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  • irishtimes.com - Posted: July 31, 2009 @ 10:32 pm

    Nama and Snip

    Deaglán de Bréadún

    The scale of the Nama (National Asset Management Agency) project is awe-inspiring. We never had it so good as in the Celtic Tiger years but it is clearly a case of, the higher they come, the harder they fall.

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     Nama and Snip? Tiger cubs at Dublin Zoo, with Mum and Dad (Photograph by Brenda Fitzsimons)

    Our  State and society have faced crises in the past. Probably the greatest was wartime neutrality. We came through that in reasonable order (I am aware that some would question the moral basis of our stance.)

    This is a threat of a different kind, but very serious in its own way. The State is absorbing some €90bn in potentially-dodgy debts, the fruits of a property boom that went horribly awry.

    As with wartime neutrality, we can batten down the hatches but we remain at the mercy of international events. If the storm abates, then it will all work out. But maybe this particular crisis is not going to resolve itself. We are all hoping for the best but the truth is that nobody knows the outcome, any more than they did back in June 1940 when most of continental Europe was under the sway of the Axis powers.

    The Opposition is raising questions and casting doubts on the scheme. That is their job. But one wonders who will vote against the Bill in the end. My hunch is that  Fine Gael may come around, provided certain assurances are given and the Bill amended to meet their concerns. Labour may vote against, as they did in the case of the Bank guarantee. But it seems that the powers the State is now taking could be used for socially-beneficial projects and that would appeal to the Left.

    Traditionally, the Left seeks to have the banking system nationalised. It is not happening in this case, but some are claiming that the Bill restricts property rights in a manner that may not be in accordance with the Constitution. The Left usually has no problem with such restrictions, of course.

     A constitutional challenge which went the wrong way could prove a big setback for Nama and the Government. But this administration appears to be getting very good legal advice.

    What a dramatic few months it has been – An Bord Snip Nua, now Nama and, in a few weeks, the Commission on Taxation Report.  Then we have Lisbon and, of course, the Budget. Stirring times indeed.

    On a lighter note, a letter-writer in today’s Irish Times has suggested names for the two new Sumatran tiger cubs in Dublin Zoo: “Nama” and “Snip”.

    • Ray D says:

      We the people will pay heavily for this disastrous Nama gamble, but we the people have not been given the opportunity to give a mandate to this policy. If democracy means anything then we need a general election.

      The political parties will not grant us this – wedded as they are to the trappings of power, but a No vote to Lisbon will bring an immediate general election. That is our opportunity and I for one will take it.

    • john Creedin says:

      The decision next Tuesday by the Supreme Court in relation to Liam Carroll’s debts will surely be the biggest in living memory.

    • There is a school of thought at the present time which suggests that the National Asset Management Agency (NAMA), or government ‘bad bank,’ is actually a conduit to allow the European Central Bank (ECB) rescue our banks which are in deep trouble.

      This line of thinking is based on how, it appears, NAMA is going to do business.

      NAMA will buy €90 billion in toxic (grossly exaggerated in value) property loans from five Irish banks. It will pay for those loans with newly-issued Irish government bonds (IOU’s). The Irish banks will then use these government bonds as collateral for new loans from the European Central Bank.

      You don’t need to be an economist to see the sheer madness of that enterprise.

      Overpriced assets which had brought down the banks in the first place are now being refinanced with government bonds so that those same toxic assets can have yet more debt attached to them.

      Absolute madness.

      ALTERNATIVE TO NAMA

      Here is an idea as to what the government could do differently with €60 billion of taxpayers’ money.

      The total value of all Irish residential mortgages is about €120 billion.

      For €60 billion, the government could reduce the face-value of every household mortgage in Ireland by 50%.

      Can you imagine the boost that would give to the economy, if people’s mortgage payments were cut in half overnight?

      There would be a sudden increase in consumption and we would see an immediate slowing of the unemployment rate.

      Who would get the €60 billion?

      The banks, because they were the originators of the mortgage loans in the first place.

      But it would be a much more transparent way of refinancing the banks and most importantly of all every householder in Ireland would benefit and not a small élite cabal of property speculators.

      Regarding the speculators’ bad loans: any bank which cannot stand on its own without the taxpayer’s guarantee should be nationalised and put into bankruptcy.

      Top management and the boards of directors would be fired.

      The bad loans would then be sold off at market value and the bond holders would receive whatever the market determines.

      The retail part of the the bank (the branches) would carry on as normal.

      The bank could then be sold back on the Stock Exchange once it was cleaned-up and this would probably make a profit for the government.

      That’s a deal which benefits everybody and not just a wealthy élite.

