NAMA Presentations

The presentations at the Cantillon School by NAMA CEO Brendan McDonagh and at the Fianna Fail think-in in Galway by NAMA Chairman Frank Daly are available online.

I don’t have time to discuss these presentations today but I would refer anyone interested in NAMA to the always excellent NAMA Wine Lake blog. How our friend Mr. Singh finds the time to keep on top of it all is a mystery but, however he does it, we are very lucky to have him.

117 thoughts on “NAMA Presentations”

  1. There’s some interesting thinking about debt for equity swaps (for residential mortgages) over on namawinelake that are worth taking a look at in the discussion about the possibility of developers buying back their loans cheaply from NAMA.

    Can someone remind me again what NAMA was originally designed to do? Like bailing out the banks (to get credit flowing into the economy again – hahaha), it seems to have been lost in the mists of some FF time warp.

  2. For good measure, how about this report published by DAVY today:

    http://www.davy.ie/content/pubarticles/econcr20100917.pdf

    The (unwelcome for many people) heading of the report is:

    REPORTS OF IRELAND’S DEBT GREATLY EXAGGERATED; SOLVENCY AND LIQUIDITY CONCERNS MISPLACED

    It seems to back up most of what I’ve posted here in recent weeks. In fact, some of the points they make are almost identical to points I’ve made on this site in the past month. Of course, that in itself doesn’t prove that Davy are correct. I’m hardly the Gold Standard for judging the accuracy of economic reports by. Nevertheless, the Davy report is food for thought for those claiming that Ireland is about to go bust.

    It is not difficult to predict that lots of posters will now come on here, and even more so on other sites like Politics.ie and Property Pin, and say that the Davy report should be dismissed out of hand because Davy failed to predict the global recession, that Davy are in the pay of the government, that a Davy economist was spotted in 2003 at the wedding reception of Willie O’Dea’s cousin, and so on. Fair enough, but those attacking the Davy report should do so by detailed statistical rebutting of their arguments, not by the usual childish smears.

    Being impartial for a moment, it is clear that there now exists a major difference of opinion in Ireland between academic economists and economists working in stockbroking firms like Davy. Only time will tell which group will triumph. Whichever side turns out to be wrong will have lost all credibility for future say in running the Irish economy. So, the stakes are high.

  3. If a story in todays Irish Times is correct, the Irish government stands accused of fasefying EU Commission approval in regard to NAMA.

    “The EU commission wrote to Fine Gael senator Eugene Regan last week, saying a loan could only be transferred to Nama if the borrower of the loan in question was “an impaired borrower.
    The commission’s letter, seen by The Irish Times , said loans were considered eligible if they were owed by an impaired borrower, rather than if loans themselves were impaired, because the existence of contractual links between loans “may trigger a ‘technical event of default’”

    http://www.irishtimes.com/newspaper/finance/2010/0917/1224279096621.html

    This has a number of implications, for example:

    1. Falsification of a Commission directive puts us in a very bad space.

    2. As the ‘good stuff’ was to finance the ‘bad stuff’ where does this leave NAMA’s finance and more importantly where does this leave Irelands banks
    .

  4. @Karl

    Thanks for the tip.

    @Cearbhall

    The story in the Irish Times this morning is a red herring. Commissioner Almunia’s office confimed to me early this morning that as regards the letter referred to in Simon Carswell’s story “it was a letter by the Commission services and not by Commissioner Almunia, which was addressed to Senator Regan. The letter contained no more information than the one mentioned in the relevant Commission decision (Case N 725/2009 dated 26.2.2010 – http://ec.europa.eu/community_law/state_aids/comp-2009/n725-09.pdf)”

    I’m sure the intent of the story wasn’t mischievous but it would have been helpful (at the very least) if it was made clear that the letter is not from Sr Almunia but the Commission services department.

  5. @JTO

    “Being impartial for a moment, it is clear that there now exists a major difference of opinion in Ireland between academic economists and economists working in stockbroking firms like Davy. Only time will tell which group will triumph.”

    Perhaps a gentle reminder that “academic economists” are not a homogenous grouping all adopting the same opinions might be worthwhile.

    To paraphrase, perhaps those attacking academic economists should do so by detailed rebutting of specific claims made by specific economists rather than by rolling out the usual childish dichotomies.

  6. @JTO

    “Being impartial for a moment, it is clear that there now exists a major difference of opinion in Ireland between academic economists and economists working in stockbroking firms like Davy. Only time will tell which group will triumph. Whichever side turns out to be wrong will have lost all credibility for future say in running the Irish economy. So, the stakes are high.”

    Seems a little dramatic John

    Besides, one would have thought that, if poor predictions were enough to shoot your credibility, Davy’s and , as far as I am aware, all other Irish stock broking houses would have lost their credibility over the last four years.

    Could it not be argued that stockbrokers have a tendency to tell their clients “if you liked AIB at 20, you’ll love it at 10”

    Davy’s have consistently told their clients that things will be fine, its only a blip, expect a strong recovery, debt problems overblown etc etc etc.

    If after getting it wrong, on the up side, every time for years, it subsequently transpires that this time things are better than some expect, that does not say anything about who should be listened to when it comes to policy.

  7. Davys appear to be saying that we’re grand for the forseeable future, no worries here mate. Their forseeable future extends to the end of Q2 next year. Hardly the medium term horizon that the solvency debate is revolving around.

    On the fiscal adjustment, they reckon 15.9 billion in savings and revenue raises which have reduced the deficit by, eh, 1.3 bn? They allocate not spending money yet as a saving (postponing the social partnership pay rises) and there is 3.3 bn that is counted as ‘other measures’ without a specification as to what these are.

    NAMA is “off balance sheet and self-funding”; there is no evidence for this assertion. The rating agencies (gormless though they may be, they are systemic in the use of their ratings) don’t see it as off balance sheet. As to the self-funding aspect, that remains to be seen. So far, only the exchequer has provided cash to NAMA.

    “Growing confidence will encourage spending and a reduction in private sector savings accumulation, even as the public sector continues to save, while a forecast return to current account equilibrium will reinforce Ireland’s ability to finance its own debt. Fiscal consolidation, by reassuring
    consumers about the health of the public’s finances, can be expansionary
    in its overall impact. Having already absorbed much of the planned
    spending cuts, unlike many of our European peers who lag Ireland on
    the adjustment path, there is potential for the forward-looking consumer
    to increase spending over the next two years.”
    Who are these super-hero consumers who are going to stop paying down their debt and start buying imported bling-und-tat again? How does this square with a current account equilibrium? (Which is still the only positive that one can draw from the current situation).

    I believe table 2 contains two errors – in the first place, the GDP figures for 2009 and 2010 appear to be reversed. Otherwise we are going to see near 6% GDP growth 2010-11. The second is that the Exchequer Balance figures for 2009 include the cost of bank capitalisations and NPRF pre-funding, but the figures for subsequent years do not. This is simply not a credible way to present the figures.

    “Ireland entered the crisis with a relatively low debt to GDP ratio,
    amounting to as little as 25.1% gross in 2007 or 13.9% net. The ratio
    has expanded sharply in the wake of the decision to count promissory
    notes as government debt, but even the revised 2010 figure of 92% is
    well below the corresponding figures for the worst European offenders.”
    So we are better than Greece and Italy? Whoopdedo. In case anyone has forgotten, Greece went bust.

