tag:blogger.com,1999:blog-8817171247555815363.post6815713467199020686..comments2024-03-26T05:57:44.937+00:00Comments on True Economics: Economics 23/09/2009: Cost of NationalizationTrueEconomicshttp://www.blogger.com/profile/07350536454228478974noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-8817171247555815363.post-68520717966181437422009-09-28T14:20:45.318+01:002009-09-28T14:20:45.318+01:00I dont know why the government is so anti an equit...I dont know why the government is so anti an equity approach the problem.<br /><br />As a taxpayer, this is the only sensible approach I would favour.<br /><br />It is only as a sharholder, that I would prefer nama.<br /><br />I would be interested in a FOI of how much key members of FF have tied up at a personal/familial level in bank shares.<br /><br />The only problem I have with the equity approach, is that the price is getting higher, due to the assumption-that-nama-will-go-ahead premium that has been building in bank share price, and which would be used as a basis of valuation.spc100noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-11367382937809933262009-09-25T14:13:25.315+01:002009-09-25T14:13:25.315+01:00@Paul MacDonnell
Wealth Creation: Contrast our g...@Paul MacDonnell<br /><br />Wealth Creation: Contrast our government run by a Lawyer, a Social Worker and an ex-Language Teacher with the Chinese one run by a team of engineers ... <br /><br />Or contrast against Silicon Valley dominated by the Chinese and Indians with Masters/Doctorates in Elec Eng from Stanford, MIT, UC. Average pay in SV is in the $130,000 to $160,000 range, depending on high-tech sector. <br /><br />NAMA will rack up our debt to Chinese banks. A new colonisation?<br /><br />_______<br /><br />{this rant ignores the autocratic Chinese demolishing of private homes; human rights, etc. <br /><br />And ignores the crass building 'architecture' such as ZOE allegedly done in IRL by engineers w/o artistic or social skills}.The Galway Tenthttps://www.blogger.com/profile/05785991600065262397noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-59387588592429838442009-09-24T20:47:43.630+01:002009-09-24T20:47:43.630+01:00@Galway Tent, That's pretty interesting and ve...@Galway Tent, That's pretty interesting and very entertaining. So the upshot is that NAMA will be the Social Partners' Bank. Social Partnership politicized the economy when it was high on debt and NAMA politicizes the economy in withdrawal..Paul MacDonnellhttps://www.blogger.com/profile/17707637371855622418noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-9096893943154074052009-09-24T14:43:19.504+01:002009-09-24T14:43:19.504+01:00@adrem >>"I haven't seen anything ...@adrem >>"I haven't seen anything that officially or formally or even factually indicates that NAMA will protect developers from going under."<br /> ......<br />Here's a rant for 'adrem'.<br /><br />Dublin Docklands Developers Autocracy (DDDA) could be considered to be the lab rat for NAMA. DDDA seems to be effectively bankrupt (no 2008 accounts yet). <br /><br />Currently DDDA is buying flats near Sheriff St with magic-money from 'bankrupt' ZOE Developments. DDDA is firing staff and possibly getting the ex-employees files mixed up.<br /><br />DDDA is waiting for NAMA to be established before DDDA cooks its books for 2008. NAMA will swallow much of DDDAs 'investments'.<br /><br />DDDA's 2008 accounts are still not published; DDDA chairman is a psuedo-PD 'governance expert'. <br /><br /><b>** Joining the dots, this is one example of NAMA bailing out a developer. **</b><br /><br />More importantly this rigs the prices for flats preventing the prices dropping to levels where honest front-line public workers can afford to buy flats.<br /><br /><br />_______<br />More of rant:<br />Bankrupt Dublin Docklands Developers Autocracy Bails out Bankrupt Developer ZOE.<br /><br />http://galwaytent.blogspot.com/2009/09/bankrupt-dublin-docklands-developers.htmlThe Galway Tenthttps://www.blogger.com/profile/05785991600065262397noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-7704039067081101782009-09-24T14:31:34.692+01:002009-09-24T14:31:34.692+01:00Paul, technically it can do either foreclosure, sa...Paul, technically it can do either foreclosure, sale as distressed asset or work out (including up to completion of the project or even initiation of an entirely new/revised project). As a financial undertaking, Nama should have an incentive to write down as fast as possible the projects that have negative value relative to the cost paid. This can be done either via foreclosure or through distressed sale (sort of a 'fire' sale).<br /><br />Of course, Nama is already being politicised and it is ambiguous as to what its objective might be. How I know that?<br />(1) It is not fully independnt as the Minister for Finance can act as a final arbiter of price and any future decisions on work out;<br />(2) We already have Green Party demanding 'social' dividends.<br />(3) There is no independnt oversight of Nama envisioned in legislation and<br />(4) There are no clear Chinese walls between NTMA, Nama, the Government.<br /><br />All of this suggests to me that Nama is already at a risk of becoming a hostage to vested interests and to political objectives.