# You can watch the Dail Committee discussion live



## Brendan Burgess (31 Aug 2009)

here:

http://www.rte.ie/live/


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## Brendan Burgess (31 Aug 2009)

I see George Lee has appeared.


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## Brendan Burgess (31 Aug 2009)

Joan Burton has been hogging the bit I have watched since 3pm. The Ceann Comhairle is trying to shut her up, but she won't stop.


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## Brendan Burgess (31 Aug 2009)

Now the Minister is trying to reply to John Bruton's 14 questions, Joan Burton keeps interrupting to make the same points over and over again.


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## Brendan Burgess (31 Aug 2009)

It is a pity that we don't allow bad language on Askaboutmoney. I am shouting at the screen every time Joan Burton interrrupts.


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## smiley (31 Aug 2009)

The scary thing is she doesn't understand what the minister is talking about and yet she is labours finance spokesperson. God forbid.


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## Mpsox (31 Aug 2009)

Brendan said:


> It is a pity that we don't allow bad language on Askaboutmoney. I am shouting at the screen every time Joan Burton interrrupts.


 
Can you not just turn the sound down?, I find it's the best way of coping with Joan Burton


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## Brendan Burgess (31 Aug 2009)

smiley said:


> The scary thing is she doesn't understand what the minister is talking about and yet she is labours finance spokesperson. .



Actually, she does have a reasonable grasp. But she is just not allowing anyone else to speak. The Ceann Comhairle had to cut Richard Bruton short and I would have liked to hear from him.

Now Senator Quinn has been called to speak, but I expect that they will limit his time.

Brendan


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## Brendan Burgess (31 Aug 2009)

FRank Fahy asking John Mulcahy about his views on the property bubble. 

Good question


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## Brendan Burgess (31 Aug 2009)

the bonds will be placed at 1.5% coupon?


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## Brendan Burgess (31 Aug 2009)

The government's preference shares have warrants to buy the shares in AIB and Bank of Ireland at a price just under 60 cents.


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## Brendan Burgess (31 Aug 2009)

Lenihan: "The debate to date suggests that the entire state and the banks are insolvent.


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## Brendan Burgess (31 Aug 2009)

She is at it again while the Minister is answering some interesting questions from Deputy Fahey.


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## Sunny (31 Aug 2009)

Brendan said:


> She is at it again while the Minister is answering some interesting questions from Deputy Fahey.


 
Lenihan is doing well. She is coming across very badly. The opposition have had a bad week on this issue


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## canicemcavoy (31 Aug 2009)

Frank Fahey "interesting"? I hope that is a tongue-in-cheek euphemism, Brendan, for his idea that we're all going to make loads of money on NAMA as - in his words on Newstalk the other days - property is already rising (in which case do we need NAMA?)

Or what about Lenihan saying that if the valuation from the "independent valuers" come back and he doesn't like it he gets to decide?

Let's stop the distasteful bashing of Bruton and focus on what he's saying please.


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## Brendan Burgess (31 Aug 2009)

I have a low opinion of Frank Fahey generally.

His questions were interesting.

He asked John Mulcahy , the valuer, what his record on predicting the market was. 

He asked him about his qualifications.

He asked how development land on the edge of towns would be valued.

They are interesting questions.

He is now answering them, during the break from Joan Burton's interruptions.


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## Sunny (31 Aug 2009)

Valuation process does sound pretty robust. Would like to hear more about these market 'norms' and the 7 year period they are talking about


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## Brendan Burgess (31 Aug 2009)

George Lee tried to get in but I don't think he did. It's not clear. John Mulcahy may have answered a question in the crossfire.


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## canicemcavoy (31 Aug 2009)

Sunny said:


> Valuation process does sound pretty robust.


 
Can you summarise it. What do they consider the "norm"? House prices from 1991 + inflation?

Mulcahy states that on average prices recover by 88% from trough; (a) how does he get the 88% figure, (b) how long does he give the recovery and (c) the problem is, we're still not sure how deep this trough is?


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## Brendan Burgess (31 Aug 2009)

The minutes will be posted on the Dail website, tonight or tomorrow.

I didn't follow it, but he seemed to think that the average recovery in property slumps from trough was 88% in 7 years. He also felt we were at the trough now. 

George Lee seemed to query that, but didn't press it.


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## Brendan Burgess (31 Aug 2009)

Chris Andrews wants to see "the workers protected from a cynical cost cutting exercize" in the consolidation of banks.