    I could go on, but the export economy demands my attention.

  8. NAMA needs modest economic growth. What if the permagrowth model is busted and the last 30 years of debt expansion have just been covering up a longer term tendency for the Western economies towards stagnation ?

  9. @ JTO

    ‘it is clear that there now exists a major difference of opinion in Ireland between academic economists and economists working in stockbroking firms like Davy. Only time will tell which group will triumph. Whichever side turns out to be wrong will have lost all credibility for future say in running the Irish economy’

    A bit of a melodramatic sweeping generalization don’t you think? Or were you just looking to pick another fight with Brian Lucey?

  10. @JtO
    As we have agreed on other threads, it all comes down to growth. If we assume decent growth, we can, at the very least, kick this can a long way down the road. Key sentence from the Davy report

    “We expect the debt GDP ratio to peak at 98% in 2012, based on the assumption of an average real GDP growth rate over 2010-2014 equal to 3%”

    This may happen, it may not. We can hope. Alternatively, we might also note that we are one recession away from a default.

  11. @ Karl

    I think this sheds some light on; “there now exists a major difference of opinion in Ireland between academic economists and economists working in stockbroking firms like Davy.”

    “Academic economists do a rather different kind of economics than their cousins in industry and government. One important difference is that the great majority of academic economists hold Ph.D.s.
    Doctoral training makes for intellectual output (“research”) that usually looks quite different from that produced by business and government economists.”

    http://www.theeconomicconversation.com/book/ch34.3.php
    .

  12. The main problem with NAMA is that the outsourcing of management of the delinquent loans to the banks is not working because the banks have very limited autonomy, are being micro managed. There appear to be extremely low levels of trust. This suggests the subirdinated part of the consideration is not large enough.

  13. The main problem with NAMA is that the outsourcing of management of the delinquent loans to the banks is not working because the banks have very limited autonomy, are being micro managed. There appear to be extremely low levels of trust. This suggests the subirdinated part of the consideration is not large enough.

  14. Does not look as if international investors got the Davy report this morning.

    Irish 10-year spread vs bunds now 376bps – a brand new high.

    AIB -9% (it will be removed from the Stoxx 600 Index). BOI -2.5%.

  15. @zhou_enlai

    “The main problem with NAMA is that the outsourcing of management of the delinquent loans to the banks is not working because the banks have very limited autonomy, are being micro managed. ”

    Why do you say that? Would NAMA not say that the banks had their chance to resolve the loans but through a mixture of corporate inertia, clientelism (in the true sense of cozy unquestioned relationships between bankers and developers), recognising losses etc etc, the banks need to be micromanaged.

    Capita have been awarded the contract to manage loans at the banks. I for one will be interested to see how Capita manage their contract which includes loan resolution should that be appropriate.

  16. What was the chairman of NAMA a civil servant doing giving a talk at a private FF function. Who paid for it and did he take a private day off his work in order to give his talk and did he spend any off his working week preparing the talk. I think I’ll have a private party next weekend in Cork and I would like the chairman of NAMA to come down and give a talk and explain what he is doing with the huge amounts of public funds he is getting.

  17. Allegedly, and one never know this with certainty the FG talk of stiffing Anglo senior bondholders is worrying the markets. The sellers smell an election and a change of policy. The resultant default on Senior bank debts in broken banks was supposed by some here to lead to lower risk to the sovereign. Hence it would lead to lower spreads.

    The market in its infinite wisdom or idiocy may have taken a different view. This culd be that Irish banks will not know be able to refinace. Balance sheets will contract taking the economy down and tax revenues with it. Hence the Sov. would be weaker.

    one is always worried about over-extapolation (if that is a word) but it could be yet another example of be careful what you wish for.

  18. @JTO
    “For good measure, how about this report published by DAVY today:

    The (unwelcome for many people) heading of the report is:

    REPORTS OF IRELAND’S DEBT GREATLY EXAGGERATED; SOLVENCY AND LIQUIDITY CONCERNS MISPLACED”

    the “unwelcome for many people” bit of this statement is nonsense

    I know you like to paint yourself as a plucky outsider, (availing of anoynomity i would add) challenging an imagined smug insider elite, whetehr it be D4 media or academic economists, but suggesting that people actually wish the irish economy ill is just more drama drama drama

  19. Something strange going on with the ISEQ off 2.3% and the 10yr bonds continuing south even through lunch time. yield now 6.27%. whats up Eoin.

  20. @ Podubhlain

    Indo has two articles today, both being taken very very badly by the markets on an otherwise quiet day. For those that think the markets dont react to newspaper opinions, i really do beg to differ given the queries i’ve been getting today. Barclays also went as far as to clarify that they strongly disagree with the Irish Indo headline (their report is the basis of both the article and the headline)

  21. The Barclays research piece suggests that the Irish government does not need to draw on outside financial assistance unless…’further unexpected financial sector losses materialise or macroeconomic conditions deteriorate beyond our baseline forecasts in the coming months’.

    What is worrying is that people in positions of responsibility within debt capital markets apparently read the Indo….

  22. @Eoin
    For once, I agree: market is currently hyper-sensitive to media stories of all kinds. I rationalise this by noticing that others are positing two types of default. One, where you actually run out of cash – we are nowhere near that. Call it ‘can’t pay’. Two, where the debtor runs out of will: ‘won’t pay’. Lots of idle chatter that we are flirting with the second camp. This is dangerous talk that needs to be rebutted forcefully at the highest levels.

  23. Thanks Eoin. The article by Roubini suggesting a 70b shortfall in the infamous Irish bank cannot have helped. ECb needs to act fast and get the yield down.

  24. I saw the Barclays report covered on FT Alphaville after markets closed and long before Indo appeared on newstands.

  25. There is zero liquidity in Irish bonds over the past few days. People are also positioning themselves ahead of Tuesday’s auction. Using hour by hour updates on bond yields as proof of some impending default or something is pointless.

  26. Of more concern than the Barclays report, I would say, is the Citigroup report bearing as it does the imprimateur of a Mr. Buiter. Someone who has built up a large measure of credibility.
    https://www.citigroupgeo.com/pdf/SGL01804.pdf
    “Given the depth of the GNP decline and the revenue losses suffered by the
    government, the steady increase in the estimated losses to the government
    from its guarantee of most of the unsecured bank liabilities cannot but create
    doubt about the ability of the Irish state to prevent default on the sum total of
    its own debt and the bank debt it guarantees until the end of the year. This is
    despite the impressive fiscal adjustment efforts made by Ireland, both on the
    public spending and on the revenue raising sides of its budget.”

    and

    “Denial is not a wise response when one is faced with unpalatable prospects.
    Statements by national, EC and ECB officials to the effect that sovereign default
    by a Euro Area member state is unthinkable, inconceivable, out of the question
    or not a topic worthy of discussion may be understandable given their delicate
    positions, the market-sensitive nature of their utterances and the responsibilities
    they have to discharge. Denial is, however, no substitute for a rational
    assessment of the odds that a highly indebted Euro Area sovereign either may
    be ambushed by the markets under conditions where non-market support is, for
    whatever reason, not available, or may decide that default is the lesser evil.”
    h/t qwerty on thepropertypin.

