What has happened to developers debts?

Slideshowbob · 11-02-2012 9:12am #1

Am I correct in saying that the entire default amounts of developers in NAMA have essentially become sovereign debts, there has been no write off with international wholesale lenders on these, and consequently, as it stands the entirety of these debts rest ultimately on the heads of the irish taxpayer and future Irish taxpayers???

Victor · 11-02-2012 9:31am

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

Liam Byrne · 11-02-2012 1:01pm

Victor wrote: »

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

Meanwhile NAMA will only be able to sell the asset for €30m and will be paying interest on the €50m that it will never get back from the developer, who at this stage is either working for NAMA for €200,000 a year, getting rent from NAMA for buildings, or the developer goes bankrupt paying nothing.

It's a horrendous con.

SBWife · 11-02-2012 1:21pm

NAMA has only bought debt from domestic institutions. The debts held by international lenders are being pursued through the normal legal channels. See for example the monies lent to Dunne for the Jury's site in Ballsbridge.

Scofflaw · 12-02-2012 12:14am

Victor wrote: »

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

The idea being that the €50m NAMA bought the loan for was less than the amount the developer will be able to pay. If the property securing the loan is worth €30m, then NAMA needs the developer to pay over €20m before foreclosure in order to yield a profit.

So in this case, say the amount the developer defaults on is €75m of the €100m. NAMA seizes the asset (property) in question, and sells it for €30m. NAMA makes €55m, having paid €50m for the loan - result, profit of €5m.

I think the OP might reflect the idea that when NAMA paid €50m for the loan, the state somehow acquired the balance of the developer's debt as public debt. That's not the case. The state has acquired an asset theoretically worth €100m for €50m. The asset in question is the loan to the developer - or to look at it another way, an agreement that the developer pay the bank €100m - which it has bought off the bank for a discount that reflects NAMA's view of how much the developer is actually likely to pay as well as the likely value of the security on the loan.

cordially,
Scofflaw

Liam Byrne · 12-02-2012 1:39pm

Scofflaw wrote: »

Victor wrote: »

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

The idea being that the €50m NAMA bought the loan for was less than the amount the developer will be able to pay. If the property securing the loan is worth €30m, then NAMA needs the developer to pay over €20m before foreclosure in order to yield a profit.

So in this case, say the amount the developer defaults on is €75m of the €100m. NAMA seizes the asset (property) in question, and sells it for €30m. NAMA makes €55m, having paid €50m for the loan - result, profit of €5m.

I think the OP might reflect the idea that when NAMA paid €50m for the loan, the state somehow acquired the balance of the developer's debt as public debt. That's not the case. The state has acquired an asset theoretically worth €100m for €50m. The asset in question is the loan to the developer - or to look at it another way, an agreement that the developer pay the bank €100m - which it has bought off the bank for a discount that reflects NAMA's view of how much the developer is actually likely to pay as well as the likely value of the security on the loan.

cordially,
Scofflaw

The issue is the "theoretically"

The developer will declare bankruptcy before forking out the balance.

Scofflaw · 12-02-2012 4:37pm

Liam Byrne wrote: »

The issue is the "theoretically"

The developer will declare bankruptcy before forking out the balance.

One cannot simply "declare" bankruptcy, and to date only 4 NAMA developers have been declared bankrupt, as far as I can gather. Although I may be missing some, of course, the majority of NAMA developers obviously aren't just "declaring bankruptcy" and laughing all the way to the bank.

cordially,
Scofflaw

Mr.Micro · 12-02-2012 5:26pm

Liam Byrne wrote: »

The issue is the "theoretically"

The developer will declare bankruptcy before forking out the balance.

Meanwhile the frackers have at least €200,000 per year plus bonuses.....only in Ireland. :mad:

Hayte · 12-02-2012 7:03pm

Scofflaw wrote: »

One cannot simply "declare" bankruptcy, and to date only 4 NAMA developers have been declared bankrupt, as far as I can gather. Although I may be missing some, of course, the majority of NAMA developers obviously aren't just "declaring bankruptcy" and laughing all the way to the bank.

cordially,
Scofflaw

Indeed, the very idea of laughing all the way to the bank whilst going through bankruptcy is a contradiction in terms. Its not a good place to be. You will not be able to get credit. Everything the company has will be disposed off to pay its creditors. There will be nothing left.

An argument can be made for individuals trading under their own names, who attempt to hide funds in secret accounts, or offshore accounts or with personal relatives. Or if company assets are stashed away in related companies or whatever. But I work in a law firm and I have chased debts before, even if not on this scale. We chase long and we chase hard. If you make us work, if you bleed our clients trying to get their money back, we have instructions to bleed you harder. Its an unpleasant line of work.

