I think NAMA is the worst possible idea apart from nationalisation, or rather, the structure of NAMA is the problem.
Look at the way the government is going to fund both NAMA and the resultant recapitalisation of the banks - it is going to issue treasuries directly to the banks both through NAMA and in recapitalisation. That is, the government is going to issue IOUs without going to the bond markets. In effect, the government is doing quantative easing. It is increasing the supply of credit in the economy by swapping bad assets for good (sound familiar to any Fed watchers?). Given that Mr. Lenihan has already indicated that the ECB/EU have approved the scheme, this is a significant point, IMO.
Now consider the situation where the banks are nationalised. Can the government issue treasuries to itself? I doubt very much that would be approved.
Why not just nationalise the banks without using the treasury swap? The banks are currently insolvent by any form of mark-to-market accounting. They would be unable to borrow and would probably have great difficulty rolling over the bonds they have due this year. Rather than a 'what if' liability of the government guarantee, we would have a 'definite' liability. There could be little more funding for the banks privately, so it would all have to come directly from the government.
Given the scale of the numbers required, the government would be looking to sell debt at a debt:GDP ratio greater than Italy's without the use of magic pixie money. It would require a huge amount of government bonds to be put on the market and the price to be paid would be huge.
Add to this the fact that some 76% of the government bond issue this year has been bought by domestic financial institutions. With those institutions privatised, who is going to buy Irish debt at a reasonable price? The nationalised banks? I don't think so.
So, however, unpalatable it is, the banks have to remain private.
What I would like to see, though, is a move to convert some of the equity and debt holders of the banks into equity holders of NAMA and have it a 60/40 state/private operation. This, I think, would encourage some transparency, would certainly encourage the recovery of the maximum value of the loans possible, would reduce the cost (in that some of the existing debt of the banks is transferred to NAMA), and might in the long run reduce the losses to the taxpayer.