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Breaking: Irish Government to overpay banks by €7 Billion

by Frank Schnittger Wed Sep 16th, 2009 at 12:22:33 PM EST

The Irish Minister for Finance, Brian Lenihan, is on his feet in the Dail at the moment stating that the Government is planning to pay €54 Billion for toxic bank loans with a book value of €77 Billion and a current market value of €47 Billion.  This represents an average "haircut" of 30% on the Book value, and a 15% premium on market value.  The Government also expects to have to take additional stakes in the banks for them to achieve adequate capital reserves and regenerate liquidity within the system.

This is against a backdrop of an average 50% decline in property prices since peak in 2007 and no guarantee that prices may not fall much further - particularly with such a large overhang of non-performing assets in the property market.

40% of the loans are "performing" at the moment, and the Minister expects such interest income to be sufficient to cover ongoing interest costs incurred by the state in funding the bail-out. The Government must be praying that the ECB doesn't raise interest rates substantially any time soon. Certainly the ECB is expected to be the main source of Government borrowing to cover the cost.

67% of the assets covered by the bail-out are located in the Republic of Ireland, 6% in Northern Ireland, and 20% in Great Britain. The bulk of the toxic loans will be bought from AIB (€24 billion), the nationalised Anglo Irish Bank (€28 billion), Bank of Ireland (€16 billion), EBS (€1 billion) and National Irish Bank (€8 billion)

€54 Billion represents c. 10K for every man, women and child in the country.  Thus my family is now a net 50K further in debt as a result of this bail-out.  We have been transformed into a nation of property speculators.  Of course Nama may ultimately cover its costs, or even make a profit.  Certainly we all now have a vested interest in bubble property prices returning.  What impact this will have on ongoing competitiveness and economic growth, I can only guess.

I will update this diary as more details emerge...


Display:
So far the Irish Stock Market hasn't registered much of a response to the announcement one way or the other...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 12:18:46 PM EST
The Irish Stock market is now closed, but Senator Shane Ross, a well known commentator expects a big rise in bank shares in the morning on the basis that the haircut was not more than the widely leaked 30%.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 12:26:13 PM EST
Nama 'a financial millstone' - Gilmore - The Irish Times - Wed, Sep 16, 2009

Nama will be a financial millstone for future generations and must be stopped, Labour Party leader Eamon Gilmore said this afternoon ahead of a Dáil debate on the proposal.

He said the debate on the Nama Bill was "the most important that we have ever had in the 90-year history of the Dáil."

"It is essential that we sort out the banks, and get credit flowing again so that we can save jobs under threat and get people back to work again," he said.

"But it is also essential that we get it right, because once this legislation is passed there will be no going back. A new government will not be able to reverse course, once the process of acquiring the dodgy loans begins."

"And the government approach is wrong and that is why the Nama Bill must be stopped," he added.

Mr Gilmore said there was a real danger that the Government would end up paying grossly inflated prices for properties, placing a financial millstone around not just the current generation of taxpayers, but possible the next generation also.

"The same Fianna Fáil that wasted millions and millions of taxpayers' moneys on PPARs, electronic voting, the Fás scandal and endless junkets and perks for Ministers, now wants to put billions of taxpayers' money at risk," he said.

He said there was growing opposition to Nama and increasing support for the alternative of the temporary nationalisation of the main banks.

"It is ironic that while Minister Lenihan refuses to consider temporary nationalisation and insists on going the Nama road, he acknowledges that Nama may not work and that the government may have to take the banks into public ownership eventually."

He said it was shocking that the Green Party "has been prepared to back up the Fianna Fáil plan to bail out the bankers and developers."

"It is now time for the Green Party to decide who they stand with. Do they stand with Fianna Fáil and their developer friends or do they stand with the people of Ireland?" he said.

Sinn Féin's Caoimhghín Ó Caoláin said his party "would do all in its power to stop the passage of the Nama legislation through the Dáil."



notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 12:55:00 PM EST
They're going to end up nationalising anyway - I'm still hearing (unsourced) gossip that AIB is due to be effectively nationalised shortly.1
by Colman (colman at eurotrib.com) on Wed Sep 16th, 2009 at 01:38:29 PM EST
[ Parent ]
One of the most astonishing figures to emerge is the €28 Billion of toxic assets to be bought from Anglo-Irish Bank - a small property development/business bank - with almost no public footprint.  It was nationalised when the crisis was at its height.  To put this in context, €28 Billion is c. one sixth of Ireland's GDP this year....

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 01:30:06 PM EST
Well, as ever, it's questionable how much of that is actually "toxic". A good amount may be overseas property that is still worth more than was lent to buy it.

By the way, why do people keep comparing debt backed by wealth (property) to Ireland's income? What sense does that make?

by Colman (colman at eurotrib.com) on Wed Sep 16th, 2009 at 01:36:50 PM EST
[ Parent ]
why do people keep comparing debt backed by wealth (property) to Ireland's income? What sense does that make?

The government guaranteed all the debt of the banks. This means that the debt is ultimately owed by the Irish state. As the diary shows, the "wealth" backing that debt can easily oscillate up/down by 30+ percent. But the amount of the debt stays constant. Therefore, a chunk of the debt will have to be paid out of Ireland's GDP. Comparing to GDP gives a measure of how long it will take to pay down that debt.

