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Archive for November 16th, 2010

Where is?

(1) Anglo’s final NAMA tranche. You might recall the ministerial announcement on 30th September, 2010 which emphasized that Anglo’s remaining tranche would be transferred to NAMA by the end of October, 2010 – “In order to support the accelerated implementation of the plan for restructuring Anglo into an Asset Recovery Bank and a Funding Bank, the Board have agreed that Anglo’s remaining eligible bank assets will be transferred to NAMA by the end of October and that bonds will issue to Anglo in return on the basis of NAMA’s current estimate of their value.”. Sources tell me that the tranche will be transferred with the 67% discount predicted by NAMA in September and relayed to us by Brian Lenihan. But why the delay? Are they waiting to capture Paddy McKillen’s reported €900m exposure at Anglo? And if so, why did NAMA agree to an adjournment on the hearing of Paddy’s application for a stay on the transfer? Anglo only submitted its version 3.0 restructuring plan (the one announced at the start of September 2010) to the EC “the last week of October” but is there any reason why that should have delayed the final transfer. After all, we now know that this transfer will be subject to post-transfer due diligence and valuation which might materially alter the figures anyway. So why the delay?

(2) The Ghost Estate (partial) review which Planning Minister Ciaran Cuffe said would be published by the “end of the summer” and then September, 2010. Yes a report and summary were produced on 21 October, 2010. And it was indeed surprising as it seems that vacant housing is far less than previously imagined (though it should be noted that the Minister’s review was a “partial” review). We were all waiting though for the detail to see precisely what estates had been included, there being suspicions that some estates were excluded. The Minister’s press office said on 21st October that “it is our intention to upload to the Department’s website early next week a further breakdown of the figures by city/county area early next week and also maps for these areas.” I would imagine others have been pressing for the release of this detailed report also. So why is it still not available? UPDATE: 17th November, 2010. It has been pointed out that the DoEHLG has now produced maps of the local authority areas showing the approximate location of the estates studied.

(3) Legislation to enable a House Price Database (HPD) to be introduced. On 10th August, 2010 Minister for Justice and Law Reform Dermot Ahern seemed to take the reins on this one from Housing Minister Michael Finneran. On 16th October, 2010 the Department of Justice and Law Reform said that the intended legislative vehicle to give effect to the HPD – the Property Services (Regulation) Bill 2009 had completed all stages in the Seanad and was awaiting the second stage in the Dail. What was expected was that the Minister’s amendment to this Bill to give effect to the HPD would be tabled as an amendment prior to the Committee or Report Stages of this Bill. The amendments should be available on the Oireachtas website. The Minister said on 10th August that “he would table amendments to this effect [amending Bill] … during the next Dail session, and would also bring forward any necessary amendments to the Data Protection Acts to facilitate the publication of sale price data by the Authority”. It’s still not on the Oireachtas website. But it seems he has another 30 days to produce the amendments. What most people want to know is when we will have an HPD and how it will operate and what information it will contain. We seem to be far from getting answers to any of these three questions at present.

(4) The Decision (N546/2009) by Competition Commissioner Joaquin Almunia in respect of Bank of Ireland’s restructuring. The Decision was announced on 15th July, 2010 but has not yet been published as Bank of Ireland, and presumably the Department of Finance are entitled to review the Decision and request redactions for confidential information. At nearly four months, the delay seems unusual. Bank of Ireland is Ireland’s only main bank to remain out of State control (though the State does own 36.5%) but whether that independence has come about through jiggery pokery with not recognising loan losses is unclear. It seemed bizarre last week that Bank of Ireland had to go to the High Court to get permission to pay a dividend in cash from certain reserves. Though of course if BoI’s share price dropped to €0.30 (€0.40 this morning) and the next preference share dividend was paid in ordinary shares then that would tip the State shareholding over the 50% mark.