    • Betterworld Now says:

      Actually Deaglán, the constitutional issues are significant and do not fall into the category you suggest.

      Traditionally the “left” has no issue with private property rights being curbed in the interests of collective rights but this is not what is being suggested in the Nama legislation.

      Nama allows the private property rights of some individuals to be overtaken by the state but with only assumed benefit to the collective. The state has yet to prove that, in establishing Nama, it is acting in the interests of the citizens. So far it is only an assumption, by an ideologically very narrow-minded government, an assumption that has been carefully crafted from undefined fears of what would happen if the Irish banks were to be allowed to collapse (in accordance with the Constitution).

      It remains to be seen if a decent barrister could assemble a Supreme Court challenge to the effect that the assumed benefit was in fact unproven, based, as it is, on only a partial examination of the available options and that the risk to the collective therefore outweighs any provable benefit.

      The consequences of a successful constitutional challenge could be many times worse than the consequences of an orderly wind-up of the banks. If the government was found to have acted unconstitutionally in operating Nama in, say, five years’ time, it could be forced to return the assets and pay damages to the developers and/or the banks – that’s the nightmare scenario.

      As the President hasn’t referred the Nama legislation to the Supreme Court, there is no limit on the scope or time for such a constitutional challenge. (I suspect she came under very intense pressure to refer it to ‘close the door’ to further constitutional challenge – possibly the toughest decision any Irish President has ever had to make.)

      Even a single taxpayer could now challenge Nama on the basis that it envisages the largest forced transfer of wealth from the citizens to the corporate sector in the history of the state, and, as such, interferes unconstitutionally with the TAXPAYER’S property rights.

      It might be far better to let the market deal with the debts in the normal way by creating zombie banks and set up a new state bank to guarantee the people have access to functioning banking services. Once an alternative bank is operational the deposit guarantee could be progressively withdrawn and the zombie banks thrown to the wolves one at a time.

      This has the advantage that the costs are measurable and the timescale of the wind-up controllable.

    • Liam says:

      Cearbhall, I don’t agree with any tax-funded write-down of loans. I paid my mortgage off in 2003 and didn’t speculate after that. It is completely immoral for my prudence to be taken advantage of to let someone else off the hook.
      Otherwise indeed the bondholders should be made chance their luck in the bankruptcy court as it was their lack of foresight in lending to Irish banks that was the initial fuel for the fire.
      This NAMA lark should really be put to a public vote. It has generational implications and within 5 years more than a third of gov. revenue will be leaving the country in interest payments. I was only a kid in the 70′s but we are looking at a fiscal repeat.

    • Desmond FitzGerald says:

      Nama is probably the biggest financial crime to take place ever in Ireland – certainly since the Cromwellian confiscations – and the Irish public haven’t a word to say.

      It is truly astounding that a group of about 20 property developers have the power to make the government risk the entire financial security of the state for the next two generations so that those people can avoid paying their debts and retain all the trappings of their wealth.

      Let’s assume each of them have given about €400k to the Fianna Fáil party or Fianna Fáil politicians over the years. Not that we’ll ever get to know the exact amounts, or to whom it was given, unless one of them has a Ben Dunne moment. So that €400k each over 20 people meaning about €8million donated by the golden circle to Fianna Fáil since 1997.

      In return they are going to get €90billion – this must surely be the biggest investment return anyone has ever received on any investment in the history of mankind?

      It simply beggars belief that Bertie Ahern is not hanging from a lamp post for what he unleashed when he came to power in 1997. Because let’s be perfectly clear: lots of people were warning this would happen, so it could have been different.

      If Fine Gael/Labour had been returned to office in 1997, Bertie Ahern wouldn’t have lasted as FF leader because he had no powers of patronage, and that power is the lifeblood of Fianna Fáil. The developers would have dropped him like a hot stone and the irony is that they would probably have still made millions anyway except they wouldn’t have ended up bankrupting the country in the process.

      A Fine Gael-Labour government would have seen the economy expand at a manageable rate and we would never be in the mess we are now in.

      To think we have the brass neck to sneer at African banana republics when we are as bad, because we actually repeatedly chose to put these gombeen sleveen politicans back into power time and time again.

      Perhaps the Irish really do need to hit rock bottom and be treated like children, with the grown-up’s at the IMF or EU Commission stepping in to do what needs to be done to put this right because the evidence so far proves we are patently unfit to run our own affairs.

    • dealga says:

      I like Cearbhall’s idea of a ‘small élite’ of property speculators. Small, of course, meaning the tens of thousands who speculated on property here, there and everywhere – the tens of thousands who drove up the prices of property, by buying-to-let, beyond the affordability of their own children.