Anyone who has been through bankruptcy or has been chased by debt collectors will understand just how terrible it is. You have to get those threatening letters in the mail, you have to go through the process of living between court dates and having to prove to the satisfaction of a Judge that you are so stone f**king broke that there are no alternatives but to write off whatever debts are outstanding. And believe me, if there are alternatives, if there is a secret account, we will follow the string until it runs out. We will hound you until you crumble.

I feel lucky that I don't have to do that very often, since I work primarily in insurance and professional indemnity. I feel luckier still that I don't have firms hounding me for every cent I've got left. I feel luckier that I don't have to watch a company I built from nothing get picked apart until not even the bones are left. And in these cases its not just company assets up for grabs because most banks providing developer loans required some form of personal guarantee.

Make no mistake, those developers are going through hell even if it may arguably be a hell of their own creation. Some derive a sense of schadenfreude in this. I don't necessarily disagree with this position but you really have to go through this process yourself to understand how bad it is.

meglome · 12-02-2012 7:57pm

Mr.Micro wrote: »

Meanwhile the frackers have at least €200,000 per year plus bonuses.....only in Ireland. :mad:

Do you mean the ones that are employed by NAMA at a huge discount over what it would cost to employ someone else to do it?

Slideshowbob · 12-02-2012 8:09pm

meglome wrote: »

Mr.Micro wrote: »

Meanwhile the frackers have at least €200,000 per year plus bonuses.....only in Ireland. :mad:

Do you mean the ones that are employed by NAMA at a huge discount over what it would cost to employ someone else to do it?

They are employed to do what exactly?

Where are the demonstrable outcomes to their works?

Are they working full time on NAMA projects?

Have NAMA sought prices for alternatives???

I'd say NAMA are wasting money paying them as long as the market is in decline.

meglome · 12-02-2012 9:30pm

Slideshowbob wrote: »

They are employed to do what exactly?

Where are the demonstrable outcomes to their works?

Are they working full time on NAMA projects?

Have NAMA sought prices for alternatives???

I'd say NAMA are wasting money paying them as long as the market is in decline.

I don't know the answers to some of those questions but unlike you I am not assuming it is one thing or another.

What I have read and it appears to be correct that on a portfolio where NAMA is paying say 200k to the Irish developer they would have to pay 5-10 times that amount to bring people in. It might be unpalatable to see these developers get paid fairly big money but it would cost far more to bring someone else in.

MadsL · 13-02-2012 5:44am

What I have read and it appears to be correct that on a portfolio where NAMA is paying say 200k to the Irish developer they would have to pay 5-10 times that amount to bring people in. It might be unpalatable to see these developers get paid fairly big money but it would cost far more to bring someone else in.

If you really think it would cost 2m a year to run some of these 'portfolios' you should take a walk in Docklands, Heuston or Smithfield. Not much 'managing' to be done, more like just making sure the doors are locked. :rolleyes:

Nijmegen · 13-02-2012 10:40am

Regardless of whomever wins from NAMA, the taxpayer is the chump losing out.

Developers may be hard hit comparatively, but for them losing 95% of what they had can still equate to a €200,000 a year salary.

Scofflaw · 13-02-2012 3:08pm

Nijmegen wrote: »

Regardless of whomever wins from NAMA, the taxpayer is the chump losing out.

Developers may be hard hit comparatively, but for them losing 95% of what they had can still equate to a €200,000 a year salary.

So you'd argue that it's OK to take away 95% of what one person has worked to achieve, simply because they've achieved more than average?

cordially,
Scofflaw

Mr.Micro · 13-02-2012 3:17pm

meglome wrote: »

I don't know the answers to some of those questions but unlike you I am not assuming it is one thing or another.

What I have read and it appears to be correct that on a portfolio where NAMA is paying say 200k to the Irish developer they would have to pay 5-10 times that amount to bring people in. It might be unpalatable to see these developers get paid fairly big money but it would cost far more to bring someone else in.

Yes it is unpalatable. Having their cake and eating it. Who here is on 200K per year for causing the biggest F**k up in our history. It is fantastic money for the rotters, when most everybody else has to emigrate or go without. Its disgusting and tbh I would rather on principle that NAMA had employed people even if it cost more. A big club for the rotters.

antoobrien · 13-02-2012 4:17pm

Mr.Micro wrote: »

Yes it is unpalatable. Having their cake and eating it. Who here is on 200K per year for causing the biggest F**k up in our history.

