Honohan on Bailout Costs

Professor Patrick Honahan governor of the Central Bank told the small firms association that the cost of Irish Nationwide €2.5 billion in net budgetary costs NAMA will break even because of low price paid for purchases of property Anglo Irish Bank <€25 billion at worst Honahan describes this cost as “manageable”

Tell that to the unemployed.

Bruton Proven Right on Banks

The €21 billion extra cost of the Anglo / Irish Nationwide bailout will cost €2 billion in cuts every year for 10 years. This is the equivalent of an extra 10% on the top tax rate over that period.

Putting last years €4 billion for Anglo into the General Government Deficit has forced the government to be real. This is money down the drain and finally brings into stark relief the error in the government’s bank policy.

This week, I think that Alan Dukes and Dr Garret Fitzgerald should be saluting Richard Bruton for being correct over NAMA and the government bail out policy. But I suppose that is too much to expect.

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Stephen Collins on Social Solidarity and Antisocial Behaviour by Bankers

Greedy actions of rich elite undermining national will

INSIDE POLITICS: Many who contributed to this mess are still feathering their own nests without a thought for the public purse, writes STEPHEN COLLINS
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Governments discovers that money is money and has the wrong bank policy

Eurostat has forced the government to add €4 billion given to Anglo Irish to the 2009 deficit raising the deficit from €19.35 to €23.35 billion. That means that the 2010 deficit will be €40 billion because the €18 billion for Anglo will have to be added. The EU treats the €18 billion investment in Anglo as spending and not an investment because there will be no return on all or part of it. In March €8.2 billion was put into Anglo. The same rationale applies to Irish Nationwide where €2.7 billion is involved.

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Nama update

Original Figures from Brian Lenihan

In August NAMA reckoned that 40% of loans were generating cash.

September 2009, NAMA will buy €77 billion of loans for €54 billion including a premium of €7 billion to reflect the long-term economic value of the loans. In September, NAMA assumed that commercial property had fallen by 47% from peak when even then the published figure was 52% or more.

Now, NAMA will now buy €81 billion loans at a discount unknown but not the 30% originally estimated. It is likely that the €54 billion will turn out to be €43 billion and the worst case estimate is that the true value will turn out to be €30 billion. A lot less awful but still dreadful!

April 2010, 33% of loans are generating cash.

12.5% to 15% of the first €16 billion tranche consisted of rolled up interest – ie a total waste of money. – (no value at all). Last summer NAMA estimated that €9 billion of the €77 billion was rolled up interest – less than 12% of the total. Now that figure will be much higher.

The October NAMA business plan assumed that 20% of the €77 billion loans would be non-performing. NAMA claimed that with luck, the taxpayer would make a profit of €5 billion after 10 years. Look at Anglo Irish, since October Anglo has made increased bad loan provision from €3.9 billion to €15 billion plus… and the Anglo rolled up €1.2 billion in interest payments.

Not pretty is it? most informative site on economy is the most informative blog on the Irish Economy. It takes on all the issues and Ken Whelan is brilliant on NAMA. NAMA answers some of the criticisms by obfuscation in the area of Current Market Value and Long Term Economic Value. Unless the rationale is published for each individual NAMA decision, it is impossible to make an objective reasoned judgement on the NAMA performance. I recommend public representatives to read that site regularly because there is a responsibility to inform yourself about the big issues affecting all our lives. Remember always look at the figures and not the government interpretation of the figures. Discount aggregates in individual financial institutions are only a vague guide to the individual components. Remember the findings of Judge Peter Kelly in the Commercial Courts. Not many developers or politicians would have second guessed the brutal reality being exposed down at the Four Courts.

Bank of International Settlements and Irish debt

State still needs drastic action to cut deficit, BIS warns

by Jon Ihle in Sunday Tribune of 11 April 2010

Brian Lenihan: committed to reducing Ireland’s deficit to 3% by 2014

Ireland is on an unsustainable fiscal path and must undertake drastic measures to check the rapid growth of government liabilities to avoid long-term economic stagnation and financial instability, according to a new working paper on public debt published by the Bank for International Settlements (BIS).

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Ivan Yates is singing my song.

Ivan Yates wrote “It’s time we pleaded inability to pay for dead banks and risky businesses.” in the Irish Examiner on 8th April. He echoes my conclusions about Anglo Irish Bank and Irish Nationwide Building Society. I will quote Ivan below –

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Irish Nationwide Building Society should be closed in September ’10

Looking at the Irish Nationwide Building Society, the September 2008, blanket guarantee by the government looks wrong in this case. The same question arises, – why should the Irish public pay for this building society that has in effect gone bust? I do not believe that this institution should have been involved in NAMA at all but should have been put into the hands of a receiver. Why did the government stray away from the true systemically important banks AIB and Bank of Ireland? Was it to placate the ECB and European finance? The effects have been to saddle a generation with debt which they have not been responsible for.

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Lenihan on NAMA – Impossible to make a detailed assessment due to inadequate published data

Impossible to make a detailed assessment due to inadequate published data

The average discount on Black NAMA Tuesday loans was 47%

This is a big improvement on the 30+% original discount intention by the government (December 4th Comment) which would have disguised the extent of the loan catastrophe in the banks but is it enough?

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