heard your contribution to The Frontline TV program. What I am saying to guys such as BL who walk onto that stage, is a general point. Respect your opponent at all costs. Or one can easily find oneself on the canvas like George ‘the mountain’ Foreman, in that famous battle. Or George Lee for that matter. Part of the psychology of politicians is to draw you in, to give away some minor skirmishes. A kind of rope-a-dope strategy. Don’t fall for it guys. Don’t fall for it.

There is one great scene in The Right Stuff, movie, where one of the astronauts has to abort his mission, ends up in the sea and returns to base. I don’t know, it was Apollo 5 or 6, or something. There was no fanfare when he got home, no presidential hand shake, for sticking his neck on the line. All he got was a motel room out in the sticks, and off the grid, so the press wouldn’t find him. His wife pointed out the obvious, and he protested to her, Look honey, we got a view of the ocean and a fridge full of beer. That is basically where we still are in the IE. Make no mistake, we are still in Syberia. BOH.

No panic - the banks aren’t going anywhere at the mo (-;

The White Knight demands its own thread. We are interested.

Sorry about the slow response I was “off the grid” today in academic meetings (mostly about grading!). Rather than tag something on to the end of a long thread on this topic, I promise to open a new thread within a day or two giving my third way/white knight/ foreign capital proposal. Sharpen your proverbial pencils if you have opinions upon the subject. More later.

Welcome back. Main benefits of N are direct, and if necessary dictatorial, access to Data, Information, and Time. Then one can Act.

The DoF must constantly re-assess progress and prognosis for the future in deciding whether to go for outright nationalisation and control.

Issues which bear consideration are as follows:
1. An updated estimate of the value of bank assets and bank security being taken into NAMA.
2. An updated estimate of the value of bank assets and bank security not being taken into NAMA. Such estimate might, in part, be based on the banks’ margin of error (if any ) in relation to NAMA assets.
3. The amount of progress which has been made in implementing NAMA.
4. An empirical analysis of how successfully NAMA could be implemented by nationalised banks. In particular, we need to assess whether the transfer of assets would require less due diligence if all the banks were nationalised.
5. An updated analysis of whether the State could afford to nationalise the banks without having to default on domestic deposits.
6. A re-assessment of the liklihood of attracting private equity into the bank.
7. A cost/benefit analysis of nationalising the banks, having regard to the likely and possible time it would take to re-privatise the banks, versus keeping the banks in part privately owned and operated as private commercial enterprises.

Don’t get me wrong - I am still not sold on wholesale nationalisation and I do not subscribe to Brian Lucey’s analyses and views. However, we must continually assess where we stand and not be afraid to change course if it appears advisable. Some factors which may have changed:

a. It has taken longer than expected to complete the NAMA due diligence process.

b. The mechanisms for valuing loans and properties and carrying out due diligence have been set up and could be used with nationalisation (as has always been the stated intention in accordance with IMF and EU Commission advice).

c. Due Diligence may be proving more onerous and expensve than expected (I believe the banks are liable for this under the NAMA Act but it is money taken out of the system).

d. Our banks may have weakened substantially.

e. The property market continues to decline making NAMA more risky and more of a subsidy. The fou to six years for the playing out of a property crash as per Reinhart and Rogoff’s study is some way off (December 2010 at the shortest and December 2012 at the long side based on a start date of December 2006 [maybe October 2006 - don't have the text to hand]). Further declines in house prices amplify possible losses based on Mulcahy’s 80% recovery rate.

f. Sovereign debt markets have been jittery (may be an argument against 100% nationalisation).

g. There may be doubts as to whether NAMA can retore credibility to the banks as the amount of loans transferred is reduced, as many development loans under €5m turn sour and as residential mortgage and private debt losses look likely to increase.

h. It has become more difficult to attract private equity to banks and companies generally.

Unfortunately, not all information on the extent of change in circumstances, particularly the variance between pre-NAMA estimates provided to the Minister by the banks and valuations arrived at by NAMA, is not available for public scrutiny.

