# NAMA and the 46 academics' letter



## Duke of Marmalade (13 Oct 2017)

It now seems that NAMA will pay off its debts 3 years ahead of schedule and will ultimately return a profit of €3bn to taxpayers.

Contrast that with this letter signed by 46 academics at the time the NAMA Bill was published.  Led by Professors Brian Lucey and Karl Whelan it predicted that NAMA would lose the taxpayer €30bn and in typical leftie style charactarised this as a massive transfer of wealth to developers.

We expected the likes of Fierce Doherty to object on ideological grounds but I wonder do the good professors even blush when they re-read that open letter.


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## odyssey06 (13 Oct 2017)

Just because it wasn't a huge disaster, doesn't mean it was a huge success.

I very much doubt that the firesale of properties by NAMA brought in the best value for the assets, or was in fact the best use that could be made by the state of those assets.

Given the rise in property values since the crash, a blind monkey could probably have managed NAMA without losing money.

A huge success would have gotten better value from this transaction ... Project Eagle anyone?
http://www.thejournal.ie/project-eagle-timeline-2978770-Mar2017/


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## Brendan Burgess (13 Oct 2017)

Here are some extracts:

"This it will do by taking the market price as a basis and then adjusting upwards to “fair economic value”. This concept works on the assumption that in the short term, property and development prices will rise. Thus, Nama will make a profit and it would be somehow unfair to now pay a low asset price.

Consequently, it is clear that the Government is determined to pay a price for land and speculative developments greatly in excess of the market clearing price.

it is clear that the Government will pay significantly above market value for these loans. Current estimates are that the State may issue agency bonds worth upwards of €60 billion in total for the €90 billion book value."

I certainly remember at the time being horrified by the concept of fair economic value instead of market value.

They also did call for the shareholders to be wiped out, which also did happen.

They called for the nationalisation of the banks, which did happen, in effect.

It certainly seemed a lot riskier at the time.


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## Brendan Burgess (13 Oct 2017)

Guaranteeing the depositors in Anglo Irish Bank and Irish Nationwide was a mistake. They should have taken losses as should the bondholders.

I think that guaranteeing the depositors in the systemic banks was right.  And it wouldn't have cost as much. 

NAMA was the right idea to stop a fire sale and total collapse of the financial system.

Brendan


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## noproblem (13 Oct 2017)

One could say that they did some good but the secrecy surrounding a lot of their business activities left a lot to be desired. In saying that, a huge problem was addressed and a lot done.


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## Duke of Marmalade (13 Oct 2017)

odyssey06 said:


> Given the rise in property values since the crash, a blind monkey could probably have managed NAMA without losing money.


Do you think NAMA might have had something to do with this rise in property values?  The good academics simply wanted to leave this all to the market (in their cushy taxpayer jobs why wouldn't they?).  Where do you think property values or indeed our whole economy would be now if we had followed that advice?

Looking down the list of signatories I see the usual lefties from irisheconomy.ie e.g. Comrade Gurdgiev.  What was of more interest was the conspicuous absence of some of the blogsters, notably Professor Lane (now head of CBI), Professor McHale (now head of Fiscal Advisory Council) and Colm McCarthy.  My respect for these three was always high and now with hindsight I see that it should have been higher still.


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## Palerider (13 Oct 2017)

Nama was the largest property company in the world at one point which is hard to believe.

It was staffed by very many people with zero real property management experience, ex bankers for example, civil servants, many bankers had taken voluntary packages from their lifelong former employers and were simply delighted to be able to get a job, any job in many cases.

Whilst the concept was good, it was too secretive, took too much money to run and had a civil service ethos within, I say this from speaking to ex Nama managers.

Hindsight discloses that virtually every property purchased at Auction some years back at market value and not at a discount as Nama acquired them has risen in value by a multiple percentile.

I'm inclined to agree that with little manual intervention, acquiring heavily discounted assets and a smaller team that this would inevitably have delivered payback, no plaudits from me for their expertise, a lot is down to the placebo effect, you build an island out of plastic and people applaud the engineers and architects when it then rises with the tide, inevitable.


