June 2, 2010

NAMA just a bailout for the professional classes

Posted in Banks · 159 comments ·
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For the past few weeks, Irish banks have not been able to borrow abroad in any manifest way. The market is now as good as shut to us as money retracts from risky countries like Ireland to safer locations like Germany. This pattern is unlikely to change any time soon as the financial world comes to the realisation that the bailouts of recent months are only postponing the day of reckoning.

As credit dries up here completely, the entire bank and recovery strategy of the Government is unraveling and NAMA will be exposed as little more than a class rescue scheme for investors and developers. The cost of trying to stop the market doing its thing — falling — will sky rocket.

Ultimately, our government bond market will seize up, because the Department of Finance is using the bond market as a big skip into which it is throwing all the rubbish of the boom. This policy needs a willing buyer of all these bonds and the buyer needs to believe that “countries don’t go bust” as the chief executive of Citibank announced weeks before the Latin American debt crisis of the 1980s.

There will come a time, possibly sooner than we think, that the sums here won’t add up and the market will panic. In fact, the panic will have less to do with sums and more to do with sentiment. As sentiment gets worse, some of the inconsistencies of NAMA which were swept under the carpet in the storm of government spin over the past few months will be exposed and re-examined.

The first thing to be questioned is the language: think about the title, the National Asset Management Agency. But there are no assets. There are only liabilities. If there were assets, there wouldn’t be any need for NAMA in the first place. And the liabilities are getting worse.

Nor is it national, because it only covers loans above €5m. And nor is there a management agency; what there is is a bunch of civil servants doling out jobs to, guess who? The same bunch of insiders who caused the problem in the first place.

So the man who valued, for example, the Dublin Glass Bottle site at over €400m, John Mulcahy, has now been given the job, by Nama, of valuing the same property at considerably less!

The lawyers for Bank of Ireland remain the lawyers for Bank of Ireland, but they are also, inexplicably, the lawyers for NAMA. Arthur Cox don’t seem to think there’s anything wrong with being the lawyers for the seller, Bank of Ireland, and the lawyers for the buyer, NAMA.

Why has the Law Society not said something about this? I am not a lawyer, but if I was looking at this country’s potential and I asked myself, have they learned from the crisis, have they changed? I’d see something like a huge law firm working for both sides as a worrying sign.

Then if I thought about the financial infrastructure what would I see? I’d see that the auditors who signed off on what we now know to have been Anglo Irish Bank’s fictitious balance sheet — Ernst and Young — have been given the job of auditing NAMA. So having failed to spot what might turn out to be a criminal conspiracy at Anglo, Ernst and Young are awarded, by our Government, with a hefty fee from NAMA.

And what about PricewaterhouseCoopers (PWC), auditors to Michael Fingleton’s little outfit, Irish Nationwide Building Society? They, too, have been rewarded for failure with a gig at NAMA.

If I was a savvy investor looking at Ireland, asking myself “will I move into this country?” maybe I’d look at NAMA and realise that it is waltzing the country up a credit cul de sac. So I’d wait.

Let’s examine this inconsistency at the core of NAMA now. Think about how it will work and remember my hunch that it was constructed in part to bail out the professionals who didn’t like commerce but needed fees.

Anybody who’s ever speculated on financial markets knows that you don’t want to be the only buyer in town. NAMA will end up owning all the real estate in the country. It will end up being the biggest estate agent, the biggest hotelier, the biggest owner of golf courses. And we are assured, even though there is no evidence, that it’s going to buy all this stuff cheaply. But the problem is, once it has bought all this stuff, it has to sell it to someone.

And the only way you sell if you’re the only buyer is by selling at an even cheaper price than what you bought the stuff for. That’s the way markets work. But because NAMA was conceived by lawyers, civil servants and academics, they forgot that bit and it’s the taxpayer who will in fact subsidise the professional and property insiders twice: first by bailing out the banks, and second by selling land that we now own at rock bottom prices back to possibly the very people who owned the land during the boom.

NAMA is a class rescue scheme for Ireland’s professional classes, conceived by one of their own, implemented by them and designed for their benefit.

Worse still, it is entirely predicated on resuscitating the property boom that caused the recession in the first place. Without a strong recovery in property, NAMA won’t work, but with a strong recovery in property Ireland won’t work because we will be back to where we started.

The financial markets have seen through this and are refusing to finance the Irish banks. Isn’t it about time we saw through this carry-on too?


  1. Philip

    @CBWEB spot on with Orwell et al. Cannot help feeling we are entering a new war. 20% across Europe unemployed. Pensionable age is rising…I expect it’ll be at 70 within 10 years. So if the young and old sections of society are not making any money, then what?

