Nama -The embodiment of underpants gnome financial planning

Mr. Incognito

Can't sleep so added this to my blog tonight. Nothing new on this disaster surprises me anymore

Flicking through the recent developments on NAMA one is reminded of South Park's underpants gnomes experience. These little fellows invaded South Park to collect underpants to their underground lair in the all encompasing task of raising a profit. The only caveat was how to get there. NAMA is leading the way to these industrious little ****ers and damned if they don't wear suits instead of pointy hats.

Here's is the underpants gnome logic as illustrated: Step one: collect underpants, Step two: ? Step three: PROFIT. Nice..............

Here is the NAMA business plan: Step one collect pants loans, Step two: ? Step three: PROFIT. Nice....................

Now here are the recent development with the banks, the proven financial whores and tinkers. NAMA as referred to in my previous posts did not even bother to audit the loan files before suggesting their billion euro purchase scheme and then, shock horror, were "flabbergasted" at the state of the loan files. The same bank, Anglo, that 8 days before they went into financial meltdown had the gall to make a presentation to the department of finance that they were in the best shape of their financial lives misrepresented the loan book- wow, who would have thunk it.

The newest unreported development is that the banks liquidated the majority of their performing "good" loans before they were transported to NAMA. Hense NAMA is mopping up the junk. The crap that is so toxic that even the underpants gnomes want no part in it and here's the fun bit. NAMA is applying a discount based on the long term vitality of these loans. The logic of the discount is simply this, "Okay Mr. Bank, some good, some bad, so we'll take them off your hands at a discount for the useless ones, cash in the good ones and we'll work out even. Cheers". The result of the banks flaking on transferring the performing loans means that we are giving a discount, albeit a higher one than envisioned on the basis that there are performing loans which no longer exist, and as any third class mathamatician would tell you, you can multipy zero by any number of years and it still is zero.

So what's the alternative. Well it's quite simply. Screw the premium, transfer the loans at their current net book value. NAMA will be lucky if they files don't catch fire on the way over. If there is any return, yipee for the taxpayer. Remember him, the dude that bailed Anglo out to the tune of 20 odd billion and rising. And while we are at it, why don't we just nationalise the bloody banks while we are at it. Every foreign bank has pulled out of the Irish market when they realised that the Irish government was propping up it's pet banks when they failed. The stock is worthless, AIB and BOI could be merged and the fact that they both have a premises in practically every provincial town leaves a lot of surplus premises that could conceivable be sold off. You don't need a firesale that would deflate the price, heck convert the buildings to apartments and stick social housing in there. Ah social housing. Remember that old trick. Times were that you needed to include 20% social housing in every new development but hey we don't want to be living next to poor people, those nurses and teachers and minions that earn less than 55K per year do we, so what did our lovely government do- allowed developers to literally buy their way out of these provisions by making financial contributions to the local authorities. What a wonderful way to avoid social responsibilities and have a convenient financial stream for bribes to be explained away, but that wouldn't happen now would it...........................

wiseguy

Mr. Incognito wrote: »

Can't sleep so added this to my blog tonight. Nothing new on this disaster surprises me anymore

That made me laugh well done

Like Mr. Matthews mentioned at the recent Dail Finance Committee meeting:

* Reverse NAMA, its not too late to scupper this and save 17 billion at least
* Close Anglo and Nationwide
* Directly inject more money into AIB, BOI and EBS (17billion) and nationalise them for a period

naoise80

And who pays all the depositors and bondholders that have been guaranteed?

Mr. Incognito

And who pays all the depositors and bondholders that have been guaranteed

NAMA has practically nil depositors. Check out the balance sheet- it's not a day to day bank. It's model was fire cash to developers and rake in on the profits.

As to bondholders- they are not covered by the government gurantee. They are investors, and as Sean Quinn discovered- investing in Anglo- bad idea. Too bad.

If you are talking about the merger I propose between BOI and AIB, you can pay market rate for the shares- as they are practically worthless the investors are taking a hit and the depositholders are unaffected.

naoise80

At 31st December 2009 Anglo had 27.3 billion Euro in customer deposits.