The one fundamental that an awful lot of people seem to want to ignore is that people wanted to buy the properties that these people were building. If there wasn't demand for houses, apartments etc the developers wouldn't have gotten into the position they did.

So are you going to start telling people to give up homes etc?

Mr.Micro wrote: »

It is fantastic money for the rotters, when most everybody else has to emigrate or go without.

There are 50% more people in employment now as there were 20 years ago. So most of the 1.8 odd million people still in employment are going without what exactly? I don't see any evidence of it with the amount of smartphones, flat screen tvs etc being bought.

I know more than one woman (who are always skint but), still manage to spend a few hundred euros on a new outfit every other week, so maybe we need to reevaluate what's really important and stop trying to keep up with the Joneses.

Mr.Micro wrote: »

NAMA had employed people

Employ whom to do what exactly? It's most likely that anyone brought in would have been involved in the boom, either here or abroad. In in that context, who would be acceptable to you?

Nijmegen · 13-02-2012 5:31pm

Scofflaw wrote: »

So you'd argue that it's OK to take away 95% of what one person has worked to achieve, simply because they've achieved more than average?

cordially,
Scofflaw

I'm fairly successful in my own life. But I didn't build what I have on a casino of debt heaped on debt far outstripping any assets I eventually owned when it all went pop.

Developers lost a huge amount because so many of them didn't realise how they got rich, let alone how it all came tumbling down. The accidental millionaires who now don't believe they should personally take responsibility for their actions.

A line of these people bleating that it was someone else who fooled them.

Well, a fool and their money. And our money, unfortunately.

Scofflaw · 13-02-2012 5:45pm

Nijmegen wrote: »

I'm fairly successful in my own life. But I didn't build what I have on a casino of debt heaped on debt far outstripping any assets I eventually owned when it all went pop.

Developers lost a huge amount because so many of them didn't realise how they got rich, let alone how it all came tumbling down. The accidental millionaires who now don't believe they should personally take responsibility for their actions.

A line of these people bleating that it was someone else who fooled them.

Well, a fool and their money. And our money, unfortunately.

So, would you argue that here's little or no actual work involved in development, and that taking risks is morally wrong?

cordially,
Scofflaw

Mr.Micro · 13-02-2012 6:05pm

antoobrien wrote: »

The one fundamental that an awful lot of people seem to want to ignore is that people wanted to buy the properties that these people were building. If there wasn't demand for houses, apartments etc the developers wouldn't have gotten into the position they did.

So are you going to start telling people to give up homes etc?

There was demand of course, based on massive borrowed money that people could not really afford, at massively inflated prices. Add to this the over development in every County in Ireland, estates everywhere ( now many ghost estates), then add the thousands of second homes. Greed in the end overruled basic sound economic principles.

antoobrien wrote: »

There are 50% more people in employment now as there were 20 years ago. So most of the 1.8 odd million people still in employment are going without what exactly? I don't see any evidence of it with the amount of smartphones, flat screen tvs etc being bought.

So there is no mass emigration, big unemployment, austerity? I cannot quite see what a smartphone or flat screen TV has to do with anything....

antoobrien wrote: »

I know more than one woman (who are always skint but), still manage to spend a few hundred euros on a new outfit every other week, so maybe we need to reevaluate what's really important and stop trying to keep up with the Joneses.

I find that story hard to believe. So the Government has got it all wrong then....we as a nation are not in debt and there is no austerity or cutbacks?

antoobrien wrote: »

Employ whom to do what exactly? It's most likely that anyone brought in would have been involved in the boom, either here or abroad. In in that context, who would be acceptable to you?

Employ qualified people , not the rotten chancers who helped cause this mess, even if it does cost. It would perhaps, alleviate some of the unemployment instead of giving jobs and a good salary to the chancers in the boys club.

Nijmegen · 13-02-2012 6:27pm

Scofflaw wrote: »

So, would you argue that here's little or no actual work involved in development, and that taking risks is morally wrong?

cordially,
Scofflaw

Not at all on either count.

Re: Work involved in development, there is much and it is a skill. But these lads became uber-rich compared to previous times thanks to cheap credit being thrown at them. They didn't stop to understand the nature of a bubble.

A smart man would have gotten out a few years and a few million in and invested his real profits somewhere more diverse.

Re: Risk taking, it's very positive. But I don't consider it risk taking when you walk away from debts and do not feel they were yours, personal guarantee or not, to service.

Scofflaw · 13-02-2012 6:34pm

Nijmegen wrote: »

Not at all on either count.

