NAMA-Why do we take it lying down?

ei.sdraob

K-9 wrote: »

Well, you'd have a Government that let banks go bust and default, hardly a good credit rating and we'd still have to borrow €20 Billion a year to pay wages, welfare and things like that.

Would all the personal and business debt just disappear if they went bust?

thanks for dropping the pretense that were bailing the banks to get credit flowing, something thats obviously not happening

and telling it as is, the banks must be bailed out because they are holding us ransom

as i said in earlier post, the banks got too big and hold way too much power, and thats one big problem

instead of 3 large banks with various wings (consumer, business, investment, mortgage, insurance) we should have alot of smaller and specialized bank that are loosely connected

so if an infection starts in one the rest are "fire-walled" from getting the "disease"

in fact thats the same conclusion that was reached after the Great Depression, but unfortunately those lesson were forgotten with time


anyways i provided an interesting alternative to NAMA that would have started credit flowing from the bottom up

my main problem with NAMA is that alot of its portfolio is coming from Anglo, and is very toxic and for most part downright worthless

you also fail to understand that developers can just say "**** it" and walk away from paying the loans once they realize theres no money to be made in it, since their companies have limited liabilities, and theres **** all that we can do about that, right now those developers are the banks problem with NAMA they become our problem

.

ei.sdraob

Scofflaw wrote: »

The only point at which the value of the property comes into play is if the borrower cannot service the loan. At that point NAMA may choose to take over the underlying assets (mostly property).

as i have shown earlier (from the NAMA business plan) a chunk of NAMA is nothing more than worthless derivatives and is not backed by any real world assets (land, property etc)

Scofflaw wrote: »

Even then, just as with a mortgage, the borrower only gets a credit against their debt to the value of the asset at that point, and still owes the remainder of the debt. There is no 'jingle mail' - the borrower still owes NAMA what they borrowed.

and there your missing a big point @Scofflaw

yes average people with mortgages in this country cant walk away from their debts

but

NAMA is not about average mortgage holders but developers companies with 5mln+ in debt

companies can quite literally walk away from their debt due to having limited liability by declaring bankruptcy, and none of the the directors assets can be touched then

thats when the taxpayer endsup with worthless assets on its hands

/

K-9

ei.sdraob wrote: »

thanks for dropping the pretense that were bailing the banks to get credit flowing, something thats obviously not happening

and telling it as is, the banks must be bailed out because they are holding us ransom

as i said in earlier post, the banks got too big and hold way too much power, and thats one big problem

instead of 3 large banks with various wings (consumer, business, investment, mortgage, insurance) we should have alot of smaller and specialized bank that are loosely connected

so if an infection starts in one the rest are "fire-walled" from getting the "disease"

in fact thats the same conclusion that was reached after the Great Depression, but unfortunately those lesson were forgotten with time


anyways i provided an interesting alternative to NAMA that would have started credit flowing from the bottom up

my main problem with NAMA is that alot of its portfolio is coming from Anglo, and is very toxic and for most part downright worthless

you also fail to understand that developers can just say "**** it" and walk away from paying the loans once they realize theres no money to be made in it, since their companies have limited liabilities, and theres **** all that we can do about that, right now those developers are the banks problem with NAMA they become our problem

.

I'm not failing to understand anything. Just exploring your option.

I haven't dropped the pretence of getting credit flowing, never had it to drop. NAMA is an intial step to that, if you can't see that, I don't know.

What happens all the personal and business debt again?

Slideshowbob

Today's indo has this piece:

http://www.independent.ie/national-news/courts/widow-with-83646m-home-loan-faces-losing-house-2074900.html

Spencer Dock Development Co is part of Treasury Holdings!

So Treasury who have the protection of Nama are pursuing a widow for completion of a contract!?

ei.sdraob

K-9 wrote: »

I'm not failing to understand anything. Just exploring your option.

my option is a response to the question of how to get credit rolling to existing and new businesses, especially the small ones (since large companies can borrow abroad)

K-9 wrote: »

What happens all the personal and business debt again?

it stays with the banks for them to deal with it, they took on the debts now they should deal with what they done

by holding the country ransom they are dumping their toxic **** on the taxpayer who right now has many other issues to deal with

Liam Byrne

Scofflaw wrote: »

Dear me.

No need for the "dear me", thanks!

