NAMA: Not great, but the best we have

jmayo

Niall Keane wrote: »

Jmayo:
I believe that it’s worse than this; everyone seems to think that when or if the boom returns we’ll be able to sell. I’ve outlined my opinion on this post #117.

Alternative:

Use the €90b instead to write off 50% of the value of everyone’s mortgage, banks will be recapitalised, everyone will have more spending power so the recession will end, let the banks pursue the toxic debts themselves, they can decide whether or not to further capitalise potential profitable development. They won't be in danger any longer, so no need for stupid "we have to keep throwing money into obviously flawed pyramid development schemes or the universe will collapse" strategies will occur, where as that is exactly what NAMA currently proposes.

NO NO NO.
What then would an individual who did not buy or has already paid off their mortgage get ?
Oh lets see they get to pay for someone elses mortgage, probably even their credit card and new car loans as well.

You are just substituting one form of bailout for another.

They are equally as bad for the taxpayer that did not getted carried away with jumping on the property gravy train during the construction bubble.

Fair enough give a helping hand to those who have become unemployed, but not every Tom Dick and Mary who happens to have a mortgage.

BTW IMHO I don't think the value of residential home loans would come anywhere clsoe to the amount of development loans and the amounts that would have to be written off, thus paying off half of the mortgages would not be near to recapitalising the banks.

Increase consumer spending is your basic solution to getting out of recession, pushing our current deficit down and getting the economy gorwing.

How about increasing our competitiveness to increase exports, increase grants to export earning and employment creation enterprises and cutting public sector spending ?
Would that not help our current deficit even more than firing wads of cash at people to have more to blow on consumer spending, most of which will probably go on imports.

Why do people think that if we either have loads of dosh to spend on consumer spending or the prices of property increases we will have a good economy again ?

thebman

Well the main problem is that consumer spending can't increase when all their money is going to service their debts which seems to be the case and as wages decrease will only become more of an issue.

cavedave

thebman

Well the main problem is that consumer spending can't increase when all their money is going to service their debts which seems to be the case and as wages decrease will only become more of an issue.

One way to reduce peoples costs would be to allow the price of renting and buying a house to fall. To fall to, and I realise this makes me a communist, their market value.

thebman

cavedave wrote: »

One way to reduce peoples costs would be to allow the price of renting and buying a house to fall. To fall to, and I realise this makes me a communist, their market value.

No that doesn't change anything because the people already have the 300,000 loans they have to pay back.

That would only help Irish people that haven't bought yet so we'd eventually recover. The problem is a large percentage of people are already up to their eye balls in debt and when wages reduce to try to make us more competitive and taxes increase so the government doesn't have to cut programs or get rid of staff that these people will have less money again and will still be unable to spend. There will be little luxury expenditure from that section of the market.

Sand

I'm tired of everyone ignoring the point of this thread. It's basically all replies saying: "Nama is awful" or "Shut up and go back to Fianna Fail". No-one understood the point of it: Discuss the opposition ideas. Once people saw "NAMA", they were off and running talking about how they think its a bad idea. Almost no-one bothered to mention the opposition ideas even once, and those who did wrote 1 sentence on them. That is not enough to prove that the opposition's ideas are better.

A) You invited comment on NAMA with the very title of this thread ( "Oh no its not, and heres why..")

You have ignored the repeated pointing out of the advantages of nationalisation and a good bank proposal, pretending no one has pointed out the advantages of

-full knowledge of the banks situation: as of now Brian Lenihan only assumes the banks must be solvent because hes pretty sure the banks would tell him if they werent. With nationalisation...we KNOW because we have full access to everything.

- forcing the shareholders and junior bond holders to take their rightful losses before forcing the risk onto the taxpayer

- elimination of moral hazard in that the shareholders, junior bondholders, and bank executives will all be punished for their recklessness as opposed to being rewarded

- direct resolution of the issue of providing credit to the real economy.