  27. @Eoin
    “but suggesting that people actually wish the irish economy ill is just more drama drama drama”

    well, actually….

    http://www.irisheconomy.ie/index.php/2009/12/29/morgan-kelly-on-the-irish-economy/#comment-29751

    “Where to go then? I have said before, in public and private, that unless the system crashes, visibly, painfully and for all, we are unlikely to see meaningful change.”

    Eoin you are trying to protect the staus quo as the best method to ensure the long term benifit of the Irish Economy.
    Morgan Kelly believes that a visibly painful crash in the system that leads to the possibility of meaningful change in society is the best method to ensure long term benifit of the Irish Economy.
    I’m with MK

  28. @hogan

    It is not great that this paragon of credibility did not even bother checking the data on P22 on the size of the banking system. The guarantee as he implies does not cover 11x GDP. He is either lazy or malicious.

  29. There may be limited liquidity, but it has been a bad week and we aren’t out of the woods yet. An Taoiseach has achieved international poster-boy status for his willingness to stick to his guns on fiscal adjustment and the perception that he is convincing a sufficient plurality of voters of the need for this. It was foolhardy in the extreme to think that he could stay up until 3:30 am ‘relaxing’ and perform effectively in a broadcast interview that would be heard by a significant proportion of voters.

    The risk of the Government falling, an election and a change in policy on fiscal adjustment and bank resolution are probably becoming more real for, and spooking, the bond market. The full impact of bank losses on the sovereign won’t fully hit until the ECB begins withdrawing liquidity support and this is some way down the road and will have to be accompanied by some restructuring of sovereign debt in the southern periphery and of the bank-imposed sovereign debt in Ireland. Any noise by Labour/FG about possible movements on senior bonds in Anglo is very dangerous.

    The Government needs to confess its loss of sovereignty in this area and rule out the possibility of anything rash being done.

  30. JtO said: “Being impartial for a moment, it is clear that there now exists a major difference of opinion in Ireland between academic economists and economists working in stockbroking firms like Davy. Only time will tell which group will triumph. Whichever side turns out to be wrong will have lost all credibility for future say in running the Irish economy. So, the stakes are high.”

    Next goal the winner, then?

    I suppose its a simpler way of proceeding than counting all the goals that have gone in before now.

  31. @Eoin

    Fair point – but i’ve told people what I do and trust me nobody cares who I am.

    But my point is that John paints himself as an outsider but doesn’t tell us what he does – for all we know he works at a stockbroking company – for all we know in 2007 he was one of those guys telling us all will be well.

    I know that may sound far fetched (or irrelevant) but given his impressive and useful use of stats i dont think its unreasonable to suspect he is not as much as an outsider as he would have you believe.

    On the second point – I take your point. Perhaps there is a bit of dram on both sides of the argument

  32. @tull
    Yeah, that’s a bit shoddy alright. The FT seems to have a bee in its bonnet about the IFSC. Does London guarantee, eh, London?

  33. @ Christy

    JtO has told us he works for a US MNC i think, specifically on statistical type stuff (right?). No reason to not believe him.

  34. Christy,

    JTO revealed who he was on one thread by accident, when his cloaking device failed him. I can reveal he is not a stockbroking analysts unless he was operating under another disguise.

    seeing as we are throwing allegations around the place. How can we be sure that those with a bearish mindset are not in the pay of organisations seeking to bring down the state…hedge funds/MI5/ MI6 .Now how about that for paronoia?

  35. @Jagdip

    NAMA does not have the resources to micro-manage the banks. That is not how it is designed. NAMA is supposed to be able to trust the banks because they have a stake in the recovery of the funds paid by NAMA via the subordinated bonds.

    I am not clear what exact rolw Capita will fulfill. Hopefully they can improve the situation.

    In the meantime, a section of the economy which deals with the subject of the assets being managed by the banks is practically grinding to a halt.

    Whether this is the fault of the bankers for past behaviour or NAMA for requiring too much detail and taking too long to make commercial decisions is irrelevant. The fact is that the system does not appear to be working.

    Apart from the need to keep credit flowing there is an economic need to have a functional commercial banking system where bank consents are available in a timely manner.

    Apart from the damage to the wider economy caused by delay in banks issuing consents, unless NAMA can make timely prudent commercial decisions they will not be able to properly protect and recover asset values.

  36. @hogan

    Ireland did not guarantee Depfa. Ulster is covered by the BOE. the Danish Central bank is responsible for Danske. Deutche Bank London is covered by the BUBA, the Fed is responsible for Goldmans London. Buiter is wrong on this score.

    In short, if Deutshe dropped 40bn in London on some dodgy trade, it is the BUBA that worries not the BOE. Similarly if RBS drops 40billion in Ireland and becomes insolvent it is the Old Lady’s problem.

  37. There may be a lack of liquidity but the deals are still being done as reported by Bloomberg. No sign of intervention and as of now we are 388bp over german bunds. Is this the inflection point?

  38. Let the 10 year do what it wants. We don’t need to issue in that space if we don’t want to as seen in the next auction and we are pretty much fully funded. Not in the office today. What’s happening in the short end of the curve?

  39. @tull
    I agree, that is why I cannot see the logic of the FT (or ex-FTers) continuing to trot out the tired statistic.

    It is not entirely complete to say that Ulster are covered by the Old Lady – their deposits here are covered under the 100k limit guarantee, so in the event they went TU there would be fallout, but that is a relatively minor matter and becoming more minor as other foreign regulated deposit taking banks leave.

  40. @Enda F
    Short end looks even worse

    2 years spread is up nearly 45bps and the spread is up at least 30bps across the whole curve

  41. Sure at those interest rates there’s no problem. 6%, pah.

    The govt should just borrow money and invest in property. Sure doesn’t property always go up and always at 10% per year or so? No problem at all!

    Oh…wait.

  42. @Karl Whelan

    Perhaps a gentle reminder that “academic economists” are not a homogenous grouping all adopting the same opinions might be worthwhile.

    JTO again:

    Fair point. I stand corrected. Maybe it is the media’s fault for not reporting those academic economists who may agree with today’s Davy report.

    @John F

    Or were you just looking to pick another fight with Brian Lucey?

    JTO again:

    I never pick fights. But, I do respond to provocation, as yesterday when Brian Lucey introduced an unsavoury and irrelevant note of religious intolerance into an economics blog.

    @Christy

    “(JTO) availing of anoynomity i would add”

    “my point is that John paints himself as an outsider but doesn’t tell us what he does”

    “given his impressive and useful use of stats i dont think its unreasonable to suspect he is not as much as an outsider as he would have you believe”

    ” suggesting that people actually wish the irish economy ill is just more drama drama drama”

    JTO again:

    Christy, while very flattered by your comment, my so-called ‘impressive use of stats’ amounts to very little more than being able to work out percentages with a calculator. The average punter in a Paddy Power betting office is at this moment employing a more impressive use of stats than I’ve ever used on here. It says a lot for maths teaching in Ireland, that being able to calculate a few simple statistics is apparently so rare that doing so automatically arouses widespread suspicion of being a secret government agent.

    Regarding people wishing the economy ill, note that I said ‘many’, not ‘all’ and not ‘the majority’. You only have to read other websites to see that this is true. I was thinking more of other sites than this one. But, as Eoin pointed out, one prominent poster on this site has posted that wish on here.

