For the past few weeks, Irish banks have not been able to borrow abroad in any manifest way. The market is now as good as shut to us as money retracts from risky countries like Ireland to safer locations like Germany. This pattern is unlikely to change any time soon as the financial world comes to the realisation that the bailouts of recent months are only postponing the day of reckoning.
As credit dries up here completely, the entire bank and recovery strategy of the Government is unraveling and NAMA will be exposed as little more than a class rescue scheme for investors and developers. The cost of trying to stop the market doing its thing — falling — will sky rocket.
Ultimately, our government bond market will seize up, because the Department of Finance is using the bond market as a big skip into which it is throwing all the rubbish of the boom. This policy needs a willing buyer of all these bonds and the buyer needs to believe that “countries don’t go bust” as the chief executive of Citibank announced weeks before the Latin American debt crisis of the 1980s.
There will come a time, possibly sooner than we think, that the sums here won’t add up and the market will panic. In fact, the panic will have less to do with sums and more to do with sentiment. As sentiment gets worse, some of the inconsistencies of NAMA which were swept under the carpet in the storm of government spin over the past few months will be exposed and re-examined.
The first thing to be questioned is the language: think about the title, the National Asset Management Agency. But there are no assets. There are only liabilities. If there were assets, there wouldn’t be any need for NAMA in the first place. And the liabilities are getting worse.
Nor is it national, because it only covers loans above €5m. And nor is there a management agency; what there is is a bunch of civil servants doling out jobs to, guess who? The same bunch of insiders who caused the problem in the first place.
So the man who valued, for example, the Dublin Glass Bottle site at over €400m, John Mulcahy, has now been given the job, by Nama, of valuing the same property at considerably less!
The lawyers for Bank of Ireland remain the lawyers for Bank of Ireland, but they are also, inexplicably, the lawyers for NAMA. Arthur Cox don’t seem to think there’s anything wrong with being the lawyers for the seller, Bank of Ireland, and the lawyers for the buyer, NAMA.
Why has the Law Society not said something about this? I am not a lawyer, but if I was looking at this country’s potential and I asked myself, have they learned from the crisis, have they changed? I’d see something like a huge law firm working for both sides as a worrying sign.
Then if I thought about the financial infrastructure what would I see? I’d see that the auditors who signed off on what we now know to have been Anglo Irish Bank’s fictitious balance sheet — Ernst and Young — have been given the job of auditing NAMA. So having failed to spot what might turn out to be a criminal conspiracy at Anglo, Ernst and Young are awarded, by our Government, with a hefty fee from NAMA.
And what about PricewaterhouseCoopers (PWC), auditors to Michael Fingleton’s little outfit, Irish Nationwide Building Society? They, too, have been rewarded for failure with a gig at NAMA.
If I was a savvy investor looking at Ireland, asking myself “will I move into this country?” maybe I’d look at NAMA and realise that it is waltzing the country up a credit cul de sac. So I’d wait.
Let’s examine this inconsistency at the core of NAMA now. Think about how it will work and remember my hunch that it was constructed in part to bail out the professionals who didn’t like commerce but needed fees.
Anybody who’s ever speculated on financial markets knows that you don’t want to be the only buyer in town. NAMA will end up owning all the real estate in the country. It will end up being the biggest estate agent, the biggest hotelier, the biggest owner of golf courses. And we are assured, even though there is no evidence, that it’s going to buy all this stuff cheaply. But the problem is, once it has bought all this stuff, it has to sell it to someone.
And the only way you sell if you’re the only buyer is by selling at an even cheaper price than what you bought the stuff for. That’s the way markets work. But because NAMA was conceived by lawyers, civil servants and academics, they forgot that bit and it’s the taxpayer who will in fact subsidise the professional and property insiders twice: first by bailing out the banks, and second by selling land that we now own at rock bottom prices back to possibly the very people who owned the land during the boom.
NAMA is a class rescue scheme for Ireland’s professional classes, conceived by one of their own, implemented by them and designed for their benefit.
Worse still, it is entirely predicated on resuscitating the property boom that caused the recession in the first place. Without a strong recovery in property, NAMA won’t work, but with a strong recovery in property Ireland won’t work because we will be back to where we started.
