# David McWilliams on NAMA



## Purple (2 Sep 2009)

From todays Indo;
[broken link removed].


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## Duke of Marmalade (2 Sep 2009)

Awful rubbish. I won't go thru it line by line but just single out one sentence:


> This _(letting the system collapse and snapping up all the land at firesale prices to be set to public use_) will mean the orderly winding down of some banks over the course of the next year.


 My bit in italics. The use of the term "some banks" suggests that we have hundreds of these and we can spare a few. In fact his proposal would certainly see the demise of the Big Two as well as most other domestic entities. Secondly there is no way this would be an orderly process stretching over a year.


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## Slim (2 Sep 2009)

McWilliams says that as depositors are guaranteed by government, they could let the bank(s) go to the wall and snap up the land/sites cheap! What I don't understand is how government can pay the depositors, which includes me so I'm grateful, and still not spend €40-60bn of taxpayers' money?


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## bluemac (2 Sep 2009)

We do have to stop NAMA its a big mistake in many many respects... we will all pay for it for a long time to come... My thoughts are let them discuss it for another 8-10 months then decide not to do it. The banks are holding on as it is, and really its not about dept its about confidence in the markets and banks and that confidence is returning in the US and UK and the rest will follow. It will be a lot slower here in ireland and credit may be harder to come by. Your average man should get his loan there just wont be money for big building projects which we dont want anyway. 

My main worry is as an example a developer local to me bought a field 20 acres for 2 million to develop on he has no planning permission carnt pay the dept now as he never sold his last 20 house's. So Nama buys that off the bank for 30% of the orginal value 600k, the tax payer now owns a field that cost 600k thats worth about 200k today. No one will want to build on it for at least 10-20 years as the market is over supplied with houses. and so all we can do is wait for a farmer to buy it back as land. how long do we have to wait for the value to increase back to the price we all paid?


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## Towger (2 Sep 2009)

It is not NAMA I would worry about, at least we are getting something for our 60b and there is an end in sight, somewhere! But what about the 20b the government is borrowing just to pay for the day to day running of the country. Now, that can't keep going on, but there is no end in sight and no sign of the government making and hard decisions or cutbacks.


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## TLC (2 Sep 2009)

He does seem to be correct in that it does appear as if the government are still backing the people who got us into this in the first place (along with themselves of course) the bankers & developers.  A case in point of the banks getting together to keep themselves in charge - is the current case in the courts re: appointing an examiner - the banks are willing to back those companies but are turning down "ordinary" punters looking for a mortgage.  It's the same old cartels still operating.


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## noelywire (2 Sep 2009)

Given that this article is from 2005, doesn't it seem the man knows what he's talking about?

[broken link removed]


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## foinse (3 Sep 2009)

I heard him on RTE Drivetime radio show yesterday, and the tone of his voice scared me.
He sounded like someone who was just about to be pushed over a cliff.
Everything that he said made sense.
You can get a summary on his blog:
[broken link removed]

Some quotes from it:
"From the Swedish crisis of the early 1990s to the Asian Tiger collapse and the USA today, banks go bust and the countries recover."  This was confirmed by a Swedish  Ploicician on RTE morning Ireland this morning.
"the State wants to protect the people who got us into this mess so they can hold on to some gains in the chaos."
"When investors see that we are being ruled by financial fanatics, they stay miles away because they know investing is pointless."

I am worried and scared about this NAMA.
If I were younger and with no commitments I would certainly consider setting up in a different country if NAMA goes ahead as proposed.


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## Duke of Marmalade (3 Sep 2009)

foinse said:


> "When investors see that we are being ruled by financial fanatics, they stay miles away because they know investing is pointless."


This is actually flying in the face of reality. Despite our huge problems (and in relative terms much worse than most) Ireland is still reasonably able to raise large funds internationally, and it needs to. We still have a AA rating and our spreads have fallen significantly from the panic days of Anglo nationalisation. Whatever the other merits of McWilliams "let them all collapse" proposal it is very difficult to see it improve our credit rating, as he implies.


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## sunrock (3 Sep 2009)

Towger said:


> It is not NAMA I would worry about, at least we are getting something for our 60b and there is an end in sight, somewhere! But what about the 20b the government is borrowing just to pay for the day to day running of the country. Now, that can't keep going on, but there is no end in sight and no sign of the government making and hard decisions or cutbacks.