Re: Work involved in development, there is much and it is a skill. But these lads became uber-rich compared to previous times thanks to cheap credit being thrown at them. They didn't stop to understand the nature of a bubble.

A smart man would have gotten out a few years and a few million in and invested his real profits somewhere more diverse.

Re: Risk taking, it's very positive. But I don't consider it risk taking when you walk away from debts and do not feel they were yours, personal guarantee or not, to service.

I'm not sure either of the above make a good argument for developers who haven't defaulted being morally culpable, rather than unfortunate/foolish. If they're still servicing enormous loans on developments that are realistically unlikely to make them money, is that not them accepting their responsibility for their debts?

Assuming NAMA doesn't employ those who have actually defaulted on their loans, what reason can be offered for not employing their skills and experience?

cordially,
Scofflaw

Mr.Micro · 13-02-2012 6:41pm

Nijmegen wrote: »

Not at all on either count.

Re: Work involved in development, there is much and it is a skill. But these lads became uber-rich compared to previous times thanks to cheap credit being thrown at them. They didn't stop to understand the nature of a bubble.

A smart man would have gotten out a few years and a few million in and invested his real profits somewhere more diverse.

Re: Risk taking, it's very positive. But I don't consider it risk taking when you walk away from debts and do not feel they were yours, personal guarantee or not, to service.

What I find abhorrent re risk taking, in Ireland there appears to have a been a huge safety net for the developers ie NAMA, where Joe Public pays for all that risk. Where is the real risk, when there is a big big cushion at the end of it all? Risk taking where one ends up winning big time, or some or losing the lot, on personal money or proper vouched collateral, and taking the responsibility win or lose. Not here though, in many cases where the money risked was not even backed up with any collateral or guarantees. Lose the money and NAMA helps you out.

Scofflaw · 13-02-2012 6:47pm

Mr.Micro wrote: »

What I find abhorrent re risk taking, in Ireland there appears to have a been a huge safety net for the developers ie NAMA, where Joe Public pays for all that risk. Where is the real risk, when there is a big big cushion at the end of it all? Risk taking where one ends up winning big time, or some or losing the lot, on personal money or proper vouched collateral, and taking the responsibility win or lose. Not here though, in many cases where the money risked was not even backed up with any collateral or guarantees. Lose the money and NAMA helps you out.

How does NAMA help the developer out?

cordially,
Scofflaw

Liam Byrne · 13-02-2012 8:17pm

Scofflaw wrote: »

Assuming NAMA doesn't employ those who have actually defaulted on their loans, what reason can be offered for not employing their skills and experience?

What "skills and experience" would that be that makes them worth €200,000 a year ?

Because anyone who took over-the-top risks and ridiculous loans isn't the type of person I would wish to have in charge of decision-making with our money, let alone being paid some of it.

Slideshowbob · 13-02-2012 8:45pm

Scofflaw wrote: »

Nijmegen wrote: »

Regardless of whomever wins from NAMA, the taxpayer is the chump losing out.

Developers may be hard hit comparatively, but for them losing 95% of what they had can still equate to a €200,000 a year salary.

So you'd argue that it's OK to take away 95% of what one person has worked to achieve, simply because they've achieved more than average?

cordially,
Scofflaw

No one "took" it away, they misread the markets they operated in and the government and regulator did nothing to prevent these practices

Slideshowbob · 13-02-2012 8:51pm

antoobrien wrote: »

The one fundamental that an awful lot of people seem to want to ignore is that people wanted to buy the properties that these people were building. If there wasn't demand for houses, apartments etc the developers wouldn't have gotten into the position they did.

You're wrong.

There was no established demand, it was speculation.

These were property speculators, (Ray Grehan was an ex tiler for pears sake) when they bought land there was no guarantee that people would want to but a dwelling there at a later date. They misread the economy and market yet the taxpayer is now paying the price

They got to keep their profits in the good times, why should we bear their loses now?

Slideshowbob · 13-02-2012 8:54pm

Scofflaw wrote: »

Mr.Micro wrote: »

What I find abhorrent re risk taking, in Ireland there appears to have a been a huge safety net for the developers ie NAMA, where Joe Public pays for all that risk. Where is the real risk, when there is a big big cushion at the end of it all? Risk taking where one ends up winning big time, or some or losing the lot, on personal money or proper vouched collateral, and taking the responsibility win or lose. Not here though, in many cases where the money risked was not even backed up with any collateral or guarantees. Lose the money and NAMA helps you out.

