Surprise, surprise ...NAMA losing (more) money already

peasant

Brendan McDonagh, chief executive of Nama, told an Oireachtas committee that this would mean borrowers are paying interest on €27 billion of the €81 billion in loans to be purchased and not €32 billion as previously estimated.

http://www.irishtimes.com/newspaper/breaking/2010/0414/breaking16.html

Ah, what's another 5 billion among friends, eyh?

Seriously ..what kind of black hole have we gotten ourselves into here/
Is there any realistic expectation out there for this whole thing to actually make a profit?

PeakOutput

peasant wrote: »

Is there any realistic expectation out there for this whole thing to actually make a profit?

its not meant to make a profit or even break even do you not understand this yet? really??

SkepticOne

This would be “a shock” to many people, said Fianna Fáil TD Michael McGrath, who chaired the hearing.

Only a shock to those who believed the stuff put out by Michael McGrath's party about NAMA.

Nody

SkepticOne wrote: »

Only a shock to those who believed the stuff put out by Michael McGrath's party about NAMA.

We should simply add "Creative accounting 101" to all basic economy courses at University going forward; it appears to be a mandatory skill for any future government accountants.

Liam Byrne

PeakOutput wrote: »

its not meant to make a profit or even break even do you not understand this yet? really??

We were told (lied to) that it would.

PeakOutput

Liam Byrne wrote: »

We were told (lied to) that it would.

it sure might but thats not its aim its just an easy target for the naysayers

edit; you need to take the anti- ff blinders off for a second and ignore their spin and bull****(there is alot) nama should be debated about on its actual merits and problems only not about what the politicians waffle on about it as they cant be trusted

Liam Byrne

PeakOutput wrote: »

it sure might but thats not its aim its just an easy target for the naysayers

Irrelevant. We were told that it would.

Liars get what they deserve - ridicule.

Let me ask you this.....if someone sold you a grossly-overpriced lawnmower having convinced you that it would also vacuum your house, would you judge it on its lawnmowing capabilities or complain that it couldn't vacuum ?

PeakOutput wrote: »

nama should be debated about on its actual merits and problems only not about what the politicians waffle on about it as they cant be trusted

That's their fault, not ours. And the first way to fix that is for them not to lie.

We were told by FF that it would break even and probably make a profit. FACT.

If FF lied about that, then there's no "anti-FF blinkers" required to acknowledge that, so please avoid strawmanning.

And if they lied about that, what else are they lying about ?

Lies aside, NAMA relies on - at least partially - re-inflating the bubble and is now talking about demolishing houses rather than selling them at current market value; that is a disgrace and is robbing ordinary citizens in order to keep a false economy going and ensure that people are paying higher mortgages to a bank.

RichardAnd

Liam Byrne wrote: »

And if they lied about that, what else are they lying about ?

Most likely a hell of alot. But guess what, FG are lying too, so are labour and so are the greens. Even Mr Obama told a few in his time and why? Because politics is the profession of lying.

But let's be fair for a moment. The lies and cheating in this country is not restricted to the men at the top. The level of dishonesty in Ireland today is sickening when you look at it. Money isn't the only thing we're short on, honour seems to be lacking too.

woodseb

Liam Byrne wrote: »

Irrelevant. We were told that it would.

Liars get what they deserve - ridicule.

Let me ask you this.....if someone sold you a grossly-overpriced lawnmower having convinced you that it would also vacuum your house, would you judge it on its lawnmowing capabilities or complain that it couldn't vacuum ?

you know what? i'd also ridicule the person who bought this lawnmower - most people would have looked at the lawnmower objectively themselves to see if it could actually perform the promised feat - caveat emptor

Liam Byrne wrote: »

Lies aside, NAMA relies on - at least partially - re-inflating the bubble and is now talking about demolishing houses rather than selling them at current market value; that is a disgrace and is robbing ordinary citizens in order to keep a false economy going and ensure that people are paying higher mortgages to a bank.

they are only talking about demolishing unfinished estates, not houses that could actually be sold.....