Why a good bank/bad bank solution (i.e., saving retail banking and payment clearing and leaving the foreign creditors holding the bank) is not being pursued is beyond me. Except, possibly, that a Eurozone member cannot advantageously hang creditors in other Eurozone countries to dry, since they share a currency.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Sep 16th, 2009 at 04:28:29 PM EST
[ Parent ]
The other reason I use a comparison with GDP is simply to give a sense of the scale of what we are talking about in relation to the size of the Irish economy/tax take.  54 Billion in a US context isn't that big a deal.  In an Irish context, it is equivalent to everyone in Ireland betting a third of their annual income on the property market which we already know is distressed and still out of line with other EU countries.  

Some Charities I do work for have had their Government subvention cut by c. 25% - i.e sums of the order of 100K.  We are literally taking money from heroin treatment programs, special needs education, and restorative justice programs to fund this.  The planned further reduction in public expenditure of €5 Billion p.a. will decimate all manner of public services for those that need them most.

We are literally taking from the poor to give to the rich on an unprecedented scale.  It's all very well for wealthy investors to take a 30% haircut or to indulge in some speculative investment.  But we are taking this money from people who don't have a cent to spare to shore up a property/banking edifice they were excluded from in the first place.

Nobody talks about morality anymore, but this is just obscene.  Even if it made good economic sense - and even if Nama ultimately turns a profit - it is still obscene.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 07:11:15 PM EST
[ Parent ]
The 'crisis' has been turned into the financial equivalent of 9/11 - not because of crazy people with box cutters, but because of crazy people with derivatives solemnly intoning that the world is different now, and we're all going to have to live with the consequences.

Inexplicably, they don't seem to feel that the New Austerity applies to them.

It seems a waste of time discussing the economics of the situation, when the problem is really one of not-so petty white collar crime and institutionalised corruption.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 16th, 2009 at 11:47:48 PM EST
[ Parent ]
But the charities aren't taking a cut because of NAMA, they're taking a cut because that's how the government wants to run things - taxes are bad, bad, bad - and because the government failed to reform a broken, pro-cyclical tax system when times were good.
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 01:46:05 AM EST
[ Parent ]
In Spain the government is scared of the fact the economic stimulus has resulted in 10% deficit for the year and want to raise taxes now before the recovery starts, with the promise that the raise will be "temporary and targeted" - that is, pro-cyclical. We don't learn.

The (also Socialist) Catalan Conseller ("minister" to a regional government) for the Economy, Antoni Castells, has criticised Zapatero's handling of the crisis as indecisive and recommended waiting with the fiscal reform until the recovery starts.

Castells afirma que el Gobierno "no coge la crisis por los cuernos" · ELPAÍS.comCastells claims that the [Spanish] government "is not taking the crisis by the horns" - ElPaís.com
Preguntado por si cree que se está haciendo todo lo necesario para salir de la crisis, Castells respondió: "En parte, no", porque "no se acaba de coger el toro por los cuernos, sobre todo a nivel del Estado". Respecto a la subida de impuestos planeada por el Gobierno central, opinó que es un debate "mal planteado y a destiempo".Asked whether he believes all is being done that is needed to get out of the crisis, Castells answered: "partly, no", because "the are not finally taking the bull by the horns, especially at the State [i.e., Spain] level". Regarding the tax raise planned by the Central Government, his opinion was that it was a "badly presented and timed" debate.

The PSOE leadership is in a weak political position because of the crisis so internal criticism expressed in public is not taken well.

Montilla reprocha a Castells su desmarque en público de la política económica de Zapatero · ELPAÍS.com[Catalan President José] Montilla rebukes Castells for setting himself apart from Zapatero's economic policy - ElPaís.com
El primer secretario del PSC y presidente de la Generalitat, José Montilla, mostró ayer su malestar ante la ejecutiva del partido por las críticas públicas que la semana pasada vertió el consejero de Economía, Antoni Castells, a la política económica de José Luis Rodríguez Zapatero. Montilla deploró el desconcierto ocasionado por las palabras de Castells y pidió a todos los miembros del partido que eviten criticar a los compañeros en asuntos que afectan el Gobierno central que pueden dificultar las relaciones entre el PSC y el PSOE. Castells, presente en la reunión, no se disculpó, pero sí lamentó el alboroto causado por sus palabras. También añadió que en el futuro continuará hablando con libertad. La vicepresidenta del partido, Manuela de Madre, lamentó el revuelo que se creó al criticar ella el desmarque de Castells.The first secretary of the PSC and president of the Generalitat, José Montilla, showed yesterday in front of the party's executive his unease over the public criticism poured on of Zapatero's economic policy by the Economic Counselor Antoni Castells. Montilla lamented the confusion caused by Castell's words and asked all the [Catalan?] party members to avoid criticising comrades in matter which can make the relationship between the PSC and the PSOE difficult. Castells, present at the meeting, did not apologize, but he lamented about the ruckus caused by his words. He also added that in the future he'll continue to speak freely. The [Catalan] party's vice-president, Manuela de Madre, lamented the commotion caused when she criticised Castells' position.

