stack of money forever, and yet life goes on.

Some comfort for us!

“It is sobering to note today, how scattered, disorganised and vague things were in September 2008 for all of us. We simply didn’t know what was happening around us in Ireland.”

Maybe this is the kind of conclusion we should aim for, as a result of an inquiry into the banking collapse in Ireland.

Maybe this is a useful conclusion to draw.

It tells us – in the case of a financial emergency, do not expect to situation to appear in any clarity.

Instead, except dis-organisation, lack of clarity and conflicting view points.

It would be wrong to begin an inquiry into the banking collapse in Ireland of late 2008, with the goal of trying to obtain clarity.

The purpose of such an inquiry, more than anything else, should be to underline the fact for future generations, that in the case of a crisis, you will not have any allies, any supports, any real sign posts which may help.

What do you do in such a situation in order to avoid pressing the panic button and setting off in motion an even worse calamity and sequence of events?

I am reminded once of a conversation I had with an oil-worker, who had undergone his training before moving to an oil rig in the North Sea. They immersed him in a simulation helicopter crash into a swimming pool in pitch black darkness, upside down.

To the mans amazement, no matter how hard he tried, he was trapped in the cockpit, because he could not even find the handle of the door. He couldn’t figure out which way was up or down.

I am suggesting the purpose of a banking inquiry is to understand this same phenomenon, in a situation where the financial system goes underwater, in the darkness, in the middle of a rough sea.

To use the metaphor of the helicopter door handle, I guess in Ireland’s situation that became the National Pension Reserve.

When you think about that, it is hard to blame the former ‘Asian Tiger’ nations for stock-piling so many US dollars in reserve, to see them through some future turbulence.

The ‘Asian Tiger’ economies as described so well in many of Stiglitz’s writing have undergone the simulation, or rather the real thing. They have been under the waves, stuck in their own cockpits, no knowing which way is up.

It is a different story, when you have lived through it once.

Recent comments focus on Lenihans decision in September 08 as a choice between survival and social armageddon.

Whats missing is Lenihan and his cabinet colleagues collective responsibility allowing such a scenario to develop at all.
There were few redundancies built into the economy and dept. of finance that would have flashed amber and then red as each contributing factor in the crisis reached those points.

In many human and natural systems such redundancies are constructed and evolve which prevent failure in one area from spreading throughout the system.
For example if you cut your finger you dont bleed to death, a building does nt collapse when a window is broken.
Horizentally and vertically, damage to the system is contained in that area and risk is prevented from spreading throughout the system.

The theory behind financial derivatives was that risk was spread throughout the financial world through many companies and countries and that this risk dissipated as it made its way.
What was not appreciated was there was no comparmentalisation of this risk and so owners of houses in California who defaulted on mortgages effectively brought down banks worldwide and transferred liability onto sovereign governments.Risk in fact increased with every stage of transmission through the system.

In Ireland massive amounts of euros came from Europe following our joining the eurozone at rates of interest out of whack with our economic cycle. As Germany remained in recession a low interest rate environment provided fuel for the boiling property market here.
There was no control mechanism which could mediate this transmission of risk into Ireland.It was impossible for our own government to set interest rates and fiscal policy was used by FF akin to someone striking matches in a fireworks factory.
There was no equivalent of the Glas/Steagal act which would have set limits on the amount of finance pouring into Ireland.

Failure to identify risk and reduce its effects meant that other mindless policies ensured economic collapse inevitable.
For example immigration was deemed to be one of the fundamentals of the economy and property market and so an open borders policy was pursued.The result is an inventory of houses built for people who have either gone back to their own countries or cant afford them as they are on the dole due to the collapse of property market.

The same policy mistakes are now being made with NAMA.The entire economic ,social and political future of Ireland is at real risk of systemic failure .There are no offsets to diversify or compartmentalise the risk NAMA poses to the entire country.
All that is happening is the bets being placed by FF are getting bigger and bigger.

Whilst people are lauding praise on Lenihan and sympathy for his illness, this should nt mitigate his own responsibilty for the disaster.
Indeed since his appointment as minister for Finance his policy mistakes have been huge.The increase in VAT rates lost about a billion euros in business to the North,NAMA (‘the only game in town’) is unravelling before it starts,two or was it three disastrous budgets before he got one through which has been deemed competentent by the ‘authorities’.

The cult of personality has been successful in the past in fooling the Irish people.Its better to watch what Lenihan does rather than allow natural sympathy for his illness and admiration for his ‘leadership’ occlude your judgement.

Oooh. Interesting.