- Clear oversight and accountability, as opposed to the secrecy and deception which clouds NAMA

- Scope for breaking up Irish banking sector into smaller units that are not too big to fail, breaking the cycle of bailouts and improving competition for the Irish depositor.

- Avoids the potential for corruption in the use of LTEV, which is very similar to Enrons accounting practises.



Neither alternative is without problems but both are vastly, vastly superior to NAMA.

gurramok

thebman wrote: »

No that doesn't change anything because the people already have the 300,000 loans they have to pay back.

That would only help Irish people that haven't bought yet so we'd eventually recover. The problem is a large percentage of people are already up to their eye balls in debt and when wages reduce to try to make us more competitive and taxes increase so the government doesn't have to cut programs or get rid of staff that these people will have less money again and will still be unable to spend. There will be little luxury expenditure from that section of the market.

Its a minority of the population that are up to their eyeballs in debt, its tough sh1t that they have to service their debts on bad decisions. The majority who have been prudent and still have jobs are the ones who should be incentivised to spend, not taxed to the hilt for any bailout.

Niall Keane

jmayo:

NO NO NO.
What then would an individual who did not buy or has already paid off their mortgage get ?
Oh lets see they get to pay for someone elses mortgage, probably even their credit card and new car loans as well.

You are just substituting one form of bailout for another.

They are equally as bad for the taxpayer that did not getted carried away with jumping on the property gravy train during the construction bubble.

Fair enough give a helping hand to those who have become unemployed, but not every Tom Dick and Mary who happens to have a mortgage.

Yea, but my point is that if the banks are to be recapitalised, I would rather see the money go to bailing out families with mortgages, than developers.
This would have the effect of ending the recession with more disposable income, and allow us to reduce salaries to make us competitive without condemning families to bankruptcy.
Trouble I see is that Irish people seem more adverse to spending €90b on a general social and economic benefit as outlined above than being forced to give it to bstrds. An attitude of no way is Johnny the neighbour going to benefit, but if the government bulldozes NAMA through well we'll be happy enough to say our hands were tied and the developers were looked after!
Bottom line if you're going to lose €90b who do you want to see reap the benefit? If developers get it i.e. an extension of time to their projects costing us €90b, the broader economy will see no benefit, even if the banks start lending. With higher taxes, set to rise further and unpredictably, who can afford to be a customer? Are people going to suddenly run out and get that extension, buy that car, go on holiday, when taxed to the hilt? No, now they also have to save for college fees for their kids, so even if money is available, they will not spend. So jobs will continue to be lost and unemployment and taxes increase.
This government is making all the mistakes possible, refusing to look to the past experience of other countries and recessions, I really believe that they must all be complicit in some serious criminal actions that developers and banks have recorded and filed away.
In most countries such disastrous governments would have the honour to resign, during the "enlightenment" they'd probably be guillotined, not our lads though, no; they have a duty to collect those ministerial salaries!

thebman

gurramok wrote: »

Its a minority of the population that are up to their eyeballs in debt, its tough sh1t that they have to service their debts on bad decisions. The majority who have been prudent and still have jobs are the ones who should be incentivised to spend, not taxed to the hilt for any bailout.

Dunno, think it is pretty widespread TBH. A minority but a size-able one and it shouldn't just be ignored.

I'm not one of them BTW, debt free :P

Count Dooku

PunkFreud wrote: »

What I wanted, was for people to say why they thought the other ideas were better. Has anyone noticed the title of the thread? I said it "wasn't great", but it was the best option available. I hope people will stop bashing it and explaining why they believe the opposition's ideas to be better.