Because Castells also mentioned the need for labour reform he was criticised by the unions. The right-wing opposition both in Spain (PP) and Catalonia (CiU) has supported Castells, taking advantage of the wedge.

(sorry for hijacking the thread with Spanish news)

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:32:30 AM EST
[ Parent ]
The PSC are Catalan socialist allies of the PSOE?  In Ireland, Fine Gael's alternative "Good Bank" proposal has been criticised by former Fie Gael leaders Garrett Fitzgerald and Alan Dukes causing a similar wedge within the opposition.  I suspect some Government figures will also come out against the 7 Billion bonus - and still have some hope the Greens will threaten to leave Government over the issue.... so there are parallels

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 04:40:19 AM EST
[ Parent ]
The PSOE is a "federal" party. The PSC is the Catalan party. You can see it as the PSOE's brand in Catalonia, or you can see it as analogous to the CDU/CSU.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:43:36 AM EST
[ Parent ]
Colman:
charities aren't taking a cut because of NAMA, they're taking a cut because that's how the government wants to run things
TBG's 9/11 analogy is apt.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:33:09 AM EST
[ Parent ]
It is simply a matter of priorities, and my point was that the marginalised don't even rate miniscule amounts of cash when compared to the banks and their investors.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 04:43:00 AM EST
[ Parent ]
No, but that's because, at this stage, the government (and all serious opinion) truly believe that bailing out the banks is essential for even the marginalised. The government is entirely bought into the Dublin consensus and "free-market" fictions. I mean, these are guys who lived through previous Irish recessions and think the banks are going to lend to "creditworthy" people during one. The Irish banks have long been famous for only wanting to lend money to people who didn't need it. There are no creditworthy businesses during a recession this deep, especially when the government is intent on deepening it by taking money out of the pockets of people who will spend it in order to put it in the pockets of people who are going to use it to pay down debt, much of it foreign.

Crazy, and most of the opposition is too close to that position for a new government to make much difference. It would be slightly better, because at least they'd be free from continuing precise policies, but it wouldn't be much better.

by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:00:49 AM EST
[ Parent ]
When was "intervention by the regulator and receivership" replaced with "bailout" in the policy toolkit? When did the Central Bankers and Finance ministers go insane?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:07:08 AM EST
[ Parent ]
It would damage our reputation abroad. Or something. Fucked if I know. Nationalisation of the utility functions and putting the rest into receivership looks like the sane way to do it to me, but I'm not serious.
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:10:56 AM EST
[ Parent ]
Colman:
It would damage our reputation abroad.
I'm not talking just about the Irish. Also the regulators and policymakers abroad have gone insane or forgotten what they once knew.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:12:56 AM EST
[ Parent ]
Colman:
It would damage our reputation abroad.
as complete idiots?  Since when does "socialist" bailing out of private investors enhance anyone's reputation?  Even the investors themselves must be chuckling at the idiocy...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:19:11 AM EST
[ Parent ]
Frank Schnittger:
54 Billion in a US context isn't that big a deal.  In an Irish context, it is equivalent to everyone in Ireland betting a third of their annual income on the property market which we already know is distressed and still out of line with other EU countries.  
In principle the "bet" would just be the €7bn that is being overpaid, not the entire €54bn. So instead of €10k per person we're talking something like €1500. But the point stands.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:29:30 AM EST
[ Parent ]
I would argue that the other 47 Billion is also a bet that market values won't go down much further and that it represents real sustainable value and a revenue stream capable of funding borrowing costs.  As I have said elsewhere, if those properties were actually put on the market, they would create an almighty further price crash because they represent a huge multiple of the actual number of properties on the market today.  So what is "market value" if you can't actually put the properties on the market and sell them at that price?

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 04:47:28 AM EST
[ Parent ]
Frank Schnittger:
So what is "market value" if you can't actually put the properties on the market and sell them at that price?
The classic liquidity problem: valuing the bulk at the margin price is a mistake but it is also the accounting convention. See my How much is $172 trillion worth? from March 25th, 2008.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:52:38 AM EST
[ Parent ]
Yea - as I commented at the time linear algebra breaks down when marginal prices are applied to the whole.  So the 54 Billion is a bet that the state can fund and hold on to the assets long enough to enable an orderly disposal over a long period of time.  But since everyone knows that the state is an unwilling owner, and wants to dispose of virtually all of the assets, what is to prevent investors from holding back buying those assets until prices reflect the entire overhang on the market?

The music has stopped, and the taxpayer has been dumped with all the crap property that no one else wants at current prices...

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:12:36 AM EST
[ Parent ]
Frank Schnittger:
everyone knows that the state is an unwilling owner, and wants to dispose of virtually all of the assets
Why doesn't the state decide to make the best of the situation and actually do something with these assets? Because that would be State intervention in the economy and we can't have that. So instead, as you predict, the state will dump the property at a loss. Gah.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:17:20 AM EST
[ Parent ]
The state owns the loans on the assets, not the assets, as long as the loans are performing or they come to arrangements with the asset owners?
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:19:02 AM EST
[ Parent ]
Actually, the thing I'm most afraid of is that NAMA will be used to punish asset holders by acting hyper-aggressively against business sense in order to make it look as if the nasty developers are being held to account and thus to make the government look better, despite that fact that this may not maximise the value of the loans for the state.
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:21:41 AM EST
[ Parent ]
Wait, if the loans are performing and interest rates are down, how can the market value be down 30%