Scofflaw wrote: »

That loss is not a loss on the value of the property, because NAMA isn't buying property, it's buying loans.

Given the state of the economy, I can see it taking over a hell of a lot of property, which is where the "book value" and "long term value" come VERY MUCH into play.

Buying loans that the banks don't want and that the developers can't repay is a minefield in this regard.

Once again, I'll point out the story from the weekend. Where a judge was stunned because his experience of a "70% - 80% drop in [ fictional, boom-nonsense ] "value" was exceeded.

Can you SERIOUSLY see this as being a one- (or even two-) off ?

And can you SERIOUSLY see a developer paying back the 30 million difference ?

K-9

ei.sdraob wrote: »

it stays with the banks for them to deal with it, they took on the debts now they should deal with what they done

by holding the country ransom they are dumping their toxic **** on the taxpayer who right now has many other issues to deal with

These are the same loans you are giving out about with NAMA. If what you say is near the truth, the banks will go bust.

What happens the loans then? Surely, the mortgages etc. aren't just scrapped?

woodseb

ei.sdraob wrote: »

sorry missed that post of yours i did link to this earlier see page 9

also mentioned on wikipedia which references same document

source

thats a heck load of derivatives, pieces of paper not backed by any real assets

they are interest rate swaps not credit default swaps
http://img186.imageshack.us/img186/8771/nama.png

your statement was wrong in the other post and they are not worthless pieces of paper but crucial instruments used by every bank to limit their interest risk in extending a loan. Now NAMA owns the loan, they are taking the hedging instrument too - the nominal value of the swap is also a bit of a misnomer and not related to the risk or value of the swap

ei.sdraob wrote: »

the FED and BOE were forced to create special facilities for large banks to tap into low interest money

they were forced to create special facilities to prevent banks going under, not to finance new entrants into the market. they are completely different situations

ei.sdraob wrote: »

then why are they in need of bailouts? giving out bad loans and mortgages is "crazy investment"

you said...

BOI and AIB that gamble billions in stocks and exotic credit default ****

this is false......these are not bad loans or mortgages which everyone knows the banks gave out - please stick to the facts and don't use sensationalist rhetoric to support your opinion

ei.sdraob wrote: »

thats another problem with the banks, they got too large for their own good, and hence pose a danger to the economy

yet you want other banks that are 'too big to fail' to come in and replace them?

ei.sdraob

woodseb wrote: »

they are interest rate swaps not credit default swaps
http://img186.imageshack.us/img186/8771/nama.png

your statement was wrong in the other post and they are not worthless pieces of paper but crucial instruments used by every bank to limit their interest risk in extending a loan. Now NAMA owns the loan, they are taking the hedging instrument too - the nominal value of the swap is also a bit of a misnomer and not related to the risk or value of the swap

these "instruments" are not backed by any real world assets, if they go south theres no collateral or anything

woodseb wrote: »

they were forced to create special facilities to prevent banks going under, not to finance new entrants into the market. they are completely different situations

im not talking about ECB extending these facilities to new entrants, but about keeping the zombies on life support

woodseb wrote: »

this is false......these are not bad loans or mortgages which everyone knows the banks gave out - please stick to the facts and don't use sensationalist rhetoric to support your opinion

if they are not bad loans or mortgages then why the need for NAMA :rolleyes:

woodseb wrote: »

yet you want other banks that are 'too big to fail' to come in and replace them?

initially yes

until the irish banks are split into smaller and more contained units

ei.sdraob

K-9 wrote: »

These are the same loans you are giving out about with NAMA. If what you say is near the truth, the banks will go bust.

What happens the loans then? Surely, the mortgages etc. aren't just scrapped?

let them go bust

any mortgages and assets then get liquidated and sold to the higher bidders

this way bad business die and replaced by good ones

thats how capitalism is meant to work, any company that goes bankrupt gets liquidated and the best parts sold to competitors

for some reason some of yee have fallen for the myth that banks are "special" and normal rules of business & capitalism dont apply to them

if the government wants to get credit going they can do that without giving it to the banks

woodseb

ei.sdraob wrote: »

these "instruments" are not backed by any real world assets, if they go south theres no collateral or anything


im not talking about ECB extending these facilities to new entrants, but about keeping the zombies on life support


if they are not bad loans or mortgages then why the need for NAMA :rolleyes:

it's not often i say this but you haven't a clue what you are talking about, please look up the definition of interest rate swaps , equities and credit default swaps....

