Can someone please explain to me why NAMA is even needed?

sdanseo

I'm a student with a very keen interest in politics, but no interest in joining a party. Just an interest and a fair bit of knowledge. I understand the basic concept of NAMA, and have a very basic knowledge of economic theory, but I don't quite get why it's needed. I've gone from a higher than average knowledge of the subject to out of my depth in 6 months. How come in the year since the markets plummeted the banks have somehow survived? Why do they need money now and not a year ago? And why in the name of all that's holy should we the taxpayers be expected to bail out private enterprise?

Leaving the opinions of whether or not it is needed aside, can someone, or a combination of people, please try and explain to me in simple terms why this is being forced upon us even though everyone seems to be against it, and common sense says we can't afford to pay €54bn (almost the ENTIRE budget for last year, as I recall)? Why not just LET the banks flounder? Surely it would come right in a natural way? (I don't nessecarily think this, just putting it out there)...

Discuss.

PCPhoto

if the banks cannot get the money they risk going tits up (like Iceland) .... and what would happen would also have been similar to Northern Rock ...people outside demanding their money .... all hell breaking loose.

and since we are in the Eurozone - it would have severe consequences for the currency and also for our economic trade partners.

thats my understanding anyway.

PCPhoto

as it stands the loans cannot actually be repaid - so the banks will have to write off some amount of the outstanding loans as bad debts - what the Government is doing is its helping the banks out by saying ....

The Banks dont need to loose out that much...we'll pay you for your loans (more than what you would have gotten 'cos the market is getting worse)..... so the Government is asking for a share in the ownership of the banks in a kind of swap deal for taking all the bad debts..... only question is how much of the banks will the government own...if it goes above 51% then I think the banks are nationalised and everyone elses shares are not worth as much as they think.

(I dont know what I'm rambling on about its after 2am...hardly a time for political/economic debate or discussion....im off to sleep)

starbelgrade

According to Labour, we are stumping up €34k per family for each family in the country to prop up the sh*tehawks, who along with the other members of the golden circle ( politicians & developers ) who got us into this mess in the first place.

Why not give US the money - yep every family gets €34k to either invest in new banks after these ones collapse, spend in the retail sector to get it going again, or just use to keep paying the bills for those who've lost their jobs?

The government, banks & developers fuelled the boom which was never gonna last - they f*cked up the country & it's finances & shafted it's people, leaving most of us in negative equity / saddled with debt / unemployed (or a combination of all those) & now WE have to pay to keep the whole corrupt system going & the boys in their jobs.

There SURELY must be SOME other solution to this mess, other than Lenihan throwing our hard earned cash away & quoting Obama while he does it.

Meanwhile - what the f*ck are they doing about job creation? FAS.. yr havin' a laugh.

Next, they'll be suggesting taking over unsold properties for social housing.. oh wait, that's part of the plan.

aftermn

Our banks have loaned huge amounts of money in Ireland. This money was borrowed from other banks in Europe and elsewhere. If they (our banks) go bust, the foreign banks will do what ACC are doing, look for their money back asap.
Imagine all borrowed money being recalled at the same time.

That is only half the problem.

With banks gone there would be no payments clearing system in place. Cheques, credit cards etc would no longer work.

We would be back to barter.

Society would last about a week.

starbelgrade

The whole scenario is obscene. Joe Soap owes money to the bank - he's lost his job & can't make the repayments, so he faces debt agencies, reposessions etc etc.

Developers owe HUMONGOUS amounts of money to the banks. They can't repay them, so they go bust. End of story.

Meanwhile Joe Soap foots the bill, but still has to repay what he borrowed.

Captain Furball

I thought developers were getting saved too?

Rockshamrover

What happens if I go to a bank to borrow money? They check me out to see if I can afford the loan and lend to me if they think that I can pay.

If I get into difficulties, they will renegotiate the terms of the loan based on my changed circumstances. If I cannot pay anything the bank will get what they can for the property and write off the balance. Basically the banks have allowed for a certain percentage of defaulters in calculating their interest rates and charges.

