September 2009 – Profit of €4.8bn
June 2010 – Profit of €1bn
July 2012 – Profit of zero (and subordinated bonds will not be honoured)
July 2012 – Loss of €1.594bn, representing the total of subordinated bonds
NAMA’s life-time profit projections
The NAMA CEO last week confirmed what the Minister for Finance Michael Noonan has been saying the Dail for several weeks – for example here – NAMA is projected to break even by 2020 and cover the repayment of its senior bonds, its additional advances to developers and its operating costs. There is now no mention of NAMA’s subordinated bonds which today amount to €1.594bn. And if these are not honoured by 2020, then it is the banks which will shoulder the loss, and as we own the banking system, that is a loss which we will bear*
So between the draft NAMA business plan in September 2009 and today, we have gone from a profit of €4.8bn to a loss of €1.594bn. But will we be lucky enough to exit the NAMA scheme in 2020 with only a €1.594bn loss?
At this stage, no-one, including NAMA, can really say.
NAMA is sitting on a paper accounting loss today of €1bn, comprising a loss of €1.2bn in 2010 partly offset by a profit of €0.2bn in 2011. NAMA paid €5.6bn in state aid for its loans, and that will materialise as a loss unless the loans or underlying property increase in value at a faster rate than NAMA runs up its costs – about €200m a year plus, presently about €500m in interest on its bonds.
The immediate outlook for property in Ireland remains challenging in the sense that further declines are expected in residential nationally. We will find out what has happened to commercial in Q2, 2012 over the next week as Jones Lang LaSalle releases its quarterly index, but the betting is that the market was weak. With both residential and commercial, there are serious oversupply issues overall, though it should be said that in specific areas for specific types of property, there are claims of normal supply and even scarcity.
NAMA itself controls about 13,000 homes in Ireland, which isn’t insignificant in terms of an 80-100,000 overhang of excess residential property but it’s not market dominating either. On the other hand, NAMA controls €6-7bn of Irish commercial property and that does potentially give NAMA a dominant role. But with both residential and commercial, it is likely to be the economy domestically and internationally that determines prices, and, as big and powerful as NAMA is, the overall economy is beyond its control!
What will our economy look like in the second half of this decade? Very difficult to say, we have projections to 2015 which assume growth returning to about 3% per annum, but in truth Ireland’s performance will be dependent on what happens principally in Europe, both economically and in terms of banking and money supply, and these are matters outside our control.
And that’s why I say, no-one, even NAMA can project to 2020.
But it is sobering that the trend in NAMA’s projections of its financial outturn, since September 2009 has been negative, and it should be appreciated now that we may end up with billions of euros of losses which will be shouldered by the Irish taxpayer from 2020.
It may be time to start planning what to do with these losses, and perhaps incorporate NAMA into discussions in Europe on our overall debt burden.
*We own 15% of Bank of Ireland which has €280m of NAMA subordinated bonds, so arguably 85% of €280m will be absorbed by the other shareholders in Bank of Ireland. But for the rest, we own 100% of IBRC and we own 99.8% of AIB/EBS.
With an increase of liquidations in small businesses how can anyone hope there will a pick up in the domestic economy anytime soon? Last year we bought a roll of carpet(YES-A ROLL) for 100euros.The best of kitchen floor tiles came in at 300euro.There is another liquidation taking place at the weekend at a local furniture store .Needless to say I am hoping for more bargains. But it will not advantage the state .Putting small firms in liquidation for what, in the great scheme of things, are small amounts of money does not make any sense to me. Am I missing something here? I cannot see us returning to growth until we have to pay full price for things. With the amount of firms being put out of business and their goods practically being given away- this is not going to be 2015 or anything like it.- We figured that one auction we were at must have cost the state money -the stuff was going so cheaply. It was The Revenue who had put them out of business.
Perhaps including them in debt calculations would strengthen the position and focus some minds,due to a controversial sleight of hand they currently are not calculated.
