National Asset Management Agency

Re: National Asset Management Agency

Postby garethace » Mon Aug 24, 2009 6:27 pm

Cliff Barnes wrote:Poor Dan.

Rejected at the polls so he has to get some attention somehow.

The Greens will grandstand,hum and haw,squeak and moan but will toe the Government line.

Its either that or face the electorate and get wiped out.


They are not great political options are they?

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Re: National Asset Management Agency

Postby garethace » Tue Aug 25, 2009 7:58 am

Suzanne Lynch reports about the BCA Research special report on Ireland. It is interesting to get a view from abroad on the Irish situation. It may present a different picture to how we see ourselves.

It points out that Ireland has one of the highest private sector debt/GDP ratios ever experienced in the industrialised world; the banks have higher property exposure; and participation in the European single currency precludes the use of a “currency relief valve”.


http://www.irishtimes.com/newspaper/finance/2009/0825/1224253193741.html

PJ O'Meara offers an opinion in relation to an investigation of the Irish banks.

If the inquiry passes these legal tests this cross-party body will still have to handle explosive political material. The collapse of the banking sector will be a key political battleground in the next general election.


http://www.irishtimes.com/newspaper/opinion/2009/0825/1224253194584.html

O'Meara also points out an obvious limitation to a PAC inquiry.

Parliamentary inquiries are subject to particular time pressures as they expire automatically on the dissolution of the Oireachtas. It is generally accepted that it would not be possible for a PAC sub-committee to reconvene in the aftermath of a general election because the inquiry would have to maintain the same membership throughout and this might not be possible after a general election.


It would save the taxpayer millions, but would test the stamina and ability of a political sub-committee. I think believe it is an important part of the ajenda from a national point of view, for generations to come.

McCarthy’s proposal for a parliamentary inquiry into the banking crisis is feasible and has merit. Parliamentary inquiries can work quickly and for a fraction of the cost of other forms of public inquiry. This banking inquiry will take no small amount of political skill, courage and energy.


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Re: National Asset Management Agency

Postby garethace » Tue Aug 25, 2009 12:29 pm

From Engineers Ireland,

Imported oil accounts for over 55% of Ireland’s total primary energy requirements and petroleum products supply the energy needs of - Over 99% of the transport sector - Over 80% of the agricultural sector - Almost 40% of the commercial sector - 33% of the residential sector.


http://www.engineersireland.com/services/web-tv/3/title,2185,en.html

We cannot afford to take our eye off of other issues, in dealing with the NAMA solution - that is the difficult part about NAMA. How to manage and organise it, while doing so many other things, including the investigation into the banking system, and dealing with High court and Supreme court cases for besieged property developers, at the same time.

PJ Meara is right, there is a lot of explosive political material to be handled over the coming months.

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Re: National Asset Management Agency

Postby garethace » Tue Aug 25, 2009 11:32 pm

Funny, but not funny, if you know what I mean.

Once we have a clearer view of these derivative instruments extent, we will have to write them down to 'zero' real value, for I suspect there can be no recovery on secondary lending that was extended on collateral with real current value that has fallen 70-80% in the crisis.


http://trueeconomics.blogspot.com/2009/08/economics-25082009-mad-maths-at-nama.html

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Re: National Asset Management Agency

Postby garethace » Wed Aug 26, 2009 3:21 pm

Good man, Eamon Ryan. He is only telling the truth.

Commenting on today's article in The Irish Times by 46 economists who called for the Nama project to be reconsidered, Mr Ryan said:

"They should have been there been there five years ago or four years ago "when the real economic mistakes were being made in terms of a property bubble and a macro economic policy that actually should have been different."

"I wish they'd actually come out at that time and said that we need to be doing things differently," he added.


http://www.irishtimes.com/newspaper/breaking/2009/0826/breaking48.htm

I have to say, I do side very much with the 46 economists, but I did read again, Alan Alhearne's letter/email in today's Irish Times.

http://www.irishtimes.com/newspaper/ireland/2009/0826/1224253267244.html

I was impressed by Alan Ahearne's courageous stance agains the 46 economists. What I would hate to see happen, is a basic anti-NAMA one sided debate. I understand that many of the pro-NAMA politicians have expressed this view too. But there was one paragraph from Ahearne's letter which I read this morning:

I would invite you to read the legislation for yourself on this matter (and indeed on all other matters). It should be obvious that it would not be helpful to specify an end date for Nama in the legislation, since this might force Nama to engage in a firesale of assets in its final year.


