nama explained in laymans terms

Sponge Bob

NAMA is straightforward.

The FF and Green government will take a number of assets owned by a coterie of FF friendly D4 Developers and Bankers and will hide them in a very secretive ( by law) body called NAMA in the hope that the market will bounce back in 10-15 years and that they can sell them on the open market then.

In the meantime the taxpayer will pay around €5bn a year to subsidise this scheme.

€5bn a year gave us a health system in the early 2000's or an education system. But as health and education do not produce streams of brown envelopes to subsidise FF then one or the other simlpy must be dropped to pay for NAMA .

I hope that is clear. Your choice as to which one you want to lose .

myk

Purple Gorilla wrote: »

I don't agree with the "It's a baliout for Developers" argument. They still owe the money. How is that a bailout? If they don't pay up, they lose their developments and that becomes the State's land. The banks aren't exactly getting off easy either..they'll be taking a significant hit by this.

The developers are already not paying up! Transferring the loans to NAMA just gives more scope for going easy on developer loans. The legislation even allows for NAMA to loan more money to defaulting developers!

myk

lucky-colm wrote: »

leaving the banks fail is not an option these are 3 of the biggest banks in the country you would be writing off more money in share value/savings/pension schemes than what the bank is owed think of all the money that would leave the economy as a result and the knockon effect that would follow when everyones savings would simply "dissappear" like what happened with the anglo shares when it was nationalised

The share holders captial should clearly take the hit before the tax payer does. That is the nature of the risk in being a share holder. There is a chance you lose it all. This is especially the case if the share holders allow negligent management to get carried away with themselves during a property bubble...

myk

Purple Gorilla wrote: »

That's why the government is buying the debt at heavy a discount, to account for falling house prices. At the least, we'll break even.

incorrect, the draft NAMA legislation allows NAMA to pay higher than current market value. if land prices continue to fall then the tax payer will most certainly make a loss.

Purple Gorilla wrote: »

But more than likely the taxpayer should benefit from this. If a developer doesn't pay up, their land becomes the State's land. That will give the State an advantage because they can develop it or sell it on for a higher price.

I thought the idea that land would continously increase in value (after taking account for inflation) has been well and truly been proven false over the last 12 months. If you still believe that, then I'm sure there are a whole load of people who would love to sell you some land.

myk

lucky-colm wrote: »

i don't think so,
but lets take your option and leave the banks go bust
what happens then?
when you go to the hole in the wall and you suddenly realise that all the money is gone. not to worry yousay i'll just get the boss to give me cash next week, oh no when the boss went to the bank to get the cash the doors were broken down all the windows were broken all the furniture was thrown around and smoke billowing out from the back offices, inflation is gone through the roof a loaf of bread is €1000 if you are lucky.

cos lets face it if your govt dosn,t see any sense in saving the banks what outside bank(as you have mentioned already) would be interested in stepping in. a state without a banking system is on the verge of anorchey and lawlessness. we only have to look at africa to see what it is like when a state has no money

what a ridiculous false dichotomy. There are other alternative ways to recapitalise the banks than NAMA.

Even that aside, if we weren't tied with the bank guarantee our banks could be broken up and taken over by international institutions and financial infrastructure of the country would still work.

myk

Purple Gorilla wrote: »

This will technically add to our government debt, but the EU and presumably other ratings agencies will record this as "off-the-book" debt so it shouldn't effect the country's ability to borrow.

sorry, rating agencies will ignore the debt because of how it is recorded?

the off the record element helps Ireland to negotiate EU regulations on debt levels. rating agencies won't turn a blind eye to billions of euro of debt!

Sand

NAMA in laymans terms:

A bunch of idiots borrowing 60-90 billion in your name to give to their mates.

SkepticOne

Just in terms of the prospects of property prices bouncing back, here's a graph of prices adjusted for inflation since 1970.



