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  • irishtimes.com - Posted: September 14, 2009 @ 4:02 pm

    Good Ship Nama Sails Close to the Rocks

    Deaglán de Bréadún

    On the face of it, the Government would appear to be in considerable difficulty after last weekend’s Green party deliberations on the National Asset Management Agency. But although the voting figures in the “Preferendum” (see below) are very negative, some Green sources keep insisting things aren’t as bad as they look. 

    What in the Nama Gawd are we gonna do now? (Photograph by James Flynn/APX)

    The Nama legislation in its current form got a mere 13% whereas the two most-favoured options both specify that there must be no long-term economic value added to the bank loans which should be paid for at market-price only.

    People who are more intelligent and better-schooled in economics than I am, tell me this would lead to the collapse of the banks. Meanwhile it is reported that Brian Lenihan will impose a 30% discount on the transferred loans, which means the State will still have to cough up an extra €10 bn. But then we’re getting an “assist” from the European Central Bank and, as one Green contact put it, we shouldn’t look that gift horse in the mouth and the Labour plan for full nationalisation would mean no help from the ECB.

    I was just remarking to friends that I have done more reading on Nama at this stage than on some of the subjects for my BA finals at good old UCD!

    Herewith today’s news story from our print edition and if you are interested in reading a related op-ed piece, click here.

    Nama Bill in its current form rejected by Green grassroots
    DEAGLÁN de BRÉADÚN, Political Correspondent
    Mon, Sep 14, 2009
    GOVERNMENT PLANS to establish the National Asset Management Agency (Nama) have suffered a significant setback with only 13 per cent of the attendance at a Green Party conference expressing support for the legislation in its current form.
    The Nama Bill came in fourth out of six options placed before an all- day meeting of more than 140 Green activists from around the country held in Athlone, Co Westmeath.
    The most popular choice at 23 per cent was for an agency which would pay only the current market rate for loans transferred to the banks.
    In second place at 20-21 per cent was the so-called “Swedish solution”, which would also mean paying only the market price for loans.
    This will place further pressure on Minister for Finance Brian Lenihan, who is to announce the valuation he will place on bad loans in the Dáil on Wednesday.
    Although Green Party activists voted by a large majority to withhold the results of Saturday’s “preferendum” for the time being, The Irish Times understands the results were as follows:
    1) Nama with strong Green Party policy conditions and only current market values being paid for transferred loans: 23 per cent;
    2) The “Swedish solution” with each institution forced to write down its loan book to current market values and the possibility of separate asset management companies for individual banks: 20-21 per cent;
    3) A free-market, laissez-faire approach, with banks left to fend for themselves: 14-15 per cent;
    4) The Nama legislation in its present form: 13 per cent;
    5) Partial nationalisation, with a “good bank” to assist small and medium enterprises: 12-13 per cent;
    6) Full nationalisation: 12 per cent.
    Green Party sources have cautioned strongly against premature interpretation of the vote as a signal that the party would walk out of the Government.
    The attendance at the special policy-making convention on Nama and the renegotiated programme for government on October 10th would have an attendance three or four times greater than last Saturday’s consultative session.
    However, the vote is still likely to cause concern among the party’s coalition partners.
    Pressure will increase on the Green Party leadership to win further concessions and on Fianna Fáil to agree to them.
    Green Party sources said there was “a very intense debate” about the valuation announcement to be made by Mr Lenihan.
    The format of the special convention on October 10th, which will be crucial for the future of the Government, remains unclear and is likely to be strongly influenced by negotiations on the programme for government.
    (c) 2009 The Irish Times

    • Liam says:

      Given that the taxpayer is covering both ends of the banks, either way the taxpayer gets screwed, we will pay via injections to NAMA or the banks. The banks should be liquidated and the bond holders should line up at the courts.
      Once the debts are writen off the assets can be sold which will bring lower prices into the property market here which will help competiveness. The state has no job being in the landlord or banking business.

    • robespierre says:

      30% will not wash. Especially when it is on the record that the 30% will come off peak prices. Many areas of the economy are down by at least 50% (undeveloped land with no planning) and I would be alarmed if all is not down by at least 20% everywhere across the country. I would have thought (if measured against peak prices) that a minimum of 40% would be required and preferably 50% to ensure we can realise a return. The idea that 70% of peak will be the medium or long term value is highly risky.

      I am a conservative, capitalist. I do not like seeing an artificial bottom being placed to impede market forces. I especially dislike one that may be placed this high.

      If FF are naive enough to [word unclear] 30% in the Dáil they deserve everything they get.

    • Dave says:

      “Moreover, the more pragmatic element in the party is reluctant to look this particular gift-horse in the mouth, especially since it will not be coming from the taxpayer’s pocket.”

      You still have to pay back loans/bonds. I’m no anti-NAMA hysteric, but we should do everything to avoid the impression that we’re being given free money.

    • barratree says:


      your article on the Green NAMA preferendum was just wrong today. There is no such thing as percentages in a preferendum. Options get points (if 6 options first preference 6, second 5 and so on). Its an ordinal ranking of preferences, not a single prefered option.

    • PR says:

      Nama without a massive discount is a fraud on the tax payer.