Are we talking about impaired loans, about impaired collateral, or about illiquid assets when we talk about the NAMA "assets"?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:24:08 AM EST
[ Parent ]
Only 40% of the loans are currently performing.  Watch this go down... - especially when owners know the Government is getting their money for 1.5% and they are paying 8% or whatever...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:27:49 AM EST
[ Parent ]
So when NAMA buys a "non-performing loan" from a bank, what are they  buying?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:30:27 AM EST
[ Parent ]
9 of the 54 Billion is actually interest due but not paid.  So it isn't buying any additional assets at all in those cases

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:32:12 AM EST
[ Parent ]
Yes, and so long as the asset owners have :
  1. the ability to pay the interest, and
  2. are not in negative equity
those asset guarantees will not be called in.

But it is the market perception that is important here.  As "market" prices continue to fall, more asset owners either can't or don't want to service debts on property now worth less than the loan - so they hand back the keys to the property.  And the more that do this, the further prices fall, and the more people hand back their keys...

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:25:01 AM EST
[ Parent ]
Frank Schnittger:
As "market" prices continue to fall, more asset owners either can't or don't want to service debts on property now worth less than the loan - so they hand back the keys to the property.
Do you have Jingle Mail in Ireland, too? In Spain bankruptcy is a much more serious proposition than in the US - all your assets are on the line, a judge can seize your income and give you a living allowance while he pays your creditors from the rest.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:26:54 AM EST
[ Parent ]
Limited liability...unless personal guarantees have been given.. and personal assets haven't been transferred to the wife ... and the assets aren't located offshore... and the law takes its course... ten years later...when there will be a general amnesty...and the Govewrnment decides its has to re-invigoate the market by giving incentives to investors...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:30:53 AM EST
[ Parent ]
Oh, we're talking about loans to businesses, not to individuals?

Or have Irish banks been giving mortgages to "limited liability" wrappers around individuals?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:32:27 AM EST
[ Parent ]
This is all about a very few "developers" owing Billions.  We haven't even started on the private homeowners defaulting on mortgages bit...  They will be screwed by the banks which is why the government doesn't want to own the banks because then the government will be directly doing the screwing...

Didn't you know that financiers have "discovered" that most people are actually honest and want to pay their debts even at enormous sacrifice to themselves.

This is why it is always the little man who gets screwed...

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 05:37:14 AM EST
[ Parent ]
See LQD: The Poor are Honest by ChrisCook on February 12th, 2009.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 05:39:43 AM EST
[ Parent ]
Thanks - I knew I'd read it somewhere but am terrible on remembering sources - we will have to appoint you ET librarian and links keeper

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 06:00:52 AM EST
[ Parent ]
It's mostly about some really insane speculative lending, especially for unzoned landbanks and residential developments that may never be worth anything.
by Colman (colman at eurotrib.com) on Thu Sep 17th, 2009 at 05:44:51 AM EST
[ Parent ]
Frank Schnittger:
Even if it made good economic sense - and even if Nama ultimately turns a profit - it is still obscene.
It makes no economic sense, even if it turns a profit.

Gambling your shirt in a casino doesn't make economic sense. If you walk out with two shirts you mad a profit, but even then it wasn't a sound economic decision in hindsight.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:31:04 AM EST
[ Parent ]
This represents an average "haircut" of 30% on the Book value, and a 15% premium on market value.

So the banks are taking 2/3 of the loss and the government 1/3 of it. What's not to like?

I mean, if the banks wanted to sell the stuff at market value they wouldn't need the government as a buyer, would they?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Wed Sep 16th, 2009 at 04:22:01 PM EST
The problem is that the assets to be "namaised" represent such a huge fraction of development property that any notion of market value is, at the moment purely notional.  Very few property transactions are taking place at the moment - because there is no confidence or credit available - and if all the Nama properties were put on the market to cover the banks liabilities there would be an almighty crash in property values.  

Already their are reports of instances where property values have crashed by up to 90% in particular areas.  A period mansion on a country estate with something like 15 houses on it near Kilkenny was valued at €10 Million and has been put on the market by the receiver at €1 Million.  Some houses that were 300K in more remote areas are now on offer at €90K.  

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 06:59:14 PM EST
[ Parent ]
There is nothing wrong with the state acquiring property rights over land. That they have to do it at extortionate prices is unfortunate.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:32:05 AM EST
[ Parent ]
Nothing wrong with that which cannot be solved by a confiscatory wealth tax and a crack-down on tax fraud enabling countries like Lichtenstein and the Channel Islands.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 17th, 2009 at 06:46:49 AM EST
[ Parent ]
euro coins are going to be devalued?

I thought maybe the harp might be replaced by a harmonica on them too.

by redstar on Wed Sep 16th, 2009 at 05:35:40 PM EST
No, its going to be replaced by a fiddle...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 06:53:06 PM EST
[ Parent ]
I keep thinking that we should start a bank of our own. I mean, it seems so bloody easy. The only thing you have to do to become the soundest bank in the world is not falling for retarded ponzi schemes, and how hard can that be?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Sep 16th, 2009 at 06:09:57 PM EST
I think you misunderestimate the point of the exercise - which is, specifically, to organise Ponzi schemes, not to act sensibly and avoid them.

