I was going over the statements issued by NTMA and NAMA to the Oireachtas Committee last week and was struck by some rather interesting bits...
Let's start with the Statement by John Corrigan, Chief Executive NTMA, to the Joint Committee on Finance, Public Expenditure and Reform, 9 September 2011:
"The banking stress tests carried out by the Central Bank in the first quarter of 2011 quantified the additional capital support required by the banking sector at €24 billion. The NTMA Banking Unit has worked very hard to minimise the amount of this additional capital to be provided by the taxpayer. Through initiatives like burden sharing with the junior bondholders and the sourcing of private capital for Bank of Ireland, the net amount of this capital provided by the State is now expected to be around €16.5 billion. The savings generated can be redirected to funding the day-to-day operation of the country."
Can Mr Corrigan explain this: as of August 1, 2011, the State has injected (under PCAR/PLAR allocations) €17.292bn (
here) according to DofF note. That €792mln difference is not exactly a pittance...
Oh, and while we are on the issue of being accurate - PCAR/PLAR capital allocations are designed to deliver capital & liquidity cushions for the period 2011-2013. Not a trivial issue, mind you, especially since Mr Corrigan repeatedly relies on PCAR/PLAR recapitalization exercise as a definitive (aka permanent) line in the sand on banking crisis.
Now, as to the "savings can be redirected to funding the day-to-day operation of the country" - that is pure rhetoric, sir, isn't it? Mr Corrigan himself shows that it is (see marked with
italics next quote below).
"In order to stabilise our debt/GDP ratio
Ireland needs to get back to running a primary budget surplus (the budget balance excluding interest payments) as soon as possible. Indeed in the context of debt sustainability, this metric is far more important than the absolute level of debt per se. Ireland still has the biggest primary deficit of any eurozone country, a fact not lost on investors..."
So, wait a sec, Mr Corrigan. You said "savings [from PCAR/PLAR recaps] can be redirected to funding the day-to-day operation of the country". You also said that we need to run a primary surplus. You can't have your cake, Mr Corrigan, and eat it.
"The objective of the [banks] deleveraging process is to achieve a more prudent loan to deposit ratio for the institutions concerned through a reduction of their balance sheet assets of some €70 billion
while avoiding sales at prices which absorb excessive capital."
Was Mr Corrigan trying to say that we need to deleverage the banks while minimizing the calls on the banks' capital for losses incurred in the process of deleveraging? Ok, that would imply selling good - aka performing - assets first. What would that do to the banks balancesheets, Mr Corrigan? It will undermine banks balancesheets, leaving them with poorer quality average assets. Is that Mr Corrigan's idea of restoring banking system to health? And is that covered by PCAR/PLAR definitive line in the sand? You know, Mr Corrigan, that it is not.
There was also Mr McDonagh speaking on the day...
Opening Statement by Mr. Brendan McDonagh, Chief Executive of NAMA, to the Joint Committee on Finance, Public Expenditure and Reform Friday, 9th September 2011"
"We have now recruited over 190 staff with the specialist skills and experience required to manage a portfolio of property loans with balances in excess of €72 billion."
So NAMA chief thinks it is a great achievement of NAMA that it managed to hire 190 people. Boy, Mr McDonagh would do well in public sector where the metrics of spending are more important than those of earning...
But what is this about €72 billion portflio balances? NAMA valued the portoflio it purchased at €30.5bn gross (inclusive of the LTEV uplift). Banks, who sold NAMA that portfolio wrote down the losses realized, implying that NAMA end valuation in their view was a reasonable reflection of the value of portfolio NAMA bought. So is Mr McDonagh deploying Eugene Sheehy's approach to claiming balances on loans to be assets under management and refusing to write down the actual loans values to the
publicly disclosed valuations that NAMA itself prepared?
And is Mr McDonagh conveniently forgetting that the book value of these assets has fallen since that LTEV was assessed and assets were valued? May be Mr McDonagh should consult his own annual report to see his organization taking charge against that loss?
Of course, Mr McDonagh is just pumping up NAMA's (aka his own) importance. NAMA, you see, is not managing €30.5 billion-valued undertaking, or an odd €25 billion actual undertaking (once we factor in at least some of the value losses on NAMA's portfolio), but a €72 billion portfolio. In a way, Mr McDonagh is like Montgomery Burns checking his old ticker for the price of his Federated Slaves Holdings plc...
I love Mr McDonagh's next statement:
"There is a third, small group of debtors ... with whom we could work but who are not co-operating adequately with the process and who appear to believe that, after all that has happened, the taxpayer somehow still owes them a living. We have been as fair, reasonable and patient with these people as any court could possibly expect us to be but, in the circumstances, it is likely that we will be left with no option but to instigate additional enforcement actions before the year is out. Above all else, ...the self-indulgent behaviour of a few has no place in resolving the national crisis with which, collectively, we are grappling."
Now, close your eyes, imagine a summer night, chirping of birds in the distance. From an open window dark woods staring into the room. Armchair. The house owner, with mustache, in military tunic, pipe in hand, explaining in deep Georgina accent to two smaller (in evident statue) men the rationale for dealing resolutely with a small group of dissidents who refuse to cooperate, betraying self-indulgent decadent behavior amidst the national crisis... Mr McDonagh's rhetoric is permeated with Joe Stalinesque tonalities, innuendos, juxtaposing reasonable (NAMA) against the decadent and asocial (developers), the 'few' against the 'many'. Himself positioned in a high priest fashion at the head of the judgment table, burdened with the duty of carrying NAMA's burden of justice to the few unwise dissenters. Why not visit Lubyanka Museum in Moscow on your next corporate outing, my dear NAMAnoids?