K-9

ei.sdraob wrote: »

let them go bust

any mortgages and assets then get liquidated and sold to the higher bidders

this way bad business die and replaced by good ones

thats how capitalism is meant to work, any company that goes bankrupt gets liquidated and the best parts sold to competitors

for some reason some of yee have fallen for the myth that banks are "special" and normal rules of business & capitalism dont apply to them

if the government wants to get credit going they can do that without giving it to the banks

No, not falling for anything, I'd love to see them fail.

So, everybody would still be in debt to their eye balls and we still have the budget deficit, so we'll have tax increases and cuts in spending for the foreseeable future, so less disposable income.

We've just let the banks fail and CU's and foreign banks are going to be queuing up to get in here and lend to businesses?

Now, we are still left with ghost estates, Apartment blocks and commercial property and land like that in Athlone.

MaceFace

ei.sdraob wrote: »

let them go bust

any mortgages and assets then get liquidated and sold to the higher bidders

this way bad business die and replaced by good ones

thats how capitalism is meant to work, any company that goes bankrupt gets liquidated and the best parts sold to competitors

for some reason some of yee have fallen for the myth that banks are "special" and normal rules of business & capitalism dont apply to them

if the government wants to get credit going they can do that without giving it to the banks

Its not just bad business - its almost every small business in Ireland who rely on credit just to operate. There is so little credit available now, businesses are closing down. If BOI and AIB were to fail, there would be NO credit. Absolutely nothing. Unemployment would more than double.
Oh, and all those lovely mortgages would also be sold to the highest bidder, and you can be dam sure that they would not be as accomodating as the banks today. You would see 10s of thousands of repossessions.

As a result of all this, the government would also probably default meaning credit would be somewhere between astronomical in price and non existent.
Think about the public services and what would happen if there is no money to pay for these?

EDIT: Oh, and I will add to another one - that variable rate mortgage you have belonging to BOI, well maybe that gets sold to a Chinese or American company who decides to raise your rates by 5% in one go. You can't do anything about it because you are in negative equity.

How do you like those apples!

ei.sdraob

woodseb wrote: »

it's not often i say this but you haven't a clue what you are talking about, please look up the definition of interest rate swaps , equities and credit default swaps....

a very simple question are these "derivatives" backed by any assets

no? thought so

K-9 wrote: »

No, not falling for anything, I'd love to see them fail.

So, everybody would still be in debt to their eye balls and we still have the budget deficit, so we'll have tax increases and cuts in spending for the foreseeable future, so less disposable income.

how is that different to what is happening under NAMA?

K-9 wrote: »

We've just let the banks fail and CU's and foreign banks are going to be queuing up to get in here and lend to businesses?

yes they will, right now the irish banks are getting an unfair and anti competitive advantage of being backed by the government, how can foreign banks compete with that?

with the main banks gone a hole appears, which is a business opportunity for anyone wanting to take it

as i said the govt can lend money to credit unions, who will in turn lend it out locally around the country

K-9 wrote: »

Now, we are still left with ghost estates, Apartment blocks and commercial property and land like that in Athlone.

once again we will be left with these under NAMA too, so whats the difference? these ghosts estates are the banks problem not the taxpayers

ei.sdraob

MaceFace wrote: »

Its not just bad business - its almost every small business in Ireland who rely on credit just to operate. There is so little credit available now, businesses are closing down. If BOI and AIB were to fail, there would be NO credit. Absolutely nothing. Unemployment would more than double

i provided an alternative to get lending again to small businesses earlier in thread, the current NAMA and bailouts are not getting any credit flowing anyways, the banks just take the money in order to patch their holes

MaceFace wrote: »

Oh, and all those lovely mortgages would also be sold to the highest bidder, and you can be dam sure that they would not be as accomodating as the banks today. You would see 10s of thousands of repossessions.

put a repossession ban (like the one thats already in place) on repossessions of primary residences

alot of the NAMA loans have little to do with average mortgage holders

MaceFace wrote: »

As a result of all this, the government would also probably default meaning credit would be somewhere between astronomical in price and non existent.

the government fullishly tied their own credit rating to the banks, by not helping the banks the govt would be seen as an independent entity

MaceFace wrote: »

EDIT: Oh, and I will add to another one - that variable rate mortgage you have belonging to BOI, well maybe that gets sold to a Chinese or American company who decides to raise your rates by 5% in one go. You can't do anything about it because you are in negative equity.!

so now we have to bailout all the mortgage holders too?

as was discussed in another thread, the strict personal bankruptcy laws are another problem altogether

ei.sdraob

noone here who is supporting NAMA has yet address one very important point



what happens when the developers companies declare bankruptcy and walk away from their debt?

