Last Saturday, I gave a short presentation to a meeting of Labour Party members on the subject of The Banks After NAMA. Here are the slides from the presentation.
As an on-the-record sceptic about job subsidy policies, I found this piece by Paul Krugman interesting. In addition to being in favour of employment subsidy schemes, Krugman also discusses the benefits of employment protection legislation, which I would admit to being even more sceptical of (memories of the phrase Eurosclerosis come to mind). At this point, I’d stick to me original opinions on this issue but I’ll happily admit that Krugman is umpteeen times smarter than me.
Of course, when dealing with these issues in an Irish context, there are practical implementation issues to be dealt with. What I’ve heard so far about the employment subsidy scheme suggests that it’s exactly the kind of bureacratic mess that I expected it would be when it was announced.
Last week the US Treasury invited a number of economics bloggers to meet senior officials. See here, here and here. I note this partially to pass on some interesting accounts of these meetings and partially to point out that, in my humble opinion, pigs would be observed circling Dublin airport before such a meeting would occur at our Department of Finance.
The NAMA Bill has passed all stages of the Dail and is on its way to the President. Worth marking with a thread, I think.
What do you think of the final bill? The draft bill was released in August to allow for debate and suggested improvements. Did this process work well? Is the final bill much better than the original draft bill? Will the passage of the bill stabilise the banking system? Will it get credit flowing?
RTE news had a story last night on a report on the Irish hotel sector written for the Irish Hoteliers Federation by Peter Bacon.
The highlight:
John Kilraine: Economist Peter Bacon, who compiled today’s report, said across the country zombie banks are allowing zombie hotels to remain open because they owe the banks a lot of money.
Peter Bacon: The problem is the most insolvent hotels are not the ones that are going under and the reason they’re not going under is because it’s not in the banks’ interests to foreclose upon them.
And the reason it’s not in the banks’ interests to foreclose on the insolvent hotels is because the banks want to sell these loans on to NAMA at their “long-term economic value”. Why foreclose on them now when you can get NAMA to carry the can? The report recommends that stakeholders
should ensure that banks fully recognise bad loans within the hotel sector and face any capital adequacy issues which might follow.
The report also warns about the potential damage to profitable hotels if NAMA shows forebearance to those hotels with bad loans.
Now if I recall correctly, the NAMA plan was recommended to the government by an economic consultant of some sort.