NAMA day at last

What a fateful day for the Republic, as Brian Lenihan bids to draw a line under the financial crisis “ once and for all.” In advance of the Dail statement, the Irish Times confirms that he’s stopping sort of full bank nationalisation. A kind of triumph has been won with an agreed package of no more public sector pay cuts to 2014 with pensions increases pegged to pre-cuts levels for the time being, and a annual review to explore the chances of making up leeways. What are the prospects for the private sector? Continued social cohesion now depends on whether shock and fear give way to anger. If the line is held at the passport office strike, they’ll be very lucky. In the end, there appears to be no way of letting the bankers go hang without liquidating the assets of the entire State, mainly people’s homes. Elaine Byrne tells what it feels like to go through this vale of tears and fears and what the NAMA process – not necessarily the end of it all – will cost every man, woman and child in the Republic. (I believe Northern Ireland exposure to Irish bad bank debt is 6% of the total).
Elaine Byrne

Six thousand and fifty four euro and forty three cent is what appears on the calculator screen when €27 thousand million is divided by the total population.

And she names names of the bailed out donors to Fianna Fail, raising the basic questions of political reform when someone gets around to considering it.

Already some €17 billion in loans linked to the top 10 developers out of a total of €81 billion in loans have been transferred in this first wave. These top 10 property developers very likely includes Seán Dunne, Ray Grehan, Seán Mulryan, Paddy Kelly, Gerry Gannon, Johnny Ronan and Séamus Ross, all prominent political donors to Fianna Fáil. But will any banking inquiry look at political decision-making which created tax reliefs and incentives which stoked up the price of land, inflated the boom and overheated the market?

  • LabourNIman

    It still baffles me why NI customers use these banks. They are uncompetitive and a complete shambles.

  • Mack

    Brian –

    Six thousand and fifty four euro and forty three cent

    is feck all squared in the grand scheme of things. The annual, recurring, fiscal deficit is similar in size.

    I had thought losses due to the bank crises would be far higher than that. Especially given that part nationalisation of the banks means the government have equity stakes that can be redeemed as the market recovers.

  • Mack

    Brian –

    This –

    pensions increases pegged to pre-cuts levels for the time being

    is slightly confused. Workers who are eligible to retire now, can retire and their pension will be a per centage of their pre-pay cut salary.

    However the system where pensions are indexed to current pay levels is under review. This system differs from the UK where pensions are indexed to inflation. Given that pensions haven’t been indexed downwards with the cut (something cleverly sold as a benefit) the index with pay is essentially broken. They can formally announce it at a later date..

  • Drumlins Rock

    News flash, Quinn insurance Ltd has just gone into administration.

  • Mack

    Perfect day to bury news…

  • suilven

    http://news.bbc.co.uk/1/hi/northern_ireland/8595018.stm

    ‘Lawyers for the regulator told the court it had been discovered that subsidiaries of the company had made guarantees in relation to the group’s assets in 2005 which has reduced the value of the assets by 448 million euros.

    Some directors of Quinn Insurance were unaware of the guarantees, lawyers for the regulator said.

    The court heard the company had significantly breaches its solvency ratios.

    The company had moved from a position where it had an excess of assets over liabilities of more than 200 million euros to a position where it had 200 million euros of liabilities over assets.’

    Not sure about news burying, Mack. IMO this is big, big news. Has the house of cards started tumbling?

  • Brian Walker

    Mack,
    I of course bow to your vastly superior knowledge. On pensions, I’m glad your pointed out the threat to indexation later. On comment, I could do with more plain journalism in the daily press to supplement the more technical reports. I found Elaine’s piece quite helpful actually – the cost per person being an emotive point, just like the notional cost per head of bailing out the banks in UK.

  • Drumlins Rock

    Suilven, with NAMAgeddon due at tea time quinn will be forgotten easily, (stole the NAMEgeddon thing form politics.ie btw, sorry)

  • Mack

    Brian –

    Elaine Byrne’s piece isn’t bad, her numbers don’t include NAMA related losses so that’s why they’re so low. €27 billion is around 15% of GDP (slightly more than the budget deficit) – not to be sniffed at – but not disastrous. €6,543 is less than 1.5 months salary for the average worker in Ireland.

    It’s quite possible that figure could be dwarfed by NAMA losses. Worth bearing in mind that Ireland started this crises with a low debt-to-GDP ratio (around 20% or so) and had built up a sort of sovereign wealth fund in the National Pension Reserve.

    I’m looking forward to some of the economists producing realistic estimate of losses including NAMA. Hopefully we’ll get that after today’s releases..

  • Mack

    47% haircut on first tranche

    http://www.nama.ie/Publications/2010/NAMAFirstLoanTransfers.pdf

    €16billion in first tranche. €81bn in total.

    Assuming (a big assumption) a 47% haircut overall. Cost of NAMA = €38bn

    Total cost of bank bailout = €65bn

    or 38% of GDP or about 3 years worth of fiscal deficits (e.g. 2009,2010,2011).