As you pointed out NWL the rating agencies include them.
“The projections include Fund and EU disbursements. Government-guaranteed NAMA bonds are excluded, based on Eurostat guidance. For 2015, no policy change is assumed” IMF first and second review Staff Report, May 2011″
http://namawinelake.wordpress.com/2011/05/23/why-do-ratings-agencies-regard-nama-bonds-as-part-of-our-national-debt/
The recent reduction in interest rates should lead to cap rate compression,the returns from RE are extremely attractive relative to other investment options.Add in some below market financing to juice the yields and the investment markets will pick up,but who knows!
NAMA is unlikely to break even in its lifetime,all more reason to explore JV’s and take a back end piece.They are giving away a lot of upside,also they should be averaging in and not trying to time the market,they don’t ring a bell at the bottom or top.
Someone really should have a provision for a 10 billion euro loss from nama. The people should insist on it.
If not there will be another scramble around 2018 to find that money (ie take from the poor and vulnerable and their kids). They cannot magic the loss away with accountancy forever. Someone will want to see some money.
2020 far away? it’s already five years into this debacle…the US has not even hit bottom yet…
Will we have started an upswing, never mind have recovered, by 2020..?
hella optimistic I’d say.
Don’t wait for a pub whip around, there are no pubs and 10 billion is pretty heavy in coins
hella heavy as they say here.
Ireland is in a Depression and yet we’re told continually that growth will somehow return “soon”. Does anyone know what exactly will cause our Lazarus of an economy to rise?
In the meantime, it seems even the Department of Finance is now concerned about growth and how the lack of it is making it harder to satisfy the Troika reviews:
“…the department official conceded that satisfying our paymasters gets harder as we move further through the process. This is because we are relying on growth returning to the economy, which – unlike the box-ticking exercise – cannot be engineered through sheer political will.”
From: http://www.irishtimes.com/newspaper/finance/2012/0709/1224319636988.html
We also have to say even if they do break even they are playing with a stacked deck. The government is allowing them hold on to any money from sales they make interest free till 2020 and they can reinvest that money until that date. That is a huge gift.
@EM, That’s news to me. My understanding is that NAMA has conceded a programme for payment to 2020 that will see €7.5 billion of its bonds paid off by the end of next year.
That’s true. NAMA has already redeemed €3.25bn of its bonds and it is now a term of the Memorandum of Understanding with the Troika – courtesy of Minister Noonan in May 2012, for which he didn’t get anything in return – that a total of €7.5bn will be redeemed by the end of 2013.
NAMA also pays interest on its senior bonds at the 6-month Euribor rate, which is around 1% but NAMA also hedges against future rate rises and last week at the Oireachtas committee, the NAMA CEO said that his cost of funds was 2%.
Sorry that’s my bad. I had asked what kind of interest rate Nama would be charged when they were deciding to invest the 3 billion in tot completions back in May. I think the answer I got at the time was that they would only have to pay the 6 month Euribor of 1% and that this did not have to be unwound till 2020. I was on holiday the time the 7.5 billion repayment in 2013 was announced.
Unless the new super supervisory eurowide banking regulator is located in the IFC,not a lot of upside in owning a building or two there,or having an office.
With supervision will come a financial tax,will London sign up ?
Unlikely to be any direct bank recapitalization or debt relief in the short term,FOT in today’s IT has interesting piece on the implications.
“Now, here we are again, with Michael Noonan taking the same industry line in opposing an FTT. He has lined up with George Osborne and the City of London against this very basic measure to impose some degree of social responsibility on a disastrously rapacious system. Why? Because, allegedly, the imposition of a transactions tax would cause banks to flee from the International Financial Services Centre.”
http://www.irishtimes.com/newspaper/opinion/2012/0710/1224319720356.html
It was alleged that UORR and the confusion was deterring international investors,this potentialy will have a far greater impact.How can you ask for debt relief and oppose FTT,impossible position to sustain.Can Ireland expect to remain a tax “haven” and receive debt relief,significant implications for NAMA’s assets in and around the IFC.
