How does NAMA 'bail out' developers?

Grudaire

I honestly don't understand how the statement makes sense - surely the developers still owe the same amount?

(Apologies, a quick search only came up with 'No to Nama' marches)

Thanks!

Sand

No bank run on common sense grounds will provide further finance to developers to complete business plans that High Court and Supreme Court judges have found fanciful, and lacking reality. In fact, faced with the prospect of throwing good money after bad, a proper bank would face up to facts and call in the loan.

NAMA will provide further funding to developers to complete their white elephants. Loans will not be called in, because nobody, nobody wants to face up to facts. The loans that NAMA is buying? 9 BILLION of it is interest which has not been paid by developers. 9 BILLION.

The only reason the banks have let developers run up 9 billion in unpaid interest before calling in loans in because they hope to dump it all on the taxpayer.

Once the loss is on the taxpayer, the loans wont be called in. They just cannot be called in. The banks are too terrified to call them in. The state will be far too terrified to call them in, and unfortunately...theres no bunch of suckers around who they can sell them on to.

The developers will be allowed to continue the fiction for a few more years, funded by the taxpayer, with the ability to benefit from NAMAs strangalation of the commerical property market.

NAMA is mainly a bailout out of the banks. But it is also a bailout of developers with failed business plans, which will now be funded by the taxpayer.

Grudaire

Ok - I'm beginning to see the idea, and up to now I have looked on it as mainly a bailout for the banks shareholders..

But surely there will be no additional funding handed to developers?

And also why can't the state just seize the lands and keep them?

And furthermore what proof makes you think that what you say is so?

97i9y3941

well the gov been the puppet to the builders they took control of the banks loans meaning that the developer and the banks get off scot free to put it politely instead of like in sweden back in the 90s where some of the managers where sued for offering bad advice...

Grudaire

Fred83 wrote: »

well the gov been the puppet to the builders they took control of the banks loans meaning that the developer and the banks get off scot free to put it politely instead of like in sweden back in the 90s where some of the managers where sued for offering bad advice...

But surely the developers still owe the same ammount?

Amhran Nua

Cliste wrote: »

But surely the developers still owe the same ammount?

Thats true, a related question to ask is why is Zoe doing backflips in order to avoid liquidation until NAMA goes through?

LostinBlanch

What Sand said, but also article 148 of the legistlation states that the minister can "employ" the same developers who f*cked our economy up to "develop" their assets that nobody wants to (or can) buy.

So we pay twice, once by vastly overpaying for their bad loans and then to add insult to injury we pay them to finish whatever sh*te they started.

chris85

Everything is speculation that is being said, no fact so cant be taken as gospel here. We dont know how it will pan out but there is little left to do.

I will add my bit of speculation. The banks are lucky to get money but are still taking a write off on their books for part of these loans. The developers will be chased hard by NAMA and will not be let away with anything. Developers cant hide anymore and Liam O'Carroll is proof and I think many developers are concerned due to O'Carrolls colapse and so they should be.

The developers and all their personal assets will be looked at and in the long term it could be a money maker for us and in fariness there is no quick solution to this so long term it will be.

It all depends on what the banks do with the money they get. For it to work the banks need to start lending again so as the economy picks up again. Their lending is crucial to the success of NAMA. If they do not lend then the market will not appreciate and the assets will be worth even less... if they do lend the economy can pick up and the assets will gain value and this will be good for NAMA and us.

If we nationalised the banks the banks would be off the hook as weel as the developers. With NAMA, the banks are getting money but developers will not be let away. These loans will be called in quick.

Its all depends on how the bank loans out money. I would like to see better legislation to enure part of the money the banks get will be recycled into lending.

SkepticOne

Cliste wrote: »

But surely the developers still owe the same ammount?

It is mainly Lenihan that had been repeating this in the early days of the Nama proposal. If you think about it, a bailout (for example an IMF bailout) normally takes the form of a loan which has to be paid out in full. The fact that a bailout is a loan that has to be paid back does not stop it being a bailout.

The fact that Lenihan has been spinning it as a non-bailout on this basis makes me very suspicious. Surely he could have come up with something better.

Of course a loan is not necessarily a bailout. For it to be one it has to be on better terms than what the market would offer. There are very good reasons for believing that NAMA will be managing these loans on better terms than the general market. See Sand's post above.

