The Carroll saga - AIB giving joe soap the fingers

It's the old chestnut - if it's a small amount the borrower has the problem if it's a big amount the bank has the problem. AIB are simply acting as any business should and have probably realised there is no hope of them being repaid in full. They are therefore now deciding what is best for them - Nama or calling in the loans. All the other banks covered by Nama that are affected here are following the same strategy - ACC don't have that option so they try and call in the loans - Carroll tries to play for time and wait for Nama as well.

Makes me wonder why anyone (taxpayer anyone - not big business anyone) can see Nama as a good thing...

NAMA cannot work. It doesn't matter what they pay for the assets, the end result for the tax payer is a bad deal.

If NAMA pay too little:

AIB have 20 billion in bad loans.
NAMA pays 10 billion for the loans.
AIB now have a 10 billion hole in their balance sheet.
AIB require a 10 billion bail out.
Cost to tax payer: 20 billion.

If NAMA pay too much:

AIB have 20 billion in bad loans.
NAMA pays the "economic value" of the loans, e.g. 18 billion.
AIB now have a 2 billion hole in their balance sheet.
AIB require a 2 billion bail out.
Cost to tax payer: 20 billion.

It's ridiculous and is one of the reasons I will be emigrating soon.

The key difference is that Nama can take a long term view on property allowing prices to recover somewhat. The banks don't have that luxury.

jimmycrackcorm wrote: »

The key difference is that Nama can take a long term view on property allowing prices to recover somewhat. The banks don't have that luxury.

No basically the Irish taxpayer is been told, not asked, to take the risk of sitting on useless property (half devleopr sites, empty buildings and over priced development land) that realistically doesn't come anywhere close to matching the loans outstanding.

We are being forced to take long term view, so that the banks can return to normally trading i.e. charging us the customers for the privledge of getting our own money lent to us or for storing our own money.
Sweet deal for them, not so sweet for the ordinary punter that is being asked to carry the can.

And we are told if the banks don't increase charges then how will they be able to make money to handle their loan writeoffs, stay in business and possibly be sellable so that the taxpayers recapitalisation costs can be recouped someday.
The real nice argument is that they need to make money to possibly pay back any possible levies that may be imposed by the government for the government guarantees, the government recapitalisation bailouts, etc.

Now in those scenarios listed above you will notice there are a lot of ifs, maybes, possiblys and unknowns . Nothing really concrete, well apart from it is going to cost us the ordinary taxpayers and customers big time. :rolleyes:

D3PO wrote: »

Just heard earlier that the majority of Liam Carrolls property debt is with AIB.

Now AIB have given him a 3 year Moratorium on this (all payments and interest)

You can be sure the average Joe soap struggling to pay their mortgage wouldnt be given a 3 year break in relation to payments and interest. Just another bank sticking 2 fingers up to the average joe soap.

I wonder if this opens up some wriggle room from a legal perspective for those struggling with repo hearings. What kind of view will the court take in terms of granting reposession orders when banks are giving developers 3 years interest free to sort themselves out ?

If you owe the bank €100,000, its your problem. If you owe them €100,000,000 its their problem. These guys are too big to fall, I would be amazed it they were allowed to be liquidated. Its all caused by poor regulation both inside and outside the banks.

Correct me if I'm wrong...

Developer owes AIB 20Bill
NAMA buys the debt for 10bill (.5 on the euro)

The debt for the developer is still 20bill.

I'm not really keeping up with the irish banking story as its too much time but I'm assuming the banks are actually paying to be bailed out (either via repayment schemes or return for equity int eh bank)

damnyanks wrote: »

Correct me if I'm wrong...

I'm not really keeping up with the irish banking story as its too much time but I'm assuming the banks are actually paying to be bailed out (either via repayment schemes or return for equity int eh bank)

Ok, consider yourself corrected

There's no equity stake for the NAMA bail-out, it would need to be all the equity, the banks are basically insolvent, but the government refuses to nationalise them.

We get no shares in return for the NAMA bail-out.

It's a deliberate gifting of tens of billions of euros to the banks to prevent them from collapsing. With no monetary return for the tax-payer unless prices reinflate to the level of the biggest bubble in irish history. Which would be more damaging again than just taking our massive loses of this gift.

There was initially some talk of banks paying back some of our loses if we bought at too high a value (which we will). However, as I understand it, that's not made it into the actual bil. Which tbh makes some sense as if the banks had a vast, un-quanitifiable debt to the government then they'd be no more credit-worthy than they are now.

IMO the whole thing reeks - if we're giving them all this money because they're so crucial (or more likely because we're on the hook for being foolish enough to guarantee their debts) we should at least be buying something, ie the banks, with it. I'd vaguely rather lose 50 billion than 60.

irishguy wrote: »

These guys are too big to fall, I would be amazed it they were allowed to be liquidated. Its all caused by poor regulation both inside and outside the banks.

I often pass by Carrolls holiday homes and they always appear to be vacant.

It no wonder , just look at the prices he is charging for one night in the 'back of beyonds '

http://www.kilkennyholidayhomes.ie/index.asp

BendiBus wrote: »

Plus any revenue stream generated from actual loan repayments. Less the discount NAMA gets on the loan.

So:

A developer borrows 100 million.
NAMA buys debt for 70 million.
Developer repays 20 million before defaulting.
Then NAMA only needs to raise 50 million from the sale of the asset to break even.
i.e half the peak price

I've no idea what the actual percentages will work out at, but is the logic of the above correct?

Your maths is right but more likely what will happen is the following:
A developer borrows 100 million.
NAMA buys debt for 70 million => bank loses 30m
Developer repays ~0m before defaulting => realistically they will probably default as soon as Nama are in control of the loan
Then NAMA needs to raise 70 million => not likely for a long long time

Then you have the risk that the bank needs to be able to handle the 30m loss too or they'll want more money.