(5) Peter Nyberg’s €1.8m report on the banking crisis due at the end of October, 2010. CORRECTION. Peter Nyberg’s report is due by 21st March, 2011. What was due two weeks ago –  “The Oireachtas Finance Committee is to finish its investigation into the banking crisis by the end of October and will report to the Dáil and Seanad by 4 November”

Of course all organs of government are distracted by the fiscal crisis/ four-year plan/ potential bailout at present but none of the above has crept up unexpectedly. You sometimes get the impression that the problem with our politicians isn’t ideology, it’s just that they’re incredibly poor managers of their time and resources. Mind you, that doesn’t excuse the delay at NAMA.

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Is this how Minister Lenihan might be persuaded to accept a bailout?

Many years ago I received a circular advertising a timeshare conference and a promise of a free gift if I gave up an hour of my time. Being curious and tempted by the no-risk free gift I gave up the best part of a Sunday afternoon to hear about the joys of fractional property ownership. And despite the well-conceived pitch which went through all the objections one by one and countered them with plausible assurances and the “real life” stories of people who stood up in front of us and waxed lyrical about how timeshares had transformed their lives, I wasn’t impressed. And having withstood two and a half hours on the subject I felt I was entitled to my free gift. And I had to wait 30 minutes to speak to the “free gift” lady who then spent another 30 minutes trying to flog me something in Malaga. She finally gave up and I received my free gift of a decanter with some tin filigree – Waterford Crystal it was not and it ended up in the rubbish bin outside the venue. Mind you, even though I wasted a Sunday afternoon I felt some satisfaction that I hadn’t succumbed to the high pressure sales approach.

So spare a thought for our Minister for Finance, Brian Lenihan, who jets off later this morning to Brussels to meet with his 15 eurozone counterparts. And from the moment he gets his head through the door I’d be willing to bet he will be subjected to the highest pressure sales techniques, though packaged up in sophisticated and diplomatic language. It seems it is the Germans that particularly want Ireland to take a bailout – to effectively convert some €130bn of ECB funding (cf total ECB funding of all banks of €530bn) to Irish banks (including some €90bn to the six “Irish” banks – AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent, Irish Nationwide Building Society) plus a reported €18bn of ECB purchases of Irish sovereign debt into a €80bn bailout. The bailout will secure German banks that are mightily exposed to Irish banks – after all in the boom they were the big lenders where boring German deposits were exchanged for less boring bonds and a bit of cha-cha-cha in Irish property development. A bailout means these bondholders get paid and don’t need engage in “amicable discussions”. The periphery (Portugal and Spain at the moment) have also been positive about Ireland taking a bailout but if Portugal is so concerned about its own funding why doesn’t it leapfrog us and open its own discussions about a bailout – after all we are fully funded for 6-9 months (and can then call on the pension reserve for another 6-9 months of funding), not so for Portugal and there is still effectively €640bn available from the EFSF.

And I hope that Brian Lenihan keeps his nerve. A bailout effectively rules out debt restructuring and that is the problem with Ireland – the bank losses are likely to be so bad that we properly need default on some bank debt. A bailout would copperfasten bank debt onto the sovereign (yes arguably it is there already though many see a distinction between bank debt and sovereign debt) making it less likely that we would default, but it would place enormous debt burden on the citizens – some of it factored in, some not. And presumably even if Brian succumbs today, any bailout will need intensive political examination and oversight before it can be formalised. After all our Constitution doesn’t allow one man to take on €80bn of debt for the State, no matter how good the sales techniques or free decanters.

UPDATE: 16th November, 2010. RTE is reporting that Taoiseach Brian Cowen is to make a statement to the Dail (Irish Parliament) at 5pm. Leaders of the three main opposition parties – Fine Gael (Enda Kenny), Labour (Eamon Gilmore) and Sinn Fein (Caoimhghin O’Caolain) are also expected to make statements. The betting is that there will be some movement to ease pressure on the ECB’s exposure to Irish banks and that is likely to be a conversion of that debt to EFSF debt – in effect the government will be converting unsecured lending to sovereign debt. If you were to suddenly allow your credit card company take a charge on your residence you would expect something in return so I would expect to see advantageous terms for any EFSF drawdown, compared with the Greek bailout in May 2010.

STATEMENT DELIVERED BY TAOISEACH – NOTHING NEW, A STATEMENT CONFIRMING THE GOVERNMENT’S POSITION AS SET OUT OVER THE LAST FIVE DAYS.

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