After the last decade saw some of the most insane speculation in financial history, the last year has seen the biggest robbery of governments by banks in financial history.

Next year we'll be seeing governments sobbing woefully and explaining how public spending will have to be cut to make up the deficit, and how terribly unavoidable it all is.

We're living in Economist-World.

Lucky us.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 16th, 2009 at 11:40:21 PM EST
[ Parent ]
If you elect corrupt governments that lack patriotism and reward special banking interest then well, that's just too bad. But we didn't do that and we've squeezed the banks, not giving them any free handouts.

Still, they've made huge losses because they've fallen for ponzi schemes and been captured by bonus-greedy management who don't give a shit about the shareholders, and the only way they seem to make money beside blowing bubbles that hurt their shareholders is by their outrageous conning of their retail customers (mutual fund management and so on).

There seem to be quite a number of different banking business models and most banks seems to have all of them in different proportions: the ponzi conning fraudsters, the sucker banks that buy the toxic crap, and the old fashioned utility banking, the only ones that actually provide financial services, the ones that make society a better place.

I feel that an honest privately held (ie non-listed) bank with the best bank account interests in the country which lends money to companies it understands (converting average joe savings into corporate loans, the dull stuff) could make great business. If it's hard to organise business relations, lending and syndication of the loans that are too big to keep on the books as a startup, buying and holding corporate bonds could be an ok beginning.

Indeed, there are great examples of the astounding success of boring utility banking already.

   

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Sep 17th, 2009 at 12:16:48 AM EST
[ Parent ]
Indeed, there are great examples of the astounding success of boring utility banking already.

Every dog shall have its day.  Given the generally corrupt manner in which most things Chinese are run, I suspect we only have to wait for these to go off like a string of firecrackers.  The difference might be that in China, the CEOs of failed banks might face a firing squad.  If ever there were an appropriate situation for capital punishment....

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 17th, 2009 at 12:44:30 AM EST
[ Parent ]
I'm not so sure that the "generally corrupt" western stereotype of the Chinese mightn't be more appropriately applied to "the West".

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 04:52:47 AM EST
[ Parent ]
I think "corrupt" generally means "not conforming to the liberal democracy fairy tale", whether it happens in the West or in the East.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Thu Sep 17th, 2009 at 04:54:33 AM EST
[ Parent ]
the fairy tale where there are no bad guys, just dreams to follow and fortunes to make...

"We can all be prosperous but we can't all be rich." Ian Welsh
by melo (melometa4(at)gmail.com) on Thu Sep 17th, 2009 at 03:47:59 PM EST
[ Parent ]
In this case I mean that China has not had even the opportunity to well develop and disseminate the concepts and the legal system on which WesternTM ideas of "Public Interest" and "public integrity" rely. These depend crucially on actual pluralism in the society, which, in China is only beginning to emerge. In China it has traditionally been and still largely remains the State vs. individuals.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 17th, 2009 at 09:54:08 AM EST
[ Parent ]
I don't know enough about Confucianism or Taoism to confirm or refute what you say and don't know to what extent Maoism still has much influence in Government philosophy.  Certainly there appears to be a strong tradition of authoritarian imperial/state control, by violent/repressive means if necessary.  

A one party state democracy may appear inimical to western ideas of multi-party pluralism but I sometimes wonder at the degree of diversity a one party system can hide, and the degree of conformity a multi-party system can disguise.

However I also get the impression of a degree of cultural and ethnic diversity within China that even a repressive state apparatus can only barely control and contain, so I don't understand how you can state that pluralism is only beginning to emerge.  It has always been there.

Official Chinese state ideology certainly seems more collectivist and authoritarian with few concessions to individual human rights but I would have thought that the ideology did have a strong emphasis on "public interest" and "public integrity" in terms of government by and for the working class.  The degree to which the reality correspond to the ideology is, of course, an entirely different matter - both here and in China!

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 10:11:44 AM EST
[ Parent ]
I am no expert on China, either!  Marco?  But they have a 2400 year tradition of central rule by an authority that needed to be seen to possess "the mandate of Heaven."  The Maoist State re-cast that paradigm in a modernizing communist mold.  But the official ideology was sort of thrown in a cocked hat by Deng's new dictum: "It is glorious to be rich."  Unfortunately, many of the new rich are seen to have been corrupt cadres whose behavior is little better than the officially stigmatized landlords of the Chinese ancien regime. Given the poison food scandals, which all involve virtually sociopathic disregard for anything but individual profit for the entrepreneurs involved, they seem to have a problem.

This is not unique to China.  The term "pork barrel politics" in the USA came from military contracts to meat packers for portable, preserved food for the US Army.  In the event of the Spanish American War it turned out that many of these barrels of pork were preserved with formaldehyde!

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 17th, 2009 at 01:14:37 PM EST
[ Parent ]
ARGeezer:
But they have a 2400 year tradition of central rule by an authority that needed to be seen to possess "the mandate of Heaven."

Europe is no stranger to the "divine right of Kings" either, and whist secular government has made great strides in Europe in the past few centuries, it sometimes seems that no one other that fanatical (if utterly hypocritical) Christians can successful stand for election in the US (or promotion in the military)...

