Cast your minds back to 2009 when the NAMA Act came into law; the Act set out the reasons for the creation of NAMA under section 2 (a) we can see that the first purpose of NAMA is
“to address the serious threat to the economy and the stability of credit institutions in the State generally and the need for the maintenance and stabilisation of the financial system in the State”
So you might have thought that this objective would always be to the fore of NAMA’s thinking, especially when it comes to big value transactions. And they don’t come much bigger than the €2bn redemption of NAMA senior debt last week – remember this is debt on which NAMA is paying interest at the 6 month Euribor rate, currently 0.9% per annum though the rate is set for NAMA every six months (29th February and 30th August) and NAMA is in fact currently paying 1.27% per annum. Still, it’s dirt-cheap.
And with NAMA sitting on €5bn and its bonds not due for redemption until 2020, you might have thought that NAMA might have found a better use for €2bn of its cash than redeeming its bonds. But at least surely NAMA considered the matter before committing to one of its biggest financial transactions to date…
Not so, it seems. On Tuesday this week, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance, Michael Noonan about the consideration given by NAMA to its primary objective, and it seems there was none. This is the full exchange:
“Deputy Pearse Doherty:To ask the Minister for Finance the consideration the National Asset Management Agency gave to its over-riding objective of addressing the serious threat to the economy caused by the banking and property crisis, before taking the decision to redeem €2bn of its senior debt, announced on 27 June, 2012..
Minister for Finance, Michael Noonan: One of the primary objectives of NAMA is the repayment of the cost of the loans acquired from the Participating Institutions and the cost of the working and development capital expenditure on the assets attached to the loans.
I am advised by NAMA that through its activities, including a phased and orderly asset disposal programme and investment in residential and commercial projects underlying its loans, it is well advanced in terms of meeting this overriding objective. The recent repayment of €2 billion of its senior debt, which brings the total redeemed to date to some €3.25 billion, is further evidence of this and the Agency has advised that it is firmly on course to meet its first major milestone of repaying €7.5 billion of Senior Bonds by the end of 2013.”
So according to Minister Noonan, NAMA has a number of primary objectives now. You might have thought the primus inter pares was to address the crisis in the Irish economy, but it seems that wasn’t even considered. And indeed it is unclear what objective was considered before NAMA handed over €2bn in cash to redeem its dirt-cheap bonds. And remember that €3bn of NAMA cash was temporarily deployed to pay the Anglo promissory note that fell due in March 2012 – read the Direction given to NAMA by Minister Noonan at the time, and you will see that NAMA has quite a wide latitude in how it uses its cash.
As for the serious threat to the economy – record 14.9% unemployment, emigration understood to be at a high level (though almost criminally this is not counted accurately on a regular basis), a double-dip recession and a generally moribund domestic economy. Serious threat, what serious threat?
NAMA Wine Lake 
If there’s a threat to something, then that threat has to come from someplace. Threats don’t just appear from no where – something has to cause it.
It might be useful to look at what’s causing this threat: Lehmans collapse, inaction of Government, depressed EU market for Irish exports, etc. We might learn something in the long-term then, rather than the simple old short-term fire-fighting we’re engaged in now.
Re 14.9% unemployment – what would this figure be without our wide-scale emigration?
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it’s difficult to get accurate emigration figures, this is interesting, http://www.irishtimes.com/blogs/generationemigration/2012/03/19/where-have-irelands-emigrants-gone/
it doesn’t include migration.
Some simple sums, 2008 to 2011 @ 20,000 /year (possibly much higher)=80,000.
Add 80K to the 14.9% 440K current and you get 520K or 17.5%.
17.5%. The caveat is that these are back of fag packet calculations, if you were to strike for 40000 per year you get up to 20%.
BUT
March 2011 blackrock report, baseline/adverse scenarios…
Adverse unemployment…
2011 14.9%
2012 15.8% (peak adverse % assumption, reduces thereafter).
Baseline was 13.4 & 12.7 for 2011/12 respectively.
raise a jar to the magic of emigration, the gift that keeps on giving.
put it another way,
in order to get to the 2012 baseline of 12.7%, 65,000 jobs will have to be created by the end of the year. Or 65,000 people leave.
It all hopelessly misses that point, achieving a % target via emigration may seem like an achievement, but when no extra jobs have been created in the process it doesn’t add to the economic output.
More detailed analysis of unemployment figures and blackspots. There’s 35-50% unemployment in places:
http://notesonthefront.typepad.com/politicaleconomy/2012/07/the-disappointment-of-unemployment-blackspots.html
The purposes of the Act were the ambitions of our legislators at the time. In effect they were the politicians ‘ promises to “to address the serious threat to the economy and the stability of credit institutions in the State generally and the need for the maintenance and stabilisation of the financial system in the State”.
But politicians’ promises have the sincerity of a whore’s kiss and they have long since been forgotten and abandoned. Instead they have been replaced by the snouts at the trough of NAMA, feeding off the €32 billion gravy train.