Who is going to pay me to sit down and read the legislation? Who is going to pay Constantin Gurdgiev, Karl Whelan or Brian Lucey to read the legislation for that matter? It is nothing but cut backs in both Trinity and UCD all this summer, with possibly more in the pipeline. The Fianna Fail government went off on holidays, and didn't even dish out a basic 'retainer' fee to interested parties to spend their time with the legislation, in order to understand it.

I mean, I have blogged, I have done national radio interviews and been published in the national newspapers in terms of my opinions about Zoe developments. I have even sent my CV into the NTMA and obtained a friendly response by email. I don't know what else to do at this stage, except to find work and keep my gob closed. Which is what I should have done all along, if I was smart. I am not too smart though. I am Irish and that is the trouble.

As you know, the Dáil will return on September 16th to commence debate on the published actual Bill in the context of a wider debate on the future of our financial sector. The publication of the legislation in draft form will facilitate an informed debate at that time.


I have to question Alan Ahearne on this count also. An informed debate will not take place, or anything like it. It will only be a load of mis-informed hot air as usual. The debate in the Dail will be un-informed for all of the reasons I have explained above and some others. What the Labour leader, Eamon Gilmore pointed out is correct. The Authorney General is the main 'author' of the NAMA legislation, even though Peter Bacon was its main 'Architect', and Alan Ahearne its 'Packie Bonner'.

“The Attorney General is the principal author of the Nama Bill and would be compromised,” said Mr Gilmore.


http://www.irishtimes.com/newspaper/ireland/2009/0826/1224253267263.html

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Re: National Asset Management Agency

Postby PVC King » Wed Aug 26, 2009 5:52 pm

garethace wrote:
I have to say, I do side very much with the 46 economists,


In a line please summarise the 46 economists.
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Re: National Asset Management Agency

Postby garethace » Wed Aug 26, 2009 8:40 pm

PVC King wrote:In a line please summarise the 46 economists.


In a line, I would refer to Karl Whelan's contribution on the 13th of August PrimeTime panel discussion, where he shook his head in disbelieve, when solicitor Graham Kenny tried to assert the Irish banks had no choice but to 'throw good money after bad', in the case of Zoe developments outstanding loans, where trade creditors were paid off.

http://www.rte.ie/news/2009/0813/primetime.html

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Re: National Asset Management Agency

Postby KerryBog2 » Wed Aug 26, 2009 8:49 pm

garethace wrote:Who is going to pay me to sit down and read the legislation? Who is going to pay Constantin Gurdgiev, Karl Whelan or Brian Lucey to read the legislation for that matter? It is nothing but cut backs in both Trinity and UCD all this summer, with possibly more in the pipeline.


Why should you be paid? Why should the various profs be paid? It is called being informed, a basic part of their job, and yours as a citizen. Those guys are well paid already, have a short work schedule and months of holidays. They are supposed to be teachers, for c...sake, knowing what is happening is an expected part of their classwork preparation.

The real question is to ask why it is necessary to read beyond local media to get a true picture and why no journalist has yet written an informed opinion piece on NAMA. Nobody has yet pinned Cowen/Lenihan down with simple basic questions.
Why? most of the media hacks are not informed or their point of departure is from an agenda based in ignorance and as a result do not know the right questions to ask. As a result we must suffer the sighs of Vincent Browne, the smart-assed comments (not questions) of the stroppy bitches in RTE & Newstalk, and buffoons like Hook and Duffy.

As for Ali Baba and the 40 economists, I would be ashamed to put my name to such BS, all based on surmise and conjecture. Why not draw up a list of pertinent questions or even suggestions for DoF and Govt?

Anyway, a camel is a horse designed by a committee. God knows what would be designed by 40 economists, academics at that!
Rant over.
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Re: National Asset Management Agency

Postby garethace » Wed Aug 26, 2009 8:50 pm

Ryan Air boss, Michael O'Leary gives some views today, featured on Irish Independent web site.

"The European Central Bank came to Ireland’s rescue last year when the combination of appalling mismanagement by Bertie Ahern’s government over the past decade left Ireland hopelessly unprepared for the effect of the property/banking crisis and the recession which would, if it were not for Europe’s help, have caused a collapse of the Irish economy."


http://www.independent.ie/business/irish/ryanair-to-spend-euro500000-on-campaign-supporting-lisbon-1870412.html

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Re: National Asset Management Agency

Postby garethace » Wed Aug 26, 2009 9:01 pm

KerryBog2 wrote:Why should you be paid? Why should the various profs be paid? It is called being informed, a basic part of their job, and yours as a citizen. Those guys are well paid already, have a short work schedule and months of holidays. They are supposed to be teachers, for c...sake, knowing what is happening is an expected part of their classwork preparation.


Yeah, I know.