How does NAMA help the developer out?

cordially,
Scofflaw

By offering them a big salary to manage their failings for one

Mr.Micro · 13-02-2012 9:12pm

Scofflaw wrote: »

How does NAMA help the developer out?

cordially,
Scofflaw

Slideshowbob got there before me. Payment for massive failings plus bonuses. It begs the questions what exactly is the 200k for? Is it a bribe, sweetner or just a made up reason to help the poor developer out? I for one am very skeptical about paying these people. There is a fair bit of secrecy about the way NAMA operates and who it pays, all very civilized for the poor distressed developer gentlefolk. I could not imagine my bank paying me to get their hands on my bad loans/assets if I owed them. It was the best wheeze that FF ever thought up, and a hedged bet for the future and thanks from their grateful pals.

Nijmegen · 13-02-2012 9:14pm

Scofflaw wrote: »

I'm not sure either of the above make a good argument for developers who haven't defaulted being morally culpable, rather than unfortunate/foolish. If they're still servicing enormous loans on developments that are realistically unlikely to make them money, is that not them accepting their responsibility for their debts?

Assuming NAMA doesn't employ those who have actually defaulted on their loans, what reason can be offered for not employing their skills and experience?

cordially,
Scofflaw

NAMA at its outset represents a state-structured path to redemption for the property market and all those who circulated around it. The state took huge risks out of the system and that has been to the benefit of many except tax payers.

These boys and girls played greedy buggers. They weren't entrepreneurs, they were playing a credit game with an easy in. In this instance, it's morally wrong to give them any assistance.

But we run round in circles back to the banking guarantee and the establishment of NAMA. All those steps taken to return solvency to the system and keep us out of an IMF bailout.

The whole lot should have been let go.

squod · 13-02-2012 9:15pm

Lovely story in The Sunday Times about Comer.
http://www.independent.ie/business/irish/comers-sell-up-german-empire-to-fund-buying-spree-at-nama-2996193.html

Can't get the ST article online, anyway it looks like this shrewd business man has just snapped up €20m worth of property for €0.9m. The original developer joined NAMA and has now of course filed bankruptcy in the UK.

Total loss to the exchequer then. Lovely.

WhatNowForUs? · 13-02-2012 9:28pm

Liam Byrne wrote: »

Victor wrote: »

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

Meanwhile NAMA will only be able to sell the asset for €30m and will be paying interest on the €50m that it will never get back from the developer, who at this stage is either working for NAMA for €200,000 a year, getting rent from NAMA for buildings, or the developer goes bankrupt paying nothing.

It's a horrendous con.

Would you say it is concievable that NAMA could go bankrupt?

Boskowski · 13-02-2012 9:28pm

Scofflaw wrote: »

I think the OP might reflect the idea that when NAMA paid €50m for the loan, the state somehow acquired the balance of the developer's debt as public debt. That's not the case. The state has acquired an asset theoretically worth €100m for €50m.

Thats all very good if looked at in isolation.
But when you consider the fact that we also 'had to' acquire the bank that made the €50m loss in the first place you will see the taxpayer - that is us - is screwed all round.

Liam Byrne · 13-02-2012 9:45pm

WhatNowForUs? wrote: »

Liam Byrne wrote: »

Victor wrote: »

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

Meanwhile NAMA will only be able to sell the asset for €30m and will be paying interest on the €50m that it will never get back from the developer, who at this stage is either working for NAMA for €200,000 a year, getting rent from NAMA for buildings, or the developer goes bankrupt paying nothing.

It's a horrendous con.

Would you say it is concievable that NAMA could go bankrupt?

If it does then property prices will return to where they should be, but NAMA will drag the country down with it meaning only the really well-off will be able to take advantage.

If it doesn't it'll keep the prices artificially inflated, with the same result that people won't be able to afford them.

Lose-lose setup, except for those it was set up to look after.

Liam Byrne · 13-02-2012 9:47pm

WhatNowForUs? wrote: »

Liam Byrne wrote: »

Victor wrote: »

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

Meanwhile NAMA will only be able to sell the asset for €30m and will be paying interest on the €50m that it will never get back from the developer, who at this stage is either working for NAMA for €200,000 a year, getting rent from NAMA for buildings, or the developer goes bankrupt paying nothing.

It's a horrendous con.

Would you say it is concievable that NAMA could go bankrupt?

If it does then property prices will return to where they should be, but NAMA will drag the country down with it meaning only the really well-off will be able to take advantage.

If it doesn't it'll keep the prices artificially inflated, with the same result that people won't be able to afford them.

