NAMA or Nationalise

[cashinhand]

Is this the biggest decision in the history of the state?

If it is, it needs a national debate more intense than Lisbon, divorce, abortion...

As others have said here and elsewhere, how will NAMA price the toxic assets when:

1. There is no market
2. Valuers in Ireland will be prone to give the answer they are expected to give
3. NAMA will be appointed... by whom... a barrister (Lenihan) and a solicitor (Cowen)
4. NAMA will be accountable to whom?

This is the key issue in Ireland at the moment.

There is obviously no consensus on it, and a lot of unease.

The upcoming elections are an opportunity to debate NAMA but is up to all of us who are concerned about it to push it up the agenda so that it becomes an election issue.

[X-ray]

Is this the biggest decision in the history of the state?

If it is, it needs a national debate more intense than Lisbon, divorce, abortion...

As others have said here and elsewhere, how will NAMA price the toxic assets when:

1. There is no market
2. Valuers in Ireland will be prone to give the answer they are expected to give
3. NAMA will be appointed... by whom... a barrister (Lenihan) and a solicitor (Cowen)
4. NAMA will be accountable to whom?

This is the key issue in Ireland at the moment.

There is obviously no consensus on it, and a lot of unease.

The upcoming elections are an opportunity to debate NAMA but is up to all of us who are concerned about it to push it up the agenda so that it becomes an election issue.

To be honest its a bit like the tribunals, I read about it, but I dont really understand what they are talking about. Is it really just transferring all the rubbish loans from the banks to the state? Who picks what goes?
Why will that help? do they still have the other guarantee?
What happens in the future is businesses know they cant fail? surely capitalism cannot work in the future if we do this now.
I dont get any of it, I would not know what to debate.

[cashinhand]

To be honest its a bit like the tribunals, I read about it, but I dont really understand what they are talking about. Is it really just transferring all the rubbish loans from the banks to the state? Who picks what goes?
Why will that help? do they still have the other guarantee?
What happens in the future is businesses know they cant fail? surely capitalism cannot work in the future if we do this now.
I dont get any of it, I would not know what to debate.

Your question are questions every citizen has the right to ask without ridicule. And the right to answers without obfuscation.

By asking questions, you are contributing to debate.

Often the "stupid" question are the best question, and get to the heart of the matter.

This issue is too big to be left to "experts".

[youngdan]

Your question are questions every citizen has the right to ask without ridicule. And the right to answers without obfuscation.

By asking questions, you are contributing to debate.

Often the "stupid" question are the best question, and get to the heart of the matter.

This issue is too big to be left to "experts".

If I could spell obfuscation prior to this I would have used it as it is the whole point of the exercise. Thanks cash.


X-ray. Do the people that you interact with daily not understand

[Finbar10]

The main argument in favour of nationalization is the government will
get 100% of the upside. It's likely that either option (nationalization
or otherwise) will cost the taxpayers roughly the same in terms
of downside cost. It's just that the remaining shareholder
holding will mop up a portion of the upside, and I don't really
think there's intrinsic shareholder worth left in these banks.

There's one strong argument in favour of *not* nationalizing.
Most of the other arguments against nationalization are pretty
weak, to be honest, and safeguards and protections could
be put in place. The likely real reason the government is against
nationalization is due to issues surrounding the raising of
government debt. I think if I were in government this would
perhaps be a strong enough reason to not go with nationalization.
It seems the ECB has basically agreed to fund the raising of debt for
NAMA. The government issues 50-100 billion of very low interest
government bonds to the banks to purchase their dodgy loans.
The banks go to the ECB with these bonds and swaps them for
hard cash (with a bit of a haircut but still at an attractive rate).
There's no way we could raise this kind of money otherwise.
Of course the ECB perhaps would still do this with nationalized
banks (not sure about the exact terms and conditions of repo'ing
money in this way) but for appearances sake it looks better
to do this with at least semi-private banks.
If NAMA is properly structured there should in theory be little
difference between this and nationalization. This is provided
that proper clawback mechanisms are put in place. This would
be a fair bit more complex that nationalization, but in principle
could be made to work.

