NAMA - figures are not adding up

ei.sdraob

K-9 wrote: »

Funnily enough, there is interest in taking over Postbank by a foreign group.

say that to the employees of Halifax

SkepticOne

K-9 wrote: »

The bad bank is buying them, because you'd have to set up a new structure for the good bank that you want privatised.

No, the bad back in the nationalisation scenario is created from splitting an entity that the state owns.

K-9

ei.sdraob wrote: »

say that to the employees of Halifax

And? Halifax had other problems, not just NAMA related.

SkepticOne wrote: »

No, the bad back in the nationalisation scenario is created from splitting an entity that the state owns.

Yes, but it still involves setting up a separate structure and transferring all the bad loans. Not a simple, quick process either.

SkepticOne

K-9 wrote: »

Yes, but it still involves setting up a separate structure and transferring all the bad loans. Not a simple, quick process either.

Not simple but vastly simpler than the current process. It is an accounting job. There's no purchasing. There's no worry about state aid to private entities. There's no EU scrutiny of each and every loan and delaying the process by months before it can start. The splitting of an entity into two is fairly routine in the business world. We haven't yet transferred a single loan yet other countries have completed the process of re-privatisation in the same time.

It is all academic now anyway. The assets will be purchased from the banks in a process that may according to some take up to two years. However they will eventually be transferred.

What needs to be discussed now is how the assets themselves will be managed over the next ten years. A lot of the media attention has been directed to the transfer process and overpayment but the real work of NAMA begins once it has hold of the assets themselves. The problems arising out of this could dwarf the overpayment issues.

Scofflaw

SkepticOne wrote: »

There's no EU scrutiny of each and every loan

Which would be such a good idea. After all, I'm sure we all trust the government implicitly.

amused,
Scofflaw

SkepticOne

Scofflaw wrote: »

Which would be such a good idea. After all, I'm sure we all trust the government implicitly.

You realise don't you that nationalisation would not involve purchasing anything from private companies in order to split the assets? The EU scrutiny we're undergoing has to do with state aid to corporations which does not arise in the nationalisation process.

Scofflaw

SkepticOne wrote: »

You realise don't you that nationalisation would not involve purchasing anything from private companies in order to split the assets? The EU scrutiny we're undergoing has to do with state aid to corporations which does not arise in the nationalisation process.

Yes, because we'd already have bought the assets along with the companies. That isn't the point I'm making at all, though. You appear to be saying that once the government had full control over the banks through nationalisation, the resulting split of loans into a bad bank would be all the better for the absence of external scrutiny - a claim that I admit to finding bizarre.

still amused,
Scofflaw

SkepticOne

Scofflaw wrote: »

That isn't the point I'm making at all, though. You appear to be saying that once the government had full control over the banks through nationalisation, the resulting split of loans into a bad bank would be all the better for the absence of external scrutiny - a claim that I admit to finding bizarre.

You don't seem to be taking on board that the EU is not scrutinising NAMA in general but only in the specific capacity of the pricing of loans. Obviously it is good that they are doing so, but this specific need does not arise under the nationalisation scenario.

I'm very much in favour of general external scrutiny but that is separate to the pros and cons of nationalisation vs what we're doing now.

Your expressions of amusement when you don't understand something are annoying. I think it only serves to wind up the other person and does not add to the debate.

Scofflaw

SkepticOne wrote: »

You don't seem to be taking on board that the EU is not scrutinising NAMA in general but only in the specific capacity of the pricing of loans. Obviously it is good that they are doing so, but this specific need does not arise under the nationalisation scenario.

I'm very much in favour of general external scrutiny but that is separate to the pros and cons of nationalisation vs what we're doing now.

Your expressions of amusement when you don't understand something are annoying. I think it only serves to wind up the other person and does not add to the debate.

Alas, you misunderstand why I'm amused, because you misunderstand what I misunderstand. I understand entirely what you're saying, but regrettably you apparently don't understand how that can be amusing.