    What’s more, most of these young and old are disabled in terms of being permanently unemployable while still being healthy and generally sane. The middle layer – the 35-55 group are the employed professionals – only selling / buying to/from eachother. It is dwindling.

    All FF and the lads are doing is what they are doing all around the world…setting up enclaves for the wealthy/ monied becasue that is the only true source of security for any nation – particularly if yer typical leader is only using the rearview mirror (advisors from the wealthy who know no better) for planning.

    Basically, this mess is playing out until such time as we have a major societal crisis and I suspect the powers that be hope to be better secured when it blows. By then expect more correctional facilities to open. More openings in the police forces etc etc etc. Governments never trusted the people, why should they start now?

    We are a nation of nuclear families. Mobile and fragmented and unable to create a alternative leadership or movement. All the old parties are based on familial hierarchies. Nuclear/ liberal/ well educated group simply do not stand a chance. Emigate and run away….you are deluded in your view of nation when you simply are afraid to participate. FF are utterly justified – not by moral decree, but by tradition.

  2. http://bit.ly/aUMydC

    Mr Justice Kelly must be one of our last bastions of democracy.

    “The bank was entitled to protect its commercial interest, said Mr Murphy.”

    Actually, no, its no longer commercially of interest to anyone, lets see what you’re hiding?

    Have a good weekend!

  3. Emigrant lass

    Speaking as an Irish female turning 30 years this weekend who emigrated to Australia in Jan 2009, I am saddened to read every day about the MESS which was made by the Irish government and the Banks. They’re all the one if you ask me! NAMA is a disaster which will drive Ireland into a double dip recession.
    I’m sure I’m one of many who if and when return home to their families would love to pull out a shotgun on those eejits TRYING to run that country to the ground…

    I remember my father saying four or five years back in the boom years ‘Can it last’???? Everybody went money mad, now look at us…
    Two men I really admire, my Dad and D McWilliams…….
    P.S. all ye economists or intellectual folk who comment on this, keep up the good work coz I’m getting hours of fun and learning loads…

    • Emigrant lass –

      Happy Birthday Season
      with showers of magic Geminis Stones may your face remain forever youthful

      Like all good geminis you are not alone.

  4. Dilly

    Problems in Hungary and a possible default. If we include Turkey, then we can call this grouping of nations PIGSHIT.

  5. Hi Dave

    Following Frank Daly’s recent cooments about Nama’s core objectives I have written an open letter to Nama’s board seeking clarification. The letter and supplementary comments can be seen at

    http://www.planware.org/briansblog/2010/06/open-letter-to-namas-board.html

    • @Brian 3

      “There has been some comment that the consequence of this objective is that NAMA, having recovered its outlay, will then absolve borrowers of their further obligations. ”

      What moron made that comment?

      Far from meeting its objectives, NAMA is at risk of losing every bit of taxpayers money put into it.

      BTW when is it going to start making money and selling its toxic portfolio? We’d like to see the cash flowing in.Lol

  6. wills

    Cbweb and Deco.

    Cbweb, informative article on your blog on info on NAMA s up to date back story.

    I reckon though, NAMA bonds must be seen within the context of the ‘insiders’ economy over seen within the context of the ‘outsiders’ economy.

    The ‘insiders’ economy is in charge and gives life to the ‘outsiders’ economy through the fractional reserve banking system.

    NAMA s function is nothing to do with the media driven analysis we get day in day out. Its function is tied up with the ‘insiders’ agenda and it carries with it a highly rational, cool calculated mathematically objective for the ‘insiders’ economy and to understand NAMA for what it actually is as opposed to what the ‘insiders’ spoof the ‘outsiders’ on what it is day in day out seems crucial now more than ever to bring to the masses the truth about NAMA.

  7. Drop the zero, give it to a phd intern if they have one. They’ll do a good job on behalf of the taxpayer. EBS has been gutted by NAMA anyhow. No one but stupid DOF mandarins want to buy their bonds.

    http://bit.ly/aQK0dk

    Someone run across and tell Dukes EBS won’t be lending out any money to borrowers interested in apartments in the satellite towns!

  8. Malcolm McClure

    Let’s keep our eyes on the ball. The ball is inflation and it is happening today.
    This evening both Wall St DOW and London Footsie ended down, however the significant stat. was the Euro/Dollar exchange rate, which ended the week at 1.1969. This happened in spite of the efforts earlier in the week to prevent it from falling below 1.22.
    This scenario brings back memories of the UK’s ERM débacle, which cost sterling a fortune in futile support and made Soros a billionaire.
    The £/$ held fairly steady this week at 1.45 but the €/£ rose to nearly 1.21 from 1.65 at beginning of last week.
    Message seems to be to convert any spare Euros into Dollars or Sterling; or better still into Norwegian Krona. (Usual disclaimers appended).