 
The 20 billion yearly deficit that the government is spending goes into everyones pockets in welfare, salaries etc.....The reason the government won`t reduce that deficit is the pain and political backlash it would unleash......so they are going to try hanging on as long as possible.
The 60 billion...actually its 80 billion + the government is going to give the banks is going to pay off the banks senior bond holders ( and no one has answered my question as to who these are but we can safely assume this money will be leaving the country).What are we getting for this....well the unsold houses and development land that comprise the property loan portfolio of the banks.The government will strive to keep the price of these houses high, even as the taxpayer who is going to be paying back the 80 billion+ ,will have much reduced spending power.


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## brenr6 (3 Sep 2009)

I don't really understand NAMA nor any of the other complex economic arguments, nor, I suspect, do many of the people commenting on it.

But on the face of it this country looks bunched whichever way we go and as a previous contributor said if you were young and had no ties it would be time to go.

One thing is for sure this country was mismanaged. Many of the idividuals responsible have insulated themselves from the consequences of their excesses through their gathering of wealth during the good years. It will be ordinary people and their children who pay for it.

Its a never ending cycle - while our kids will have great difficulty attending college in years to come, the children of those responsible wont and a new elite will be created to do the same thing to another generation.

Im just an ordinary person with no political leanings whatsoever but I cant help feeling a bubbling rage inside at whats happened and that in other countries there would be a revolution.


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## tiger (3 Sep 2009)

In general I like DmW, decklanders and popes children aside.
I think what he's proposing here is a little extreme, but maybe closer to what we should be doing than NAMA in it's current form.


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## darag (3 Sep 2009)

I'm not a big fan of DMcW but I think it is worth reading the article linked to by noelywire which is shockingly prescient.  I know the response will be that he has been predicting doom of some sort or other for quite a while and so people will argue that it was inevitable that he would eventually be proven correct.  This would be unfair as, in this article, he uncannily describes the precise mechanism and the result of what has happened over the last year and a half.

In regard to his "Stalingrad" message, you can normally pick big holes in his arguments (one of the silliest was his call for Ireland to leave the euro) but I don't find anything ludicrous in this piece.  Duke has a point but I'm not sure it's enough one to dismiss the substantive message of the piece.


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## csirl (4 Sep 2009)

McWilliams is opposed to our Eurozone membership in spite of our membership of it being a no-brainer. This makes me sceptical of his opinions on anything because if he was so far off the mark on the euro, he may also be with his other opinions.


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## suemoo1 (4 Sep 2009)

+1 totally agree brenr6.. we are being punished for the sins of bankers, politicians, developers etcetc.......


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## onekeano (11 Sep 2009)

csirl said:


> McWilliams is opposed to our Eurozone membership in spite of our membership of it being a no-brainer. This makes me sceptical of his opinions on anything because if he was so far off the mark on the euro, he may also be with his other opinions.



so CSIRL - would you be more inclined to support something that is being promoted by the people who have governed us for 23 out of the last 25 years. I'd go for McWilliams every time myself and I'll be on the march tomorrow....

Roy


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## goosebump (11 Sep 2009)

brenr6 said:


> Im just an ordinary person with no political leanings whatsoever but I cant help feeling a bubbling rage inside at whats happened and that in other countries there would be a revolution.



What is happening in Ireland has happened in several countries, both in the recent and more distant past.

Its worth remembering that for all our outrage re. the property bubble and the reckless lending, there were few if any of us manning the barricades when the Government was spending hundreds of millions of stamp duty receipts on childrens allowance, pensions, early childhood supplement, €200 per week Jobseekers Benefit etc etc


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## goosebump (11 Sep 2009)

bluemac said:


> My main worry is as an example a developer local to me bought a field 20 acres for 2 million to develop on he has no planning permission carnt pay the dept now as he never sold his last 20 house's. So Nama buys that off the bank for 30% of the orginal value 600k, the tax payer now owns a field that cost 600k thats worth about 200k today. No one will want to build on it for at least 10-20 years as the market is over supplied with houses. and so all we can do is wait for a farmer to buy it back as land. how long do we have to wait for the value to increase back to the price we all paid?



