Richard Bruton's rebuttal

DarkRaven

Count Dooku wrote: »

Names, please

Do I have to name every single economist in the European Central bank?

EU didn’t object much to NAMA mostly because a lot pension funds in Europe would lose money in Irish bank bonds and a lot of influential people in management of those funds could lose their jobs
As soon as taxpayers will pay bonds, those fat cats are safe


NAMA can be profitable only if economy and population will start to grow as it was 5 years ago
Otherwise, those assets never will find customers

The ECB is funding it. If the property prices don't rise to the levels they used to, then they will find themselves with a lot of worthless land. Their loss, not ours.

Year ago banks had enough good assets to cover current accounts and deposits below 100K
Now those deposits sold to pay money back to bondholders, banks are insolvent and government will have to nationalize them soon

You are a labour man then? This is the very thing that NAMA is supposed to prevent.


And Nate: If you can't be bothered to post something constructive, don't bother. Seriously.

Count Dooku

DarkRaven wrote: »

Do I have to name every single economist in the European Central bank?

Definitely they are not the smartest economist on the planet, because they didn’t do anything to stop bubble here

DarkRaven wrote: »

The ECB is funding it. If the property prices don't rise to the levels they used to, then they will find themselves with a lot of worthless land. Their loss, not ours.

You forgot to mention that Irish taxpayer can be asked to pay back IOU anytime, if NAMA fail

DarkRaven wrote: »

You are a labour man then?

No, absolutely opposite

DarkRaven wrote: »

This is the very thing that NAMA is supposed to prevent.

Really? :rolleyes:
You forgot that NAMA can save only from first wave of developers defaults, but cannot do anything when second wave of defaults will hit banks
I mean defaults from property investors, who bought property to let
Very soon they will be hit by lower demand due emigration, property taxes and increased interest rates
Too much for them

DarkRaven wrote: »

And Nate: If you can't be bothered to post something constructive, don't bother.

Do you mean repeating FF propaganda NAMA advertisement is constructive?

DarkRaven

Count Dooku wrote: »

Definitely they are not the smartest economist on the planet, because they didn’t do anything to stop bubble here

Seriously what? Ireland is one small part of the European economy. The low interest rate was to facilitate larger economies like France and Germany. If the interest rates were hiked to slow down our economy when it was needed, it would have caused the French and German economies to grind to a halt - the ECB didn't want that.

You forgot to mention that Irish taxpayer can be asked to pay back IOU anytime, if NAMA fail.

That's right. Just listen to Joan Burton... Do the guarantees that Lenihan got off the ECB mean nothing to you?

No, absolutely opposite

Then why are you reiterating the exact same message that I get on the radio every second day from Joan Burton?

Really? :rolleyes:
You forgot that NAMA can save only from first wave of developers defaults, but cannot do anything when second wave of defaults will hit banks
I mean defaults from property investors, who bought property to let
Very soon they will be hit by lower demand due emigration, property taxes and increased interest rates
Too much for them

Break that up in sentences and put in full stops so that it is readable - then I will respond.

Do you mean repeating FF propaganda NAMA advertisement is constructive?

This is a debate - people share their views. Some make an effort to back it up with a half decent argument - others like Nate refuse. I'm here to have a political debate because it's fun and mentally stimulating. People like Nate just ruin that. I'm also taking FF's side in this, probably because it's the most unpopular one (ie. the most challenging one to defend).

Économiste Monétaire

DarkRaven wrote: »

Also it's gotten full backing from the top economists in the EU.

And they are? The ECB opinion was a legal one based on the draft legislation, and, if you had read it, does not constitute 'full backing'. Also, what guarantees from the ECB are you talking about? The ECB doesn't own the NAMA bonds, do you know how collateral in ECB monetary policy operations work?

Count Dooku

DarkRaven wrote: »

Seriously what? Ireland is one small part of the European economy. The low interest rate was to facilitate larger economies like France and Germany. If the interest rates were hiked to slow down our economy when it was needed, it would have caused the French and German economies to grind to a halt - the ECB didn't want that.

ECB could stop property bubble here without changing interest rates.
Trichet could clearly mention to all world that Ireland is experiencing property bubble and everybody, who lend money to Irish banks, will do it on own risk.
In few days interest rates for Irish banks would skyrocket without any effect on German and French economics.
Just as example of incompetence of ECB economists

DarkRaven wrote: »

Do the guarantees that Lenihan got off the ECB mean nothing to you?

Do you have text of those guarantees?
Lenihan word is not enough for me

DarkRaven wrote: »

Then why are you reiterating the exact same message that I get on the radio every second day from Joan Burton?