    Regarding my use of nom-de-plume, by my count all but Karl Whelan, Michael Hennigan, Brian Lucey, Joh Ihle, Eamonn Moran, Frank Galton are using nom-de-plumes on this thread (apologies if I omitted any), unless, of course, hoganmahew, podubhlain, zhou_enlai, seafoid, simpleton are people’s real names. If I gave my full name, what difference would it make? Nobody here would know me from Adam. I’m a total nonentity. But, I’ll give you a clue, so you can have lots of fun over the weekend. I have the same name as a famous Ulster, Irish and Lions rugby international from the 1960s, but I’m not him, and am not related to him, although back then I sometimes pretended to be him to attract girls at QUB hops.

    As for who I work for, the answer is ESRI. Satisfied?

    Yes, ESRI. Now are your suspicions confirmed?

    Alas, its NOT (repeat: NOT) the ‘ESRI’ as in Economic and Social Research Institute, Dublin, but a totally different and unconnected outfit, also coincidentally called ESRI, with headquarters in California, where I go frequently, although working from various locations in UK and Ireland, and I work in the development of GIS modelling software with specific application to the optimised computer-automated placement of labels on online maps (google ESRI or Arcmap or Maplex for further info, should you be inclined to believe I’m making all this up as a cover for working from FF head office). If you think that the stats I post here is complicated, you should see what goes into that stuff.

    Sorry to bore everyone with these irrelevancies, but I didn’t want Christy to have a sleepless weekend trying to work out who I am. I’m nobody.

    Back to the main point:

    Ireland’s reputation has been trashed in recent weeks by a number of economists claiming that Ireland is about to go bust. The media has been deluged with their comments, analyses and opinions over that time. It has been relentless, 24/7. It is costing the economy a fortune in higher interest rates. Now, today, a group of perfectly reputable economists, namely Davy, have published a report basically saying that these economists are talking nonsense. All I’m saying is that (a) the media should give equal prominence to this report (b) the economists should respond to the Davy report in the same amount of statistical detail as the Davy report itself contains. If Davy have it wrong, they should show us exactly why. Its not good enough to simply dismiss the Davy report with the comment: “Zero marks for presentation – cluttered, confusing and way too busy.”

  43. @Tull & Eoin

    Fair enough – my attempt to the play the man was misplaced

    I still think JTO is too shrill. Particularly with respect “to his attempt to be impartial”.

  44. @ Eoin

    “for clarity, that was actually Brian Lucey’s comment

    @ Christy

    pls add Eamon to the list”

    Oops! Very sorry for that one.

  45. @Christy

    Posts crossed – mea culpa with respect to my suspicions

    JTO again:

    I’m not in the least offended, Christy. I come from the North, where the concept of the impartial bias-free observer is unknown. As for being suspected of working as a secret agent on behalf of the government (any government), I find that very flattering.

  46. @JohntheO
    “It is costing the economy a fortune in higher interest rates. Now, today, a group of perfectly reputable economists, namely Davy, have published a report basically saying that these economists are talking nonsense.”
    Two things:
    1. It hasn’t cost the economy a penny yet.
    2. “Davy” and “reputable” do not sit in the same dictionary, not now the caution of Mr. White is denied them.

    Why not publish and talk about it? Because it is mostly harmless stuff. It is, like their equity ratings, backward looking. No underperform ratings on a company that they have financial dealings with? Only 5 underperform ratings of the 84 companies they track in the last twelve months? During that time a share of BoI has lost 95+% of it’s value, AIB nearly 60% of value, CRH nearly 50% of value.

  47. JTO
    “Zero marks for presentation – cluttered, confusing and way too busy.”” was my comment (and a reiteration of a tweet I did last week) on NAMA .

  48. @Brian Lucey

    Very well. Do you have a comment on the Davy report? Given that their analysis totally conflicts with your’s, how about a debate with them on tv or radio? I’m sure that, if your analysis is the correct one, you’ll easily demonstrate that in the debate.

    @Michael Hennigan

    Congratulations on your demolition of David McWilliams in Finfacts today.

    http://www.finfacts.ie/irishfinancenews/article_1020590.shtml

    @hoganmahew

    Davy have produced a lot of stats in their report today, and based their conclusions on those stats. Your reply is not to debate those stats, but simply to dismiss Davy as not a reputable firm.

  49. @ JTO Mc Bride

    Thanks once again for your input. Anyway I took the trouble to print off the Davy Report which I find is always the best way to read these reports – old way. Jebus it made my day rather than the drivel we wade through everyday in the media and sometimes on here. It is truly amazing when S & P and others of their ilk do their sums they always seem to miss the assets like cash at bank – €20 Billion, NPRF another €20 Billion etc etc . These are the same useless credit agencies that got it so wrong on the US Banks etc but when they have a cut at Ireland we have no problem with anything they spew out of their wordprocessors.

    Have a good weekend on the exporting front as you have an uphill battle here to get any help which might get the economy going forward. The past is dead money but then the Irish always like to have their head up their posteriors and hurl on the ditch.

  50. @TRP
    While it may be great to have money in the NPRF, isn’t that set against a pension liability that S&P didn’t count either?

    Also, your phrase “the past is dead money” isn’t right any more – if it ever was.

    The government has made itself liable for lots of private debt incurred during the boom and will have to raise significant tax money in the future to pay off these debts.

    The future efforts of living workers will have to pay off this “dead money”.

  51. @Karl

    “To paraphrase, perhaps those attacking academic economists should do so by detailed rebutting of specific claims made by specific economists rather than by rolling out the usual childish dichotomies.”

    I seem to recall an academic economist, I forget his name or whether he has a PhD or not, suggesting that the answer to all our woes was to offload our 28bn of Anglo deposit liabilities in exchange for 21bn of assets, a 49bn windfall which would solve not only the banking crisis but also the fiscal deficits.

    Is that detailed enough of a rebuff?

  52. I don’t think that unnamed person suggested solving fiscal deficits that way. Could be wrong tho. If you remember their name maybe email them and ask.

  53. @BL

    “I don’t think that unnamed person suggested solving fiscal deficits that way. Could be wrong tho. If you remember their name maybe email them and ask”

    To be fair he didn’t siggest that it would solve the fiscal deficits. I think he had in mind giving much of the windfall back to NAMA by giving them the money and cancelling their loans in return, bizzarre I know you will agree but that’s what this guy suggested.

    I can’t remember the name so I can’t e-mail him.

  54. @Michael Hennigan

    Thank you for this article http://www.finfacts.ie/irishfinancenews/article_1020590.shtml

    You say There has been no reform of the failed governance system

    Equally, the Regling/Watson report speaks of, in my own words, massive failures in corporate governance, and a complete lack of interdepartmental confrontational culture.

    In other words, i guess you could speak of the behind closed doors policies.

    You also wonder about growth and where it may come from in the midterm.

    This is deed is the biggest puzzle I have not been able to find any convincing proposals. We are loosing young professionals who are forced to leave the country, the very brains we would need to rebuild.

    To me a lot of these developments have a vicious cycle character.

    What I observe is a lot of headless chicken running around, and it seems to become worse, on days like today, utter chaos reigns, and war of words.