I purposefully, made the post above, sound as if I was clueless. However, I took the line of argument for a simple reason. It is a little like the Edward De Bono technique, when you say something absolutely ridiculous, in order to re-organise the logic path in your brain, in a different direction. It is very easy to burst the bubble of my argument. (That is what we tend to focus on in western society . . . trying to point out the deficiency of logic or rationality in someone else's argument . . . we are good at that, but we tend to ignore other thought processes)

Alan Ahearne chose to attack the 46 Economists based on their exact quotation of 'words' from the lengthy draft legislation document. If you read Ahearne's letter you will see that.

http://www.irishtimes.com/newspaper/ireland/2009/0826/1224253267244.html

The purpose of my line of argument, is to highlight that Alan Ahearne knows the document so well, that he was able to search through it, line by line, looking for individual words. Now, before anyone tries to point out the very obvious again. I know he didn't leaf his way through 180 pages or whatever length the document is. He obviously did a 'search' in Adobe Acrobat Reader. A much easier thing to do.

But the point I wish to highlight, is that Alan Ahearne as an employee of the State, rightly makes it his job to look at the exact wording. It is wonderful that Ahearne is there doing that. We should all be very glad he is there. It is important work and someone has to make sure it is right. The point I wish to make, is while someone is watching the words very carefully, someone else should be watching the big picture to see how it is developing. The person who is in charge of the bigger picture should be interfacing with the 46 economists. Not the person who is in charge of the word-by-word aspect of the job.

Because this has all become a big distraction for Alan Ahearne. He shouldn't be next or near this debate in my view as an experienced project manager. I blame the project manager, who is supposed to be overhead Alan Ahearne in the NAMA process for not doing their job properly. All the 46 economists want is someone they can have a banter with, who is willing and able to engage in a discussion on their broader level. (Not least, because they will need to teach and discuss NAMA on this broader level as part of their educational work all through next term and beyond) The project manager who is in charge of Alan Ahearne, should have identified the need to given the 46 economists a suitable 'interface' to argue with. That should have happened months ago. If that person was made available to them, they would be a lot happier all round. Alan Ahearne is not that person, but he is being allowed to 'front' the discussion from the government's point of view.

I think, the 46 economists would have got much better satisfaction from minister Eamon Ryan's comment today. That the economists should have opened their mouths 4-5 years ago, when it was really needed. That is what the 46 economists really deserve, is someone who can hit the ball back, which they are attempting to serve. Alan Ahearne isn't able to do that, and as a consequence things are getting nastier and nastier, while the 46 economists are getting more and more 'profile' that perhaps they do not credit. While Ahearne is getting dragged deeper and deeper into something, which has nothing to do with his task. A task that he is well capable of doing, if left to it. If the government had anyone in project management worth their salt, they would know this. They would do the old 'umbrella handle' trick with Alan Ahearne and remove him as the 'front man' for NAMA on the government's behalf.

What the 46 economists are doing is challenging the document, based on its overall strategy. So Alan Ahearne's comments in today's newspaper do not even confront the 46 economists on that same battlefield. Ahearne has tried to turn it into a war of words, because that is the component of the NAMA plan he is intensely focussed on, and knows most about. That is the work that fascinates Alan Ahearne as an economist. Within professions you will always get frictions going on, between the various factions, who believe their fascination is what really matters. There is nothing at all wrong with that. We do need economists who look at detailed wording. Where someone goes into the nitty gritty stuff and tries to weed out 'bad language'. It is an interesting field of research in itself, but Ahearne should be having his discussion with some other bunch than the 46 economists. Of course it would be stupid if I was paid and all of the other economists were paid to read through the NAMA legislation. Because then we would all begin to read it word by word and perhaps not stand back at all from it, to see it in the greater context of the country and it's citizens . . . as you so rightly pointed out above.

But the point I wish to make is a general one - the sheer poverty of our tools for thinking out problems and communicating them to one another in today's society. That is really what has us beaten every time. Not only in Ireland, it is a problem wherever you go now in the first world. It is something that knows no boundaries, every single job and occupation is suffering from a lack of ability to think and communicate effectively between ourselves.

That is what is so useful about the Archiseek medium we are in at the moment by the way. Because it tends to address the problem I am talking about, and encourage people to improve in the way they communicate. Even when they are sitting down at the dinner table with one another and ask each other to 'pass the plate of spuds'. I admired Alan Ahearne on the one hand for making his stand against 46 other experts. But on the other hand, I was absolutely disappointed with the way in which he made his stand. Ahearne is supposed to be the expert, the bright fellow, and I thought his response lacked some willingness to engage with the 46 guys on their own terms. I am reminded again, of Michael D. Higgins article in the Irish Times last Saturday - not only language, but also scholarship has failed us. Not even the questions rise to the challenge.

http://www.irishtimes.com/newspaper/opinion/2009/0822/1224253076519.html

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Re: National Asset Management Agency

Postby garethace » Sat Aug 29, 2009 10:04 am

Good article in the Guardian about Battersea power station site.

