May 2010 Archives

Nama is Bailout for Builders

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The headline on page one of last week's Markets stated "€5.5 billion-worth of mortgages now in arrears". This doesn't include the many thousands of mortgage holders with restructured loans or the hundreds of thousands being locked into negative equity amounting to €10-15 billion. Page two of Markets indicates that the Minister for Justice has ruled out a so-called 'Nama for the people' on the grounds that lenders or taxpayers must take the pain if borrowers do not replay their debts.

Contrast this with the treatment of developers and banks. Taxpayers, including those in negative equity, are being forced to assume at least €40 billion of additional debt to pay for their bad loans and decisions. And in a classic case of pass the parcel, Nama will shortly start writing off, effectively forgiving, about €20 billion of developers' debts due their inability to pay. And this takes no account of the massive write-offs directly incurred by the banks.

Where the justice in this when developers can also avail of tax breaks and losses, legal loopholes, ring-fencing, limited liability and expensive advice to duck their debts?

Letter published in the Sunday Business Post on 30th May 2010.

Fighting White-Collar Crime

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In addition to whistleblower legislation, would it be feasible to alter the guilty requirements for certain types of white-collar crime to a civil rather than the virtually unprovable criminal standard of proof? This should speed up the collection and presentation of evidence and reduce the duration and complexity of trials.

Letter published in the Irish Times on 27th May 2010.

Nama and Freedom of Information

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The call by Alan Dukes, director of Anglo Irish Bank, for Nama to be covered by the Freedom of Information Act should also embrace Anglo given that it could account for about half of all loans going into Nama. This should enable taxpayers to find out about Anglo's bondholders, the cost of winding up and its extraordinary lending decisions.

By my reckoning Nama will, unless it is very lucky or tough-minded, have to write off about €11 billion of unpaid interest on top of loan defaults of least €20 billion over the next ten years. Given the scale of these losses, it is essential that Nama's and Anglo's plans and operations be open to maximum public scrutiny.

Letter published in the Sunday Business Post on 16th May 2010.

National Solidarity Bond

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Solidarity with who? Arguably, every cent raised by the National Solidarity Bond will be needed to bale out reckless banks and greedy developers rather than improve the infrastructure.

Letter published in the Irish Times on 1st May 2010.

Nama's Website

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If you open the home page for Nama and view its source (via View, Source with IE), you should see (near the top) that its meta tag for keywords contains the following:

" ireland, treasury, debt management, bonds, exchequer,
          europe, euro, EU, credit, economic, commercial paper,
          notes, exchange, programme, national, agency, dealing,
          primary, market, short-term, long-tern, currency, sovereign,
          asset,saving certs, saving bank, instalment saving, prize bonds,
          post office saving bank, group saving schemes, fexco, an post, tax, savings"

The keywords towards the end raise some interesting questions! Is Nama going start a savings bank, take over Fexco and An Post etc.?  It would appear that Nama is not simply content with using taxpayers' money to bail out builders and banks, it also wants our leftover savings.

You couldn't make it up!

Nama and the Banking Crisis

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These three letters from me about Nama and the banking crisis were published in the Sunday Business Post over the three Sundays commencing 18th April 2010:

Updated Cost of Crisis

On 22nd March you published a letter from me indicating that the banking crisis could cost taxpayers up to €35 billion. In the light of recent revelations, my "worst" case estimate has been upped to €47 billion. This is additional to related interest payments, social and economic costs and forfeiture of future investment opportunities.

How is this going to be paid for? Surely, it would be unrealistic to expect the cost to be shouldered by the lower paid who, by definition, are having trouble making ends meet. On this basis, the only realistic answer is a new levy on high earners on the grounds that they can still enjoy boom-time lifestyles and probably don't pay full taxes thanks to untaxed pension contributions and tax allowances arising from the ill-fated building binge. I can think of several memorable names for such a levy!

Lead letter published on 18th April 2010.

Haircuts and Scalping

Much attention has focused on the larger than expected haircut on the €81 billion of bank loans going into Nama. However, this haircut amounts to a scalping for taxpayers as it means that developers will walk away from residual debts of €36 billion if Nama merely breaks even over the next decade.

Accordingly, Nama's mission must be to collect as much of the haircut as possible - every unpaid billion euro is in effect a donation by taxpayers to developers' gambling debts and their incompetent banking pals. This means no sweetheart deals or fire sales, and maximum enforcement no matter how long it takes or difficult it proves.

Lead letter published on 25th April 2010.

Phantom Funds

Your front page headline "Phantom funds make up to 66% of INBS income" (25th April) could just as easily refer to Nama. Buried in the financial projections of Nama's draft business plan is evidence that it expects to roll up about €5 billion of interest in its initial three years and there is no indication that any of these phantom funds or "unrealised interest" will ever be paid. Indeed, I estimate that they could amount to €11 billion over ten years to 2020 and would almost equal the projected interest actually paid by borrowers. The Nama plan is silent on this possible write off.

It is interesting to see how the plan, issued with great flourish and used to justify Nama to the electorate and secure Eurostat approval for off-balance sheet borrowing, has been suddenly downgraded to "illustrative"  before a Joint Oireachtas Committee. Of course, the best approach would be to include Nama in the Freedom of Information Act to facilitate access to details of Nama's plans and operations.

Letter published on 2nd May 2010.

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