Obama seems to be trying to out Bliar Blair with his faith based initiatives and determination not to be seen as opposed to the "Christian" "mainstream".

Thus the attempt to achieve some transcendent legitimation/justification for power does not seem to be restricted to the Chinese!  If anything, Confucianism/Taoism is much less deistic than Christianity....

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 02:22:50 PM EST
[ Parent ]
If anything, Confucianism/Taoism is much less deistic than Christianity....

Methinks you mean "theistic."

Theism. Deism. One confuses these two at the peril of making fundie heads explode. Which, while some would no doubt consider that a feature rather than a bug, does have the disadvantage that blood and brain goo are horribly hard to get out of the curtains.

</PN>

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 17th, 2009 at 02:55:05 PM EST
[ Parent ]
The Theism/Deism debate is a debate internal to a fundamental belief in God(s) and relates to theological differences of belief as to the nature of God and whether s/he intervenes in natural events.

Since most fundis seem to believe they have God more or less in their back pocket, and that they, and they only can understand Him correctly, I suspect that debate is somewhat over their heads and you need not worry over much over their heads exploding.

Certainty and self righteousness have a way of protecting you from brain strain...

Your deep and abiding concern for their welfare is, of course, noted...:-)

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 03:26:51 PM EST
[ Parent ]
PS remind me - how did we get from the Irish Government overpaying banks for toxic assets to a discussion of the finer points of theology?  Could it be God's way of telling us that he who would sup with the devil should use a long spoon?  Or that the Irish Government's creation of Nama is divinely inspired?  Nama has something of a biblical quality to it don't you think - a land flowing with gilt and dollars...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 03:32:11 PM EST
[ Parent ]
Well, it seems to me that the necessary debt/equity swap could be looked upon as a form of Jubilee....

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Sep 17th, 2009 at 03:54:18 PM EST
[ Parent ]
Oh shit - it's going to take 50 years to sort this out?


notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 04:06:51 PM EST
[ Parent ]
PS remind me - how did we get from the Irish Government overpaying banks for toxic assets to a discussion of the finer points of theology?

I believe it started when I expressed some doubt about the Chinese banks that Starvid held up as exemplary.  I suspected that they are little better than US banks, just at a different point in development.  

I certainly did not mean to imply that their system is less corrupt than ours.  Different cultural contexts, comparable corruption.  The State still holds the balance of power in China.  In the US the state is a de facto subsidiary of the largest banks.  On my own scale of corruption, the USA wins, hands down.  Reality totally subverts the perceived social ideal of "government of, by and for the people."

In the Chinese system the state is supposed to be dominant and largely still is.  But ideologically, the society is in transition.  My own perception is that the emerging capitalist elites have little if any allegiance to the Communist Party except as something that might occasionally be favorable to their business prospects.  My other point is that civil law is poorly developed in China and that enforcement of social norms or Government policy through exemplary violence, such as putting errant businessmen in front of firing squads, while possibly viscerally satisfying to many, has been known to be ineffective at least since Sir Robert Peel.    

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 17th, 2009 at 08:38:06 PM EST
[ Parent ]
Should have said:
My other point is that civil law is poorly developed in China and that, under these circumstances, enforcement of social norms or Government policy through exemplary violence, such as putting errant businessmen in front of firing squads, while possibly viscerally satisfying to many, has been known to be ineffective at least since Sir Robert Peel.

Should have said

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 17th, 2009 at 08:43:10 PM EST
[ Parent ]
Add to that the observations that some of the most spectacular corruption in China seems to be occurring amongst CCP cadres, many of whom are envious and resentful of business elites, and that these cadres are the current tool of choice for the Chinese Government to exercise control.  We could have the spectacle of a society moving from the equivalent of an Absolute Monarchy to an Age of Robber Barons in one generation.  

If the CCP cracks down hard, they would likely kill the goose that lays the golden eggs. Plus, if any society needs rapid growth to maintain social order it is China, and their market of last resort has just tightened the belt severely. Chinese Government actions to mitigate that problem could easily end up destabilizing their financial system and/or their economy, regardless of the ethics or competence of their bankers.  

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 17th, 2009 at 09:00:32 PM EST
[ Parent ]
Thanks for bring this conversation back onto the rails and a few notches up the intellectual scale!  Judging from afar, and without having been there, I find your points intuitively plausible.  

When the old CCP was in power, almost everybody was poor, and power came mostly from position in the political hierarchy. Now I suspect the real power is wielded by oligarchs who bribe who they have to to get what they want and bump off rivals.  

Massive and growing economic inequalities (perhaps even more so than the USA) will breed social unrest even when the whole economy is growing, and social stability depends on unrealistic growth for all going forward (so that the trickle down effect can help the poor) allied to a very authoritarian state.

Ironically it is a loss of state control which has helped generate both the overall economic growth and the massive increase in inequality, and thus unless the state can reassert some control over the capitalist class and rein them in, social unrest will increase.

I could thus see a re-emergence of Maoist type underground political activity in an attempt to rebalance the scales.  Unfortunately, in the absence of a strong civil society, respect for human rights and consumer protections I see the scope for conflict being much greater than in the US.