Mr McDonagh warned that Nama may be forced to knock down unfinished property developments outside Dublin. “This will incur costs, but unfortunately there is no avoiding this,” he said. The agency may consider paying for the completion of some housing estates if it brought a higher return, he said, or if it addressed health and safety issues.

“We can all see land and half-built developments which should never have been contemplated as it is hard for anyone with an objective view to see how they made sense even at the top of an over-heated market,” he said.

Mr McDonagh warned that Nama would not provide loans to complete half-built developments just for the sake of it but would take “a strictly commercial view”.

Liam Byrne

woodseb wrote: »

you know what? i'd also ridicule the person who bought this lawnmower - most people would have looked at the lawnmower objectively themselves to see if it could actually perform the promised feat - caveat emptor

Many of us did, and pointed out the fact that it wouldn't make money, and were ridiculed or told that we weren't being "objective".

woodseb

Liam Byrne wrote: »

Many of us did, and pointed out the fact that it wouldn't make money, and were ridiculed or told that we weren't being "objective".

i said it myself that it is likely that NAMA will make a loss - i guess the question that we have to decide among ourselves is the possible size of the loss and whether a certain level of losses may be a price worth paying?

jmayo

SkepticOne wrote: »

Only a shock to those who believed the stuff put out by Michael McGrath's party about NAMA.

Oh I know how he could be shocked alright.

PeakOutput wrote: »

it sure might but thats not its aim its just an easy target for the naysayers

edit; you need to take the anti- ff blinders off for a second and ignore their spin and bull****(there is alot) nama should be debated about on its actual merits and problems only not about what the politicians waffle on about it as they cant be trusted

So tell us about it's merits.

As we were told they included:
a) it would help get lending to business going again.
No it won't as has being admitted

b) it would break even or make a small profit.
Not unless we have bubble part II

c) the loans they bought would include a small proportion of bad loans, they others would be serviced.
Less than 40% of loans in first tranche are being serviced AFAIK.

d) loans that were in default NAMA would chase the borrowers for outstanding amounts.
Well looking at how the borrowers i.e. the developers have for the last two years being siphoning assets off to spouses and family members, it remains to be seen how this little merit will work out.

EDIT: if they knock down unfinished estates/properties what will the land be sold as ?
If agricultural then you could be looking at max 10,000 an acre.
Remember the land could have been bought at 500,000 an acre if for multiple housing development.
That is one almighty drop in value.
Factor in cost of demolition, administration and legal fees means that 10,000 an acre will not even cover cost of demolition and resale.

PeakOutput

jmayo wrote: »

So tell us about it's merits.

it will probably save the economy i dont care if you believe it or not im not here to persuade you otherwise

what im saying is ff are gone in the next election because of their constant lieing and bull**** over the last however many years nama is here to stay long into the future

so arguing that its bad because ff lied is ridicolous. weather or not it will or wont make a profit and weather or not they lied to us about that is irrelevant the actions still needed to be taken in an effort to save the economy and weather it does or not has nothing to do with it making a profit

Stabshauptmann

peasant wrote: »

http://www.irishtimes.com/newspaper/breaking/2010/0414/breaking16.html

Ah, what's another 5 billion among friends, eyh?

Seriously ..what kind of black hole have we gotten ourselves into here/
Is there any realistic expectation out there for this whole thing to actually make a profit?

The title of this thread, and the quote from the IT are quite misleading. Yes the loans in Tranche 1 are not of the quality expected; but NAMA is paying a LOT less for them than originally estimated as a result!

The original estimate was that loans would be acquired for approx 65% of their book value. Loans acquired to date have been for 53% of their book value.

To be honest its not the type of reporting I would have expected from the IT to leave out this very important other side of the sea-saw.

Liam Byrne

PeakOutput wrote: »

it will probably save the economy i dont care if you believe it or not im not here to persuade you otherwise

so arguing that its bad because ff lied is ridicolous. weather or not it will or wont make a profit and weather or not they lied to us about that is irrelevant the actions still needed to be taken in an effort to save the economy and weather it does or not has nothing to do with it making a profit

No-one's arguing that it's bad on that basis.