That dilema exists in every solution other than letting the system collapse. The size of our insolvency hole is just too great to deal in (so called) market values.


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## onekeano (11 Sep 2009)

goosebump said:


> What is happening in Ireland has happened in several countries, both in the recent and more distant past.
> 
> Its worth remembering that for all our outrage re. the property bubble and the reckless lending, there were few if any of us manning the barricades when the Government was spending hundreds of millions of stamp duty receipts on childrens allowance, pensions, early childhood supplement, €200 per week Jobseekers Benefit etc etc



Classic Bertienomics.... throw money at everyone and everyone and slither away with a pension which costs the victims €7mn!


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## smiley (12 Sep 2009)

onekeano said:


> Classic Bertienomics.... throw money at everyone and everyone and slither away with a pension which costs the victims €7mn!



What you say is not rational. Im not a big fan of bertie but from what i can recollect bertie was forced to resign as taoiseach due to massive pressure from the mahon tribunal findings?

He was very lucky when it came to timing, but so was Tony Blair.


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## onekeano (12 Sep 2009)

Benchmarking, all the union guys on the board of FAS, Joe Burke Chair of Dublin Port, no redundancies when the HSE was set up etc etc  ...... Bertie was throwing favours all over the place and Cowan wasn't strong enough to speak up because he had done the Blair / Brown deal with Bertie so he was afraid to make a stand. He's paying for it now.

Roy


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## onq (12 Sep 2009)

brenr6 said:


> I don't really understand NAMA nor any of the other complex economic arguments, nor, I suspect, do many of the people commenting on it.
> 
> But on the face of it this country looks bunched whichever way we go and as a previous contributor said if you were young and had no ties it would be time to go.
> 
> ...



I'm getting tired of hearing "the rats leaving the sinking ship" pocket philosophy.
Instead we have to buckle down the lot of us and get working! 

Develop new products and sell them abroad.
Channel the anger into useful pursuits.
Get elected and make a difference.

Support your country by what YOU do, and don't look for others to do it.
Nama is just a stop gap until we get on our feet again next year.
So fer gawds sake let's stop whinging and simply perform.
Lets see some home grown enterprise here guys!

Thanks.

ONQ.

PS With reference to other comments, don't let us forget that ONE OF David McWilliams jobs is to help sell newspapers.
Two years ago on his mini series on TV he told us credit "would become dearer" because the Germans were going to stop saving and start spending.
He DID NOT predict the current Global Financial Meltdown - so much for McWilliams foresight!


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## Shawady (16 Sep 2009)

[broken link removed]

Dermot Desmond isn't a fan either. He seems to be suggesting loaning the 60 billion to the banks but letting each bank look after their own bad property loans.


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## Latrade (16 Sep 2009)

Shawady said:


> [broken link removed]
> 
> Dermot Desmond isn't a fan either. He seems to be suggesting loaning the 60 billion to the banks but letting each bank look after their own bad property loans.


 
Mr Desmond has a considerable property portfolio. When the details are published, the rates paid by the state will effectivley create the market value and Mr Desmond will see a considerable loss immediately. I think that's why he's not a fan.


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## censuspro (16 Sep 2009)

Those in favour of NAMA can they please outline the benefits of NAMA for the Irish taxpayer, because I cant see any!

I think McWilliams has hit the nail on the head with this. It's absolute beggars belief to think that you should pay over the odds for anything on the basis that it might be more valuable in 10 years time.

Lets say NAMA goes ahead and buys the loans from the banks, then what happens, there is no guarantee that the banks will start lending again?

We should just let the banks fall, what is so wrong with that. McWilliams pointed out it happens in all around the world but for some reason in Ireland we tend to think that things are different here just like we were told that the property boom would go on forever. Now we're being told that it will damage our reputation, international debt will become more expensive.

No NAMA, No Fine Gael alternative, No Nationalisation. Just let them go.


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## canicemcavoy (16 Sep 2009)

censuspro said:


> Those in favour of NAMA can they please outline the benefits of NAMA for the Irish taxpayer, because I cant see any!


 
I suggest the best thing to do is go on the protest and write letters to your TDs. Probably won't do any good, but at least my conscience will be clear when I emigrate.