Lose-lose setup, except for those it was set up to look after.

Liam Byrne · 13-02-2012 9:47pm

WhatNowForUs? wrote: »

Liam Byrne wrote: »

Victor wrote: »

Let us say a developer borrowed €100m from a bank.

NAMA has bought that debt from the bank for say €50m.

To pay the bank, NAMA/NTMA has borrowed €50m.

The developer still owes NAMA €100m, but NAMA realises that it is likely to only be able to recover a smaller number.

Meanwhile NAMA will only be able to sell the asset for €30m and will be paying interest on the €50m that it will never get back from the developer, who at this stage is either working for NAMA for €200,000 a year, getting rent from NAMA for buildings, or the developer goes bankrupt paying nothing.

It's a horrendous con.

Would you say it is concievable that NAMA could go bankrupt?

If it does then property prices will return to where they should be, but NAMA will drag the country down with it meaning only the really well-off will be able to take advantage.

If it doesn't it'll keep the prices artificially inflated, with the same result that people won't be able to afford them.

Lose-lose setup, except for those it was set up to look after.

Slideshowbob · 13-02-2012 10:40pm

NAMA is set up on the premise of "Long term economic value".

Guess what folks - that term didn't exist 5 years ago - Google it and you will see.

It was dreamed up by Brian "the patriot"* Lenihan and his colleagues.

At what stage will we realise the LTEV pitch was a fallacy!?! They assumed 10 years - how many years are we into NAMAland now?!

*courtesy of the Sindo

Scofflaw · 13-02-2012 10:56pm

Boskowski wrote: »

Thats all very good if looked at in isolation.
But when you consider the fact that we also 'had to' acquire the bank that made the €50m loss in the first place you will see the taxpayer - that is us - is screwed all round.

True, but that has nothing to do with the developers. The banks were the ones being bailed out.

Nijmegen wrote:

NAMA at its outset represents a state-structured path to redemption for the property market and all those who circulated around it. The state took huge risks out of the system and that has been to the benefit of many except tax payers.

These boys and girls played greedy buggers. They weren't entrepreneurs, they were playing a credit game with an easy in. In this instance, it's morally wrong to give them any assistance.

But what's the suggested alternative? How much would it cost to hire in equivalently skilled/experienced outsiders?

cordially,
Scofflaw

Scofflaw · 13-02-2012 11:00pm

Slideshowbob wrote: »

NAMA is set up on the premise of "Long term economic value".

Guess what folks - that term didn't exist 5 years ago - Google it and you will see.

It was dreamed up by Brian "the patriot"* Lenihan and his colleagues.

At what stage will we realise the LTEV pitch was a fallacy!?! They assumed 10 years - how many years are we into NAMAland now?!

*courtesy of the Sindo

Sorry - are you sure about that?

http://www.google.ie/search?q=%22Long+term+economic+value%22&num=100&hl=en&newwindow=1&client=firefox-a&hs=Lz4&rls=org.mozilla%3Aen-US%3Aofficial&sa=X&ei=Eoc5T6nOEo2KhQfT_-3nAQ&ved=0CAwQpwUoBg&source=lnt&tbs=cdr%3A1%2Ccd_min%3A1%2F1%2F2001%2Ccd_max%3A1%2F1%2F2006&tbm=

cordially,
Scofflaw

Nijmegen · 13-02-2012 11:06pm

Scofflaw wrote: »

But what's the suggested alternative? How much would it cost to hire in equivalently skilled/experienced outsiders?

cordially,
Scofflaw

The difficulty is that no objective outside assessment can be made of this, given NAMA's lack of transparency. We don't know what the expertise would be or what the market rate for it would be.

In this circumstance, and given the perceived prevalence of 'jobs for the boys' in Irish government spending, I think people are right to question whether or not the NAMA employed developers haven't got a sweet deal.

It may not be the case. But that's the price of crossing your citizens: Habitual mistrust.

Slideshowbob · 13-02-2012 11:39pm

Scofflaw wrote: »

Sorry - are you sure about that?

http://www.google.ie/search?q=%22Long+term+economic+value%22&num=100&hl=en&newwindow=1&client=firefox-a&hs=Lz4&rls=org.mozilla%3Aen-US%3Aofficial&sa=X&ei=Eoc5T6nOEo2KhQfT_-3nAQ&ved=0CAwQpwUoBg&source=lnt&tbs=cdr%3A1%2Ccd_min%3A1%2F1%2F2001%2Ccd_max%3A1%2F1%2F2006&tbm=

cordially,
Scofflaw

It's written into those texts alright in sentences but can you show me definition from back then or even one from now that doesn't have an NAMA context.