The financial markets have seen through this and are refusing to finance the Irish banks. Isn’t it about time we saw through this carry-on too?
Might NAMA say that it negotiated below-market rates for the third party professionals and indeed NAMA is reported as making a “profit” on due diligence fees this year because it apparently entered into a contract to recharge the banks a minimum of €125m and the actual costs will come in at €100m? Might NAMA also say that there is a limited pool of professional firms in the State with the presence and experience needed to deal with NAMA’s business and inevitably the same players will constantly turn up and that there are Chinese walls in firms acting for both sides… Read more »
Christ.
Thanks again David for your insightful take on the stomach churning reality of corruption in action. The institutions involved in this mess will hopefully one day have to explain to their shareholders – and the Irish people how they walked a tightrope hoping to reach the other side but fell into the self made swill and crap beneath them. The same swill and crap that the rest of us are already enduring.
Discrimination / Ostracisation I meet people daily to assist them complete and declare their income tax returns every year.Recently I have noticed those in the taxi business the hardship all of them suffer .These people have been displaced by the policies of the government in recent years. Yesterday I had an appointment to meet a Limerick Taxi Driver and he rang to tell me he had to cancell it because he had been waiting in the taxi rank since early that morning and had not taken any fare and could not afford to get off that rank otherwise he could… Read more »
Hi John in the same way that you can’t accuse Israel of being very unfair in their policies or you become an anti-semite. Having a discussion regarding the amount of non E.U residents working here and claiming welfare makes you a racist. Its always the do gooders the P.C bounty hunters that pay sweet F.A to the state in TAX…..those with the free tickets are first to go boo.
There is nothing new here see http://www.rte.ie/player/#v=1074035 Limits of Liberty. This is the same old corporatist state since the beginning. The populist are to blame for allowing this. False promise after false promise it is time we copped-on but I very much doubt we will. Simple answer is that, the people have to grow up and realize that the state is not the answer. Government needs to be cut at the knees or even at the hips. They are stuck in every facet of our lives and making a pure balls of everything they touch. That is of course as… Read more »
John the Taxi situation is symptomatic of the larger contraction of the economy. Lack of or significant reduction of consumer spending filters through to cost cutting and more efficient use of discretionary spending habits that in the past were providing the income for service industries such as Taxi, Hotels, Pubs and other non-essential service providers. In a profession with limited scope for earning from an alternative source this results in market forces (which apparently do not work for banks) culling the excess with the associated hardships you illustrate in your comment. As for the social welfare position of the neighbours… Read more »
You’re on the money, again, David. Seems to me the economy won’t go round if MOST people don’t have a dollar in their pocket, so why do we only bail out the high flyers of finanace whose risk management let the whole system down? It’s fair seeming to say that the Greeks lived high on the hog and now they don’t want to pay the penalty for having done so, but maybe a better interpretation is that they are standing on their hind legs (the horrible bank deths notwithstanding), not prepared to be further done in the neck by the… Read more »
During the last Rose of Tralee, one contestant who worked for Arthur Cox said what David has said here. That the company represents both Nama and The Bank of Ireland. When she was questioned on this by the interviewer (Ray Darcy), she said that the lawyers for NAMA were on a different floor to the lawyers working for the bank. i.e., they are in the same building! Does this define corruption?
SACROSANCT By stating the obvious, nothing will change! Politicians in this country have reached a sacrosanct state by which they become untouchable. Logic, reasoning, undeniable facts, nothing has meaning anymore in this country of corruption, denial and arrogance. I only wonder what this arrogance is based on? After leaving department of finance, the most right wing ideologist of FF was sent to Europe as a Commissioner, he now has joined Ryan Air as NED. Back in 2007 a german diplomat who called a spade a spade had to make a formal apology for his speech. I laughed out loud when… Read more »
UNEMPLOYMENT UP 6,600 LAST MONTH , NOW STANDS @ 440K, ALMOST 200K HIGHER THAN THE EIGHTIES.500K BY YEAR END.SCOTLAND HAS 200K OUT OF WORK AND HAS A POPULATION OF 5.6 MILL.
“Hell on earth is a place with no reason”.