I am referring specifically to EU oversight in the transfer of the loans under NAMA and under the putative nationalisation-scenario bad bank. I am aware that the EU will not be overseeing NAMA on an ongoing basis (which is something of a pity, since they're rather better at transparency than our government). I still find your contention that the lack of EU oversight of the loan transfer and valuation process would be an advantage of the nationalisation scenario amusing.

My apologies if you find that annoying.

cordially,
Scofflaw

kippy

Lads, take a break and head out for a few pints for the day thats in it.

K-9

SkepticOne wrote: »

Not simple but vastly simpler than the current process. It is an accounting job. There's no purchasing. There's no worry about state aid to private entities. There's no EU scrutiny of each and every loan and delaying the process by months before it can start. The splitting of an entity into two is fairly routine in the business world. We haven't yet transferred a single loan yet other countries have completed the process of re-privatisation in the same time.

It is all academic now anyway. The assets will be purchased from the banks in a process that may according to some take up to two years. However they will eventually be transferred.

What needs to be discussed now is how the assets themselves will be managed over the next ten years. A lot of the media attention has been directed to the transfer process and overpayment but the real work of NAMA begins once it has hold of the assets themselves. The problems arising out of this could dwarf the overpayment issues.

They'd still have to decide what loans to transfer to the bad bank and what to keep, not simple either. The "accountancy job" isn't that simple because they are transferring them to a brand new bank, completely separate from say, AIB. The state would be the new owners or bankers. The relationship with AIB would have to be cut completely as a foreign bank wouldn't touch them with a barge pole otherwise.

As far as I can see it's very similar to NAMA, barring the LTEV criteria.

Sand

Heres a thought, why dont those in favour of NAMA explain how its going to work?

K-9

Sand wrote: »

Heres a thought, why dont those in favour of NAMA explain how its going to work?

Huh? The plan is on Nama.ie. I don't think I can see I'm in favour of it either!

Sand

Huh? The plan is on Nama.ie. I don't think I can see I'm in favour of it either!

I'm sure though youve got a good solid base for your views on NAMAs likely success though.

Right?

Scofflaw

Sand wrote: »

I'm sure though youve got a good solid base for your views on NAMAs likely success though.

Right?

I don't think anyone here is arguing that NAMA is going to work as per Fianna Fail's rosy prospectus....perhaps it would be a good idea to ask what people mean by 'success' rather than using a definition they may not subscribe to?

cordially,
Scofflaw

Sand

People seem pretty sure NAMA is going work, certainly impervious to reason as to why its going to fail.

I am sure there are good and strong reasons for this belief. Perhaps they could be shared with the rest of us. While theyre at it, why not define what they view as the goal of NAMA. Maybe the disagreement is down to some misunderstandy over what NAMA "working" means. There was that major misunderstanding that NAMA was to restart lending in the economy, but that has since been clarified as not being the goal of NAMA.

K-9

Sand wrote: »

I'm sure though youve got a good solid base for your views on NAMAs likely success though.

Right?

More I'm not convinced by the plans put forward by the other parties either.

I'd say it could well work out a failure as in their projections. As regards getting lending going again, I'd say it is part of the process in doing that.

The alternatives, particularly the plan to Nationalise over a year ago, don't look that hot now. Alot of the criticism levelled at NAMA would still be there if they had gone the Nationalisation route.

Liam Byrne

Scofflaw wrote: »

I don't think anyone here is arguing that NAMA is going to work as per Fianna Fail's rosy prospectus....perhaps it would be a good idea to ask what people mean by 'success' rather than using a definition they may not subscribe to?

That's just giving FF an "out", Scofflaw........they're the ones proposing it, and claiming that it'll do X, Y and Z.

So therefore that is the issue - whether it will do X, Y and Z - and that is how it should be measured.

If we start getting arbitrary definitions, then you'd have the equivalent of people who viewed a short-term boom as a "success", with no concept of the damage done by the crash, and often those people have vested interests; e.g. there are still those who view the Iraq war as a "success", even though it was supposed to go after Bin Laden and find WMDs and last a few months.