But Dublins loss may be London’s gain so NAMA’s holdings in London will appreciate…..at one point they had a decently geographically diversified portfolio.They pretty much exited the London and UK market’s or are finalizing it,would it not be ironic if London turns out to be the best performing market in terms of rental growth,returns and capital appreciation over NAMA’s lifespan.
@ john Gallagher
“How can you ask for debt relief and oppose FTT,impossible position to sustain.”
Great Point, now watch them slithering to do just that. And watch the media side step the hypocrisy in “the national interest”
@Eamonn Moran,very easy to have missed the significant change in NAMA’s repayment of bonds,it’s like a national obsession to pay back back bond holders!
I think NWL was only one to carry this news,FTT is going to happen,is Ireland in or in the way.The suggestion that there will be a mass exodus from IFC may be overdone,but has the govt. actually taken a position on FTT and explained the rationality?
Perhaps,Cowen the x “leader” now on a leadership course can assist with the strategy,he famously overruled Revenue in its recommendation to tax CFD’s.
One interesting aside that the papers missed is that the head of Enterprise Ireland is Cowens’s old pal Hugh Cooney of SiteServ fame,he was appointed by Cowen.
http://m.dailymail.co.uk/news/ireland/article-2170386/Cowen-58-000-student-California-sunshine-Irelands-taoiseach-takes-Executive-Education-course–wont-say-paying-huge-fees.html
“Fianna Fail will leave office with its friends in situ at many of the most important semi-states. Hugh Cooney, current chairman of state agency Enterprise Ireland and advisory board member of the NTMA….”
http://www.shaneross.ie/cowen-caught-in-crony-curse/
You say,
“no-one, even NAMA can project to 2020″
and then,
“It may be time to start planning what to do with these losses,”
This is silly. Why would we start planning 8 years in advance for a profit or loss that no-one can project? State spending over this period will exceed half a trillion. The euro may not exist in 8 years time.
NAMA was conceived to prevent a retail bank run. It succeeded. In return, a billion euro profit/loss over a decade is an acceptable risk.
The failure to regulate the asset expansion of the Irish banks over a decade of credit bubble is costing the state circa €67bn. Public overspending will cost double that. Where does NAMA figure in this scale of calamity? NAMA is hardly the problem.
Yes, it needs to be watched carefully as there is so much room for fraud and mismanagement and you are helping out as an informal channel. NAMA can make a profit if local real estate prices rise but this would have wider disbenefits for society. NAMA at this stage is a public utility not a profit focused company. You may as well complain that the NRA or CIE is not turning a profit. Their remit is wider.
I prefer a more holistic critique of NAMA. Is NAMA making the best choices for the Irish economy and for Irish society?
@Rob D, you don’t know if your home will burn down in the next year, but you weigh the probability and consequences when you consider insurance.
We don’t know at this stage if NAMA will make a profit or loss, but we are getting into discussions with our partners in Europe about banking debt now. So planning for bad news at NAMA is appropriate today when we might secure some insurance against such losses. That’s the point.
Domestic fire risk is typically a multiple of the occupier’s net income and often a multiple of the occupier’s net worth – a financial catastrophe for an individual. Event probability is small and such an event should be insured. NAMA represent a risk of a billion or two over 10 years to an economy that spends 70bn per year. There is no comparison whatsoever between these situations.
Failure of NAMA to make a profit in 2020 will not be a catsatrophic or unpayable event for Ireland. Indeed as discussed above, it may be desirable from the point of view of the wider econbomy that commercial and domestic real estate prices remain low in the long term.
Ireland rightly has little say in the discussions on programme debt. Why would anyone pay attention to the opinions of a nation that authored its own financial destruction yet fails to accept resposbilbility for its actions and has failed to reform the institutions and regulations that led to its downfall?
