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How Berehaven Credit Union could save the country

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  • 01-08-2014 5:46am
    #1
    realitykeeper
    Registered Users Posts: 4,138 ✭✭✭


    Recently I read that NAMA could make a profit of 10 billion when it is finished its business of selling the best performing loans that used to belong to the bailed out banks. When this is subtracted from the cost of bailing out the banks then the taxpayer owes 65 billion that the bankers borrowed.

    This was not a good deal for the taxpayer. So why did the government do this to us? The reason is that if they had not, they would not have been able to borrow to camouflage the effects of their incompetence.

    It occurred to me that if a bankrupt entity like Berehaven Credit Union were to buy the 65 billion euro debt for a cent then the state would be free of this burden. Either that or just give the debt back to the banks along with whatever profit NAMA makes.

    NAMA was just a way of trying to sell the bailout to the taxpayer but a 10 billion profit does not cover a 75 billion euro cost. Therefore, on behalf of the taxpayers, the next government should say to the banks: "No thanks. Here is the 10 billion profit and there is your 75 billion euro debt. Good luck."


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    #2
    Cookie_Monster
    Registered Users Posts: 24,473 ✭✭✭✭Cookie_Monster


    How do you imagine anyone would let the CU buy such debt at such a price?


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    #3
    comongethappy
    Registered Users Posts: 2,753 ✭✭✭comongethappy


    NAMA cost €32 billion.... Paid to the institutions as government bonds.

    http://www.nama.ie/about-our-work/key-figures/

    Personally, I don't think it will make a profit.


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    #4
    gaius c
    Registered Users Posts: 3,528 ✭✭✭gaius c


    comongethappy wrote: »
    NAMA cost €32 billion.... Paid to the institutions as government bonds.

    http://www.nama.ie/about-our-work/key-figures/

    Personally, I don't think it will make a profit.

    And even if it does, it's only a makey uppy profit.

    Loan was worth 100 quid.
    They paid 30 for it.
    They got 40 back for it. Let's throw street parties at being out of pocket by 60 quid!


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    #5
    Good loser
    Registered Users Posts: 3,181 ✭✭✭Good loser


    realitykeeper wrote: »
    Recently I read that NAMA could make a profit of 10 billion when it is finished its business of selling the best performing loans that used to belong to the bailed out banks. When this is subtracted from the cost of bailing out the banks then the taxpayer owes 65 billion that the bankers borrowed.

    This was not a good deal for the taxpayer. So why did the government do this to us? The reason is that if they had not, they would not have been able to borrow to camouflage the effects of their incompetence.

    It occurred to me that if a bankrupt entity like Berehaven Credit Union were to buy the 65 billion euro debt for a cent then the state would be free of this burden. Either that or just give the debt back to the banks along with whatever profit NAMA makes.

    NAMA was just a way of trying to sell the bailout to the taxpayer but a 10 billion profit does not cover a 75 billion euro cost. Therefore, on behalf of the taxpayers, the next government should say to the banks: "No thanks. Here is the 10 billion profit and there is your 75 billion euro debt. Good luck."

    You can dispose of an asset by selling it but not a liability - the €65 bn debt. At this point the debts are all dispersed - your proposal is four years too late. Even if it ever made any sense.


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    #6
    realitykeeper
    Registered Users Posts: 4,138 ✭✭✭realitykeeper


    Good loser wrote: »
    You can dispose of an asset by selling it but not a liability - the €65 bn debt. At this point the debts are all dispersed - your proposal is four years too late. Even if it ever made any sense.
    If the banks can do it so can the state. Those of us who have no intention of bailing out the banks have already sent our wealth abroad. By saving or investing in this country, the gullible are exposing themselves to 65 billion of bank liability along with 145 billion of state debt. One way or another this has to be paid for.

    When the fake economic recovery runs out of steam, those who think they have bought at the bottom of the market will realise how foolish they have been.


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    #7
    sedric
    Registered Users Posts: 49 ✭sedric


    The saddest thing about the bailout/recession is the lack of any lesson learnt.

    No economist, minister, advisor or other genius seems to be saying , whatever about the past let's try to build a more independent and resilient future where we don't tremble at the idea of enforcing the consequences of burning the bond holder who took the risks.

    No, apparently here we go again back to the markets with mainly the same people in charge and the same assumptions about how the system works.


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    #8
    Good loser
    Registered Users Posts: 3,181 ✭✭✭Good loser


    realitykeeper wrote: »
    If the banks can do it so can the state. Those of us who have no intention of bailing out the banks have already sent our wealth abroad. By saving or investing in this country, the gullible are exposing themselves to 65 billion of bank liability along with 145 billion of state debt. One way or another this has to be paid for.

    When the fake economic recovery runs out of steam, those who think they have bought at the bottom of the market will realise how foolish they have been.

    Sorry I made a mistake. The €65 bn debt is/was an asset. Which Nama took over at a discount of approx 50%. It looks like it will break even and finish two years early. That's alright.

    If you live here you have no choice but to do your bit.


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    #9
    hfallada
    Closed Accounts Posts: 4,180 ✭✭✭hfallada


    sedric wrote: »
    The saddest thing about the bailout/recession is the lack of any lesson learnt.

