NAMA - How can it be profitable for Irish tax payer?

is_that_so

is_that_so wrote: »

Indeed but there is plenty of precedent and bank levies will be the order of the day to resolve issues of this nature as with ICI. If the NAMA plans works it won't be needed and even if there are shortfalls no-one can even guess at them.

You can pretty much guarantee that if the banks end up paying levies, that WE will be the ones paying for them through higher rates and fee's.

is_that_so

Rojomcdojo wrote: »

You can pretty much guarantee that if the banks end up paying levies, that WE will be the ones paying for them through higher rates and fee's.

Absolutely but my one wish for this whole NAMA thing is that the second stated element - facilitating banks return to normal activity comes with wholesale banking sector reform.

bangersandmash

Rojomcdojo wrote: »

You can pretty much guarantee that if the banks end up paying levies, that WE will be the ones paying for them through higher rates and fee's.

We're unlikely to have to wait that long

Once NAMA gets up and running banks will be expected to start lending again, but there is also likely to be a sting in the tail for consumers.

This is because those banks with assets that are due to be sold off to NAMA have been told by the Department of Finance to resist hiking rates or charges until the new body is set up. The rationale here is that banks and building societies are unpopular enough without further upsetting consumers by raising the interest rates they charge on loans and mortgages and increasing credit card charges and fees.

But once NAMA is up and running, expect banking to get dearer for consumers.

http://www.independent.ie/opinion/columnists/charlie-weston/postnama-rates-likely-to-sting-the-consumer-1880587.html

It really is Win-Win!

is_that_so

SkepticOne wrote: »

I think in reality what will happen will be that further credit will be extended to keep the developer going in some form so that this does not happen for the same reasons that the banks (except ACC of course) are falling over themselves to keep Zoe going.

Yes I agree but I think it very much depends on the developer and the likelihood of them failing. A developer failing is not going to affect NAMA to the same degree it might a bank. Part of the enthusiasm for the Zoe deal I suspect was to get the loans into NAMA anyway.

is_that_so

is_that_so wrote: »

Yes I agree but I think it very much depends on the developer and the likelihood of them failing. A developer failing is not going to affect NAMA to the same degree it might a bank. Part of the enthusiasm for the Zoe deal I suspect was to get the loans into NAMA anyway.

From where I was sitting, the enthusiasm for the ZOE deal was purely to avoid a sale of the assets which would expose their true worth.

The banks will take FF's makey-uppy valuations any day over what these 'assets' are actually worth.

transylman

is_that_so wrote: »

Yes in answer to your questions but NAMA will buy both good and bad loans.
If a developer goes bust the collateral will be exposed. NAMA, will in theory acquire it and sell it off to get the best possible price. If there's still a shortfall there will most likely be a mechanism whereby NAMA can go after the original bank for it. I reckon as I posted above that will a levy of some sort.

If the developers go bust and the assets have to be sold, the value of property is going to drop further. They are hardly going to let this happen when the whole premise of NAMA is that property prices will bottom out at 47% below peak prices, before rising 10% by 2019. We will in effect be propping up developers as well, in the hope the property prices will magically start to rise again.

I have no idea where you pulled this idea of a levy on banks from. As far as I know nobody has mentioned anything of the sort.

The main beneficiaries of NAMA are the banks, the banks shareholder, the developers, and FF. The country will most probably lose 30 billion from the scheme.

http://www.irishtimes.com/newspaper/opinion/2009/0915/1224254555311.html

is_that_so

transylman wrote: »

If the developers go bust and the assets have to be sold, the value of property is going to drop further. They are hardly going to let this happen when the whole premise of NAMA is that property prices will bottom out at 47% below peak prices, before rising 10% by 2019. We will in effect be propping up developers as well, in the hope the property prices will magically start to rise again.

I have no idea where you pulled this idea of a levy on banks from. As far as I know nobody has mentioned anything of the sort.