The repayments are being set by the troika at a level to allow the economy to slowly recover. Where necessary, the interest or the capital amounts will be reduced so that the objectives will be reached. As Ireland is mostly complying with the conditions, it is not in the troika’s interests to allow Ireland’s recovery to fail by setting repayment levels too high. This would send the wrong signal about compliance to other programme countries.
Ireland is a ward of the EU court and will do fine so long as it can stick to the programme so long as the EU can hold together.
Can you define “do fine”?
fine= a couple of years of gentle austerity measures and modest growth followed by a little faster growth. Look at the programme tables: the state is to be allowed to continue spending 68-70bn nominal per year with only slight
reductions.
current welfare rates are above or equal to 2007 levels. 0.7% GDP growth last year. exports rising. balance of trade current account in surplus, Public sector pay frozen – at high levels. Income taxes for (medium and low paid) still low compared to other countries. Most Neg eq people on incredibly low rate trackers
Absolute levels of our welfare and ps pay rates very high compared to our creditors. 1000km of motorway. Some of us are prone to the odd moan but we are doing pretty well. 188 a week for dole recipients is more than twice the UK level.
Another low interest bailout in the pipeline if we can’t make it back upright next year.
NAMA was painted as a terrible injustice that would cost the country tens of billions to benefit private banks but it has achieved its core purpose of bank run avoidance and is now a distraction from the genuine problem of deficit reduction. Any losses or profits it makes will be at the expense of the state owned banks and wider society. It should be run well but let’s not get hung up about it.
I’d like to see it now converted to a REIT and sold off slowly.
Its exactly this defeatism and acceptance of mediocrity that is endemic in Irish society,ah sure NAMA can give it a lash. Sam Walton famously motivated his employees by having them sing a song every morning.Sure, NAMA can do their best and finish up with a rousing rendition….
“It’s so lonely ’round the Fields of Athenry. ”
NAMA was constructed to be profitable,they have been lowering the bar consistently.The treatment by Gilmore of the diaspora is embarrassing and a sad reflection on cronyism and a backward insular society.
http://www.irishtimes.com/newspaper/finance/2012/0709/1224319637008.html
@rob downes good points regarding NAMA, however, currently no REIT legislation in place or planned,unlikely current govt. will get to it.
NAMA owns ‘loans’ so any proposed legislation would have to include mortgage REIT’s,do you think there is that much public appetite for REIT’s ?
NAMA,would be a pretty big REIT,more likely an exit strategy for the couple of billion vendor take back mortgages they are providing.
Slowly,can NAMA be any slower or non-strategic in its dispositions strategy,why the aversion to joint ventures,with a back end piece for NAMA, after clearing a few hurdles.
Regarding ‘fine’ the suicide rate is up by 7%!
http://www.rte.ie/news/2012/0711/recorded-suicides-rose-7-last-year-cso.html
@John, dreadful figures revealed in the suicide statistics today, and every one is a tragedy. But, and I say this to add context to the constant self flagellation about suicide in Ireland.
There were tragically 525 deaths through suicide in the Republic of Ireland in 2011.
In Northern Ireland there were just over 300 in a jurisdiction that is 40% the size of the Republic by population.
http://www.bbc.co.uk/news/uk-northern-ireland-18595294
In other words, our suicide rate is 11 per 100,000. In Northern Ireland it is 18 per 100,000 or 60% more than in the Republic.
And internationally we’re now about 40th from top, after Switzerland, Belgium, France, Austria, Sweden, Norway, Denmark and on a par with Iceland and United States.
http://en.wikipedia.org/wiki/List_of_countries_by_suicide_rate
Every single death through suicide is a tragedy, but Ireland is not the desperate case that is often portrayed in the media and elsewhere.
@rob downes
Let’s just say your definition of “fine” and “gentle austerity” are very different to mine.
@NWL agreed,probably the wrong figure to utilize in response to the ‘fine’ comment,and its not my intent to trivialize it either.The unemployment figures perhaps a better yardstick.
