Have you heard of Neelie Kroes? Last November, this column said that the European Commission would save us from the crazy excesses of our politicians – and it delivered last Friday.
We should get down on bended knees, because the commission worries more about your money than the Irish politicians you voted for.
Last Friday, the commission – with Joaquin Almunia now holding the competition brief – told this reckless, incompetent government, which has been throwing around billions of our money as if it were confetti, to get a grip. The commission has said the valuations the government is putting on land for Nama are too generous to the banks.
Despite this, the spin put out from Merrion Street is that the commission was happy with Nama. This is not the case.
Closer reading of the press release suggests there is considerable unease in the European Commission about our latest ill-advised adventure. Of course, the mainstream media swallowed the government’s spin hook, line and sinker. No surprise there.
However, the press release, designed to obscure, not inform, is quite different. Hidden in the Department of Finance’s press release, there is a crucial line that states: ‘‘Within the valuation methodology, a higher remuneration risk margin and higher enforcement costs will be applied.”
As a result: ‘‘It is not the minister’s intention to perform another top-down aggregate estimate of the potential haircut that the institutions will face.”
This means, in plain English, that the commission believes the government is trying to shaft us, the taxpayers, with its optimistic valuations. It has told the government that there is no way the commission will allow it to stick to its original 30 per cent discount.
You might remember that, originally, the government said that it would apply a 30 per cent discount to the property loans Nama was supposed to buy off the banks.
The commission has obviously told it to snap out of it. The commission maintains that the valuations will have to come down significantly from the minister’s original estimates.
This clearly means that Nama will not make a profit – which was the silly spin of last year. It also means that, unless there is another inflated property bubble, the taxpayer will be left holding fields in Mullingar that no one wants.
The meaning of the minister saying he will no longer give ‘‘another top-down aggregate estimate’’ is that each loan will now be evaluated on a case-by-case basis, as opposed to the government’s original blanket discount approach. This means there will be enormous variations in every bit of property that goes into Nama.
Logistically, we can already see how this Nama is going to grow to be a bureaucratic monster.
On the upside, the commission’s intervention could be good news for taxpayers. But why did the commission side with the taxpayers while the government sided with the banks? Why would the remote commission side with ‘outsiders’, while elected politicians side with the ‘insiders’? What happened to the assumption that the government acts with the best interests of the people at heart?
The commission not only believes the government is living in cloud cuckoo land, but must be perplexed at the behaviour of ministers who tried to railroad through valuations which would impoverish the taxpayer, and enrich the banks and their investors. This stance of our politicians is quite extraordinary, and the opaque language of the press release is depressingly revealing.
Rather than speak plainly about this huge financial gamble, our government – possibly because it knows Nama is a mistake – tries to obscure the truth and muddle through. Pathetic really.
Why did the commission act to constrain the government? Maybe the commission saw the news from Athlone last week that development land valued at €31million in the boom is now worth only €600,000.Could it be that this 98 per cent fall in the price of development land made the commission think again about the 30 per cent discount that the government was trying to get away with?
The commission – unlike Brian Lenihan – concluded what the dogs on the street know to be true: much Irish land is almost worthless now. To force the Irish taxpayer to pay the difference between today’s price and the boom price would bankrupt the place. It also saw that what the Department of Finance was trying to do with the 30 per cent discount was keep the wretched Irish banks open by giving them an unfair ‘dig-out’ – or, in EU parlance, state aid.
So we know why the commission acted as it did, but why has the government acted against the interest of the taxpayer? The Brian Lenihan who discussed banking issues with me never struck me as someone who would put the banks’ interests ahead of the taxpayers’. In fact, the rhetoric suggests the opposite, but the reality is that he has put the banks before the people.
Why?
He is advised by people who, from the beginning, wanted a certain outcome, irrespective of the facts. The people who came up with Nama had the answer they wanted before they asked the questions. They wanted to keep the banks as private entities at all costs.
