Tuesday, March 30, 2010

Ireland: Nama Announcement-30/3/10 (Summary and Possible Implications)

NAMA will acquire some 14,000-15,000 loans worth €81 billion. The largest 100 borrowers account for approximately 50% of the portfolio. Some 1,400 other borrowers make up the rest.
About 67% of NAMA’s prospective assets are based in the Republic of Ireland and approximately 6% in Northern Ireland. The rest are overseas, with the bulk of these (approximately 21%) in the UK.
About 43% of NAMA’s prospective assets are land, about 26% are development and about 31% are commercial.

· There will be an average discount of 47% on INITIAL loans transferred to NAMA. The following are the INITIAL transfers:

· AIB to get €1.88bn for loans worth €3.3bn - 43% discount
· Anglo Irish to get €5bn for €10bn of loans - 50% discount
· BoI to get €1.2bn for €1.9bn of loans - 35% discount
· Irish Nationwide to get €280m for €670m of loans - 58% discount
· EBS to get €90m for €140m of loans - 37% discount
· The transfer of ALL loans is to be completed by February 2011
FULL TEXT Of Minister Lenihan's Speech here

Botched Bank Bailout Ensures Ongoing Uncertainty and Shortage of Credit- Richard Bruton (FG):
National Debt Doubled at the Stroke of a Pen in Dáil Today.
The taxpayer is now facing a bill of €40bn, and counting, for bailing out Anglo Irish Bank and the reckless debts it ran up under the stewardship of Sean FitzPatrick, according to Fine Gael’s Deputy Leader and Finance Spokesman Richard Bruton T.D. He said over 70% of the money that the Government is allocating to recapitalise our banks is now going to Anglo, which will not get one cent of new credit flowing or finance a single new job.

Deputy Bruton was speaking today (Tuesday) in light of the details of the Government’s recapitalisation plans for Anglo Irish Bank and the decision to give AIB and Bank of Ireland 30 more days to come up with a plan for recapitalisation.“The Government are throwing good money after bad with Anglo Irish Bank – to the tune of €40bn and counting. Fine Gael’s policy to wind up Anglo in an orderly fashion and allow the creditors recover whatever value they can is now becoming more and more relevant. The Government’s argument against such a course of action is based on trying to scare people in to believing that any option but their own is too costly. This simply isn’t true.

Brian Lenihan should publish the evidence he is basing his decision on regarding Anglo so that the public and relevant experts can make an informed judgement on the Government’s strategy.“It is this strategy that has resulted in our national debt effectively being doubled this evening. That is a doubling to €150 billion to bail out delinquent banks and to pick up the tab for the debts run up by people like Sean FitzPatrick. This is like adding €50k to every family’s mortgage. It is the bill for 10 years of reckless Fianna Fáil economic management.“Having built up today’s announcement as the day to sort out our banking system once and for all the Government bottled it when it came to AIB and Bank of Ireland. Those banks have faced the Government down, and been given another month to prepare plans to recapitalise before the end of the year.The uncertainty regarding the final taxpayer commitment to these banks will continue. In the meantime, these banks will not be willing to finance bankable business projects. They will be hoarding their capital to try and protect their independence.“Through all of this we haven’t heard one word about job protection or creation.

The Government seem perfectly adept at finding scarce resources to pour in to Anglo but are paralysed when it comes to adopting Fine Gael’s stimulus plan, NewERA, to create over 100,000 jobs. Bailing out our reckless banks is a priority for Fianna Fail; bailing out the 440,000 people unemployed in our country is much less urgent it seems. That is where Fianna Fail has got their policies and priorities completely wrong.”

Govt Bail Out Of Banks Makes Taxpayer Pay Cost Of Crony Capitalism-Joan Burton (Labour):

Irish taxpayer is today seeing the costs and consequences of crony Irish capitalism.Today's recapitalisation and transfer of assets to NAMA is socialism for bankers and developers while each taxpayer was being saddled with €22,000 of debt for the Anglo Irish arrangement alone.This is the sixth time the 'donkeys' of Fianna Fáil will be asking the taxpaying 'lions' to take on the chin the mess that was made of their economy.This is not a formal Budget Statement but let us be in no doubt that Brian Lenihan has today set the parameters for every Budget for years to come, perhaps as much as a whole decade.