You said yourself that it will "probably" save the economy. I'd disagree, and say that it might, with a lot of luck, help save the economy.

But it's far too much of a gamble; almost like putting the entire tax take on a 50/50 bet.....if it works, then you're sorted, but if not, you're screwed.

Even if I believed it, "probably" isn't strong enough.

And it also depends on prices "recovering" to unrealistic and uncompetitive levels.

PeakOutput

Liam Byrne wrote: »

No-one's arguing that it's bad on that basis.

You said yourself that it will "probably" save the economy. I'd disagree, and say that it might, with a lot of luck, help save the economy.

But it's far too much of a gamble; almost like putting the entire tax take on a 50/50 bet.....if it works, then you're sorted, but if not, you're screwed.

every solution is a gamble there is no guaranteed solution

And it also depends on prices "recovering" to unrealistic and uncompetitive levels.

no it dosnt the house prices are irrelevant the important thing is the banks start operating properly again (under stricter regulation)

Zynks

PeakOutput wrote: »

no it dosnt the house prices are irrelevant the important thing is the banks start operating properly again (under stricter regulation)

Why does nobody seem to consider the possibility of opening the market for foreign banks? Even if some 'sweeteners' need to be offered. After all, there is a lot of business up for grabs which 'our' banks can't handle, and probably won't be able to handle for another year, at least.

PeakOutput

Zynks wrote: »

Why does nobody seem to consider the possibility of opening the market for foreign banks? Even if some 'sweeteners' need to be offered. After all, there is a lot of business up for grabs which 'our' banks can't handle, and probably won't be able to handle for another year, at least.

the foreign banks have pulled out they dont seem to think its worth it here

either way the foreign banks are free to operate here if they think its worth it

maybe there should be sweeteners offered as well but getting them to come is a long term process the banks we have right now still need to be saved

ei.sdraob

PeakOutput wrote: »

the foreign banks have pulled out they dont seem to think its worth it here

of course its not worth being here

would you stick around and do business when your competitors are gaining an unfair advantage with the state pumping money into them instead of letting them fail and you take over

would you stick around and do business when the country is full of cowboys and corruption

Stabshauptmann

ei.sdraob wrote: »

of course its not worth being here

would you stick around and do business when your competitors are gaining an unfair advantage with the state pumping money into them instead of letting them fail and you take over

would you stick around and do business when the country is full of cowboys and corruption

Funny, the EC doesnt think it breaches any competition rules. But then again I suppose ignorant online punters would know far more about these type of things than the EC...

ei.sdraob

Stabshauptmann wrote: »

Funny, the EC doesnt think it breaches any competition rules. But then again I suppose ignorant online punters would know far more about these type of things than the EC...

they might yet be challenged in court over unfrair competition, dont count your pennies yet

you can bet their decision was political and influenced from the top not by whether it was competitive or not, because other banks had to be taken over in other countries, if they prevented one they would have prevented them all plunging the EU into a crisis of confusion

ei.sdraob

http://www.irishexaminer.com/ireland/eu-inquiry-into-states-euro14bn-funding-of-nationalised-bank-116070.html

Competition Commissioner Joaquin Almunia said both Anglo and INBS need significant recapitalisation. "The measures are also necessary to preserve financial stability in Ireland. However, INBS needs to establish a viable restructuring plan and Anglo Irish Bank has to restructure profoundly in a way that effectively tackles the weaknesses of the past business model and ensures a sustainable future without continued state support."

A commission expert said they need to be convinced that there is not a cheaper or less distorting option to giving the additional funds to Anglo. Asked if they would recommend that the bank be wound up, he said they were still looking at it from the point of view of restructuring.

they are worried about competition and are investigating Anglo

so once again, dont count your pennies, they might not like what they see especially in relation to Anglo

MaceFace

Wow, another NAMA bashing thread. There is a surprise.

How about someone change the record and suggest alternatives?

