Let academic economists draw up replacement for NAMA.

[Eamonn76]

In a recent speech to the Oireachtas on the NAMA bill Dan Boyle, Green Party chairperson and finance spokesperson, made the following comment:

"What is failing to be addressed in the debate is that there is no clear, consistent, cohesive, coherent alternative".

Dan Boyle’s Seanad Speech on NAMA Banking Expert Peter Mathews on fixing Ireland's Banking Crisis

Dan must have missed this article in The Irish Times from Professor Karl Whelan:

Government must change flawed Nama strategy - The Irish Times - Fri, Oct 02, 2009

Whelan wrote the following:
"The idea that the only possible way to deal with banks in difficulty is to overpay them for their assets is, frankly, ridiculous.

Around the world, there are a series of well-established procedures for dealing with problem banks and none of them looks like the Government’s current Nama proposals".
(the whole article is excellent but from there on is especially relevant on alternatives to NAMA).

Dan also said:
"However, if one takes the public debate involving the 45 or 46 economists who do not like NAMA, were one to place them into a room and ask what they would have instead, the likelihood is you would get 45 or 46 different responses".

I make the following proposal. Invite all the academic economists to a conference. They are the most independent economists we have. Ask them to come back to you with a majority agreed proposal within 1 week. NAMA as is will lose €20 Billion according to property loan expert Peter Mathews. I guarantee the economists will come up with a better plan than property company board member Peter Bacon's is turning out to be.

What do other posters think?

[Hal]

do other posters think?

Who knows.

That said, all the "independent" economists have had their chance at an objective look at NAMA, they fluffed it, chance gone, end of.

[hiding behind a poster]

I've a better idea. Why don't we remind ourselves every single day that FF have now bankrupted this country twice in 30 years - and that we should never let them near the levers of power ever again.

[Eamonn76]

Who knows.

That said, all the "independent" economists have had their chance at an objective look at NAMA, they fluffed it, chance gone, end of.

I think avoiding €20 Billion of losses plus net interest, plus no or slowed legislation on retail rents, those in mortgage arrears and personal bankruptcy is worth taking a week to avoid. The most relevant section of Professor Whelan's about NAMA alternatives is as follows:

"The idea that the only possible way to deal with banks in difficulty is to overpay them for their assets is, frankly, ridiculous.

Around the world, there are a series of well-established procedures for dealing with problem banks and none of them looks like the Government’s current Nama proposals.

Banks that are insolvent can be liquidated, or taken over by other banks (with governments making up the shortfall) or nationalised. Banks that are undercapitalised are required to get outside equity investment from private investors or the government.

Asset management agencies have been used elsewhere to allow banks to get impaired assets off their balance sheets and move on with their core businesses. However, where this method has been used to minimise losses to taxpayers, it has involved buying assets at realistic low prices rather than Nama’s “best of all possible worlds” approach to pricing.

Brian Lenihan has argued that there is no point in considering a scenario in which property prices continue to fall because in that case, apparently, we’ll all be bankrupt. This argument ignores the future competitive benefits of cheaper housing and lower rents for businesses and appears based more on a lack of willingness to consider “appalling vistas” than on concrete economic analysis.

With the Government guaranteeing almost all debts of the Irish banks and with AIB in particular appearing to be insolvent without Nama’s overpayment, there is a strong case for temporary nationalisation of at least one bank and a combination of tailored restructuring measures for the others. Any temporary nationalisation could be combined with a search for new private investors and new management.

Unfortunately, in parallel with its pro-Nama spin, the Government has engaged in a sequence of anti-nationalisation arguments that are as honest as their claims about free money from Europe.

One way or another, the State guarantee obligates the Government to get our banks recapitalised and the fact remains that any plan that starts out by deliberately overpaying for assets cannot, by definition, be the cheapest solution for the taxpayer.

Other scaremongering comments ignore the fact that a number of troubled financial institutions around the world have been nationalised without unleashing the plagues of frogs and locusts suggested by the Minister for Finance and his stockbroker supporters.

It is noteworthy that in the US, the Troubled Assets Relief Program, which had originally been based, like Nama, on the idea of overpaying for bad assets, was altered to be a programme of equity investments by the US government.

These investments now look likely to provide a return to the US taxpayer. Despite what the Government tells us about Nama, it is not too late to adapt the legislation to reflect a similar change of strategy here".