    No economist, minister, advisor or other genius seems to be saying , whatever about the past let's try to build a more independent and resilient future where we don't tremble at the idea of enforcing the consequences of burning the bond holder who took the risks.

    No, apparently here we go again back to the markets with mainly the same people in charge and the same assumptions about how the system works.

    Lessons have been learnt. There is no longer 100% mortgages on offer. Irish banks are now lowering their loan to deposit ratios. Irish banks are no longer giving massive loans without serious collateral or business plan( they are being too strict on lending). Only people with flawless credit and serious ability to pay a mortgage are getting a loan in 2014.


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    #10
    Rightwing
    Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    €65 bln is too high a figure.


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    #11
    Pete_Cavan
    Registered Users Posts: 6,726 ✭✭✭Pete_Cavan


    NAMA was set up to take loans off the banks balances sheets, without it we would have had a bail in like in Cyprus and deposits would be taken as banks collapse. No a great option either.


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    #12
    comongethappy
    Registered Users Posts: 2,753 ✭✭✭comongethappy


    sedric wrote: »
    The saddest thing about the bailout/recession is the lack of any lesson learnt.

    The main lesson to learn is not to treble public spending in a decade.

    A tragedy that caused the whole mess.


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    #13
    Scofflaw
    Registered Users Posts: 23,283 ✭✭✭✭Scofflaw


    gaius c wrote: »
    And even if it does, it's only a makey uppy profit.

    Loan was worth 100 quid.
    They paid 30 for it.
    They got 40 back for it. Let's throw street parties at being out of pocket by 60 quid!

    Hmm. Let's see:

    €100 owed by bank
    NAMA (state) buys it for €50
    NAMA (state) sells it for €60

    State has made a profit there, as long as that's all the costs to the state. The question is whether it was, because the longer version looks like this:

    €100 owed by bank
    NAMA (state) buys it for €50
    Bank is down €50
    Government recapitalises bank for €x to cover for the €50
    NAMA (state) sells it for €60

    The question, in traditional form, is "what is the value of x?". How much additional capital was needed by the banks because of NAMA?

    cordially,
    Scofflaw


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    #14
    recedite
    Closed Accounts Posts: 13,993 ✭✭✭✭recedite


    realitykeeper wrote: »
    It occurred to me that if a bankrupt entity like Berehaven Credit Union were to buy the 65 billion euro debt for a cent then the state would be free of this burden. Either that or just give the debt back to the banks along with whatever profit NAMA makes.
    Yes, but....
    The owner of debt is the person who is owed the money, ie the creditor.
    In this case, its the IMF/EU mainly, plus some extra loans from individual countries such as the UK, plus govt. bonds sold on the open market.

    They won't sell 65 billion euro debt for a cent. If Berehaven Credit Union wants to pay 65 billion for it, maybe they will sell.

    Unfortunately Berehaven Credit Union can only get that money if it is recapitalised by the govt. who can only get it by borrowing.
    Back to square one.


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    #15
    gaius c
    Registered Users Posts: 3,528 ✭✭✭gaius c


    Scofflaw wrote: »
    Hmm. Let's see:

    €100 owed by bank
    NAMA (state) buys it for €50
    NAMA (state) sells it for €60

    State has made a profit there, as long as that's all the costs to the state. The question is whether it was, because the longer version looks like this:

    €100 owed by bank
    NAMA (state) buys it for €50
    Bank is down €50
    Government recapitalises bank for €x to cover for the €50
    NAMA (state) sells it for €60

    The question, in traditional form, is "what is the value of x?". How much additional capital was needed by the banks because of NAMA?

    cordially,
    Scofflaw

    Correct. It's the sheer dishonesty of the claims that is the problem. It suits NAMAfans to ignore the loss to the bank thus causing a recap.


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    #16
    realitykeeper
    Registered Users Posts: 4,138 ✭✭✭realitykeeper


    Pete_Cavan wrote: »
    NAMA was set up to take loans off the banks balances sheets, without it we would have had a bail in like in Cyprus and deposits would be taken as banks collapse. No a great option either.
    That is a possibility. Had it happened like that the government would have been obliged by the electorate to repay the savers like those in Iceland. However it may not have come to that.

    The money that the banks borrowed came from abroad and it was used to build houses in Ireland. So in reality, foreigners owned the houses Irish mortgage payers were paying for. Suppose the Irish government passed a law saying that those with mortgages can stop paying and the government will issue deeds of ownership if the Irish banks should ever refuse to give savers back their money.

    The bailout would never have happened if the government had threatened to up the anti in this manner. It is true they would not have been able to borrow the billions needed to soften the recession but that would have been a good thing. Those billions were borrowed and must now be paid back with interest.


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    #17
    sedric
    Registered Users Posts: 49 ✭sedric


    hfallada wrote: »
    Lessons have been learnt. There is no longer 100% mortgages on offer. Irish banks are now lowering their loan to deposit ratios. Irish banks are no longer giving massive loans without serious collateral or business plan( they are being too strict on lending). Only people with flawless credit and serious ability to pay a mortgage are getting a loan in 2014.

    That's true however it's in a heavily regulated environment,where the CBI /fin regulator was kicked for the banks sins..I don't believe the authority to regulate heavy will last there are too many pressures on gov to lighten up .


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