The only one I can see is that we stop all transfers of loans from Anglo and once the guarantee runs out, we let the whole thing go. The problem with that is there are a lot of people who have money on deposit there that will lose a fortune, and before you say tough, your money could be on deposit there through your company deposits, pension scheme, health insurance (where does Quinn keep that €1b cash reserves?), or even through 5 year savings schemes that you locked into before the bust.

As I have said before, NAMA is a good idea. The only problem is what price we pay for the loans transferred. The bigger the discount, the more recapitalisation required.

I am quite confident that in the end, NAMA will end up costing us very little, because whatever loses we have in the short term will be recouped in the long term through levys. The only question is if we can survive the crisis.

Finally, I don't buy for a second that FF are bailing out their mates or even deliberately telling us lies (apart from very white ones which they may feel they have to).
For anyone to suggest that FF are helping their mates from the Galway tent, explain to me what is in it for them? What does Lenny get out of it personally?

SkepticOne

MaceFace wrote: »

How about someone change the record and suggest alternatives?

Maybe do a search of the forum where alternatives (most of them better than the current NAMA, imo) were discussed.

Liam Byrne

MaceFace wrote: »

As I have said before, NAMA is a good idea. The only problem is what price we pay for the loans transferred. The bigger the discount, the more recapitalisation required.

In other words, we pay either way.

MaceFace wrote: »

I am quite confident that in the end, NAMA will end up costing us very little, because whatever loses we have in the short term will be recouped in the long term through levys.

Levying the banks that we've subsidised ? i.e. recouping "our money" by recouping "our money" ? Doesn't sounds

MaceFace wrote: »

Finally, I don't buy for a second that FF are bailing out their mates or even deliberately telling us lies (apart from very white ones which they may feel they have to).

Absolute bull, IMHO. Show me a lie related to NAMA that's "a very white one" and show me why they "have to".

MaceFace wrote: »

For anyone to suggest that FF are helping their mates from the Galway tent, explain to me what is in it for them? What does Lenny get out of it personally?

"Lenny" :rolleyes:

You don't need to get something personally in order for it to help your mates, so this is strawmanning.

alias141282

Anyone see the Vincent Browne show last night on TV3? A few economists on there were saying that AIB and BoI would end up needing a lot more money than Lenihan was saying and that Nama would cost a lot more as well.

Plus the mortgage debt problems coming down the line?

beeno67

Liam Byrne wrote: »

And it also depends on prices "recovering" to unrealistic and uncompetitive levels.

It depends on what you call unrealistic and uncompetetive levels. To make a profit prices have to rise 10% from now over next 10 years. This is assuming all property is kept for 10 years. Obviously you have to add to this running costs and interest but also take into account interest received.

On the point of the banks needing further refinancing due to the low amount NAMA is paying for the loans, the financial regulator said yesterday that it was unlikely they would need this.

ei.sdraob

beeno67 wrote: »

It depends on what you call unrealistic and uncompetetive levels. To make a profit prices have to rise 10% from now over next 10 years. This is assuming all property is kept for 10 years. Obviously you have to add to this running costs and interest but also take into account interest received.

On the point of the banks needing further refinancing due to the low amount NAMA is paying for the loans, the financial regulator said yesterday that it was unlikely they would need this.

that (bold bit) is a lie and has been shown to be a lie many time on this forum and by various economists

the figure is ~25% from november 2009 level, as that date is now set in stone by NAMA

beeno67

ei.sdraob wrote: »

that (bold bit) is a lie and has been shown to be a lie many time on this forum and by various economists

the figure is ~25% from november 2009 level, as that date is now set in stone by NAMA

No you mean 10% from Nov 2009.

ei.sdraob

beeno67 wrote: »

No you mean 10% from Nov 2009.

nope 20 to 25% from november 2009, dont forget prices have fallen since and are still falling, never mind rising

this has been discussed to death on this forum

beeno67

ei.sdraob wrote: »

nope 20 to 25% from november 2009, dont forget prices have fallen since and are still falling, never mind rising

this has been discussed to death on this forum

Why does it matter if prices have fallen since? If prices fell 80% since Nov 30th they would still only have to rise 10% from the valuation date.