The main beneficiaries of NAMA are the banks, the banks shareholder, the developers, and FF. The country will most probably lose 30 billion from the scheme.

http://www.irishtimes.com/newspaper/opinion/2009/0915/1224254555311.html

It was mentioned, quite some back and left floating while they were trying to wok out how NAMA would function. I have no doubt that NAMA will devise a mechanism to address this if it comes up short although the subordinated debt bond proposal may mitigate that risk anyway.

FF will not benefit from this at all as their goose is cooked. If your point is that losing the NAMA vote will bring down the Govt unfortunately that is not the case. Bank reform has already been mentioned and like many others I'd take great pleasure in seeing some of the so-called developers disappear. I also don't understand this blanket schadenfreude for bank shareholders. Big institutions sure but there are an awful lot of small older shareholders who have been decimated by the recklessness of the banks.

superhooper

Is this the right take on the workings of the thing.NAMA will issue bonds in lieu of the loans. The banks will then go to the EU Central bank and use the bonds as collateral. Will there be any interest payments on these Loans?

Amhran Nua

is_that_so wrote: »

Most plans of this type are based on previous successful ones anyway. NAMA is what we ended up with.

No, NAMA is where we are being dragged.

is_that_so wrote: »

Indeed but there is plenty of precedent and bank levies will be the order of the day to resolve issues of this nature as with ICI. If the NAMA plans work it won't be needed and even if there are shortfalls no-one can even guess at them so a muttered gesture is as good as it gets for now.

It would be a very easy matter to include legislation based on the total, the maximum amount of exposure of NAMA to bad loans, with repayment schedules graded based on the amount due. By making the banks solely responsible for this shortfall you ensure both honest valuations and the vigorous pursuit of bad debts by the banks, who will be managing the loans. There is no reason to exclude this from the legislation, and plenty of reasons to include it.

The great thing about all this is the banks are meant to start lending after NAMA -why would they, they've just been handed years of profit.

20goto10

transylman wrote: »

If the developers go bust and the assets have to be sold, the value of property is going to drop further. They are hardly going to let this happen when the whole premise of NAMA is that property prices will bottom out at 47% below peak prices, before rising 10% by 2019. We will in effect be propping up developers as well, in the hope the property prices will magically start to rise again.

You're assuming that continued drops in property prices is good for everyone. There are a lot of people who would be glad to see the crash bottom out right now. Myself included, someone who bought 6 years ago and is trying to move home. That's a lot of people who have bought or remortgaged in the last 6 years (and more) who have an interest in seeing prices bottom out.

TheInquisitor

SLUSK wrote: »

why would prices recover for these assets? Why would their value magically appreciate in the future?

Its called Inflation

Mr.Micro

Since the collapse of Lehman brothers bank a year ago on Wall Street there has been much debate as to should it have been saved by the US Government? Many argue that the financial credit crunch was much worse for that failure to act. Now it appears that the banks have not learned their lesson. Effectively the banks are now in a stronger position, more powerful and realize that Governments will not allow them to fail, so they can really do as they like and will probably continue as before. How can bank be regulated if it can never be allowed fail no matter what it does wrong, as it will always be rescued, with Lehmans being the notable exception. It defies logic but that what we now have.

http://news.bbc.co.uk/2/hi/business/8256010.stm

MY point is that what happens here if the banks go belly up again and we have another crisis and its possible. Will there be NAMA 2 that's how ridiculous this whole farce is. So it would have been better off to nationalize all the banks because that is probably what has been done but in this case its passing over public money to private hands forever, its absolute robbery of the Irish people.

MeatProduct

Could someone tell me what bonds actually are? What value does a government have on a bond it is issuing, what is backing it? Is it property, TAX returns, assets?

Nick

is_that_so

MeatProduct wrote: »

Could someone tell me what bonds actually are? What value does a government have on a bond it is issuing, what is backing it? Is it property, TAX returns, assets?

Nick

A bond is an agreement by the issuer, the government/NAMA in this case, to pay the people who buy a bond an agreed amount over the lifetime of the bond. The ones the banks will be getting from NAMA are more like IOUs which can be cashed in with the ECB. They are really more like cash but by making them bonds the Govt is not handing out any money and so is putting off payment. This comes back to this 40% of loans which in theory will pay the interest the Govt/NAMA will have to pay to cover the issuing of bonds by NAMA. This is the simplest summary I could find on bonds.

http://en.wikipedia.org/wiki/Government_bond

is_that_so

Amhran Nua wrote: »

No, NAMA is where we are being dragged.