The banks are required to hold a certain minimum amount of capital. If a bank is trading recklessly without sufficient capital, someone has to inject capital. But without investors, the government has to nationalise. Of course, for ideological reasons, Lenihan and his gang wanted to avoid nationalisation.
The other night, as I was doing sums with my seven-year-old son, I thought of an easy way to explain the government’s dilemma which the commission has seen through. We were doing additions and takeaways at the kitchen table. We lined up rugby players to visualise the sum and make it easier.
Using the sin bin analogy, which kids love, the sum is how many Irish rugby players would be left from seven if five were sin-binned. The answer is two rugby players.
Let’s turn it around and say then if seven rugby players minus five rugby players is two, what is five rugby players plus two rugby players? Answer: seven.
OK, so what’s two plus five? Wow, it’s seven. So if I have seven players and I want to be left with two players, what do I take away? Answer: five. So if I want to be left with two – not one or nil – and I start with seven? The answer has to be five.
Now think of Nama. Lenihan started with €70 billion-odd of bad developer loans. He needed to have capital of €20 billion (some of which he had in the pension fund), so the value of the bad loans couldn’t be lower than €50 billion odd.
So the clever people behind Nama knew the answer to the question before they asked it. The discount had to be 30 per cent, not because that’s what the land was worth, but because anything lower than that risked having to nationalise the banks.
This is why they have tried to rip off the taxpayer, when we know that the value of land has fallen by much, much more than that. This is why they keep blustering and spoofing, and this is why the commission called their bluff.
If only they had been up-front at the beginning, they would have saved us all this angst. They could have told us that Nama was never about land, but was always about protecting the banks – which the government erroneously thinks are viable only with the present ownership structure.
This would have explained their irrational and, at times, tragicomic obfuscation. But then again, could it be that maybe being this straight-up is just not in their nature?
Astonishing Article David.
Just read your latest (dare I say “diatribe”?) article, David. Like a good wine ,you keep getting better and better,with each passing week. I detect a sense of “angry George Lee” in this contribution. You know I was thinking about how to reward the suffering taxpayers who will endure so much pain for the coming decade- or longer. As we are now socializing the enormous losses of our obscenely rich developer class,surely we can do it properly. With this in mind I made a little video which I believe will prompt Mr Lenahan to act as I believe he is… Read more »
A stake through the heart of all the lies and propaganda.
It’s a pity this only appears in the SBP and catches the ABC1’s. Not many average punters buy the SBP, mores the pity.
Whats the chances of doing a DMcW Lite for the C2,D&E’s, particularly the recently dispossessed E’s?
Mrs Furry is well impressed.
David In order to make sense of the antics of the political and economic elite in Ireland in the current situation, I think that you need to look further back to at least the 1930s and then refer to Fintain O’Tooles recent history and analysis. One can only then conclude that they are as dissolute a bunch as any corrupt republic in the developing world not excluding Zaire under Mobuto. Why would they need to care? If the country fails to develop,or worse moves backwards they still have their capital stashed, their overseas investments and their Dail and EU pensions,… Read more »
PS I have ghost written a script for Mr Lenehan to announce the plan to the nation.
It may appease the angry multitudes and prevent civil strife;
http://www.soldiersofdestiny.org/kclubhighlights.htm
One of the main arguments that the No side of the Lisbon treaty put forward was that we would be handing over more control to Europe and that this would be bad for Ireland. I think that Europe and other external forces are the ones keeping this country on any sort of straight track. The government are a sham and putting band-aids on corpses. Listening to government ministers talking about how great a thing it was to get shares instead of hard cash back from the banks, how it will be worth more in a year. The next 6 months… Read more »
On ‘The Front Line’ aired on Monday 21st September 2009 Pat Kenny put it to Minister Lennihan that Richard Curran from the Sunday Business Post had valued the loan book of the banks to be bought by NAMA at 40bn and not 47bn euro as estimated by the government. The minister said that if Mr. Currans esitmate is correct then NAMA would pay 47bn instead of the 54bn it had estimated, that is to say the 7bn will be tagged onto 40bn and not 47bn. 7/40 is not the same as 7/47. Why would the minister still overpay by 7bn… Read more »
Excellent article, David.