NAMA is so obvious scam that even Joan Burton can see it.

BTW, LP doesn’t have so much connections with banks as FG or FF

DarkRaven wrote: »

Break that up in sentences and put in full stops so that it is readable - then I will respond.

Does it means that you don’t have any arguments against my statement that NAMA will not save banks from personal defaults on mortgages when property investors will be hit by lower rents demand due emigration, property taxes and increased interest rates?

DarkRaven wrote: »

I'm here to have a political debate because it's fun and mentally stimulating. People like Nate just ruin that. I'm also taking FF's side in this, probably because it's the most unpopular one (ie. the most challenging one to defend).

Lets have some fun

DarkRaven

Économiste Monétaire wrote: »

And they are? The ECB opinion was a legal one based on the draft legislation, and, if you had read it, does not constitute 'full backing'. Also, what guarantees from the ECB are you talking about? The ECB doesn't own the NAMA bonds, do you know how collateral in ECB monetary policy operations work?

According to a friend of mine who is doing a masters in the London School of Economics, the property acts as collateral. Maybe I'm misinformed. But there. That property does have value though. Even if we do not make a profit, we will not make a total loss.

Count Dooku wrote: »

ECB could stop property bubble here without changing interest rates.
Trichet could clearly mention to all world that Ireland is experiencing property bubble and everybody, who lend money to Irish banks, will do it on own risk.
In few days interest rates for Irish banks would skyrocket without any effect on German and French economics.
Just as example of incompetence of ECB economists

Dude. I knew we were in a bubble as far back as 2006. It was sort of obvious, jeez. We all bought into it. Don't go blaming it on the ECB.

Do you have text of those guarantees?
Lenihan word is not enough for me.

Ok, you don't trust politicians. I get it.

NAMA is so obvious scam that even Joan Burton can see it.

BTW, LP doesn’t have so much connections with banks as FG or FF

Dude, the Labour Party are oposition. Of course they are against NAMA.

Does it means that you don’t have any arguments against my statement that NAMA will not save banks from personal defaults on mortgages when property investors will be hit by lower rents demand due emigration, property taxes and increased interest rates?

I have better things to do than read run on sentences with poor punctuation. Now the thing is that the main problem facing the banks are those massive loan defaults from developers. The effects of the personal defaults are not really worth taking into account. They are tiny in comparison to the toxic debt from developers.

Lets have some fun

Yes, let's!

me_right_one

Maybe I'm missing something here, but is NAMA not a much better idea than nationalisation? Its basically nationalisation in lambs clothing anyway, but the taxpayer will also get whatever those assets eventually sell for. And they will sell, everything has its price!

Aswell as that, is nationisation not extremely risky? If the banks fail, the tiny banking system of Ireland fails. Nobody would dream of lending to us, people's savings would vanish, and we'd be back to Eastern European living standards. If NAMA fails, well sure its only another govt. scheme. Bring on NAMA 2. At least it buys time. Its an obstacle between our current situation and our being forced to nationalise.

DarkRaven

me_right_one wrote: »

Maybe I'm missing something here, but is NAMA not a much better idea than nationalisation? Its basically nationalisation in lambs clothing anyway, but the taxpayer will also get whatever those assets eventually sell for. And they will sell, everything has its price!

To add to that, NAMA does not go on our ballance sheet in Brussels. If we nationalised the banks, the debt we would incur would be so great that no one would lend to us. In the absence of lenders, we'd go bust. Think about it. The state would no longer have the money to function. Economy collapses, country goes down the tube.

me_right_one

DarkRaven wrote: »

To add to that, NAMA does not go on our ballance sheet in Brussels. If we nationalised the banks, the debt we would incur would be so great that no one would lend to us. In the absence of lenders, we'd go bust. Think about it. The state would no longer have the money to function. Economy collapses, country goes down the tube.

Exactly! Why cant people see that? I know its sh1t, but I'd rather have a lower wage or lower dole than none at all! It is FF's fault, but we cant really complain, we elected them in! Won't be making that mistake again I can tell you!

Économiste Monétaire

DarkRaven wrote: »

According to a friend of mine who is doing a masters in the London School of Economics, the property acts as collateral. Maybe I'm misinformed. But there. That property does have value though. Even if we do not make a profit, we will not make a total loss.