At least there is a (so far losing) battle against the corporate kleptocracy in the US.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Sep 18th, 2009 at 05:50:24 AM EST
[ Parent ]
Perhaps marco will be able to provide some on the ground reality check, when he has an opportunity.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 18th, 2009 at 11:02:33 AM EST
[ Parent ]
ThatBritGuy:
After the last decade saw some of the most insane speculation in financial history, the last year has seen the biggest robbery of governments by banks in financial history.

governments being a euphemism for people, in this case, (but not when the people want to avert a war).

it feels like we wandered into some sim where we didn't oughta...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Thu Sep 17th, 2009 at 03:29:46 PM EST
[ Parent ]
their success in introducing "risk sharing between the banks and taxpayers if Nama doesn't break even.  However it seems that the Government's idea of risk sharing is that the taxpayer takes 95% of the risk, and the banks 5%...

 Nama to pay €54bn for bank loans of €77bn in rescue plan - The Irish Times - Thu, Sep 17, 2009

The Government also revealed details of its mechanism to spread the risk of part of the overpayment from the taxpayer to the banks and building societies. The lenders will only receive €2.7 billion of the €54 billion payment for the loans if the agency makes a profit over time.


notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Sep 16th, 2009 at 09:42:20 PM EST
Irish bank shares rise sharply on Nama plan - The Irish Times - Thu, Sep 17, 2009

Irish bank shares have risen sharply this morning following yesterday's disclosure of how much the National Asset Management Agency (Nama) will pay for property-related loans.

AIB rose were 23 per cent higher this morning at €3.26 at 8.45 am. The bank said yesterday it would seek to raise about €2 billion as it transfers loans to Nama.

Bank of Ireland shares rose 10 per cent, to €3.16 as the Dublin market overall rose 3 per cent.

"The sentiment is going to be one of relief in the short term and a perception that State involvement is being kept to a minimum, which is welcome and is going to be supportive into the likely capital issues in the months ahead from the banks," Goodbody analyst Eamonn Hughes wrote in a note this morning.

"However, our models show that valuations are starting to look stretched when the market comes around to recognising the substantial capital requirements of the Irish banks over the medium term."

Minister for Finance Brian Lenihan this morning defended the risk-sharing mechanism provided in the Nama Bill in which 5 per cent, or €2.7 billion, of the €54 billion to be paid for the loans will be in the form of subordinated bonds. These will only be paid if Nama makes a profit.

Mr Lenihan said the more risk that was put into the banking system "the less they will be able to lend".

He said the figure of €54 billion was an estimate, not a finalised figure. "The figure is subject to detailed legal valuation of each loan." 

Mr Lenihan said the bank was paying €7 billion more than the estimated current market value because the property market was distressed and "we have to provide some allowance for long-term value," he told RTÉ's Morning Ireland. 

He said the effect of the risk formula was that the most "we expect the property market to increase by over the next ten year period is 10 per cent," adding this contrasted with a 250 per cent gain over the preceeding ten years.

Mr Lenihan said Nama would pay for the assets it was purchasing through the issue of six-month bonds.

"The bonds are of six months duration. They are short-term bonds that are renewable. The rate of interest is half a per cent over the ECB rate," the Minister said.

He was responding to comments from Trinity College Dublin Professor Brian Lucey this morning who said the: "ECB are not backing it or funding it [Nama]...it is the Irish Government, the taxpayer, that is funding it," he said.

Speaking in the Dáil yesterday Mr Lenihan revealed that the Nama will pay about €54 billion to the banks for loans which have a face value of €77 billion.

The banks will have to absorb the difference and have been told to raise private investment to offset the resulting losses.

The Government has indicated that if the banks cannot raise the money themselves, it will invest the capital. This could lead to the State taking up to 70 per cent of Allied Irish Banks (AIB) and 30 per cent of Bank of Ireland.

But market sources said the bank might be able to avoid further Government investment by raising money from private investors or through the sales of assets.

Minister for Finance Brian Lenihan told the Dáil yesterday that the State would on average pay 30 per cent less than the face value of the bank loans. 

However, last night Fine Gael and Labour claimed the main banks, AIB and Bank of Ireland, would escape with a significantly lower discount because of the scale of the problem at the nationalised Anglo Irish Bank skews the average figure provided by the Minister.

The Minister said that Nama would purchase €28 billion in loans from Anglo Irish, €24 billion from AIB, €16 billion from Bank of Ireland, €8 billion from Irish Nationwide and €1 billion from the EBS.

The full extent of bank forbearance with large property borrowers was revealed for the first time when the Minister disclosed that the loans Nama will acquire include €9 billion in overdue interest payments.

In addition, the Government has proposed extending the State bank guarantee by up to five years to allow them to access longer-term debt.



notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 04:26:13 AM EST
I was hoping to attend the gig, but was otherwise engaged.

FEASTA :: View topic - Taxation as Indirect Borrowing by Irish Government

Good post, Brian, as is your blog post.

Sorry I missed Richard's NAMA lecture and the rest of the day. The problem with transaction taxes and taxes on earned income is that they rely upon there being transactions or earned income to tax.

It makes much more sense to tax unearned income from privilege which is a continuing flow..

I think that the solution to the NAMA problem lies in a new approach to the property relationship, ie the bundle of rights and obligations that connect the subject individual to the object - location/land.