Dragged, ended up. It's just a matter of semantics. It is unlikely at this point that anything other than the NAMA solution is going to be used to address the mess.

Amhran Nua wrote: »

It would be a very easy matter to include legislation based on the total, the maximum amount of exposure of NAMA to bad loans, with repayment schedules graded based on the amount due. By making the banks solely responsible for this shortfall you ensure both honest valuations and the vigorous pursuit of bad debts by the banks, who will be managing the loans. There is no reason to exclude this from the legislation, and plenty of reasons to include it.

The great thing about all this is the banks are meant to start lending after NAMA -why would they, they've just been handed years of profit.

NAMA is not yet legislation. There are still at least three weeks till we get the final vote and therefore scope to make all kinds of amendments. As for the banks well things will change for them. Aside from being smaller, a lot of the smaller ones are likely to be forced into this "third force".
In theory we/NAMA are supposed to have some influence on their evolution. Not sure that we will but a good overhaul/punishment of the banks would go some way to convincing people that this isn't just another cosmetic exercise to helps banks make even more money.

MeatProduct

is_that_so wrote: »

A bond is an agreement by the issuer, the government/NAMA in this case, to pay the people who buy a bond an agreed amount over the lifetime of the bond. The ones the banks will be getting from NAMA are more like IOUs which can be cashed in with the ECB. They are really they are more like cash but by making them bonds the Govt is not handing out any money and so is putting off payment. This comes back to this 40% of loans which in theory will pay the interest the Govt/NAMA will have to pay to cover the issuing of bonds by NAMA. This is the simplest summary I could find on bonds.

http://en.wikipedia.org/wiki/Government_bond

Thank you, so it seems the security is on taxes. So, as has been made clear, it is the tax payer that is paying for it. However, does that mean that me, as a flesh and blood person, is liable to pay this? Does it make me, as an Irish tax-payer, personally responsible in the payment of this?

What is the legal situation here? Who does the ultimate responsibility fall to? I'm curious as I can't imagine the goverment would be doing this if the ultimate responsibility were to fall to them.

What if I as a citizen of Ireland didn't want to be party to this, is there a means of emancipating myself from the desicions and legal obligations of the goverment placed upon me?

A lot of questions. I have tried to find some answers but the mostly apply to the US and I'd like clarity on the Irish situation.

Nick

is_that_so

The NTMA looks after bonds.

Link

The idea of NAMA is the "assets" passed to it, will over time take care of it all and pay off the loans. That's the real risk and why people are talking about paying for this for generations.

MeatProduct

is_that_so wrote: »

The NTMA looks after bonds.

Link

The idea of NAMA is the "assets" passed to it, will over time take care of it all and pay off the loans. That's the real risk and why people are talking about paying for this for generations.

From your link it states that NTMA is a government agency. Does this mean it is government owned or that it just acts as an agent for the goverment and may be a private company.

Not that I give this website any weight but NTMA came up as a listed company.

Nick

Amhran Nua

is_that_so wrote: »

It is unlikely at this point that anything other than the NAMA solution is going to be used to address the mess.

Unfortunately I think you may be right in that. What this means is that any future government should start making plans to unravel the shambles that is NAMA as it stands now.

is_that_so wrote: »

NAMA is not yet legislation. There are still at least three weeks till we get the final vote and therefore scope to make all kinds of amendments.

But didn't Lenihan already state it wouldn't be included in the legislation?

is_that_so

MeatProduct wrote: »

From your link it states that NTMA is a government agency. Does this mean it is government owned or that it just acts as an agent for the goverment and may be a private company.

Not that I give this website any weight but NTMA came up as a listed company.

Nick

It looks after our national debt and the raising of bonds,the National Pension Fund, fairly successfully IMO, is a part of the Central Bank and reports to the Minister of Finance. As agencies go it is probably one of the most independent and one of the better ones.