It is refreshing to see somebody saying it like it is
Hi David, The decision is sufficiently vague to allow the disaster to continue. ‘Claw back mechanism’ brings the term ‘shifting deck chairs on the Titanic’ to mind. Whats to claw back if these same banks never make a profit or go bankrupt anyway? The commission repeats that the State should not pay over ‘long term economic value’. The government implies that this price is a higher value than current market price and therefore this is as an implicit approval of the governments approach and they will use this to their advantage. Payment for assets is also a distraction because any… Read more »
[…] to David’s article http://www.davidmcwilliams.ie/2010/02/28/it-took-europe-to-rein-in-nama […]
Reading the Sunday newspapers to —day, I don t know which is more depressing The prospect of having the opposition takes the place of the current bag of misfits in the Dail I mean they haven’t really distinguished themselves and I am not so sure of their solutions to the whole NAMA Con job. Their proposals are exactly what??? The Government seems to be trying to control the content of our main stream newspapers by touting the cabinet’s possible re- shuffle in the coming weeks and is deflecting away from more important thing like NAMA I know I should say… Read more »
David , your forgetting something about how F.F. do sums and using the Rugby team well that just isn’t fair as while you may have 7 rugby players and you take off 5 , well our F.F. department of Finance would of course not SEE they have two left on the field as they would be looking at the NUMBERS on the backs of the 2 left out there so of course depending on the 5 who got Sin binned , you could have a variety of answers for the remaining two on the field , 5 players from 7… Read more »
“No To NAMA” Protest.
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The sluggishness with which anything gets done in this country may have helped us out for once, along with the Euro Commission coming to our aid. The man in the street is beginning to glimpse that our banks cannot be bailed out … they’re in too much trouble and we simply haven’t got the money, nor can we feasibly borrow it. One thing which someone more knowledgeable will have to explain to me — I’m guessing that not all bank creditors are equal; that there are “preferred” creditors and that foremost among these will be the bondholders. That means that… Read more »
Good Morning
Sorry, but I don’t know what to say.
It seems on the surface as if NAMA has morphed into a bail-out for certain favoured professional classes. But it’s hard to read into their (the governing classes) intentions because these people venerate a culture of cunning, deviousness, lying and spin. I wonder when we are going to stand up and demand that this insidious culture and the institiutions that propagate it be turned around on their heads.
David another tough article on the muppets who decide what happens in Ireland, regardless of what the taxpayers interest. And David – also compliments on being consistent with regard to your analysis of the economy in Ireland. You are not one of the ‘Johnny come latelys’ who indulged Ahern and the IBEC/ICTU consensus of controlling Ireland, and then decided to change tack in order to re-establish credibility. The EU has to have rules, and there is more pressure to make them transparent. Especially in the current climate with respect to the PIGS. Neelie Kroes is very strict compared to our… Read more »
In case anybody is looking for some entertainment.
http://www.independent.ie/national-news/courts/judge-prefers-pigs-to-bankers-2084131.html
It is about the only return that we have got so far for the billions given to the banksters.
Can somebody tell me why we are giving billions to the banks when they have shares in other ISEQ companies that can be sold ? These shares are not in the strategic interest of the banks. The directors of the big two banks(AIB/BoI) use these shares and the recommendations from stockbroking firms that they control, to be able to appoint themselves and their cronies as directors to these companies. And thereby they get nice handy little earners.
If they sold these holdings, then they would not need to be getting such massive injections from state borrowings.