I think that it is possible for the owners of land, especially mortgaged land, to exchange their rights for a new right of "Co-ownership" occupation of indefinite duration.

ie for as long as they pay a rental they may occupy the location/land.

This rental will comprise two components: firstly a payment made to the rest of society for the exclusive right over the commons of location, and this reflects the value conferred on the location by society's collective investment.

ie this is to all intents and purposes identical to a tax on land rental values. Hong Kong's crown/state rental (land having been on crown leases) shows how this may work as a quasi-tax, which painlessly raises up to 35% of Hong Kong's public revenues.

Secondly, there is what I call the "capital rental", which is a payment made for the use of the investment of money and money's worth in the location.

I advocate that all of the NAMA land should be placed in the hands of neutral custodians, probably local councils. (Note here that most financial assets traded by institutions are nominally owned by custodians, while the institutions trade the economic interests in the assets.)

A land rental value should then be set - most countries have valuation departments that could tell you how that works - and then the difference between that rental and an affordable market rental for the property will be the "capital rental".

This creates a single NAMA Rental Pool which may simply be divided into "n'ths" eg billionths. Banks then exchange their existing rights under their mortgage loans for these "billionths".

The result is that the former owners now become "co-owners" alongside the investors in the land/location, while the banks (and land owners with equity remaining) may sell their "units" to pension investors, sovereign wealth funds and the like.

I think that a rental returning around 1% pa in respect of the value of unimproved land is reasonable, while the Capital Rental will maybe bring in another 1 to 2%. A single Pool of revenues from what is essentially a land-based NAMA Equity would be an extremely solid investment, and an overall return of between 1 and 2% - rising or falling with rental values - is not unreasonable. The price of the Units then depends upon the return required by the investors. (NB -Risk free returns less than 1% are now commonplace on government debt.)

The Occupiers would be responsible for developing and maintaining the property and would be credited with Units in return for doing this.

On the face of it, the sweat equity granted in respect of depreciating property would mean a transfer from existing Unit holder investors to the Occupiers. But in fact there is a flow of rental value into the Pool which is "free", which consists of the use value of the location.

This flow essentially forms the basis of what will be seen to be land-based money creation, since if you think about it, Units redeemable in the right to occupy location are a form of geographically constrained money.

What I am getting to in a rambling sort of way, is that NAMA should not be an organisation but should simply be an agreement or protocol between the different stakeholders:

(a) Custodians - probably local councils;

(b) Occupiers - with an exclusive "co-ownership" right of indefinite duration; (an "evergreen lease" or "co-ownership")

(c) Investors - initially Banks and land owners insofar as they have equity, but subsequently pension investors,and then Occupiers who buy Units in cash or "sweat equity";

(d) Manager - a network of service providers eg valuers, dispute resolution, estate agents; financial liquidity prividers.

For banks, there is no sale, but a one-off debt/equity swap which realises more value than any debt-based solution ever could.

For Ireland there is a new form of National Equity, which any one who wishes to would be able to join in return for taking on the obligations of location and capital rental.

See Pages 8 and 9 here Co-ownership


"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Sep 17th, 2009 at 09:39:00 AM EST
No realistic alternative to Nama, says Taoiseach - The Irish Times - Thu, Sep 17, 2009

Shares in AIB and Bank of Ireland made strong gains today, with both finishing up at close of trading. Bank of Ireland finished 18 per cent higher at €3.38, while AIB at €3.37 a gain of 28 per cent.

However, Irish Life & Permanent, which is not participating in the Nama process, saw its share price drop 5 per cent mid-morning, although it regained some ground to close fractionally lower at €5.85.

Green Party leader John Gormley said his party will pull out of Government if its party members reject Nama and the new programme for government at the Green Party's convention scheduled to take place on October 10th.

Speaking on RTÉ's News at One Mr Gormley said his party would be pressing for further amendments to Nama to promote a social dividend and ensure a windfall tax is part of the legislation.

"If Nama and the programme for government is rejected on October 10th we could not continue our participation in Government," he said.

snip--------

The Financial Times said: "Either way Ireland is on the hook. The more banks rally, the more likely Dublin will be stung for the recapitalisations that will surely loom. If they don't, Dublin will have to foot the bill anyway."

Speaking during the resumed Dáil debate on the issue this morning, Mr Cowen rejected suggestions that Nama is a bail-out for bankers and developers.

"Nama is not designed to be and will not be permitted to operate in practice as a bail-out mechanism for anybody who has operated irresponsibly," he said.

Mr Cowen told TDs alternatives to Nama proposed by Fine Gael "unrealistic" and "not founded in any practical plan."

"The suggestion by Deputy Bruton that we can divide most or all of our banks into a good and bad bank system without disrupting the flow of finance to the economy is totally unrealistic and not founded in any practical plan."

Fine Gael leader Enda Kenny said Nama was a "fatally flawed piece of legislation. He told the Dáil this morning it was the "economics of the madhouse, supported by the fiction of long term economic value".

snip--------

The full extent of bank forbearance with large property borrowers was revealed for the first time when the Minister disclosed that the loans Nama will acquire include €9 billion in overdue interest payments.



notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Sep 17th, 2009 at 03:15:36 PM EST


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