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NAMA won't recoup as much money for taxpayer as originally claimed

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  • Closed Accounts Posts: 595 ✭✭✭George Orwell 1982


    No great suprise really. For me, the most memorable image from Morgan Kelly’s Irish Times pieces, was in December 2008, when he suggested the first State investment of €1.5 billion in the builder’s bank Anglo, might as well be incinerated on St. Stephens Green - - and that was only €1.5 billion!

    http://www.irishtimes.com/newspaper/opinion/2008/1223/1229728473144.html

    Then, given lending of about €80 billion to developers, it follows that Anglo Irish is facing losses on the order of €15 billion. The true figure could easily turn out to be twice as large.
    With likely losses of this magnitude, the Government’s proposed investment of €1.5 billion will vaporise in months, forcing it either to continue pouring good money after bad, or to repudiate Anglo Irish’s liabilities. For all it will achieve, the money might as well be piled up in St Stephen’s Green and incinerated.
    Anglo Irish epitomised the Irish bubble economy. Its rise began a decade ago as the boom created a demand for houses and commercial property.
    As prices started to rise, banks made a miraculous discovery: the more they lent, the more prices rose; and the more prices rose, the more people wanted loans to get into the booming market. And the more loans that bankers made, the bigger the bonuses they could award themselves.
    It was brilliant while it lasted. One of Bank of Ireland’s stable of developers would buy an office block for €100 million, and sell it on a year later to one of Anglo’s for €120 million, and so on: a process known to bankers as adding value.
    Everyone was a genius and nobody could lose.


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    Some of us believed this from day one, but were shouted down, even right here on boards.

    I wonder where those same NAMA apologists and yes-men are now ?

    And I wonder whether FF will be quizzed on this on TV ?

    Because it certainly blows their whole "we're unpopular because we're doing the right things" lie out of the water.

    How do Lenihan & Cowen sleep at night, having thrown away our cash on NAMA & Anglo ?

    * Not that I give a damn about their wellbeing, mind; they obviously don't care about mine, or my ability to pay my way and survive, so I'll return the favour in that regard


  • Registered Users, Registered Users 2 Posts: 802 ✭✭✭Scarab80


    Jesus, did any of ye actually read the article??
    NAMA has told the Department of Finance in a new business plan it will not recoup the €4.8bn for the taxpayer it envisaged in its original forecasts published last year.



    Political sources said while last year's business plan included an estimate of being able to return €4.8bn some time after 2020 when NAMA finishes its work, the number of performing Irish loans has deteriorated further, putting this at risk. However, the plan still envisages a profit for the agency and any loss will be recovered by a levy on the banks.


  • Registered Users, Registered Users 2 Posts: 3,412 ✭✭✭oceanclub


    Scarab80 wrote: »
    Jesus, did any of ye actually read the article??

    So they're already €5bn out only a year after their estimate, but it'll be grand. *handwave* Trust us.

    Jesus, how gullible are you?

    P.


  • Registered Users, Registered Users 2 Posts: 3,095 ✭✭✭ANXIOUS


    I think people should give Nama more than 12mths, before we start judging it. Nama can't lose money people forget that any loss made by Nama will be re-couped by a bank levy.


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  • Registered Users, Registered Users 2 Posts: 3,095 ✭✭✭ANXIOUS


    oceanclub wrote: »
    So they're already €5bn out only a year after their estimate, but it'll be grand. *handwave* Trust us.

    Jesus, how gullible are you?

    P.

    You obviously didn't read the article, that money is not meant to be paid back for another ten years. They are just revising it.


  • Registered Users, Registered Users 2 Posts: 3,412 ✭✭✭oceanclub


    ANXIOUS wrote: »
    I think people should give Nama more than 12mths, before we start judging it. Nama can't lose money people forget that any loss made by Nama will be re-couped by a bank levy.

    Pardon me for disagreeing with someone who trumpets the .sig "Ten years of peace and prosperity... Ireland is a better place because of Bertie", but you do know where the banks are getting that money from in the first place, don't you?

    P.


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    ANXIOUS wrote: »
    I think people should give Nama more than 12mths, before we start judging it. Nama can't lose money people forget that any loss made by Nama will be re-couped by a bank levy.

    Oh yeah......and remind us again where Anglo are going to get money to pay a bank levy ? Or how much AIB and BoI will simply up their charges in order to recoup it from the poor, unsuspecting taxpayers.

