The Fine Gael alternative to NAMA

[Lee Fields]

Is there any merit in the Fine Gael proposal:

Fine Gael will oppose the NAMA legislation published by Government as currently drafted, because it is a request for a €90 billion blank cheque to gamble our children’s future by buying toxic developer loans from banks at inflated, sweetheart prices, and because this approach will not generate the immediate improvement in credit conditions that our small business sector desperately needs.
We believe that there is a better way. If restoring credit flows is the prime objective of banking policy, taxpayer investment in a new, State-owned bank with a clean balance sheet and an appetite to lend, such as Fine Gael’s proposed National Recovery Bank, would be far more likely to succeed at a fraction of the risk. Future losses by the banks should be absorbed first and foremost by their investors and bond-holders, not by the Irish taxpayer

 

[steviel]

Re: An alternative to nationalization - give the government options

It is based on very nice theory and wont work in the real world. Are Fine Gael actually proposing that international investors and holders of senior debt in AIB and BOI do not get paid back? Well, as they rank equally with depositors (you and me) that opens a whole can of worms. If the good assets are taken out, the bad assets will not be enough to repay international investors at the senior level, let alone the subordinate. So how are these same investors going to be persuaded to fund a 'new' bank if they have just been screwed by Ireland!!! And if FG dont care about the international investors, and are suggesting that the bank will be funded by retail depositors and the ECB alone, it will not be able to provide the credit that we need

It is a nice idea, and a very convenient plan in that it will never work but they can use it to beat up Lenihan, but the idea that you can fix this problem with a €2bn (I think that is what was suggested) cheque is laughable!! how do they get from €90bn to €2bn?!?!? I dont think that they fully thought it through

 

[Duke of Marmalade]

Re: An alternative to nationalization - give the government options

Stevie boy, that was beautifully put. I have labelled this FG idea the "fantasy silver bullet". It is despicable, if understandable, populism on the part of FG to suggest that we can lump this problem on the bondholders but what really sticks in the craw is that academics like Brian Lucey also pedal this nonsense. Or can someone explain why Steviel's argument is unsound?

 

[Purple]

Re: An alternative to nationalization - give the government options

It is based on very nice theory and wont work in the real world. Are Fine Gael actually proposing that international investors and holders of senior debt in AIB and BOI do not get paid back? Well, as they rank equally with depositors (you and me) that opens a whole can of worms. If the good assets are taken out, the bad assets will not be enough to repay international investors at the senior level, let alone the subordinate. So how are these same investors going to be persuaded to fund a 'new' bank if they have just been screwed by Ireland!!! And if FG dont care about the international investors, and are suggesting that the bank will be funded by retail depositors and the ECB alone, it will not be able to provide the credit that we need

It is a nice idea, and a very convenient plan in that it will never work but they can use it to beat up Lenihan, but the idea that you can fix this problem with a €2bn (I think that is what was suggested) cheque is laughable!! how do they get from €90bn to €2bn?!?!? I dont think that they fully thought it through

Add to that the immediate collapse of the existing banks (the moment the new “good bank” is announced) and the simple logistical problem of every business, small and big, in the country looking for a new bank the same day.

 

[Mpsox]

Re: An alternative to nationalization - give the government options

I was watching Fr Ted on DVD over the weekend and it suddenly became crystal clear what the FG view on NAMA is
-Down with that sort of thing

 

[Brendan Burgess]

It is a pity that Fine Gael are not engaging properly with the process. The language used is deplorable.

"a €90 billion blank cheque to gamble our children’s future by buying toxic developer loans from banks at inflated, sweetheart prices"

However, the plan does have one advantage over the various NAMA proposals. The objective of NAMA is to have well capitalized banks lending to businesses and the economy generally. It is unlikely that a shareholder owned AIB, for example, will start lending again any time soon. A government owned good bank set up for the purpose of lending might be worthwhile.

However, it would be an addition to NAMA, and not a substitute for it.

 

[jhegarty]

Re: An alternative to nationalization - give the government options

How much exploration has been done on a the concept for a good bank ?

Why is it not a runner ?

 

[Purple]

However, it would be an addition to NAMA, and not a substitute for it.

Isn't that the key point in all of this; one way or another NAMA has to happen.

 

[BeanPole]

Isn't that the key point in all of this; on way or another NAMA has to happen.

+1

Was listening to the discussion on these FG proposals on Today FM at the weekend, and they were torn to shreds by the commentators.

Typical of the sort of nonsense that FG come out with. The opposition in this country is so feeble, that there is a real risk that FF/Labour would get in at the next election. What a disaster that would be !

 

[Shawady]

Isn't that the key point in all of this; on way or another NAMA has to happen.

I think even the 46 economists that wrote the letter in the IT are not against NAMA, just in it's current format.
So are the 2 options proposed by most of the 'experts' NAMA or NAMA plus nationalisation?