MaceFace

Liam Byrne wrote: »

In other words, we pay either way.

Yes - recapitalisation & NAMA - Hansel & Gretel.

Liam Byrne wrote: »

Levying the banks that we've subsidised ? i.e. recouping "our money" by recouping "our money" ? Doesn't sounds

I am thinking more of the lines that the banks will be hit with levies once they get back on proper footing and this will impact share price, but I would expect that once everything gets worked out (assuming it will), we will be looking the share price on multiples of what we paid for it. So, the levy will come out of operating profits rather than diluting our share holding.

Liam Byrne wrote: »

Absolute bull, IMHO. Show me a lie related to NAMA that's "a very white one" and show me why they "have to".

Well, an example may be the haircut that was going to be applied. He was asked what it was likely to be and he gave a suggestion of 30%. I think he knew very well that it would be considerably more (as it has shown) but if he was honest back when he mentioned 30% and said it would be more like 40% for AIB, the bank would have come under a lot more pressure than it has since.
Another one is a few weeks ago when when we expected AIB to go under 70% state ownership but Lenny :P held off and said they may not need any more money. That gives confidence to the market and makes bonds issues cheaper. I fully expect AIB to require more recapitalisation.

Liam Byrne wrote: »

"Lenny" :rolleyes:

You don't need to get something personally in order for it to help your mates, so this is strawmanning.

Strawman? Not at all. It is crucial to understand the motivation of the actions to know whether the intentions are good or bad.

Seriously, the idea that Cowen or Lenihan will destroy their reputation and forever be known as the people who crippled Ireland for decades just to do their mates a favour is ludicrous.
If this thing goes belly up as many here think it will, then the current crop of ministers will be treated in much the same way as David Drumm who had to emigrate. It just doesn't make sense that they risk so much just to help a mate stay rich.
If they were benefitting through brown envelopes or powerful jobs somewhere, then maybe, but not just to do a favour.

alias141282 wrote: »

Anyone see the Vincent Browne show last night on TV3? A few economists on there were saying that AIB and BoI would end up needing a lot more money than Lenihan was saying and that Nama would cost a lot more as well.

Plus the mortgage debt problems coming down the line?

And I think Lenihan does know how much this may cost and the risks involved, but if he came out and said it, the potential public hysteria would make what he thinks is the least worst solution a no-goer.

SkepticOne wrote: »

Maybe do a search of the forum where alternatives (most of them better than the current NAMA, imo) were discussed.

I have been involved in many of those threads, and like other threads, none of them stack up to criticism. Maybe you would like to point me to one?
It is no different than the PS workers banging on about how their wages should not be cut. WAWWA and TINA apply to both and if more effort was put into discussing what we can do now rather than complaining about something that is already done, we might get somewhere.

Actually, I wonder if this is something bigger. Like many others, I don't know why we have not being out on the streets demonstrating. I would be leading those parades if there was something I actually believed in.
Like, why have their been no threads or conversations about the government taking over Irish Nationwide. We only took this over a couple of weeks back, but why did we do that? Why was this forum not full of posters demanding that we don't take it over?

It just seems like we are too interested in moaning about things rather than actually coming up with ideas that we can rally around and get support on. At least then, those in power will be challenged on the descisions they are making, not the ones that were made already.

ei.sdraob

beeno67 wrote: »

Why does it matter if prices have fallen since? If prices fell 80% since Nov 30th they would still only have to rise 10% from the valuation date.

aghgh

look at the graph, the figure was 20% in november 2009 (not 10%)
so thats 20% from november 2009, about 25% from today

ei.sdraob

back on topic of unfair competition

http://trueeconomics.blogspot.com/2010/04/economics-12042010-namas-economic.html

Posted by Dr. Constantin Gurdgiev

An interesting quote from the just-published paper (Claessens, Stijn, Dell’Ariccia, Giovanni, Igan, Deniz and Laeven, Luc A., Cross-Country Experiences and Policy Implications from the Global Financial Crisis. Economic Policy, Vol. 25, Issue 62, pp. 267-293, April 2010). I reported on this paper last year at length, when it was still an IMF Working Paper.