    I tell ya this country must have absolutely zero credibility left thanks to this shower of incompetent Galway Tent cronies!


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    oceanclub wrote: »
    Pardon me for disagreeing with someone who trumpets the .sig "Ten years of peace and prosperity... Ireland is a better place because of Bertie", but you do know where the banks are getting that money from in the first place, don't you?

    Given said-same sig, I don't think I'd bank on a straight answer about where money comes from ? ;)


  • Closed Accounts Posts: 595 ✭✭✭George Orwell 1982


    Any levy on the banks will just be passed on to customers via higher interest rates and charges.


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  • Closed Accounts Posts: 595 ✭✭✭George Orwell 1982


    Scarab80 wrote: »
    Jesus, did any of ye actually read the article??

    Scarab, do you actually believe Nama will make a profit?


  • Registered Users, Registered Users 2 Posts: 2,321 ✭✭✭IrishTonyO


    ANXIOUS wrote: »
    I think people should give Nama more than 12mths, before we start judging it. Nama can't lose money people forget that any loss made by Nama will be re-couped by a bank levy.

    And who do you think will pay for the bank levy? Us the customers


  • Registered Users, Registered Users 2 Posts: 3,412 ✭✭✭oceanclub


    Liam Byrne wrote: »
    Given said-same sig, I don't think I'd bank on a straight answer about where money comes from ? ;)

    Maybe from where his hero keeps his money - in a safe, after "winning" it on the "horses".

    P.


  • Registered Users, Registered Users 2, Paid Member Posts: 24,639 ✭✭✭✭Cookie_Monster


    Scarab, do you actually believe Nama will make a profit?

    It'll make plenty of profits for those in the right circles :mad:


  • Closed Accounts Posts: 595 ✭✭✭George Orwell 1982


    It'll make plenty of profits for those in the right circles :mad:

    Its a winner for the lawyers and property evaluators and other consultants.


  • Registered Users, Registered Users 2 Posts: 3,095 ✭✭✭ANXIOUS


    I'm not getting into talking about possiblitys of what may happen. Nama may turn a profit so no levy will apply at the end if the day the goverment had to save the banking sector ( may be not to the extent that it did ).

    No one knows how the bank levy may work so no point guessing. Or uf it will even be needed.


  • Registered Users, Registered Users 2 Posts: 802 ✭✭✭Scarab80


    oceanclub wrote: »
    So they're already €5bn out only a year after their estimate, but it'll be grand. *handwave* Trust us.

    Jesus, how gullible are you?

    P.

    It's nothing to do with gullibility, it's to do with understanding basic english.
    NAMA has told the Department of Finance in a new business plan it will not recoup the €4.8bn for the taxpayer it envisaged in its original forecasts published last year.


    It will not recoup as much as was originally forecast, this does not mean that they are out by 5bn, it means the profit - which they still think they will make - will be less than 4.8bn.

    If you look at the draft NAMA business plan on which the 4.8bn forecast was made, you see the following....
    It is important to emphasise that much of the information regarding the prospective NAMA portfolio included in this draft Business Plan is based on aggregate data which has been provided by the various institutions. The interim NAMA team has not had direct access to individual transaction records and loan files and will not be in a position to verify the integrity of the data until it carries out its own due diligence on each of the loans proposed for acquisition. Given the unavailability, as yet, of the detailed asset information required for strategic planning and given that the Board has not yet been appointed, this interim plan focuses more on the operational planning required to ensure an efficient asset valuation and transfer process and the establishment of the NAMA organisation and its key governance structures.

    The original figure was a draft figure based on information that the banks provided to them, following due dilligence a non draft plan has been produced showing a higher level of defaults and a lower level of running costs than has been assumed.


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    Sentence 1 :
    ANXIOUS wrote: »
    I'm not getting into talking about possiblitys of what may happen.

    Really ?

    Sentence 2 :
    ANXIOUS wrote: »
    Nama may turn a profit

    :rolleyes:


  • Registered Users, Registered Users 2 Posts: 3,412 ✭✭✭oceanclub


    Scarab80 wrote: »
    It will not recoup as much as was originally forecast, this does not mean that they are out by 5bn,

    It means their estimates are already out by €5bn - yes or no?

    P.


  • Registered Users, Registered Users 2 Posts: 802 ✭✭✭Scarab80


    estimates are out between 4.79 bn - 0.1bn, that's all you can say


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  • Registered Users, Registered Users 2 Posts: 3,412 ✭✭✭oceanclub


    Let's see how close to 30pc the default rate is when the report is published next week.