    One of the key characteristics of the Irish governance system is the pass the buck culture, where accountability is hard to pin down.

    Literally not existing! …. and the longer I think about it, the more I am convinced that it might be a good idea to start from scratch and debate a new constitution.

  55. @Sarah
    re Frank Galton from your trustworthy wiki link
    “..he argued that the Chinese, as a race capable of high civilization and (in his opinion) only temporarily stunted by the recent failures of Chinese dynasties, should be encouraged to immigrate to Africa and displace the supposedly inferior aboriginal blacks.”

    and now we are getting them here too whoopee

  56. Back to the NAMA presentations.

    ‘Loans are bought from banks ar close to (politically directed estimates of) market value’. The absence of a market is neither here nor there.
    Current vaues stringently (and confidentially) assessed by valuers with duty of care…OK….does cross checking for consistency protect against )politically directed) sysematic bias ?
    NAMA takes the ‘longer view when it makes commercial sense to do so’ ?
    Commercial sense as defined by whom ?
    ‘Hotel sector- base decision on optimal commercial outcome”’optimal for whom ? Non-NAMA hoteliers, NAMA hoteliers or a third party ?
    Debtors will be pursued ‘to fullest extent possible’ ? Legally, politically or socially ?
    Engage with Local Authorities etc regarding property needs”right of first refusal..obstruct (by word of mouth direction) state authorities in their attempts to acquire any property which is not in the NAMA portfolio ? You can have any colour car you like as long as it is black.

    ‘No speculative hoarding’ …sales of assets in the UK, where some semblance of a market remains….

    NAMA is about separating the ‘potentially impaired (!) borrowers’ from the banks, and ‘reaching (unspecified) agreements’ with the former so that they will to ‘co-operate’. If the (politically and socially embarrassing) individuals agree to ‘co-operate’ there will be no ‘enforcement action/public scandal’

    Work with debtors if they make ‘full disclosure’ …of domestic assets, overseas assets, or assets disposed of within the clan ?

    Work with debtors who are ‘realistic (discreet) about lifestlye (their personal wealth) ‘.. and don’t wave it in the face of Joe Public ?

    ‘Enforce personal guarantees to the greatest extent feasible’..bearing in mind the need to maintain the status quo (somehow) and avoid further scandal to the Faithful.

    Sound familiar ?

  57. @ Eoin
    It is not that people wish the Irish economy ill, it is just that some of us realise that the structural reforms needed in almost every area of the economy will not happen unless politicians of whatever hue can blame someone else for ‘having’ to make the hard decisions. Our government will be a proxy for the EU and IMF do you think FG and Labour will care about this? Not a bit, it makes their job easier.

    Lenihan gave us the blanket guarantee which gave us nationalization of Anglo and the rest, his next big move was NAMA another mechanism to further socialise the losses. Lehihan has sacrificed us on the alter of his own expedient, “only game in town” policies. Policies formulated by the same men that caused the disaster. He grossly underestimated the losses and his limited mind set, made him believed that he had no other choice, as his “policies” necessitate continued, further borrowing from the same sources. Now those policies have been shown to be foolish and threadbare. This country was not even paying itself out of the till it was borrowing the money to put in the till to pay itself.

    The only thing that will change this country is the bond markets and the swaps. They will cleanse not just the economic system but the political system.

    “once customs are established and prejudices ingrained, it is a dangerous and futile enterprise to try and change them. The people cannot bare to have the disease treated, even in order to destroy it”.

  58. @paul quigley

    Sound Familiar? Yes it does. It sounds like the Our Father for elitists.

    Wallets Full of Blood: Roscommon Death Trip:

  59. In boom times, there is always a niche market for books on the next crash, particularly for the paranoid in the US.

    Following exuberance, there is a tendency to overdo the doom and gloom and the vacuum in political leadership encourages it.

    This vacuum is not just at government level; it is also very evident in the Oireachtas.

    There was an outcry by independent senators on the proposal for abolition of their talking shop. But beyond the ministers in the group of 216, who among them have dared propose significant change and challenge the people to embrace reform?

    Shame on them as they act like the other vested interests that have brought the country to this sorry pass.

    It is not surprising that some people would view the swift change from feast to famine, as an existential crisis.

    A crash and extreme solutions like exiting the euro made by relatively wealthy people, would inflict most mayhem on the people at the bottom of the pyramid.

    I do believe however, that an IMF involvement is the best way to bring significant change; a positive factor for Ireland is that the FDI sector has operated over the decades in a parallel world to the gombeenism of domestic politics.

    The motorway services issue is just another illustration of a serious problem in the way we do things; build motorways but pander to local demands and do not provide service areas.

    In 2005, Minister for Transport Martin Cullen asked the National Roads Authority to review its policy on service areas. Now the NRA has no money and Reuters reports via a South African site:

    Drive Ireland from sea to sea, but don’t stop to pee:
    http://www.ioltravel.co.za/article/view/5647745

    Back to NAMA…

    It’s reassuring from Brendan McDonagh that NAMA only needs modest growth over the next 7/10 years to break even.

    That of course ignores the costs elsewhere.

    Given that €60 – €70bn that was invested by the Irish in overseas commercial property in the decade before the recession, there will of course be developers who go bankrupt in Ireland but who will retain overseas properties that have been ringfenced in foreign companies, have an income stream and have been also been funded overseas.

    @ Sarah Carey

    I note from wiki that the real Frank Galton wrote a novel which described a utopia organized by a eugenic religion, designed to breed fitter and smarter humans.

    Gender and race studies can be a minefield and in the early 1970s, London-based Professor Hans Jürgen Eysenck, who had fled Nazi Germany in the 1930s, in Race, Intelligence and Education (in the US: The IQ Argument), linked genetics with IQ differences and identified the Irish, blacks and Poles, as having lower intelligence than other racial groups.

    For its high IQ readership, the London tabloid, The Daily Mirror, headlined a story on Eysenck’s work: Irish not as brainy as Brits says Prof.

  60. seafoid

    “By George he’s got it!” Rex Harrison in My Fair Lady? Inflation occurs as a result of too much money. One form of money is bank credit. Formation of money becomes rampant at low rates of interest as “”investors (gamblers!) seek returns. The future is destroyed by the loans taken on and as the bubble always bursts when people stop borrowing ……..

  61. @ Karl Whelan

    Karl,

    Just wondering would you or other colleagues consider opening a thread on the C&AG’s report on the third level sector?

    A true test of the propensity for change is the willingness to confront the sacred cows in our midst!

    I acknowledge that you do more than your fair share in keeping this blog going.

    Interesting that the payroll bill at UCC exceeded Trinity’s in 2007/08.

    http://www.audgen.gov.ie/viewdoc.asp?DocID=1239

  62. @Jagdip Singh – “Capita have been awarded the contract to manage loans at the banks. ”

    You are kidding me…. now we are really in the doo-doo. My first hand experience of them is that they are very good at selling and very bad at delivering.

    @JtO – there are no secret agents in Ireland. Even I know who they are so it’s not a very well kept secret. The few that exist like to meet up in the Horseshoe bar (do they still call it that since the refurbishment?) in that expensive hotel on the green. I believe they still call their unit the ‘IIS’ (Irish Intelligence Services)… and people can do whatever they like with oxymorons etc.

