Madam, – Four questions about Nama:
1. Why is the onus on Irish taxpayers to recapitalise the main banks via Nama? These banks could raise substantial capital by selling off non-core investment and insurance activities, and holdings in banks in the UK, Poland and the US.
2. Why is the Minister preoccupied with the capital requirements of the banks when determining the haircut on loans being transferred to Nama? Surely this amounts to match-fixing, with taxpayers on the losing team?
3. Will the Minister accept that property values could continue falling for the next few years and might not rise for several years thereafter? This would be a consequence of the overhang created by Nama’s portfolio, rising interest rates and ultra-conservative bank lending.
4. Why doesn’t the Government direct the banks to grant share options to mortgage holders experiencing negative equity? This would help compensate them for the failures by the Government, regulator and banks to exercise judgment and prudential control during the boom which they provoked. Yours, etc,
Madam, – With the airwaves and papers filled with Nama debates the last few days, one point seems to have been missed.
When comparing the nationalisation option with the Nama option, various commentators make the seemingly good point that goes something like this: at current stock prices, the cost of buying all the assets, good and bad, of the banks would be something like €5 billion, ie nationalisation, so why then would it be a good deal for the taxpayer to buy only the bad assets (under Nama) for something in the order of €40-50 billion?
What this point misses is that the current value of the equity of the banks at stock market prices already has “priced in” with a high probability the possibility of Nama going through. In other words, the current stock price reflects the market’s expectations about various options and possibilities for the bailout of the banking sector.
Further, the minimum price for the stock (equity) is zero, but this does not mean that if the banks were nationalised that the price to the taxpayer would be zero. One should expect that, if it were announced that the banks would not be getting any form of government bailout, the equity value would fall quite close to its minimum, and then nationalisation would have a similar €40-50 billion bill, payable by the Exchequer without the option of availing of ECB liquidity, to recapitalise the banks. – Yours, etc,