17/6/15: 10 Cases Worth Asking Nama About...

So we are having an inquiry into IBRC on foot of an allegation that the 'bank' sold Siteserv asset at a loss to the taxpayers of some EUR10 million or so compared to another bid. Or you might want to hike that loss to EUR15 million if you consider a simple fact that EUR5 million gifted to the Siteserv shareholders in this deal was at best bizarre, at worst negligent.

Then again, we are not having an inquiry (yet) into the ways in which Nama has been trading.

May be we should. For one, there are questions worth asking in the context of economic value destruction concept outlined in this post: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html

Why? Because there are some, shall we say, slightly exotic things that might be happening over there.

Define: value destruction as an action or a strategy for managing assets that results in asset value realisation at sale that is below the alternative value that can be obtained by adopting different approach to managing the asset. Now, take some public domain information:

1) In late January 2014 Nama sold project Holly portfolio of Irish non-performing loans to Lone Star Funds for "around €220m and reflecting a circa 41% discount" on par value of the loans. "The nominally-valued €373m Project Holly is comprised of 28 commercial property investment and development loans all lent to Sean Reilly’s McGarrell Reilly Group, secured by around 40 assets," as reported in CostarFinance (http://costarfinance.com/2014/01/23/lone-star-wins-namas-project-holly-loan-sale-paying-around-e220m/). In March 2015 Lone Star Funds sold Project Holly portfolio to US fund Starwood Properties for €350 million. http://costarfinance.com/2015/03/12/starwoods-mortgage-reit-acquires-lone-stars-dublin-office-pool-in-e350m-debut-equity-investment/. Which means the vultures got a return of 59% over 13 months or cool annualised rate of return of 53.5%. That is doubling your money every 16 months. The portfolio included already developed and operating properties, so Lone Star did not add any value to them to make this sort of a return - it simply put up funds in early 2014 to cover the purchase and the sat on the assets for just a year before flipping them. Thus, Nama lost taxpayers a cool EUR130 million and it also wasted EUR130 million of Sean Reilly’s asset. Question is - any inquiry into this transaction by Nama forthcoming? Question two is: did Sean Reilly incur a claim from Nama due to this loss?

2) Property at One Warrington Place, Dublin 2 was sold by Nama to the US fund Northwood Investors for €27 million on 25th of April, 2012. Based on reports in the media, Nama provided 'staple finance' on the deal, whereby it took an unknown percentage of the final price paid as a deposit from the buyer, and allowed the buyer to repay the remainder of funds over some period of time. In July 2014, the building was sold for €42 million to Irish Life http://www.d2private.com/portfolio/one-warrington-place-dublin-2/. This implies an annualised rate of return of 27.2% doubling your money every 31 months. Zero value was added to the building by Northwood as it was fully leased. Given this was a staple finance deal, Northwood most likely had to put down not much more than a few million for taking charge of the asset. Again, we have no idea how the original developer was treated with respect to this loss that Nama crystallised, but we do know that taxpayers got shortchanged on some EUR15 million. As an aside, here is Namawinelake description of the 'financing' side of this deal: "the Northwood deal was NAMA’s first vendor finance deal, whereby NAMA, accepted part of the purchase price by way of a loan. The interest on the loan would have been around 3%, and repayable within five years. The property was yielding 7.25%, based on a €27m purchase price." So Nama 'gifted' Northwood a guaranteed 4.25% uplift via staple financing arrangement on the amount covered by deferred payment - a margin that could have remained taxpayers'. Reports had it, Northwood only put EUR8 million down on its EUR27 purchase.

3) The Forum Building, IFSC, Dublin 1 was sold by Nama for €28 million to Atlas Capital Group (https://namawinelake.wordpress.com/2012/12/30/nama-sells-dublin-office-block-for-e28m-with-eye-watering-10-yield/) in late December 2012. Subsequently, it was flipped for €37.8 million to Hibernia REIT (http://www.irishtimes.com/business/commercial-property/hibernia-reit-acquires-forum-building-in-ifsc-for-37-8m-1.1904874) in late August 2014. There was no value added to the building as it is fully let to Depfa Bank on an annual rent of €40 per square feet on lease which expires in 2029. So over 20 months, the return on this purely speculative holding totalled 89% with annualised rate of return of 46.5% or doubling of your money in roughly 18 months. Taxpayers lost EUR9.8 million.

4) Per Irish Independent report: "The site, at 1-6 Sir John Rogerson's Quay in Dublin's Docklands was sold by NAMA to Australia-based student accommodation firm Urbanest for €7.5m in June 2013. Property investment company Hibernia Reit then paid €17.75m for the same site in August this year - a 136pc increase." http://www.independent.ie/business/irish/nama-site-was-sold-for-double-the-price-after-barely-a-year-30680193.html The set of transactions involving the site is quite bizarre. Urbanest bought the site with a plan to develop student accommodation. It failed to secure planning permission for that and sold the site with no new value added to it for "close to EUR10 million" to "a consortium of private investors" February 2014. Four months later, with no value added to it, the site was resold once again to Hibernia Reit for €17.75m. Adding insult to the injury, the site "has planning permission for 102,000 sq ft of offices, about 5,000 sq ft of retail, two live & work units and one residential unit along with 34 parking spaces. The planning permission expires in 2018". Which means large share of the site value is already attached to it (planning permissions attached to sites carry a large share of the value of the site). At least Urbanest were trying to add more value to the site, but - here's additional farce - it couldn't. Taxpayers lost EUR10 million.

5) Dock Mills, Grand Canal Dock, Dublin 2 was sold in 2013 by Nama to the developer Chris Jones for €1.3 million. Spent €1.4 million converting to offices and then sold on for €13 million to Google in January 2014 (http://www.irishtimes.com/business/commercial-property/google-buys-former-warehouse-at-grand-canal-dock-1.2081392). At least Jones added some value to the building, raising his original investment a return of 381 percent in one year. Taxpayers loss (remember, Nama employs 'the best specialists in property markets' available in Ireland, who, in theory, should have been able to do what Jones did many times over) EUR12 million.