“An example of distortions between financial institutions and the fiscal conditions is the extension of guarantees in the case of Ireland to the largest banks. Prior to the extension of guarantees, the CDS-spreads for the large Irish commercial banks were very high. Post guarantees, bank CDS-spreads declined sharply, while the sovereign spread increased. Measures like these, now numerous in many advanced countries today, distort asset prices and financial flows.”

This goes hand-in-hand with the EU assessment of Nama as a market distorting mechanism, which, as reported last week by Irish Independent, was concealed from the public when our Minister for Finance issued a press release claiming that Nama was fully supported by the EU Commission

beeno67

ei.sdraob wrote: »

aghgh

look at the graph, the figure was 20% in november 2009 (not 10%)
so thats 20% from november 2009, about 25% from today

Sorry don't see the graph showing that. NAMA says valuation are based on valuation Nov 30th plus 10% but you are saying that it should be Nov 30th valuation plus 20%. Perhaps you could explain it rather than use the graph.

MaceFace

ei.sdraob wrote: »

back on topic of unfair competition

http://trueeconomics.blogspot.com/2010/04/economics-12042010-namas-economic.html

Market distortion is different than unfair competition.
Any bank based in Ireland could have, and probably still can join NAMA. It is an equal opportunity bailout.

I do not believe that foreign banks are put off operating here because of the bailout. After all, we have a number of foreign banks operating here that could upscale pretty quickly if they so choose, but they never have and I don't think that it is down to the bailout, but rather that the market here is too small for them and the risks here are too great for any potential reward.

I would bet that if Santander or Danske (using these name) opened a few hundred new branches and well all out, it would be very difficult for them to persuade people to join them, because Mary and Joe are quite happy to stick to the Irish that they know rather than go with those foreign banks they never heard of.

Would be interesting if someone had some stats on how many customers Halifax had and what kind of growth they were seeing prior to them announcing the pullout.

ei.sdraob

MaceFace wrote: »

Market distortion is different than unfair competition.
Any bank based in Ireland could have, and probably still can join NAMA. It is an equal opportunity bailout.

I do not believe that foreign banks are put off operating here because of the bailout. After all, we have a number of foreign banks operating here that could upscale pretty quickly if they so choose, but they never have and I don't think that it is down to the bailout, but rather that the market here is too small for them and the risks here are too great for any potential reward.

I would bet that if Santander or Danske (using these name) opened a few hundred new branches and well all out, it would be very difficult for them to persuade people to join them, because Mary and Joe are quite happy to stick to the Irish that they know rather than go with those foreign banks they never heard of.

Would be interesting if someone had some stats on how many customers Halifax had and what kind of growth they were seeing prior to them announcing the pullout.

I dunno Rabo/ACC are doing rather well and are cleaning up in the savings aector, they would not wont to get involved in NAMA since that would impact them negatively, they instead went by the court route to get their money given to Liam

Postbank tried to expand and did quickly, but then their parent bank had to be nationalised by Belgians and Postbank eventualy sold to BNP Paribas who think Ireland is a basket case and are pulling out now

"the unprecedented circumstances in which the financial services sector finds itself, the highly competitive savings market within Ireland and the absence of a perspective of profitability in current market circumstances."

and lets not forget Halifax...



as I mentioned in a post before why doesnt the government try to sell Anglo to a foreign bank, the bank will know they are taking on a **** bank and all the toxic crap with it,
but the government could do what they do best and give all sorts of tax consessions, like exempt the buyer from corpo tax for X years, the buyer can then recoup the losses by using Ireland as low tax heaven, something weve been doing for a long time anyways

Liam Byrne

MaceFace wrote: »

Seriously, the idea that Cowen or Lenihan will destroy their reputation and forever be known as the people who crippled Ireland for decades just to do their mates a favour is ludicrous.