Sean Quinn was a shareholder, not a bondholder.

Bondholders and deposits have been guaranteed 100%

http://www.angloirishbank.com/Media-Centre/Press_Releases/Annual_Report_Accounts_2009_Press_Release.pdf

whatawaster

naoise80 wrote: »

And who pays all the depositors and bondholders that have been guaranteed?

doesn't the guarantee run out in September? Nobody can expect to have their investments guaranteed for life.

Cookie_Monster

whatawaster wrote: »

doesn't the guarantee run out in September? Nobody can expect to have their investments guaranteed for life.

extended to December minimum already and probably another year after that for some inexplicable reason Anglo is still included in it.

Mr. Incognito

Thank you for that info. Having a look at the assets and liabilities means that is is starkly clear- this bank should be wound up.

27.4 billion in liabilities to be met out of whatever can be dug out of the assets, well sell the lot to NAMA, take the knock down and use it to fund the deposit holder refunds and then we won't be throwing good money after bad.

To bring this bank back to solvency is dead money. it has ZERO credibility and ZERO reputation. Wind it up- who is going to go to Anglo for a loan in the next 20 years- we're flogging a dead horse. Call in the loans that it can, transfer the rest and refund the deposit holders and close the hole.

monkeypants

Pardon my ignorance on this subject, but what I've seen on the news this week suggests that the guarantee is based on lies. Can the guarantee then stand? In insurance terms, isn't that a "lack of good faith?"

jdivision

Mr. Incognito wrote: »

NAMA has practically nil depositors. Check out the balance sheet- it's not a day to day bank.

It's not a bank

Mr. Incognito

It's not a bank

Really? Funny looking fishmongers. It's a state owned bank. Still a bank

Cool Mo D

How is it a bank? It's manages loans that it's bought from banks, but that doesn't make it a bank. It doesn't take deposits or give out loans.

And NAMA's business plan is perfectly easy to understand. The problem with it is not that it doesn't make sense, but that it will likely lose billions of euro of out money.

The plan is this:

Currently, Irish banks have lots of bad loans, and little idea of how much they are likely to lose. This makes them vulnerable, and unlikely to lend, as they don't know what losses the loans will take. They become the legendary 'zombie banks', sucking up deposits and not giving out loans.

Here is where NAMA steps in. By buying the bad loans at a discounted rate, the banks now have certainty about their balance sheets, and can start giving out loans again. If they need more capital, they raise it by issueing shares, with the Government buying them if necessary.

So basically, NAMA is not the big issue - the Government bailout of the banks is. If NAMA takes a steep discount on the loans now, a bigger capital injection from the taxpayers is required. If NAMA takes a smaller discount, NAMA will require more taxpayers money. If NAMA doesn't happen at all, the government will still be on the hook for recapitalising the banks, which is what really costs money, especially for Anglo Irish Bank.

To summarise: NAMA is not what really costs money. Bailing out the banks is what costs money. NAMA and the bailout are closely related, but not the same thing.
If the Government really wants to save money, it basically has to let the guarantee lapse, and let Anglo inevitably collapse.
This will likely have major repercussions for the rest of the banks, but dealing with them could well be cheaper then bailing out Anglo. No-one seems to know for sure what these are though. The Government, however, are clearly not willing to take the risk. It's not clear if Labour of Fine Gael are either.

whatawaster

Would it be feasible for, say, the government to:

- guarantee the deposits of private citizens, up to a certain maximum level (how much would we be talking here)

- Wind up the banks, pay what they can to their creditors, who will obviously lose out, but surely they all lent money to our banks at a certain rate of Interest to reflect what they deemed the risk of the investment to be?

My understanding of the whole situation is very limited, but i don't understand how a) this could cost nearly as much or b) what the big problem is for the state if our banks can't pay back other banks/lenders etc

It seems to me what we're doing is taking the liabilities of private companies, let them off the hook, and putting the state at risk of defaulting on these liabilities instead.