As a footnote to the entry on here earlier in the week generally criticizing what increasingly looks like more multi-billion-euro policy-making on the fly with the split of Anglo into two new units, there remains a legacy question regarding the NAMA levy.
The NAMA levy, to remind ourselves, was going to be the mechanism by which NAMA’s profitability was guaranteed because if NAMA made a loss through its normal operations then when the time came for NAMA to be wound up, that loss could be levied (or recovered) from the banks that transferred loans to NAMA.
This issue was examined on here earlier on this year but in summary Anglo is transferring just under half of NAMA’s loans and would appear to be on the hook for a corresponding proportion of any NAMA loss. NAMA’s June 2010 Business Plan projected a base scenario of a €1bn net present value though there were two other scenarios which showed a €0.8bn negative net present value and one which showed a €3.8bn positive net present value. Independent commentators have projected losses up to €20bn (not sure how they relates to a net present value because it depends on the timing of losses and the discount rate used). My own view is that NAMA could make a profit though recent policy decisions to abandon performing loans at AIB, BoI and Anglo give cause for concern.
But let’s for the sake of argument say NAMA makes a loss of €5bn. The NAMA Act suggests that about €2.3bn will be charged as a levy to Anglo. But which Anglo? Since both the Funding Bank and the Asset Recovery Banks might be wound down before NAMA, where can this levy be applied?
And let’s remember that Eurostat gave a “preliminary” view that NAMA’s debt could stay off the national debt based to a large extent on NAMA being profitable and the levy was specifically referred to as a safety net to ensure NAMA was profitable. So does Eurostat now change its assessment?
NAMA Wine Lake 
[…] Which of the two new Anglo units, the Funding Bank or the Asset Recovery Bank, will bear the cost of… […]
IMHO, I do not believe that this is the way it will “play out”.
We have never been fully informed regarding anything in this debacle to date and that is particularly so in relation to the banks. And this time is no different. What we have been fed is a “red herring”. There will be no recourse to the banks. There was never meant to be. It was just more “spin” and bullshit to calm the masses. The taxpayer will have exited Nama long before the question arises.
Nama is theoretically in the majority ownership of private funds. I believe that the exit mechanism will be based on 2 to 3 years of profits from the sale of the best 20% to 25% of its portfolio. The rump of the run-off loans will then be sold on to a vulture fund, or its existing private majority investors, or some of its developer debtors…… who knows? But its all been done before.
Forget what we have been told. It’s all garbage. Watch what they do – not what they say.
Although it relates to insurance rather than a loan book, history in the form of Lloyd’s, Equitas and Warren Buffett’s National Indemnity subsidiary of Berkshire Hathaway shows the template of how it has been done before and how it will be. See: http://en.wikipedia.org/wiki/Equitas