  9. Aye & Ney

    My current concept of gold reserves is measured by the number of ‘yes loans’ as against the number of ‘no loans’ administered each month in our little country.These are the best viable units of measurements that can create confidence in business.This monthly report should be issued monthly by the Financial Regulator and this report can act as good as any removed ‘Fitch’ or Standard & Poor’ report.

  10. @6 Malcolm

    “Fire in the hole”

    1.196 breaks the 1.200 ceiling in spite of the Greek bailout money.

    See Hendry Sachs and Tett here, given this before but worth repeating Hugh Hendry, ‘time to panic’, ‘banks should be audited and be required to hold 20% equity to their loans outstanding rather than the 8% today’. I totally agree with this guy, time to let the banks fry.

    http://bit.ly/9Yty1N

    also CDS on Spanish banks widen here

    Re what Tett says of the need for transparency, Spain is more interesting than Greece with 16 of the 45 cajas under threat of merger and/or closure. Interesting that Cajasur chose to be taken over rather than merged with Unicaja, a bigger and allegedly more profitable savings bank. Whats in the loan books of the 16?

    http://nyti.ms/cFXTgE

    “Many of Spain’s savings banks, known as cajas, were originally pawnshops started by Catholic charities. The clergy gradually ceded control of most cajas to regional politicians, who were eager to use them to finance city projects. But the priests of Córdoba fought hard to maintain the banking powers they had held since 1864, even after a merger with a secular competitor created the current CajaSur 15 years ago.

    In most ways, though, CajaSur’s woes are much like those endemic in the cajas, which control about half the banking assets in Spain. Local political parties in Córdoba accumulated loans from the bank totaling 87 million euros, or $106 million, over the last five years.”

    I agree with Hendry and even go further. Let these cesspools of corruption go to the wall. EMU should immediately kill two birds with the one stone and bring forward Basel 11 accord to 2010 and apply the 20% rule.

    Use the opportunity of a sovereign debt crisis in eurozone to implement solid construction of a new enforced regulatory regime for banks.

    Why is the EMU pouring money into these festering ‘banks’, money is only going to be sidelined or pocketed to prop up bad practices of the past plus provide villians with getaway money.

    So, forget the bandaids that are not good enough for the job. Two things are required:

    1. Bring forward immediate implementation of Basel 11 regulations:
    http://bit.ly/15Eeb

    2. Only give aid to countries in the eurozone who require this policy for all its banks. Require banks to be audited to prove compliance.

    3. Aid to be conditional upon application to a national body e.g NTMA who can issue certificates of compliance and can make judgments on the credit worthiness of a bank.

    Stitch the national vers of our NTMA into a network of self regulation under the EMU/ECB.

    Its time the Eurozone either finished the currency, or began adjustments/reform along the above lines.

    There may be no choice involved. Freefall. Time to get out in the good weather with your Slean and turn the sod:)

  11. 31 YEARS…259 DAYS… 1 HOUR… 46 MINUTES AND 40 SECONDS….

    http://dl.dropbox.com/u/4914840/ontario_niagara.jpg

    Greetings,

    In 2008 I went for a private 10 days shooting with world famous photographer Michael Reichmann in AlgonqiunPark and other areas in Ontario.

    I also spent some time on my own, visiting places around Toronto, which I call ‘city made of glas’.

    The G8 and G20 meetings are taking place there, and I just wanted to put some things into perspective.

    If you would want to pay the costs for the two meetings of our famous-all important-problem solving-working for the people and not banksters- finance ministers and their crews, by putting down 1 dollar every second, it would take you that long…. 32 years ish.

    The cost for these two meetings stands at > 1bn dollar.

    May be in a far distant future…. children will be told this story in context, that there are 24,000 children dying every day for lack of nutrition, and at the same time a handful of ‘very important’ people meet to discuss everything and do nothing, and create costs on a scale that needs to be understood from a different perspective…. every 3,6 seconds a child dies for lack of food and water.

    http://dl.dropbox.com/u/4914840/ontario_american_falls.jpg

  12. We’ll see if the banking inquiries show any substance when published next week. Meanwhile we can wonder if Patrick Honahan has proved to be a damp squib or squid for the banks.
    News from EBS not good
    http://bit.ly/aQK0dk
    No changes to the Irish bubble mortgage market along the lines of refactoring the well respected
    Danish mortgage market and implementing an Irish version.
    http://bit.ly/19YBf3

  13. Kowns Konstipation in Stone

    ‘ a Burren Desert in Stone ‘

    ( coming to a cinema near you )