      Its nonsense to think that property prices will recover to ‘normal’. Prices over the last decade weren’t normal they were abnormal and prices are still heading (down) towards normal with quite a way to go :)

    • robespierre says:

      One of our most experienced, expert and influential businessmen will tear strips off NAMA in an article to be published later this week. He also offers an alternative that is remarkably similar to FG’s proposals only it is actually thought through and comprehensible. It also gets the risk balancing aspect more or less right.

    • Dan Sullivan says:

      Barratree, it is still possible to give % figures for what option got what % of the first preferences. What the eliminations would have led to being the option as selected we will have to wait and see.

    • barratree says:


      there are no eliminations in a preferendum. Its not STV. “first preferences” have little to do with the process. read about it here:

    • Betterworld Now says:

      I once rigged a preferendum: I am willing to share the process with any Green delegate interested.

      The trick is to vote for one preference only and give it your maximum allocation, after that don’t express a view. You are not required to cast a vote for each option listed, least of all one you don’t like, and not voting makes a much bigger impact on the result than voting for lower preferences.

      My work colleagues enjoyed our Christmas party venue that year, in spite of their failure to fully appreciate the subtleties of preferendum voting.

    • Gregory Pym says:

      One of Margaret Thatcher’s best-known statements was “you can’t buck the market “. Modern financial theory is based on the premise that if all traders in a market have access to the same information then the market will reflect the true value of an asset. Our financial systems are also based on the concept of “moral hazard”, take a risk and call it wrong and you lose.

      With Nama we are going against two of the fundamental underpinning of commerce. We are going to pay inflated prices for property assets, 30% of which are not even in this country, which in turn will distort our markets for years to come. Tokyo property prices are still 40% below their high of 19 years ago , so expect a very long and costly wait to get the taxpayers money back.

      Nama also assumes that interest rates for funding borrowing will be low, while in fact the average global interest rate for the last century was in the region of 10%. Be assured that rates will rise once quantitative easing (printing money) by the European Central Bank kicks in rapid inflation, as it has always done. It also fails to factor in that in the same period long term prices for houses were 4-6 times average industrial earnings giving an average affordable value today of around 150-200 thousand euro for a semi-detached house. On a historical basis our property values have some way to fall yet !

      We have also removed from our political and financial arenas the concept of failure and its consequences. We have removed the moral hazard from our bankers and politicians who if they do go eventually will retire no doubt on handsome pensions and golden parachutes.

      The bankers with their deeply flawed business models have put the fear of God into our current administration , claiming that they are systemic to the Irish market and should they fail no one will ever buy our bonds again. Anecdotal evidence would suggest that the Irish financial institutions have all but stopped lending to their home market in the last year, so much for being systemic, and as their loyalty is to their shareholders as dictated by commercial law they cannot be made to lend to Irish businesses should they be recapitalised.

      It is nonsense to think that our Government will not be able to raise money on the bond markets should our main banks be liquidated. These are public companies and as such their failure should not impact on the raising of sovereign government debt with its citizens’ tax base as collateral . In fact a country which does not have 60 billion debt arising from a bank rescue would be far more attractive to the Institutional and Sovereign investor purchasing government bonds. The Argentine government failed to pay back 3 bond issues in the eighties and still could raise money on the markets.

      The banks should be allowed to fail and an examiner appointed to sell off their assets, including their branch networks which no doubt would find ready buyers in the large European financial institutions with traditional banking models based on long term sustainable growth. Real prices for property would then be established and the market could then start to function again. Businesses would also get access to money, again based on the long term outlook, not short term speculation.

      As for the shareholders and bondholders of the liquidated banks, yes they will lose most if not all of their investment but that is the law of the market, That is the price paid for being complacent in allowing the wrong people with the wrong business models to run your company as long as the dividends rolled in.

      Cut through the spin and Nama is a bail out for banks and their cronies in the political and commercial sector. Time and time again we have allowed our financial institutions to be run in a reckless and feckless manner with no repercussions apart from Joe and Josephine Public being expected to pick up the tab, and this time so will their kids. The Green Party if it wants to retain any respect with the general public should pull the plug now on Nama and this Government with its incestuous ties to financial, building and property firms and allow the shareholders of this country through the market of the electoral system to decide who they want to be on the Board of Ireland Inc.

    • Betterworld Now says:

      “Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism.” – Karl Marx, Das Kapital, 1867

      “NAMA is not optional, it is a must” – Brian Cowen, Dáil Eireann, 16 Sept 2009

      Is NAMA a smoke and mirrors operation designed to obscure the inevitable destination of the Irish economy?

    • Deaglán says:

      Dan Sullivan already pointed out on this Blog that this alleged quotation from Marx is a fake. I had fallen for it myself! See: http://cedarlounge.wordpress.com/2009/01/28/marx-not-as-we-know-him-or-why-bother-quoting-from-das-kapital-when-you-can-make-up-any-old-rubbish/

    • Ray D says:

      Why should it matter what the very few members of the tiny minority Green Party think. They have no mandate to decide what the Government do. They cannot decide what the Government do. It’s time for the Green members to either p### or leave the pot.

      If there was any real democracy in the party they would sink the Government and have an election on what the country now wants.

    • Angel says:

      There is obviously a lot to know about this.

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