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About LinkBacksSimple question, what benefit does the state get from paying long-term economic value rather than paying market value for the loans through NAMA?
Simple question, what benefit does the state get from paying long-term economic value rather than paying market value for the loans through NAMA?
LTEV is government intervention in the market - its an artificial support of prices for a certain period.
this will allow FF developers to sell off their assets before the second double-dip decline in property values hits the economy when Nama fails.
think breathing space. they'll offload their assets to gullible eejits, and once Nama fails, prices will rocket even further downwards.
the "state" gets no benefit. this is FF after all. we the taxpayer will pick up the tab.
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Originally Posted by Dreaded_Estate
Absolutely none.
The banks and their shareholders on the otherhand ...
There isn't a current market for say €90billion (book value) of Irish property development loans (or their underlying property securities)
Without creating one: we can't say that we know current market value... so we can't say if LTEV is in fact different to market value
cYp
"Yawn , am I alive yet ?"
But it LTEV does have a definition in the NAMA bill and it is higher than current market value.
If you can't calculate market value how can you calculate LTEV?
LTEV is some sort of "projection" ... they'll play with graphs and try to continue the say 1974-1997 growth line through 1997-2009
No idea if they plan to put in other variables germane to 1997-2009 (GDP growth, inflation etc)
Personally I don't like the idea of a small number of people centrally planning our long term prices ...
cYp
"Yawn , am I alive yet ?"
House prices in Japan never returned to their heights of the 1980s. Of course we have to factor in deflation. But if the Japanese government did a Nama 20 years ago?
The interest on our government bonds will make the principle double in that time (are these going to be 10 years or 30 years, does anyone know?)
Both as part of the process they will calculate a market value. No this might not be accurate but it will exist.
The question still remains what benefit does the state get from paying the LTEV rather than the lower economic value?
I do not know whether the LTEV will be higher than a market value
I'd far rather investigate market value myself... and let private investors guide the price ... perhaps they might also agree with LTEV ... but receiving the collective wisdom of private investors would be useful (as previously said offer them 10% equity in Nama and possibly sell some underlying securities)
cYp
"Yawn , am I alive yet ?"
You have not being listening to your betters, Ireland is different, because of our young population, we do not have a bubble, we will have a soft landing. Sorry, that's last year's story. The Irish banking system is sound/ all our problems were caused by Lehman Bros. Property values will return to 88% of their peak values and if they don't, we'll fix it so they do.
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