Why is it different for banks borrowing from other banks? BOI or AIB borrowed from international banks so that they could then lend to us. Those international banks lent to BOI etc based on their ability to pay. If BOI cannot meet their new commitments they fail. The international banks take the hit.
Why don't our banks renegotiate their loans with the international banks?
Pay back what THEY owe over the next 50 years. Why should we pay?

SLUSK

You could let the current banks go bust and let foreign banks take over, they have proven to be less incompetent. Bailing out the incompetent is disgusting.

Nietzschean

have they proven to be less incompetent though? between nationalisations, bad debt buying by govt.'s and re-capitalisation....a lot of western banks haven't done much better than our own

kippy

What really really bother me here is the fact that even if we do "bail out" the banks (not so much the developers, they still owe the money) we have no guarentee that the banks will play ball in the future. None at all, especially if we dont have a solid stake in them.
Imagine this:

1. NAMA saves the banks's collective asses.
2. Taxpayers foot the bill for years to come.
3. Eurozone interest rates rise betweek 3 and 4 % in the next five years. Oil rises significantly in the meantime.
4. Irish banks push up their mortgage rates for existing customers significantly.
5. A large portion of "mortgage holders" cant afford to pay mortgage, bills etc and banks repossess.

1. The banks "owe" US nothing. We've seen before after banks have gotten bailed out how little they "pay" us back and even more importantly, despite banks getting bailed out in the past, the governments,financial gurus dont seem to have learned anything from it.
2. When those things do happen, the banks will have another batch of "bad" loans. What happens then?

If banks REALLY are that critical to a country and its economics, they SHOULD, in my opinion, be completely state owned and run with the sole intention of supporting those who need them and NOT specificilly for profit. (I am not condoning state ownership, I know it doesnt work in all cases, but a different model is required)


I can see why a NAMA esqu entity is being put forward, as there are issues and letting a major bank fold is not in anyones interest, however in my opinion the ins and outs of NAMA are in the very very bad interests of the taxpayer.
To be honest I cant believe we are letting the same politicians and "experts" who so eagerly lead us into financial meltdown, write and set up the legislation for this entity.

kevpants

It's not needed.

This morning's surge in bank shares, despite how the media are reporting it, is a BAD thing. This isn't about keeping Irish society going, it's about keeping these banks in business DESPITE the fact that they ran their businesses into the ground. It's about driving up share prices. This has NOTHING to do with lending, it a bail out. You and I just handed over €54bn to let blokes who drive to work in €100k Mercedes wearing €2k suits off the hook.

The government could easily have let the banks deal with it themselves and if they went under, nationalise them. At least then we OWN the banks in entirety and the gobsh*tes running them would be out on the street, we own nothing now! We're broke and will be for a long long time.

We are more than screwed.

djpbarry

starbelgrade wrote: »

The whole scenario is obscene. Joe Soap owes money to the bank - he's lost his job & can't make the repayments, so he faces debt agencies, reposessions etc etc.

Developers owe HUMONGOUS amounts of money to the banks. They can't repay them, so they go bust. End of story.

Meanwhile Joe Soap foots the bill, but still has to repay what he borrowed.

Boo-****ing-hoo. Joe Soap shouldn’t have borrowed more money than he could afford to repay. It takes two to tango.

SLUSK

In a free market you let the incompetent go bust, simple as that. This is how the system should work. By bailing out bad banks you encourage excessive risk taking. You need the profit motive to keep companies to strive to improve, but you also need the fear of bankrupcy to avoid excessive risk taking.

Amhran Nua

kippy wrote: »

What really really bother me here is the fact that even if we do "bail out" the banks (not so much the developers, they still owe the money)

So why is Zoe going through extraordinary acrobatics to stay intact until NAMA is set up? Something to do with Lenihan's Deus ex Machina powers under NAMA?

kippy wrote: »

If banks REALLY are that critical to a country and its economics, they SHOULD, in my opinion, be completely state owned and run with the sole intention of supporting those who need them and NOT specificilly for profit.