It is very simple
If banks will get 60 bn from taxpayers, there is no guarantee that those money will go Irish economy. I more then sure that those money will go outside of country, because there is no opportunity to invest with reasonable profit and banks are private companies, which suppose to look for profit of shareholders, nothing else
Both opposition idea take care about it, or through special bank or through full control from state in case of nationalization

population

Count Dooku wrote: »

It is very simple
If banks will get 60 bn from taxpayers, there is no guarantee that those money will go Irish economy. I more then sure that those money will go outside of country, because there is no opportunity to invest with reasonable profit and banks are private companies, which suppose to look for profit of shareholders, nothing else
Both opposition idea take care about it, or through special bank or through full control from state in case of nationalization

I seem to remember Channel 4 running a series of stories about how the recapitalisation that the Labor govt gave to its major banks essentially all vanished to pet projects in emerging countries rather than trickle into the UK economy???

thebman

Make nationalisation seem like a smater idea TBH. At least if you own them you control them and with the money we are going to have to give them, we are basically buying them anyway.

They aren't actually worth anything anyway without our guarantee, they should be begging for the state to take ownership and rescue them, not looking for a handout.

erictheviking

Count Dooku wrote: »

It is very simple
If banks will get 60 bn from taxpayers, there is no guarantee that those money will go Irish economy. I more then sure that those money will go outside of country, because there is no opportunity to invest with reasonable profit and banks are private companies, which suppose to look for profit of shareholders, nothing else
Both opposition idea take care about it, or through special bank or through full control from state in case of nationalization

Sorry to go off topic here ...Why is it when I read your posts I keep thinking of the comparethemeerkat.com ad off the telly???:D:D:D

puffdragon

I often just scroll through these threads and laugh at the over educated way that most posters seem to try using historical politics or economic trends to unravle the NAMA conundrum but I can hold my tongue no longer. I am sure now that there may only be a "few good men" left, I dont intend to keep you long with the mathematics except to say that there are 1500 well off developers and Fiana Fail cronies anxiously awaiting your money! And when you finaly figure out that if you are a parent or a child of a parent then your future is bleek, this debt will outlive you and probably your children, If someone fools you once shame on them but if someone fools you twice shame on you,
Im not out to antagonise or to upset but please for my sake ,your own and that of the nations children do not vote for this craziness ,there are so many alternatives to this governments proposals and anythings better than selling your country for a few bad apples, Im going to bed!!

Nate--IRL--

puffdragon wrote: »

Im not out to antagonise or to upset but please for my sake ,your own and that of the nations children do not vote for this craziness ,there are so many alternatives to this governments proposals and anythings better than selling your country for a few bad apples, Im going to bed!!

Eh ... we don't get a vote on this, unfortunately

Nate

ifconfig

I got embroiled in a heated discussion earlier today on the NAMA proposal versus what was put on the table by FG, Lab and the opinion of the 46 economists, etc.

The other party within this little fireside debate is bullish on matters of finance, etc and tends to see "reds under the bed" in the least likely places.
Eg, he describes ESRI as a left-wing economics think tank. His current theory is that Richard Bruton's FG good bank proposal is a sop to the Labour party because they see them as the most likely bedfellows should an election occur and FG wanted to get back into power, etc.
Surprisingly he is a lifelong FG supporter who despised Garret for his liberal (social) tendencies but feels Garret was right in his recent pronouncements on NAMA.

Anyway - he is pro-NAMA as-was (i.e purchase the loans at LTEV price with no discounts, levies or risk-sharing because we need to minimise the state stake in the banks at all costs). He, unsurprisingly has shares in the main banks as well as sunk-ones in Anglo). When I raised the argument that the banks would still most likely need to be heavily recapitalised following even modest haircuts on the loanbook purchases he retorted that liquidity was the only issue and that any recapitalisation would be a sniff for the banks because they could simply perform a rights issue and raise capital that way.
Highly bullish.

So , say NAMA goes through with some of the tweaks as already flagged by the Greens - is there any credibility that rights issues by the main banks could be instrumented and that banks purged of their toxic assets could get the confidence of the market to invest and resurrect the bank sector ?

Diarmuid

cavedave wrote: »

. To fall to, and I realise this makes me a communist, their market value.

