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Morgan Kelly in IT on NAMA: likely to result in 30billion in losses for taxpayer

blacbloc

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MK exposes the deeply flawed caluclations underlying Lenihan's 'long term economic value' proposal for NAMA. He suggests that neither side in the debate thus far has provided any credible rationale for their arguments.

Already the Irish property market has seen unusually sharp falls by international historical standards. The Sherry FitzGerald house price index is down 35 per cent nationally, and 42 per cent for Dublin; while the Society of Chartered Surveyors estimate that commercial property prices have fallen 48.6 per cent from their peak; and Knight Frank estimate that farmland prices, which were driven by their development potential, are down 45 per cent from their peak but are still twice those of comparable UK land.

Despite these large falls, which already exceed the one third haircut on Nama assets rumoured to be proposed by the Government, the property market remains moribund. Property transactions, measured by stamp duty receipts, are two thirds down on this time last year, and 80 per cent lower than two years ago.

In other words, if nobody is buying despite large falls in price, then price needs to fall considerably further to reach its long-run equilibrium
The prognosis is not good - not nearly as good as it would have to be for Lenihan/NAMA figures to stack up. A key factor (among others) that has been overlooked - or more likely is being deliberately ignored or finessed out of the equation - is the fall in rental values for both commercial and residential rental property. Daft had 25,000 rental properties available at start of 09 compared to 5,000 in 07. In addition to an excess of property supply, incomes are down, spending cuts are up and there is no economic stimulus to ease the economy. The excess of rental property was the exact indicator that Kelly pointed to two years ago to show that the bubble was already busting - to howls of outrage. It took 15 years for the market to hit its floor during a similar property-related crash in Japan. And yet our genuises in government are STILL carrying on regardless as if we in Ireland are uniquely impervious to economic realities. I don't believe there is a single head in the Dail that doesnt know this NAMA thing is pure scam. It's main objective appears to be to get the filthy thing through, get the boys paid off as quickly as possible and let the ramifications of it all be felt and lamented long after there is any chance of preventing it. Fianna Fail will brazen this out like they have brazened everything else out. Are we seriously going to let them do this?

Every man woman and child in this country should be registering their anger with all of their local TDs about this crime. The government have got to be sent a strong signal: thus far but no further, you shower of incompetent, thieveing wretches.

Overpaying for Nama may hit taxpayer for €30bn - The Irish Times - Tue, Sep 15, 2009
 
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Dreaded_Estate

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The assumption that property prices are going to increase, even only slightly, is going to cost the taxpayer dearly.

The government still believe that if they get the economy going again then property prices will automatically start to increase again.
 

Dreaded_Estate

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We still have much further to fall

Despite some of the highest rents in the world at the peak of the bubble (according to Lisney, Dublin ranked as the second most expensive location for industrial property and ninth for offices, with Grafton Street coming in as the fifth most expensive retail street on earth), new residential and commercial property was earning a paltry rental yield of 3-4 per cent.
 

blucey

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oh. look. Morgan is saying the true cost is closer to 30b than the 60b to be paid. Exactly the same as the 46. Amazing coincidence there.....
Watch out now for the raving pro-ff nama-philes to wake up and start roaring...
 

ang

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We also need the opposition to wake up and roar loudly. Speeches in the Dail won't be enough.
 

Raketemensch

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We also need the opposition to wake up and roar loudly. Speeches in the Dail won't be enough.
Labour are having a demo outside the Dail tomorrow at 1PM. For those lucky enough to still have a job, if you work in the city centre you can pop over during your lunch break.
 

cactusflower

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Its important to go to the Dail tomorrow. Its the first opportunity since last Autumn to show what is thought about what Government is doing.

On NAMA, there is no doubt that in FF's hands and without Nationalisation and changing the Banks Guarantee, it would turn a very great crisis into a disaster. Bizarrely, one of the things that worries me is that they haven't spoken to the developers about it. Not consulting with the people in the field was what led us into trouble on Evoting Machines.
It's a certainty that there will be extreme disfunction in the legislation. Costs - consultancy in banking, valuation, legal fees etc. - will be run up that will make the Tribunal costs look like pocket money.

Simply, these people have to be put out of Government.
 

libertarian-right

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goosebump

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oh. look. Morgan is saying the true cost is closer to 30b than the 60b to be paid. Exactly the same as the 46. Amazing coincidence there.....
Watch out now for the raving pro-ff nama-philes to wake up and start roaring...
Everyone knows that the current value is €30bn as opposed to €60bn. The issue is how do you recapitalise the banks if you know that the current value is €30bn.

If you only pay €30bn, you have to give another €30bn in equity, which means the taxpayer is exposed to equity in the same way that LTEV will exposes them to property.