Guys, we owe it to BL to give a rigorous analysis of the performance I think, for the effort and work that BL, KW, PL etc have put in. (PL about Greece on The Late Debate, excellent btw) Look it, economists such as BL have their medium, they have their medium and it as simple as that. BL writes a devastating article in just 1000 words. He can pack more into 1000 words, with more punch, than anyone out there. Deputy Darragh O’Brien can never do that. But one ventures outside of their own medium at one’s own extreme peril in my opinion.

What you saw on The Frontline was a wrestler in the ring with a boxer. (I can’t think of a better analogy) But I will be up front and honest with BL, he didn’t run rings around anyone on The Frontline. In fact, he was lucky not to come away with any major self-inflicted wounds. Pat Kenny was careful to keep it an even debate, but that Darragh O’Brien fellow knew how to defend an in-defensible position, with some real skill. BL of all people should know that. Mark my word, when NAMA does fizzle out, two, three years from now, or whatever, no one will remember Pat Kenny or The Frontline, and sophisticated debate-r(s) such as Mr. O’Brien will be on shows, able to convince people blind, they were against NAMA all along, or the full facts were not revealed to them or something. Lets be straight about that, as difficult as it is for economists to admit to PR skills.

That is just what the PAC guy, Darragh O’Brien was waiting for, and ready to pounce on, any trip that BL or Pat Kenny made. In fact, it was so interesting, Pat Kenny himself had O’Brien on the ropes at one point. But Pat Kenny tripped himself up at the crucial moment. He inserted a word, ’simple’ to describe NAMA, where he shouldn’t have, and deputy O’Brien saw that opening, and made the most of it. Mr. Kenny is used to dealing with slippery opponents all the time - it is his stock and trade - but make no mistake, deputy O’Brien was able for both Mr. Kenny and Mr. Lucey together. You have to remember, deputy O’Brien was so capable, he could defend the in-defensible. And Mr. Lucey with ‘x’ no. of years in studying economics didn’t land a glove. Sorry to be harsh about it. BTW, if you really want to witness a FF deputy defend the indefensible, check out my comment here:

http://www.irisheconomy.ie/index.php/2010/02/27/ministers-speech-at-taxation-institute/#comment-37643

BOH.

http://www.rte.ie/player/#v=1067663

Skip to at least half way through to catch Brian undermining Darragh…great fun.

He won’t get it - he’s got me up against him.

Damn - can’t believe I missed BL on Frontline.

“It’s difficult to build a retail banking business from scratch in a mature and well-supplied market. Cheaper way to try than BOSI, Danske, Rabo, and no room for conspiracy theories.”

I have got one whopper of a conspiracy theory, that I made earlier. Green minister John Gormely will not publish the report(s) on the Dublin Docklands Development Authority, for fear it will damage former Taoiseach Mr. Ahern’s chances of becoming elected Mayor. S-t-o-p the night - mare! BOH.

Robert Browne made a significant contribution to the last thread on NAMA being approved. He said:

“While they waffle on about LTEV they will be milking NAMA for every cent they have and I believe they have already exceeded their legal bill for all of 2010 and we are only into March. Surprise, surprise.”

It seems that a lot of the front bench in FF, derive from the legal background, and one wonders how can we benefit from a broader cross section of opinion? The front bench of government has recently been labelled as being ’stale’. Could some of the stale-ness derive from a lack of diversity of views? I mean, minister Martin gets criticism for being an ex. school teacher, but at least, a school teacher is on average more likely to be receptive to input from younger folk. BOH.

You see Karl, you can run this through the parliment house again, and again, but what hasn’t happened yet, is a cultural change within Dail Eireann. You have to step back and look at this in the broader historical context. Refer to The Week in Politics episode of February 28th 2010. Noel Whelan commented recently on the cabinet re-shuffle - why is it the case, that only the minister for finance, is the only person allowed to talk about finance and economics for - the - government. If anyone from the Greens are listening, wake up! That includes the Greens also, you are not only an appendage. Why the minister for finance is the only minister allowed talk about economics, is a legacy from the days of Charlie Haughey. Because Haughey’s right hand didn’t know what his left hand was doing, he had to centralised all speaking to do with finance and economics in one person - the minister for finance. Most of the time, I would argue, the minister for finance doesn’t even know the whole picture. S/he is merely handed down something from above, and asked to sign it through. This procedural system was still very much in evidence by 2006, the height of the boom, when present Taoiseach Cowen and former Taoiseach Ahern were working it together, authorising loan extensions for the Dublin Docklands Development Authority - which had effectively become a branch of Anglo. Heck, why would Anglo even bother to develop a branch network, when former Taoiseach Ahern could hand the city to them on a plate. This is the same former Taoiseach Ahern, btw, that we soon hope to elect as Mayor of the capital city. Minister Gormley of the Green party has a great article about that in today’s paper also, I urge all to read it. Former Taoiseach Ahern will make an extremely popular Mayor of Dublin city, and I wish him all the best. (You have hopefully identified my sarcasm by now)