6) There is a big issue with Nama operations as the example of the Battersea Station in London exemplifies. Nama held a loan attached to Battersea that is 'acquired' for roughly EUR480mln. Nama sold the loan in a fire sale in June 2012 for EUR600mln, making, officially a 'profit'. The loan recovered 100% of the value. However, Battersea is expected to generate EUR9-10 billion in profit for the buyers, led by SP Setia. The site is 40-acre sized South Bank of the Thames location with a planning permission for 8.5 million sq.f. of development attached to it. At the time of sale, there were plans afoot for the Tube new northern line extension and a pedestrian bridge linking Battersea with the northern part of London. In other words, the key value points related to EUR9-10 billion in expected profit have already been in place. The sale by Nama represents a clear case of opportunity cost being generated to expedite sales of non-Irish properties under the pressure from the Troika for Nama to generate early disposals. It is also a sign of just how poor Nama development opportunity foresight is. In a joint venture as a passive participant, Nama could have expected to get around 20 percent  share of the profit. Assuming net profit of around EUR5-6 billion, that means an opportunity cost of early disposal of some EUR1.0-1.2 billion. There was virtually no cost for Nama to carry the loans into longer term development. Even if Nama were to hold off on selling the site for another 12-24 months, the likely foregone return on the site would have been some EUR120-150 million. (http://www.independent.ie/irish-news/nama-lost-a-fortune-on-power-station-sale-29950832.html)

Update: in response to some queries about Batttersea Station sale, here are couple of links: http://www.costar.co.uk/en/assets/news/2012/July/EPF-SP-Setia-and-Sime-Darby-complete-400m-Battersea-Power-Station-buy/ and http://www.irishtimes.com/business/commercial-property/nama-lloyds-to-seek-buyer-for-battersea-power-station-1.10783. Contrary to the arguments presented to me by some readers, Nama was in the driving seat of the process, at least Nama is the one that ended up facing the risk of defending the sale: https://namawinelake.wordpress.com/2012/05/01/treasury-holdings-sues-nama-for-hundreds-of-millions/. 

7) Nama sale of the Chicago Spire was a massive miss. Chicago Spire is a large development project located in the U.S. city of Chicago, on 2.53 acre site located immediately north of the Chicago River and bisected by the Lake Shore Drive. The site is zoned as a planned development with present zoning allowing for FAR of 25:1, which means the site can sustain 2.75 million sq.ft. of improvements. Nama-held liabilities associated with the Chicago Spire totalling US$93 million, including rolled up interest. Liabilities to the contractors added some USD22 million but were not held by Nama. CBRE estimated in January 2014 the value of the Chicago Spire site and associated assets at US$327 million at the upper envelope of valuations and with lower applied density at the lower envelope of US$255 million. Nama refused to fund further development of the project or to allow such funding to be raised by the developer in the markets. Nama sold USD93 million (EUR68.4 million) of its loans at close to 40 cents on the dollar, for USD37.2 million (EUR27.4 million). Many turns and twists in this saga aside, the loss to taxpayers on this transaction by Nama can be computed, at lower end, as the loss on the fact that the original developer had a connected party willing to bid some USD110 million on the project and that CBRE's lower end estimate is at USD255 million. Which means a conservative loss of some USD70-USD185 million. This disregards the fact that the Spire had pre-sold a large share of properties to be developed, and Nama actions on the Spire forced these pre-sales to be cancelled.

8) There is an issue of Nama interest rate hedging, which was costing the agency, at around 2012-2014, some 1% of the interest-paying bonds, or roughly EUR200 million per annum. Not exactly cheap pennies when one considers that the rates have been declining, not rising. Here's a living example: in 2013 Annual Report, Nama shows that it made gross profit of EUR6 million on its underwriting the IBRC. But Nama hedging of the interest vis-à-vis IBRC cost the agency EUR8 million. Net result - a loss of interest of EUR2 million. Nama also rung in administrative expenses relating to IBRC of some EUR6 million in 2013, which means total net loss for Nama from its dealings with IBRC stood at EUR8 million in that year. Total cost of dealing with IBRC for Nama was, therefore, greater than the total cost charged by IBRC liquidators.

9) In CAG report looking at Nama operations over 2010-2012, the agency was shown to be net yield of 5% on its holdings of rented properties. Net of funding cost, the yield was around 4% pa. At the same time, Nama was aggressively disposing of rented properties. The only way that strategy made sense was if Nama expected declining capital values in the markets where it was selling properties: U.S., UK and (smaller segment) Ireland. Nama was, during that time, of a view that property prices will rise in all three markets, directly contradicting the logic for accelerated disposal. Namawinelake provided an example of "the madness of NAMA’s strategy to dispose of rent-producing properties. Take a €100m commercial property which is generating €5m per annum. NAMA’s cost of funding is 1% or €1m. So,NAMA is generating a profit of €4m. In addition, the likelihood is that the value of the underly-ing property is increasing. Commercial prices are up 7.7% in the UK in the 12 months to April 2014, commercial prices in Ireland are up 14.1% in the four quarters to Q1,2014. So, by selling the property at the start of 2013, NAMA will have foregone €4m in profit in 2013, [and] the benefit of the capital appreciation of €7.7-14.1m." Chop change this ain't: hold a rent-yielding asset for an extra year, get a return of EUR11.7-18.1 million on each EUR100 million, net of all costs. Speculation aside, actual numbers: Nama's interest income was down 20% in 2013, but Nama's non-disposal income (primarily income from rents) was down €400m or 33% in 2013, having declined b EUR300 million annually in 2010-2012. That's cool EUR1 billion foregone in just 3 years in rental income alone, and capital gains lost of some 21% - estimating very conservatively.

10) Small, but visible, Booterstown Marsh site was sold by Nama for EUR400K and resold less than two years after that for over EUR1 million.

You can follow the topic of overcharging and other sharp practices and questionable strategies deployed in the post-banking crisis resolution process in Ireland here:

1. Deputy Peter Mathews June 2015 speech on the issue of overcharging by Anglo, its legacy and issues relating to Nama was covered here: http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html
2. My summary view of the Anglo’s sharp practices toxic legacy: http://trueeconomics.blogspot.ie/2015/06/11615-anglos-toxic-legacy-it-is-still.html
3. Mr. Declan Ganley’s Affidavit from 2013 concerning overcharging: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html
4. Deputy Mick Wallace’s speech in June 2015 delivered in the Dail on the subject of Nama and Anglo legacy with my introduction of the concept of value destruction: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html 
5. John Morrissey’s legal letter on overcharging: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html 

17/6/15: European Policy Uncertainty: May 2015

The latest reading for the European Policy Uncertainty Index (measuring economic policy uncertainty as reflected in the media sources) has continued to trend within the range of the crisis period averages in April-May 2015. This range has been now sustained since September 2014 when the index reversed local decline to below-average levels over the sub-period of March 2014 - August 2014.