Indeed, I didn't vote for anyone on the banks' boards of directors.

kippy

djpbarry wrote: »

Boo-****ing-hoo. Joe Soap shouldn’t have borrowed more money than he could afford to repay. It takes two to tango.

You see,

Joe Soap was well able to service his debt before he got laid off. No one really EVER factors in layoffs in ability to pay back debt and unless you are insured against it you are screwed.
Joe probably has bigger issues now like being able to put food on the table for his family.

I dont particularly like your attitude towards poor Joe.

kippy

Amhran Nua wrote: »

So why is Zoe going through extraordinary acrobatics to stay intact until NAMA is set up? Something to do with Lenihan's Deus ex Machina powers under NAMA?


Indeed, I didn't vote for anyone on the banks' boards of directors.

Good point re Zoe,
There is so much smoke and mirrors involved in that particular debacle, I really havent a clue as to what the fub happens.
To be honest, I think NAMA will be taking those Zoe loans one way or another anyway no matter the timing.

Amhran Nua

Reading between the lines, it seems clear that the directors of Zoe have been in communication with Lenihan or one of his proxies, and have received assurances that they will be better served and probably kept intact under NAMA than if they were liquidated entirely. Interesting and somewhat chilling stuff, the fingerprints of massive endemic corruption are all over this.

daveyboy_1ie

The ecnomy is stifled at the moment because banks are refusing to lend
unless you have very healthy circumstances. This is understandable as the mess they created in the first place with lending to people who clearly could not afford it if anything unfavourable happened (i.e. no Plan .

So now we have given the big boys €4 Billion each already lending certainly did not improve, all it did was improve the banks cash flows to pay themselves healthy bonuses when they proved they could not run their own businesses, any other managers would be replaced, removed or at worst, go bust.

Now we still have no gaurantees that lending facilities will be made available even aftre handing €54 Billion to them, so in affect the banks are being let off scott free and we the taxpayer are suffering.

And the 'takes two to tango' comment from the moderator is still valid, the difference is we are facing the consequences of paying the money we owe AND paying for the banks mistakes too (I am not, I knew from 8 years ago when I first wanted to buy a place that it could not last and bought recently when the market crashed and I still had my substantial savings from holding off for years ).

The whole FF mismanagement argument does not ring true either, this assumes they did not know what was going on and that to me just does not add up, they must have as the person on the street knew that the bubble was going to burst, or at least suspected it could not last forever.

So NAMA was a great idea on paper, but only with provisions from the bannks that they improve lending criteries, but doing so sensibly and promise to start repaying the debts when they return to profitability, which has not happened of course.

NAMA has the potential of causing more problems than its solving.

kippy

daveyboy_1ie wrote: »

And the 'takes two to tango' comment from the moderator is still valid, the difference is we are facing the consequences of paying the money we owe AND paying for the banks mistakes too (I am not, I knew from 8 years ago when I first wanted to buy a place that it could not last and bought recently when the market crashed and I still had my substantial savings from holding off for years ).

.

Well done,
Your medal is in the post.

IM0

the profoundly dirty secret is that the banks cant be allowed to fail. Banking = Civilisation (or so the powers that be would lead us to believe)

In short banks have governments over a barrel, they dont tend to close up shop either, rather change hands (be it mergers or tax payer nationalisation)
Banking began in Florence (Italy) you can draw your own conclusion there

If there is no consumer confidence in banks, then you get a run on it and everyone wanting their money....which the banks dont have :eek:
and before you know where you are 'civilisation' is crumbling around your ankles..

In short the less time spent thinking/researching and trying to figure out
why, the better, its just one big Pandoras Box that you dont want to open..every answer just leads to another question :cool:

I wish to cod that I never opened the box when I was younger..ignorance is bliss:P

MikeC101

me@ucd wrote: »

Banking began in Florence (Italy) you can draw your own conclusion there

Who were those guys Jebus bate out the temple then, surely they were a wuncha bankers?