Over the course of time of course someone will string the words together.

antoobrien · 14-02-2012 10:08am

Slideshowbob wrote: »

There was no established demand, it was speculation.

Really? 66% of the residential mortgage market is, wait for it, owner occupied houses. So by now the people who bought homes were also speculating?

Isn't that undermining the whole argument that homeowners aren't responsible for the €100 billion (currently outstanding) they borrowed to pay for their homes.

The demand wasn't artifical, it was there. There were idiotic decisions made by all sides, but at the base of it all were people who wanted to buy.

But since you ndon't want to see that I'll introduce an example you might understand. MP3 players. Where would the ipod be if it weren't for people who wanted to listen to their entire music collection on a little device? Probably along side the devices brought out by thompson, sony and philips at the same time. There was no shortage of a supply of mp3 devices, but the demand was there (and people decided to saint steve jobs in the process).

K-9 · 14-02-2012 10:17am

antoobrien wrote: »

Really? 66% of the residential mortgage market is, wait for it, owner occupied houses. So by now the people who bought homes were also speculating?

Isn't that undermining the whole argument that homeowners aren't responsible for the €100 billion (currently outstanding) they borrowed to pay for their homes.

The demand wasn't artifical, it was there. There were idiotic decisions made by all sides, but at the base of it all were people who wanted to buy.

But since you ndon't want to see that I'll introduce an example you might understand. MP3 players. Where would the ipod be if it weren't for people who wanted to listen to their entire music collection on a little device? Probably along side the devices brought out by thompson, sony and philips at the same time. There was no shortage of a supply of mp3 devices, but the demand was there (and people decided to saint steve jobs in the process).

Obviously homeowners played a big part but the investor market seemed to be the biggest player, decent article on it:

Economic Incentives: Who “went mad borrowing”?

antoobrien · 14-02-2012 10:31am

K-9 wrote: »

Obviously homeowners played a big part but the investor market seemed to be the biggest player, decent article on it:

Economic Incentives: Who “went mad borrowing”?

Interestingly it points out that in 2008 the residential mortgages market (€110 billion) was about the same size as the property sector (€112 billion), both of which dwarfed buy to let (€36 b) and business laons (€60 b).

The fact that the buy to let sector and residential sector are greater than the property sector is a clear indicator that there was indeed demand.

K-9 · 14-02-2012 10:52am

antoobrien wrote: »

Interestingly it points out that in 2008 the residential mortgages market (€110 billion) was about the same size as the property sector (€112 billion), both of which dwarfed buy to let (€36 b) and business laons (€60 b).

The fact that the buy to let sector and residential sector are greater than the property sector is a clear indicator that there was indeed demand.

That is one way of looking at it, or:

Excluding buy-to-let investment mortgages loans to households rose from €52 billion to €140 billion. Residential mortgages increased from €40 billion to €110 billion and other consumer borrowings rose from €13 billion to €30 billion.
With property-related loans perceived as being the source of our ills it is worth noting that household residential mortgages rose by €70 billion while investment and speculative loans in the property sector rose by more than €130 million. Both increases are excessive but it must be realised that one is almost twice as large as the other and also that the increase in mortgage debt was spread over hundreds of thousands households rather than being concentrated like the property loans.

The stand-out figures are the 350% increase in buy-to-let mortgages and the 490% increase in loans to the construction and property sectors.

It's interesting how loans to the property went from less that half the loans of residential mortgages in 2003 to overtaking them in 08.

Could well all be a bit academic as obviously demand for buy to lets and residential property was feeding the property sector loans.

professore · 14-02-2012 10:57am

Hayte wrote: »

Indeed, the very idea of laughing all the way to the bank whilst going through bankruptcy is a contradiction in terms. Its not a good place to be. You will not be able to get credit. Everything the company has will be disposed off to pay its creditors. There will be nothing left.

An argument can be made for individuals trading under their own names, who attempt to hide funds in secret accounts, or offshore accounts or with personal relatives. Or if company assets are stashed away in related companies or whatever. But I work in a law firm and I have chased debts before, even if not on this scale. We chase long and we chase hard. If you make us work, if you bleed our clients trying to get their money back, we have instructions to bleed you harder. Its an unpleasant line of work.

Anyone who has been through bankruptcy or has been chased by debt collectors will understand just how terrible it is. You have to get those threatening letters in the mail, you have to go through the process of living between court dates and having to prove to the satisfaction of a Judge that you are so stone f**king broke that there are no alternatives but to write off whatever debts are outstanding. And believe me, if there are alternatives, if there is a secret account, we will follow the string until it runs out. We will hound you until you crumble.