No, that would make you a capitalist. Nothing to be shamed of though

puffdragon

I thought that a nights sleep might help but no its still the same and to add insult to injury now RTE is telling lies to the public by deliberately missreading the poll figures ,I was talking to a friend in Australia today It looks like we may have to get out of here , It's a sin that I feel this way because I hate to give up and turn my back on my homeland but unfortunately theres no-one left with any balls, Fiana Fail is going to ruin our lives and I for one wont be giving them a penny, or staying around to hand my children the poison challice!!

puffdragon

Nate--IRL-- wrote: »

Eh ... we don't get a vote on this, unfortunately

Nate

This speaks for itself, truly we are now in a dictatorship, how does it make you feel when you see stories like the muslim lady who was being whipped for wearing trousers or the chinese lady who got 15 years in prison for letting anAmerican journalist stay in her house,yes im being over dramatic but think of it this way I am being asked if I want to pay back someone elses debt for them and the simple answer is NO. but do I have a choice? NO. then I am being dictated to.

Count Dooku

puffdragon wrote: »

but think of it this way I am being asked if I want to pay back someone elses debt for them and the simple answer is NO. but do I have a choice? NO. then I am being dictated to.

Yes
You do have a choice
Choices are
or you will let government do what they want
or you will start you own fight against NAMA, if it is scary to do alone, you can join to some of anti-NAMA groups.
Without fight, you have only one choice, if we will exclude emigration

puffdragon

Thank you for the wise words Count Dooku but I am doing as much as i can in that respect also but thats not really my point, The way I see it unfortunately is that we are damned if we do and damned if we dont and none of it is either mine or your fault so either way I refuse to participate in the paying back of any debt. I will hang on here now until my son finishes college which is about two more years during which time I will try to pay no tax and then Im off to Aussie, their not getting a penny from me!!

LostinBlanch

Nice article from Morgan Kelly in the Times today. Look at the way he examines Japan. It's banks were in a parallel position to Ireland

Two previous booms fit this pattern closely: Japanese urban land in the 1980s, and Irish agricultural land in the late 1970s.

In Japan between 1985 and 1990, the real price of commercial land in major cities tripled, while the price of residential land doubled. What makes the Japanese case particularly relevant to Ireland, as I pointed out here two years ago, is that at the peak of their bubble, Japanese banks had the same extreme exposure to development and construction loans – 30 per cent of their lending – as Irish banks did in 2007.

As Japanese banks buckled under bad property debts, lending fell sharply and prices with it. By 2005 – 15 years after the peak – residential land had fallen back to its pre-bubble level, while commercial land had fallen by nearly 90 per cent. Given that many people are claiming that Irish property prices will recover once the economy starts to grow again, it is interesting to note that Japanese property prices collapsed while the economy continued slowly to expand: real output in Japan rose 20 per cent between 1990 and 2007 and did not fall in any year during this period.

The next case is much closer to home but almost forgotten: the boom and bust in Irish farmland prices in the late 1970s. After joining the EEC in 1973, Irish banks began to lend heavily to farmers. As a result, the inflation adjusted price of agricultural land tripled between 1975 and 1977, reaching a peak equivalent to €14,000 per acre in 2009 prices. Real Irish GNP in 1977 was about one third of its present level, so this price is roughly equivalent to €50,000 per acre in current purchasing power for land with no development potential. For comparison, during the recent boom, when agricultural land prices were driven by demand for potential development, prices peaked in 2006 at an average of €21,000 per acre nationally.

The bubble quickly burst as farmers ran into difficulties servicing loans: between 1977 and 1980 real prices fell by around 75 per cent, and remained at this level, more or less where it had started in 1973, until 1995, 18 years after the peak.

These examples illustrate a general principle: property bubbles are the consequence of abnormal levels of bank lending. Once the bank lending that fuelled the boom returns to its usual levels, prices return roughly to where they started before the boom.

Good to see that Irish banks learnt their lesson from the late 70's. Oh wait.

Then he looks at the mythical 25% that all property developers are supposed to have put in as collateral, and is used as a justification for overpaying even more of our money to FFs friends.