    They used to make a damn good bloody mary in the horseshoe. It’s the celery salt that is the difference that makes a difference.

  63. @Joseph

    “My first hand experience of them is that they are very good at selling and very bad at delivering.”

    Of course the Capita operation in Ireland is a distinct entity but I think it would be fair to say that Capita in the UK, whilst being an enormously profitable outsourcing company, has frequently been the subject of controversy. The British satirical magazine Private Eye has been a frequent reporter on the company, and it is they who baptised the company Crapita.

    Capita were awarded the NAMA loan services contract in May this year, though interestingly NAMA paid over €1m for loan services upto March 31st though some or all of that might have been to the banks themselves – surely NAMA wasn’t paying Capita before awarding the contract???

    Thanks to the good folk at Private Eye (and to a lot of reading of dust covered archive copies of the magazine which aren’t online) there is an extensive entry on Capita in the UK over at NAMAwinelake. As I say Capita in Ireland is a different entity but is still under the Capita group umbrella and I for one will be watching closely as it delivers on its NAMA contract.

  64. Hi Jto
    I’ve been using Davys as my broker for nearly 10 years. I end up looking at their comments and reports most weeks. They have always been on the overly optimistic side. Mind you I’ve noticed a bit of pessimism creep in recently.
    Personally I’d like to see a more ruthless Nama in operation and see the process of disposals speeded up and let the Market find its true value.
    Expanding my own business and taking on our first employee so not all doom and gloom out there. Lower commercial rents and prices would help.

  65. @Michael Hennigan

    For its high IQ readership, the London tabloid, The Daily Mirror, headlined a story on Eysenck’s work: Irish not as brainy as Brits says Prof.

    The dagger of racial and cultural separation is being used more often these days. Sarkozy and the Roma, Thilo Sarrazin and the Muslims, all over Europe a wave of xenophobia is washing away tolerance.

    It is my opinion that this dagger is used on purpose to cause a social divide.

    The hate preachers from all fractions are given the stage to spread their poison. At the same time, targeted disinformation appears more often in the media and propaganda style messages are also on the increase.

    The language that is being used on the international stage was always a important indicator, and this language changed.

    On the economic front, I am not an educated economist, just interested in these matters, I admit that I am waiting since 2006 on somewhat breakthrough suggestions coming from this sector in the academic world.

    In my humble understanding, Fiat money is based on faith and it is also based to no small part on manipulation of markets. The latter is the domain of gamblers high up in the system, and it is them who have overwhelming lobbying power over politicians.

    The democratic deficit in Ireland and other countries is another factor that enables this high stake game to be driven by vested interests.

    Basel III is an attempt of global regulators to do what? Fix the system? I feel it is a rather weak approach, watered down by powerful Interests. German Bank taps the markets now in an attempt to raise nearly 10bln to buy Postbank.

    It is a complex world we try to understand, but I guess one thing is evident by now, the social political fall out from this global heist will be with us for decades.

    Military exports and the language change on the international stage, both are increasing.

    While fiat money is based to a large degree on faith, I would hope that people might start to trust something different again.- Reason! –

  66. I would like to join Karl Whelan in congratulating Mr Jagdip Singh on his superb Namawinelake Blog.

    Mr Singh’s energy in fact finding and producing highly relevant reliable analysis is quite breath-taking. His work is hugely valuable, an outstanding contribution to presenting and illuminating the truth of where this country finds itself, despite the obfuscation efforts of what Fintan O’Toole has aptly described as the powerful elite in this country.

    In addition to congratulating Mr Singh, I’d like to thank him for his courage in persevering in the quest (which I’ve shared with him since the start of 2009) to get to the full truth of the situation.

    Now that the government is, at last, on the point of acknowledging the scale of the Banking sector losses, we must insist on full, holistic, transparent re-capitalisation of the viable 3 banks in the Banking Sector at a level of €17.5bn [i.e. AIB €10bn; BoI €6.5bn and EBS €1bn].

    This will involve temporary nationalisation of AIB, BoI and EBS by infusion of €11bn State capital investment (by way of zero coupon State Bonds) together with a €6.5bn discounting of face value of Bond Liabilities on Bank Balance sheets. This will reasonably assure proper re-booting and rehabilitation of the banks through appointments of fresh bank boards and infusions of fresh senior managements. Loans transferred to NAMA would be reversed and collected by Banks’ Recoveries Divisions for the Banks’ own accounts rather than for account of NAMA.

    No time should be lost on implementing the above outlined Strategy and Action Plan. It is the correct approach to restructuring the broken banking sector. Correct restructuring is supremely urgent. NAMA was proposed over a year and a half ago. It has been a failure on every count. It should be abandonned.

  67. Peter,

    Who are the zero coupon bonds to be issued to?
    Could you explain the following statement pls
    “together with a €6.5bn discounting of face value of Bond Liabilities on Bank Balance sheets”. Are you talking about a debt for equity swap?
    Could you explain the difference between your capital requirments and Mr Eldefield’s stress test. Is it due to bigger losses & more capital?
    Do you envisage abandoning the guarantee?

  68. @Jagdip Singh – “- surely NAMA wasn’t paying Capita before awarding the contract???”

    Some funny things happen in these outsourcing deals – especially when the bidding gets to ‘preferred supplier’ status i.e. there is only one company left in the bidding.

    This (only one company left on the list) is usually the situation for several months before the deal actually being signed. Quite often, companies like Capita will have a large number of employees on site with the customer before it is signed and they will be charged out at whatever day rate. I know this from first hand experience…. and I mean very first hand experience, where Capita and large outsourcing deals are concerned.

  69. I suppose we could

    1 Get the EC stabilisation fund to guarantee deposits in Irish banks

    2 Pass a resolution scheme

    3 Stop guaranteeing new issues of bank bonds

    4 Any bank that cant fund itself is run through the scheme

    5 Losses imposed on bondholders and banks are once and for all fully recapitalised

  70. @ Georg R. Baumann

    As for fiat money, credit has given people a modern life billions across the world.

    Too much of most things, is not good!

    It’s interesting that before the last ice age, most humans in Europe had migrated from the plains of Central Asia.

    Then about 1,000 years ago, the ancestors of the Roma people moved to Europe from India and they have been badly treated since.

    Given the treatment of the Jews by the Vichy regime, it’s a shame that a French leader would seek to target Roma migrants for political purposes.

    It should be recognised that most populations have a significant number of people who in particular at times of economic stress, scapegoat migrants.

    Governments of course cannot allow unchecked migration from poor countries and inspired integration policies are important to avoid tensions with existing citizens.
    It is a universal human trait to seek the perceived weak or negative characteristic in another to seek to humiliate him or her. When my son was ten years old, I took him to a Munster Gaelic football final between Cork and Kerry. I was among Cork supporters who viewed the referee as a lackey of Kerry. He was an individual on the field, dressed in a black kit and nobody knew him from Adam. Whether his grandfather had stolen sheep in days past, nobody could tell. However, there was one feature which provided fodder for the red-shirted Corkmen who were baying for his blood. A Cork supporter beside me kept spluttering with venom: ‘You baldy fucker!’ It brought to mind the story of the tumultuous Democratic Party Presidential Convention in 1968, in the city of Chicago. Protesters against the Vietnam War were battling police on the streets and long time mayor Richard J. Daley (father of the soon to be retired current mayor) was on the main floor when Senator Abraham Ribicoff of Connecticut began speaking from the podium. Ribicoff called on Daley to withdraw his ‘Gestapo troops’ from the streets and bedlam was let loose. Amidst the din, an incandescent Daley shouted towards the podium: ‘You Jew son-of-a-bitch! You lousy motherfucker! Go home!’