<br /><br />Will it foreclose on a development project that was approved as a 'bribe' to some local constituency that is politically connected (e.g the so-called 'independent' TDs) even if this project does not stand hope of generating anything but a loss? Will it intitiate a 'complete at any cost' for a social housing project that is, once again, politically sensitive to let go?<br /><br />In my view, there is a very significant probability that Nama will simply 'sit' on many projects that should have been wound down ages ago in a hope of recouping some losses. This will, indeed, contribute to zombie development markets in this country for years to come. <br /><br />But my concerns go further than that - will Nama politically decide what gets built and what gets thrown out to the vultures? Will it prop up some developers, giving them more time to recover losses simply because these developers are better connected? <br /><br />Not to place these risks at the feet of FF, other parties, once in Government might be equally problematic.TrueEconomicshttps://www.blogger.com/profile/07350536454228478974noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-38442787048581652602009-09-24T13:42:35.613+01:002009-09-24T13:42:35.613+01:00Dr. G. When NAMA takes over the loans does it have...Dr. G. When NAMA takes over the loans does it have any incentive to foreclose (ACC-style) on the developers....and realise losses that are bigger than it claimed....or does it make any difference? will they sit on the foreclosed property like a big zombie bank...waiting for LTV to materialise?Paul MacDonnellhttps://www.blogger.com/profile/17707637371855622418noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-10834574687254625962009-09-24T13:08:42.013+01:002009-09-24T13:08:42.013+01:00(3) Read carefully before you jump with comments. ...(3) Read carefully before you jump with comments. If we do Nama, we get Nama loans - their value is important. In current market it is worth between 10 cents (for some projects/land) and may be 80 cents (for finished buildings in urban locations with loan vintage of, say around 2003-2004) on the Euro of face value of the loan before interest roll overs. The mix of what percentage of loans belongs to what category is unknown, vintage of loans is unknown, amount of rolled up interest is unknown, and seniority of loan over underlying collateral (cross-collateralization) is unknown.<br /><br />However, it is clear to anyone involved, even to the Government claiming a discount of 30% under LTEV assumption that your absolutely absurd and careless allegation that it is worth 80bn is not even deserving a comment. <br /><br />Now, if we do some sort of change in ownership per my balance sheet, we get an asset to hold as well. Unlike under Nama - it is not in form of loans we cannot price, but in form of equity in the banks that has market pricing today and can be estimated into the future on the basis of the future demand for financial services and market shares of the banks. <br /><br />If you cannot understand the fact that banks shares (equity) are assets, don't bother commenting.<br /><br />If you do not understand the fact that we know more about share prices today than about the loans we are about to buy into Nama, don't bother commenting.<br /><br />If you do not understand that liquidity risk, operational risks, market risk, economic risk and so forth, are all lower under the costed 'nationalization' proposal than under Nama, I am not sure what I can do for you at this stage in the debate.<br /><br />(4) Per your statement in the last paragraph: in Nama Trust legal (and effective - an I am not sure this can be really spelled out in more plain English) owners of the banks will be PRIVATE SHAREHOLDERS - individual residents of this country. <br /><br />You will own, say 10 shares in AIB and 10 shares in BofI and 15 shares in Anglo. I will own the same. And so will every other tax resident of this country.<br /><br />Not the Government or the State. You and me, and every other tax resident of Ireland. <br /><br />For reasons of orderly disposal of shares, we will be restricted from selling these shares for some period of time required to work through banks management, business models, profitability. I suggest it will be 5 years. This is what Nama Trust will do - it WILL HOLD (not OWN - HOLD) shares for us in our names for that period of time. <br /><br />Once banks are repaired reputationally and financially and economy returns to growth, the Trust, in our names will either sell shares or give them to us. <br /><br />You will get yours based on your preferences - either in shares or in cash at disposal; I will get my; Joe next to us will get his (either in cash of in form of shares or both). We will pay CGTon these shares. Do you get it? I hope so. <br /><br />Government WILL NOT OWN A SINGLE SHARE IN THE BANKS at any moment in time, so it is not a Nationalization...<br /><br />Really, can you check definition of 'not' in the Oxford English Dictionary? Please? <br /><br />Stop posting nonsense - I am frankly too busy to deal with this drivel.TrueEconomicshttps://www.blogger.com/profile/07350536454228478974noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-91407438158459859082009-09-24T13:08:34.524+01:002009-09-24T13:08:34.524+01:00Adrem, you got me angry.
