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How does NAMA 'bail out' developers?

Grudaire · 2009-09-20 22:49:26

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!

Comments

#32 22-09-2009 11:22AM

SkepticOne

Closed Accounts Posts: 6,718 ✭✭✭

Join Date: September 2001

Posts: 6644

Cliste wrote: »

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)

I don't think they will be ruthless for two reasons.

1. It is fair to see there's a fairly optimistic view of the market underlying the NAMA philosophy.

2. NAMA will be the biggest single player in the market.

If NAMA were a small player, one of many players, holding one or two loans, then it would be a no brainer to dump many of the assets. First of all there would not be a huge impact on the market and secondly the impact doesn't really matter as, having shifted your assets, the impact will mainly affect others.

However NAMA will be the largest single entity on the market. Any decision will have to take into account the impact on the market since it will hold so much of the market.

Therefore the tendency will be to go easy on developers. Make them delay their projects as long as possible. Help them with financing. And so on. This is why they were cheering in Spain.

Politically if they were to let, say, Zoe go to the wall after NAMA is established and all their properties get thrown onto the market (which is what an individual bank would want to do) then people would be asking why we paid x billion for these loans when we only got y billion when they were sold. Not to mention that all the other assets would need to be revalued.

To me this is why NAMA is flawed. If, having established NAMA, you have to take these bizarre non-commercial steps to keep it going then ultimately it is doomed to failure.

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