[Newsy]

I make the following proposal. Invite all the academic economists to a conference. They are the most independent economists we have. Ask them to come back to you with a majority agreed proposal within 1 week. NAMA as is will lose €20 Billion according to property loan expert Peter Mathews. I guarantee the economists will come up with a better plan than property company board member Peter Bacon's is turning out to be.

What do other posters think?

I absoluely agree with you. I have listened several times to Peter Mathews. What he speaks of scares me, with regard to the billions which we will loose, which he projects. In this economic climate, his projections of defaulting loans are very reasonable.

I believe FF and the Greens are committed to this make-shift dumb deal, called NAMA. And I also believe that the vast majority HAVE NO IDEA WHAT IT IS ALL ABOUT or the LONG-TERM IMPLICATIONS of it.

If the Greens had any bottle, they would have demanded such a gathering as you are proposing and see what ideas come to the surface and go from there.

[Hal]

I've a better idea. Why don't we remind ourselves every single day that FF have now bankrupted this country twice in 30 years - and that we should never let them near the levers of power ever again.

One of your better ones, but coming from a low base and still not really very good.

Even if true, which of course it isn't, FF would have messed up twice but rescued us once already, whereas FG have messed up many times and never been able to do anything about it. (82-87, don't mention the war)

[hiding behind a poster]

One of your better ones, but coming from a low base and still not really very good.

Even if true, which of course it isn't, FF would have messed up twice but rescued us once already, whereas FG have messed up many times and never been able to do anything about it. (82-87, don't mention the war)

I'll mention 82-87 all you like, Hal - particularly the fact that the IMF were ready to intervene before, thankfully, Haughey was booted out of office. Anyway, the national debt increased by 240% between 1977 and 1981, which was the root cause of our problems in the 1980s (embedding higher costs into our system, narrowing the revenue base, and basing all that on overoptimistic forecasts for the world economy - sound familiar?).

Remind me, who was in government for ALL that period again?

[PaddyJoe McGillycuddy]

Nouriel Roubini interviewed on Prime Time this evening was asked about overpaying for toxic loans and specifically about Stiglitz calling it "criminal". While saying he did not want to describe it as 'criminal' he did say that it was a deeply unfair transfer of wealth from the taxpayer to stockholders and bondholders. He said that these categories should take the pain before taxpayers. He also used the line about 'socialising loss and privatising profit'.
Another international expert who has an clinical and unbiased view of Scama.
The interview should be on the RTE website by now.

[Hal]

I'll mention 82-87 all you like, Hal - particularly the fact that the IMF were ready to intervene before, thankfully, Haughey was booted out of office. Anyway, the national debt increased by 240% between 1977 and 1981, which was the root cause of our problems in the 1980s (embedding higher costs into our system, narrowing the revenue base, and basing all that on overoptimistic forecasts for the world economy - sound familiar?).

Remind me, who was in government for ALL that period again?

Always with the bad figures & bad information.

The IMF had no interest in Ireland until 86/87.

The national debt from '77 to June '81 increased from 5.4 billion to 11.5 billion or by 113%, from '82 to '87 it increased from 14.8 billion to 30.1 billion or by 104%. Not too dissimilar in percentage terms but in actual terms very different, 77-81 + 6.1 billion, but '82-'87 + 15.3 billion or almost 3 times the earlier increase.

By contrast over the next 5 years '87-'92 there was only a 10% increase in the national debt. Something must have happened in '87.

[Hal]

Nouriel Roubini interviewed on Prime Time this evening was asked about overpaying for toxic loans and specifically about Stiglitz calling it "criminal". While saying he did not want to describe it as 'criminal' he did say that it was a deeply unfair transfer of wealth from the taxpayer to stockholders and bondholders. He said that these categories should take the pain before taxpayers. He also used the line about 'socialising loss and privatising profit'.
Another international expert who has an clinical and unbiased view of Scama.
The interview should be on the RTE website by now.

It is and he said the NAMA plan was the way to go, but shareholders should take a hit first, they have, they were wiped out by going down to 0.20 cent per share and the bondholders should also take a hit, they have, a 6 billion hit. He said there was no problem in paying the long term fundamental value for bank loans and while valuing at 47 billion but paying 54 billion (he wasn't told we are only guaranteeing 51.7 billion) for 77 billion in loans sounded marginally high, it was difficult to know what the true fundamental value might be. He also said that whatever you overpay you should have a way of getting that back from the banks eventually, we have.

So, no cynical view, no scama.