Agree with Laughingbear, same old gang rehashing the same old shit.
This blog with the exception of its author is a talking shop for f****d up heads with no audience to rant to but themselves.
David – I dont think your article is very logic : You are trying to transpose fixed values over variable values to suit your arguement. NAMA is designed to buy time to allow some sort of equilibrium to establish itself. I dont know if it will work – but I do know its the best shot in town at the moment. Thats based on not having heard any REALISTIC alternative. Property Values: A strong sustainable property market is a good thing so long as it is driven by the strength of an economy (not the other way round as happened… Read more »
A huge problem here is that the people whereby money magics itself into their account every month via the Taxpayer are in charge, with no understanding of how money is made or works .
Great article, David, it sums up the reason for Nama’s existence and the main players in the scam. The only people you left out were the government but I suppose that’s a subject for another article. Apart from their close association with the developers, they’re probably trying to buy time until the next election in the hope that they can keep the property market fairly stable until then. Whether or not Nama eventually achieves its aims, it will involve a huge transfer of wealth from working people to the land-owning elite. If it’s a failure the tax payer will pick… Read more »
The main socio-economic process of the early modern period was the transfer of power from the secular and ecclesiastical aristocracies to the merchants. This is what the French Revolution and similar events were really about; the bankrupting and overthrow of the aristocracies; and the ascendancy of the merchants. They knew better than to attempt to rule directly or publicly; and so they have ruled indirectly through a professionally staffed management agency called government. Our governments are middle-management agencies running our countries on behalf of the financial oligarchs. The merchants and their hand-maiden science built the modern world and have brought… Read more »
The problem with the “professional” class in Ireland is that they work like amatuers. The have the FAI ethic of pretending to be professional – it is only an official title. Classic example is that clown who valued the Glass Bottle site. When the property boom was in it’s high summer phase, the media regarded the ‘investment’ in the glass bottle site as a dead cert to make billions. Now, they are all scurrying for cover trying to be critical of the entire event. I bet none of them have any grasp on what is currently going on. David –… Read more »
Of course the problem is that many of these professionals bought these big old expensive “piles” in places like Carrickmines, Milltown, Glenageary, and have massive mortgages, at the height of the madness. So NAMA will provide them with the fees they need to hold onto the piles and keep young Ross and Sorcha in boarding school. And the rest of the population can queue up like the 140 applicants for a job in a chipper in Letterkenny last week. And with the inside information they will be able to get commision from the buyers also. Ireland is a small world.… Read more »
http://www.irishexaminer.com/ireland/demand-for-callely-to-explain-if-he-left-scene-of-accident-101504.html
I think it’s just a bailout for the Status Quo, as I always suspected it would be. Remember the old status quo has been very good to Fianna Fail, as it has seen them in power for most of the time. All the Party faithful have good jobs in all Departments of Government, Quangos,etc. Access to power at every level, even down to the local BANK manager for a soft loan, and discreet write-off when things go pear shape. Contacts all over the place for entry to Colleges, football matches, Chelthenam, Croke Park and so the list goes on……. Being… Read more »
David, excellent piece on NAMA and its conspiracy afoot going forward and it’s true functions,…..
– Preserving the ruling interests and occupiers of the centers of power vanguard.
– A further opportunity for a fast buck in the passing of the property boom toxic wastage over to joe taxpayer and his kid’s.
– A further consolidation and tighter grip of the ruling oligopoly class on the free market and its bounty.
The problem with this GFC / debt crisis or whatever its called these days is that nothing is real . Greese has been put on the long finger , nobody knows whats happening in Anglo which sucked in another 2 billion yesterday . The EBS is now under state control ( that used to be called nationalization ) dittio with Irish nationwide . NAMA will make a profit 200 years from now . Nobody is talking about personal debt / SME debt in the banks . We have suspended dealing with people who can’t pay their mortgages until sometime in… Read more »
Hi David, I like your stuff but…I’m just wondering if theres a tendancy to go overboard on the negativity bit. I read a fella called Joern berninger also (jberni1 on google), He’s unfalteringly negative also and I just wonder if theres a bit of wishful thinking about a lot of commentators. Yep, the politico’s and the professional classes are crooks largely but what else can we do but attempt to deal with thesituation as we find it and with the tools at our disposal? In the 1840’s we had the famine, millions died on roadsides or emigrated,any revolution? Nope, we… Read more »
David, As you always say, life is stranger than fiction or in your own words, “you cant make this stuff up”!!!!!