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## Duke of Marmalade (13 Oct 2017)

I suppose I was really trying to expose the signatories of that letter rather than hail NAMA as a huge success, I have changed the Thread subject.  It is clear that some of the contributors so far would have written a very different letter along the lines that NAMA was equivalent to building plastic islands.


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## odyssey06 (13 Oct 2017)

Duke of Marmalade said:


> Do you think NAMA might have had something to do with this rise in property values?



No, I think that is down to the inherent strength and demand of the Irish economy - when it is not being sabotaged by government, semi-states or too big to fail banking dinosaurs (which act like semi-states because they know the government will underwrite their mistakes).


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## Duke of Marmalade (13 Oct 2017)

odyssey06 said:


> No, I think that is down to the inherent strength and demand of the Irish economy - when it is not being sabotaged by government, semi-states or too big to fail banking dinosaurs (which act like semi-states because they know the government will underwrite their mistakes).


I guess even Fierce would stop short of closing down the government, the semi states and the banks.  I was hoping this thread would rise a little above The Depths.

If the academics had been proven right we would now be deafened by a mighty "I told you so".  Now that they were so clearly wrong my guess is they wouldn't even admit it; they would have some sort of plastic island explanation or other.  After all Prof Lucey never did admit to being wrong in recommending that we should sell Anglo's deposits for €25bn


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## Brendan Burgess (13 Oct 2017)

Duke of Marmalade said:


> Professor McHale (now head of Fiscal Advisory Council)




He is the former head of the Irish Fiscal Advisory Council.

The current head is Séamus Coffey another non-signatory. 

Brendan


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## Brendan Burgess (13 Oct 2017)

The odd thing is that Brian Lucey and Gurdgiev roped in some very good people to signing that letter.

They later wrote another letter calling for up to €30 billion in debt forgiveness for mortgage holders.

*Mortgage debt forgiveness is essential to recovery*

A lot of the signatories of the NAMA letter didn't sign this one, but some new people did. 

I have spoken to some of the signatories since and they do regret signing it. I think it was a sort of committee job. 


"In the case of Ireland, such a formula would most likely lead to an implicit writedown of at least 30 per cent of the more recent mortgage amounts on average, yielding an expected total cost to the entire system of circa €37 billion to €49 billion.

...

The losses that will be crystallised in the banks can be filled with additional Nama bonds – now that we have Nama, we may as well make some use of it. This will increase the interest burden on the taxpayer, or in the end perhaps on the ECB but we argue that, in the overall socioeconomic context, debt forgiveness to the maximum feasible extent is a first step to restoring the economy and society."


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## Duke of Marmalade (13 Oct 2017)

Brendan Burgess said:


> The odd thing is that Brian Lucey and Gurdgiev roped in some very good people to signing that letter.
> 
> They later wrote another letter calling for up to €30 billion in debt forgiveness for mortgage holders.
> 
> ...


I didn't notice that one.  Lucey just keeps on giving.  If he was a consultant surgeon he would find it impossible to get professional indemnity cover, as an academic he is untouchable.


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## Brendan Burgess (13 Oct 2017)

Duke of Marmalade said:


> as an academic he is untouchable.



He was given a chair recently, and not to sit down on

https://www.tcd.ie/business/people/brian-lucey.php

He still writes a column for the Examiner.


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## dub_nerd (13 Oct 2017)

Duke of Marmalade said:


> Do you think NAMA might have had something to do with this rise in property values?


You say that like it's a good thing. Like we should be proud that we've hiked the median Dublin house price by 60% in five years, back to a dozen times the median wage. That we are back to seriously unaffordable levels and approaching the bubble territory where our whole mess began. As someone else said, it would be hard not to make a packet as the world's biggest property speculator when you get to choke off supply and set your own prices. Never mind that we still have the third highest debt per capita in the world and have made sure that property will continue to be a millstone around the necks of the next generation.


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## Duke of Marmalade (13 Oct 2017)

dub_nerd said:


> You say that like it's a good thing. Like we should be proud that we've hiked the median Dublin house price by 60% in five years, back to a dozen times the median wage. That we are back to seriously unaffordable levels and approaching the bubble territory where our whole mess began.