Sand

More I'm not convinced by the plans put forward by the other parties either.

I'd say it could well work out a failure as in their projections. As regards getting lending going again, I'd say it is part of the process in doing that.

The alternatives, particularly the plan to Nationalise over a year ago, don't look that hot now. Alot of the criticism levelled at NAMA would still be there if they had gone the Nationalisation route.

None of this actually references NAMA positively. I amnt looking for reasons why you think other plans (which include "Do nothing") are bad ideas. I am asking why you think NAMA is a good idea.

K-9

Sand wrote: »

None of this actually references NAMA positively. I amnt looking for reasons why you think other plans (which include "Do nothing") are bad ideas. I am asking why you think NAMA is a good idea.

It will, together with Recapitalisation, get lending going again, which is important when our main banks are, to all intents and purposes, bankrupt. There is a clawback mechanism if it results in a loss, which either FF, FG, Labour and the rest of the parties will love to activate.

NAMA isn't that far away from the logic of Nationalisation. To me, people should see the logic of NAMA if they see the logic of Nationalisation. If they can't, well.........................

I can't speak of NAMA positively? Can anybody?

Liam Byrne

K-9 wrote: »

our main banks are, to all intents and purposes, bankrupt. There is a clawback mechanism if it results in a loss, which either FF, FG, Labour and the rest of the parties will love to activate.

And if they're still bankrupt, what do we "claw back" ?

Given that this is the second time FF have bailed out AIB, I sincerely doubt they would "love to activate" anything, and to date they have dealt with the banks as if they were doing us a favour and giving us money, rather than the other way around.

K-9

Liam Byrne wrote: »

And if they're still bankrupt, what do we "claw back" ?

Well, we've far more things to be worrying about if they are still bankrupt at the end of NAMA.

Why would they be bankrupt when the dodgy loans are removed and the bad debts will be written off in the next couple of years?

Even in the current bad times they are making an operating profit.

K-9

Liam Byrne wrote: »

And if they're still bankrupt, what do we "claw back" ?

Given that this is the second time FF have bailed out AIB, I sincerely doubt they would "love to activate" anything, and to date they have dealt with the banks as if they were doing us a favour and giving us money, rather than the other way around.

PS. Are you referring to PMPA?

Under my mature recollection, that was FG/Labour under Garrett and Dick.

Scofflaw

Liam Byrne wrote: »

That's just giving FF an "out", Scofflaw........they're the ones proposing it, and claiming that it'll do X, Y and Z.

So therefore that is the issue - whether it will do X, Y and Z - and that is how it should be measured.

If we start getting arbitrary definitions, then you'd have the equivalent of people who viewed a short-term boom as a "success", with no concept of the damage done by the crash, and often those people have vested interests; e.g. there are still those who view the Iraq war as a "success", even though it was supposed to go after Bin Laden and find WMDs and last a few months.

There seems to be something of a discrepancy between what Fianna Fáil are claiming according to posters here, and what is claimed by NAMA:

Why is the Government setting up NAMA?

The Government examined all of the potential approaches available to it in dealing with the riskiest loan portfolios on the balance sheets of Irish banks, which were preventing banks from lending into the economy and thereby supporting economic recovery. Following an examination of the options available the consensus amongst the Government’s advisors including the Central Bank, the Financial Regulator and the NTMA, was that an asset management agency approach was the best means of ensuring the stability of the financial system, the protection of depositors and ensuring that banks were freed up to lend to the real economy.

That's from the NAMA FAQ, and I suppose that's the yardstick I'd judge it against. At that, whether it's the best means of ensuring the stability of the financial system etc is obviously arguable. As to what Fianna Fáil say:

What is NAMA?

NAMA, the National Asset Management Agency is a Government agency set up to buy assets, i.e. loans, from banks. This will take the riskier loan classes away from the balance sheets of the banks and make the banks safer and more secure for depositors and investors. This is the best approach to ensure stability in our financial system and free up the banks to lend to businesses and households.

