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Archive for April 9th, 2012

To the regular audience on here, I hope you’ll indulge a spill-over of the weekend political slot into Monday, but it is a Bank Holiday Monday after all. Last Thursday there was an event to examine the forthcoming Fiscal Compact referendum; the event was organised by the National Forum, which presumably is still Marc Coleman’s lot. The event was held in the Davenport Hotel just down the road from Leinster House and there were four keynote speakers – Declan Ganley of Libertas,  Brian Hayes the Minister of State at the Department of Finance, Michael McDowell, former Attorney General and leader of the defunct Progressive Democrats and lastly Fianna Fail grandee and until recently, deputy party leader, Eamon O’Cuiv, Deputy O’Cuiv having “resigned” after adopting a nuanced position towards the referendum which was at odds with the majority of the Fianna Fail parliamentary party.

The transcript of Deputy O’Cuiv’s speech is now available on his own blog here. The perception on here is that it dwarfs the inter-Government spat about Minister Hogan last week, because the speech seems to reinforce Deputy O’Cuiv’s position which at its essence argues that ratification of the Fiscal Compact should be conditional on a number of concessions from our partners in Europe, including a sharing of the burden of the bank bailout which is 40% of our GDP and is presently being 100% shouldered by this State whilst the benefit is to a substantial extent conferred on banks and banking systems outside the borders of this State. The speech is well worth a read.

Eamon also takes a pot-shot at the “tired polemics of prancing ponies of polarised politics” and it is hard to conclude that he is confining his remarks to the two coalition partners, Fine Gael and Labour. And coming on the back of the strained and conflicting accounts of Eamon’s resignation, and the iconic photograph – shown here in photos 11&12 – showing his unhappiness at the Ard Dheis, it would be surprising if this speech didn’t have imminent ramifications. Eamon’s blog is called “Outside the Box” which may turn out to have more than one meaning!

In terms of hard information, the speech sets out Eamon’s understanding that, following confirmation via a question in the Dail, that Ireland’s ratification of the ESM treaty – that’s the one which makes access to cheap and certain EU funding of future bailouts dependent on signing up to the Fiscal Compact – will take place AFTER the forthcoming referendum on 31st May 2012, Eamon says it is his understanding – and puts the “in my understanding” in bold letters – that the ESM treaty needs be ratified unanimously in the 27 EU member states and that the Fiscal Compact cannot be actualised until the ESM treaty is ratified in the Dail. Here’s where this gets convoluted but bear with this a second – if Ireland votes “no” in the 31st May referendum then if the Dail does not subsequently ratify the (new) ESM treaty, then the ESM cannot be introduced across the EU. The simpler point is that Eamon says that unless we get some debt relief and there are other reforms in Europe, then we can vote “no” now which will stymie the ESM in the rest of Europe, and presumably Europe will then move to address Irish concerns and there can then be a second referendum.

I am surprised that the speech and it deviation from the official Fianna Fail position received scant attention last week when the relatively unimportant matter of Ministers meeting with delegations led by an elected TD (Michael Lowry) seemed to hog the headlines.

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NAMA’s management accounts for 2011 have now been with the Minister for Finance, Michael Noonan for at least a week now, but it’s likely we’ll need wait another few weeks before we see NAMA’s out-turn for 2011, but the betting on here is we’ll see a nice chunky loss after impairment charges are properly accounted, but there continue to be aspects of NAMA’s operation which show a positive side to the Agency. Here are a few

(1) The NTMA which is the umbrella organisation which includes NAMA was asked by Minister Noonan in December 2011 to ask staff whose salary exceeded €200,000 to consider waiving at least 15% of salary or such amount of salary as exceeds €200,000 whichever was less. Of the 15 in the NTMA that earned more than €200,000, all but one have surrendered part of their salary as requested. The “one” who said “no” hasn’t been identified, but that shouldn’t take away from the sacrifice. We don’t know how many NAMA staff were earning more than €200,000 but remember they were generally recruited from 2010 onwards so their salaries should have reflected the chastened times which succeeded the collapse in the financial and property sectors. So as far as NAMA is concerned, these sacrifices are very real indeed. On a less positive note, it would be interesting to know the identity of the “one” dissenter, it would also be interesting to know if NAMA’s John Mulcahy accepted a sacrifice one day, but saw his pay restored the next day when on 7th March, 2012 he was elevated to the NAMA board. But, all-in-all, an episode which does show sacrifice at NAMA.

(2) NAMA is approving most applications by commercial tenants seeking reductions to their upward only rents. NAMA told an Oireachtas committee a month ago that it had approved practically all of the 120 requests received and that another 30 were presently under review. It is not clear if the tenants are getting market rents or continue to pay premiums over market rents, but it seems at least that NAMA is doing its bit to keep a lid on commercial rents. It would be interesting to find out how much value has been lost in NAMA property as a result of these approvals – NAMA after all did deliver a “sulphur and brimstone” warning on the 20% negative effect that the abolition of Upward Only Rent Reviews would have on its portfolio.

(3) Just as AIB largely escaped the opprobrium poured on Anglo in this financial crisis, despite costing as much in State interventions, so it seems has Anglo in turn escaped much of the scrutiny and criticism that has been focussed on NAMA. Witness the Siteserv transaction where Anglo is writing off 60c in the euro on a loan to a company, where it allowed the CEO to continue to earn a €400,000+ salary. Mind you, Anglo or IBRC as it is now known is writing off 60c in the euro on a €150m loan whilst shareholders in Siteserv reportedly walk away with €5m. For any of you who owned Anglo shares and saw your investment 100% wiped out in 2009 whilst other creditors were repaid 100%, you might feel confused at this apparent upending of the normal rules in debt recovery.

(4) After three weeks of testimony at the Paddy McKillen and Barclay brothers legal clash in London, we haven’t heard anything about NAMA’s dealings in the case that suggest anything other than NAMA pursuing the best deal for the taxpayer. Sure NAMA kept its cards close to its chest in the case but of all the protagonists in the case, it is currently coming out smelling most of roses. Perhaps that will all change this week with Derek Quinlan and NAMA executives set to take the witness stand, but so far it seems that NAMA is doing what it says on the box.

(5) And speaking of legal cases, although NAMA didn’t succeed in stopping Treasury Holdings getting permission to proceed with the judicial review of NAMA’s dealings with its loans, the judge did not accept that NAMA had acted in bad faith in its dealings with Treasury. And although Treasury was held to have raised a substantial issue worthy of judicial review, it is by no means certain that Treasury will succeed in the substantive judicial review itself, and it remains the case that Treasury is massively balance-sheet insolvent.

NAMA is set for a rocky few months ahead as it must finally confront the scale of its involvement in Irish property, especially commercial property where its €9bn of purchases – by reference to November 2009 values, which are likely to be worth €6-7bn today – represent a dominant position in a market which peaked at €3bn in 2006 and which was worth less than €0.5bn in 2011 – losses and trading difficulties loom, but the Agency is not flat-dimensioned and continues to display positives as well as negatives, something that’s worth remembering.

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