Over time, we continue to trend within the post-crisis regime associated with above-historical average levels of policy uncertainty. The trend toward uncertainty decline in the post-crisis period has now slowed down and showing signs of potential reversal despite the media overwhelmingly tending toward a positive news reporting selection bias.

16/6/15: Indigenous Sectors and Exports: Ireland's Conundrum

In response to my comment on Irish exports of goods data through April, one analyst suggested that things are not as bleak, citing expansion of industrial production in Traditional sectors as a sign of real economy improvements (as opposed to accounting economy of our MNCs-led tax optimisation exports).

No doubt, the comment is correct. Things are not so bleak as Traditional sectors shrinking. In fact, they have been growing and with them, there has been some growth in indigenous exports too.

Here is the latest quarterly data on industrial production separating Modern sectors (MNCs-dominated) and Traditional sectors (which also include a large segment of MNCs, for example in food and beverages).

Yes, Traditional sectors have expanded. Which is good news. But they expanded at a rate of 20.4% over 12 quarters, while tax optimising Modern sectors expanded at a rate of 78.6% over 8 quarters. Good news is not too great, it turns out.

But what about more recent data? I prefer quarterly series for they provide a bit less short run volatility. But as you might ask, here are comparatives:

• In Q1 2015, Modern Sectors output by volume rose 39.4% y/y while Traditional Sectors output rose 10.1% y/y. That's almost 4 times slower rate of growth for the Traditional Sectors.
• In April 2015, Modern Sectors output rose more reasonable 7% y/y (and shrunk 1.1% m/m), while Traditional Sectors output rose 11.3% y/y (and grew 4.7% m/m). That made April 2015 the first month since December 2014 that this happened.
• But what exactly did happen in April to drive Traditional Sectors output up faster than Modern Sectors output? Modern sector includes the following industrial sectors: NACE 20.00 - 21.20 Chemicals and pharmaceuticals: up only 7% in April y/y,  NACE 26.00 - 27.90 Computer, electronic, optical and electrical equipment was up 44.8% in April y/y; NACE 18.20 Reproduction of recorded media up 34.8% y/y in April y/y; and NACE 32.50 Medical and dental instruments and supplies which goes into "Machinery and equipment, not elsewhere classified" reporting line - up 54.8% y/y. So I am slightly puzzled how did Modern Sector manage to post 7% growth when all components of the sector are growing at 7% or higher. The answer is, of course, in the CSO not fully reporting exact components of what is included in the Modern Sectors. 
• On Traditional Sectors side, the biggest gaining sub-sector was "Other Food Products" at 13.2% y/y. Which means that the fastest growing Traditional sub-sector was growing slower than all but one Modern Sector sub-sectors. 

Let's set aside monthly figures, and focus on less volatile quarterly production to recap: in 1Q 2015: there is some growth in the Traditional sectors, but that growth is vastly below the 'miracle' growth recorded in Modern sectors...

16/6/15: Sinn on ECJ's OMT Ruling

Hans Werner Sinn on ECJ ruling concerning OMT:

Not always to agree with, but he's got a point there... Which makes for an interesting debate: is a promise / threat of an action equivalent to an action? In markets - which are based on expectations, as much as physical changes - this just might be so. In which case ECJ shows little ability to understand the market, even if it has great ability to understand the law.

16/6/15: Russian FDI Flows in 2014

Per data reported by BOFIT, FDI inflows into Russia fell below 2009 crisis period in 2014. Average 2007-20013 inflows stood at USD55 billion, falling to USD37 billion in 2009. In 2014, FDI inflows totalled only USD21 billion. As expected, net FDI inflows became negative in 2H 2014.

FDI outflows totalled USD56 billion in 2014, in line with the average for 2007-2013 period and relatively steady over all four quarters of 2014.

In a reversal to pre-2013 period, Cyprus was once again the largest destination for outflows of FDI from Russia and (alongside the Bahamas) the largest source for inflows of FDI into Russia - reflective of ongoing flows of funds within Russian enterprises that use off-shore centres for reinvestment of domestic earnings and debt financing. Surprisingly, as BOFIT reports, "Russian FDI flows doubled to the United States and quadrupled to Switzerland". The surprising bit, of course, was not Switzerland…

16/615: Expresso on Ireland's Repayment of IMF Loans

My comment on Ireland's early repayment of IMF loans for Portugal's Expresso, 13/06/2015 ECONOMIA page 11

16/6/15: Russian Economy in a Chart: It's Structural...

Russian's economy problem is not crises-linked volatility. Instead, it is structural:

16/615: Building & Construction Ireland: Something's Up, Something's Down

So allegedly construction workers are now being bid out of Poland back into Ireland, the cranes are rising everywhere.

Nama is on track to deliver thousands of new homes, and commercial property markets are booming, primed for new development (see http://www.irishtimes.com/business/commercial-property/nama-set-to-dispose-of-ready-to-go-housing-sites-around-dublin-1.2234668)

Indices of construction activity are up in value, officially, q/q and y/y, while volume of activity is up y/y.

PMIs are signalling massive increases in building.

But the latest Building Information Index shows that the value of construction projects launched in 1Q 2015 was down EUR333 million or -20% on 1Q 2014, declining to EUR1.359 billion. In five out of seven escorts covered by the report there have been declines in activity, led by residential building sector that posted a decline of EUR174 million to EUR600 million in 1Q 2015. Good news, applications for new build are up 42% y/y in terms of value (including price and cost effects). Not surprisingly (down to price and development costs inflation), residential sector value of new applications is up 91%, while commercial is up 59%.

As they say, if we ain't building more and better, at least we are building more expensively...

16/6/15: Irish Exports & Trade Balance: April 2015

This year, we had some pretty darn bizarre stats coming out of the Irish data on exports of goods. April was no exception.

Take a look at the numbers:

• On a seasonally unadjusted basis, Irish imports of goods stood at EUR4,699.2 million in April 2015, up 9.35% y/y having previously posted a rise of 15.88% y/y in March. Over the last 3 months through April 2015, imports are up 12.57% y/y. Which sounds like a lot. But...
• Irish exports of goods have risen to EUR9,813 million in April 2015, up 30.08% y/y having previously posted an increase of 20.10% y/y in March. Over 3 months through April 2015, exports of goods were up cumulatively 22.4% y/y. April 2015 saw the highest monthly volume of exports of goods from Ireland on record.
• Irish trade surplus for goods trade only shot up 62.33% y/y in April to EUR4,484.1 million - the third highest monthly surplus on record. In March, trade surplus was up 27.60% y/y and over the 3mo through April 2015, trade surplus rose 38.2% y/y.