Another question. Can we have a proper examination of the developers who are in default ? It seems that even though they are declaring bankruptcy, many of them still have considerable assets in the names of relatives or companies that are registered in places like Lichtenstein, Bermuda, etc… And then we have the likes of David Drumm(ex Anglo) and Mr. Quinlan Private who decide to flee the jurisdiction and live in mansions elsewhere, even though they are in dire straits here. Are we the taxpayers just left carrying the can for the liberal laxity that exists in Irish company law… Read more »
Roc, I always, (possibly naively) thought that booms and busts it could be argued, are simply different modes of wealth redistribution. People who get rich in booms can lose their shirts in a bust. Nama from its very inception was intended to ensure that the latter did not happen, as those losing their shirts are plugged directly in to the governing elite, and in fact includes members of the Oireachtas, including the Taoiseach. David, Nama is a fait acompis, it is a very bad idea, made somewhat less damaging by the EU, who’s primary motivation is the protection of the… Read more »
@Tim, I see where your favourite “International man of mystery” the one and only Mr.Peter Sutherland has managed to get his son Shane onto Maire Geoghegan Quinn’s team in the European Commission. FF have bypassed the Greens and Deirdre de Boooorka’s request for a slot on the Commissh. I would have thought that Peter Sud’s was more of a FG voter, then what would I know since they deported me and my kinsmen to van deeeeemens land.
Meanwhile the hoteliers of Ireland are squealing like stuck pigs because no foreign tourists are coming here any more-and besides, the banks operating hotels now in receivership and offering very good deals(at last) . Among the most profitable air routes from Ireland, for both Aer Lingus and Ryanair, must certainly be those to the Canary Islands. I live on Gran Canaria and whichever company I travel with,there is always a high seat occupancy. Ryanair have come in the Gran Canaria route a year ago after negotiating a package with the Spanish government which is bringing many millions of tourists to… Read more »
In yesterday’s Sunday Times, Damien Kiberd estimated the cost of NAMA , bank recap etc of 80 bill euro.This is the equivalent of the UK having to pay 1 trillion sterling as a bail out.At least they have all that oil in the south atlantic to look forward to!.What happens if sterling collapses in the run up to the UK election in May?.Businesses north of Swords will, be wiped out.Can’t wait for Anglo results to come out.Fitzpatrick should be fed to the Lions in the zoo.
“We have one party which is unashamedly corrupt and a collection of others who are queueing up for the chance to be corrupt under the pretension of fighting corruption”
Good one Deco..
The competition commission’s provisional announcement is here: http://ec.europa.eu/ireland/press_office/news_of_the_day/commission-approves-nama_en.htm It says: “The Commission has found that the establishment of NAMA constitutes state aid to the participating institutions pursuant to Article 107(1) of the Treaty on the Functioning of the European Union (TFEU), but that this aid is compatible by virtue of Article 107(3)(b).” The full adjudication will be published when confidentiality issues have been resolved. As I wrote yesterday, “What the EC is doing seems to be reviewing NAMA under the provisions of Articles 107 and 108 in http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0047:0199:EN:PDF Strangely, they don’t mention Article 108, which requires that ” the Council… Read more »
It’s a very interesting question as to why the European Commission are taking a double take look at NAMA. The Lisbon Treaty plus the gathering together of positions from member states on how to manage meltdown within member states is focusing on how best practice solutions can be formulated. So NAMA is being looked at in terms of its 1. unfair advantage distortion of the market place eg hotel industry 2. unfair advantage distortion of the banking sector. Private gain against public expense generates more pressure on a total meltdown or bankruptcy of states like ours. Failed solutions like NAMA… Read more »
Nice heads up here from the good doctor. Economics 01/03/2010: AIB, Nama & tomorrow’s numbers Posted by Dr. Constantin Gurdgiev From the Dolmen guys – today’s preview of AIB results announcement tomorrow – “We expect operating income of €2bn for the year, impacted by lack of demand for credit by Irish consumers and lower Net Interest Margins (NIM). Due to a pre-tax loss of €2.7bn, equity tier 1 of the group will move down to 5%. Overall, the market will be looking for guidance on NAMA, capital raise and credit quality in the non-NAMA loan book. It is also likely… Read more »
Great article David.