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## Complainer (17 Sep 2009)

Shawady said:


> [broken link removed]
> 
> Dermot Desmond isn't a fan either. He seems to be suggesting loaning the 60 billion to the banks but letting each bank look after their own bad property loans.


Given that his right-hand man Dr Michael Walsh presided over Irish Nationwide as Chairman for the period where they ran up their dodgy loans, I don't think Desmond and his cronies have much credibility here.


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## onq (18 Sep 2009)

censuspro said:


> Those in favour of NAMA can they please outline the benefits of NAMA for the Irish taxpayer, because I cant see any!



<negative stuff snipped>

Its very simple.

NAMA allows the Government to buy bad debts at a discount using Government Bonds - not "money", so thus far it has cost the taxpayer no money, as I understand it.
There is no downside unless the property market remains stagnant - with the EU moving forward this is unlikely.

This suggests a break even scenario is possible, even likely, and the real possibility exists of a small profit.

A mechanism binds the Banks into paying for non-performing debts, further reducing the risk to the taxpayer, again at no immediate cost.
It is a masterful use of futures marketeering principles and Bond issue practices which are known to work.
There is no bail-out in this for the builders.

NAMA actually scored a coup by keeping said debt in the control of the state, while supporting the banks just enough to prevent them from being either taken over by foreign interests OR becoming a huge immediate burden on the taxpayer by becoming nationalised.

Because they remain independent, any further "hits" on the Banks can be taken initially by them, with the "let them go bankrupt" option still being held in abeyance should even more merde hit the fan.
So matters I think will be dealt with professionally and to Lenihan's credit, quite cleverly, in relation to the builders bad debts.
As a benefit, the increased indebtedness of the Banks to NAMA will allow the Government to control and oversee an orderly clean out of the top management which got them into this mess.

I have some sympathy with the people involved, particularly in AIB, when it seemed they were just following the market leader Anglo-Irish, at a time when it seemed the right thing to do.

HOWEVER...

The major outstanding debt is the Derivatives Portfolio debt.

This resulted from - as I understand it, and I may stand corrected - unwise trading in the futures markets.
This debt has the potential to bankrupt the entire world economy if allowed to.
This has been commented on in these forums and it dwarfs the bad debts arising from the construction industry
Personally I think we need to legislate this problem out of existence by declaring it to be a form of unauthorised gambling and simply not honouring the debt.
The entire world needs to do this in a concerted move, or servicing the debt will cripple us for decades.

FWIW

ONQ.


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## Bronte (18 Sep 2009)

onq said:


> <negative stuff snipped>
> 
> 
> I have some sympathy with the people involved, particularly in AIB, when it seemed they were just following the market leader Anglo-Irish, at a time when it seemed the right thing to do.
> ...


 
You are kidding right?  Just because someone walks into a fire doesn't mean one should follow.  That's riduculous.


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## Kine (18 Sep 2009)

Bronte said:


> You are kidding right? Just because someone walks into a fire doesn't mean one should follow. That's riduculous.


 
Bronte, to most people your reaction would seem to be the correct one. However, Anglo Irish only came about as a result of an area of the market AIB and BoI were not lending too. As a consequence, Anglo built up a huge business in a relatively short space of time and if memory serves me correctly Anglo were the main lenders to about the top 60% or so of developers. All the other banks decided they wanted a piece of what was, at the time, a very lucrative pie. Some (such as AIB) pursued market share more aggressively than otehrs and as a result, will get burnt slightly worse. 

Remember, when BoI and AIB's shareholders are shouting at the CEO at every AGM up to the bubble about how Anglo's share price was going up and up and up and why they weren't making the returns, most shareholders don't want to hear about conservative lending (back then). Perceptions will change for a while, but in the end, we'll end up right back where we were a few years ago.


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## Complainer (19 Sep 2009)

onq said:


> There is no downside unless the property market remains stagnant - with the EU moving forward this is unlikely.


There is the very real possibility that the 'remaining stagnant' is a pipe dream, and that property still has a long way to drop before prices become realistic. Leninhan's line of 'only 10% needed over 10 years' sounds like a bit of a pipe dream, and worse, it incentivises everybody in the system (banks, developers, Dept Finance) to create another property bubble.



onq said:


> Because they remain independent, any further "hits" on the Banks can be taken initially by them, with the "let them go bankrupt" option still being held in abeyance should even more merde hit the fan.