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## canicemcavoy (31 Aug 2009)

Brendan said:


> The minutes will be posted on the Dail website, tonight or tomorrow.
> 
> I didn't follow it, but he seemed to think that the average recovery in property slumps from trough was 88% in 7 years. He also felt we were at the trough now.
> 
> George Lee seemed to query that, but didn't press it.


 
So, we're being told that we should buy into NAMA because:

(a) we're *right now* at the bottom of the market
(b) the next 7 years will see an average *9.5% increase* in property prices per year

?


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## DerKaiser (31 Aug 2009)

Brendan said:


> The minutes will be posted on the Dail website, tonight or tomorrow.
> 
> I didn't follow it, but he seemed to think that the average recovery in property slumps from trough was 88% in 7 years. He also felt we were at the trough now.
> 
> George Lee seemed to query that, but didn't press it.


 
Averages of slumps in other countries bear no relation to what our experience will be. 

I wouldn't place much confidence in anyone that thinks we will somehow follow a path based on averages of other countries. I'd be more interested in:
1) The extremes in terms of recovery from a trough
2) How in the name of God we can be sure we have reached the bottom

I'd have a lot more confidence if the valuation process (arriving at Economic value) started from 1st principles, i.e.
1) The rent less expenses expected on completed properties
2) The expected costs and times to completion on properties to be completed and the resultant rentals streams on these
3) What kind of return we can ever hope to make from land that will not be developed


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## Brendan Burgess (31 Aug 2009)

Folks

Wait until you see the minutes. As I say, I didn't fully follow his arguments.


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## Brendan Burgess (31 Aug 2009)

They are all clear that property with planning permission on the outskirts of towns in rural ireland should be valued as agricultural land.


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## Brendan Burgess (31 Aug 2009)

OK, Joan Burton has raised John Mulcahy's assessment.

Commercial Property has tended to recover "remarkably" from trough to peak. 88% in 7 years(?).

However, he and the Minister have emphasised that this  will not be used in the valuations. 

Joan Burton had some point about 30% or 20% haircut, but it didn't get teased out. She asked for a pen and paper.


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## Brendan Burgess (31 Aug 2009)

> Some of the banks have done interest rate swaps relating to the leases. So the NAMA will have the power to buy derivatives.
> 
> The NAMA will not be buying the trading books of the banks



- Brendan McDonagh


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## smiley (31 Aug 2009)

I think they have a good guy in John Mulcahy.

Oh please Joan shut up!


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## Brendan Burgess (31 Aug 2009)

Joan does have some good points, if she used fewer words.


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## canicemcavoy (31 Aug 2009)

Brendan said:


> OK, Joan Burton has raised John Mulcahy's assessment.
> 
> Commercial Property has tended to recover "remarkably" from trough to peak. 88% in 7 years(?).
> 
> However, he and the Minister have emphasised that this will not be used in the valuations.


 
If that factoid had nothing to do with the valuation process, I wonder why he wasted the committee's time bringing it up. Did he mention what actually _is_ the valuation process? From the sounds of it, he seems to be thinking aloud.


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## smiley (31 Aug 2009)

canicemcavoy said:


> Did he mention what actually _is_ the valuation process? From the sounds of it, he seems to be thinking aloud.



Best to check the minutes later on i feel. His contribution was probably the most interesting/important part this afternoon.


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## Brendan Burgess (31 Aug 2009)

Joan Burton is gone and now , believe it or not, Pat Rabitte is heckling. 

I suspect he has no idea what is going on, so is resorting to slagging people.

The Labour Party representatives are being totally irresponsible.


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## Sunny (31 Aug 2009)

canicemcavoy said:


> If that factoid had nothing to do with the valuation process, I wonder why he wasted the committee's time bringing it up. Did he mention what actually _is_ the valuation process? From the sounds of it, he seems to be thinking aloud.


 
There is a template and set out forumla that each independent valuation will have to follow. The valuer will have to prove where he got his figures from and the valuation will then be analysed. He didn't go into detail but I think the formula may be published in the bill. As Brendan said, you would be better off reading the minutes.


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## Brendan Burgess (31 Aug 2009)

*Alan Shatter* has congratulated the  Minister on bringing out the discussion paper to allow people make suggestions.

He has asked when will the bill be published.

He wants to see the valuations regulations published in draft form, so that we can discuss the concept of "long term economic value".

He is now asking John Mulcahy how his historical analysis can apply to the Irish situation which is unprecedented in its scale and economic backdrop.