Why is NAMA Necessary?

Given asset prices are depressed, owners of these assets will not sell until prices increase in an economic recovery. However the economy will not recover unless the banks are able to lend to businesses and households once again. Banks cannot access funds to lend money given the uncertainty of the value of loans on its balance sheets. This prevents prospective buyers from entering the market with the result that asset prices remain depressed. The Government must unlock this Catch-22 situation.

The replacing of property-related loans with Government bonds will remove uncertainty about the soundness of banks’ balance sheets. This will increase their capacity to access funds in the financial markets and, if necessary, from the ECB. This response will ensure the banking system’s safety, stability and capability to lend, all of which are crucial for economic recovery.

cordially,
Scofflaw

Sand

It will, together with Recapitalisation, get lending going again,

Everyone is agreed that it wont get lending going again, from the IMF to Brian Lenihan. The banks themselves have said it will not get lending going again. In fact, they would argue it was never intended to get lending going again.

There is a clawback mechanism if it results in a loss, which either FF, FG, Labour and the rest of the parties will love to activate.

Can you reference the clawback mechanism in the NAMA legislation?

Do you think the politicians would activate the clawback mechanism if the liability forced the banks back into insolvency again? Do you think the shareholders wouldnt sue the banks for overvaluing their balance sheets if it were activated?

Heres the clawback mechanism lifted from the NAMA legislation:

Surcharge on
participating
institutions.
134
[No. 34.] National Asset Management Agency [2009.]
Act 2009.
225.—(1) In this section:
“accounting period” shall be construed in accordance with section 27
of the Taxes Consolidation Act 1997;
“surcharge” means the tax referred to in subsection (3);
“underlying loss” means the amount, if any, by which the aggregate
of losses incurred by NAMA (including NAMA group entities)
exceeds the aggregate of the profits arising to NAMA (including
those entities) in the period from the date of its establishment to the
date referred to in the direction under subsection (2) or the date of
the occurrence of the event so referred to.
(2) If—
(a) the Minister decides under section 227(3)(b) that the continuation
of NAMA is unnecessary having regard to the
purposes of this Act, the Minister shall, or
(b) (i) 10 years have elapsed since the establishment of
NAMA, or
(ii) the Minister proposes to publish or has published a
Bill for NAMA’s dissolution, restructuring or
material alteration,
the Minister may,
direct NAMA to prepare a report and accounts as at a date specified
by the Minister or as at the date of the occurrence of an event so
specified—
(I) showing the aggregate profits and losses arising to and
incurred by NAMA (including NAMA group entities),
respectively, from its activities in the period from the date
of its establishment to the date or the occurrence of the
event so specified, and
(II) duly certified by the Comptroller and Auditor General,
and NAMA shall send such report and accounts so certified to the
Minister.
(3) Where—
(a) the report and accounts sent to the Minister under subsection
(2) disclose an underlying loss has been incurred by
NAMA (including NAMA group entities), and
(b) the Minister is of the opinion that such underlying loss is
unlikely to be otherwise made good,
then the Minister may cause—
(i) a provision to be included in a Money Bill, or
(ii) a provision to like effect to be included in any other Bill
initiated in Dáil Éireann,
[2009.] National Asset Management Agency [No. 34.]
Act 2009.
providing for the imposition of a special tax by way of a surcharge
on participating institutions in accordance with subsection (4).
(4) The aggregate tax by way of a surcharge to be imposed on
participating institutions on their respective profits (within the meaning
of section 4 of the Taxes Consolidation Act, 1997) if any—
(a) shall not exceed the amount of the underlying loss, if any,
incurred by NAMA (including NAMA group entities),
(b) shall be apportioned to each participating institution on
the basis of the book value of the bank assets acquired
from each participating institution concerned as a proportion
of the total book value of the bank assets
acquired from all of the participating institutions,
and the surcharge so apportioned shall be imposed on each institution
accordingly and paid by each of them over such period and at
such times as provided for by the subsequent Act giving effect to this
section and to which subsection (3) relates.
(5) Any surcharge due to be paid by a participating institution in
accordance with subsection (4) may not exceed 100 per cent of the
corporation tax, if any, due and payable by that participating institution
for the accounting period or periods as the case may be, falling
within the period referred to in that subsection.
(6) No surcharge shall become payable until either—
(a) 10 years after the passing of this Act, or
(b) NAMA is dissolved or restructured, or there is a material
alteration of NAMA’s functions,
whichever last occurs.

