Pricing of Loans to NAMA

[Sailor]

I would be interested to hear some views on this issue, which I will attempt to summarise here:

1. Let us first accept the assumption that the Banks are actually of systemic importance and have to be kept in business.

2. Secondly, while nationalisation might be preferable - particularly for reasons of difficulties which will arise in the transfer pricing - NAMA will go ahead.

3. It is unlikely that it will be possible to arrive at a price for the impaired assets which will be absolutely "fair" to both the taxpayer and the banks. Probably anywhere within a few billion of being correct is as much as can be hoped for.

4. If the pricing were to err seriously in favour of the taxpayer, the entire exercise would be futile in that the banks would go under.

5. Does this suggest that the soundest policy - no matter how much we might dislike it - would be to pragmatically decide to err in the banks´favour, thus improving the likelihood of their surviving and playing their required role in getting credit flowing to the wider economy?

6. As an corollary to 5. above, is it, to some extent at least, not the case that the determination of asset transfer prices must primarily be dictated by what the banks can bear and still survive? In other words, there will be no pricing exercise per se - rather prices will be be the output of a calculation of how much of a discount the banks can afford and still survive as functioning entities?

I have no expertise in this area - which may be more obvious than I realise !!!

[stanley]

The FF'rs and their mates will decide who wins and who loses, do not expect a modicum of fairness but to dump the debts and turn it into sovereign debt they must stay in power, a diff Govt would not be able to reverse, the big play is on.

[odie1kanobe]

I would be interested to hear some views on this issue, which I will attempt to summarise here:

3. It is unlikely that it will be possible to arrive at a price for the impaired assets which will be absolutely "fair" to both the taxpayer and the banks. Probably anywhere within a few billion of being correct is as much as can be hoped for.

4. If the pricing were to err seriously in favour of the taxpayer, the entire exercise would be futile in that the banks would go under.

5. Does this suggest that the soundest policy - no matter how much we might dislike it - would be to pragmatically decide to err in the banks´favour, thus improving the likelihood of their surviving and playing their required role in getting credit flowing to the wider economy?

6. As an corollary to 5. above, is it, to some extent at least, not the case that the determination of asset transfer prices must primarily be dictated by what the banks can bear and still survive? In other words, there will be no pricing exercise per se - rather prices will be be the output of a calculation of how much of a discount the banks can afford and still survive as functioning entities?

I have no expertise in this area - which may be more obvious than I realise !!!

Reasonable summary.

2 points on the asset pricing
1.) there will be a cost
2.) removal of toxic debt will increase share price of banks

1 and 2 may not balance out but everyone is assumming 1 will be way worse than is likely and 2 will never happen.

There are quite a few people who would love all the banks to fail without realising that life and trade would cease to exist as why would any retailer open when not getting paid.