The 'NAMA bonds' are not a CDO on an income stream of the NAMA portfolio. The 'NAMA bonds' are government bonds and are funded by the tax-payer; the very same type of bonds we're issuing to cover the budget deficit with a minor change in that they're floating rate notes. The ECB's opinion even refers to them as 'government bonds', as does the NAMA business plan, and this is why the banks can use them in MPOs. There's zero chance a body like the ECB will accept collateral in the form of CDOs on an assortment of garbage.

When banks borrow from Eurosystem central banks, the collateral acts as a protection against default, i.e. if a bank borrows and fails to return the funds they have something cover the loss. Only in a case of default would the central bank exercise its right to take ownership of the collateral—the government bonds, a.k.a NAMA bonds. Until that point, the bonds are a liability of the central bank because they are owned by AIB/BOI in their securities account.

The property, and €14bn in interest rate swaps attached to them, are probably worth something in the future. For the persons holding these 'NAMA bonds', this is only a tangential issue because the NAMA portfolio is not directly paying the interest on the NAMA bonds, the tax-payer is. Whether the tax-payer recoups the cost of the NAMA bonds is dependent on the the final wind-up of NAMA, the banks get paid either way (minus some 5% risk sharing that has yet to be clarified). Whether we, the tax-payers, make a profit is something no-one really knows, but it's entirely incorrect to state that the ECB is left with the losses. We are.

DarkRaven

Économiste Monétaire wrote: »

The 'NAMA bonds' are not a CDO on an income stream of the NAMA portfolio. The 'NAMA bonds' are government bonds and are funded by the tax-payer; the very same type of bonds we're issuing to cover the budget deficit with a minor change in that they're floating rate notes. The ECB's opinion even refers to them as 'government bonds', as does the NAMA business plan, and this is why the banks can use them in MPOs. There's zero chance a body like the ECB will accept collateral in the form of CDOs on an assortment of garbage.

When banks borrow from Eurosystem central banks, the collateral acts as a protection against default, i.e. if a bank borrows and fails to return the funds they have something cover the loss. Only in a case of default would the central bank exercise its right to take ownership of the collateral—the government bonds, a.k.a NAMA bonds. Until that point, the bonds are a liability of the central bank because they are owned by AIB/BOI in their securities account.

The property, and €14bn in interest rate swaps attached to them, are probably worth something in the future. For the persons holding these 'NAMA bonds', this is only a tangential issue because the NAMA portfolio is not directly paying the interest on the NAMA bonds, the tax-payer is. Whether the tax-payer recoups the cost of the NAMA bonds is dependent on the the final wind-up of NAMA, the banks get paid either way (minus some 5% risk sharing that has yet to be clarified). Whether we, the tax-payers, make a profit is something no-one really knows, but it's entirely incorrect to state that the ECB is left with the losses. We are.

Interesting, thank you for clarifying that. What do you think of the NAMA proposal vs the Nationalisation proposal? Also, do you think it is an effective way of stabilising the financial system?

imme

me_right_one wrote: »

FF's side of the fence is the only way. It's painful, but nescessary. Anyone who disagrees is only deluding themselves. Chow-chess-ku (dunno how to spell it) got Romania out of a recession, and 4 billion dollars debt, which was massive money for an eastern bloc country, AND it was 1989, all in one year. It was so painful for the country that it caused a revolution. Fecked up Romania permanently. They should have been the new Poland or East Germany. Even now, 20 years on, people still dont rate Romania with either of those countries.

If FG, or anyone else, thinks they could fix things with less pain, they're wrong. I'm not a FF man, I detest them, but this time the whole country has been caught with our trousers down, and we just need to row in behind the FFcukers this time to get back on the straight and narrow. I think they have the budget balanced just right under the circumstances.

Richard Brutons rebuttal was weak because in reality, he can't fault the budget, and he knows it. Its like choosing between eating dog poo or human poo when you're a minute away from starving to death. And FF chose the human.

1. did you actually listen to/look at Bruton's speech? in case you didn't see it here you go http://www.youtube.com/watch?v=behl53TrO1Y

Between Bruton and Lenihan which has an economics qualificaltion, Bruton. Bruton knows what he's talking about, whereas Lenihan has had to do the lawyer bit of reading up and trying to be up to speed on what he's dealing with.

2. why do you bring up Ceaucescu? what's all that about? what are you trying to say or prove about an evil dictator, who ran Romania through fear, created orphanages for the unwanted children that he through his policies encouraged.

Sand

@DarkRaven

To add to that, NAMA does not go on our ballance sheet in Brussels. If we nationalised the banks, the debt we would incur would be so great that no one would lend to us. In the absence of lenders, we'd go bust.