This is fiction. The banks have been told in words and in deeds that they will not be let go bankrupt in any circumstances. So do you really think they will be worried about reckless lending when they get their fresh funding?


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## censuspro (19 Sep 2009)

Complainer said:


> This is fiction. The banks have been told in words and in deeds that they will not be let go bankrupt in any circumstances. So do you really think they will be worried about reckless lending when they get their fresh funding?


 
Correct, Lenihan and Cowen have stated that they will not let these banks fail.


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## onq (22 Sep 2009)

censuspro said:


> Correct, Lenihan and Cowen have stated that they will not let these banks fail.



<chuckle>

First you're complaining when the bubble we were all chasing burst - now you're believing what politicians say - you guys never learn, do you?



ONQ.


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## Purple (22 Sep 2009)

Complainer said:


> There is the very real possibility that the 'remaining stagnant' is a pipe dream, and that property still has a long way to drop before prices become realistic. Leninhan's line of 'only 10% needed over 10 years' sounds like a bit of a pipe dream, and worse, it incentivises everybody in the system (banks, developers, Dept Finance) to create another property bubble.


The correct way to value property is to look at yields. Property yields in Dublin are quite high at the moment. Prices based on yields rather than capital appreciation are far healthier for an economy so this whole crash is, in the long run, a good thing. Capital investment in the productive, export focused part of the economy is what the government should be aiming for (rather than interfering in the market to look after their mates and produce a property bubble). Therefore in the long run (over the next 10 years) I would be happy if there was no appreciation in property prices. This would keep speculative investor landlords out of the market and keep costs down for business and the populace generally. The government now has a key opportunity to put proper financial regulation in place ( the light touch/ heave hand argument is a red herring; the real requirement is competence and teeth) and the boards of the banks will be under more scrutiny than ever.   



Complainer said:


> This is fiction. The banks have been told in words and in deeds that they will not be let go bankrupt in any circumstances. So do you really think they will be worried about reckless lending when they get their fresh funding?


 The state, through NAMA, has a lean on all of the major banks. I don’t think they can afford to let that happen.


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## canicemcavoy (22 Sep 2009)

> I don’t think they can afford to let that happen.


 
They couldn't afford to have a bubble in the first place, but they let _that_ happen.


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## Purple (22 Sep 2009)

canicemcavoy said:


> They couldn't afford to have a bubble in the first place, but they let _that_ happen.



Nice sound bite. 
We couldn't afford the bubble but the polit-bureau that’s been carving up the country for the last 10 years (er, sorry; the social partners) could afford it. In fact they made a fortune out of it (developers, bankers and public sector employees). 
Now that democracy has been re-established it is not unreasonable to expect things to change for the better.


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## Complainer (22 Sep 2009)

onq said:


> - now you're believing what politicians say - you guys never learn, do you?


It's a nice diversion attempt, but it's not going to work. It's not just a matter of what they say, it is a matter of the €54 billion of our money that they are handing over. Money talks.

Are you seriously suggesting that you think AIB or BOI would be let fail at any stage in the future?


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## canicemcavoy (22 Sep 2009)

Purple said:


> Nice sound bite.
> We couldn't afford the bubble but the polit-bureau that’s been carving up the country for the last 10 years (er, sorry; the social partners) could afford it. In fact they made a fortune out of it (developers, bankers and public sector employees).
> Now that democracy has been re-established it is not unreasonable to expect things to change for the better.


 
Sorry, but the last person I heard say _they_ can't afford to let something happen, was Liz O'Kane in relation to negative equity:

*[broken link removed]*

*Mary*: Do you think that the property market could crash?
*Liz:* No... I don't think any government can afford to let that happen. A levelling off is what we are seeing.

Needless to say, our national TV channel's property expert got quite a surprise when, oops, they did let it happen.


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## Bronte (22 Sep 2009)

Purple said:


> Now that democracy has been re-established


  Where do you see this?  You're very optimistic I hope you are right but I'm too pessimistic to believe you are.