The taxpayer is going to have to pay €30bn extra for something, and hope the value of that something rises in future.
 

Cassandra Syndrome

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Some sites may have up to 95% to fall. As unemployment increases and real income decreases the property market is going in 1 direction only.
 

Best is yet to come

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Everyone knows that the current value is €30bn as opposed to €60bn. The issue is how do you recapitalise the banks if you know that the current value is €30bn.

If you only pay €30bn, you have to give another €30bn in equity, which means the taxpayer is exposed to equity in the same way that LTEV will exposes them to property.

The taxpayer is going to have to pay €30bn extra for something, and hope the value of that something rises in future.
If you only pay €30bn for the assets, you get those assets and you can get something "extra" for the additional €30bn.

If you pay €60bn for the assets, you only get the assets.


So which of the following will have greater value in the future:

  • The assets PLUS something extra
  • The assets
 
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Dreaded_Estate

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Everyone knows that the current value is €30bn as opposed to €60bn. The issue is how do you recapitalise the banks if you know that the current value is €30bn.

If you only pay €30bn, you have to give another €30bn in equity, which means the taxpayer is exposed to equity in the same way that LTEV will exposes them to property.

The taxpayer is going to have to pay €30bn extra for something, and hope the value of that something rises in future.
You keep repeating this line goosebump and you keep getting picked up on it, only for you to disappear from the thread and reappear somewhere else with the same arguments again.

A) If we pay LTEV we end up with €30bn worth of loans and say 50% bank shares.

B) If we pay market value we end up with €30bn worth of loans and 100% of the bank shares.

B) is always worth more than A)

It is not a choice between equity and property we will get both.
 

goosebump

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A) If we pay LTEV we end up with €30bn worth of loans and say 50% bank shares.

B) If we pay market value we end up with €30bn worth of loans and 100% of the bank shares.

B) is always worth more than A)

It is not a choice between equity and property we will get both.
Except that B (nationalisation) involves a whole slew of costs that you aren't factoring into your equation. Any gains that would arise from owning extra banks shares will be offset by increased debt servicing costs and the premium that will have to be paid on borrowing to fund equity as opposed to NAMA purchases.

And we'll be left with an entirely nationalised domestic banking system.
 

Dreaded_Estate

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Except that B (nationalisation) involves a whole slew of costs that you aren't factoring into your equation. Any gains that would arise from owning extra banks shares will be offset by increased debt servicing costs and the premium that will have to be paid on borrowing to fund equity as opposed to NAMA purchases.

And we'll be left with an entirely nationalised domestic banking system.
There is no premium to fund equity purchase rather than loan purchase goosebump.

If done correctly this would be a very temporary nationalization.
We give the subordinated bondholders equity in the newly recapitalized banks the instant we nationalize the banks.
 

Cael

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And we'll be left with an entirely nationalised domestic banking system.

Which is precisely what we need. We can never again put our future in the hands of a few private gombeens, who's only cause is their own private fortunes.
 

JCSkinner

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If NAMA is such a good deal which is going to ultimately turn a profit, how about the TDs who vote for it and their families and descendants personally underwrite the risk, by guaranteeing to pay off any loss (which they say will never happen) to the taxpayer?
 
B

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Which is precisely what we need. We can never again put our future in the hands of a few private gombeens, who's only cause is their own private fortunes.
Would nationalised banks have to make a profit or would they be the private banks of Fianna Fail and the social partners?
Nationalisation has some attractions but there are also downsides especially with FF and Irish politicians in general. They could end up being a millstone around our neck.
Already look at how Ulster Bank has shed staff on two occasions while Anglo, AIB and BOI plough on as if the last two years had never happened.
What if AIB/BOI had been nationalised at the time of the Waterford Glass closure?
Just imagine the political pressure that would have been applied for more loans.
We would probably still have Irish Steel in Cork, IFI/NET in Arklow and alist of other dinosaurs.
 

Derrida

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Why are the bondholders getting off scot free ? They decided to lend money to a bunch of losers but will still get all of it back in full. That's the bit I don't get.

The official explanation is probably some bullsh1t about 'our ability to borrow' or 'reputational damage'.

Cael is right, the banks should be nationalised and so should any business which, if they failed, would do severe damage to the country.

I'm beginning to think the land should be nationalised too. I was abused at the weekend by a foking hillbilly on whose land I accidently 'tresspassed'.
 

DCon

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Which is precisely what we need. We can never again put our future in the hands of a few private gombeens, who's only cause is their own private fortunes.
As someone pointed out on another thread, nationalising all the banks would lead to people requesting loans from their TD's. Is this what we want?

Imagine FF politicians being the link between a bank branch manager and an angry constituent who has "voted FF all his life".
 


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