Remember the NAMA estimates in September, 2009 – Original Asset values of €88bn; Original Loans of €68bn plus Rolled-up Interest of €9bn giving €77bn of loans; a 30% haircut or discount to the €77bn giving a consideration to be paid by NAMA of €54bn; which comprised the existing market value of €47bn and something called the Long Term Economic Value of €7bn? Remember all that?
Many people asked what was meant by Long Term Economic Value and they will have found an explanation in the NAMA Bill, section 79 (2) (c) which states “a reference to the long-term economic value of property is the reference to a value, as determined by NAMA in accordance with this Part, that it can reasonably be expected to attain in a stable financial system when the crisis conditions prevailing at the passing of this Act are ameliorated and in which a future price or yield of the property is consistent with reasonable expectations having regard to the long-term historical average”
Simply put, the current crisis is so bad that values have crashed well below their long-term average. So a plot of development land for example might have had a value in September 2009 of €47m but according to long-term averages it should have had a value of €54m.
What has happened since September 2009? The Sunday Business Post last Sunday stated that instead of a drop in values of 47% as suggested by Mr Lenihan, values had in fact dropped by 55% which would mean the €88bn of assets were now worth €39.6bn. HOWEVER, the long-term economic value will still be €54bn (if that example of a development plot had a long-term economic value of €54m last September, why should that have changed in the last 5 months?). This means that we must now pay the banks a Long Term Economic Value of €14.4bn (€54bn less €39.6bn) and not €7bn.
No wonder Mr Lenihan didn’t want to turn on his calculator to re-run the numbers. Is Mr Lenihan concerned that the revelation of this information would cause such uproar that citizens would at last grab their frying pans and pots as they did in Iceland and force the government to stop the NAMA project now?
NAMA Wine Lake 
This NAMA con will devastate this nation and is about as good for us as drug dealers are for junkies!
The government has lost all touch with reality on the ground and it is freighting to see how much control, and how far the vested interests have infiltrated right into the heart of Government.
Equally it is so discouraging to see the Greens abandoning the Nations best interest by propping up the Fianna Fail Government
The hope now is that Brussels will come in and stop this madness from ever happening
Reading the latest uttering’s from them they have sent a shot across the bows of the Pirate ship NAMA and inserted a payback clause.
This clearly shows that Brussels does not trust our political elite.
I equally have no time for the current opposition parties as they seem not to be able to express the sheer anger and frustration that is destroying our nation. Their solutions are not all that convincing and are not well known either! I get the feeling that they are not entirely all that much different in their outlook with regards to the NAMA con!
I believe this government are deliberately causing friction between the various groupings of our people as thus hope to keep the opposition from gaining traction.
Perhaps it is now, time for a new people’s political movement.
[…] This blog has been predicting for a week that the Long Term Economic Value (LTEV) as defined in the 2009 NAMA Bill would mean that a premium of some €15bn was now payable as a LTEV premium now compared with an estimate of €7bn last September because a long term estimate of value will not have altered significantly in the 5 months since September 2009 even though the property market that was down 47% in relation to NAMA loans is now down 55%. […]
[…] That is indeed a cause for deep concern if correct and I was saying that a couple of weeks ago at Exclusive! NAMA is now to pay banks ?15bn more than the assets are worth. Nama Wine Lake I speculated that the reason that Brian Lenihan didn't redo the numbers after the EU approval was […]
You are completely wrong, as you ignore that fact that each individual loan is being valued separately, and neither you not the Tribune have access to the precise details of each loan, both of you are just guessing
You are right that I do not have access to the precise details of each loan. NAMA’s has released very little information formally (do we even know how many banks are even part of the NAMA scheme after the closing deadline of 19th February, 2010). However there has been substantial reporting in the media from “sources” and from this reporting, which has not been contradicted, we have learned NAMA has exceeded its legal budget for the year, it has a minimum contract of recharging €125m for due diligence costs this year and more importantly we have had updates of the loans to be transferred by bank. I don’t know where the Tribune got its information but in the absence of any denial PLUS the fact that commercial and residential prices have continued to fall since last September 2009 (IPD and ESRI indices), I tend to think it basically truthful.
How does the fact that each individual loans needs be valued separately make the conclusion that the aggregates estimated last September 2009 have changed according to average market changes? And how does it make the conclusion wrong that Long Term Economic Values on the estimated loans would broadly remain the same now as they were in September 2009. I don’t see how that can be “completely wrong” or even in principle wrong.