On a more serious note, wouldn't the Templars (with say, letters of credit) have beaten the Florentine banks by a bit? What we would recognise as modern domestic banking maybe began in Florence though.

djpbarry

kippy wrote: »

Joe Soap was well able to service his debt before he got laid off.

Provided interest rates didn’t increase too much, yes (which was a big gamble).

kippy wrote: »

No one really EVER factors in layoffs in ability to pay back debt and unless you are insured against it you are screwed.

They should. Pretty much everyone is going to face a period out of work at some point in their lives. If losing your job suddenly plunges you into serious financial difficulty, there is something seriously wrong with your financial planning. Nobody should be totally dependent on their next (few) pay-packet(s). That’s before we even get into the very generous welfare supports available in this country and (as you mentioned) the availability of insurance.

kippy wrote: »

Joe probably has bigger issues now like being able to put food on the table for his family.

How many people in this country are struggling to feed their families as a result of recently losing their jobs?

me@ucd wrote: »

the profoundly dirty secret is that the banks cant be allowed to fail.

I think it’s probably more accurate to say that the entire banking system cannot be allowed to fail. Losing the odd pointless institution (such as Anglo-Irish) won’t bring an end to civilisation.

kippy

djpbarry wrote: »

Provided interest rates didn’t increase too much, yes (which was a big gamble).
They should. Pretty much everyone is going to face a period out of work at some point in their lives. If losing your job suddenly plunges you into serious financial difficulty, there is something seriously wrong with your financial planning. Nobody should be totally dependent on their next (few) pay-packet(s). That’s before we even get into the very generous welfare supports available in this country and (as you mentioned) the availability of insurance.
How many people in this country are struggling to feed their families as a result of recently losing their jobs?
I think it’s probably more accurate to say that the entire banking system cannot be allowed to fail. Losing the odd pointless institution (such as Anglo-Irish) won’t bring an end to civilisation.

1. Interest Rate rises and being out of work are two totally different things.
2. Joe could probably factor in large enough interest rate rises, so long as he had a job they wouldnt, in general, be a problem. Joe factors in not having a job, and he never ever gets a loan for anything, and probably doesnt have a family.
3.Suddenly losing ones job will plunge you into financial difficulty, more so if two earners in the house are out of work.
4. People out of work will feed their family before paying back a mortgage, yet the banks have no time for it.

I agree with your last point.

starbelgrade

djpbarry wrote: »

How many people in this country are struggling to feed their families as a result of recently losing their jobs?

Quite a large number, I would imagine. I know of one particular Joe who was self employed & due to the recession, has little or no business these days, is not entitled to Social Welfare & is living off savings that are soon going to run out.

He can't get a loan from the banks to tide him over, he gets no help from the state & he's very worried about the future.

It's a bit high & mighty to go around "boo-hooing" anybody who's in difficulty these days - a lot of people are up the swanny & very few see NAMA directly affecting them, apart from putting them further out of pocket.

It's times like these where a bit of empathy goes a long way... telling people that it's their own fault, gets no-body anywhere. I would have expected more from a a Mod.

djpbarry

kippy wrote: »

1. Interest Rate rises and being out of work are two totally different things.

Maybe, but they both fall into the ‘risk’ category.

kippy wrote: »

2. Joe could probably factor in large enough interest rate rises, so long as he had a job they wouldnt, in general, be a problem.

Bear in mind that interest rates have plummeted over the last 12 months or so. Were they to return to even mid-2008 levels, the average monthly mortgage payment would increase by a few hundred euro.

kippy wrote: »

3.Suddenly losing ones job will plunge you into financial difficulty, more so if two earners in the house are out of work.

And I’ll repeat again; if your family’s wellbeing is largely dependent on your next pay-check, you’re being incredibly reckless with your finances. Pretty much everyone will face unemployment at some point – you’ve got to be prepared for such an eventuality, especially if you’ve got kids depending on you.

kippy wrote: »

4. People out of work will feed their family before paying back a mortgage, yet the banks have no time for it.

The banks have no time for what exactly?

djpbarry

starbelgrade wrote: »

Quite a large number, I would imagine.