K-9

ei.sdraob wrote: »

a very simple question are these "derivatives" backed by any assets

no? thought so



how is that different to what is happening under NAMA?




yes they will, right now the irish banks are getting an unfair and anti competitive advantage of being backed by the government, how can foreign banks compete with that?

with the main banks gone a hole appears, which is a business opportunity for anyone wanting to take it

as i said the govt can lend money to credit unions, who will in turn lend it out locally around the country




once again we will be left with these under NAMA too, so whats the difference? these ghosts estates are the banks problem not the taxpayers

Ah right, so it isn't that different from NAMA then.

I'll get more time to reply later.

woodseb

ei.sdraob wrote: »

a very simple question are these "derivatives" backed by any assets

no? thought so

your very simple question ignores the risk profile, purpose and function of a swap

again, please actually look it up, and then explain to us all why they are so objectionable to be included in NAMA?

ei.sdraob

woodseb wrote: »

your very simple question ignores the risk profile, purpose and function of a swap

again, please actually look it up, and then explain to us all why they are so objectionable to be included in NAMA?

i understand their use as a "hedging" instrument and the reason they were used was to lower the cost of borrowing

but as in any "futures" contract these "swaps" you can loose on them too, they aint a win win

at least if a developer walks away from a loan, we have some land/building left

when a futures contract goes sour it has to be paid back as per contract and you dont have much to show for it (like land/buildings)


they are essentially a gamble on a future point of time

so the whole Long term economic Value crap obviously enough doesn't apply to this part of NAMA, since you cant predict which way the currencies would go 10 or so years in future

woodseb

ei.sdraob wrote: »

i understand their use as a "hedging" instrument and the reason they were used was to lower the cost of borrowing

but as in any "futures" contract these "swaps" you can loose on them too, they aint a win win

at least if a developer walks away from a loan, we have some land/building left

when a futures contract goes sour it has to be paid back as per contract and you dont have much to show for it (like land/buildings)


they are essentially a gamble on a future point of time

so the whole Long term economic Value crap obviously enough doesn't apply to this part of NAMA, since you cant predict which way the currencies would go 10 or so years in future

an interest rate swap contract allows somebody to exchange interest payments in one form for another - usually fixed for floating or vice-versa

it is not a 'futures' contract, no principal is exchanged and the only thing that has to be paid if if 'goes sour' is the difference between the two cash flows. To be clear, there is no asset backing it, only a notional amount of money - equally there is no asset at risk. They are no more of a gamble than simply receiving interest rate payments on a loan and if you don't think NAMA or banks should be doing that we should all just go home now....

you stated that we can't predict where currencies will go in 10 years time - well isn't that a good reason to maybe lock in a rate ahead of time?

ei.sdraob

woodseb wrote: »

it is not a 'futures' contract

wikipedia disagrees with you

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

The most simple currency swap structure is to exchange the principal only with the counterparty, at a rate agreed now, at some specified point in the future. Such an agreement performs a function equivalent to a forward contract or futures.

if these are "no harm" and will be profitable as you think they will then why are the banks getting rid of em

Rongil

It seems to me that the varying opinions on whether NAMA is good or bad depends on ones stand-point. If one is still employed, getting a reasonable income and paying off the mortgage, then keeping the banks afloat, irrespective of the future public indebtedness seems plausible.

If, like me, you were made redundant 1 year ago and found no new work, you might view the banks and NAMA quite differently. EBS gave me 1 years grace by making my mortgage an interest only one. That has now ended and they will repossess unless I pay back the full amount. No bail-out for me. NAMA has taken over the EBS and has controlling management of the board and can do what they want. :mad:

Whether NAMA works or not is open to much speculation and only time will tell. In the short term it does not help me and I would quite happily stand next to bankers in the dole queue.