Instead of stabilising the financial system and addressing the threat to the economy, the feeding frenzy at the trough over the next ten years will see those in power adding a further €10 billion plus of losses within the very vehicle designed by the Act to resolve the problems in an expeditious and efficient manner and “achieve a recovery in the economy”.
Whores’ kisses.
More negative arbitrage,assume math not the NTMA’s strong point.The constant on this debt must be above those NAMA bonds.
“The funding has been agreed with the National Treasury Management Agency, NTMA, which acts on behalf of the Irish State as for all Exchequer borrowing”
http://www.eib.org/projects/press/2012/2012-096-eib-agrees-to-fund-550-new-classrooms-across-ireland.htm
Whatever the aspirations in the Act may be, the following extract from an irish Independent article says it all:
“Moody’s analyst Dietmar Hornung, meanwhile, told Dow Jones Newswires that the (Irish) government must overcome challenges to meet plans to finance itself entirely through the bond market borrowing from 2014.
Mr Hornung, who rates Irish bonds as junk, said the economy was set to grow slowly because of weak demand for exports and weak demand at home as a result of the Government’s austerity programme.
“Things are developing in a way anticipated by us,” Mr Hornung said. “In respect of Ireland, we see a continuation of low economic activity.
“We have seen a kind of economic recovery, but domestic demand remains weak. We are sticking with our rating because so far our expectations have been met.”
Until there is employment – and that means an active construction industry, as it one of the main , if not the main driver in any economy – there will be no recovery.
@WSTT, don’t fall off your seat but apparently NAMA is putting together a strategy for the construction sector. Minister Quinn said in the Dail on Thursday
“NAMA will soon make proposals on the construction sector”
http://debates.oireachtas.ie/dail/2012/07/05/00003.asp
You can but speculate whether NAMA’s Head of Relationships (formerly Relationship Manager), Martin Whelan, former communications director at CIF, had any input into the strategy.
BTW, you don’t get an active construction industry and a recovery by selling to private equity vulture capitalists who are only interested in playing the cap rate reduction over a period of the next 3 to 4 years. You get it by investing in improving the physical infrastructure in the State and encouraging inward investment and SMEs to expand.
A very similar conversation led to the creation of the Obelisk. Didn’t exactly solve the problem though.
@sf ca writer. Wasn’t the Obelisk a folly? :-)
@sf ca writer. Actually maybe we need an obelisk.. As you say they have been built before. A phallic symbol one is built right in front of the Vatican and of course there is a gigantic one in the US capital known as the Washington Monument – a long pointed four-sided shaft, the uppermost portion of which forms a pyramid. The word “obelisk” literally means “Baal’s Shaft” or Baal’s organ of reproduction.
The Masons and Egyptians had high regard for the obelisk. The very same obelisk that stands in front of the Vatican is the very same obelisk that once stood in Egypt. Ralph Woodrow explains: “The very same obelisk that once stood at the ancient temple which was the center of Egyptian paganism.
“The red granite obelisk of the Vatican is itself 83 feet high (132 feet high with its foundation) and weighs 320 tons. In 1586, in order to center it in front of the Church in St. Peters square, it was moved to its present location by order of Pope Sixtus V. Of course moving this heavy obelisk was a very difficult task. Many movers refused to attempt the feat, especially since the Pope had attached the death penalty if the obelisk was dropped and broken. Finally a man by the name of Domenico Fontana accepted the responsibility. With 45 winches, 160 horses and a crew of 800 workmen, the task of moving began. The date was September 10, 1586. Multitudes crowded the extensive square. While the obelisk was being moved, the crowd, upon penalty of death, was required to remain silent. But after the obelisk was successfully erected, there was the sound of hundreds of bells ringing, the roar of cannons and the loud cheer of the multitude.”
Going back even further, in biblical times, when the children of Israel would forsake God, they turned to worshiping idols. One of the idols they worshiped was the Obelisk. God had specifically forbidden them to do so.
Mad as hatters! It seems an appropriate symbol for the lunatic asylum that is Ireland today. Why not indeed?
Life w/o NAMA some interesting numbers, it’s called extend and pretend.
“Trepp reports that 61 percent of the commercial mortgage-backed securities loans that should have been repaid this year are still outstanding. Half were extended or otherwise modified, while the other half are zombies — not modified but continuing to exist.”
http://www.nytimes.com/2012/07/06/business/bad-mortgage-loans-burn-investors-and-tenants-high-and-low-finance.html?pagewanted=1&ref=business&src=me
The Trepp report referenced is here.
http://www.trepp.com/
In case anyone hasn’t been there, here’s a link to the obelisk in killiney, built to give the hungry cold local peasants something to do. Perhaps that mentality persists…. we’ll see what enda et al come up with.
Amazing views, worth a visit.
http://en.wikipedia.org/wiki/Killiney_Hill
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