Unfortunately figures for commerical property and development land don't exist, but we can see from this that prices, at least in the residential sector, are still way removed from their long term norm. This is not a blip we're talking about but the ending of a massive bubble. It just went on so long that people (banks, regulators, etc.) stopped recognising it as such.

blucey

Professor Karl Whelan of UCD has a great piece in the indo today. Worth quoting in full

It is basic economics that it's a bad idea to tell somebody whom you're buying something from in advance that you've decided to deliberately pay more than anyone else will.
However, this is what our Government's draft Nama legislation is proposing to do with perhaps as much as €60bn to €70bn of our money -- about €15,000 for every man, woman and child in this country.
The Nama bill is 136 pages long, most of it tedious. But the key bit is as follows: Page 50 of the bill describes something called the market value of an asset as the price that would be paid "between a willing buyer and a willing seller in an arm's length transaction where both parties acted knowledgeably, prudently and without compulsion".
Fair enough. So, how much are we going to pay?
Page 51 tells us that we will buy the assets at "(i) their current market value, or (ii) a greater value (not exceeding their long-term economic value) that Nama considers appropriate in the circumstances".
So what is this long-term economic value that Nama will consider appropriate to pay using our money? It's hard to know -- the legislation mentions something about a value that the assets "can reasonably be expected to attain in a stable financial system when current crisis conditions are ameliorated".
Take this in for a minute. There's a value that prudent, knowledgeable people would pay for these bank assets (being prudent and knowledgeable, presumably they know the current crisis won't last forever). And then there is some higher value that we are going to pay, based on something about things becoming ameliorated.
Perhaps that makes you a bit uneasy, but I hear many of you saying that there must be some great benefit to us from paying too much for these assets.
Indeed, we are constantly told that we need to overpay for these assets because we need to save "the banks" because they are crucial to the economy.
Well, banks do indeed play an important role in the economy, but forget about banks for the moment, let's focus on who owns these banks. Who gets the extra money that we have decided to deliberately overpay for these assets? The bank shareholders.
Nama is a conscious policy of transferring billions of euro through overpayment from the taxpayer to bank shareholders. These are the same bank shareholders who appointed and cheered on the boards of directors that contributed to bringing the Irish economy to its knees.
Now, distasteful as this is, surely there must be some good reason for it, I hear you say. For instance, people like Pat Farrell from the Irish Bankers Federation tell us that "our banking system cannot absorb" the losses that would be incurred from the Government paying what these assets are worth.
But again this confuses our leading banking institutions, which we need to help, with their current shareholders, who we don't. The Government has committed to provide whatever investment is required to ensure that our banks are adequately capitalised after the losses associated with Nama.
And it has stated that it will take an equity stake in the banks in return for these investments. One way or another, the plan is to recapitalise our banks. What is at stake here is the ownership structure after Nama.
So do not be fooled: Those who defend the impending over-payment with our money are actually expressing a desire to minimise the losses that the Nama process will trigger for current bank shareholders and, by the same token, expressing a desire to limit state ownership of the banks.
Remember that once these banks are cleaned up and recapitalised, a state equity stake could have considerable value. The overpayment enthusiasts would prefer to use our money to keep that value for themselves.
Hanging over this whole process, of course, is the question of nationalisation. Without Nama's friendly overpaying intervention, the banks in their current incarnation are facing enormous losses on recklessly made loans.
The main Irish banks have been desperately trying to hide from us exactly how big these losses are. But Dutch-owned ACC (apparently being kept off the Nama gravy train) have done the Irish taxpayer a great service by exposing the true state of the accounts of one "leading" developer, Liam Carroll, whose Zoe group now admits it can only pay back a quarter of its loans. Given the size of the major banks' development portfolios, paying anything close to current market values for their bad loans would almost certainly see them being nationalised.
And this, we are repeatedly told by the Government, is A Very Bad Thing.
Again, this is largely scare-mongering. Permanent nationalisation of banks generally leads to bad outcomes but nobody is recommending this. Instead, what should be undertaken is a temporary nationalisation of those institutions that turn out to be insolvent, something which has been recommended by the International Monetary Fund, and which has worked as part of successful resolutions of banking crises in countries such as Sweden and Norway.
Even if the Government doesn't agree with me about the limited dangers of temporary nationalisation, it has done little
to explore the available options for getting private ownership involved in banks like AIB while still paying a fair price for their assets. This could be done, for instance, by offering debt-for-equity swaps to certain classes of bondholders or by negotiating with foreign banks or private equity firms to take ownership stakes. Instead, the Government would prefer to line the pockets of domestic bank shareholders. It is a legitimate question to ask why.
So this is where the Nama process is right now. They have as good as told us that they are going to pick our pockets to give large amounts of unnecessary money to bank shareholders. And we are expected to cheer this process on.
Well, we don't have to. Even if a Nama-like process is required to clean up the Irish banks, there is no need for it to rely on the awful "long-term economic value" approach to pricing. This is your hard-earned money they're wasting at a time when valuable public services are being cut and your taxes are being raised.
Meanwhile, delinquent property developers are being indulged while regular people who can't pay their mortgages are being evicted. It's time to let your local representatives of the Soldiers of Destiny, An Comhaontas Glas and their remaining independent supporters know what you think of this plan.

