Nama will ensure the big boys are looked after

 

OPINION:The asset agency will oversee the transfer of society’s wealth to the richest elite, writes VINCENT BROWNE

POTENTIALLY THE single largest transfer of wealth ever to take place at once is about to be enacted here in the coming months. And it will be a transfer probably of tens of billions, not from society to the poor but from society – from the poor, the poorish, the comfortable and the well-off here – to the very richest.

It is being done on the basis of the false claim that if it weren’t done the economy would collapse.

It arises from the guarantee given to the depositors and lenders to the financial institutions on September 30th last, a guarantee defended on the grounds that if it weren’t given, the entire edifice of our financial institutions would have collapsed. It was unavoidable.

But the guarantee was avoidable.

We could have allowed Anglo Irish Bank to go to the wall last September and we could have allowed some or all of the other financial institutions take their chances.

That would have been possible either by the State establishing a new “clean” bank and investing the billions in it that they have since invested in the two main banks.

Alternatively, the State could have taken over one of the main banks – the one least encumbered by bad loans – and funded it, letting the other financial institutions take their chances

Instead, the unlimited guarantee was given to the depositors and lenders to all the financial institutions, a guarantee now crystallised in the establishment of the National Asset Management Agency (Nama). The people that are benefiting and will benefit from this guarantee are/were the large depositors (depositors under a €100,000 threshold were already protected by the State), the category known as the subordinated debt holders and other financial institutions here and abroad.

The subordinated debt holders were owed about €10 billion and these were/are, in the main, what is known as high-net-worth individuals, in other words the very rich.

We got a glimpse of who the Anglo Irish depositors and lenders were, courtesy of Brian Lenihan on January 20th last. Anglo Irish had 300,000 retail depositors, of whom only 72,000 were Irish. The number of corporate depositors was 12,000, of whom 3,500 were Irish and 8,500 non-Irish.

So, to be clear, the beneficiaries have been these high-net-worth individuals, then the depositors who had deposits of over €100,000, retail depositors (mainly supermarkets of whom only a few are Irish) and corporate depositors (a large number of whom were non-Irish).

The shareholders of the financial institutions already had lost their shirts, underpants and trousers, so it didn’t affect them one way or another.

The sole beneficiaries are/were very rich individual and corporate elites here and abroad. And the cost of us keeping them happy will probably be up to €20 billion.

Isn’t it quite startling?

Now along comes the mechanism to make this stupendous transfer of wealth from this society as a whole to the wealthiest elite here and abroad, Nama.

This will oversee the transfer of the dodgy loans held by the banks, loans amounting to €90 billion, transferred for a price that has to be greater than their true value, because the point of the exercise is to clean up the balance sheets of the banks and this couldn’t be done if only the true value were paid for the loans.

In other words, these €90 billion loans are not worth the price the State will pay for them, the differential almost certainly being of the order of €20 billion (ie the State will pay around €60 billion for “assets” that are worth only €40 billion, to make the banks appear viable). And for this €20 billion the State will get nothing. Yes nothing. Nothing at all. No shares, no payback, no revenue from a bank levy. Nothing.

The “nothing” being central to the exercise. Brian Lenihan said in his Budget speech that this would be funded by a levy, clearly a levy on the populace or some of the populace. As the Financial Timespointed out in an editorial last Thursday, it can’t be a levy on the banks.

How was it that the Government, or rather Brian Cowen and Brian Lenihan, did this?

It can’t have been that they were forced into a hasty decision, for the draft of a Bill providing for the nationalisation of Anglo Irish Bank was before them, again, according to Brian Lenihan. And that legislation must have taken weeks to prepare. So they knew there was a crisis looming for some time.

Why did they do it?

I don’t buy the claim they had any motivation to bail out their developer friends, because, for one thing, none of this bailed out or will bail out the developers.

They did it, I believe, because their minds are overawed by the might of the capitalist and financial systems. They are, were and will be prone to being persuaded that if the big boys are not looked after, we are all done for.

An Italian communist, Antonio Gramsci had a name for this: hegemony.

And hegemony is your only man.