  I am not a million miles from you on that, but my comment was in the context of that letter which predicted that NAMA would lead to massive losses for the Irish taxpayer.  I remember myself reading that letter at the time. I thought yes NAMA are probably paying over the odds, but maybe the losses will be much more manageable than the learned ones were predicting. 





> As someone else said, it would be hard not to make a packet as the world's biggest property speculator when you get to choke off supply and set your own prices.


Again in the context of that letter this may indeed have been obvious to yourself and oddyssey but that is all the more reason to question how 46 academics in the field missed your blindingly obvious reasoning.


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## Duke of Marmalade (13 Oct 2017)

Palerider said:


> Nama was the largest property company in the world at one point which is hard to believe.
> 
> It was staffed by very many people with zero real property management experience, ex bankers for example, civil servants, many bankers had taken voluntary packages from their lifelong former employers and were simply delighted to be able to get a job, any job in many cases.


It shows you how over hyped property management is when a bunch of amateurs can so outperform the dire warnings of the learned ones.


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## PMU (13 Oct 2017)

dub_nerd said:


> You say that like it's a good thing. Like we should be proud that we've hiked the median Dublin house price by 60% in five years, back to a dozen times the median wage. That we are back to seriously unaffordable levels and approaching the bubble territory where our whole mess began.


  There is an objective look at Ireland's housing market here in an OECD report on the Irish economy from 2015. http://www.oecd.org/eco/surveys/Ireland-2015-overview.pdf.  Housing is on page  26.  House prices were back to year 2000 levels by 2015.  They have gone up since then, but if you can buy an asset for about what you paid fifteen years go, I wouldn't say it's pricey.   The house price - to - income ratio is also back to where it was in 2000; this would indicate good value in present house prices.  Residential prices have increased, but from a very low base in 2009.  There's nothing here to indicate that house prices are either high in absolute terms or represent poor value.  They're not unaffordable or approaching bubble territory.  But poor policy instruments like  the Help to Buy scheme that push money into housing that exhibits inelasticity of supply will just push prices up further.


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## Palerider (13 Oct 2017)

Duke of Marmalade said:


> I was hoping this thread would rise a little above The Depths.
> 
> 
> Quote above..
> ...


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## Duke of Marmalade (13 Oct 2017)

Possibly because of my original misnaming this thread many contributors have focused on the performance of NAMA.  But does anybody seriously believe that letter stands up to any scrutiny?


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## Brendan Burgess (14 Oct 2017)

Duke of Marmalade said:


> It shows you how over hyped property management is when a bunch of amateurs can so outperform the dire warnings of the learned ones.



That is a brilliant summary of the issues.


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## noproblem (14 Oct 2017)

Funny you should say that because, Nama had to employ the very people they took the property from in order to show them what to do with it. Nama also used a former boss of the revenue commissioners to lead the way, I wonder why? Most people know NAMA did some good, but we'll never know what underhand methodology was used. I've no doubt but some will say, "needs be" but as Mick Wallace found, it was a closed shop with powers that surpassed anything this Irish state has ever seen. It still has those powers, uses them, abuses them when they have to, and nothing you or me or indeed anyone can do about it. Do people really believe Daly and McDonagh were the property management gurus in NAMA , AS THE ABOVE STATEMENT WOULD SEEM TO SUGGEST? SERIOUSLY?


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## MrEarl (16 Oct 2017)

I wish the massive write downs on the loans "sold" to NAMA would be remembered and mentioned, each time there is mention of NAMA potentially making a profit.

Discounts on the loans acquired from AIB, BoI, IBRC etc. all varied, but ranged up to 60% (or possibly even a little more) of the face value of the various loan portfolios !


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## Brendan Burgess (16 Oct 2017)

Hi Mr Earl 

These loans were sold at a discount to their face value. 

But they were sold well above their market value, which was the complaint in the academics' letter. 

There were sold at their long term economic value which is why the academics thought that the taxpayer would lose €30 billion. 

Brendan


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## MrEarl (16 Oct 2017)

Hello Mr. Burgess,

Yes, I fully appreciate that - but they are two different points  

Basically, I'm saying that we should not forget how much was lost on the back of these loans, not just how much NAMA may ultimately make in profit.


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