Shame the letters to our own dear president didn’t have the same effect with the NAMA bill. The NAMA bonds construe about the same proportion of GDP to Ireland as the Icesave debt does to Iceland’s GDP.

@ YM

same proportion, but assuming you place a non-zero MV on the NAMA assets, then its slightly different.

The repurcussions of the Icesave deal falling apart are reasonably serious – IMF deal stalling, trade sanctions potentially being placed, EU membership being taken off the table.

Ah, but I reckon the MV on the NAMA assets varies between something, nothing, and less than nothing, adding up to pretty close to nothing, particularly when you take the excessive recapitalisation required at the other end (i.e. the banks will never be worth the amounts that have been ‘invested’ in recapitalisation).


“Whats missing is Lenihan and his cabinet colleagues collective responsibility allowing such a scenario to develop at all.”

Agree. That’s the purpose of an inquiry. Not if what we did to deal with the collapse was correct, but how the regulators ignored the rather obvious warning signs that a collapse was inevitable. Otherwise, why shouldn’t this happen again? People have short, short memories.

Sean O’ says:

“There was no equivalent of the Glas/Steagal act which would have set limits on the amount of finance pouring into Ireland.

Failure to identify risk and reduce its effects meant that other mindless policies ensured economic collapse inevitable.”

That sounds like a very good analogue for the reality as I experienced things myself during the Celtic Tiger boom period. We in Ireland fool-ish-ly gained more and more false confidence in ourselves and our drive to achievement. We did not identify any risk at all hardly, in the course we pursued.

That is roughly the size of it, when all of the dust settles down.

Sean O’ says:

“The same policy mistakes are now being made with NAMA. The entire economic, social and political future of Ireland is at real risk of systemic failure. There are no offsets to diversify or compartmentalise the risk NAMA poses to the entire country.

All that is happening is the bets being placed by FF are getting bigger and bigger.”

That also is a very valid contribution and assessment I would think. Thanks for making this point.

I appreciate the way you have managed to juxtapose those ideas – risk assessment and NAMA.

Certainly a working knowledge of one can certainly shine some light in attempts to think about the other, rationally and objectively.

@Brian and Sean

“There was no equivalent of the Glas/Steagal act which would have set limits on the amount of finance pouring into Ireland”

Well of course, there wasn’t one in the US either since it was repealed under Clinton….

sarah caray says:

”..Well of course, there wasn’t one in the US either since it was repealed under Clinton….”

Goldman Sachs lobbied hard for the repeal of the Glas/Steagal act which came into force during the great depression.
Various secretaries of the Treasury have come from GS under both Democratic and Republican administrations.
The G/S act was a barrier to investment banks exceeding prudent LTR .It worked very well until its repeal.
Hank Paulson who created the biggest bailout in history as US Treasury Secretary was a former GS man.
The political establishment of both parties in the US act as one when it comes to such matters .
Of course Clinton is still lionised in Ireland (cult of personality again)
but the decision to repeal G/S and setting up NAFTA under his watch have been enormously damaging to the US and further afield.

In Ireland a similar revolving door between the political,legal and business establishments exists.
For example Alan dukes ,former FG leader and Finance minister is now deeply involved with Anglo Irish Bank.
Would FG or Labour bin NAMA?. I doubt it.
Why did nt the unelected (FF appointed President) sign NAMA into law when there were clearly other Constitutional rights that would be impinged .?

The system has failed ,it continues to fail and greater risks are being made to right it by people who lack basic understanding of the Constitution and competence to do the jobs they were appointed to.


Of course Stiglitz has an agenda though I fear Mr. Keenan’s article is rather operatic in plot. EVERYONE has an agenda but whereas some agendas are for personal enrichment others are for the enrichment of the country or of humanity. I rather suspect that Stiglitz is motivated by more than just the red mist. For one thing, his arguments are rather supported by the evidence of the past two years. For another, no one has really told us why letting a few banks fail would have meant the end of the world. Why would the failure of banks have led to no bread in the shops of troops on the street? Where is the evidence for these fantastic claims that Mr. Keenan chooses to repeat? Would we really have been in a worse position than we are now, waiting for the second half of the hurricane?

@ Garo,

“For one thing, his arguments are rather supported by the evidence of the past two years.”

Fair point. I remember reading his chapters about the Asian crisis a number of years back, and thinking to myself, wow, that is so exotice, so far away from anything we have ever experienced.


“no one has really told us why letting a few banks fail would have meant the end of the world.”

Did the fall of Lehman’s not prove that failure has enormous consequences? No bread crisis, but a paralysing effect on global finances nevertheless. Or do you think that might have passed?