Yeah, looks bulletproof doesnt it.

Its so full of holes and caveats you could run a marching band through it. There is absolutely no compulsion there for the government to recover losses, and having gone to the bother of propping the banks up, they arent going to knock them down all over again.

Its probably worth citing the reason they didnt want to put in any clawback mechanism in the first place:

Mr. Brendan McDonagh:

If there was a clawback within the NAMA legislation affecting the balance sheets of the banks, they would not be able to reduce the assets transferred to NAMA because effectively there would be an unpriced option in terms of what the clawback would be in the future. One cannot do this because it would not be possible to take risk weighted assets off the balance sheets of the banks if the levy was imposed in the NAMA legislation

Deputy Joan Burton: That is another critical valuation issue because the Minister has just said he has a guaranteed fail-safe device — a clawback in the event of the assets not realising whatever the taxpayer takes. Mr. McDonagh is actually saying — I accept what he is saying — that in fact that would be almost legally impossible because of the long-term impact on the balance sheets of the banks, assuming they remained quoted companies but the Minister is directly contradicting this.

Mr. Brendan McDonagh: What I am saying is entirely consistent with what the Minister is saying. I am saying the Government has many mechanisms under which to impose a levy on financial institutions. However, because the extent of the levy will not be determined until NAMA completes its work in, say, ten years time, it will only be then that we will work out the appropriate levy for each individual institution. We will be able to work out what the assets of each individual institution realised and work out fairly the appropriate levy to be applied to the institution at that stage.

Deputy Joan Burton: Presumably, if they are not nationalised by then, the banks will still be independently quoted or if they had been nationalised, they would have been refloated. Mr. McDonagh is saying there will still be a contingent liability which will remain unpriced for a period of at least ten years and that this contingent liability will relate to the €60 billion to €90 billion discounted on values that we do not yet know. How would any financial analyst decide to exclude this for a period of ten years from the liabilities of such a company?.

Yet NAMA proceeds despite McDonagh saying it would be impossible to do so with a levy in place. By all probability neither the banks nor the designers of NAMA considered the above mechanism to be a credible levy. Lets not forget, one of NAMAs board members praised the legislation for being "masterfully vague".

Why would they be bankrupt when the dodgy loans are removed and the bad debts will be written off in the next couple of years?

450K unemployed, 100% mortgages, negative equity, a lending culture where a person on a 50K salary could buy 8 rental properties on credit from a variet of banks...are you discounting the possibility of them making losses on their residential mortgages in the aftermath of a property bubble at all?
@Scofflaw

That's from the NAMA FAQ, and I suppose that's the yardstick I'd judge it against. At that, whether it's the best means of ensuring the stability of the financial system etc is obviously arguable.

How do you rationalise NAMAs claimed aim with the rescue of Anglo Irish which is not a systematic bank?

K-9

Sand wrote: »

Everyone is agreed that it wont get lending going again, from the IMF to Brian Lenihan. The banks themselves have said it will not get lending going again. In fact, they would argue it was never intended to get lending going again.

SAND, WHO are you arguing with here? Who are you debating with? Everybody knows this.

Sand wrote:

Can you reference the clawback mechanism in the NAMA legislation?

Do you think the politicians would activate the clawback mechanism if the liability forced the banks back into insolvency again? Do you think the shareholders wouldnt sue the banks for overvaluing their balance sheets if it were activated?