Charts to illustrate:

These numbers are simply not reflective of real economic activity in Ireland and are so heavily polluted by tax optimisation schemes and correlated exchange rates effects, there is little point of talking any more about our 'exporting' economy.

The CSO breaks down (or attempts to explain) some of the farce as follows: "The main driver behind the April 2015 increase was the increase in the exports of Medical and pharmaceutical products of €1,056 million (+63%) to €2,727 million. The exports of Organic chemicals also increased by €560 million (+40%) in April." On an unadjusted basis: "During April 2015 imports of Chemicals and related products increased by €234 million (+25%) to €1,179 million and imports of Miscellaneous manufactured articles increased by €137 million (+28%) to €628 million. Imports of Machinery specialised for particular industries also increased in April by 86% to €225 million." 

You have to laugh here: having created no new serious additional production capacity of any note over the last 12 months, we have rises in output to the tune of 25%-plus. If this wasn't a miracle economy of MNCs, we would be world-beating, record-holding economy for productivity growth, richer than Switzerland and Norway, combined. But do keep in mind, employment in pharma sector has been effectively stagnant for years, just as output of the sector is booming at exponential rates.

15/6/15: CBR Cuts Rates to 11.5% in Hope of Lifting Sagging Investment

Central Bank of Russia cut policy rate to 11.5% today from 12.5%, undershooting markets expectation for a 150bps cut to 11.0%. The move was expected and relatively modest cut this time around suggests more heavy cuts in 2H 2015. In part, this reflects relatively sharp decline in growth in April: having contracted modest 1.9% in 1Q 2015, Russian GDP fell at an annual rate of 4.2% in April. Another incentive for CBR to lower rates is the Ruble, which posted surprising comeback in early 2015, putting new pressure on the federal budget. CBR bough USD3.6 billion in May, in an attempt to keep Ruble lower.

Rate cut is a welcome move, but in current environment it also shows just how little room for manoeuvre the monetary policy has. Russian banks are deleveraging. Loans outstanding in the corporate and household sectors have fallen in 1Q 2015. The trend continued in April: SME loans share of total corporate loans fell from 22% in April 2014 to 18% in April 2015. In January-April 2015, corporate lending outstanding was up nominally 17% in ruble terms compared to the same period 2014. Inflation run at around 15.8%, which means that in real terms, corporate loans remained basically flat. Household loans grew by 4% y/y in ruble terms. Which means in real term, level of outstanding loans to households fell. As usual, roughly 1/3 of all corporate loans were denominated in foreign currency.

The rate cut will also help with non-performing loans. Stock of NPLs in the corporate sector rose by roughly 30% y/y in the first four months of 2015 to 6% of the total stock of corporate loans. Household credit NPLs stood at 7%. Both rates of NPLs are relatively benign, by Western standards, but the growth rate in NPLs is worrying. Lower cost of carrying these loans will help alleviate some of the pressures.

Overall, Russian investment remains a major bottleneck for the economy. Chart below shows Russian Investment as percentage of GDP, compared to both the Emerging Asia economies and Emerging Europe economies. This clearly highlights the dire state of Russian investment over 2000-2013, and a significant decline in investment from 2014 on, including the IMF forecasts for 2015-2020 period.

15/6/15: Next Step: Cyprus.

Next stop for Greece:
http://www.ecb.europa.eu/press/pr/date/2013/html/pr130321.en.html
... or in simple terms: Cyprus.

Anyone surprised by Draghi not mentioning any of this anywhere today, shouldn't be. Il Capo does not do the work of Soldati... But Dr. Draghi did say he thinks ELA underwrites solvent banks... presumably in an insolvent state... which, of course, makes banks insolvent too.

How? In two steps: Step 1 - banks hold 'insolvent' state bonds. As long as they do, the state remains 'solvent' but once the state becomes insolvent, banks go too. Step 2 - Greek banks have tax offsets. Once the state goes, so do the offsets and banks.

Source: Raoul Ruparel ‏@RaoulRuparel

15/6/15: Long Run Oil Price Chart

Quite a wonkishly fascinating chart (I love long time series, even if much of them are imaginary numbers): via http://uk.businessinsider.com/oil-is-cheaper-than-it-was-in-the-1860s-2015-6?r=US we have oil prices from 1860s on, though, sadly, not updated to most current, which is just around 1970s decade average.

Draw conclusions at your own peril. I chance to say: post 1900 price trend is all steady, until Governments mess up (the 1970s crisis - Governments-led, the 2000s lift-off - also Governments-led). So here you have it... boring commodity that is occasionally over-politicised into a bizarre beast.

15/6/15: Euro Area Labour Productivity: It's Low and Lagging

Euro area's problem in one chart? Might sound like a bit of an over-simplification, but here is a summary of labour productivity index simply constructed as real GDP per employee:

The chart shows several facts:

1. Euro area labour productivity is currently low, despite massive uplift in unemployment (which should have increased output per employee more substantially).
2. Euro area labour productivity has grown faster than that in the U.S. in the period of 1986-1995, but has been growing at a slower rate for some twenty years now.
3. Post-2010, euro area productivity has been lagging all groups of advanced economies.

Now, remember, no one talks as much about carrying out labour markets reforms as euro area leadership. In a way, this might be warranted, given poor performance, but in a way it also might suggest that the reforms are not working. After all, since the start of the Great Recession, allegedly, we had plenty of these reforms, and we had a 'productivity-enhancing' rise in unemployment, reduction in labour force and wages moderations galore. And productivity is not really expanding much. Secular stagnation, anyone?

14/6/15: Why Read Wallace's Speech on Nama & IBRC?

Mick Wallace, TD speech from earlier this week is worth a read: http://mickwallace.net/index.php/dail-work/dail-diary/760-ibrc-behind-bureaucracy-and-secrecy-our-government-takes-best-care-of-big-business

Let me quote some choice bits relating to the way Ireland operates at the level of IBRC, Nama et al. Italics and bold typeset are added by me.