Define “large”.

starbelgrade wrote: »

It's a bit high & mighty to go around "boo-hooing" anybody who's in difficulty these days...

I’m not mocking people who have gotten into difficulty, I’m mocking a certain attitude, which is incredibly prevalent at the moment, that it’s all the fault of the banks and the government that so many people in this country have massive mortgages that they are having difficulty repaying. As I have said countless times on these fora in the past, nobody was forced into “investing” in property. A large chunk of the population were obsessed with getting on the property ladder and were prepared to stretch themselves to their financial limits to do so. That decision hasn’t worked out for a lot of people and they have to shoulder some of the responsibility themselves. Let’s also not forget that people were quite happy to re-elect Fianna Fáil as long as the value of their property continued to increase. We are all collectively responsible for the mess that this country is now in.

kippy

djpbarry wrote: »

Maybe, but they both fall into the ‘risk’ category.
Bear in mind that interest rates have plummeted over the last 12 months or so. Were they to return to even mid-2008 levels, the average monthly mortgage payment would increase by a few hundred euro.
And I’ll repeat again; if your family’s wellbeing is largely dependent on your next pay-check, you’re being incredibly reckless with your finances. Pretty much everyone will face unemployment at some point – you’ve got to be prepared for such an eventuality, especially if you’ve got kids depending on you.
The banks have no time for what exactly?

I am fully aware of interest rates and the impacts of their fluctuation.
Most people while working can take interest rates rising and have that factored in (or the banks should have done so)
Most people cannot pay back mortgages/loans etc without jobs and I would suggest that the vast majority of people with mortgages outstanding would not be able to pay them off at the same rate as they would have if they lost their jobs. Its simply not something you can factor in to making decisions on your future.
I personally believe your health is your greatest assest, followed closely by your job and both should be insured adequately, not everyone is of this opinion however.
How does one prepare for unemployment?

Joe has 3 kids under 7, his wife stays at home. He lives in Lucan, works in city center, commutes via bus. He has an annual salary of 55k gross. His mortgage is approximately €800 per month.

How does he plan for not having a job in the future? (a serious question, many here would like to know the answer to)
The simple answer is, he wouldnt have had kids nor bought a house were he to factor in job loses at some stage.
The banks have no time for hardluck stories from people like Joe.

kippy

djpbarry wrote: »

Define “large”.
I’m not mocking people who have gotten into difficulty, I’m mocking a certain attitude, which is incredibly prevalent at the moment, that it’s all the fault of the banks and the government that so many people in this country have massive mortgages that they are having difficulty repaying. As I have said countless times on these fora in the past, nobody was forced into “investing” in property. A large chunk of the population were obsessed with getting on the property ladder and were prepared to stretch themselves to their financial limits to do so. That decision hasn’t worked out for a lot of people and they have to shoulder some of the responsibility themselves. Let’s also not forget that people were quite happy to re-elect Fianna Fáil as long as the value of their property continued to increase. We are all collectively responsible for the mess that this country is now in.

I do agree with you're second point.
People HAVE to shoulder some of the responsibility themselves especially in the case of reckless borrowing. But there are lots of people out there who haven't borrowed recklessly but who may have followed all the advice and commentary coming from economists, state and private institutions over the years and who now find themselves out of a job with a mortgage that was completely manageable to pay before hand....

Amhran Nua

djpbarry wrote: »

A large chunk of the population were obsessed with getting on the property ladder and were prepared to stretch themselves to their financial limits to do so. That decision hasn’t worked out for a lot of people and they have to shoulder some of the responsibility themselves.

That responsibility starts and ends with their mortgage repayments however. The banks stretched themselves too far which is why the rest of us are now being held hostage to fill out their bottom line, so it pretty much is the fault of the banks.

Idbatterim

I assume the only reason bank shares fell from €18 to €.20 was that there were huge fears that they were going to be nationalised?