You’ve exposed that
1. Lenny is a fraud (I never bought into that bullsh!t that Lenny was the good guy and won the NAMA debate which the commentariat tried to spin us). The truth is David McWilliams / Peter Mathews would have wiped the floor with Lenny if the opportunity ever arose). Lenny, just because the dail passed NAMA doesn’t mean you won the debate – all that means is that the government have more votes than the opposition.
2. The mainstream meeja are frauds.
3. The EU care more about Irish people that FF.
Yet another ‘no spin zone’ article from David ~ good. Thanks for highlighting the issues, as I became midly despondent when I heard the media line that the ‘European Commission had given green light to NAMA’ – I should have known better than to accept statements from Big Brother without further analysis. You did a great service with this article bringing to light the nuance in the statements issued, who knows what the government submitted to the Commission but no doubt they have their own sources and know the score. Do people think we could be on for a 1980s… Read more »
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Just in case anyone missed this at the tailend of the last post from the host;-
http://ow.ly/1ccUa
http://www.scribd.com/doc/27021139/An-Smaoineamh-Mor-M-A
The winner of big idea would appear to be “Lets get all the Proles talking about a big idea to keep them occupied”.
Cynical Shoyte.
Folks, ANGLO in news today: “ANGLO IRISH BANK WILL REPORT LOSSES OF UP TO €12 BILLION – State-owned Anglo Irish Bank is preparing to post losses of between €10 billion and €12 billion – the largest in Irish corporate history – when it announces its financial results over the coming weeks, writes the Irish Times. The bank is expected to write off the record amount for the 15-month period to December 31st, 2009 as it faces an estimated discount of 35% on €30 billion-€35 billion in loans being moved to the National Asset Management Agency (Nama). Anglo’s new management team… Read more »
Worth a read for those wondering how the US economy will fare in the next 2 years: –
http://www.moneyandmarkets.com/transcript-nine-shocking-new-predictions-for-2010-2012-2-38086
Has David seen the EU Decision which sources are saying will be months before it is published to protect confidential information – so we will have bought most of the NAMA loans before we get the Decision. If NAMA is so good for the banks and so bad for the taxpayer, then why haven’t more than 5 banks elected to take part in the scheme. Isn’t the truth that no-one really knows whether this is going to be good or disastrous for the banks – BoI, AIB, Anglo, INBS and EBS arguably have no choice regardless of whether it’s disastrous… Read more »
Oddly enough…there is a country where the behaviour of the banksters if even worse than here….next door…
http://www.independent.ie/lifestyle/independent-woman/celebrity-news-gossip/risiacuten-murphy-inspires-financiers-pound70000-spree-2084546.html
Gordon Brown has facilitated this with his steadfast drive for socialism for the rich.
[…] 1, 2010 by namawinelake Today, David McWilliams, prominent arch critic of NAMA reviews the Commission’s Statement giving approval to NAMA. It would appear that David isn’t yet […]
Apologies, here is the link to the slide show accompanying Lenihan’s talk last Friday (mentioned above):
http://www.finance.gov.ie/documents/speeches2010/spl43irishtax.pdf
Another muppet on the way out…
http://www.breakingnews.ie/ireland/cullen-has-asked-to-be-left-out-of-next-cabinet-448181.html
Do we really need a Minister for Sport ?
