Constitutional referendum for NAMA

In order to avoid the undoubted string of expensive and protracted legal cases that will ensue when NAMA starts dealing with developer/banks loans/assets, it may be worthwhile to consider holding a referendum to restrict such peoples constitutional property rights in these cases. Difficult to structure of course but I think it would get an overwhelming majority vote in favour.

At least the Gov would be popular for once. Could hold it in conjunction with Lisbon vote.

Extraordinary times require extraordinary powers sometimes.

What's planned at the moment is merely the transfer of the ownership of the mortgages, not the property - there is no constitutional issue

Even when it comes to repossession, I see no potential constitutional issue - the state is obliged to protect citizens property rights against unjust attack. Repossession for non-payment of a debt freely contracted into is not an unjust attack. Holding a referendum would create a new locus that could cause more problems that in solves (a la eighties abortion referendum), and ultimately could end up letting some people off the hook.

Either I don't understand the process or you don't.

• NAMA purchases "impaired loans" at commercially agreed discounts from the banks
• NAMA as the new owner of the debt can then :
  • Sells off the assets securing the loans
  • Pursues debtor for any difference between the asset sale price and purchase price of the debt

Loans are bought and sold commercially all the time by lending institutions; the toxic mortgages packaged and traded as derived financial instruments were largely responsible for the word-wide problems in financial markets.

Once the the legislation is enacted NAMA, under the aegis of the NTMA, can operate as a debt purchaser / toxic repository for impaired Irish bank-loans. Where do you see the necessity for a referendum?

If my understanding of the proposed NAMA operation is wrong, please feel free to correct it.

I was thinking of this after hearing a commentator a few evenings ago ( Drive time or the Last Word, can't remember which) stating that banks and delelopers were already lining up their barristers as they expected to be forced by the NAMA to do things they may not want to do.

Don't know the full ins and out of the NAMA but as it involves property I just think that the point that there may be a lot of legal expense and delay for the state was valid. If this is the case then my idea was to bring in something to override this.

I understand loan books are bought and sold on commercial terms as part of a normal market but this is not what we will have here. Banks may refuse to sell the loans, developers may refuse to sell assets.

NAMA is there to break the deadlock. Developers are on record that the banks are not currently pursuing them for repayment of debts, one notable recent quote (paraphrased) was about "not even paying a penny interest".

You'd kinda wonder why the banks don't seem to want their money back and don't seem to want to pursue the debtors nor do they seem to want to take ownership of and liquidate the assets the loans are secured against; a very strange situation indeed.

JoeRoberts said:

Banks may refuse to sell the loans

Click to expand...

They'll be burning a path to the NAMA door to get their toxic loans off their balance sheets.

mathepac said:

You'd kinda wonder why the banks don't seem to want their money back and don't seem to want to pursue the debtors nor do they seem to want to take ownership of and liquidate the assets the loans are secured against; a very strange situation indeed.

Click to expand...

My take on this was they do want their money back but they know they can't get it, currently, as the market is too depressed, so they are being 'kind' to developers to let them room to manoeuvre and hopefully sell some property/houses whatever but slowly without flooding the market and bringing down a complete collapse in the price of land and houses.

Joe Roberts- I agree with other comments that a referendum is not required. However my understanding of how NAMA will operate (open to correction) is that the banks can participate on a voluntary basis, However once in the scheme then NAMA has the right to choose the assets it selects including good assets currently being used as cross collateral.
I cant see the banks rushing to do this as 1) they dont get to select the assets that NAMA buys 2) Depending on the price NAMA pays tbc they may need to raise Capital (this should be partially offset by them now holding a zero% or very low risk weighted asset i.e Govt bond) and 3) if NAMA over pays and losses develop then a further levy will be imposed on the participating banks.

If the bankers are taking their fiduciary responsibilities seriously, they need to consider if participation in NAMA is in their shareholders best interests. I accept not much evidence of that fiduciary responsibility demonstrated in the last few years!

So NAMA's objectives are sound - get the system lending again but I think the project might not go anywhere due to a bank/NAMA stand off.

I think an insurance scheme would be more palatable to the banks as they dont run the risk of writing down capital and they have a better chance of managing themselves out of their current predicament.
The Govt can always apply a levy on the banks ata future date to ensure it gets back the cost of theinsurance scheme and therefore would protect taxpayers interests.
The first priority is to get the banking and lending system working again to protect employment, and we should be open to all suggestions as how best to achieve this and not have all our hopes pinned on NAMA

WE don't need a vote on the constitution. We need to nationalise the banks, fire the boards and top management, fire the Financial Regulator and board, and same for the central bank top brass

My understanding from comments made by government people that NAMA will pursue borrowers for the full amount which they owed to the banks and not the amount which NAMA paid for the debts

I guess this is the type of thing I mean. To prevent it, NAMA could be given powers that cannot be challanged in court - this is where a referendum conferring special powers to override constitutional rights would come in.


NAMA could be 'courts bonanza' - Somers

Thursday, 14 May 2009 15:20
The chief executive of the National Treasury Management Agency has said it is not adequately staffed to deal with the banking crisis.
Dr Michael Somers also told the Public Accounts Committee he was not sure how the National Asset Management Agency would interact with his agency.
He said NAMA was supposed to be under the aegis of the NTMA, but added that the NTMA has no experience of bank restructuring.
Advertisement

He said the state of the banks' bad loans was an appalling dilemma, adding that he had been 'aghast' when he saw the amounts that had been lent by banks.
Dr Somers also said there would be 'eating and drinking' at the Public Accounts Committees for years to come on how NAMA is set up. He said it would be 'extremely constroversial', and the people in the courts were lining up for a bonanza.

JoeRoberts said:

banks and delelopers were already lining up their barristers as they expected to be forced by the NAMA to do things they may not want to do.
.

Click to expand...

Regarding only developers in the 10 million debt ballpark, a lot of them don't have the resources to bankroll a lengthy legal challenge and will be put to the wall.

On the other hand the top 20 largest developers will string this process out for years.

Regardless of the principle of whether NAMA is a Good Idea or not and whether Nationalisation is just another method of bailing out failed banks or not [you can guess where I stand on these two], the following has to happen:

Banks are saying that money is available for "viable enterprises".
What does that phrase mean in times of financial crisis?
Very, very little for most businesses.

We have to ensure that the banks support the economy and do not merely close the stable door after the horse has bolted - this means that applying rigorous rules as to what constitutes a "viable enterprise" should be frowned upon, as this means that they'll only lend to businesses that don't need money.

My clients are telling me horror stories about people caught between paying their bills and not getting paid for 60, 90, 120 days or more and needing credit facilities to tide them over and the banks are refusing to lend.

Worse, I hear tales of existing overdraft facilities being drastically reduced, in the order of a €30,000 overdraft being cut to €10,000.

The banks seem to think a sudden sharp shock will "prompt fiscal rectitude". In the case of businesses teetering on the brink it is more likely it will drive them over it.

So to qualify my first comment - "support the economy" means just that - lend money to businesses per se and do not try to make businesses jump through hoops when they are already lame, not because of their busines model, but because of the time that's in it.