"We are discussing the alleged preferential treatment of the private sector, in particular deals that may have cost Irish taxpayers startling sums of money. …The number of people who have complained to me in the past couple of years about trying to buy assets from financial institutions controlled by the State, including NAMA and banks, but have not been able to do so despite being prepared to pay more than others, is frightening."

So Deputy Wallace is saying here that, allegedly, Nama has been turning down higher bidders and accepting lower bids. This can take place perfectly legally, in cases where bidders are connected to the original borrowers (Nama does not allow such bids, although this practice is rather bizarre to begin with and is in contrast to normal practice in the U.S., past practice in Sweden and Finland, and even IBRC practice). If Deputy Wallace's allegation stands for cases excluding bids by parties connected to the original borrowers, then we have a problem.

"…I was also shocked at how NAMA, ...operated. I understood NAMA was going to hold assets until their value recovered and would not offload stressed assets for less than what they were worth. Some of the apartments I built have been sold for €100,000 each during the banking crisis, Apartments which I could not build now for €200,000, even if I got the land and the money for nothing."

Now, Deputy Wallace is an ex-developer with quite an experience under his belt. So he knows what he is talking about. Deputy Wallace goes on to cite several examples, where combined loss to the taxpayers due to Nama premature sales of assets amounts to ca EUR165.1 million. From just a handful of examples.

What he is arguing is that Nama has been engaged in a destruction of value - selling assets at depressed valuations compared to what could have been achieved if it properly managed these assets.

The deals cited by Deputy Wallace are all on the record, in the media. I have been made aware of at least one case of an asset originally pushed by Nama into the market, subsequently being withheld from the market due to legal actions, staying off the market for a year or less. The asset was subsequently sold by Nama for a hefty upside on the original asking price. An upside comparable with what vulture funds reap in their own operations. In other words, delays by developers in this case produced actually higher returns to Nama. These delays were actively resisted by Nama. I have been made aware of at least one asset sold by Nama seemingly in disregard for its upgrading and/or development potential and possible uplifts to asset value arising due to completion of major adjoining public infrastructure project. In another project, I was told of a situation whereby Nama presided over termination of a value-additive joint venture with another organisation that could have nearly doubled the value of the original asset.

In economics, there is a term of 'opportunity cost' - the cost arising from pursuing one course of action as opposed to opting for a different course. In Deputy Wallace-cited examples of public knowledge, that cost is non-negligible EUR165.1 million. Or, roughly, 2/3rds of the the 'savings' achieved in one year from imposing higher costs onto users of insurance-funded health services. That too is an 'opportunity cost'.

12/6/15: Anglo Overcharging Saga: Ganley Affidavit of 2013

Here are some select quotes from the Affidavit, filed by Mr. Declan Ganley on August 12, 2013 with respect to his knowledge about the share interest rate rigging practices at the Anglo Irish Bank as covered in my earlier posts here:
http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html
http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html
and implications of which are discussed here:
http://trueeconomics.blogspot.ie/2015/06/11615-anglos-toxic-legacy-it-is-still.html

Per Mr .Ganley's Affidavit: he met Mr. R.K. - former executive in Anglo Irish Bank in October 2010 and during the course of his discussion with Mr. R.K., Mr. R.K. "told me that one of several areas that should be pursued should be the opportunistic over charging of interest rates targeting multiple customers of Anglo. He said that it wasn't a great secret within Anglo and that it had been standard practice for many years. He said that the skim on these loans was jokingly known as "TIBOR" after a Mr. Tiarnan O'Mahoney, who he said oversaw this practice at the bank. He explained that TIBOR was the fake rate that Anglo would apply, pretending that it was the daily DIBOR rate. He said that it would be easy to check, by just looking into what the actual DIBOR rate was on a given day and then checking what Anglo had reported it to be to various customers. The resulting mark up would go to Anglo's coffers."

Now, take a slightly different angle on this. Suppose you go to a Bank and ask for a tracker mortgage loan. Suppose you get a quote of "ECB rate plus 1%". You take the loan and subsequently receive a statement that your interest rate charged in the past month was 1.35%. Except that 1.35% = ECB rate of 0.05% + 1% declared margin + 0.3% clerk-own make up margin. You contracted to pay 1.05%. You paid 1.35%. The clerk pocketed 0.3% as personal gain. How fast would the law be brought down on that clerk's case? Oh, in a nanosecond.

In Anglo's DIBOR case, there is no law being brought down on anyone. Because a bank engaged in defrauding customers is not the same as a clerk engaging in defrauding customers.

"I expressed a certain degree of disbelief that such a practice could run for more than a year or two without someone spotting it, a regulator, auditor, a professional investor (e.g. a bond investor) or other. I also said it was hard to imagine that the practice was well known."

"Mr. R.K. then said that not only was it the case but that he even had a copy of internal Anglo Irish Bank minutes where it was covered as a matter of fact practice."

Now, note, the above alleges explicitly that the fraud was conducted repeatedly, regularly, knowingly and was approved by the bank.

"He offered to show me a copy, I said "yes" and he proceeded to produce a copy of a document that appeared to be minutes of an Anglo Irish Bank meeting covering TIBOR. I then made arrangements to forward a copy of the document to a media outlet in London, who proceeded to use their documents as part of their basis for a report on the "TIBOR" story…

One of the pages was a schedule of "TIBOR" rates that the bank has charged to their clients as genuine DIBOR rates over a provisos period. I checked these rates against the official rates for the same period and confirmed that none of the rates replicated the actual published DIBOR rates. It appeared from the documents that, per Mr. R.K.'description, the official DIBOR rates had all been randomly and substantially loaded by differing amounts by Anglo Irish Bank."

Now, let us return to that clerk in your local bank example. Suppose that there is evidence showing that the said clerk perpetrated the same fraud time after time after time with all borrowers who came to his office to secure a mortgage. And that he notified his superior of this fraud and arranged to report regularly on his progress of defrauding banks' clients. How long will it be, in your view, before the weight of law is brought down onto the bank clerk's superior?

We had several cases in the past when bank employees would engage in stealing clients funds. These cases were prosecuted, wrong was addressed and clients were compensated. But when it comes to "TIBOR", even after two courts establish evidence that Anglo Irish Bank engaged in sharp practices, and years after this is notified to the Irish authorities by the likes of Mr. Ganley and John Morrissey and John Flynn and others, there is static silence in the air on the topic from all Irish authorities concerned.

And this is a simple, established, evidence-backed case. What can we expect from a much more complex inquiry into business dealings of IBRC? And more importantly, what can we expect from any attempt by the State to even look into how Nama has been running its business?