Folks, the comments from Brian Lucey, Michael Figgegan and others are well-worth reading, here:
http://www.irisheconomy.ie/index.php/2010/02/27/ministers-speech-at-taxation-institute/
Folks, this is a pretty *serious* perspective!:
“To put the Irish position into perspective, each Icelander owes approx. €9,000 to the UK arising from the default of their banks, and a further €4,000 to the Netherlands arising out of their State guarantee. The Icelandic people are voting on whether to renege on that deal, and have won the vociferous support of John Kay in his Financial Times column this week to do so. Our debt to the Germans is more than three times greater than that of Iceland to the UK and the Netherlands. ”
http://ow.ly/1pl1Ny
David, you may have read this already: http://www.federalreserve.gov/pubs/feds/2007/200734/revision/200734pap.pdf “News, Noise, and Estimates of the ”True” Unobserved State of the Economy” Dennis J. Fixler and Jeremy J. Nalewaik from Fed Reserve website. General gist is to reevaluate the measures used to evaluate economic performance more realistically. Found it from the Freakonomics Blog from last Friday @ http://freakonomics.blogs.nytimes.com/2010/03/01/is-okuns-law-really-broken/ debating why there has been an increase in unemployment while the US economy APPEARS to be improving. He suggests that by using income measures, the rise in unemployment is logical and matches the alternate measure which suggests things are not so rosy. My concern… Read more »
Sorry for going off-topic, but I was just marvelling at how the BBC just held an interview over Skype with a resident from the earthquake zone in Chile.
Meanwhile, here in Wexford I can’t buy an internet connection despite being less than 2 km from an ADSL-enabled Eircom exchange, and the gangsters running an alternative wireless service cannot even diagnose why their service is unavailable for more than half of every day.
:-(
Joe Higgins makes an interesting point
http://www.joehiggins.eu/2010/03/release-pat-odonnell-and-bring-the-corrib-gas-field-back-into-public-control/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+joehiggins-eu+%28Joe+Higgins.eu%29
I think NAMA is a bad deal but it is only the tip of the iceburg, everywhere you look in Ireland there is huge debt , mortgages , credit cards , company loans and overdrafts the only problem is that property developers can quiet happily avoid paying their debts while we have no choice in the matter. How is it in this country if you owe a few thousand you must pay but if you owe a few million or more you get away scott free. Do you know in law if you steal a loaf of bread because you… Read more »
Contributions Invited:
“5 Things the Individual Can do to Stop NAMA:”
and
“5 Things the Collective Can do to Stop NAMA:”
People will act if there is a roadmap to stop NAMA.
Posters. Irish society is a fraud. It is not what it represents itself to be. Our societies socio economic system is bent in the favour of ruling elites. IBEC, private banks, corporate interests, international money lender interests, political interests, aristocratic interests, land owners interests, scientific interests. An interlocked special class ruling overlords encircling the money making machines. An insider hegemony. Low in numbers compared to the outsiders population numbers. Some of the outsiders work in tandem with the insider class for their crumbs from the table. The outsiders proportion of which are the sheeple. NAMA is another phase to the… Read more »
The EU cavalry has appeared on the hill, maybe they will save Ireland from the Irish government. I think that Ireland would be a better country if we were actually run by the Germans / Belgians / Dutch. A couple of weeks ago, I asked is anyone in favour of a US style Europe? I am. Ireland has been a mismanaged country for decades. We still have a sub-par road, rail, telecoms network after the years of the bubble and massive funds available. Instead money was spent on public sector jobs and ‘performance’ related pay increases. In defense of the… Read more »
We must remove this corrupt government before NAMA comes in or we’ll end up paying the developers’ debts. Surely, we could put pressure on 5 TDs to withdraw their support from FF and the government would fall. TDs like maureen o’sullivan, finian mc grath, paul gogarty,jackie healy,trevor sargent might not be willing to take the flack for making us pay for NAMA. It can be done and needs to be done before we end up paying developers’ debts.
Posters. NAMA is merely another feather in the ruling elites monopolistic capitalist hat. NAMA proves the economic political system is rigged in the favour of special interests. At anytime the elites may drop NAMA and try something else. The whole system is owned and controlled by an elite few. Anything goes as long as the elites preside over anything of power and substance and anything goes as long as it poses no threat to the ruling order. For the moment it is the NAMA project for the elites. Next week it could be dropping the NAMA project and just nationalizing… Read more »