Brian Lenihan to appear before Oireachtais Finance committee at 2pm. 31/08/09

[SamVimesBoots]

Indeed. I thought it best not to reply to digout's interesting theory of genetics

Why not? It's something we're going to have to face up to at some point and decide what to do about it. You can't have 400 years of constant warfare, occassional genocide, and perpetual mass emigration without it leaving some scars.

Bottom line, we've got a very thick populace, with a huge gap between them and the minority of smart people, where the smart people have been conditioned over many generations to screw everybody else and act ruthlessly sly to line their own pockets. We've a miniscule layer of what in other countries would be "average" intelligence, those genes got cleaned out over the last 400 years.

We're left with a huge mass of dumb-as-a-brick lumpenproletariat and a minority of smart-but-sly gombeen landlords.

Everyone else fights this system for a while and then leaves.

[Hal]

I just read the Irish Times various summaries of this:
Basically they're claiming that the market has bottomed out and that prices will almost double in the next 7 years. If this is the underlying premise of the scheme then we're screwed.

I listened to every word of it and that would not be a fair summation. The valuation expert did say in answer to a question that when tracking all bubble & busts over umpteen years the average bounce back from bottom was 88% after 7 years. He also said that the one exception to that was Japan, where they didn't react and let their banks stagnate by trying to absorb the losses over years.
However Lenihan was very quick to point out that for NAMA this will not be a factor in the valuations and that NAMA will only be allowing a small fraction over the market value for "long term value"

I thought he answered a lot of questions and seemingly to the satisfaction of most there.

[HanleyS]

I listened to every word of it and that would not be a fair summation. The valuation expert did say in answer to a question that when tracking all bubble & busts over umpteen years the average bounce back from bottom was 88% after 7 years. He also said that the one exception to that was Japan, where they didn't react and let their banks stagnate by trying to absorb the losses over years.
However Lenihan was very quick to point out that for NAMA this will not be a factor in the valuations and that NAMA will only be allowing a small fraction over the market value for "long term value"

I'll read the transcript later when I have more time. You asked:

Did he change any minds on the anti side I wonder?

Based on the Irish Times reporting of proceedings I'm very very disappointed because I had hoped that a workable plan would be presented. I will reserve judgement until I read the transcript but if the Irish Times reporting proves accurate then this plan is going to causes a lot more problems than it solves.

[HanleyS]

The ECB has just come out in favour of the NAMA proposal, In a legal opinion published on its Web site today, the ECB said Nama created no major legal state aid problems or unfair advantages, adding it should help strengthen Irish banks' balance sheets and increase liquidity.

That is highly disingenuous. There were strong caveats in the ECB opinion.

[Hal]

Lenihan made a very good point on the risk sharing situation, in that he reminded the committee that there are really only three banks involved, Anglo, AIB & BoI and as we already own Anglo we have no overpayment risk there, leaving only the loans of AIB & BoI where risk sharing is an issue. He also said they were looking at various risk sharing options apart from a levy.

He had a bit of good news too when he said the total loans they were looking at would be less that the 90 billion expected.

[Simbo67]

That is highly disingenuous. There were strong caveats in the ECB opinion.

The whole issue with NAMA is that it will overpay for assets based on some ridiculous notion of long term economic value. The recommendation said that the Irish government should avoid overpaying for these assets so to say that the ECB comes out in favour of NAMA completely misses the whole point of the controversy!

[HanleyS]

Mulcahy came over ok until he took out his chartist analysysis that Irish property (from memory) typically increasess about 88% from trough about 7 years after a crash.

1. This is not a normal cyclical property crash - this is out there with the Dutch tulip bulbs.

2. Even if it did recover that much, applying a commercial discount rate (say 10%) to a value in 7 years time would just get you back to the trough value as its Net Present Value.

Mulcahy appears from the summary to have mentioned that the drops are unprecedented in his 39 year career. He neglects to mention that the climbs were also unprecedented in his 39 year career. Overall this boom/upcycle has lasted over a quarter of his career. His career experience has been coloured by that extended up cycle.

[HanleyS]

Lenihan made a very good point on the risk sharing situation, in that he reminded the committee that there are really only three banks involved, Anglo, AIB & BoI and as we already own Anglo we have no overpayment risk there, leaving only the loans of AIB & BoI where risk sharing is an issue. He also said they were looking at various risk sharing options apart from a levy.

Why are INBS, EBS and PTSB not involved?

PTSB are bullish right now because they're not included in NAMA but if their mortgage assets become distressed they may be included. Provision has been made in the legislation to deal with mortgage assets as prescribed by the IMF among others.

[Hal]

The whole issue with NAMA is that it will overpay for assets based on some ridiculous notion of long term economic value. The recommendation said that the Irish government should avoid overpaying for these assets so to say that the ECB comes out in favour of NAMA completely misses the whole point of the controversy!

No one has ever said it would be a good idea to "overpay" for the assets. A realistic long term valuation is NOT the same as overpaying.

The ECB said that when using the "long term valuation" model, of which they approve, you have to be very careful not to overpay and that a good risk sharing element is necessary.

[HanleyS]

Is there a transcript of this session or a audio/video recording?

The committee meetings are not as well archived as Dail debates it appears.