    P.


  • Registered Users, Registered Users 2 Posts: 802 ✭✭✭Scarab80


    oceanclub wrote: »
    Let's see how close to 30pc the default rate is when the report is published next week.

    P.

    It would have to get closer to 35% for the taxpayer to make a loss, due to the issue of 5% subordinated bonds.


  • Registered Users, Registered Users 2 Posts: 2,985 ✭✭✭skelliser


    And what of the 53% let off for the developers?
    Recapitalisation ie. we pay
    What makes it even more sickening is these developers are getting a nice deal whilst people are in negative equity and now have to
    also pay their debts! you couldnt make it up!

    Remenber NAMA only has to get back 47%, anything above that is this "profit" they are taliking about! They keep saying they will pursue them for 100%, will they ****, once they reach 47%, NAMA is done.

    It is robbery, pure and simple.


  • Closed Accounts Posts: 595 ✭✭✭George Orwell 1982


    I'm going to go with Morgan Kelly on this. NAMA is "cash for trash".

    His IT article on Nama on 3rd July 2009.
    Nama is in effect Fianna Fáil’s shrine to the property bubble for which the party still yearns. Prepare to pay 10 per cent more in income tax for the next 10 years to pay for it all . . . we are headed for national bankruptcy, argues MORGAN KELLY
    WRITING HERE two years ago, I pointed out that the exuberant lending of Irish banks to builders and property developers would sink them if the property bubble burst. Since then, the bubble has burst, the banks have sunk, and we are all left wondering how to salvage them.
    Two ideas for fixing the banks have been suggested: a bad bank or National Asset Management Agency (Nama) and nationalisation. While these proposals differ in detail, their impact will be identical. Irish taxpayers will be stuck with a large bill, and in return will get an undercapitalised and politically controlled banking system.
    A far more efficient and cheaper alternative to Nama is to copy what Barack Obama did with General Motors, and transfer ownership of Irish banks to their bond holders. In this way we can achieve well capitalised banks, run without political interference, at minimal cost to taxpayers.
    By converting a portion of Allies Irish Banks’ approximately €40 billion of bonds, and Bank of Ireland’s €50 billion, into shares, each institution can be recapitalised. Transferring ownership to bond holders will not cost the taxpayer a cent and will avoid interminable legal battles over the transfer of assets to Nama.
    While the shaky state of Irish banks had been worrying investors since early 2007, when the crisis finally broke in late September the Government was taken completely by surprise and reacted with blind panic. Faced with a run on Anglo Irish Bank by institutional depositors on September 29th, the Government was stampeded into guaranteeing virtually all liabilities, except shares, of the six Irish banks.
    This guarantee contained two obvious but fundamental flaws. Everything that has happened since – the proposed recapitalisation of Anglo, the nationalisation of Anglo, the establishment of Nama – can be understood as the Government scrambling to catch up with the consequences of these two errors.
    The first mistake was to guarantee not only deposits – which had to be guaranteed – but also most of the existing bonds issued by banks to other financial institutions. Bond holders receive higher returns in the knowledge that they are accepting the risk of losses on their investment. In addition, unlike depositors who can scarper, existing bond holders are effectively stuck.
    It made no sense for the Government to insist that taxpayers would take the hit on any bank losses instead of the financial institutions that had already entered legal contracts to do so.
    The second mistake was to extend the guarantee to Anglo Irish and Irish Nationwide. As specialised property development lenders with incompetent management, they were at risk of heavy losses as their market collapsed, and fulfilled no role in the wider economy.
    In making the guarantee on September 29th, I do not doubt that the Government believed that the difficulties of Irish banks ran no deeper than temporary liquidity problems stemming from the international crisis. However, as it has become apparent that Anglo was a mismanaged wreck, with AIB and Bank of Ireland scarcely better, the Government has stuck with the mantra that all banks are equally important and equally worth saving at any cost to the taxpayer.
    Brian Lenihan and Brian Cowen are happier to dice with national bankruptcy than lose face by admitting that they were misled about the state of Irish banks last September.
    Nama, then, is the latest twist in the Government’s increasingly bizarre efforts to save the Irish banking system while claiming that it does not really need to be saved.
    Underlying Nama is the delusion that the collapse of our property bubble is a temporary downturn. In a few years time when the global economy recovers we will be back building houses like it was 2006. All the ghost estates, empty office blocks, guest-less hotels and weed choked fields that Nama has bought on our behalf will once again be worth a fortune.
    The reality is that, because of our surfeit of empty housing, there will be almost no construction activity for the next decade. Empty apartment blocks in Dublin will eventually be rented, albeit at rates so low that many will decay into slums. However, most of the unfinished estates that litter rural Ireland – where the only economic activity was building houses – will never be occupied.