doubleglaze

lucky-colm wrote: »

how nama will achieve this:
nama will "buy" the "bad" loans from the banks at a reduced price (No they won't. They will pay way ABOVE market value for them. ) somewhere between 50-70% of their original value (You are WAY out of touch on your figures here. However, yes, you are right in that this is what they SHOULD be paying for them). they can't pay to much for the loans as the assets that are gauranteeing these loans have reduced in value (spot on with that one), neither can they buy them for their current market value as this would value them to low (but wrong on this one: the assets are still, even today, at bubble prices and have a long way to fall) and this would seriously under value the assets that are gauranteeing the banks remaining loans (point 2 above).

Some of original post, with commentary.

ei.sdraob

SkepticOne wrote: »

.

any update to this graph I noticed it ends about a year ago

SkepticOne

ei.sdraob wrote: »

any update to this graph I noticed it ends about a year ago

No, it is the latest available figures. Goes up to July 09 for the ESRI figures which became available in early August and Q2 09 for the figures from Dept. of Environment and Daft. Note the gap after Sep 08.

jmayo

NAMA really appears to be another way of sustaining property prices.
It is a means to prolong the inevitable and it's basic premise is that somjeday property prices will return to the glory days of early 2007.
Meanwhile the tax payer can take the hit because they are ones carrying the risk, developers can continue to trade and they have already been given leeway on their outstanding loans.

If the banks as in normal circumstances were forced to call in the loans, or even God forbid get repayments on the loans, then all the unsold, half developed property would hit the market.
Then we would see what the real price of property was in this country and we would reach the bottom.
Yes a lot of preople would suddenly discover how much negative equity they were in, people would lose jobs, developers would have to fold and drag others with them.

It is noticable how Carroll's barrister Cush was affectively trying to bully the supreme court threatening what dire consequences there would be if all Carrolls holdings had to be liquidated in order to repay one bank.
Also he let the cat out of the bag by stating all the other lenders were behind Carroll and were faciliating him in continuing.
These would be the same institutions that are getting cash injection from the taxpayers.

Did we give AIB a few billion so that they could keep Carroll in busiiness ?
For some reason I remember being told it was so that they could lend to ordinary DECENT businesses and not these pyramid schemes :mad:

ei.sdraob

jmayo wrote: »

NAMA really appears to be another way of sustaining property prices.
It is a means to prolong the inevitable and it's basic premise is that somjeday property prices will return to the glory days of early 2007.
Meanwhile the tax payer can take the hit because they are ones carrying the risk, developers can continue to trade and they have already been given leeway on their outstanding loans.

If the banks as in normal circumstances were forced to call in the loans, or even God forbid get repayments on the loans, then all the unsold, half developed property would hit the market.
Then we would see what the real price of property was in this country and we would reach the bottom.
Yes a lot of preople would suddenly discover how much negative equity they were in, people would lose jobs, developers would have to fold and drag others with them.

It is noticable how Carroll's barrister Cush was affectively trying to bully the supreme court threatening what dire consequences there would be if all Carrolls holdings had to be liquidated in order to repay one bank.
Also he let the cat out of the bag by stating all the other lenders were behind Carroll and were faciliating him in continuing.
These would be the same institutions that are getting cash injection from the taxpayers.

Did we give AIB a few billion so that they could keep Carroll in busiiness ?
For some reason I remember being told it was so that they could lend to ordinary DECENT businesses and not these pyramid schemes :mad:

it will take a very long time if ever for property prices to reach these levels again

Japan is a case in point where over a decade later property prices are still falling from the crazy bubble heights

So that leaves me to believe that NAMA is nothing more than a bailout at our expense

its a sick sick joke

jmayo

ei.sdraob wrote: »

it will take a very long time if ever for property prices to reach these levels again

Japan is a case in point where over a decade later property prices are still falling from the crazy bubble heights

So that leaves me to believe that NAMA is nothing more than a bailout at our expense

its a sick sick joke

Exactly 17 years or so on, even after dotcom tech bubble and credit bubble, Japanese proeprty is still below it's glorious peaks.
Of course Ireland is different :rolleyes:

Sponge Bob

Very Apt



http://1.bp.blogspot.com/_2TONRBOd21o/SoK83hHa9zI/AAAAAAAABIk/18LTX7pkuvU/s1600/3813875003_7e58e1ddc3_o.jpg

Rebelinho

herya wrote: »

How will the taxpayer benefit? Do you believe that full 90 billion will be recovered if developers are going bust right left and center and the land their loans are secured against is worth much less than it was valued for and will go down even further?

