# IT-OPINION:Nama is in effect Fianna Fáil’s shrine to the property bubble.



## Teatime (9 Jul 2009)

[broken link removed]

*OPINION:* NAMA is in effect Fianna Fáil’s shrine to the property bubble for which the party still yearns. Prepare to pay 10 per cent more in income tax for the next 10 years to pay for it all . . . we are headed for national bankruptcy, argues *MORGAN KELLY......*


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## onq (9 Jul 2009)

*Re: Excellent article (IMHO)*

I read this and it much of it chimed with what I've posted here.

Why haven't we indentured the Banks into paying back from profits?

I read on, intrigued.

Then I realised the tone had changed to one of hectoring the goverhment and I thought

"I hope this isn't another George Lee style Blueshirt about to launch a political career..."

FWIW

ONQ


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## Ghodadaba (9 Jul 2009)

*Re: Excellent article (IMHO)*

It is entertaining, but a touch shrill, don't you think? To be fair to Kelly, he has been reasonably accurate with many of his predictions so far. But he has become intoxicated with his own notoriety and is now obsessed with out dooming everyone else around. It is the Morgan Kelly brand: 'frighten the life out of everyone, get my name in the papers and make everyone scared of me......'


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## Duke of Marmalade (10 Jul 2009)

*Re: Excellent article (IMHO)*

Frightening stuff from Kelly, as usual, but the new point is surely flawed. He argues that there was a silver bullet for the banking crisis - let the bondholders take the hit just as Kelly's new hero, Obama, did with General Motors. For a start GM does not have depositors.

The point Kelly is deliberately missing is that bondholders only take the hit in law when the company goes bust. As has been pointed out many times here on AAM letting our banking system go bust was not an option.

Kelly's armageddon prognosis may be right, but it is quite disingenuous of him to suggest that we missed a silver bullet to all this.


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## Statler (10 Jul 2009)

*Re: Excellent article (IMHO)*

Overall, I don’t think the article adds anything to the NAMA debate.

I agree with Duke that the notion that bondholders could have been left to take the hit is fundamentally flawed. I also disagree with Kelly’s assertion that “Underlying Nama is the delusion that the collapse of our property bubble is a temporary downturn.”

While much about NAMA is unlikely to be clarified before legislation is brought forward, I can’t shake the feeling that NAMA is a charade. The proposal is about liquidity management rather than asset management. The agency is a construct to allow the government overpay for loans with bonds it would have difficulty selling on an open market in such volume. 

With a staff of 30 or 40 NAMA cannot hope to effectively manage the loans it is to have oversight of/ responsibility for and day-to-day management will have to be left with the financial institutions that originated those loans in the first instance. Sure NAMA will probably have ultimate approval on actions taken, but not having direct interaction in a workout situation effectively removes it form the decision-making process. In most instances where approval from NAMA is required an experienced lender will be able to present their preferred option as a fait accompli. 

Overpaying for the loans (personal opinion is that we could see them transferred at an average of 80-85% of book) will avoid the necessity to inject significant capital into the banks immediately. It could be argued that it will, via the proposed levy, incentivise the lenders to obtain the maximum recovery possible. Taking a medium term view, some value will be recovered from the loans as part-finished developments are completed, fire-sales of assets are avoided and the economy (hopefully) stabilises and eventually recovers. Losses will be recognised slowly as the workout process continues, allowing the government to fund them over a longer period rather than up front. Part of this loss can be recovered from the banks via the levy, which will be paid from future profits. A point that seems to have been missed in the debate is that, at their core, Irish financials excluding Anglo and Irish Nationwide are viable, sustainable and profitable businesses. 

My conclusion? NAMA is window dressing and nothing more. The loans concerned will effectively remain with the institutions that originated them and the taxpayer is still picking up the tab, but the scale of the problem will be fudged to manage liquidity.


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## leesider29 (12 Jul 2009)

*Re: Excellent article (IMHO)*

well then isn't the system seriously flawed if the bondholders do not take any hit at all but the tax payer takes the full brunt. After all the bondholders are as such investors in the banks the taxpayer is not!!

With nama or nationalisation the taxpayer takes the hit, reducing some of this hit could be accomplished when the guarantee scheme has expired and the bondholders are hit to some extent.....there has to be a happy medium not just black and white!

Brian Lenihan seems to think taking on the bondholders would damage our reputation but don't you think a bankrupt country from bank bailouts would damage our reputation just a small bit more???


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## goosebump (22 Jul 2009)

*Re: Excellent article (IMHO)*



leesider29 said:


> well then isn't the system seriously flawed if the bondholders do not take any hit at all but the tax payer takes the full brunt. After all the bondholders are as such investors in the banks the taxpayer is not!!



There is nothing in the system to prevent the bondholders taking a hit.

That's just the choice we've made. If we didn't have to borrow €20bn this year from (you guessed it) bondholders, we might have had a few options.

Dumping on the bondholders would be the equivalent of torching your bank managers car and then going in to ask him for a mortgage.


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