Do you think the markets are somehow fooled by NAMA being kept in an SPV? Our states credit rating has taken a beating in the recent past and retains a negative outlook. The markets are very much aware of the liabilities to the state from NAMA, and they wont blindly ignore it. It is their money they will be lending, and funnily enough they do tend to be a little more careful with their own money than the government is with our money.

@me_right_one

Maybe I'm missing something here, but is NAMA not a much better idea than nationalisation? Its basically nationalisation in lambs clothing anyway, but the taxpayer will also get whatever those assets eventually sell for. And they will sell, everything has its price!

No, its much worse than nationalisation.

Ireland has guaranteed all deposits and bank bonds, so its already on the hook for the whole thing. It has taken the 40-50 billion loss were going to see on the commercial property loan books and forced the taxpayer to take the loss. It has ensured the bank shareholders, executives and bank bondholders retain all the upside. The state has already attempted to recapitlise the banks, and will have to recapitalise them again in 2010.

So, taxpayer can only lose, and shareholders get all the benefit of any upswing.

Oh and the whole thing is pointless: when the ECB rates go up and our unemployed/salary reduced/higher tax paying mortgage holders start defaulting on the silly loans taken out in the boom, the banks are going to take another mortal blow.

And this time, the government wont have anything left in the tank to save them, nationalisation or otherwise.

Économiste Monétaire

DarkRaven wrote: »

Interesting, thank you for clarifying that. What do you think of the NAMA proposal vs the Nationalisation proposal? Also, do you think it is an effective way of stabilising the financial system?

I'd prefer the risk sharing aspect to increase, with NAMA funded by an assortment of government bonds and CDOs issued on the worst, say, quartile of NAMA's portfolio, which wouldn't be that difficult to structure given that NAMA will be a collection of mini asset management companies. There's a balance that needs to be struck there, otherwise the whole process is pointless for the banks, but touting risk sharing as a cornerstone of NAMA when it's only 5% of the total being paid to the banks, doesn't seem very good to me. Let's get a little creative .

Both NAMA in its current incarnation, and nationalisation à la Sweden, involve further (probably large) capital injections by the state—after loans are re-valued, losses realised, and the junk placed into AMCs—so we may end up with de facto nationalisation yet. If the banks have about 8% core tier 1 capital after the transfer to NAMA, then we have a banking system in a position to lend. We've already guaranteed senior and (non-perpetual based) subordinated bond holders, so we're liable for their losses already; moving to nationalisation doesn't change that. I would prefer nationalisation to what we're doing now.

BrownianMotion

me_right_one wrote: »

FF's side of the fence is the only way. It's painful, but nescessary. Anyone who disagrees is only deluding themselves. Chow-chess-ku (dunno how to spell it) got Romania out of a recession, and 4 billion dollars debt, which was massive money for an eastern bloc country, AND it was 1989, all in one year. It was so painful for the country that it caused a revolution. Fecked up Romania permanently. They should have been the new Poland or East Germany. Even now, 20 years on, people still dont rate Romania with either of those countries.

If FG, or anyone else, thinks they could fix things with less pain, they're wrong. I'm not a FF man, I detest them, but this time the whole country has been caught with our trousers down, and we just need to row in behind the FFcukers this time to get back on the straight and narrow. I think they have the budget balanced just right under the circumstances.

Richard Brutons rebuttal was weak because in reality, he can't fault the budget, and he knows it. Its like choosing between eating dog poo or human poo when you're a minute away from starving to death. And FF chose the human.

Sorry to go off topic here but did this guy seriously say that Ceausescu's rule of Romania was great and that the only reason things were fcuked up was because the people rebelled??

And two people thanked him. I've got to be reading this wrong.

johnnyskeleton

DarkRaven wrote: »

The thing that has been ignored here is that NAMA is actually profitable!

Since it hasn't actually come into operation yet, it is far to early to suggest that it is profitable.

DarkRaven wrote: »

If this goes right, we will not actually lose a penny on it. We may actually make some.

For it to go right, the government is relying on:

1) many of the NAMA borrowers to make more repayments than they are now. Realistically, once in NAMA more payments will stop;

2) the arbitrary valuations they put on the loans i.e. the 54bn from 77bn to be correct. Recently it has appeared that the valuations will be a lot less (http://www.thepropertypin.com/viewtopic.php?f=50&t=26683)

3) house prices to go up 10% in the next few years. More likely, they will decrease another 15-30%;

4) interest repayments (i.e. the 4% NAMA bonds) are not included in their calculations;

5) inflation to be medium-high, or at the very least not negative. We are likely to be in for further deflation over the coming years.