But I don’t think Dr. Michael Mulreany, assistant director of the IPA, in his points about change management really understands the full picture. In other to get that ‘better public debate’ that Karl Whelan craves so much, requires the entire culture in the Dail and throughout the permanent government to radically alter. Otherwise, we will continue to have major mess-ups like the Irish Glass Bottle site, and other failures. Because the economics discussion is not happening right across all divisions between individual department silos. If the economic debate could occur, across those divisions, then we would not have statements like former minister for environment, Dick Roche made in late 2006, after the government had purchased the Ringsend land, from itself effectively, at a cost of hundreds of millions. Refer to Elaine Byrne’s IT piece, Not level playing field when it comes to new Gaelscoil, for a more typical parish pump everyday man’s example, of the state renting/buying property from itself at enormous excess cost. Smart economy how are ye? The point is really, the structures and procedures are in a mess - not wholly through the fault of Cowen, Ahern, Cullen, Roche etc. The structures are what they inherited from a legacy regime of Charles J. Haughey, which was all about corruption. He was the master. This is why a pick axe has to be wielded at those structures today. I hope everyone is on board with that. BOH.

Please don’t go to the PR dark side.

…or, the government knew even back then that there were problems coming with Anglo/AIB/BOI and they thought it might be prudent to ensure there was something solvent and relatively within their control around so that at least people could still be paid and pay their bills?

Discuss.

Thanks for the reply and in particular that you do not regard me as a wind-up merchant (psychological not insolvency) even through I come from the political end of the spectrum.

As regards timing, the FG plan was regularly re-launched so the may date is hardly critical. In particular we proposed before Xmas 2008 that Anglo not be offered preference shares but that it be subject to an orderly wind-up. Subsequent statements were a development of the same line of thinking. Our policy of subordinated bond holders was already very clear by the time of Lenihan april budget.

The endorsement by Labour last year of ye’re proposals is not the type of endorsement that inspires confidence. Joan Burton is good on some detailed points such as the stamp duty avoidance through not transferring title. They have however a nationalisation fetish, that they can indulge in opposition, and the inclusion of the magic words would have to bring their acclaim. In government with FG, they have accepted privatisation as when Irish Steel was sold-off for £1 if memory serves me right by Richard Bruton.

FG are not afraid of nationalisation - it is just that we are more pragmatic in and mostly out of government about using it.

The famous letter made no reference to professional investors (FG speak for subbies) being burnt along with existing shareholders to defend taxpayer interest - the key point of FG post-guarantee (9/29 ?) thinking. The only way in which the owners of the nationalised equity could have the benefit of any eventual uplift was by pumping in wads of taxpayer money to settle the claim of our favourite subbies.

I am not aware of any great events in the last year that has changed the argument.

To me it is more a case of trying all wrongheaded options until only the right one is left.

But then I would say that wouldn’t I.

I am busy trying to persuade the owner of a J35 yacht on which I crew to sail to Quebec so as to get a decent price for it. [Yachts declined less than Bank shares]. Will that do? Bring wet weather gear instead of suitcase.
Am proposing an adventure-school weekend to toughten up academic economists in their TV debates with Govt spin-doctors [oops:ministers].
Am considering Willie O’Dea as a guest street fighter to lecture the guests on how to be a gurrier street fighter. Any takers?

Thanks for the reply. ACC was of course more expensive than Postbank!

I think it’s fair to add Northern Rock’s subbies as at risk. NRock has split into a good and not good bank. The “not good bank” seems to be designed to run-off most of the existing loan book. http://www.northernrockassetmanagement.co.uk/

any room in your suitcase?