How does the FG plan fit into this? Is that a compltetely seperate 3rd option?

Where is George Lee these days? Given his background you think he would be out fronting the FG plan if it has merit.

 

[BeanPole]

Where is George Lee these days? Given his background you think he would be out fronting the FG plan if it has merit.

Georgie boy is evidently enjoying the long Dáil Summer hols.

Not a peep out of him since the election. FG have been parachuting in celeb candidates for years and years, most of whom (Austin Deasy being the honourable exception) quickly disappear into the back benches.

No wonder they keep losing out to an inept government.

Still, I suppose we get the government we deserve.

 

[Complainer]

Re: An alternative to nationalization - give the government options

So how are these same investors going to be persuaded to fund a 'new' bank if they have just been screwed by Ireland!!!

I'm sure these smart investors will know that they haven't been screwed by 'Ireland', they have been screwed by the Directors and management of the banks in which they invested, and the property developers to which those banks loaned money. The Irish people did not screw the bond investors.

Once again, we see a huge dichotomy between how people are treated. If you are on minimum wage, or social welfare, then it's your own fault, and you are fair game for a cut to have food taken off your table. Yet if you are a senior investor in a bank, then god forbid that we do anything that might offend you. What happened to the 'free market' ensuring efficiency and effectiveness?

 

[csirl]

Re: An alternative to nationalization - give the government options

I'm sure these smart investors will know that they haven't been screwed by 'Ireland', they have been screwed by the Directors and management of the banks in which they invested, and the property developers to which those banks loaned money. The Irish people did not screw the bond investors.

I agree. Commentators need to divorce themselves from the socialist idea that the country owns everything. Investors look at individual companies on their merits. They will invest if there is money to be made. In fact the likes of pension funds are mandated to invest to give the best return.

It may not be a bad thing making investors wary of investing in badly run banks. And if a good bank is created, I think it will be very attractive to investors - none of the credit crunch baggage that most banks worldwide are carrying.

 

[Shawady]

FG have been parachuting in celeb candidates for years and years, most of whom (Austin Deasy being the honourable exception) quickly disappear into the back benches.

Maybe so, but given that Lee is an economist, it would give their plan more credibility if he was out explianing it. It's unlikely FG would have ran with this without Lee being involved.

 

[csirl]

This may seem a bit simplistic, but isnt the "everyone will have to change banks" argument a red herring?

Surely if any of our banks go bust, the "good bank" would be able to purchase their assets including premises, good customers etc. at a song from the liquidator thus gaining a ready made network of branches and customers and meaning that customers of existing banks dont have to change accounts etc.

 

[Padraigb]

This may seem a bit simplistic, but isnt the "everyone will have to change banks" argument a red herring?

Surely if any of our banks go bust, the "good bank" would be able to purchase their assets including premises, good customers etc. at a song from the liquidator thus gaining a ready made network of branches and customers and meaning that customers of existing banks dont have to change accounts etc.

It could not be done overnight.

 

[Brendan Burgess]

Maybe so, but given that Lee is an economist, it would give their plan more credibility if he was out explianing it. It's unlikely FG would have ran with this without Lee being involved.

It is extraordinary that he has been so quiet - or completely silent.

What about Richard Bruton. I have heard him a bit, but not much.

I suspect that the media are probably not giving much credence to the FG plan.

Brendan

 

[Purple]

Re: An alternative to nationalization - give the government options

I'm sure these smart investors will know that they haven't been screwed by 'Ireland', they have been screwed by the Directors and management of the banks in which they invested, and the property developers to which those banks loaned money. The Irish people did not screw the bond investors.

That’s a valid point but if they stay away from the banks then we are still screwed.

Once again, we see a huge dichotomy between how people are treated. If you are on minimum wage, or social welfare, then it's your own fault, and you are fair game for a cut to have food taken off your table. Yet if you are a senior investor in a bank, then god forbid that we do anything that might offend you.

Yes, it is very unfair (though I haven’t seem too many regular posters suggest “If you are on minimum wage, or social welfare, then it's your own fault”). I have seen many posters say that we cannot afford to pay what we are paying (notions of “fair game” don’t come into it).

What happened to the 'free market' ensuring efficiency and effectiveness?

Banks don’t operate in a free market, they are (or at least should be) licensed and regulated by their respective central banks.
It would be great if we could just let them fold but unfortunately we can’t.
In the context of the mess we find ourselves in I would love to see the corporate and political culprits spend long spells in prison but I don’t hold out too much hope. I don’t even think they will suffer financially.

 

[Mpsox]

There's a fundamental issue with the FG plans, they can't say how much it will cost. They're basically saying no to NAMA and follow our plan even though we have no idea what the price will be

 

[Complainer]

There's a fundamental issue with the FG plans, they can't say how much it will cost. They're basically saying no to NAMA and follow our plan even though we have no idea what the price will be

Do we know what the NAMA option will cost?