Why is NAMA Now Protecting Foreign Loans?

[canicemcavoy]

The supposed reason for NAMA was to protect Irish banks.

According to today's Irish Times:

[broken link removed]

THE NATIONAL Asset Management Agency (Nama) is making plans for foreign banks not protected by State guarantee to Irish lenders to participate in the €90 billion “bad bank” scheme.

The inclusion of loans granted by non-Irish banks would reduce some of the complexity in Nama’s work, as many of the developers who have loans moving to the new agency also have loans outside Ireland. With plans well-advanced for the publication next week of draft legislation to establish Nama, this may also reduce potential for disruption to the scheme from foreign banks taking court action against Irish developers.

Can anyone explain why the scheme now extends to foreign banks? Is "reducing its complexity" a good enough excuse to be extending the scheme for many billions more? The only explanation that I can see is that NAMA is actually mainly or partially for the benefit of developers.

 

[JackFeeney]

It was cheaper for Leno to do this than to allow ACC / Rabbo expose the real truth of the market - NAMA plans to value assets at 70% but the recent Zoe case shows that 30% would be a more realistic estimate. It's a round peg in a square hole: If NAMA gave a true value on to the toxic debts, our Banking system would fail. Whilst it may appear than Leno is actually doing something, its the Banks driving the entire agenda. Leno is just puckering up the Nations backside: the Banks have the power and will continue to drive the agenda.

 

[canicemcavoy]

It was cheaper for Leno to do this than to allow ACC / Rabbo expose the real truth of the market - NAMA plans to value assets at 70% but the recent Zoe case shows that 30% would be a more realistic estimate. It's a round peg in a square hole: If NAMA gave a true value on to the toxic debts, our Banking system would fail. Whilst it may appear than Leno is actually doing something, its the Banks driving the entire agenda. Leno is just puckering up the Nations backside: the Banks have the power and will continue to drive the agenda.

In the context of economists advocating slash-and-burn economics against the vulnerable, this is pretty sick-making.

 

[JackFeeney]

Leno will give the Banks whatever they want....

In the context of economists advocating slash-and-burn economics against the vulnerable, this is pretty sick-making.

I agree but it will get a lot more sickening before it gets any better - It's an ill concieved concept being applied by a tired and corrupt government. The real worry is that the opposition don't seem interested in opposing it. People were angry today on the Joe Duffy show regarding the Interest Rate increases but these will be TINY relative to the amount of additional taxes we will pay as a consequence of NAMA.

I hate to say it but it will get a lot, lot worse!

 

[z109]

Re: Leno will give the Banks whatever they want....

I hate to say it but it will get a lot, lot worse!

Depressingly, I agree with you.

Interest alone on the circa 60 bn of NAMA bonds will amount to some 30% of income tax revenues (3 bn interest (5%) of 10 bn income tax revenue). This is before any attempt is made to pay back the bonds. The sickener is that the interest will be paid to the very banks that we have overpaid for the loans. Well, one of the sickeners, anyway.

Never mind the Zoe case, what about the Tivway one? The Sentinel building in Sandyford was valued at 2.5-5% of the loan value (0.5-1 mn with a loan to ACC of 22 mn) excluding the cost of the land. Even accepting a 70% of loan (as opposed to original value) price, the value of Sentinel would need to increase by 15-30 times to get back to what NAMA bought it for, excluding interest and administration.

NAMA as currently proposed is a disaster for the Irish people, in particular the taxpayers (but the cuts that will be required to pay for it will be hard enough on everyone else).

 

[canicemcavoy]

Re: Leno will give the Banks whatever they want....

Depressingly, I agree with you.

Interest alone on the circa 60 bn of NAMA bonds will amount to some 30% of income tax revenues (3 bn interest (5%) of 10 bn income tax revenue). This is before any attempt is made to pay back the bonds. The sickener is that the interest will be paid to the very banks that we have overpaid for the loans. Well, one of the sickeners, anyway.

Never mind the Zoe case, what about the Tivway one? The Sentinel building in Sandyford was valued at 2.5-5% of the loan value (0.5-1 mn with a loan to ACC of 22 mn) excluding the cost of the land. Even accepting a 70% of loan (as opposed to original value) price, the value of Sentinel would need to increase by 15-30 times to get back to what NAMA bought it for, excluding interest and administration.

NAMA as currently proposed is a disaster for the Irish people, in particular the taxpayers (but the cuts that will be required to pay for it will be hard enough on everyone else).

Surely this is the kind of issue that AskAboutMoney should be taking up, rather than bashing the unemployed.

 

[JackFeeney]

Re: Leno will give the Banks whatever they want....

Depressingly, I agree with you.

Interest alone on the circa 60 bn of NAMA bonds will amount to some 30% of income tax revenues (3 bn interest (5%) of 10 bn income tax revenue). This is before any attempt is made to pay back the bonds. The sickener is that the interest will be paid to the very banks that we have overpaid for the loans. Well, one of the sickeners, anyway.

Never mind the Zoe case, what about the Tivway one? The Sentinel building in Sandyford was valued at 2.5-5% of the loan value (0.5-1 mn with a loan to ACC of 22 mn) excluding the cost of the land. Even accepting a 70% of loan (as opposed to original value) price, the value of Sentinel would need to increase by 15-30 times to get back to what NAMA bought it for, excluding interest and administration.

NAMA as currently proposed is a disaster for the Irish people, in particular the taxpayers (but the cuts that will be required to pay for it will be hard enough on everyone else).

Indeed, the Tivway case is really scary stuff but would more Tivways help reflect better NAMA pricing? Or is it as case that they (NAMA) simply can't state toxic debts at less than 70% ?

 

[z109]

Re: Leno will give the Banks whatever they want....

Indeed, the Tivway case is really scary stuff but would more Tivways help reflect better NAMA pricing? Or is it as case that they (NAMA) simply can't state toxic debts at less than 70% ?

I don't think they can offer less than 70% for them, as I don't believe the government want more than 50% shareholding (whether the ideology is in Dublin, Frankfurt or Brussels, I don't know). Given that the market capitalisation of AIB is 1.5 bn and BoI 1.75 bn, there is not much scope for imposing losses on the banks and recapitalising them through equity stakes.

Aside from not wiping out equity holders, the further complication is funding for recapitalisation. The NAMA funding, as I understand it is going to come from directly issued bonds, that is bonds that have not been sold on the open market. This avoids a flood of extra issuance on the bond market that would disturb financing of the deficit. It is not clear, however, if the banks could be recapitalised in this manner - it looks like equity has to be bought with cash, so any recapitalisation would require bond issuance to raise it.