    My son who is a Filipino by origin, has very seldom encountered racism. Young people give the world hope.

  71. @Peter

    “No time should be lost on implementing the above outlined Strategy and Action Plan.”

    So let me get this straight, the government should immediately:

    1) Multiply the recapitalisation of the banks
    2) Nationalise the whole banking system
    3) Torch bondholders
    4) Renege on the guarantee
    5) Reverse NAMA

    Yes, I can just see that inspiring confidence and slashing our cost of borrowing.

  72. @ Peter Mathews

    can you also clarify the BoI recap figures – you have still not adequately explained why you are using a NAMA-bound figure of 16bn vs the actual figure of 12bn. All you actually did was complain, via a vague insinuation about dodgy accounting, about BoI reducing down the figure.

  73. @loan arranger

    Yes, impending loan losses embedded in the banks’ balance sheets are and will be seen to be much larger than was anticipated at and before March 2010 when Mr Elderfield’s Prudential Capital Assessment review was conducted.

    In relation to the 2 year blanket guarantee…. it should be remembered that it was issued under duress, and, as any bondholder or creditor fully appreciates, guarantees given under duress are vulnerable, often times voidable.

    It might be helpful to understand my earlier comment on this post, if I referred you to the article I wrote published in the Irish Times on 9th Sep on Opinion & Analysis page 16 under the title “Stark reality of losses at AIB and BoI must be faced” and also the letter of Dan Loughrey, Bank of Ireland, Group Communications, published in Letters to the Editor, Irish Times, 10th Sept, and finally my letter of reply to Dan Loughrey published in Letters to the Editor Irish Times on Wed 15th Sept.

    The weblink to my Op-Ed article and also to the letters that followed are:-

    The op-ed article:-

    http://www.irishtimes.com/newspaper/opinion/2010/0909/1224278513715.html

    and the 2 letters:-

    Dan Loughrey, group communications, Bank of Ireland:- http://www.irishtimes.com/newspaper/letters/2010/0910/1224278569240.html

    Peter Mathews reply to Dan Loughrey:-
    http://www.irishtimes.com/newspaper/letters/2010/0915/1224278896672.html

    Also,

    @christy Says

    Ireland is in financial and fiscal crisis…. We’re facing an unprecedented National Emergency.

    In these circumstances we are faced with devising an Extraordinary National Emergency Mechanism in the form of a Banking Sector Financial Strategy and Action Plan Task Force mandated by the Cabinet to

    (a) to present to the Public, to the Minister for Finance, to the EU, to the IMF, to representatives of the bank bondholders, to the Boards and Managements of the banks the truthful comprehensive, holistic, Banking Sector situation, fully admitting and explaining the true scale and honest best measurement of impending embedded losses in the Banking Sector and

    (b) to present to the Public, to the Minister for Finance, to the EU, to the IMF, to representatives of the bank bondholders, to the Boards and managements of the banks the necessary allocation of those losses as between the bondholders and the State in accordance with the outlined re-capitalisation Plan (see my earlier comment on the Post), entailing temporary nationalisation of the 3 remainder viable banks, AIB, BoI and EBS and orderly wind-down of Anglo and INBS.

  74. @Michael,

    thank you for sharing this personal experience! It is our world today, hence our generation, that does not give a lot of hope to our young people, unfortunately.

    Yes, the history of genocides and the events that lead to them, a very important lesson to remember!

    It is good to hear that your son was spared the traumatising experiences of racial hate attacks.

    @Eoin

    It is my strong impression that all banks, not only in Ireland, were playing tactical games by methods of ‘Fog of War’, drip feeding us with ever increasing demands, whole shortly after receiving bailouts paying obscene amounts of boni to their upper management.

    This did not change from what I can see. In Germany the Hype Real Estate reported Losses of 2,2 billion in 2009, while managers recently threatened legal actions to enforce 2009 bonus payments of 25 million to them, and of course HRE payed out 25 million.

  75. @ Bond. Eoin Bond

    Eoin,

    My reply to Dan Loughrey, Group Communications, Bank of Ireland, which was published in the Irish Times on Wed 15th Sept fully addresses your concerns and also the inadequate and deliberately misleading letter of Dan Loughrey published in Irish Times on 10th Sept.

    As one observant Dail Deputy wrote to me in an email last week….Bank of Ireland should have kept their head down!”

  76. @Robert Browne

    The only thing that will change this country is the bond markets and the swaps. They will cleanse not just the economic system but the political system.

    JTO again:

    What exactly is the nature of the cleansing you have in mind for us after the crash. Is it to be a Pol Pot-type cleansing perhaps? You are a bit short on specifics. More detail please so we can assess whether it will be worth having the economy crash for.

    @Stuart Blytheman

    Delighted to see you posting here again. Also delighted your business is picking up a bit. You haven’t been on much recently. We need voices of sanity from the business world, as opposed to BrowneStuff about wanting an economic crash so that foreigners can cleanse us of our sins.

    @Simpleton

    As we have agreed on other threads, it all comes down to growth. If we assume decent growth, we can, at the very least, kick this can a long way down the road. Key sentence from the Davy report. Alternatively, we might also note that we are one recession away from a default.

    JTO again:

    Totally agree. Growth is the key. But, note that Davy are only assuming 3pc annual growth from 2011 on, which is well below Ireland’s long-term growth rate since 1958. So, it is a reasonably cautious assumption and not over-ambitious. We are in good company. Garret Fitgerald’s article in this morning’s Irish Times is making exactly the same point.

    Re ‘one recession away from a default’, by the same token, I’m probably only one heart attack away from sudden death, but I don’t plan on the assumption that I’m going to have one and hope to be around a long time yet.

    @joseph

    There are no secret agents in Ireland. Even I know who they are so it’s not a very well kept secret. The few that exist like to meet up in the Horseshoe bar. I believe they still call their unit the ‘IIS’ (Irish Intelligence Services).

    JTO again:

    And there also used to be quite a few of them (Irish Intelligence Services) in a
    certain bar near the university in Belfast in the early 1970s. Many an evening I spent in their company. I won’t name it, as these things are still not joked about quite as much in Belfast as in Dublin.

    @Michael Hennigan

    When my son was ten years old, I took him to a Munster Gaelic football final between Cork and Kerry. I was among Cork supporters who viewed the referee as a lackey of Kerry. He was an individual on the field, dressed in a black kit and nobody knew him from Adam. Whether his grandfather had stolen sheep in days past, nobody could tell. However, there was one feature which provided fodder for the red-shirted Corkmen who were baying for his blood. A Cork supporter beside me kept spluttering with venom: ‘You baldy fucker!’

    JTO again:

    Disgraceful! Shows how primitive GAA fans are. You’d never get English, German or Dutch soccer fans insulting a referee because he was follicly challenged. I do hope that those same Cork fans get their comeuppance at Croke Park tomorrow at the hands of the second best team in Ulster. Up Down!