“Ireland has the fifth highest unemployment rate in the EU behind Spain (24.3 per cent), Greece (21.7), Portugal (15.2) and Latvia (15.2). The average unemployment rate in the EU is 10.3 per cent, according to the EU statistics agency Eurostat.”
http://www.ft.com/cms/s/0/7eed663a-b0b9-11e1-a2a6-00144feabdc0.html#axzz20LXRLs4L
DUBLIN — Ireland’s unemployment rate rose to an 18-year high of 14.9 percent in June, underscoring the country’s struggle to stimulate economic growth in the face of austerity measures, government statisticians reported Wednesday.
The rising joblessness could have been worse but for Ireland’s tradition of mass emigration in times of economic hardship. The Central Statistics Office says about 76,000 left this country of 4.5 million last year for stronger job markets in other English-speaking countries — chiefly Britain, Australia and Canada — and the trend has continued this year.”
http://www.washingtonpost.com/world/europe/irelands-unemployment-rate-rises-to-18-year-high-of-149-percent-despite-tide-of-emigration/2012/07/04/gJQAwK2vMW_story.html
The emigration level represents at least 25,000 job seekers per annum leaving and that represents about an additional 5% per annum to our unemployment rate – which puts us right up there with Spain and Greece.
@NWL, I know your tongue was firmly in your cheek when you asked the question. In truth it’s worthy of a place in the Kilkenny Comedy Festival.
The worst disaster that ever happened to the Irish economy took place in September 2008 when Brian Lenihan gave the blanket guarantee to the banks. It set in train a series of events that ensured that the bondholders were saved at the expense of the country. It meant that the recession was destined to become an extended depression, because the banks and their bondholders were not let take the hit. If that had happened, our zombie banks would be dead, we would have new ones and the property market would have found a bottom and would now be in recovery. It would have been a short sharp shock, with the banks forced to deal with the liquidation of the assets.
Instead we have had no liquidation and a NAMA that is sitting on the fence watching the assets of Ireland deflating into a dark hole. They will eventually be picked up by the Vulture Capitalists, because they are the only buyers with the cash. Our “pillar” banks wouldn’t lend an Irish citizen €500 at present. The vultures will out-wait NAMA. They are old hands at it.
NAMA has two choices. They sell now at the price the market will pay and let the VCs take the cream when they resell to the Irish (the only end buyers for Irish property), or they sell later to the same vulture buyers at a lesser price as the market falls further due to inactivity.
Either way the citizens of this State are more likely to be back to digging praties than they are to rebuilding their wealth. And as for NAMA breaking even by 2020…. that wishful thinking would make a cat laugh.
“It set in train a series of events that ensured that the bondholders were saved at the expense of the country”
While this is the accepted legend by a public seeking to abdicate responsibility for its own policy choices, it is false.
No senior bondholders have been burnt in the eurozone ex Greece. The bank guarantee has long expired and senior bondholders continue to be made whole even when unguaranteed and unsecured. Spain’s bailout is contingent on no losses for bank seniors.
The cataclysm for the Irish economy was not a single event in 2008, it was a decade-long policy of encouraging a property bubble by loosening credit, by introducing property tax reliefs during a real estate boom, by loosening an already superlax planning regime, and by loosening bank regulation. Setting public wages and welfare at ludicrous levels that could only be paid with windfall tax revenue was the killer policy, supported by voters.
Without the bank guarantee, what would be different? A few additional sub debt holders would have been burnt and a retail bank run could well have occurred. Irish people made poor investment and electoral choices for 10 years. Pretending the problems come from the one-night decision of a dead man is always going to be attractive to those who cannot learn from their own mistakes or lack the strength of character to even accept their own failings.
@RD, Whether Brian Lenihan is alive or dead is irrelevant, the criticism is not directed “ad hominem”, it is directed against his action.
