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About LinkBackshang on. Are you saying that the names were made up?Originally Posted by MortgageBroker
hang on. Are you saying that the names were made up?
Ahearne is a SELLOUT
C3 must have generated some files on him that made the man turn
What happens when inevitably there is huge disagreement between NAMA and the banks on the property loan valuations? The lack of liquidity and infrequency of commercial property transactions makes it impossible to do statistically meaningful property valuations in most cases,even within a broad limit of say + or - 20%. So even if experienced valuation experts come up with plausible judgements,there will be massive scope to challenge their valuations. Will this give rise to litigation under Irish constitutional property rights? Meticulously valuing properties on a case by case basis to avoid litigation may take so long that it would be impractical.
However,there may be a relatively quick way to achieve agreement through an auction process. Say there is a bunch of 100 different houses on a partially finished estate. NAMA, the bank and the auctioneer could each ask independent valuers to come up with a quick valuation. The bank is given valuation figures of €12 million,NAMA is given a figure of €15 million and the auctioneer a figure of €17 million. The auction rule is that each side simultaneously submits one figure,with the closest figure to the auctioneer's figure deciding the price. Hypothetical examples of prices for different cases A,B and C are shown below.
Valuations (€Million)
Bank NAMA Auctioneer Winner
A €12 €15 €17 €15
B 40 22 30 22
C 60 42 50 42
In A, NAMA paid too much by setting its bid too high when a bid of 13 would have won. In B and C, the bank lost by setting its bid too high when bids of 37 and 57 would have won (eg 57-50 =7,50-42=8,so 57 wins out over 42). The auction rule incentivises the bank to bid low and NAMA to bid high.
Before the bidding process starts,banks would have to agree to a binding agreement on this auction process for all assets where valuations could prove difficult,if not for all assets.
When a profession is divided in such an acrimonious dispute, it raises raises broader questions about the nature of economics.
Can economics provide answers to practical questions of economic policy? Can economics provide scientific evidence to support or refute proposals such as the nationalisation of our banking system or is it fundamentally a matter of politics?
This links back to the question: what were economists doing while the bankers were sucking the lifeblood out of our economy?
Personally, I favour nationalisation as the only way to prevent the taxpayer being ripped-off when NAMA takes over the banks' assets. Six months ago, I would have said bank nationalisation would be a prelude to an orgy of political corruption and mismanagement.. Imagine what Charlie Haughey would have done if he had a nationalised bank at his disposal
I was worried when Cowen said Anglo would be run as a going concern but they seemed to have backed off that idea. What would it be like to have AIB and BoI run by the Government?
The goal now should be to manage nationalisation while keeping the politicians at bay and dealing firmly with the banks and developers. The aim should be re-privatisation is the shortest practicable time.
I have some further comments about economics and the banks on my blog. Lefournier - An Accidental Philosopher
So what happens if they get it wrong across the board ? As they very likely will?
That is why the Swedes nationalised the banks when they set up a bad bank. In the event the valuations were too high, the public purse was protected to some extent as they also owned the good banks.
Of course we're in a much worse position than Sweden was in all kinds of ways, in particular the global nature of the crisis. But Lenihan is acting as though we were in a better position.
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