# Reservations about NAMA



## onekeano (16 Sep 2009)

Here's my initial list.................

- If NAMA is so transparent how come they won't disclose what properties they are buying or who the developer is that is involved?
-  If NAMA is so independent how come the NAMA executive are restrained from commenting on decisions about property portfolios they will be purchasing?
- If NAMA is so independent how come Brian Lenihan reserves the right to tell NAMA to reconsider offers on particular sites, take a site bought in Ballsbridge for say €400 million and NAMA offer €200 million. Then Mr Lenihan can tell NAMA to reconsider the offer made to a man who is a close friend of the Taoiseach who first appointed Mr Lenihan a minister - can this be right?
- Apart from the obvious madness of paying more than something is worth, it is quite clear the whole process is open to interference and collaboration between Fianna Fail and the developers.
- Unemployment has rocketed, huge amount of people have taken significant pay cuts and against that background the government wants to introduce a bail out that can only work if house prices increase!!!

Given all of the above, is it any wonder that shares prices in the major banks have already risen by around 2000% since the NAMA scheme was announced?  It hardly augurs well for the taxpayer....

For all the reasons set out above I willl be supporting the March on Saturday @ 1pm from the Garden of Rememberance and would encourage others to do likewise.

Roy


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## GSheehy (17 Sep 2009)

If NAMA was an investment proposition, would I invest my own money in it? An emphatic No.

Do I hold shares in the Banks? No.

It's just not morally right.


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## onekeano (17 Sep 2009)

*When is 30% not 30%?*

Mr Lenihen stated that the discount would be 30% ie. paying €54 billion from a value of €77 billion. This was not true, as the minister knows the €77 billion included €9 billion of interest that had been rolled up. So the real figure, is €54 billion from a value of €68 billion which is a 20% discount!!!

I just heard Parlon on the radio saying "the builders have already lost their 30%" - thi is clearly not true for reasons given above. This is obviously the spin that has been agreed to try to sell this plan.

Roy


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## Brendan Burgess (17 Sep 2009)

Actually, the €77 million figure is a pretty meaningless historical figure anyway.

The only relevant figure is what the loans are worth now. In other words, how much might be recoverd from them over the longer term. 

Brendan


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## suemoo1 (17 Sep 2009)

+1 ill be marching too...


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## goosebump (17 Sep 2009)

GSheehy said:


> If NAMA was an investment proposition, would I invest my own money in it? An emphatic No.



Nor would anyone else, but that's irrelevant.

NAMA isn't suppose to be an investment product. Its a mechanism that is designed to fix our banks. Only the State has that interest at heart, so only the State has an interest in investing in NAMA.

If we could fix the banks with an investment product, we wouldn't need NAMA.


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## censuspro (17 Sep 2009)

My reservations are:

No benefit to the taxpayer

Paying over the odds for the loans

No guarantee that banks will start lending again

Is stinks of cronyism i.e. high profile developers, banks and Fianna Fail. "Ah sure stick it into NAMA they'll take care of it"


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## Latrade (17 Sep 2009)

censuspro said:


> My reservations are:
> 
> No benefit to the taxpayer
> 
> ...


 
If it works, it benefits everyone. 

There is no market so it's impossible to say what is or isn't over the odds. Effectively, NAMA creates the market.

There's no guarantee under any circumstances the banks will lend.

Look around, how does this in anyway protect FF? They've been under more scrutiny if anything.

The whole point of it is to protect the banks. I don't think anyone has ever denied that.

But how does it protect developers? Outside of media misrepresentation, the developers still have the full debt at their agreed loan rates and terms. It's just a different person owns the loan. How does this protect them?


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## censuspro (17 Sep 2009)

Latrade said:


> If it works, it benefits everyone.
> 
> There is no market so it's impossible to say what is or isn't over the odds. Effectively, NAMA creates the market.
> 
> ...


 
"IF NAMA Works" is the issue, and IF NAMA works would it not benefit the taxpayer more if the actual market values were paid?

NAMA is artificially inflating the market to the ultimate benefit of developers.