You are correct in your analysis of the events leading up to what was the most crucial financial decision ever made by a Minister of Finance in this country. His decision switched the cost of the folly that had taken place from those who should have borne it to the taxpayers.
If the banks, the shareholders, the bondholders and the debtors had taken the hit we would not now have zombie banks (next to useless) and we would be on the road to recovery.
Like the curve on the NWL logo we are in a state of Limbo, suspended somewhere between the NAMA support line and the bottom where the real market is.
The real market level was demonstrated well this week by the sale of the ghost estate in Carlow. It is a cash market because there is no credit market and we are not benefitting from the short sharp shock and quick recovery that the burning of the bondholders and the zombies rather than the taxpayers would have provided.
We are suffering the “civil service” solution – the socialising of the losses and the subsequent drawn out NAMA controlled nationalisation and deflation of our economy.
The majority of Irish financial instructions had/have a solvency problem,no amount of liquidity could/can fix that.The question really is what’s the point in providing liquidity to insolvent institutions,the real solution is similar or a variation of the Danish solution to Amagerbanken.It’s also the solution take by the FDIC with Washingto
‘‘Our empirical findings reveal that unlimited deposit guarantees, open-ended liquidity support, repeated recapitalisations, debtor bailouts and regulatory forbearance add significantly and sizeably to costs,”
Patrick Honohan .
http://kathleenbarrington.blogspot.com/2011/02/are-depositors-in-firing-line.html
http://www.bloomberg.com/news/2011-02-07/amagerbanken-senior-bondholders-to-suffer-losses-in-bailout.html
Apologies half finished sentence,caffeine has not kicked in.
The largest bank failure in the US was WaMu or Washington Mutual,handled surgically,cold hearted,simply business no drama or dithering around,done over,next.
“With these swift actions, tens of thousands of shareholders and bondholders lost billions of dollars, and Washington Mutual became known as the largest bank failure in U.S. history — nearly eight times larger than the Federal Deposit Inurance Corp.’s previous record failure, set during the savings and loan crisis of the 1980s.”
http://www.bizjournals.com/seattle/stories/2009/09/28/story1.html?page=all
Investors were well aware of the risks associated in holding/investing in Anglo bonds,they were know anacedotaly in NY and Boston as the lender of last resort,they were considered “dumb money”.Anyone holding their bonds was chasing yield and fully deserved to get not only burnt but scorched.If the buyers of their bonds had started to reject Anglo bonds or demand a much higher interest rate they would not have been able to embark on a lending binge.Instead they pulled up a chair had another drink and allowed the party to continue,it’s absolute disgraceful that bond holders who funded Anglos madcap adventures get paid in full.They bear much more responsibility that the Irish taxpayer and should have gotten torched.
Amagerbanken peaked at 2% the size of AIB or BoI. Imposed losses totalled less than 200m on seniors (Ireland has imposed 15bn on sub debt holders). Denmark paid in higher borrowing costs for its choice of resolution policy. Denmark is outside the Eurozone and not dependent on emergency national financing. There is no useful comparison between Ireland and Denmark given that the circumstances are so different.
WaMu was AIB sized but operating in an economy 100 times larger than ours. The US gov simply asked JPM with 2trillion in assets to take over WaMu. It would be nice if the ECB had done the same for us but then we don’t pay federal taxes and the ECB has less power than the fed.
Honohan’s report on the bank guarantee is here: http://www.bankinginquiry.gov.ie/The%20Irish%20Banking%20Crisis%20Regulatory%20and%20Financial%20Stability%20Policy%202003-2008.pdf
He makes it clear that a guarantee was necessary but that the terms were too broad. Also he supports the decision to back Anglo. The decision to save the Irish banks was taken on the advice of the regulator and the ICB that the crisis was of liquidity. The reason that the information was so poor was that regulation had failed over the past decade. It is hard to imagine an alternative to the guarantee tha would not have led to catastrophic losses and it must always be remembered that the greater part of national debt is simple overspending.