Amhran Nua wrote: »

Unfortunately I think you may be right in that. What this means is that any future government should start making plans to unravel the shambles that is NAMA as it stands now.


But didn't Lenihan already state it wouldn't be included in the legislation?

Yep but he has also invited amendments from all parties. The legislation in a few weeks time will look different. How much is hard to say.

mathie

is_that_so wrote: »

We are shareholders.

AS I've said before I am not huge fan of NAMA although I do see how it could logically work. Like everyone else I am extremely nervous about the risk. As none of the other "plans" seemed to gather traction or support it's ended up as the only game in town.

The very basic idea is this

40% of loans going into NAMA are generating cash. It is believed/hoped/expected that this cash will help NAMA fund the interest on the money borrowed.

They are also proposing to split the types of bonds going to banks into two groups. Simply put the good ones and the bad ones. How this will happen is still unclear.

The discount on all of the loans is supposed to reflect a "fair" valuation of what the loans and properties are worth. The properties have been assessed at €48 billion or so.

Meanwhile they'll try to figure out what to do with the rest. There is an argument at present to hang onto some sites as a firesale will deliver very little at present. There's €5 billion available for "project completion" which as far I understand it could be used with some sites to finish and sell them off. Developers will still have to pay off the loans or where they can't the original bank may have to cough up more for it.

Incidentally we the taxpayers will benefit from this anyway as we own Anglo and will get money back through bonds for the €28 billion or so they have.

So if, and this is a real guess but they claim historical evidence for it, property prices increase by 10% over the lifetime of NAMA it will break even. If it's more then there's your profit. What seems to be pushing that logic is that fact that a lot of the property is not in Ireland. Property in the US and UK might be expected to recover in price better.

If and only if the historical evidence is proven correct and we are close to the bottom, which is why there is so much concern about NAMA, then there'll be loadsa money. If not then it's that children's children speech.

So only 40% of the loans taken out are being paid back.
Why aren't the 60% not paying their loans being thrown in jail?!
If Joe Soap doesn't pay his credit card bill there would be hell to pay.

Niall Keane

A lot of talk about when the property market recovers, NAMA will turn a profit. This is based on looking at trends and not detail. How property sells, is not the same as how specific properties sell. I've posted on this point here:

http://www.boards.ie/vbulletin/showthread.php?t=2055685039

bangersandmash

Niall Keane wrote: »

A lot of talk about when the property market recovers, NAMA will turn a profit. This is based on looking at trends and not detail. How property sells, is not the same as how specific properties sell. I've posted on this point here:

http://www.boards.ie/vbulletin/showthread.php?t=2055685039

I think your point in the original post was very well made. NAMA properties near completion and those in the pipeline may well be based on bubble notions that will be unpalatable to buyers at any time in the future, even when the market eventually recovers.

Namely that people will come to accept the same poorly located and/or poorly built and/or small properties that were being planned at the peak when people would buy anything simply to "get on the ladder" before it was too late. It's hard to see how that kind of buying frenzy could be rekindled.

peasant

bangersandmash wrote: »

. It's hard to see how that kind of buying frenzy could be rekindled.

worse than that ...if we ever want to get a sustainble economy going again, it mustn't be rekindled

gar32

There is a simple fact in life the Many pay the taxes to run the country. The Few in control try to use the money so they get voted back into power. The few always take a little for themselves. If they can help their family they do. (Jobs, helping industry, banking, Farming and Stud farms etc etc)

NAMA is just another way to get the many to pay for the Few's mistakes. The Many never win as they are Taxed, levied, stealth taxed, PRSI, VAT, car tax, fuel tax and many other ways the Few try to take as much as they can. This is done in a way not to upset the Many to much as the Few want to be voted in again. Even if NAMA makes a killing from selling property or all the loans are paid back.. Who pay’s to buy the property? (The Many) Who gets the money if NAMA works?

NAMA Protest tomorrow starting at the Garden of remembrance Parnell square. :mad: Lets start making sure we get are moneys worth!!!!!