The bigger question to me is "what plan does the government have to bail out the unemployed?" If NAMA is the answer to this, then I reckon its time to dust off the passport.

woodseb

ei.sdraob wrote: »

wikipedia disagrees with you

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

wikipedia is looking up the wrong term - NAMA has interest rate swaps:rolleyes:

Currency swaps are over-the-counter derivatives, and are closely related to interest rate swaps. However, unlike interest rate swaps, currency swaps can involve the exchange of the principal

ei.sdraob wrote: »

if these are "no harm" and will be profitable as you think they will then why are the banks getting rid of em

a) i never said they would be profitable - but they do help to limit risk
b) the banks aren't getting rid of them, they are linked to the loan portfolio, without loans behind it they are purely speculative instruments

ei.sdraob

woodseb wrote: »

wikipedia is looking up the wrong term - NAMA has interest rate swaps:rolleyes:

i see you used the word currency swap earlier in the thread confusing me altogether and thats what i looked up as per your suggestion


anyways in that case see this

Risks

Interest rate swaps expose users to interest rate risk and credit risk.
Interest rate risk originates from changes in the floating rate. In a plain vanilla fixed-for-floating swap, the party who pays the floating rate benefits when rates fall. (Note that the party that pays floating has an interest rate exposure analogous to a long bond position.)
Credit risk on the swap comes into play if the swap is in the money or not. If one of the parties is in the money, then that party faces credit risk of possible default by another party.

basically a part of NAMA woth few billion has little to do with property but consists of exotic "derivatives"

these are a form of gambling, since your betting on a particular outcome to hedge yourself

Today, interest rate swaps are used to hedge against or speculate on changes in interest rates.

hence the Long Term Economic Value doesnt apply to this part of NAMA

these swaps are very dangerous and exactly the type of exotic instruments that brought down so many banks in US


this is also very interesting

The Bank for International Settlements reports that interest rate swaps are the second largest component of the global OTC derivative market. The notional amount outstanding as of June 2009 in OTC interest rate swaps was $342 trillion, up from $310 trillion in Dec 2007. The gross market value was $13.9 trillion in June 2009, up from $6.2 trillion in Dec 2007.

the derivatives market is larger than the GDP of the whole planet

and is nothing more than a giant casino with "funny" money


i have a huge objection with the taxpayer being dragged into these derivatives

i can just about swallow loans backed by real world assets, but derivatives are just downright complicated and dangerous

woodseb

ei.sdraob wrote: »

i can just about swallow loans backed by real world assets, but derivatives are just downright complicated and dangerous

complicated? yes , but dangerous in the case of interest rate swaps? no

i've given up trying to explain this to you - there are at least 3 factual errors in your comprehension of the wiki quotes - it's taking too much of my time, i might come back to this later

ei.sdraob

woodseb wrote: »

complicated? yes , but dangerous in the case of interest rate swaps? no

i've given up trying to explain this to you - there are at least 3 factual errors in your comprehension of the wiki quotes - it's taking too much of my time, i might come back to this later

were talking 14 billion worth of stuff that has nothing to do with property or land

if they weren't dangerous or for that matter were profitable then why are the banks getting rid of them?

and of course LTEV doesn't apply to this lot

woodseb

ei.sdraob wrote: »

were talking 14 billion worth of stuff that has nothing to do with property or land


if they weren't dangerous or were profitable then why are the banks getting rid of them

it's not 14bln worth, it's 14bln notional....

i'm leaving at that:mad:

ei.sdraob

woodseb wrote: »

it's not 14bln worth, it's 14bln notional....

i'm leaving at that:mad:

so how much are paying for this 14 billion worth of funny "stuff"?

and why is the taxpayer having to take on this exotic derivative crap??

Liam Byrne

Rongil wrote: »

It seems to me that the varying opinions on whether NAMA is good or bad depends on ones stand-point. If one is still employed, getting a reasonable income and paying off the mortgage, then keeping the banks afloat, irrespective of the future public indebtedness seems plausible.

Disagreement on that one from here, anyway.

woodseb

ei.sdraob wrote: »

so how much are paying for this 14 billion worth of funny "stuff"?

and why is the taxpayer having to take on this exotic derivative crap??

nobody knows until transfer, the value of a swap is the present value of the difference between the next two payments - some may be in the money, some may not - but it will be in the millions, not anway near the billions and probably not material

i've already explained why the instruments come part and parcel with the loan portfolio

stop putting buzzwords like 'exotic derivative crap' - it does nothing for your arguement