When Anglo approved a billion euro loan to a developer, where did that money go? In truth it was shared out by the landowners and the construction firms and their employees and shareholders. In most cases these were Irish citizens. They took this cash and spent it on luxury items for themselves while the lected govt looked on in approval. Why the rest of Europe should pity us now, I don’t know.
Dole in 2006 at bubble peak… €165.80
Dole in 2012 following years of ah jaysus austerity… €188
Dole in 2012 in the UK …€90
Get real
If the Krone had ceased to exist or opted out of the ERM-II I may have noticed,but thanks for that.The comparison was for illustrative purposes and I did pick up your point regarding ‘eurozone’ members.
JPMorgan did not ‘take over’ WAMU the FDIC did-linked its press release.
“JPMorgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. Claims by equity, subordinated and senior debt holders were not acquired.”
http://www.fdic.gov/news/news/press/2008/pr08085.html
What ‘Irish’ banks were saved,how do you define saved,B of I is owned and operated by offshore hedge/vulture funds.The remainder are being asset stripped or wound down,they are not lending or contributing to the economy in any meaningful way.The banks were not ‘saved’ the bondholders were.
Its all those dole scroungers fault.
WaMu’s liabilities were less than 2% of US GDP. Both AIB and BoI had liabilities greater than 100% of Irish GDP. These Irish banks should not have been allowed to grow to this size. The comparison is invalid. The forced merger of WaMu with JPM would be like AIB taking over Dingle credit union at the state’s request.
FDIC is a regulatory govt body.
The banks are still operating. There were no losses for depositors.
The owners of the banks lost their entire holdings. The problems in Ireland stemmed from too much lending and not enough productive activity. Naturally part of the solution is a return to productive labour rather than betting on real estate and a reduction in lending with an increase in repayments for past indulgences.
I note today that last year’s GDP growth has been revised up to 1.4%
The dominant myths during the boom were that Ireland had achieved a new prosperity plateau that deserved imitation, that the problem in the real estate market was a lack of credit for young people trying to get on the ladder and the planning rules should be loosened to let young people build more houses in remote locations. These myths have now been replaced with a new set of media promoted self-serving falsehoods: that Ireland’s problems were not caused by the Irish, that everything would have been OK had it not been for the guarantee, that there was an easy way out of the end of the boom were it not for some bad guys somewhere.
How can Ireland claim to be imposing austerity while paying welfare rates at double the level paid by those lending us the emergency funds?
Really good discussion there all.
3 points
1. It is crazy to underestimate the malice of dynasty politicians, who absolutely ‘would’ ruin the country for nothing other than spite.
2. People should not be accountable for the Banks actions as there were supposed to be safeguards and regulations in place. If there were not, that is a political failure. What exactly were we paying these guys for?
3. Little has been saved, many careers and dreams are ruined. Many families scattered. The future is bleak. By what standard is this ‘doing fine’?
Bertie was the most popular politician in the country rivalled only by willie o dea. The people of Ireland freely chose their public representative to legislate and govern on their behalf, knowing their characters. It is cheap and unconvincing for Irish people to try now to abdicate responsibility for their electoral choices.
People voted for the parties promising the most free stuff. Parties that increased spending before election were rewarded with re-election. There were no votes in prudence and the are none now.
Ireland is still a wealthy country in comparison with the rest of Europe.
@rob I agree with some of what you are saying: mass sense of entitlement, willful delusion, they play into it too.
I see an urgent need to change direction, perhaps some people don’t. Either way, it will get a lot worse before it gets better. In fact some people are betting on that, and others are making careers from it.
One thing for sure, the people are no longer in control.
The banks are not operating they are being asset stripped/deleveraged at the absolute worst time in the economic cycle,one can only imagine the fee bonanza for the advisers.
From this morning,Merrill Lynch picked this up!