There's also the not insignificant issue of us having to go
to the international bond markets every month to raise debt
for day to day expenditure.
Investor interest in these is fast declining. A few years ago most buyers of
Irish bonds were international, now most are domestic. I'd guess our
banks are significant purchasers of these bonds at the moment.
It would look really bad if we were issuing Irish government bonds to
simply be bought by nationalized Irish banks. Keeping the banks at
least semi-private and at arms length puts a better gloss on
what's happening.

This is about the best argument against nationalization. It's also
an argument that Brian Lenihan and Alan Ahearne etc. simply can't
publicly use, which is why their arguments against nationalization
sound so weak and unconvincing on tv.

Domestic buyers can't keep eating up significant
government bonds for ever but it'll keep the show on the road for a
while at least. We've strong leverage at the moment, anyway, with a
Lisbon referendum coming up. I can't see our monthly attempts to
sell bonds on the international market failing before then.
I speculate that enough buyers will be found, one way or the other,
domestically or perhaps from the central banks of other countries,
to tide things over until October anyway (that is if opinion polls
continue to show Lisbon will pass). If opinion polls look bad for Lisbon,
I wouldn't be at all surprised to see a partial failure to sell
government bonds in the month before the referendum (that would
nicely scare voters).

As far as I can see, the ECB is basically financing most of our borrowing,
directly or indirectly, at the moment. Perhaps the plan is to leave
this go on indefinitely. Or perhaps this will only last until the
Lisbon referendum is out of the way. Europe certainly won't allow a Euro country to fail.
Europe will bail us out. I suspect there's already a plan in
place. But it's likely this could come with severe IMF style conditions
attached.

It's "how much of the banks we end up owning" stupid.
How NAMA prices toxic assets is a related question but this is the key.

The banks can only write off 15% of their loans and survive.
Whatever NAMA ends up paying for these loans, the state still has to give the banks the rest of what they need (in return for shares) or they're bust.

The crucial thing is that the state must end up as a major shareholder.

And here's the secret.
All the arguments of Karl Whelan, his twenty experts, Bacon and the Department of Finance come down to this too. As for how big a shareholder the state should be, they're not that far apart either.

Karl says we should get 100%. Bacon says not so much but still a lot.
Karl says I could live with that.

Go through all the arguments for nationalisation and find one that doesn't also hold for a large shareholding.
On the other hand keeping some part of the banks private has advantages of its own.



I wonder if, when he praised Bacon, Karl maybe revealed a bit more than he meant to about the case for nationalisation.
(To paraphrase Karl himself), Because he is the most important one to make this admission, I hereby dub this Karl's Camel Toe.

[droghedasouth]

For the life of me, I dont understand why the FG policy of burning the subordinated bond holders for 15-20 billion in total (not guaranteed on September 29th) is getting so little attention.

After all, Richard Bruton has quite a reputation as an economist and is not simply a paid consultant to the government like Dr. Bacon.

[anewbeginning]

NAMA, provided the good assets are thrown into the mix.

Fianna Fail have let the problems grow and grow. The big mistake was the 3 month holiday last year when the crisis was starting out. Then was the time for action not a holiday.

[Lefournier]

The Department of Finance has issued an FAQ document about NAMA which I have summarised on my blog.
http://lefournier.blogspot.com

The FAQ asks the right questions but the answers are vague or confusing on all the key issues. No wonder Somers was distancing himself from NAMA.

[AMCW177]

The total bad property loan bill will be a minimum of €40bn.

The Irish banks are bust and should be allowed to fail.

There will always be banks, whether foreign, State owned, or new Irish entities (or any Irish bank that doesn't have billions in bad property loans that might survive).

There is no need for the taxpayer to bail out a bunch of corrupt and astonishingly badly-run organisations who bet the farm on a game of roulette and lost.

In addition to the ramping of the property bubble, and their atrocious record in support for Irish-owned SMEs, the Irish banks are also technologically backward. And AIB and Anglo Irish in particular have been up to their necks in FF dodgy dealings over the last 20 years. We'd be better off without them.

[libertarian-right]

We are struggling to get 500million in bonds every 2, 3 weeks and most of you want to burden us with the banks? NAMA is by far the worst option, followed by nationalisation. There will not be a profit from buying these bad debts, do you think house prices will be back up to 2006 levels? We wont breakeven! Do you really want generations paying for this mess?