NAMA what other countries have tried this and what was the outcome?

Just wondering where did the idea of NAMA come from? Have other countries historically tried something similar and if so what was the outcome?

Please tell me we are not winging this and that there is evidence of success?????

I think you'll find NAMA is a one off, a particularly Irish invention similar to other Irish inventions like a tram line that doesn't meet up and tunnels that leak as opposed to keeping out the water and are too low for certain trucks.

You could even say that we are the 'guinea pigs' for the rest of the world.

If it works, then everyone will know what to do the next time it happens

That's it we're trailblazers, leading the way to the promised land.

Similar "band banks" have been tried and worked before:

Resolution Trust Corporation (USA)
Secrum (Sweden)

Germany has is also moving towards a similar Bad Bank.

Latrade, the RTC and Securum were different. They only dealt with nationalised/bankrupt bank assets. Securum lost 60% of the money the Swedish government put into it.

I haven't seen anything on the German bad bank - anyone got any links?

yoganmahew said:

Latrade, the RTC and Securum were different. They only dealt with nationalised/bankrupt bank assets. Securum lost 60% of the money the Swedish government put into it.

I haven't seen anything on the German bad bank - anyone got any links?

Click to expand...

My caveat was "similar", the principles are generally the same and ideas.

There's nothing concrete on the German version, last I heard was over the summer that the consideration process has moved on to a definite maybe. However, I think the germanic parliament process is a bit more complicated in terms of ratifying these things.

"Agreement" details here:
http://news.bbc.co.uk/2/hi/business/8047760.stm

Bit more on their plans here:
http://www.businessweek.com/globalbiz/content/may2009/gb20090513_146803.htm


All from mid May. I'm not aware of any more recent information.

Yeager said:

Just wondering where did the idea of NAMA come from? Have other countries historically tried something similar and if so what was the outcome?

Please tell me we are not winging this and that there is evidence of success?????

Click to expand...

Various forms of state-owned and private sector-owned bad banks have been used to help resolve dozens of financial crises, big and small, for decades. Sweden's is generally considered a success (they turned their economy around in little over two years), although they used several bad banks, not just one like Nama, and several of their bad banks were privately owned. The Japanese made a balls of it (they dragged out the process and did massive damage to their economy). Dresdener bank, earlier this decade, is considered one of the most successful private sector examples.

But the Nama proposal - a single state agency forcibly buying a massive volume of assets from all of the state's home-grown financial institutions, the majority of whom are still privately owned - is truly a new departure. Nothing as big as this, on a relative scale, has ever been tried before.

Nama dwarfs the Swedish example of the early 1990s, and is a completely different concept.

The reason we are supposed to be doing this is to clean the banks so they can start lending again. In theory, when the banks are cleaned after Nama, there is no reason why lending should not pick up because they will have to lend to make future profits and protect their future capital bases. Banks must lend to survive over the long term. It's natural order. In this regard, it is fairly likely we will have a moderate level of success with Nama.

The part where we are winging it is regarding how much it will cost taxpayers over the long term. Sweden almost broke even over the long term, (there is a long-running debate over this, depending upon which valution methods you use).

We need a moderate pick up in the property market over the next decade or so to break even. IMHO it is unlikely we will break even, but the final price that we eventually end up paying will probably be worth it, I believe.

Thanks for the feedback on this. Sounds like unchartered waters particularily on the scale we are invloved in.

I'm not confident considering all the blunders to date.

Asset Management Agencies (like NAMA) are old hat.

Valuing assets at Long Term Economic Value is, lets say, 'innovative', but I don't think we have any choice.

The depth of the insolvency is too deep to write off the bad loans at market value, and given our precarious fiscal position, we can't risk nationalisation for fear of what it will do to our cost of borrowing.

That's my read.

An AMC's objective to rescue viable banks and manage out their losses. In Ireland's case it is to prevent banks from destroying the economy. But the two biggest banks are too big to bail out - force them to write down their loans and the state would have to take them into public ownership which is something it cannot afford to do.
Translated into NAMA this means Government must arrange a bad loan buyout without triggering nationalisation. Enter LTEV which is effectively a mechansim to buy the loans at a price that allows the banks to remain in private hands (for now). The €7bn uplift (net retention) is probably targetted at AIB and BOI. In this sense it is a capital subsidy as its payment prevents the write down of loans. And as bonds for loans releases rwa capital it can be seen as a subsidy top up.
The hope is banks will self-build capital either through asset sales (poland etc) and or raise equity from shareholders. Hence AIB 2bn...the success of the latter depends on investor confidence - the bet is the banks will stand on their own two feet - but given their thin capital base and loan loss exposure post-nama they remain unnattractive. Gov will want to see a rise in share price as if it has to inject more capital it will not want to take on full ownership.

Lenihan stated on the radio that the Nama plan was within the guidlines laid out by the ECB which implies it is an ECB idea.

sfag said:

Lenihan stated on the radio that the Nama plan was within the guidlines laid out by the ECB which implies it is an ECB idea.

Click to expand...

Not really. NAMA is TARP as not used by the Bush administration. TARP was originally designed to do what NAMA is doing - buy assets at below book price, but above current market price. The Americans thought they had hit bottom about a year ago too...

Anyway, Mr. Paulson abandoned that idea and instead used the money to take equity stakes in the US banks. Stakes that are now worth good money...

Have we reached the bottom of the chasm? Commercial rents (retail) are still heading south and house prices are continuing to decline- nama is an amc designed to bail out banking - it's scale is unprecedented but its objective is to rescue viable banks and close down those that have no future.

Some food for thought on Bloomberg Bank Bailout Reject Embraced by Declawed Tiger: David Reilly

This backdrop makes it understandable that the Irish government felt it had to do something, anything to prop up the banking system. Still, there are alternatives short of nationalization.

Recapitalizations that make creditors and shareholders share in the pain, such as debt-for-equity swaps, should be an option. Ireland, like other countries, has to get over the notion that creditors are a sacred group who must be spared at all costs.

At the very least, the government shouldn’t ask taxpayers to wager so much on the hope that things will stop getting worse.

Click to expand...