“Allied Irish Bank has sold a 300 million euro-equivalent ($367.48 million) portfolio of loans to Bank of America Merrill Lynch as struggling banks continue to de-risk, banking sources said on Thursday.”
http://in.reuters.com/article/2012/07/12/aib-loans-idINL6E8IC7UG20120712
‘AIB HAS sold its near-50% stake in a Bulgarian bank, which cost €216 million just three years ago, for a mere €100,000.”
jhttp://www.irishexaminer.com/ireland/aib-sells-216m-bank-stake-for-100k-158771.htmlust three years ago, for a mere €100,000.”
Check out Project Kildare,for sale via Morgan Stanley.
http://www.ft.com/intl/cms/s/0/99670170-a014-11e1-90f3-00144feabdc0.html#axzz20LXRLs4L
A very small sample of whats for sale or just sold,AIB will end up like Dingle CC by the time this is over.
AIB is now 25% smaller than peak….136bn vs 182bn in assets. It was too large and clearly unable to manage its affairs.
I agree that asset reduction during a slump is not ideal but we no longer have the right to set our banking policy. Banking policy is now set by the troika and outlined in the programme. When you are dependent on the lender of last resort, you forfeit your independence.
We would not be in this debt riddled situation had we not set wages and welfare at unaffordably high rates during a property bubble. We would not have had a property bubble had we regulated our banks. We failed at running our affairs and everyone seems to recognise this but us. I am ashamed to read the commentary from the local ingrates who cannot recognise their idiocy when laid before them.
Basic things did not exist In Irish bank regulation. Did you know that there was no central bank limit on mortgage lending? Regardless of income or assets, a retail bank could lend anything to anyone – and eventually did. As far as I know, this has not been changed.
In another country, NAMA would be a big deal, in Ireland it is a teaspoonful in a bowl of shit. Why is average pay for a primary school teacher or a guard 60 grand? Who thought that this was sustainable?
Slowly the situation is being unwound with cheap euro money to help us off the ledge. But never forget that we created all this.
Actually checked AIB yesterday and the prevailing exchange rate,in comping the 350 Billion WaMu to AIB :)
Happen to agree with a lot of your points,specifically how Ireland became so noncompetitive.The main trust of my argument was the ‘joining at the hip of sovereign and bank debt’ and the popular delusion that somehow it saved Irish banks.It saved the bondholders,by transferring downside risk to the taxpayer.
Undoubtedly,light touch regulation was a disaster from Ireland’s perspective,but keep in mind Greenspan at the Fed was also advocating this approach.Where WSTT started was the decision to guarantee the banks has had unexpected consequences, the IMF in a working paper examined it in more detail.
Also,agree that the cry of ‘burn the bondholders’ is overly simplistic,was equity in Irish banks in exchange for some restructuring of debt fully explored?
The Eurozone Crisis: How Banks and Sovereigns Came to be Joined at the Hip
“The size and scope of the guarantees provided by the government to ensure liquidity for banks has indeed proved controversial. And an orderly winding down of Anglo Irish, rather than its nationalisation, would certainly in retrospect have been the superior course of action.”
http://www.imf.org/external/pubs/ft/wp/2011/wp11269.pdf
The credibility of the current govt. in imposing ‘austerity’ has been somewhat strained by its own actions,one example is the hiring and paying of advisers.Leadership starts at the top,reforming the benefits and perks enjoyed by the current bunch in the Dail is a great starting point, non-vouched expenses, etc. etc.
I disagree with your assertion that NAMA,the largest state undertaking is irrelevant in the overall scheme of things.It at one point was/could have been the largest ‘Re Opportunity Fund’ in the world with cheap long term financing in place, and a very strong bench of talent, indebted to them yes but still extremely talented.It also had a well diversified portfolio,untapped lines of credit and plenty of time on its hands.
Instead of being a potential profit center for the indebted Irish state, staffed with the best and brightest,it morphed into a vindictive small minded debt collection agency,with little or no strategic thinking,hows that business plan coming along,and most likely will lose money with no accountability at all.