    Staring : U D Irish Taxpayer

    Co Staring : Lenny & Kown
    Kapital Punishment
    Lotsa Banks
    Cops & Robbers

    http://www.democracynow.org/blog/2010/4/13/poet_and_author_alice_walker_speaking_in_gaza

  14. Tull McAdoo

    I’m at a total loss here people. I have heard Brian Linehan and Brian Cowen for that matter SAY with absolute conviction that “We have turned a corner”. Now I don’t want to joke at this time of stress, but they have said that three times already this year. Where I live in Perth the roads are done out in a grid system like New York, Barcelona, Toronto etc. planned Cities, and the truth is when you turn three times in a row either left or right you finish back up on the same street you started turning from i.e. you have gone around in a square, which is usually pointless.
    The problem I have is that I cannot find any meaningful data to back up their contention. Unemployment for May is up by over 6 thousand even though the FF safety valve of emigration has seen thousands leave our shores in May.
    Tax Revenue’s or Income to me and you are down again in May and that’s even Down on the revised estimates that the Boffins over at the, by now totally discredited DOF came up with.( don’t get me wrong I’m sure there are top class people in DOF but they just need to come to the fore and oust the delusional .)
    Even when you get away from the hard numbers (before some peoples eyes start to glaze over) and look at areas like confidence, sentiment, optimism, and all these more subjective areas that are surveyed, then I’m afraid the feedback from there does not suggest that any corners have been turned in peoples minds.
    So where are these corners that Linehan and Cowen seem to think we are turning?. What are these men seeing from the bridge of the ship or what are their spin doctors seeing from their vantage point above in the crows nest, to keep with the maritime theme. Is it the case that they are trying to put a positive spin on things because they have committed the most awful blunders since the foundation of the State? Have they prevented a run on the Banks and saved them by offering the Country to the markets instead? Are we now faced with the “worse case scenario” of having to try and prevent a run on the Country, our very Sovereignty, our Bonds, our place, our sense of place?
    When did Ireland become just another cash-cow to Fianna Fail/ Pd/ Amish. Who in the name of all that is right gave them a mandate to do that? Maybe this shower are our latest “dark cow” as I’m sure ye all remember “ when the dark cow leaves the moor, and pastures poor with greedy weeds” At least now we know who some of the greedy weeds are!!
    Its just coming up to 7am and I’m going driving north towards the pinnacles, to meet some friends, I have my travel CD, enjoy the rest of yere Bank holiday weekend, we will tease it out some more next week. I will leave ye with an Ozzy track from the CD, which always makes me smile and starts the foot tapping . Fir ag Obair agus an “talamh a leagtar síos faoi” ….. Ha ha LOL .
    http://www.youtube.com/watch?v=zlbjt-Msewc&feature=related

  15. Our Flag

    Like Kown & Lenny I believe our flag has become lost in translation.We need to devise a new flag that we can lead with conviction what we believe in.

  16. The Banner

    Our Flag was created from a civil war time period and is relatively young .It has made happen what it was supposed to do and now we must devise a new Flag to take us where our dreams want us to go.Unless we do that, we like our economy, will flounder rudderless for a long time and our sovereignity will continue to become eroded further.
    There is sex in economics and without that there is no economy only stone .The Flag denotes the spiritual and physical and emotional dimensions of who we are as a nation and how we perceive ourselves.
    To find what kind of flag we want we need to look further back to the beginning as we know it .We perceive ourselves as the island of saints & scholars from the time of St. Patrick and his followers that created a spiritual empire then that embraced much of northern Europe .This can be seen on the emblems of other countries such as : Finland, Norway, Sweden, Iceland , switzerland etc and also on the British Flag .All of these display christian symbols of the cross or crosses as the case maybe.
    We must retrieve our titular spiritual presence by creating an empirical symbol that embraces all that went afterwards and to remind the world that our island was in another time a center of ‘world authority’ and ‘world order’ for a large part of Europe and formed the basis of christianity of the forefathers of many worldwide.
    Without the Flag there is no sex and we will continue to be constipated in stone.

  17. Tim

    Folks, some Dáil expenses visualisations and spreadsheets for you to look at (you may be VERY interested in the matter of mobile phone expenses and the FoI ACT):

    http://thestory.ie/2010/06/04/expenses-visualisations-and-spreadsheets/

  18. [...] some anti-NAMA opinion pieces in the press, some economists using the internet to criticise NAMA eg here , celebrity economist David McWilliams will take to the planks in June 2010 with his self-penned [...]

  19. [...] are expected to incur a 60% haircut. Why should the lower value loans which are expected to be more green fields in Athlone have a lower haircut than the €20m+ [...]

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