None of the underlying assumptions for NAMA are realistic, and have a very slim chance of coming through. It is entirely reliant on the economy going back to the way things were in 2006 when the boom was at its height. Yet ironically, even BL & BC would admit that we are not going back to those times. So the plan is based on a fiction that they know cannot become a reality.

DarkRaven wrote: »

Also it's gotten full backing from the top economists in the EU.

It has the backing of economists in the European Union area, some of them are well placed. That does not mean that the EU has approved it. Far from it, they are raising concerns about the German Government's bailout for Hypo Real which is a much more straight forward bailout. So it's a case of the EU being our only hope (to defeat NAMA before it bankrupts the country).

DarkRaven wrote: »

And if we are to let them fall, we will still have to bail them out! Why? Because of the amount of money that the banks have saved at the moment.

First of all, we don't have to bail out anyone. We can let them fail just like any other business, and let a better bank come in to take their place. But aside from that, it looks like the banks will be bailed out again next year in the form of recapitalisation/partial nationalisation. So NAMA is not the end of it by any standard.

DarkRaven wrote: »

Banks are only required to keep ten per cent of the amount deposited in them inside the banks at any one time. I honestly doubt that they can give everyone their money back given the toxic debts that they have. I can't verify that though. If I'm wrong on this, please correct me.

If a car dealership goes under with more debts than assets, they can't give everyone their money back either.

DarkRaven wrote: »

I'm also highly sceptical about the one in five loans approval rate as it only measures the rate of formal applications. My father was denied loans several before he could even fill out the form. I'd imagine that the actual figure is much higher.

You misunderstand what that article is about, sorry if I didn't post a link. Here it is. The original claim was that 14% of loan applications were rejected for SMEs, but this was increased to 18% when "limitations" on reporting i.e. loans refused before the formal application was made were taken into account. To my mind, this is quite a low figure for refusing business loans and even the 28% claimed by the SME representative association is not to my mind too high a rejection rate during a recession. As for personal borrowing, I don't know what the story is with your father so can't possibly comment. But I could equally say that if I wanted a personal loan tomorrow I could get one.

johnnyskeleton

Économiste Monétaire wrote: »

The 'NAMA bonds' are not a CDO on an income stream of the NAMA portfolio. The 'NAMA bonds' are government bonds and are funded by the tax-payer; the very same type of bonds we're issuing to cover the budget deficit with a minor change in that they're floating rate notes. The ECB's opinion even refers to them as 'government bonds', as does the NAMA business plan, and this is why the banks can use them in MPOs. There's zero chance a body like the ECB will accept collateral in the form of CDOs on an assortment of garbage.

As I understand it, the NAMA bonds could possibly be accepted by the ECB as collateral for loans, but there is nothing to guarantee that they will provide such services.

Indeed, JCT has indicated that the ECB will withdraw emergency funding from banks, believed to begin in early 2010 (though it seems hard to pin the ECB down on this). If they are withdrawing the emergency funding which had to be dragged out of them in the first place, it seems even less likely that they will provide funding backed by government bonds, which are very close to the bailouts and quantitive easing that the ECB are sworn against.

So the banks are likely to have to look for private funding. The idea behind these bonds in blunt terms is that bank X gets €10bn NAMA bonds from the government which have a coupon of c. 4%. The banks then borrow €10bn from the ECB (or whoever) at 2%, thus giving the banks a steady net income stream of 2% on that €10bn and thus they are slightly less insolvent than they were. However, if they go to international markets and the lowest rate they can borrow is say 5%, they will either have a guaranteed loss of 1% or, more likely, the government will have to increase their rates to 7%. It would be funny though if NAMA actually made the banks less solvent than they are now.

However, all this is premised by the usual NAMA caveat - there is so much uncertainty as to NAMAs terms and so little clear information available outside of the DoF that the above may be completely wrong.


http://www.ecb.int/press/key/date/2009/html/sp091211_2.en.html

BrownianMotion wrote:

Sorry to go off topic here but did this guy seriously say that Ceausescu's rule of Romania was great and that the only reason things were fcuked up was because the people rebelled??

I think what he meant is that if all the cuts are done in one year it will have similar effects as happened in Romania - revolution and 20 years of economic decline. So all that can be done is take small cuts and slowly deflate.

Amhran Nua

DarkRaven wrote: »

Eh, that was somewhat a bad idea.

Bit of an understatement there - I would have thought it was tricky to come up with a way that the government could make the country less attractive to inwards investment, but they managed it alright. Come to Ireland, ten thousand welcomes and we'll slap you with twenty five thousand in fines if you badmouth any religion anywhere.