The Minister believes that the banks have intrinsic value

The minister asserted [in front of the Dail Committee] that the banks were solvent and that they have adequate capital.

This is correct from a technical accounting point of view, only because they are not allowed write down all the impaired loans.

He says that the stock market agrees with him that the shares have intrinsic values. I think it was Joan Burton who shouted out that the intrinsic value only arises from the possibility that the NAMA will overpay for the loans.

This was not pursued.

I have moved this from the thread on the Minister's appearance in the Dail.

The Minister did a very good job overall, but this is a very serious and fundamental mistake and needs to be highlighted.

It is a pity that the committee did not pull him up on this.

At one stage, the Government or the NTMA could have bought both AIB and Bank of Ireland for €1 billion in total. There would have been no need for nationalisation at nil value, just an acquisition at "!market value". Even at €1 billion, the value was just a play on the price that NAMA will value the loans at.

Would it really have cost less? Would the government/state/taxpayer not have to take the loans off the banks books and recapitalise them anyway?
I know it would have solved the “how does the state see a return if the banks shares go back up” but would it have really changed the net cost to the state by much?

Hi Purple

I was not suggesting that buying the banks would have solved the problems.

NAMA is essential. It exposes the taxpayer to a huge cost.

If we owned the banks, we would have an upside.

We could have got that upside cheaply some months ago.

Brendan

Does the government still have a 25% share in AIB and BOI?

The minister asserted that the banks were solvent and that they have adequate capital.

Click to expand...

So why do we need NAMA ?

NAMA is essential.

Click to expand...

Remove the guarantee and let the banks collapse.
There'll be riots and pain etc, but it will only last maybe a year. Then we'll have new, improved banks, and a fresh start.
NAMA = years and years of slow death

umop3p!sdn said:

So why do we need NAMA ?


Remove the guarantee and let the banks collapse.
There'll be riots and pain etc, but it will only last maybe a year. Then we'll have new, improved banks, and a fresh start.
NAMA = years and years of slow death

Click to expand...

This is lunacy. What new, improved banks? Who is going to set them up, using what money?

Let the banks collapse and we all lose our savings. We can't just "remove the guarantee either". It is enshrined in legislation. Even if we could, we'd never be able to borrow a brass farthing ever again if we defaulted on a state guarantee.

Also, when the toxic assets are transferred to Nama, who says that the state has to fill the capital funding gap? These will be clean banks in a modern economy. Foreign banks and private equity would be falling over themselves to invest in the cleaned-up banks.

RIAD_BSC said:

Let the banks collapse and we all lose our savings. We can't just "remove the guarantee either". It is enshrined in legislation. Even if we could, we'd never be able to borrow a brass farthing ever again if we defaulted on a state guarantee.

Also, when the toxic assets are transferred to Nama, who says that the state has to fill the capital funding gap? These will be clean banks in a modern economy. Foreign banks and private equity would be falling over themselves to invest in the cleaned-up banks.

Click to expand...

We don't have to default on the guarantee - all we have to do is not extend it.

This is lunacy. What new, improved banks? Who is going to set them up, using what money?

Click to expand...

Who set up all the new banks after the Great Depression? If there's money to be made, people will be there to take advantage.

Let the banks collapse and we all lose our savings.

Click to expand...

We're probably all going to lose our saving anyway, although by a less direct route. How will new levies, higher taxes and unemployment etc, affect your savings?

These will be clean banks in a modern economy. Foreign banks and private equity would be falling over themselves to invest in the cleaned-up banks.

Click to expand...

Won't the same people be running them though? This is the problem.