I am getting sick of politicians and reporters trying to grab headlines by trying to make NAMA scarier than it already is.
Myth No 1: Here is George Lee
http://www.independent.ie/national-news/lenihan-has-got-figures-all-wrong-1890230.html
Does he think the people in NTMA and their financial advisors are muppets? Of course they are taking into account rising interest rates. That is why I assume the bonds they issue will be FRN's to match the Assest's i.e. loans income streams which are usually based on a floating rate of interest. So as interest rates rise on the bonds, interest on the loans should rise to offset it. They can also use derivatives to offset any basis or interest rate risk. There is no €10 billion black hole. Credit risk remains the biggest danger to NAMA.
Myth no 2: This is not a €54 billion gamble as reported in newspapers. For the taxpayer to lose €54 billion, property in Ireland would have to be worth zero in 10 years. If that's the case NAMA will be the least of our concerns. I am not trying to belittle the risks involved but if we are going to discuss NAMA, lets have a rational debate based on realism and not tabloid rubbish
Myth no 3: This is a bailout for developers. It's not. It is no different than a persons bank where they have their mortgage being taken over. It doesn't mean you don't have to pay back the mortgage or that the bank won't go after you for repayment.
I am sure there are more that I can add as I get through the papers today.
Myth No 1: Here is George Lee
http://www.independent.ie/national-news/lenihan-has-got-figures-all-wrong-1890230.html
Does he think the people in NTMA and their financial advisors are muppets? Of course they are taking into account rising interest rates. That is why I assume the bonds they issue will be FRN's to match the Assest's i.e. loans income streams which are usually based on a floating rate of interest. So as interest rates rise on the bonds, interest on the loans should rise to offset it. They can also use derivatives to offset any basis or interest rate risk. There is no €10 billion black hole. Credit risk remains the biggest danger to NAMA.
Myth no 2: This is not a €54 billion gamble as reported in newspapers. For the taxpayer to lose €54 billion, property in Ireland would have to be worth zero in 10 years. If that's the case NAMA will be the least of our concerns. I am not trying to belittle the risks involved but if we are going to discuss NAMA, lets have a rational debate based on realism and not tabloid rubbish
Myth no 3: This is a bailout for developers. It's not. It is no different than a persons bank where they have their mortgage being taken over. It doesn't mean you don't have to pay back the mortgage or that the bank won't go after you for repayment.
I am sure there are more that I can add as I get through the papers today.