NAMA will pay (hypothetical) 60 bln and recover (hypothetical) 30 bln. 90 bln is just an empty figure now. Where's the gain for the taxpayer?

That Darren Holden is strange though, very camp

RachelMorrogh

Can anyone explain to me the impact of foreign-owned banks not being part of the Government's bail-out scheme? I'm sure they'll work with NAMA on properties where they have mutual interests, but what are the implications for the banking sector if banks such as NIB and KBC choose not to apply to be covered?

Sorry if this has been covered elsewhere.

ei.sdraob

RachelMorrogh wrote: »

Can anyone explain to me the impact of foreign-owned banks not being part of the Government's bail-out scheme? I'm sure they'll work with NAMA on properties where they have mutual interests, but what are the implications for the banking sector if banks such as NIB and KBC choose not to apply to be covered?

Sorry if this has been covered elsewhere.

foreign banks not covered by NAMA will sue to recover their money in any way possible

case in hand this month: Carrol vs. Acc Bank

RachelMorrogh

So they think there's more likelihood of getting the money back through the courts even though general consensus is that NAMA will over-value assets? What does that mean for the banks that are going the NAMA-route? And does it put foreign banks at an advantage because they can be covered by their parent bank and get money back from dodgy developers?

Sponge Bob

If you are not allowed into NAMA the courts are the only option for getting your money back .

You surely don't think that Irish developers pay interest every month , do you ??

85% of all loans for property development were on agreed interest rollover at the beginning of 2009 and of the remainder a proportion were delinquent .

ei.sdraob

RachelMorrogh wrote: »

So they think there's more likelihood of getting the money back through the courts even though general consensus is that NAMA will over-value assets? What does that mean for the banks that are going the NAMA-route? And does it put foreign banks at an advantage because they can be covered by their parent bank and get money back from dodgy developers?

The have no chance in hell of getting all their money back, these developers are bankrupt

what ACC is trying to do is to extract as much of the money owed to them as possible and to ensure they are the first in line to get paid in case of any bankruptcy wind down, ACC are basically trying to cut their losses and get the hell out of Ireland

The banks that are going the NAMA route are staying quiet, in fact they are doing everything to shut ACC up, if ACC get some of their money the house of cards falls and the rest of the banks go bust, hence why they are trying to bribe ACC to STFU

Foreign banks have bigger banks behind them, but almost all banks made some sort of a loss in this mess

Sponge Bob

ei.sdraob wrote: »

The banks that are going the NAMA route are staying quiet, in fact they are doing everything to shut ACC up, if ACC get some of their money the house of cards falls and the rest of the banks go bust, hence why they are trying to bribe ACC to STFU

Pretty much. yes.

Carrolls assets for example would fetch 20% of their value vis a vis his loans on the open market . That would mean the banks must write off 80% .

NAMA promises to only write off around 20% ( the haircut) meaning that the banks will get up to 4 times more money from the taxpayer under the NAMA bailout than they will get from a Liam Carroll liquidation . Except that ACC are not let into in NAMA and are faced with a choice of the 20% value now or 0% because the government has frozen Carroll into NAMA for the next 20 years.

Then we , the taxpayer, liquidate Carroll in time and take most of the hit instead and pass it to our children and our childrens children .

RachelMorrogh

Did either of you hear Alan Ahearne spinning on Newstalk at lunchtime? There were lots of 'ehs' and 'ums' in response to listener's questions. Hardly confidence inspiring.

So the foreign banks who have big money behind them are going to take what they can get through the courts and leave Ireland, you think? Is there any incentive for them to stay?

Very troubling that general consensus seems to be that generations to come will be paying for the mistakes legislators and regulators have made.

AlekSmart

The only real hope we have as a country,and perhaps as a stand-alone cultural entity is that there are enough honest members of the Legal Profession still holding down senior Judicial positions.