SkepticOne

chris85 wrote: »

Everything is speculation that is being said, no fact so cant be taken as gospel here. We dont know how it will pan out but there is little left to do.

I will add my bit of speculation.

Of course there is going to be speculation. To expect otherwise would be unreasonable. It is how well that speculation is argued that is important. Merely pointing out that it is speculation means nothing.

CorkFenian

A lot of developers have already (apparently) been putting their assets and monies in their kids names or siphoning it out of the country, expect massive long court cases which will help fund the legal profession..Have heard of this already happening for the "smaller" ones....

Grudaire

Ok - correct me if I'm wrong here, but they still DO owe the same ammount right?

And Loistinblanch:

Article 148 wrote:

148.—A statutory receiver is not obliged to sell a charged property
at any particular time or at all, but is accountable for all profits and 20
other monetary benefits arising directly from possession of the
property

Is it a different article, or am I reading it wrong?

SkepticOne

Cliste wrote: »

Ok - correct me if I'm wrong here, but they still DO owe the same ammount right?

Yes.

http://www.rte.ie/business/2009/0731/nama.html

NAMA will have the ability to borrow up to €10 billion to finish uncompleted developments which it acquires.

This is where things really get dodgy. 10 BILLION to pay developers to finish off places...

dresden8

Deleted User wrote: »

http://www.rte.ie/business/2009/0731/nama.html




This is where things really get dodgy. 10 BILLION to pay developers to finish off places...

Not to mention of course it will not be in the public interest to let these apartment blocks go to rack and ruin.

Somebody will have to be paid to keep them intact.

Wonder who that could be?

And it won't be in the public interest to bankrupt the developers, remember, we're avoiding firesales like the plague at the moment.

chris85

SkepticOne wrote: »

Of course there is going to be speculation. To expect otherwise would be unreasonable. It is how well that speculation is argued that is important. Merely pointing out that it is speculation means nothing.

I know that, thats why i said i was adding my bit of speculation as thats all it is at the moment. I dont mean it means nothing but just pointing out it is difficult to know how it will go.

Grudaire

dresden8 wrote: »

Not to mention of course it will not be in the public interest to let these apartment blocks go to rack and ruin.

Somebody will have to be paid to keep them intact.

Wonder who that could be?

Can this be avoided either way? It is probably (I not being an economist am afraid to say outright!) not a good idea to leave housing estates empty as a monument to out excess's..

It is something that I didn't know about - I must admit - interesting point on Nama alright.

Sand

Can this be avoided either way? It is probably (I not being an economist am afraid to say outright!) not a good idea to leave housing estates empty as a monument to out excess's..

Sure, they can be put on the market and sold at whatever price the market determines.

Grudaire

Sand wrote: »

Sure, they can be put on the market and sold at whatever price the market determines.

Is the problem not that they won't sell?


I'm trying to build up a full case against Nama in my mind - I posted this thread to see if there was any credence to the 'stop bailing the bastards/Developers argument'

I see now that there is a limited truth in the argument, although in the whole I think Nama is still a bailout of the banks (namely their shareholders [which is still unjustifyable]).

dresden8

Sand wrote: »

Sure, they can be put on the market and sold at whatever price the market determines.

Brian Lenihan is giving himself the right to spend at least 54 billion of our money as he sees fit.

As well as the 10 billion extra, that'll go to his mates.

It's his plan to put a floor on property prices, thereby keeping a high cost economy.

He is talking crap on RTE now, close to the bottom, high yields etc.

I can't decide if he is a liar or a fool. I think he takes after the dad.

anonymous_joe

Lenihan's no fool. Problem is he's a barrister. Not a financier. Great barrister as well.

SkepticOne

Lenihan should not be allowed to sign cheques. He doesn't appear to understand how markets work.

SkepticOne

Cliste wrote: »

Is the problem not that they won't sell?

What people really mean when they say this is that they can't sell at the price that they want. They don't mean that there's no price that will shift the thing.

I'm trying to build up a full case against Nama in my mind - I posted this thread to see if there was any credence to the 'stop bailing the bastards/Developers argument'

I see now that there is a limited truth in the argument, although in the whole I think Nama is still a bailout of the banks (namely their shareholders [which is still unjustifyable]).