Nope, I don't have much of conviction we will see a definitive conclusion to this Anglo/IBRC saga any time soon.

Note: Mr. Ganley's affidavit references the fact that in late 2010 the TIBOR scandal was made public in international press and through other media channels. In other words, Irish Government and authorities were aware of the problem since then. They are yet to reply on how it can be rectified.

12/6/15: IMF Tells Kiev: "Default"

Things are getting really testy Friday night in Ukraine. As I noted earlier today (see here: http://trueeconomics.blogspot.ie/2015/06/12615-ukraine-debt-haircuts.html), IMF gave Kiev a bit of strong-man-behind-me support in negotiations with private sector bondholders.

Later today, IMF head had the following to say on the subject: "To ensure economic and financial stability, [programme] objectives need to be achieved in a manner consistent with maintaining a strong international reserves position over the medium term, in line with projections under the program. In this regard, the NBU’s international reserves cannot be used for sovereign debt service without the government incurring new debt, which would be inconsistent with the objectives of the debt operation. Ultimately, Ukraine’s debt repayment capacity is limited by its fiscal capacity."

De facto, Ms. Christine Lagarde means the following: forex reserves held by the National Bank of Ukraine will not be used to fund debt repayments or servicing. IMF loans cannot be used for debt redemptions or servicing. Which means Kiev can only pay out on bonds out of current revenues left or via new borrowing in the markets. Kiev has none of those funds available, so Ms. Christine Lagarde effectively gave Kiev an order to default, as "Ukraine lacks the resources under the program to fully service its debts on the original terms."

"...in the event that a negotiated settlement with private creditors is not reached and the country determines that it cannot service its debt, the Fund can lend to Ukraine consistent with its Lending-into-Arrears Policy."

Ms. Lagarde effectively said in Ukraine, IMF will act differently than it did in all European programme countries and differently from pretty much every other case in its history.

In addition, Ms. Christine Lagarde has gone as far as ordering the bondholders to accept Kiev deal or face a forced default. Ms. Lagarde qualified this order being in the interest of the bondholders, explicitly linking that interest to the IMF 'conviction'. This is a major point, because IMF is now indirectly dictating - via Kiev - to the private markets terms and conditions of their surrender.

Note: I tend to agree with Ms. Christine Lagarde on the necessity of a write down, but this is one of these rare (if not unique) occasions where the IMF is effectively ordering a default and expropriating private property of third parties.

Final note: private sector investors have based their proposal for haircuts on the premise that Ukraine will be able to use forex reserves at NBU as a source of repayments post-restructuring. Ms. Lagarde now cancelled that position in one go.

All of this means two things - beyond the immediate consideration of Ukrainian situation:
1) IMF is trying to hedge the risk of future (not current) slippage in the programme and insulate the funds it supplies from being exhausted on debt servicing and repayments. This means the IMF is seeing Ukraine as a huge risk engagement at this stage and is doing preemptive damage control. All the talk about debt sustainability under the IMF programme is a fig leaf of decorum: even if haircuts are delivered as planned, IMF sees big risk of programme being derailed and wants its money ring-fenced.
2) IMF is also trying to re-establish some sort of an independent agency reputation, post-European experience.

Ukraine's default is now a matter of days, unless private bondholders surrender. Prepare for a wild ride…

12/6/15: Ukraine Debt Haircuts

Important article today in the FT on the issue of write downs on Ukrainian debt: http://www.ft.com/intl/cms/s/0/949628a4-102a-11e5-bd70-00144feabdc0.html#axzz3cg6nwFC9

In my view, the write down should take into the account discounts at which current debt holders have taken their long positions, so that vulture funds and distressed debt speculators take a larger haircut than someone who held debt over longer term and bought it at lower discounts. This will put heavier penalty onto distressed debt speculators and reduce penalty on investors who acquired Ukrainian debt before the crisis started.

Meanwhile, Ukraine's probability of default is climbing. Here are two sources: implied bonds probability of default at >95% and Credit Default Swaps implied probability of default at almost 82%.

Source: @Schuldensuehner

Source: CMA

The latest spike in default probabilities took place following IMF comments (see:  http://www.imf.org/external/np/tr/2015/tr061115.htm) that effectively altered markets expectation as to whether or not the IMF will allow Kiev to default on private debt. It now appears that the IMF has little problem with Kiev using strong-arm tactic of threatening (and enacting) a default on private sector debt. Prior to this week, the understanding was that the IMF will not lend to Ukraine if it goes into a default - a position that allowed private debt holders to argue that their intransigence is supported by the pressure from the IMF on Kiev to conclude a deal. Now, that pressure is gone and IMF seemingly is giving green light to Kiev to default, as long as such a default does not take place after any deal conclusion.

Update: The strategy deployed by IMF in the case of Ukraine - the strategy of actively forcing a default as a credible threat to private sector holders of debt - is not new. It was outlined in this document from 2002 (see page 28 of http://www.imf.org/external/pubs/ft/exrp/sdrm/eng/sdrm.pdf): "There may be a risk that creditors would withhold an extension of the stay in the hope that the IMF would provide more financing or call on the member to make additional adjustment efforts. For example, even in circumstances where the member is implementing good policies and negotiating in good faith, creditors may refuse to extend the period of the stay as a means of persuading the member to turn to the IMF for financing that could enhance the terms of any restructuring. The creditors could threaten to lift the stay to force the debtor to agree to more adjustment than contemplated under the IMF-supported program. Such risks could be reduced, however, by the resolute application of the IMF’s policy of lending into arrears, under which it signals its willingness to continue to support a program, even if the member has interrupted payments to its creditors."

12/6/15: Did Ireland Abandon Homeowners in Need?

An short, but informative article on the issue of mortgages arrears in Ireland:
http://www.herald.ie/news/state-has-abandoned-mortgage-holders-31296163.html

The article correctly points to the lack of state engagement with the issue of long term arrears and the banks' strategy of extend-and-pretend in hope that rising house prices will maximise their returns on future foreclosures.

But the real, the main, point here is whether the Irish state has abandoned the homeowners in need. In my view - the Irish State was never concerned with the interests of homeowners. To think otherwise is to delude oneself once again into a fallacy of seeing the State as an agent concerned with the interests of the people.

Here are the excerpts from the recent study commissioned by the EU Parliament on changes in core rights accruing to individuals across a number of European nations in the wake of the post-crisis austerity programmes. The selection addresses the view of the reporters on Ireland in the context of the right to housing.