    Nama is a variant on the “Cash for Trash” scheme briefly floated in the United States last year where the government would recapitalise banks by overpaying for their bad loans. Our Government is proposing to buy €90 billion of loans and will reportedly pay €75 billion for them.
    The International Monetary Fund (IMF) guesses that Nama will cost us €35 billion, and this is probably optimistic. The narrowness of the Irish property market meant that banks effectively operated a pyramid scheme, bidding up prices against each other. Now that banks cannot lend, development assets are effectively worthless.
    The taxpayer is likely to lose well over €25 billion on Anglo alone. Among its “assets” are €4 billion lent for Irish hotels, and almost €20 billion for empty fields and building sites. In fact, I suspect that the €20 billion already repaid to the casino that was Anglo represents winners cashing in their chips, while the outstanding €70 billion of loans will turn out to be worthless. And it is well to remember, as the architects of Nama have not, that although the problems of Irish banks begin with developers, they do not end there.
    The same recklessness that impelled banks to lend hundreds of millions to builders to whom most of us would hesitate to lend a bucket; also led them to fling tens of billions in mortgages, car loans, and credit cards at people with little ability to repay. Even without the bad debts of developers, the losses on these household loans over the next few years will probably be sufficient to drain most of the capital out of AIB and Bank of Ireland.
    Brian Lenihan’s largesse to bond holders could cost you and me €50 to €70 billion. What do numbers like these mean?
    The easiest way to put numbers of this magnitude into perspective is to remember that in 2008 the Government generated €13 billion in income tax. Every time you hear €10 billion, then, think of paying 10 per cent more income tax annually for the next decade.
    In other words, the fiscal capacity of a state with only two million taxpayers, and falling fast, is frighteningly thin. Ten billion here, and ten billion there and, before you know it, you are talking national bankrutcy. Even without bankrupty, Nama will ensure a crushing tax burden for everyone in Ireland for decades.
    The tragedy is that, were it not for the Government’s botched efforts to save financiers from the predictable consequences of their own greed, the Irish economy would have recovered far more quickly than most people, including the IMF, expect.
    Recovery for the Irish economy will not be easy – there is no painless way for an economy to move from getting about 20 per cent of its national income from construction to getting about zero – but the flexibility of the Irish labour market would have ensured that our incomes and share of global trade would have rapidly recovered. Now, however, any fruits of recovery will be squandered on Nama.
    Aside from the fact that Nama will spend huge sums to achieve little, its governance is problematic. Here, the fog of secrecy that has quietly settled over Anglo Irish since nationalisation sets an unsettling precedent.
    After revelations of financial irregularities forced the resignation of three executive directors, Anglo moved decisively to replace them with . . . Anglo insiders. Most astonishing, in the light of the scandal over Irish Nationwide deposits, was the decision to replace Anglo’s disgraced financial director with his immediate subordinate, Anglo’s chief financial officer.
    It is hard not to conclude that a deliberate decision has been made at the highest level of Government that what happened in Anglo, stays in Anglo. And we can expect Nama to be run in the same tight manner.
    While there has been considerable speculation about dark motives for bailing out developers and banks, I do not believe that the Government’s behaviour has been corrupt: it has been far worse. At least corruption implies a sense that you are doing wrong, and need to be paid in return. Our Government actually thought it was doing the right thing in risking everything to safeguard the interests of developers who had given us an economy that was the envy of Europe.
    Instead of recognising bankers and developers as parasites on our national prosperity, the Government came to see them as its source. While everyone else in Ireland has come to see the past decade as an embarrassing episode of collective insanity to be put behind us as soon as possible, the Government still sees it as the high point of our nation’s history. Nama is effectively Fianna Fáil’s shrine to the bubble, and likely to be an expensive and enduring one.
    What should be done instead of Nama? First, we need to understand how the idea of Nama follows from a mistaken analogy with the Swedish banking crisis and bad bank of the early 1990s. The Swedish banks differed in one fundamental way from ours: they only had deposits as liabilities. If their government had not taken over their bad debts, ordinary depositors would have suffered. By contrast, Irish banks had borrowed heavily from other financial institutions through bonds, and these bondholders originally agreed to take losses if Irish banks got into difficulties.
    By placing the costs of the banking collapse primarily on existing holders of bank bonds, the State can improve its credit rating and pull back from the edge of bankruptcy. Knowing that taxpayers are not liable for the losses of AIB and Bank of Ireland will make capital markets more willing to lend to the Irish State.
    Instead, like a corpulent Tooth Fairy gently slipping billions under the pillows of sleeping bond holders, Brian Lenihan has chosen to extend the liability guarantee and further weaken the bargaining position of the State.
    The drift into national bankruptcy looks increasingly unstoppable.