What we have seen then is that as the abnormal lending that fuelled the property boom returns to its normal level, Irish property prices should fall back to their pre-bubble values, at around one third of their peak values.

In the absence of evidence to support it, the Government’s claim that €90 billion in developer loans are backed by €120 billion in assets appears implausible. While five-year developer loans were the norm, properties were usually flipped on after two years, meaning that existing loans were mostly taken out at peak prices.

In addition, while loans were supposedly 70 per cent of property value, the collateral supplied was usually equity in other property or personal guarantees, both now worthless.

It appears, therefore, that, by paying an average of two thirds of the face value for Nama assets, the Government is likely to impose severe losses on taxpayers of the order of €30 billion, or one fifth of national income.

Let's see NAMA apologists answer these.

ardmacha

I will hang on here now until my son finishes college

Good idea, suck as much Irish taxpayers money as possible, before leaving.

thebman

ardmacha wrote: »

Good idea, suck as much Irish taxpayers money as possible, before leaving.

Hey if you can't beat em join them right?

puffdragon

ardmacha wrote: »

Good idea, suck as much Irish taxpayers money as possible, before leaving.

If I never worked or paid tax again I'd still be putting more money back into the economy than my local co-councillor or any politician for that matter and although I probably wont do this for long (the longest I've ever been out of work was three weeks) I still over my lifetime have paid an awfull lot of tax,
Im not ashamed of taking some dole money for a few months but I am ashamed of my elected politicians who have wasted money, my money feeds my family , food bought in Ireland, Oil and gas bought in Ireland, bin tags,etc etc .Last year I paid €48.000 tax bill I'll never be self-employed again not in this country.

Amhran Nua

puffdragon wrote: »

It's a sin that I feel this way because I hate to give up and turn my back on my homeland but unfortunately theres no-one left with any balls

If you and all the other people who honestly care about the well being of the country leave, we'll have nobody here to stand up and say enough is enough. Stay for a bit longer sure, some people have the minerals and are fighting back on the politico's own level.

On topic, the banks have a lot of fairly decent assets in the shape of retail mortgages, we could use those to cover the deposits while we set up a new credit agency of some sort. I say these are fairly decent because bankruptcy laws in this country are harsh, and impairment rates were in the low single digit percentages last time I checked. That will change but again IMO will stay under the 10% level. Shareholders (and that includes pension funds) are already wiped out, damage done, bondholders and so on are meant to be big boy investors, they knew the risks going in.

Or we could just go the David McWilliams route which gets to the same destination by a different route. There are plenty of alternatives.

puffdragon

Amhran Nua wrote: »

If you and all the other people who honestly care about the well being of the country leave, we'll have nobody here to stand up and say enough is enough. Stay for a bit longer sure, some people have the minerals and are fighting back on the politico's own level.[end quote]

Dragon says;
I havent gone away yet you know!! yes I agree stand up and say something , The RTE news was predictably biased tonight but George Lee made a good stab at sounding suitably disgusted, as I am with the whole thing ,
Honestly what I've heard from friends and family already tonight now that the threat is looming closer I wont be on my own either,I could I suppose go into the economics of investing in our future rather than selling our childrens future down the river but thats too simple.
I would really like to see a better plan which ensured the true benifits of the potential resale of the then value added assets(In ten years time?)going directly to the common good and not liniing Fiana Fail cronies pockets, I dont trust them you see .

superhooper

Howwill NAMA deal with our property developers? Will they be madeto paythe piper:rolleyes:

Amhran Nua

puffdragon wrote: »

I dont trust them you see .

Then stand and fight man. You don't stand alone.

Nate--IRL--

Amhran Nua wrote: »

Then stand and fight man. You don't stand alone.

Judging by the pitiful Nama protests on the 12th and 16th, we are alone. To quote Zack de la Rocha..... WAKE UP!

Nate

thebman

RTE's coverage is basically say whatever you want as long as it isn't against FF.

If it is against FF, change the subject after talking down the remark.

Brian Dobsen or whatever his name is was a disgrace today IMHO.