  77. Peter,

    Is it E12bn or E16bn? NAMA appears to agree with BOI that it is 12bn (see Frank Daly’s slidedeck. I am none the wiser.

  78. @the loan arranger

    The point is that the capital replacement requirement for Bank of Ireland should be based on €16bn of course!! That’s why the whole question of “economical” accounting and loans classification and re-classification underscores the smoke and mirrors aspects of this very sorry mess that is the Banking Sector.

    Please refer closely to my letter published in the Irish Times on Wed 15th Sept. If Bank of Ireland was / is standing on solid ground it would have responded to my letter. Their silence is deafeningly instructive! Frank Daly and his slide-deck is a distraction form the valid point made in my letter.

  79. Peter,

    I see the point you are making.

    On another point. Who are the zero coupon bonds to recap the system to be issued to? Is this another promissory note?
    How do yoy propose to fund the shrunken loan books if you default on senior debt?

  80. Yes, the banks would receive the Bonds / Pro Notes in return for issuingf shares which would nationalise the banks. Note that the banks can use these bonds / pro notes as security / collateral for borrowing from the ECB, thus creating some of the the liquidity the banks need.

    Of course I’m not advocating just a bland default on senior debt. The recommended solution would be intelligently tailored to achieve optimum restructuring e.g. perhaps a fractional increase in the interest rate, a token / minimal equity swap element. But remember this is a restructuring (a) because the banks are essentially bust [only the blanket guarantee keeps them open, thereby providing a somewhat false “prop” to the nominal value of the senior bonds] and (b) the blanket guarantee was issued under duress conditions and arguably might be voidable.

    In summary, it shouldn’t be beyond the capabilities of an intelligent, robust, fair, factually well armed Financial Sector Strategy and Action Plan Task Force (say max 5 capable, qualified non-compromised people) to present and successfully negotiate an Overall Banking Sector Restructuring for this country.

  81. @Peter

    I can think of 5 suitable candidates for the FSSAPTF.

    Yourself of course in the chair. Prof Lucey as chief negotiator of the OBSR. Morgan Kelly as chief fire officer. David McWillams as entertainment supremo. Gene Kerrigan in charge of press relations. And I would be prepared to be secretary.

  82. Peter,
    I understood the pro notes were repoed to the Irish CB not the ECB. The authority or capacity to just create thes out of thin air must be limited
    So the nationalised banks would not have any capital as such, just unfunded pro note a la Anglo. How would debt investors and corporate depositors have nay confidence in a capital structure like that, particularly when you have just defaulted on them.

  83. @all
    I’m old enough that reading down through the multiple sub-threads on this post with several entries having several different conversations contained within it makes me miss Usenet and newsreader software. One JtO post had something like 8 different threads within it….

    Web forums (fora?) and blog comments are such a technological step backwards compared to Usenet!

  84. @Brian Woods II

    Don’t laugh too hard, Brian.

    All that’s happened in the last 24 months has been nothing short of a black farce. Try and recall the chronology of events starting with the mantra that the “banks are fully capitalised and can withstand any shocks”, move on next to the PWC Report, which at the time it issued I knew would fall very short of a good assessment of the bad property loans in the banking sector and which in retrospect was recently pointed out by Prof K. Whelan to be very bad value for money!, moving swiftly on to NAMA and the Propaganda fraud that loan losses across ALL the banks would be contained at €23bn and that NAMA would make a profit of €5.4bn over 10 years and so on and so on ….Oh, and by the way, there were no other alternatives! The NAM model was the only show in town! Of that we were assured by the Minister, The Dept of Finance, the Taoiseach and all their well paid cheerleader professional advisers. Steam roller Propaganda par excellence!

    I’m sure, at this stage on this Sunday evening, you’ll have read David McWilliams’s article in today’s Sunday Business Post. A stark reality has arrived!

    I’m afraid I won’t be able to revert to this Post tonight or tomorrow or Tuesday. I’ve commitments to attend to. So, thank you for your interest and I send you my best wishes. Kind regards, PBM

  85. @JohnTheOptomist

    It’s true that Ireland’s debt was 1t 90% in the 90’s. But what was the cost of our borrowing back then.

    I have no doubt that Ireland can grow a couple of percent in 2011, and NAMA can be made to work, but is time against us?

  86. @Peter

    Sorry you won’t read this till Wednesday and glad to see your talents are so sought after. I read that DMcW piece. His position as entertainment officer of FSSAPTF ia absolutely secure.

  87. Peter,
    a pity you did not have the time to answer my pro-note question. If I understand correctly what you propose to do is issue zero coupon promissory notes to the banks as consideration for shares. The banks would then repo these notes with the ECB (not the CB). This would constitute the capital base of the banks. Is this correct?

  88. @ JTO
    “More detail please so we can assess whether it will be worth having the economy crash for.”

    Well for starters, I believe the choice is no longer in our hands as you infer, I believe that the crash is all but inevitable. Even if flinging 30bn into Anglo was somehow “manageable” how manageable is flinging another 41bn into NAMA which is just another version of a black hole? Lately, I have heard a lot about the 14bn remaining in the NPRF. I hate to remind people, but there was a reason why that money was there in the first place Honohan and Lane predicted that the NPRF if not ring fenced would be toast at the first crisis and they were right.

    I have more faith in the international markets crying halt to our reckless borrowing than I have belief that our government will eventually stumble on a solution. As McWilliams says we need to actually “bring the crisis forward”. These markets will be the catalyst that makes us finally face reality and reality means facing problems now not producing more reports. Left to ourselves we just come up with report after report and crack pot ideas like the Croke Park agreement. Almost everyone from the low paid to social welfare recipients straight through to 400,000 state workers are well “OVERPAID”. The axe has to be wielded and not by Irish people because we are too squeamish.

    Your reference to Pol Pot is OTT but hints at the level of paranoia that exists when it is evident that the political and legal hegemonies days of of raiding our exchequer are numbered. In India the “untouchables” are the poorest class in Ireland the “Untouchables” are the richest class. The way out of this is that nobody becomes “untouchable” otherwise, it won’t be too long before people start demanding truth and reconciliation mechanisms.

    Any normal observation of the Irish economy, where a dog gets chaffuered to Kerry and back, and where we pay almost 350,000 for two chapters of OPW history must surely admit that we have gone past the point of no return, we are an immature, irresponsible delinquent people. I am surprised that our spreads are not already 7% and there is plenty of statistics to support that proposition as Mr Gurdgiev has shown. The response of our government after fostering greed and recklessness has been to reward inevitable failure and incompetence with ransom money. Unfortunately, for this government and us, the ransom has turned out to be too high.

    Government must be made seriously smaller and the cost of government made seriously cheaper even while achieving efficiencies. Decoupling of unions and government and killing Croker are all necessary acts followed by the deep excisions into the world of the quango. Ireland = no regualation but Ireland was also allowed to run riot within the Eurozone who must now share the bill if they want their beloved Euro to be around in 5 years time. We need to reform our judicial and political systems as well as coming up with an economic model based on growing employment and which does not give away our natural and export our human resources, one which puts agriculture, tourism and clean water at the heart of our strategy rather than the micro idea of the smart economy. Surely, it is not my job to design all of this, is it?

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