It really has now come down to the wire as quite obviously shaky-flaky stuff is being presented as "new" evidence to yet another High Court Judge.

I simply do not for a minute accept that Liam Carroll`s fellow Board Members AND a retinue of expensive financial advisers,bankers and lawyers ALL completely failed to notice that their CX was Howling-at-the-Moon.

This scenario reads far too alike to the basic defence strategy of the former Taoiseach who,it seems,was "Told Nuttin about antin" in relation to the countrys finances....:eek:

The Dutchmen are right in my opinion,get this disaster sorted NOW,at whatever discount is available TODAY.
We as a Nation surely cannot afford to once again follow the directives of a gang of Auctioneers,Publicans,Teachers and the odd Professional Gambler who like all such dependent types will constantly assure us that the next big win is only round the corner.

Liquidate,realize what "assets" there are and do it NOW...then we have a TRUE indicator of what is required and perhaps a time frame to do some rebuilding.

As RachelMorrogh points out there is just waay too much emming and umming coming from the serried ranks of the People who KNOW about stuff as opposed to the sighs of depression from those who have to pay the vast cost of this enterprise.

RachelMorrogh

But there appears to be no recourse, that's what upsets me. We complain about the decisions that have been made but the decision makers are still ploughing ahead with what they want to do.

Even if Government changed, the appalling financial architecture that supported the boom years, has fallen apart and no one has come up with a solution that anyone is happy with.

I think it's so unfair that the people who worked steadily and didn't splash the cash, are the ones who suffer and actually commit to bailing out those who have contributed to the ruin of the country.

ei.sdraob

RachelMorrogh wrote: »

But there appears to be no recourse, that's what upsets me. We complain about the decisions that have been made but the decision makers are still ploughing ahead with what they want to do.

Even if Government changed, the appalling financial architecture that supported the boom years, has fallen apart and no one has come up with a solution that anyone is happy with.

I think it's so unfair that the people who worked steadily and didn't splash the cash, are the ones who suffer and actually commit to bailing out those who have contributed to the ruin of the country.

as I said in another thread its win win for the banks

the gun is loaded and being held up against the taxpayers head

hence why its so perverse

RachelMorrogh

So if the taxpayers don't play ball, credit won't be forthcoming? Is that the implication if NAMA legislation isn't ratified? Or are they saying that the whole banking system will fall if it isn't approved? Is that a credible threat?

Sorry, don't know much about this stuff.

SkepticOne

RachelMorrogh wrote: »

Even if Government changed, the appalling financial architecture that supported the boom years, has fallen apart and no one has come up with a solution that anyone is happy with.

There's no correct answer that everyone will be happy with, but there are answers that will minimise (but not completely eliminate) the financial impact on those who chose not to gamble.

The current NAMA is the opposite of that. It is about maximizing the burden on ordinary people while minimizing it on bond holders, shareholders, the management of the banks that made the poor decisions, property developers and speculators and, of course, Fianna Fáil.

But I agree that it is important to be realistic. There is no way of completely avoiding burdening some people who recognized the bubble for what it was and tried to stay out of it.

jmayo

RachelMorrogh wrote: »

Did either of you hear Alan Ahearne spinning on Newstalk at lunchtime? There were lots of 'ehs' and 'ums' in response to listener's questions. Hardly confidence inspiring.

So the foreign banks who have big money behind them are going to take what they can get through the courts and leave Ireland, you think? Is there any incentive for them to stay?

Very troubling that general consensus seems to be that generations to come will be paying for the mistakes legislators and regulators have made.

We have lost him, he has gone to the dark side ....

Remember he who pays the piper calls the tune. :rolleyes:

Did anyone hear that spanner Ned O'Keefe on Newstalk yesterday claiming that the reason the Irish banks got carried away lending was that the foreign banks came in and started it.
At least teh interviwer piped up that the two big ones AIB/BOI were copying senaie scumbag fitzs gameplan and not that of any of the Johnny Foreigners.

Then to cop it off o'keefe wanted CIE/Irish Rail heads to roll for the bridge collapse, somthing texters pointed out was a bit rich coming from ff party deputy.
Then he blamed bertie and absolved clowen even though finance minister and second in charge.

Tar and feathers are the things that came into my mind listening to yet another ff gobs***e trying to mangle history to suit their ends.