Also, isnt the whole point of NAMA to get the banks to lend again? Whats the point in giving the banks €54 billion if they're just going to pay it out in didvidends? If there are no guarantees, whats the point?


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## Latrade (17 Sep 2009)

censuspro said:


> "IF NAMA Works" is the issue, and IF NAMA works would it not benefit the taxpayer more if the actual market values were paid?
> 
> NAMA is artificially inflating the market to the ultimate benefit of developers.
> 
> Also, isnt the whole point of NAMA to get the banks to lend again? Whats the point in giving the banks €54 billion if they're just going to pay it out in didvidends? If there are no guarantees, whats the point?


 
Since NAMA was proposed and discussed, the banks have seen share prices increase. On the day details are published: a further increase. However, no system in these current times would ever have a 100% guarantee to work. Something had to be done and as soon as is possible and there weren't too many options left. 

Your view of the specific limited returns of NAMA negate the potential overall benefits to the economy and the tax payer of solvent banks and trust of the Irish banking system. Whether you like the bankers or not, we really, really need them.

The developers still have the loans at the old price. While NAMA has created a market price, it only benefits the developers if they can sell and sell at that price. However, even if it were at the NAMA price, they'd still be left with a 30% shortfall that they would have to pay back. They're still in negative equity and the old terms of their loan still applies. Again, how does this bail out the developers?

Ultimately the point of NAMA is to get the banks up and offering credit again. But it's not like you can walk into the bank immediately and get that loan for a car. The banks have still taken hits the last 18 months and it still needs other banks to have faith in the Irish Banks. This method was seens as more likely to achieve this confidence than nationalisation.


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## censuspro (17 Sep 2009)

Latrade said:


> Since NAMA was proposed and discussed, the banks have seen share prices increase. On the day details are published: a further increase. However, no system in these current times would ever have a 100% guarantee to work. Something had to be done and as soon as is possible and there weren't too many options left.
> 
> Your view of the specific limited returns of NAMA negate the potential overall benefits to the economy and the tax payer of solvent banks and trust of the Irish banking system. Whether you like the bankers or not, we really, really need them.
> 
> ...


 
The increase in share price is of benefit to the shareholders not the taxpayer.

A 30% loss is better than a 60% loss.

The point about how important the bankers are, this is the problem, people think that the banks are an institution like the Catholic Church that must be saved at all costs. Let the banks fail, new ones will come in and take their place. This happens in other economies all over the world and Ireland should be no different. This would put a real market value on the assets and the government can buy up as much assets it likes for alot less then what NAMA proposes to do without the risk to the taxpayer.


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## Kine (17 Sep 2009)

censuspro said:


> The point about how important the bankers are, this is the problem, people think that the banks are an institution like the Catholic Church that must be saved at all costs. Let the banks fail, new ones will come in and take their place. This happens in other economies all over the world and Ireland should be no different. This would put a real market value on the assets and the government can buy up as much assets it likes for alot less then what NAMA proposes to do without the risk to the taxpayer.


 
I'm curious as to which banks _would_ enter the Irish market place now are all our main lending institutions to fail? Many of the current International players are trying their best to limit their Irish expousre and are pulling out or stopping expanding. Have many banks set up in Iceland since all their banks failed?


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## Sunny (17 Sep 2009)

censuspro said:


> The increase in share price is of benefit to the shareholders not the taxpayer.
> 
> A 30% loss is better than a 60% loss.
> 
> The point about how important the bankers are, this is the problem, people think that the banks are an institution like the Catholic Church that must be saved at all costs. Let the banks fail, new ones will come in and take their place. This happens in other economies all over the world and Ireland should be no different. This would put a real market value on the assets and the government can buy up as much assets it likes for alot less then what NAMA proposes to do without the risk to the taxpayer.


 
Actually considering that the taxpayer is now a major shareholder in the Irish banks, a rising share price should be welcomed by all. 

What new ones will come in? Or more importantly, how long will it take for them to come in. Do you see a rush a foreign banks running into Iceland after the failure of their banking system? Foreign banks here are already withdrawing from the Irish market. They are under pressure to concentrate on their home markets just like the Irish banks will come under pressure to sell off foreign units. Someone has to take up the slack or our economy will face a generation stuck in the abyss. And that someone are the domestic Irish banks.