Every Autumn from now on whoever is Minister for Finance will have to frame a Budget that will incorporate the true year by year cost of today’s announcements. In all probability there will be an Inspector from the European Central Bank sitting there in the Minister’s office with a grim smile saying what can and cannot be done. That will be an historical loss of national financial sovereignty that will infuriate all who value with pride the independence of our nation. Sadly that loss of sovereignty will be the price of financial survival because of the bill for the banking collapse that today is being transferred to the taxpayer. So the first item of many future budgets in this House is the cost of the bank bailout and that cost will be massive and it will dominate the economic landscape of this country for many years. Remember the pain that a mere € 4 billion caused last December. Today is just the preliminary announcement of adjustments to come and any Minister for Finance of whatever party will have to grit his or her teeth and grasp some very stinging nettles. The State is now the hapless and reluctant owner of dominant shareholding of all the main financial institutions in the economy. ‘I own the banks’ is really a hollow boast. Every single extra percent ownership is an admission of policy failure and in his heart he knows that is the truth and will be acknowledged internationally as the bitter truth. You don’t own the banks.

In truth is that the banks own you. They dictate every element of policy, their interests take precedence over everything else and financial resources that ought to be channelled into economic recovery are directed instead to protecting 2 rogue institutions the INBS and Anglo. Since late 2008 you have thrown literally billions of precious public savings to bail out these institutions from the consequences of their reckless casino operations. You never spent such money to rescue indebted homeowners or indebted manufacturers or to offer a lifeline of credit to small businesses. You devoted the entire stock of family silver, even the curtains and carpets, to these banks because they told you they were too big to fail and you were panicked into believing them by their sinister threat to unleash Armageddon should you refuse to give in to them. Today’s massive bailout announcement is the natural consequence of decisions made that fateful night of September 29th 2008. That night, you were surrounded by bankers, you took advice only from bankers.

You meekly promised to jump through whatever hoops they put in front of you and your Taoiseach even went on radio to say no cheque could be big enough for him to sign if it was necessary to meet their insatiable demands. The ‘Too big to fail’ doctrine, applied with no economic justification even to Nationwide and Anglo, has taken a savage toll on the economy and the raw evidence of that was highlighted in the CSO document last week. This was supposed to be the cheapest bank rescue in the world. The Taoiseach said that no cheque was too big to write to save our banks Today, we get the first glimpse of the likely size of this cheque. A €36bn bank bailout package on top of NAMA - €20,000 for every taxpayer in the country. Today is really Endgame Day. The endgame in chess is when there are only a few pieces left on the board and the remaining pawns take on a special importance. Well we are certainly close to Endgame in this protracted chess game that has gone on for 2 full years now, since that fateful St Patricks Day massacre of the Anglo Irish share value in March 2008, the event that triggered the unwinding of that banks business model with all the consequences we now experience to our cost.

Since then there have been 6 Government interventions:
The guarantee on September 29th 2008
The nationalisation of Anglo Irish
The € 7 billion recapitalisation for AIB and BoI
€ 4billion injection of capital last summer into Anglo

The transfer of the preference shares in BoI into ordinary shares.
None of these interventions lived up to the expectations claimed for them by Ministers. Today, we have Fianna Fáil’s final solution. In the light of those experiences one question stands out: Is there even the slightest shred of credibility left in this Government’s banking policy after the Minister’s speech today? The failures in our financial system demonstrate the more general failures in our entire economic system. It is inevitable that changes will come from the events of recent years and the decisions of the new Regulator are the first examples of a tighter regime. Nevertheless there remains one fundamental issue that is only partially treated today. The Government has worked on the assumption that the banks are favoured institutions that must be secured at any cost even when they become insolvent by their own decisions.

This House is going to have to set out new rules in law for future bank collapses. These laws will need to be the toughest ever to be brought in this country. God knows we have endured enough from bad banking behaviour in the 1980s and 90s. I could not now take anything they promise on trust. Jim Kemmy once joked that while politics might seem easy to some, others had come by the scenic route. Fianna Fáil are certainly taking the scenic route to nationalisation, via a mega-NAMA bailout, as taxpayers now look set to be full or majority shareholders in four banks and minority shareholders in another. All nationalisations were not created equal, of course. We had the panic nationalisation of Anglo, and now we have the belated nationalisation or part nationalisation of the rest.

Labour proposed a different approach. Following the model of the successful Swedish bank rescue, and as articulated by Bo Lundrgen when he spoke in Dublin, the Labour Party proposed taking our key banks into temporary public ownership before cleansing their balance sheets for return to the private sector. The key attraction of this approach was that it would have eliminated the valuation risk and the bailout element of NAMA. There would not have been any need for the fantasy of ‘long-term economic value’.Having taken the scenic route, we will now be left with the worst of both worlds – a nationalised banking sector alongside the risky NAMA bailout. Not only was the scenic route the longest route, wasting 18 valuable months, it was also the most costly.

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