The state of affairs gets more and more depressing by the week. Its simply going to take too long to fix so I am looking for suggestions on where to move or invest my money (80k). Please people, give me some serious suggestions
David I think at this stage your point has been hammered home loud and clear.Its just that Smalltown want to believe this SIV (might as well be an SUV for all its worth) called NAMA is the new Economic Boom.Instead of “filthy brickies” we now have “filth bankers” riding up and down the financial ladders pissing on top of anyone who has anything left.Think on people.From first hand experience the property market in the North and the Uk as well as Spain is starting to pick up without divine intervention.NAMA is the soft landing that was spoken about two years… Read more »
Folks, Michael Taft on the Ernst & Young report …. and the inter-relationship of it all:
http://short.ie/rz66r2
Derivatives Made Simple Easily Understandable Explanation of Derivative Markets Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon… Read more »
Hugh Hendry here http://bit.ly/9Yty1N Tip toeing through the caja tulips http://bit.ly/a8Kjdt “BBVA which is regarded as a well run bank with strong international operations is facing difficulties in getting short term funding in the US commercial paper market according to WSJ.This is a classic contagion effect with even stronger players paying for the sins of weaker and incompetent companies.It is not a surprise that investors would be wary of lending to any Spanish bank even if it is one of the stronger ones.” @Deco, you were right. According to above even so-called safer and larger Spanish banks are in danger.… Read more »
Some info concerning the NEDs in the EBS from Senator Shane Ross. http://www.shane-ross.ie/archives/315/x-marks-spot-to-save-ebs/ and earlier cronyism http://www.independent.ie/opinion/columnists/shane-ross/ebs-cronies-confronted-1248552.html The mood of the net public… http://www.thepropertypin.com/viewtopic.php?f=4&t=30802&p=394150 Actually you peasants should stop slagging of Fergus. Fergus is very important. Recently IBEC had a “Financial Services Ireland 2010” conference. It was held on April 10, in the Four Seasons Hotel in D4. (can somebody please tell me who owns the Four Seasons hotel currently – it was passed around between a few banks….maybe it is the flagship for the NAMA hotel chain now ???). So here you go. Fergus is giving people lectures on… Read more »
I was listening to Drivetime yesterday and Olivia O’Leary .She said the following:
one life of an american is equal to four lives of a european is equal to 100 lives of san salvadoreans;
in samespeak couls we say that here in this scholarly island the following;
one fianna fail td is equal to four professional / bankers is equal to 500,000 displaced irish workers incly those who have emigrated.
Were KPMG not the auditors for Irish Nationwide, and not PWC as stated?
We have moved ON – next on stage – forget what you remembered as in PIIGS thats history ……..start thinking new again about …’.Black List’ ….. if you want to know we have become members of this default club ( pardon the pun) by default.
I have decided that instead of allowing Konstipated Kown bury me down I will instead do the honourable thing and keep my own dreams and become millionaire again.Furrylugs and I are alligning our stone circles limestones in each of our back gardens to face south with a copper pot in the middle .We think that the archimedes principle will work for us when we expect so much of the € bn of euros displaced from Merrion Sq and Treasury to fall into our pots . Our Gold will be better than the Gold Standard.
Anyone can do it .
Economic apartheid is no remedy for a cash flow shortages but this is what is happening .New fault lines are forming and some families will dissapear down ‘swallow holes’ never to be seen no more.Simply Gone ….imithe …as laithear …..amach….kicked out. So much for nationalism and republicanism….even community spirit.Does anything matter anymore?
