The Sunday Tribue carried a story on NAMA’s haircut (“haircut” having entered the Irish lexicon to mean the discount that will be applied to the value of loans (and rolled up loan interest) before NAMA will pay for said loan – in September 2009 the “haircut ” was estimated to be 30% so the loans of €68bn plus €9bn rolled-up interest would be bought for 30% less or €54bn). “Market sources” which turn out to be a Dublin stockbroker now estimate the average haircut to be 34% – how they arrived at their conclusions is unknown as is their identity in case they are wildly wrong but to these author the notion that any “market source” can have reviewed the entire loan book and come up with a discount to reflect market value of the underlying asset in each case is just plain bonkers.
Still, it’s worth remembering that every 1% added to the haircut represents a “saving” of about €770m to the taxpayer (the loans last Sept were worth €68bn plus €9bn rolled up interest, I’d guess that has increased somewhat since then as a result of interest increasing but 1% of €77bn is €770m).
It seems appropriate to again call for more transparency in how NAMA operates, at present we are depending on unidentified sources.