WHAT "reputation" ? Cowen presided over the creation of this mess as Min for Fin, and Lenihan stuck a millstone around our neck with the guarantee.

MaceFace wrote: »

If they were benefitting through brown envelopes or powerful jobs somewhere, then maybe, but not just to do a favour.

Lets just say that I won't be surprised if there are some job appointments available to them somewhere down the line.

MaceFace wrote: »

And I think Lenihan does know how much this may cost and the risks involved, but if he came out and said it, the potential public hysteria would make what he thinks is the least worst solution a no-goer.

Why are you phrasing it as "public hysteria" ? Why not say "public outcry" ?

MaceFace wrote: »

It just seems like we are too interested in moaning about things rather than actually coming up with ideas that we can rally around and get support on. At least then, those in power will be challenged on the descisions they are making, not the ones that were made already.

There were plenty of ideas put forward, but we were told that "NAMA is the only show in town", and then (when the **** started to hit the fan) "it's too late to change from NAMA, it would delay our recovery".

NAMA does not add up.......yes, maybe Lenihan knows something we don't (an asteroid about to hit the earth, making the debt irrelevant by the time our children need to pay it ?) but he should stop lying and tell it like it is and let us make a fully informed decision.

That's what LEADERS do. They SELL an idea (assuming, that is, that it's sellable).

At this stage FF are like the boy who cried wolf.

Liam Byrne

ei.sdraob wrote: »

they instead went by the court route to get their money given to Liam

Can I just clarify that this post isn't about me ?

beeno67

beeno67 wrote: »

Sorry don't see the graph showing that. NAMA says valuation are based on valuation Nov 30th plus 10% but you are saying that it should be Nov 30th valuation plus 20%. Perhaps you could explain it rather than use the graph.

Sorry ei.sdraob but I really don't understand your point. Perhaps you could explain it.

Stabshauptmann

ei.sdraob wrote: »

http://www.irishexaminer.com/ireland/eu-inquiry-into-states-euro14bn-funding-of-nationalised-bank-116070.html



they are worried about competition and are investigating Anglo

so once again, dont count your pennies, they might not like what they see especially in relation to Anglo

You, like countless other punters, do not understand what is going on re: the banks. The quote you highlighted refers to pumping capital into Anglo, a nationalised bank. It in no way can be construed to be an attack on NAMA as being anti-competitive.


There is a three pronged approach to dealing with the banking crisis.

I. The guarentee
Aim: To tackle the immediate liquidity problem facing Irish banks

- at a time when banks were failing left right and centre because they couldnt access short term funding / inter bank lending the gov guaranteed Irish banks.
- this meant that people were comfortable lending to irish banks and this kept them afloat
- a big gamble / bluff, because the state could never have afforded to pay the full guarantee if it had to that seems to have worked


II. Recapitalisation
Aim: Banks must hold a certain ratio of assets to liabilities. The state invested money into Irish banks to ensure they maintained this ratio.

- Much of Irish banking had centered on land and property related loans and these loans are less valuable when the borrowers get into difficulty (less chance of being repaid on time and in full).
- The State has invested in bonds & shares in these banks
- If the banks recover the government can sell its investment in these banks


III. NAMA
Aim: To price with certainty the balance sheets of the participating institutions.

- When the guarentee runs out investors will need something else to give them comfort that investing in Irish banks is a safe decision. The problem is its hard to know what their assets are worth because of the uncertainty surrounding land and property
- NAMA will attribute a value to property and land related loan assets and acquire these loan assets from the banks in return for Gov bonds.
- This value is derived at using a formula approved by the EC
- Gov bonds are the best "quality" of asset and can be repo'd with the ECB for cash to provide liquidity
- The flip side is that when the banks balance sheets are cleansed of uncertainty they may very well no longer meet their required capital ratio. It is hoped that banks will be able to source capital privately on the stock market and bond market since there balance sheets can be valued accurately; but if they cant the gov. has pledged to invest further capital.