I have witnessed a number of property cycles, since early 70s, and I would say that the last major peak happened in the early 80s. I bought my first house — a 3-bedroom semi for which I obtained the most generous 90% mortgage available based on a max of 2.5 times my gross income for the max duration of 25 years. It was 1981; the market was reaching a peak; prices fell about 25% over the following 7 or 8 years; and did not regain 1981 levels until the early 90s. (County Louth) I will now list the MAIN reasons… Read more »
Coffee Orgasms I have just read this mornings Irish Times front page where it attemps to explain that coffee does not increase our alertness or wake us up.They call this science research. I must say its impossible to believe what these findings are .I cannot function any morning unil after I have had my cup of fresh strong roasted arabica lungo coffee .I believe these samplers had an inferior granule or it was weak . Monks in the midnight desert in Egypt discovered coffee and learned to stay awake to pray while they consummed the flavour of their coffee.Every coffee… Read more »
Hi David, I fully agree with you on NAMA, and the possibility that it will drive us into the ground. Note that the process of purchases/transfers to NAMA is only at the early stages so its STILL possible to stop NAMA IF there was a change in power in the Dail. The people of Ireland can still stop NAMA IF they want to. It may require a “partial” revolution though. So sitting at home watching NAMA and the Dail on our HD widescreens may be stealthily costing/”robbing” Irish citiziens 10k or 20k or whatever it is a head, whether they/we… Read more »
If you should have watched the last hour in the dail, you might agree when I say this entire system is utterly dysfunctional!
Point of order… dang… you are out of order…. order of business… dang…. you are out of order…..resume your seat… dang dang dang dang….
If you ever had a chance to compare these sittings with other democracies around the world, you might find this to be a ridiculous kindergarden. DANG
“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”
РFr̩d̩ric Bastiat
It cannot go on indefinately. Weather is not bad of late. People and BBQs are out and no one gives a toss. Contentment reigns. No one dares speak of the unspeakable. It’s only a matter of time before desperation sets in. 450K officially on the live reg. and I suspect another 100-150K simply becasue they were self employed. I really empathise with many of the above who feel like throwing in the towel. As a nation we are the most conservative and gentlemanly of revolters this world has known or….our black economy must be a lot lot lot bigger than… Read more »
@ Deco 30 @Deco thanks for nb Bloomberg link http://bit.ly/9bf1zC info here nb updated to today Jun 3 “Banks are parking cash with the ECB amid investor concern that a 750 billion-euro European rescue package may not be enough to stop the crisis from spreading and spilling into the banking industry. The ECB said on May 31 that banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be hampered as governments seek to finance fiscal deficits. “The banking crisis is back,” said Norbert Aul, an interest-rate strategist at Commerzbank… Read more »
Anybody else get ‘your comment awaiting moderation’ comments?
@Deco 30 Thanks for nb Bloomberg link http://bit.ly/9bf1zC info here updated to today Jun 3 “Banks are parking cash with the ECB amid investor concern that a 750 billion-euro European rescue package may not be enough to stop the crisis from spreading and spilling into the banking industry. The ECB said on May 31 that banks will have to write off more loans this year than in 2009 and their ability to sell bonds may be hampered as governments seek to finance fiscal deficits. “The banking crisis is back,” said Norbert Aul, an interest-rate strategist at Commerzbank AG in London.… Read more »
Tim Comeback – I think we should expect his arrival from tomorrow evening he is never short of FF backbencher political forethoughts .Arise Tim school is over you are on holidays again.
The Germans have a word called Gotterdammerung, a word associated with the violent end of a regime. Ireland needs cleanse itself or it will rot and perish. The current ruling class, most of whom were born with golden spoons in their overactive mouths have destroyed the country. While I regret to say it, no person in their right mind would lend to this Irish regime. They need to be removed en masse. Gotterdammerung.
The war is not meant to be won, it is meant to be continuous. Hierarchical society is only possible on the basis of poverty and ignorance. This new version is the past and no different past can ever have existed. In principle the war effort is always planned to keep society on the brink of starvation. The war is waged by the ruling group against its own subjects and its object is not the victory over either Eurasia or East Asia, but to keep the very structure of society intact. George Orwell English essayist, novelist, & satirist (1903 – 1950)… Read more »
@ Deco 30, I’d a contribution to thread 30 but it got moderated out, so decided to blog it instead, here’s the link:)
http://bit.ly/aLZKiM
[…] write thinking of economist David McWIlliams’ recent paper in the Irish Independent in which he drops something of a bombshell explaining that Irish banks haven’t been able to […]