> We are ignoring the growing number of impaired home mortgages. Banks were paying 110% of the property price at the top of the market.  What does this mean for the capitalization of Irish banks. We simply don't know the level of impairment.


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## canicemcavoy (31 Aug 2009)

Sunny said:


> There is a template and set out forumla that each independent valuation will have to follow. The valuer will have to prove where he got his figures from and the valuation will then be analysed. He didn't go into detail but I think the formula may be published in the bill. As Brendan said, you would be better off reading the minutes.


 
Pointless for him to appear then. The maths is key; anything else is waffle.


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## Brendan Burgess (31 Aug 2009)

Poor George Lee. He is listening to Alan Shatter making sense and he seems to be realizing just what he has let himself in for by becoming a TD.

I doubt if he will stand again at the next general election.


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## smiley (31 Aug 2009)

Tomorrows newspaper headlines.  'Lenihan to squeeze a pound of flesh from developers'. In his own words


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## Brendan Burgess (31 Aug 2009)

*Minister replying to Alan Shatter:*


He has asked when will the bill be published. I missed the answer 

He wants to see the valuations regulations published in draft form, so that we can discuss the concept of "long term economic value".at the beginning of the second stage debate.

He is now asking John Mulcahy how his historical analysis can apply to the Irish situation which is unprecedented in its scale and economic backdrop.


Impaired residential mortgages: LTV ratio is between 50% and 60%, although there is a problem with the recent mortgages. 11(?) repossessions by the covered institutions in the first 6 months. 

We have provided in the legislation to take over these loans,(EU suggested this)  but we have no plans to do so.


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## Brendan Burgess (31 Aug 2009)

George Lee is speaking now. Obviously there was some prearranged order and he is very low on the pecking order.

He has a very tough gig, as the rest of them have covered most points over the last 4 hours.


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## canicemcavoy (31 Aug 2009)

Shane Ross has asked what's Plan B, if prices don't rise....


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## Brendan Burgess (31 Aug 2009)

George Lee hasn't challenged John Mulcahy's figures.

None of them challenged the Minister's assertion that AIB and Bank of Ireland are not insolvent and that they are adequately capitalized.


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## Brendan Burgess (31 Aug 2009)

Pat Rabitte has asked the very good question "You have been reported as supporting the Honohan amendment. Do you? "

The Minister's response: 



> The one difficulty is that it is formulated in terms of shareholding. I have discussed it with the Professor Honohan. We are examining it


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## Brendan Burgess (31 Aug 2009)

The Minister is now discussing with Shane Ross about the future prices of the market. The Minister says that the yields are way above their long term trend.  But he is passing Shane Ross over to John Mulcahy.

The Minister says we could not do this plan if we were not in the Euro.


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## Brendan Burgess (31 Aug 2009)

I have caught up with Shane Ross's contribution just now and he was by far the most impressive. He only spoke for about 5 minutes, but he asked good questions. 

He asked what evidence had they got that property prices were going to rise? 

He asked could the bonds being used to buy the loans from the banks, be traded on the open market - yes they can.

He asked what an independent valuer was.


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## Brendan Burgess (31 Aug 2009)

It is a terrible pity that there were so many contributors and that Joan Burton took such an unfair amount of the available time. 

It would have been much better if it was a round table informal sort of discussion between the Minister and his advisers and say Richard Bruton, Joan Burton and Shane Ross. Possibly with Alan Shatter added.


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## CorkGuy12 (31 Aug 2009)

The whole session is on RTE's website if you the time to want to watch it - over 4 hours!
[broken link removed]


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## Brendan Burgess (1 Sep 2009)

You can read the transcript here


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## canicemcavoy (1 Sep 2009)

*July 2007: *"The Irish commercial property market is extremely healthy... the prospects for next year look equally promising." ()

*August 2009:* "...while my natural humility gets in the way, I have been a bear for the past four years." (http://debates.oireachtas.ie/DDebate.aspx?F=FIJ20090831.xml&Node=H2#H2)

I'm not sure how one bashes that square peg into the round hole.


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## Duke of Marmalade (1 Sep 2009)

Brilliant spot canice - that is unnerving

From what I have read Lenihan turned in a tour de force but there is one area where I think he overplayed his hand. He says that nationalisation would mean significant compensation for bank shareholders. As a bank shareholder myself I would not be expecting much, the 10 fold increase in my share price over the last 6 months is due entirely to the government guarantee and the Nama project.


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