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## Purple (22 Sep 2009)

canicemcavoy said:


> Sorry, but the last person I heard say _they_ can't afford to let something happen, was Liz O'Kane in relation to negative equity:
> 
> *[broken link removed]*
> 
> ...




My granny once said that she couldn't afford to get her windows replaced but it turned out she could... since we are introducing utterly irrelevant topics.


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## Purple (22 Sep 2009)

Bronte said:


> Where do you see this?  You're very optimistic I hope you are right but I'm too pessimistic to believe you are.



The vested interest groups are no longer running the country; the social partnership carve-up is over. We are now being governed by the government again rather than the unholy alliance of developers, public sector union fat-cats and other vested interest groups who have carved up the country for the last decade.


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## canicemcavoy (22 Sep 2009)

Purple said:


> My granny once said that she couldn't afford to get her windows replaced but it turned out she could... since we are introducing utterly irrelevant topics.


 
Your point, as it was, was that somehow, governments cannot afford to let catastrophes happen. I'm pointing out that due to mismanagement, self-interest and short-term political gain, governments _do_ let catastrophes happen. Such catastrophes include the bubble itself, which short-term was good for government revenue but which most people knew could not last. Cowen himself says he wanted to do something about it, but, eh, just didn't get around to it. (Maybe was washing his hair that night.)

As for hifalutin statements such as "democracy has been re-established", even Fianna Fail canvassers don't come out with such codswallop. In case you haven't noticed, the current government has the lowest support of any in the history of the state. Joan Burton has already said that Lenihan consulted with banks over NAMA, but not with the opposition who would actually form the government if an election was held tomorrow.

So much for democracy.


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## Purple (22 Sep 2009)

Your point seems to be that the government (any government?) doesn’t have the ability to run the economy properly. I disagree. I think that successive governments did a very good job between the mid 80’s and the early 00’s. It was only when vested interest groups (the social partners) were given what amounted to executive decision making powers that things went wrong. I blame Bertie Ahern for that. Cowan is tarnished by association and by the fact that he was minister for finance during some of the worst excesses but now the vested interest groups are outside the decision making process again (where they belong) and buy everyone off Bertie is also gone. Soon Cowan will be gone (from power and from the leadership of Fianna Fail) so it’s not unreasonable to expect a return to reasonably competent government. 
I’d be happier if Enda Kenny was not the leader of FG and someone like Ruairi Quinn was leader of Labour but at least when the people elect the next government that government will govern, rather than it just being one part of a committee that governs.


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## canicemcavoy (22 Sep 2009)

Purple said:


> I’d be happier if Enda Kenny was not the leader of FG and someone like Ruairi Quinn was leader of Labour but at least when the people elect the next government that government will govern, rather than it just being one part of a committee that governs.


 
Well, we can certainly agree on that! Quinn was the last good Minister of Finance we had. The later ones had it easy, simply giving away goodies that Quinn's policies had been responsible for. I always find it ironic when PD (or ex-PD) supporters ascribe successes to their party which Quinn was actually responsible for.


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## Shawady (22 Sep 2009)

Purple said:


> I blame Bertie Ahern for that. Cowan is tarnished by association and by the fact that he was minister for finance during some of the worst excesses but now the vested interest groups are outside the decision making process again (where they belong) and buy everyone off Bertie is also gone. Soon Cowan will be gone (from power and from the leadership of Fianna Fail) so it’s not unreasonable to expect a return to reasonably competent government.


 
Cowen is still keen to go the social partnership route. Only last week when potential pay cuts were being talked about he said he hoped it could be done through social partnership.
And when Impact failed to get a majority for strikes earlier in the year, he called back in the unions and saved them from a potentially embarrassing situation.

But I aggree, his days are numbered.


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## censuspro (19 Oct 2009)

Did anyone read the article in the Sunday Business Post ? He has a point to some degree, just looked at the NAMA website and PWC won the contract for tax advice and Arthur Cox for Legal.


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## z101 (1 Nov 2009)

I am amazed at what seems like a serialisation thats coming out at the moment on his new book. It's like a soap opera and would have though McWilliams would have been a bit above that kind of opportunism just to sell a book. Seems like he has gotten that bad advice on this occasion as I am sure this is his publicists doing.


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