      Like it or not, the banks didn’t force overpriced property down our throats – we swallowed with gusto and went back for more.

      Ray, we did have an election – in 2007. Fianna Fáiled won. Now either all of the Fianna Failures have been since 2007 or the great Irish bourgeoisie were quite happy two years ago to ride the back of our Albanian-esque property pyramid scheme as long as they weren’t at the bottom… unless, of course, you’re implying that the electorate were too stupid to see the writing on the wall ..?

      How supremely Irish it would be to make our mature European partners the victims of an adolescent tantrum.

    • Deaglán says:

      Betterworld Now:

      Regarding your comment that:

      “As the President hasn’t referred the Nama legislation to the Supreme Court, there is no limit on the scope or time for such a constitutional challenge. (I suspect she came under very intense pressure to refer it to ‘close the door’ to further constitutional challenge – possibly the toughest decision any Irish President has ever had to make.)

      “Even a single taxpayer could now challenge Nama on the basis that it envisages the largest forced transfer of wealth from the citizens to the corporate sector in the history of the state, and, as such, interferes unconstitutionally with the TAXPAYER’S property rights.”

      RESPONSE: The Nama legislation has not gone through Dáil or Seanad as yet. We only have a draft Bill. The President has not been asked to sign it into law – it has to go through the houses of parliament still. Deaglán

    • Ray D says:

      The election in 2007 did not deal with the issues now before us and no party campaigned on these issues. Nor did FF win the election.

      There are no mandates for this current Government nor for its policies as evidenced in the last 3 budgets. Now don’t be throwing mature adult tantrums around the place.

    • Betterworld Now says:

      You are absolutely correct Deaglán, I was getting ahead of the process, allow me to re-phrase those paragraphs:

      “So long as the President doesn’t refer the Nama legislation to the Supreme Court, there will be no limit to the scope or time for such a constitutional challenge. (I therefore forecast that she will come under very intense pressure from FF to refer it to ‘close the door’ to further constitutional challenge – which, given the risk to the constitution it poses, should make that referral the toughest decision any Irish President has ever had to make.)

      “A single taxpayer could challenge Nama on the basis that it envisages the largest forced transfer of wealth from the citizens to the corporate sector in the history of the state, and, as such, interferes unconstitutionally with the TAXPAYER’S property rights.”

    • John Nolan says:

      While, as an experienced chartered accountant, I am far from convinced about the whole NAMA concept, I simply can’t understand why setting it up seems to be so complicated nor can I see why it needs special legislation. For as long as I’ve been in business, banks have purchased loan books from each other and usually at a discounted rate. Surely NAMA is no different? Its buying approximately €90bn of high risk loans for a figure which we all expect (and I earnestly hope) will be a pretty substantially discounted figure. Certain banks were always prepared to purchase risky loan books at an appropriate discount having become comfortable with a value/purchase price following adequate due diligence. There could be many justifications for such a purchase but it was never rocket science either to execute or account for and certainly never required special legislation. There might be a question of there being a transfer of an undertaking which under Irish legislation protects the jobs of the employees associated with the undertaking but again that would not hugely complicate such a transaction. So, what on earth are this leaderless, rudderless, incompetent government up to – and I ask that question as a life-long supporter of Fianna Fail? It’s time they stepped aside and let somebody who actually has a clue what they are doing take control. The current government is more of a worry than the recession itself.

    • dealga says:

      “The election in 2007 did not deal with the issues now before us and no party campaigned on these issues.”

      That is a fudge. The election, like all elections, was fought on the issues that the parties believed *mattered* to the electorate. And people just didn’t want to hear about the potential (logical) consequences of debt-fuelled boom. Sticking your head in the sand is no defense. Ignorance is no defense. The whingers will get their chance to shut the stable door in due course.

      “Nor did FF win the election.”

      They’re in power. I’m guessing they think they did.

    • Dan Sullivan says:

      Ray D, “The political parties will not grant us this – wedded as they are to the trappings of power, but a No vote to Lisbon will bring an immediate general election. That is our opportunity and I for one will take it.”

      It’s not in the gift of all political parties to grant an election, only those in government. It’s this sort of “they’re all the same” thinking that let’s the government of the day off the hook. Are you seriously suggesting it is SF or the Socialist Party’s fault we’re not having a general election. And a No to Lisbon will not cause a general election, why do you think that it would?

    • Ray D says:

      Having worked in the civil service with all Governments since 1964, they are all the same in my experience. We are an endemically-corrupt nation and our Government and civil service is no exception.

      A Lisbon NO would precipitate a genaral election as it would be a further massive vote against FF and would blitz the stumbling inter-party Government.


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