One last think, I might add to this discussion. It arises from my reading about the 1929 crash and as it affected New York in particular. There was an insurance firm back then who had financed building of the Empire State Building to the tune of almost $30.0 million. Eventually the insurance company made back a good deal of the principle but had to drop its interest agreement, because the Empire State Building which offered about 40 acres of new office space in mid town Manhattan was not the success that was hoped at the end of the roaring 1920s.

The funny thing is, the same insurance company who was aware of its trouble with the Empire State Building loan, did advance a much larger loan to John D. Rockefeller the second. A loan of $60.0 million, which was half of the (lowest) estimated cost to build the Rockefeller centre between Fifth and Sixth avenues. But on one condition. That Rockerfeller had no other loans taken out with regard to the said project.

The reason being, if things went bad for John D. the second, the insurance company did not wish to have any competitors or complications to deal with. The Rockefeller centre was built over 3 no. Manhattan sized blocks. The insurance company would be free to dispose of this land (only a lease on the land actually, as Columbia university owned the land itself) as it deemed necessary.

Compare that to our situation today with regards to NAMA. I know there has been a huge deal of economic debate and analysis here at IE blog. But I would like to make the point, that with NAMA, at least all of the property loans to various parties are integrated into one ‘bank’, that is, NAMA.

There is a world of difference between 1 no. ‘bank’ institution such as NAMA which buys all of the loans (or the significant proportion of loans) related to a particular property developer and/or project. It seems to be a solution, which is tailor-ed to the working out of deals and arrangements. The alternative, as we saw with the Zoe court case this summer, is where several lenders are all stuck together is some ghastly arrangement, which has no chance of a work-out.

No doubt, folk here at IE will argue that NAMA is a good deal for lenders, and possibly borrowers alike. But there are precedents for this kind of approach at earlier periods in history as I described.

@Sarah Carey
We’ve been over this before. All we need to do is pass the necessary legislation, repeal the law giving a guarantee to bondholders before Sept 2008 and then in this new year have a bank resolution. As Morgan Kelly said:

“Nama then, will turn out to be expensive, corrupting, and inadequate. While the abject, almost endearing, eagerness of the Greens to please their Fianna Fáil masters means Nama is almost certain to go ahead, it is perhaps worth asking what would happen if it did not.

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.

Under existing Irish corporate law, this transfer would be a recipe for centuries of litigation. That is why most other industrialised economies have, or are introducing, special legislation to resolve failing banks with limited judicial review. Particularly impressive is the UK’s Special Resolution Regime introduced last February, which could easily serve as a template for similar legistlation here.”

Stop playing by FF’s rules. Who do you trust? Morgan Kelly or the crony capitalists who are getting the taxpayer to bail them out while they shamelessly cover up their corruption?


Now how can I argue with you when you were so nice about me earlier in the thread? 🙂 I think my last column on Nama urged the Greens to walk out over it. Hardly no surprise they didn’t listen!

Let’s go on Iceland watch. Should be instructive….

@Sarah Carey
I don’t want The Irish Times to become a left-wing monolith but The Irish Independent is right-wing and The Irish Daily Mail populist but right of centre. The Examiner too seems right wing:

“There is no sweet way to say it but these cuts do no more than recognise our desperate situation and are absolutely unavoidable. There is no alternative if we are to avoid bankruptcy and encourage the nascent recovery Mr Lenihan assured us was at hand yesterday.”–very-tough-medicine-for-tough-times-107494.html

No mention of cuts to pork spending or reduction in tax breaks there!
Under the current editor in the current crisis The Irish Times has been right-wing. I expect that after the crisis is over the paper will move left a bit but this is when we need them most. Even if the paper were to be relentlessly sceptical rather than deeply trusting it would be a huge improvement. At the moment it’s 4 – 0 to the right.
I just want it to be 3 -1.

I’m surprised no one has mentioned that McCardles laughable article is almost certainly a thinly veiled communique from the DoF.

The dead give away is the defence of NAMA and its rigorous overvaluation of assets by 15%. The defence of Nama is described from the position of the government, rather than McCardles’. It is almost as if some senior civil servant in the DoF had written the article themselves?

Perhaps even more telling is the assertion that the Central Bank has the most to lose from any inquiry into the crisis, rather than say the DoF which presumably bears little responsiblity for the collapse of the public finances. Dof/CB rivallry seems to be alive and well.

Could anyone tell me which of the pubs around Baggot Street or Merrion square I should go to in order to eavesdrop…….

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