It is mainly a bailout of the banks, in fact it is more than a normal bailout since money is being given to the banks for which there is nothing required in return.

Unoficially and to a lesser extent it is a bailout of developers since they will owe the State through NAMA rather than ruthless private concerns. It is a bailout in the sense that they will have their loans on better terms than the market.

In addition provision is there for a further 54 billion to be extended to help them finish their work. This is money that no private operator would be willing to extend and so is also a bailout and a more overt form of bailout.

It is not easy to argue these points because Lenihan himself has hidden a lot of the details. How many of these firms are bankrupt (like the Zoe group) to all intents and purposes and will be kept going by the tax payer? How many are reasonably sound? Of the "performing" loans, how many are paying interest just as long as they need to before NAMA takes over when they will default?

SkepticOne

anonymous_joe wrote: »

Lenihan's no fool. Problem is he's a barrister. Not a financier. Great barrister as well.

I think there's a connection between being a great barrister and being poor at grasping reality. As a barrister you are concerned with taking a particular proposition and making it accepted. Being true or false is secondary it is how you go about presenting it that is key. Better not to even wonder if it is true or false as that is merely a distraction.

it seems like the more preposterous NAMA becomes the more Lenihan is in his element.

ghost_ie

Cliste wrote: »

Is the problem not that they won't sell?


I'm trying to build up a full case against Nama in my mind - I posted this thread to see if there was any credence to the 'stop bailing the bastards/Developers argument'

I see now that there is a limited truth in the argument, although in the whole I think Nama is still a bailout of the banks (namely their shareholders [which is still unjustifyable]).

If they won't sell then let the government sieze them in payment for the loans and let them be used as social housing.

SeanW

For the last 30 years or so, any time you have "Fianna Fail" and "Property developer" in the same sentence, the end result was not anything good. As far as I'm concerned, the €54bn about to be spent on NAMA can be regarded as lost, all or most of it, because I do not for one second expect an FF government to make any effort to recover value. The extra €10bn to fund the finishing of projects will most likely end up in the pockets of the same clowns that caused all this.

But the loss of €64,000,000,000 will only be the start of it - by telling the banks that they're too important to be allowed even to struggle - instead of letting the market punish them which they deserve, we are creating a Moral Hazard.
http://en.wikipedia.org/wiki/Moral_hazard

So next time there's a bubble - possibly anywhere in the world - our banks will act like an even bigger bunch of tools, because they know they will be insulated from any failures (even if we have to destroy ourselves providing such insulation).

Sand

Is the problem not that they won't sell?

They will sell eventually, once they fall to a price at which buyers are interested.

Grudaire

Firstly I don't see how NAMA can afford to be leinient on the loans, if anything, with the risk of bankrupting the country NAMA would have to be pretty ruthless (although I can understand doubts to this)

Sand wrote: »

They will sell eventually, once they fall to a price at which buyers are interested.

That will leave a shortfall, and such the banks will be left short changed - is there agreement that a 'bailout' of some sort needs to be done?

Liam Byrne

Cliste wrote: »

That will leave a shortfall, and such the banks will be left short changed - is there agreement that a 'bailout' of some sort needs to be done?

Isn't that the whole ethos of taking a risk ?

Isn't that why the banks should have evaluated the risk properly before giving out the loan ?

Isn't that the whole point of a commercial operation ? You take a risk, reap the benefits if they occur, and suffer the hit if they don't ?

Grudaire

Liam Byrne wrote: »

Isn't that the whole ethos of taking a risk ?

Isn't that why the banks should have evaluated the risk properly before giving out the loan ?

Isn't that the whole point of a commercial operation ? You take a risk, reap the benefits if they occur, and suffer the hit if they don't ?

I mean in terms of the fact that we cannot allow the savings, and mortgages etc to just disappear...

I agree fully that the shareholders should get a kick up the arse

SkepticOne

Cliste wrote: »

I mean in terms of the fact that we cannot allow the savings, and mortgages etc to just disappear...

I agree fully that the shareholders should get a kick up the arse

That is correct. Theres a large hole that needs to be filled no matter what course of action you take. Nama just seems to be the worst option in terms of protecting the wrong people.