RTÉ - "Did Ireland's 'bad bank' NAMA work?"

No it didn't work, it got assets at a 70% discount to cost and there was no ambition for them to try and recover that, they just sold the best assets quickly on the cheap and it was so easy for them to make a profit since they got them at a 70% discount. Of course they never got challenged on that fact in the media, the media just continued to focus their ire on the big bad banks and developers.
It would have been better to have recapitalised the banks but leave the banks in charge of those assets at least the banks would have had more expertise and more ambition to get back the true value of those assets than a bunch of civil servants with no skin in the game.
 
Correct 70% write down of original loan value

Assets sold then at a marginal price uplift to outside capitalists

And the guy in charge was going to solve our housing crisis like he is some kind of alchemist or guru
 
NAMA acquired distressed loans from the five banks with a face value of over €72 billion for a discounted price of €32 billion.

However, that discounted price was roughly €5.4 billion higher than the market value of those assets (remember Brian Lenehan’s “economic value” concept?).

So, to finish up with a projected surplus of €5.05 billion actually understates the total financial gain to the State.

You can certainly quibble with individual decisions taken but, in an overall sense, I think it’s self-evident that NAMA has been successful as an asset manager of distressed loans.

The idea that those assets could have remained on the balance sheets of the banks is pure fantasy.
 
joe sod said:
it got assets at a 70% discount to cost
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Those original valuations were fiction, window dressing by failing banks. While they made for good headlines all they reflected was a made up number to make the banks look solvent.


Billybob said:
It worked all right, just not for the tax payers.
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With a profit of €5.5 billion how has it failed for the tax payer?

The success or otherwise of NAMA is less to do with any profit or loss it made and all to do with the cleaned up banks it left behind. It wasn't a panacea but it sped up the banks recovery compared with waiting for them to first realise the problem and then do something about it.
 
Sarenco said:
NAMA acquired distressed loans from the five banks with a face value of over €72 billion for a discounted price of €32 billion.

However, that discounted price was roughly €5.4 billion higher than the market value of those assets (remember Brian Lenehan’s “economic value” concept?).

So, to finish up with a projected surplus of €5.05 billion actually understates the total financial gain to the State.
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yes the gap was made up by recapitalising the banks by 40 billion and NAMA only came out with a surplus of 5 billion in todays money, that's shambolic performance. The state itself is doing far better selling its bank shares back onto the market , the recent sale of AIB shares back onto the market has been far better than the sham that was NAMA. Look at the hames they made by selling off the best assets like Battersea power station now worth multiples of what NAMA sold it for and would have had a healthy profit even at full book value . NAMA had no expertise whatsoever in managing such a portfolio and no ambition to get the best prices. As I said already they had no skin in the game as they could always divert the blame back to the banks.
 
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Sarenco said:
The idea that those assets could have remained on the balance sheets of the banks is pure fantasy.
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By the mid-2010s most of the bad bits of the European banking sector (Italy, Greece, Cyprus) were belatedly taking the Irish approach of selling non-performing assets rather than having to keep massive amounts of capital tied up with them.

Irish banks had little capacity for sweating impaired assets in 2009. First it would have been very labour intensive at a time they were shedding staff to get operating costs down it would have impeded them from lending to good-quality borrowers. Second impaired assets are very capital intensive, again something in scarce supply at Irish banks at the time. Third, Nama had the funding to wait til markets improved. It didn’t sell RoI loans at any scale until 2014 when the market had started to rise.

I think at micro level Nama got many things wrong but at macro level it got it right.
 
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@joe sod

Back in 2013, the IMF told the Department of Finance that NAMA would likely end up with a shortfall of around €10 billion.

So to end up returning a surplus to the State of over €5 billion is an excellent result.

Sorry but the facts simply don’t back up your assertion that the management of the loan portfolio was “shambolic”. Quite the opposite.
 
joe sod said:
the recent sale of AIB shares back onto the market has been far better than the sham that was NAMA
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If you think the only rationale for NAMA was profit maximisation You've missed the point.

It's was the least worst option from a pool of bad options.. an economy doesn't function without a banking system and a set of banks that were drowning in their own mistakes were never going to be in a position to lend any time soon.

Unlike a vulture fund that picks away at a business or loan book to maximise its own profits NAMA was the aggressive surgery aimed to save the patient. A latter profit was incidental to the primary aim.

The success of the AIB shares sales you mention are not separate to NAMA but rather were built on NAMA and the various other measures that were taken to fix our banks.
 
Sarenco said:
Back in 2013, the IMF told the Department of Finance that NAMA would likely end up with a shortfall of around €10 billion.
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I don’t know of a source for a claim like this.

Nama did take on some additional ex-IBRC assets as part of its liquidation in February 2013. There was indeed some uncertainty around their valuation in the course 2013. But this is kind of irrelevant to question as to whether Nama achieved its founding objectives from 2009.
 
Sarenco said:
Back in 2013, the IMF told the Department of Finance that NAMA would likely end up with a shortfall of around €10 billion.
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In 2013 the government was still under the watch of the troika, one of which was the IMF, obviously the IMF were never going to put out a rosy scenario given that it was their money that recapitalised the banks and they were trying to push the government into other spending cuts and reforms outside of banking most notably in social welfare ,public sector and legal system reform. This was heavily resisted by the then fg government and enda Kenny made a big play about getting out from under the nose of the IMF in 2014 I think.
In political terms the 40 billion put into recapitalise the banks was now water under the bridge and the cost had already been paid in political terms by ff and Brian cowen in 2010. Therefore it was then never a political objective to get NAMA to get as much as possible of that 40 billion back because there was no big political prize for the then fg government, it might have actually given a reprieve to ff, Brian Cowen and even the banks .
What really annoyed me about the whole thing was that NAMA were allowed to put out all this spin about them making a surplus in the subsequent years without any counter arguments about them getting the assets at 70% discount. That was all conveniently forgotten. Any ejit could achieve that
 
First of all, Greece & Syriza showed what happens when you try to burn the bondholders. It makes things much much worse.

Banks and governments operate on different timelines when it comes to return on investment- that's a verybig part of the very solid economic rationale for free/heavily subsided childcare and education for example.

So theoretically the banks could over time have gotten more cash back on the bad loans. But they didn't have time- left alone they would have just folded. So it was nationalise the loans and (to the extent necessary) nationalise the banks or have no banking system operating in the country.I don't know what happens when the entire financial infrastructure of a country collapses and I never want to find out.

The government of the day went for the least crappy option. And even if NAMA hadn't recovered a penny of the investment it would still have worked. Getting a €5 billion surplus was however a very nice bonus.
 
@joe sod

Again, NAMA paid €32 billion for distressed loans with a combined face value of €72 billion (that was never going to be fully recovered).

But at that time nobody would have paid more than €26 billion for those assets on the open market. So, simply referring to a 70% discount is misleading.

By 2014, NAMA themselves stated that they thought they could potentially achieve a surplus of around €1 billion (and this was widely derided at the time).

As it turns out, NAMA will actually return a surplus of over €5 billion to the State. That’s some achievement in the circumstances.
 
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