People need to wake up to the fact that no Country can operate efficiently without a functioning banking system. David McWilliams can print what he likes but he I have let to hear of one Country that allowed it's banking system to fail and woke up the next morning to clear blue skys and a bright future


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## Latrade (17 Sep 2009)

censuspro said:


> The increase in share price is of benefit to the shareholders not the taxpayer.
> 
> A 30% loss is better than a 60% loss.
> 
> The point about how important the bankers are, this is the problem, people think that the banks are an institution like the Catholic Church that must be saved at all costs. Let the banks fail, new ones will come in and take their place. This happens in other economies all over the world and Ireland should be no different. This would put a real market value on the assets and the government can buy up as much assets it likes for alot less then what NAMA proposes to do without the risk to the taxpayer.


 
And who, after previous bailouts, is also a shareholder of these banks? Would that be us? 

You're right, and kudos for spotting that, but it's still a massive loss if they were to sell now. They still owe the original loan in total. There has been no watering down of their debt or liability. And that's all on the basis they could sell now to anyone. 

Banks all over the world are looking to pull out and restrict their operations. None are in any position to suddenly enter a new market. So we let the banks fail. We lose all our savings. We have no means of receiving or making payment. Business can't get credit. Shops can't get stock...just how long do we let that go on before the banks come in?

The banks fail, we fail. It may not sit easy with you or even me, but the banks are absolutely essential. The repercussions for their actions can follow. But right now it's in everyones interest to bite that bullet and urge for revenge and get things back on track.


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## censuspro (17 Sep 2009)

Latrade said:


> And who, after previous bailouts, is also a shareholder of these banks? Would that be us?.


 
NAMA is not proposing to buy the shares in AIB or BOI, as you know, and if an increase in share prices was the solution then why dont the government just buy more shares or Nationalise.



Latrade said:


> You're right, and kudos for spotting that, but it's still a massive loss if they were to sell now. They still owe the original loan in total. There has been no watering down of their debt or liability. And that's all on the basis they could sell now to anyone.


 
Yes but NAMA is still artificially inflating the price of Land, ultimately restricting losses for developers and making the cost of buying a house more expensive for the likes of me. 



Latrade said:


> Banks all over the world are looking to pull out and restrict their operations. None are in any position to suddenly enter a new market.


 
Why would new banks enter the Irish market when you have the government willing to bail out the big 2 at any cost? I doubt they would do the same for a foreign back so why should AIB or BOI be any different? Its the law of supply and demand, there is a demand for credit in the Irish market and by letting BOI & AIB fail new banks will come in and the signs above the doors will change.



Latrade said:


> So we let the banks fail. We lose all our savings. We have no means of receiving or making payment.


 
AIB & BOI are private limited companies, if you put money on deposit with them then you run the risk of losing some of that deposit. As limited companies they have performed badly and by pumping cash back into them it's simply rewarding bad behaviour. Is the risk of people losing their deposits greater than the increase in taxes, and the lack of public services that we are in for because 2 private companies performed badly and the tax payer bails them out? As for direct debits and cheques bouncing, this happens all the time. It's a no gain no loss situation for both the payer and payee just use some other method of payment. This arguement is a bit like saying I dont want to move house because the postman wont know where to deliver my letters. Its a small burden to bear.



Latrade said:


> Business can't get credit. Shops can't get stock...


 
Businesses are not getting credit as it is, and there is no guarantee that they will even if NAMA goes ahead.



Latrade said:


> just how long do we let that go on before the banks come in?


 
How long will it take for NAMA to realise gains?



Latrade said:


> The banks fail, we fail. It may not sit easy with you or even me, but the banks are absolutely essential. The repercussions for their actions can follow. But right now it's in everyones interest to bite that bullet and urge for revenge and get things back on track.


 
I dont agree that the faith of the Irish tax payer is linked to two private companies who acted irresponsibly. They're a completely seperate entity and should be treated as such. Laissez faire laissez passer.