There's more of the same, pardon me self-indulgent and arrogant stuff in relation to the public allegedly asking politicians uninformed questions and some people (unknown to us) making uninformed statements about NAMA. "The accusation that NAMA is bureaucratic and slow in dealing with these approvals is unfair and unwarranted but, unfortunately, in the current environment, when it comes to NAMA, many seem to feel that they have no obligation to check the facts before making the accusation."
Ok, Mr McDonagh. I would like to make an informed observation. Where do I get the facts? From you? From NAMA? Who can assure me that the facts you &/or NAMA present are full, correct and not mis-represented?
Let's try the 'trust your NAMA' thingy. Here you say: "There has been much interest from the public (over 100,000 downloads) [in relation to NAMA list of properties under receivership] and in particular from younger people who are keen to use the current correction in property prices to purchase their own homes."
How do you know these are young people? I downloaded the list without any registration. Are you tracking my IP address and accessing, unbeknown to me my details? Are you acting legally in doing this? Or are you simply making a claim that cannot be verified? So much for 'trust your NAMA' proposition then.
And now to the conclusion: "It is our intention that NAMA will be a
creative and dynamic force in the property market and, more generally,
that it will contribute significantly to the economic resurgence of Ireland in the years ahead." Sorry, Mr McDonagh, but you are not getting it. NAMA has a defined - according to your own chairman and legislation establishing NAMA - mandate. That mandate does not envision NAMA becoming either 'creative' or 'dynamic', nor does it envision 'NAMA contributing to the economic resurgence of Ireland'. Your mandate is to:
- Recover taxpayers' funds, and
- Close the shop after doing so.
In case you weren't paying attention on September 9th, Mr Frank Daly said in his statement - made alongside your own: "...the objective that has been set for us by the legislature, under Section 10 of the NAMA Act, is to recover, at a minimum, that amount plus whatever additional funds we need to advance as working or development capital for projects." Mr Daly repeats this objective (in slightly different wording) twice in his statement. Mr Daly does refer to NAMA being "creative and flexible", but unlike Mr McDonagh, he limits this to the reference to properties that NAMA is working with, not to the entire property market and not to the economic resurgence of the whole country.
“
Ἀπόδοτε οὖν τὰ Καίσαρος Καίσαρι καὶ τὰ τοῦ Θεοῦ τῷ Θεῷ” (Matthew 22:21), Mr McDonagh. And please, extinguish that pipe and change the tunic... Being Uncle Joe is not only uncool, it is also, fortunately, infeasible for you.
As the result, trade balance fell 24.67% mom to €3,150.5mln, with annual rate of decline standing at 21.34% and relative to same period in 2009, trade balance is down 5.59%. Much of this seems to be accounted for by a combination of an increase in imports from the Chemicals & Related Products and decreases in the same sector exports, although current release does not provide sectoral data breakdown for July (data is supplied with 1 month lag).
Terms of trade remained subdued at the lower end of export prices
Terms of trade in June were up to 78.2 (higher ratio of export prices to import prices) from 76.9 in May 2011, but year on year terms of trade are still down by 11.5% and relative to June 2009 terms of trade are now also lower by some 10.73%. as highlighted below:
Imports intensity of exports also fell - perhaps in part due to rebuilding of supply stocks (higher imports) in core exporting sectors, such as Chemicals:
Imports intensity of Irish exports (ratio of exports value to imports) now stands at 181.3% in July 2011, down from a record-breaking 210.7%. This reflects a normal pattern of supplies inventories exhaustion followed by subsequent rebuilding. Two interesting trend, however emerge from the above chart:
Now, recall that pharma accounts for 90% of our trade surplus. Basic pharma sector wholesale prices have now fallen to 87.4 in August 2011, down from 90.7 in August 2010 and from the local peak of 106 attained in November 2008.
Using the data from core QNHS we can compute decomposition of employment pool into three broadly defined subsectors, as shown below. The core trends here are the following:
Ratio of private sector employees to those employed in public sector now stands at ca 2.76 private sector workers per 1 public sector employee. Sacred yet? That ratio rose from 2.73 in (an improvement, in fact) qoq between 1Q 2011 and 2Q 2011, but is down from 2.78 in 2Q 2010 and 3.00 in 2Q 2009. In other words, there are fewer private sector employees now per each public sector employee than in either 2010 or 2009 or indeed in 2008 and so on.
That's a tough thing to swallow, folks. Per CSO: "The number of employees in the public sector showed no change over the year to Q2 2011. However, the employment figures for this quarter include 5,300 additional temporary Census field staff who were employed during the periods covering Q1 and Q2 2011. When these staff are excluded there was a fall of 1.3% in employment over the year to Q2 2011." Give it a thought, folks - a fall of 1.3% when unemployment rose 3.93% and underemployment went up 20.89% and employment fell 2.1% and private sector employment declined 2.4%.
Full-time employment fell by 53,000 (-3.7%) yoy with declines in both male (-33,700) and female (-19,300) full-time employment. Per CSO: "This decline in full-time employment was partially offset by an increase in the number of part-time workers where the numbers increased by 15,200 (+3.7%) over the year. Part-time employment now accounts for 23.4% of total employment. This had been as low as 16.7% in Q3 2006." Full-time employment is now down 367,600 on peak (4Q 2007) and part-time employment is now at its new peak at 426,800 - up 40,800 on 4Q 2007.
It's not exactly 'turning the corner' moment, is it?