"Right to housing was affected in Belgium, Cyprus, Ireland and Spain in two
principal ways: with the increase of foreclosures and evictions and by the
interventions into the allocation of social housing and rental allowances." (page 15)

Note: this is not 'new' as in being indicative of an 'abandonment' of homeowners - rather, this is an assessment of systemic, long-term changes enacted by the State. And it covers both: private structure of homeownership and rental markets, and public provision of social housing.

"At the same time, in Belgium, Cyprus and Ireland, rental allowances or the
availability of social housing are inadequate and insufficient to respond to the needs of people in the wake of the crisis" (page 123)

"The Irish social housing budget was cut by 36% in 2011 and by another 26% in 2012. At the same time, with the loss of jobs and turbulence in the labour market, it is not surprising that the number of households on waiting lists for social housing increased by 75% between 2008 and 2011, i.e. from 56,000 to 98,000. Moreover, it is estimated that in 2011, approximately 5,000 people were homeless in Ireland compared to 3,157 people in 2008. The continued rise in rents, particularly in the last 12 months, is seen as contributing to the problem498, while rent supplements, having been reduced by 20% to 25%, are becoming increasingly inadequate with the severe budget cuts. Certain vulnerable groups have been adversely affected in Ireland. Travellers have
experienced 85% spending cuts on housing since 2008. Moreover, resource allocations for asylum seeker accommodation were reduced by 13% in 20115. In 2008, 36% of all single-parent households were on the waiting list for social housing and one fifth of all people who relied on a rent supplement to meet their rental costs were single parents. The capital assistance scheme, which used to house people with disabilities, was also reduced from EUR 145 million in 2010, to EUR 50 million in 2012" (page 125)

So here you have it - the EU report does not document an act of abandonment as a departure from past policy. It suggests systemic, long term trend toward such abandonment. In other words, the report findings imply a lack of concern or interest on behalf of the State to secure rights to housing from the start of the crisis, not a sudden change of heart.

Full EU report is available here: EUP (2015: PE 510.021) "The impact of the crisis on fundamental rights across Member States of the EU Comparative analysis". Study for the Libe Committee, Policy Department C: Citizens’ Rights and Constitutional Affairs, European Parliament. February 2015: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/510021/IPOL_STU(2015)510021_EN.pdf 

11/6/15: Full Letter Concerning IBRC Overcharging

Yesterday, I posted about Deputy peter Mathews' speech in the Dail concerning the egregious sharp practices in the Anglo Irish Bank and IBRC (link here). Today, I posted my point of view taking these practices to the macro level in relation to the remaining legacy of Anglo/IBRC (link here).

In his speech, deputy Mathews quoted from the Black & Company Solicitors' letter on behalf of Mr. John Morrissey and I quoted from the same some more in my post (linked above).

Here is the actual copy of the letter (I had to break it into segments in order to post on this platform). All sections are sequential and reproduce the letter in its entirety. You can click on each segment to enlarge.

I provide no comment beyond what has been already provided in the two posts linked above.

11/6/15: What Markets Are Pricing in Greece-Troika ex-IMF Standoff

Head on collision warning 1: IMF has now left the 'political dialogue' room where Greece and Troika (pardon, Institutions) have been pretending to negotiate a pretence at a solution: http://uk.reuters.com/article/2015/06/11/uk-eurozone-greece-chance-idUKKBN0OR13020150611

Which brings us to the markets.

CDS-implied probability of default for Greece is now at 82.04%, ahead of Ukraine:

But bond markets seem relatively cool:

Which suggests two things:

1. Markets still anticipate a deal; but
2. Markets also push down expected duration / longevity of the deal and, in case of the deal unraveling, they expect lower recovery rates.

This, amidst continued 'warnings' and 'dire warnings' and 'ultimatums' and 'take-it-or-leave' offers and the rest of warring rhetoric is not a good omen for the crisis resolution.

Even Jean-Claude 'The Rubber Chicken of European Politics' Junker seemed to have given his last push to this: http://uk.reuters.com/article/2015/06/11/uk-eurozone-greece-juncker-attempt-idUKKBN0OR23V20150611?mod=related&channelName=businessNews and failed...

11/6/15: FT on IBRC Inquiry

Financial Times on IBRC Inquiry: http://www.ft.com/intl/cms/s/0/295fdf8a-0f4e-11e5-897e-00144feabdc0.html#axzz3chjkDlNH with comment from myself amongst others.

11/6/15: Anglo's Toxic Legacy: It Is Still Around Us, Today...

Here is an edited version of a note from 4Q 2014 that I provided to a non-commercial party interested in the matters of the Anglo Irish Bank that outlines my view of the sharp practices at the bank and the spillover from these practices across Irish banking, economic and political systems.

"As you know, Ireland was forced by the ECB and the EU to bail out its banks. The most egregious case involved Anglo Irish Bank - a mono-line property lender that was nationalised on January 21, 2009 and bailed out using Irish Government funding to the tune of EUR29.3 billion.

Funds for this bailout came from a combination of the Troika loans and taxpayers-owned National Pension Reserve Fund and thus, de facto, amounted to taxpayer financing of the bank.

Nationalisation of the Anglo Irish Bank, as we now know, came on foot of the bank, the auditors and regulators failing to report egregious sharp practices in the bank when it comes to the regulatory rules that date from the early 1990s through 2008 and include systemic and wilful overcharging of customers, breaches of liquidity rules, bank providing funding for its own directors on the basis of preferential treatment of public disclosures in collusion with another bank, INBS, bank engaging in misclassification of loans as deposits, and bank providing funding to its own customers for share price support schemes.

Any one of these sharp practices would have resulted in either a bank closure in a properly regulated regime, such as, for example, the U.S., and/or a complete wipeout of the equity value of the bank in the markets.

Two Examples

Take one example of one such practice. The overcharging problem at the Anglo Irish Bank continued from 1990 through 2004, with clients billed on average 0.3% concealed margin on their loans without notification of the customers charged and without disclosure to the auditors. Bankcheck review of the large number of loans revealed that 80% of these were involving overcharging. More importantly, from the point of view of the current situation, the Irish Government agencies, such as the IBRC and Nama, as well as the purchasers of distressed loans from Anglo borrowers, continue to charge the rates that include the original fraudulent mark ups, despite at least one official judgement on the matter issued by the Irish court. Taken in perspective, the overcharging - officially and on the record exposed in Irish and US courts - represents a quantum of estimated EUR1 billion of overstatement of publicly recorded and audited profits declared by Anglo through the period of 2004, and although we have no means for ascertaining the quantum of overcharging since 2004, the figure of at least around EUR2 billion total over the span of 1990-2014 is most likely a conservative estimate. This overcharging was notified to the Irish authorities repeatedly and on the record, with no action taken in response to notifications by the current Government, the Financial Regulator and/or the Central Bank.