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## Attica (17 Sep 2009)

I am interested in whatever facts we can be sure of in NAMA, as against putative gains or losses. The one fact I can ascertain, is that we will borrow 54 billion at a rate of 1.5% ( I know, I know, the amount borrowed may be less or more, but let's stick with this figure). That means *810 million* to be paid over the next year in interest. Mr. Lenihan says 40% of the 66b. (77b. less 9b. in rolled over interest) are performing loans. NAMA people cannot say what rate of interest is being applied, it varies with each loan but let's say 5%. So 5% on 26.4 b. should come to over 1.3b. and would cover our ECB interest. There is a fat chance that the 60% who are in default of interest will not start to pay it; with the market in decline, the 40% good guys will be struggling to keep up their payments so there is no guarantee at all that we will continue to be covered for our ECB interest payments - which we cannot default on. And the 1.5% rate is only guaranteed for 6 months; don't interest rates usually rise in a depression?

Can anyone explain why there is 9 billion in rolled over interest? Based on 60% non-performing i.e. 39.6b. at average of 5% interest, wouldn't that mean that these have not been paying interest at all over the last 4 years or thereabouts? Just  how long has this crisis been building up? 

Also, the "associated loans" of which 9 b. is rolled over interest - what are they all about? It wouldn't be for the 25% deposits supposed to be paid by the developers, would it?


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## Protocol (17 Sep 2009)

Attica said:


> I am interested in whatever facts we can be sure of in NAMA, as against putative gains or losses. The one fact I can ascertain, is that we will borrow 54 billion at a rate of 1.5% ( I know, I know, the amount borrowed may be less or more, but let's stick with this figure). That means *810 million* to be paid over the next year in interest.
> 
> *Correct, NAMA pays this interest to the banks.  They sell interest earning loans, and receive NAMA bonds, which pay them interest.*
> 
> ...


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## Attica (17 Sep 2009)

Have I misread the situation? Isn't NAMA borrowing the 54b. from the ECB in order to buy the bad debts from the banks? Or is the 54b. merely a paper figure, a promissory note to the banks in fact? but if they borrow from the ECB using the NAMA bonds and they default, isn't the risk very real then to the taxpayer as we will have to repay both bank loan and interest to the ECB? I'm getting dizzy with all this...


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## Protocol (18 Sep 2009)

Normally, a govt borrows by issuing bonds which pay interest over 5, 10 or 20 years.

Anybody can buy the bond and so lend the govt money.  The usual buyers are pension funds, banks, life cos.

In this case, the Govt issue the NAMA bonds and give them just to these few banks, who pay for them not in cash, but by giving a mixture of good and bad loan assets.

So the Govt now owe coupon interest each year on the NAMA bonds to the banks, but the Govt will earn the interest from the borrowers / developers.

Nothing to do with the ECB so far (except that they have approved this unusual transaction).

The banks will then have NAMA bonds as assets on their balance sheets, earning a variable interest rate of initially 1.5%.

This is a poor return, so the banks can go to the ECB, as they often do, and use the bonds as collateral to borrow cash for up to a year.

They then lend this money out and hopefully earn more than 1.5%.


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## Attica (18 Sep 2009)

That is the best explanation of the process I have seen, Protocol, thank you.
AAM has been very good generally about investments, bank procedures etc. but not always easy to follow. You have put it in very clear terms.


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## ipxl (18 Sep 2009)

Protocol said:


> So the Govt now owe coupon interest each year on the NAMA bonds to the banks, but the Govt will earn the interest from the borrowers / developers.
> 
> Nothing to do with the ECB so far (except that they have approved this unusual transaction).



In the enlightening discussions I have read on the matter (and not in the popular media coverage on the whole) there is nothing unusual
about the transaction as far as current operating procedure is set down by the independent ECB.

It might be argued that the only precedent here is the volume of the bonds which might be transacted.

The ECB has for some time since the global crisis occured, AFAIK, provided the means for banks to avail of those rates and are providing unlimited liquidity facilities.

The unusual transaction is the one between the banks and the state run agency NAMA. It is, on paper , a clever way , as I see it of using the existing mechanisms afforded by the ECB. Are we saying that other EU countries would have to get the nod from ECB to do this ?


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