Heres the clawback mechanism lifted from the NAMA legislation:



Yeah, looks bulletproof doesnt it.

Its so full of holes and caveats you could run a marching band through it. There is absolutely no compulsion there for the government to recover losses, and having gone to the bother of propping the banks up, they arent going to knock them down all over again.

Its probably worth citing the reason they didnt want to put in any clawback mechanism in the first place:

Mr. Brendan McDonagh:


Yet NAMA proceeds despite McDonagh saying it would be impossible to do so with a levy in place. By all probability neither the banks nor the designers of NAMA considered the above mechanism to be a credible levy. Lets not forget, one of NAMAs board members praised the legislation for being "masterfully vague".



450K unemployed, 100% mortgages, negative equity, a lending culture where a person on a 50K salary could buy 8 rental properties on credit from a variet of banks...are you discounting the possibility of them making losses on their residential mortgages in the aftermath of a property bubble at all?
@Scofflaw


How do you rationalise NAMAs claimed aim with the rescue of Anglo Irish which is not a systematic bank?

This has been gone through already on this thread and others.

K-9

Sand if there is no clawback, we are fecked and NAMA is the least of our worries.

Same as if we'd Nationalised, Nationalisation is the least of our worries.

If what you say is true, we are truely fecked, NAMA, Nationalisation or let the Banks fail!

Scofflaw

How do you rationalise NAMAs claimed aim with the rescue of Anglo Irish which is not a systematic bank?

I've always assumed that Anglo was rescued because it was the bank of the Irish golden circles and friends of Fianna Fáil - if you like, that its clients were too big for it to fail - although I admit to not having subjected that assumption to particularly critical analysis. Why?

cordially,
Scofflaw

P. Breathnach

Scofflaw wrote: »

I've always assumed that Anglo was rescued because it was the bank of the Irish golden circles and friends of Fianna Fáil - if you like, that its clients were too big for it to fail - although I admit to not having subjected that assumption to particularly critical analysis.

The decision to rescue Anglo was made in great haste in a crisis situation -- not the sort of circumstance in which the best decisions are likely to be made.

I'm inclined towards a more charitable interpretation than Scofflaw's: that when the problem was presented to the government, there wasn't enough time to make a full appraisal of the likely consequences of Anglo failing, but that it seemed likely that if it failed, it would bring the other banks down with it (it was systemic at least in the sense that it was big enough to bring down the system).

Sand

SAND, WHO are you arguing with here? Who are you debating with? Everybody knows this.

You claim it will get lending going again. Everyone, including yourself, claims it wont. Resolve the paradox.

This has been gone through already on this thread and others.

No it hasnt, instead the response has been something like:

Sand if there is no clawback, we are fecked and NAMA is the least of our worries.

Same as if we'd Nationalised, Nationalisation is the least of our worries.

If what you say is true, we are truely fecked, NAMA, Nationalisation or let the Banks fail!

Which isnt an argument, either for NAMA or against the flaws I have highlighted. Again, I am hoping someone can make an argument for NAMA which doesnt rely on claims that

1 - It will get lending restarted...it wont.
2 - The taxpayer cant lose because we'll just get the money back from the banks - no one considers that at all credible. The designers of NAMA have gone on the record as saying NAMA couldnt proceed if there was a levy mechanism.

@Scofflaw

I've always assumed that Anglo was rescued because it was the bank of the Irish golden circles and friends of Fianna Fáil - if you like, that its clients were too big for it to fail - although I admit to not having subjected that assumption to particularly critical analysis. Why?

Theres a view put forward that NAMA is needed to save the Irish banking system...I think this is confusing the institutions with the function but whatever.

What yardstick would you measure NAMA against regarding its dealings with NAMA seeing as Anglo is not a systematically important bank? If you think it was propped up because its clients were considered too big to fail, do you consider those clients will be pushed to repay their loans on a neutral, calculating basis?