In another sharp practice, the bank lent money to a single customer to cover margin calls on CFDs held against the bank own shares and, subsequent to the accumulated loans in excess of EUR2 billion, the bank arranged and funded a buyout facility for 10 investors (also clients of the bank) who were lent funds by the bank predominantly on unsecured basis to purchase shares underlying the said CFD positions. In simple, most basic terms, the bank used its lending book to prevent a share price collapse that could have resulted from the disclosure to the markets of the cumulated CFD positions.

Impact

In effect, thus, Irish taxpayers were compelled by the European component of the Troika, the EU and the ECB, in contravention of the IMF advice, to underwrite losses in a bank that was neither systemic to the Irish economy (it had basically no retail deposits and conducted virtually no retail business) nor operated within the confines of banking regulations and laws. On foot of the Anglo Irish Bank rescue, we were compelled to rescue an equally egregious Irish Nationwide Building Society - a counterpart to some of the sharp practices carried out in the Anglo Irish Bank.

Between 2007 and 2013, Irish Government debt rose by EUR155.8 billion - the largest jump in debt relative to GDP of any country in the euro area, including Greece. More than 22 percent of this increase is down to Anglo Irish Bank and irish Nationwide Building Society rescues. 

The damage runs deeper than that, however. If the Irish Government was allowed by the ECB to shut down Anglo Irish Bank prior to nationalisation, Irish Government debt today would have been around 93% of GDP as opposed to the current level of 112%. But this does not take into the account the potential contagion that resulted from the Anglo Irish Bank collapse to other banking institutions in the country. At the time of the September 2008 banking Guarantee, the State and its advisers have argued that not rescuing Anglo Irish Bank would have spread market panic to other Irish banks. 

This claim is, in my opinion, dubious. It could have been as likely, if not more so, that shutting down a rogue institution (or, with INBS - two rogue institutions) in a public and transparent manner could have resulted in more confidence in the systems and procedures present within Irish regulatory and supervisory regime. By opting to preserve and secure Anglo Irish Bank and INBS, Irish Government at the time sent a signal to the markets that any institution, including that with questionable business model, strategy and practices will be preserved and protected. In turn, such a signal was consistent with telling the markets that Ireland has no will to or cannot (due to the limited regulatory abilities) distinguish rogue operators from legitimate and functional ones. The effect of this could have been undermining confidence in all Irish banks, in order to protect a rogue one.

Ireland opted for a solution of shoring up and covering up the structural vulnerabilities exposed by the Anglo Irish Bank practices in the system of our regulation and supervision, as well as governance. This is neither a sustainable strategy, nor is a markets-securing strategy.

Legacy

The legacy of the Anglo Irish Bank-related debt remains with us. Currently, Irish Central Bank holds some EUR25 billion worth of long-term Government bonds issued to offset Emergency Liquidity Assistance credit line extended to the bank liquidators. Ireland is mandated by the EU and ECB to gradually sell these bonds into private markets. As we do so, the burden of this debt is befalling Irish people who will have to fund interest and principal on these bonds into perpetuity. 

There is an easy solution to this problem that ECB can enact within a minute: the bonds should be left in the Central Bank and cancelled at maturity. This implies no cost for European taxpayers and no new issuance of money by the ECB.

In ethical terms (moral hazard etc), such a move is warranted due to the sheer scale of deception and concealment of the facts of the Anglo Irish Bank operations that have been exposed to-date and are still being exposed and that were not disclosed at the time of the September 2008 Guarantee or, indeed, at the time of the 2010 Troika 'Bailout'. In other words, the argument can and should be made that both the Guarantee and the Bailout involved Irish commitments to lenders and lenders agreements that were not reflective of the full informational disclosures by the Anglo Irish Bank and the INBS.

In moral terms and economic terms, Irish people have paid a huge price for the crisis - far more than their fair share, given the fact that in rescuing Irish banks, we have underwritten a rescue of private bondholders and banks across the EU, the US. Irish people are paying for the crisis with dramatically higher rates of suicide, destroyed families, lost or endangered family homes, decimated health care system, devastated pensions, underfunded education and childcare, and an economy that in per capita GDP terms has sustained the third biggest drop across all Euro area countries. A large share of these costs is attributable to EU and ECB decision to force Irish Government to accept full losses in the Anglo Irish Bank and INBS - two rogue banking institutions that were not systemic to Ireland - which itself was predicated on incomplete information and misleading information being supplied to the Irish authorities at the time of decision making.

Furthermore, it is my opinion that the legacy of the Anglo and INBS - embodied in the continued process of disposal of the residual bonds on the insistence of the EU and ECB - is toxic to the democratic institutions of Ireland, from the point of view of the future. As long as Irish political elites are forced to deal with the legacy of the bonds disposals, there will remain an incentive for the Irish establishment to stay mute on the issues of systemic breaches in regulatory, supervisory and legal frameworks around the operations of the two rogue institutions. In return, official refusal to deal with the legacy fuels public mistrust of the core democratic institutions of the State, increasing the appeal of the extreme ideologies and political positions. 

The legacy of Anglo and INBS is so toxic that it prevents a rational, informed discovery of facts and debate of these facts as relating to the regulatory and supervisory breaches within Irish financial system. The only way we can functionally deal with this malfunctioning of the state systems is if the European authorities allow Ireland to move beyond the cost of carrying the repayments accruing from these liabilities on the State balance sheet. Only after shedding the immediate burden of having to finance their legacy can we, as a nation, move to the stage of addressing deeper, more structural problems exposed by the crisis.

Note: Details of overcharging sharp practices at Anglo Irish Bank that allegedly continued into IBRC and Nama are discussed here: http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html. Details of Mr. Morrissey letter quoted in the Dail (Irish parliament) are available here: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html. Details of the affidavit filed by Mr. Declan Ganley with Irish authorities concerning overcharging allegations are available here: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html. Details on evidence of Nama value destruction and other systemic problems are covered here: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html.