I feel lucky that I don't have to do that very often, since I work primarily in insurance and professional indemnity. I feel luckier still that I don't have firms hounding me for every cent I've got left. I feel luckier that I don't have to watch a company I built from nothing get picked apart until not even the bones are left. And in these cases its not just company assets up for grabs because most banks providing developer loans required some form of personal guarantee.

Make no mistake, those developers are going through hell even if it may arguably be a hell of their own creation. Some derive a sense of schadenfreude in this. I don't necessarily disagree with this position but you really have to go through this process yourself to understand how bad it is.

Somehow I suspect being chased by NAMA and by private creditors are two different things.

Scofflaw · 14-02-2012 11:04am

Slideshowbob wrote: »

It's written into those texts alright in sentences but can you show me definition from back then or even one from now that doesn't have an NAMA context.

Over the course of time of course someone will string the words together.

OK: http://www.proz.com/kudoz/english_to_french/finance_general/3028727-long_term_economic_value.html

cordially,
Scofflaw

Scofflaw · 14-02-2012 11:07am

Nijmegen wrote: »

The difficulty is that no objective outside assessment can be made of this, given NAMA's lack of transparency. We don't know what the expertise would be or what the market rate for it would be.

In this circumstance, and given the perceived prevalence of 'jobs for the boys' in Irish government spending, I think people are right to question whether or not the NAMA employed developers haven't got a sweet deal.

It may not be the case. But that's the price of crossing your citizens: Habitual mistrust.

I'd accept those points. At the end of the day, though, they're fundamentally a comment on the optics.

cordially,
Scofflaw

Nijmegen · 14-02-2012 11:19am

Scofflaw wrote: »

I'd accept those points. At the end of the day, though, they're fundamentally a comment on the optics.

cordially,
Scofflaw

I disagree there: I think that 'poor optics' is not the reason why people object to a culture like this in giving out public monies. I also believe that people have a credible past history to work on from government, this one and the previous one, in making the mental leap that NAMA might be benefiting a select few.

Optics is not the reason why people have a problem with this. It's the pervasive culture among those who should be spending our money wisely.

Scofflaw · 14-02-2012 12:11pm

Nijmegen wrote: »

I disagree there: I think that 'poor optics' is not the reason why people object to a culture like this in giving out public monies. I also believe that people have a credible past history to work on from government, this one and the previous one, in making the mental leap that NAMA might be benefiting a select few.

Optics is not the reason why people have a problem with this. It's the pervasive culture among those who should be spending our money wisely.

The reason I say they're comments on the optics is because we haven't actually established any reason for developers being bad people. I'd accept the idea that developers who didn't see the of the bubble probably shouldn't be hired as economic consultants, but that's not what's happening - your reasoning above essentially says that NAMA shouldn't employ developers because they should be being punished.

Punished for what, exactly? Losing a lot of money? If they haven't declared bankruptcy, then they're repaying that money - and under current circumstances, not with any real hope of profit.

Developers borrowed from the banks large sums to build the properties which Irish people wanted to buy. If they didn't foresee the end of the bubble, they were left with large amounts of debt, and a reduced ability to pay. They may, as a result, have had their loans transferred into NAMA. They didn't choose to have their loans transferred into NAMA, and indeed several of them fought the process. NAMA may make a loss - or a profit - but it's not a "bailout" for the developers. They're not being saved from their debts - that idea seems to be based on a complete misunderstanding of who the NAMA haircut applies to!

There is no difference there between a developer and any other business there, though - you borrow to expand. If you borrow to expand and a downturn hits, you go out of business and you owe money. Why are developers somehow evil whereas those who, say, borrowed to expand their tech company in 2000, and were wiped out in the dotcom crash in 2001, aren't?

There's a clear consensus here and elsewhere that developers are somehow "bad" - yet we've established that wanting to make money isn't intrinsically bad, that taking risks is not just not bad but usually admirable, and that borrowing money is just part of doing business. So where's the bit that makes developers "bad"?

cordially,
Scofflaw

Hayte · 14-02-2012 12:18pm

It is kinda weird paying a developer €200,000 a year when you have appointed a receiver to squeeze his company for every rusty cent its got prior to its inevitable liquidation. At which point, you go after the personal guarantee i.e. the developer's many homes, cars and personal bank accounts that are not in the company's name.

That sounds like a...pity f***.

What has happened to developers debts?

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