  • Registered Users, Registered Users 2 Posts: 1,189 ✭✭✭Mango Joe


    NAMA won't recoup money for taxpayer

    - Oh yes it will!!!!


    - Sorry, I thought I was in a bad Pantomime, all the other ingredients were there......


  • Registered Users, Registered Users 2 Posts: 3,553 ✭✭✭lmimmfn


    Nama is going to lose an absolute fortune, anyone with an ounce of cop on realises this, the running costs alone are astronomical along with all the dud stuff in it, some will sell, no doubt at rock bottom prices to matey developers or investment firms.

    Not only that, theyre not even liable to publish the actual sales values of the properties in it when they do sell, theyre only responsible for end of year bottom line profit or loss( you'll see a lot of that at the end of every year for NAME ), so no one will know what the hell is going on until its actually completed whereby there will be some tribunal or something to setup some finger pointing

    Again another nice vehicle with noone having any responsiblilty and hiding all the numbers from the public to aid that.

    NAMA rox!!!!!!!!

    Ignoring idiots who comment "far right" because they don't even know what it means



  • Registered Users, Registered Users 2 Posts: 685 ✭✭✭jock101


    You actually thought it would! Castles in the Sky!:rolleyes::rolleyes:


  • Registered Users, Registered Users 2 Posts: 594 ✭✭✭Fr0g


    I'm with Peter Mathews. He knows better than most what is wrong with NAMA

    http://bankermathews.com/nama-whats-wrong/
    NAMA Loans Losses
    Summary Projected Alternative Realisations Outcomes

    NAMA original Loans value 77.00 bn Purchased by NAMA 54.00 bn
    60% Non-performing: 46.20 bn
    40% Performing: 30.80 bn
    Let’s look at immediate / present situation, assuming that all Performing
    Loans can be 100% recovered:-
    Recovery rate on Performing: 100% X 30.80 bn = 30.80 bn
    Recovery rate on Non-performing: 25% X 46.20 bn = 11.55 bn
    Total recoveries 42.35 bn
    NAMA loss: €11.65 bn

    But let’s suppose that over time we get to (which experts believe will be best case):
    Recovery rate on Performing: 80% X 30.80 bn = 24.64 bn
    Recovery rate on Non-performing: 40% X 46.2 bn = 18.48 bn
    Total recoveries 43.12 bn
    NAMA loss: €10.88 bn

    Now let’s suppose that instead we get (which experts believe will be likely case):
    Recovery rate on Performing: 60% X 30.80 = 18.48 bn
    Recovery rate on Non-performing: 20% X 46.20 = 9.24 bn
    Total recoveries 27.72 bn
    NAMA loss: €26.28 bn

    Best case scanario: loss of 10 bn
    worst case: loss of 26 bn


  • Registered Users, Registered Users 2 Posts: 3,553 ✭✭✭lmimmfn


    Fr0g wrote: »
    I'm with Peter Mathews. He knows better than most what is wrong with NAMA

    http://bankermathews.com/nama-whats-wrong/



    Best case scanario: loss of 10 bn
    worst case: loss of 26 bn
    erm i think he's missing the 5% interest that the government are paying to fund NAMA loans, 5% over 10 years = around 62% of initial loan cost.

    So by 2020 worst case scenario the loan of 54bn would come to nearly 88bn, plus theres the expected 1bn+cost of it. Of course it wouldnt come to that, but still its going to cost an extra 5-10bn in loan interest.

    Ignoring idiots who comment "far right" because they don't even know what it means



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  • Registered Users, Registered Users 2 Posts: 5,932 ✭✭✭hinault


    I should be shocked.

    But given that the politicians and bankers have lied throughout, I cannot muster shock/anger/annoyance anymore.


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