If you think this blog i...Adrem, you got me angry.<br /><br />If you think this blog is a rant (or a 'rant'), read something else, don't waste your time.<br /><br />Now to your points.<br /><br />(1) 54BN tax bill - do you think that issuing bonds today does not constitute a tax bill tomorrow? And can you take this belief to a bank and borrow free of charge? Why do you think we have to impose an interest rate on Nama bonds if we can borrow free of charge? If no one will pay for the bill? It is either to be paid out of future taxes or it will be paid out of foregone future tax receipts that underly returns on Nama assets, or both. Either way - there is no free lunch. <br /><br />This, incidentally, the only point you raise that is close to being pertinent, which shows, really, how absurd your entire comment is.<br /><br />(2)Nama costs are not going to be tiny - the state already managed to commit paying about 15mln in different Nama-related fees and this is before Nama became operative. Once it is, there will also be legal costs, further advisory costs and the fees to be paid to the banks (in form of foregone earnings on Nama loans, I presume) to compensate them for managing Nama loans (again, no free lunch there either) - banks historic conservative returns are around 2-3% on loans net of capital cost. Management fee about 0.5% (also conservative), so up to 25% of net yield traditionally goes to cover costs of managing loans. Under Nama, we do not know where this will come from, but that does not mean it won't have to come from somewhere. See one example (http://www.independent.ie/national-news/nama-mother-of-all-bureaucracies-is-silent-on-costs-1885327.html).TrueEconomicshttps://www.blogger.com/profile/07350536454228478974noreply@blogger.comtag:blogger.com,1999:blog-8817171247555815363.post-13423465099078687242009-09-24T10:37:50.723+01:002009-09-24T10:37:50.723+01:00A tax bill of €54bn? What are you on about??
How...A tax bill of €54bn? What are you on about?? <br /><br />How does the NAMA delay developers going into receivership? Is that an assumption or is there something in the legislation that says that NAMA will be softer on the developers than the banks? Currently the banks are all (bar the foreign ones) trying to go softly softly with the developers. I haven't seen anything that officially or formally or even factually indicates that NAMA will protect developers from going under.<br /><br />The NAMA staff costs are tiny !! You know that but regularly pop it in to your "rants". The banks are being required to provided the dedicated staffing to look after the work on managing the book and the banks are required to pay them, manage them, HRM them etc. NAMA supervises only.<br /><br />If you go with your approach am I correct in saying that ownership of the loans (and by extension the collateral) stays with the banks? If yes then you have to account for that difference when comparing the costs. There's hard assets that were once worth over 80bn involved here - whatever about the row over their current worth or LTEV - they sure ain't worth nothing.<br /><br />There's a phrase that I can't quite remember but it goes something along the lines that if it walks like a duck, swims like a duck, flies like a duck and quacks like a duck then it's probably a duck - you nationalisation that isn't nationalisation because it's in a "trust" brings that phrase to mind.Unknownhttps://www.blogger.com/profile/17627813366693973836noreply@blogger.com