Critics argue that for developers the real prize is the land around the power station, and that there is little concern for its heritage status.


http://www.guardian.co.uk/business/2009/aug/28/battersea-power-station-real-estate-debt

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Re: National Asset Management Agency

Postby PVC King » Sat Aug 29, 2009 10:17 am

That is quite frankly untrue.

You have to understand the location to understand that a leisure use inside the power station would be a massive success. To the East you have a combination of holdings which are ripe for residential development and will in the medium term produce 10,000 plus homes which will be predominently occupied by affluent young prefssionals. To the North you have the affluent districts of Victoria, Belgravia and Chelsea and to the South and West lie Battersea and Clapham which both have a disproportionate population of young professionals who eat out and socialise disproportionately. The Power station will become another Covent Garden albeit on a much larger scale; there is not one of the major restaurant groups that would not cut off their right arm to get in there and pay a central London rent to have access to such a high quality demographic.

The question is do public bodies grant aid the project as a stand alone project or do they await development funding streams to materialise for the wider development of the site.
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Re: National Asset Management Agency

Postby garethace » Sat Aug 29, 2009 10:20 am

Does any Green party member still think that joining FF in government was a good plan? Stephen Collins, Irish Times political editor writes today:

The Greens also have to contend with their past but from a very different perspective. Since the party’s foundation in 1981, members have campaigned against planning abuses and they can claim to have forecast exactly what would happen as a result of the property bubble. If the party was now in opposition it would be having a field day at Fianna Fáil’s expense, and would, in all likelihood, be soaring high in the opinion polls.


http://www.irishtimes.com/newspaper/opinion/2009/0829/1224253466985.html

More to the point, what seems to be the best option now, in terms of damage control for the Green party? I believe, if its ideas are strong enough, which they are, the Greens will ride through their current downturn in popularity. Both Green government ministers have achieved a lot more in cabinet than they otherwise would have done outside of cabinet. The Greens aren't going to disappear anytime soon as there is too much grassroots members who do still support the ideals. Even if the Greens will cease to be a major political influence for a while.

Lenihan’s real dilemma is that he has been left to clean up the mess left by Bertie Ahern and his pals. That was symbolised every summer for a decade by the Fianna Fáil tent at the Galway Races, and its ugly underbelly was exposed to public view at regular intervals during the hearings of the planning tribunal.


It seems to me that Ahern knew he was going down and managed to take down a party with a very viable, long term plan with him.

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Re: National Asset Management Agency

Postby garethace » Sat Aug 29, 2009 10:39 am

You have to understand the location to understand that a leisure use inside the power station would be a massive success.


Sure listen, I spoke to Dave Wetzel, the vice chair for Transport for London all through Ken Livingston's era as Mayor of London. Dave and myself had a good chat about the fact, that roofs all over London were being removed, in order to avoid payment of rates. That buying property and sitting on the investment was a one way bet. Inevitably, government investment is injected which raises the value of the site, and that premium is captured by the land owner, who doesn't pay any tax on that.

Take for example someone in Dublin who owns a house beside a LUAS line and sells at the height of the market. What percentage of the value of their property was added as a result of the LUAS project, funded by the taxpayer? It was good that Treasury were willing to co-fund the train station and line extension to the Battersea site. But the Guardian article raises all the right issues.

Why was the roof removed and the interior allowed to decay? Why aren't buildings all over London, without roofs on them being used to provide places where ordinary London dwellers can go and work, and have jobs? I think the Guardian article exposes a lot of difficulties with the current system, where we do not have land taxation. It would burn the fingers off of guys such as Treasury Holdings, who hope to row in there, in the hope of extracting value from the site in one massive building project.

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Re: National Asset Management Agency

Postby PVC King » Sat Aug 29, 2009 10:55 am

The roof may have been removed because unlike the Irish treatment of business rates which takes account of the cyclical nature of property; any vacant building at that time in the UK may have been liable to pay business rates on vacancy after 3 months; business rates generally equating to about 40% of the annual rent; the UK system doesn't allow for cyclical movements and full business rates kick in after 3 months.

We had this discussion on the forum 4 or 5 years back in respect of a similar tax regime in North American cites leading to developers or more often than not land speculators vs developers pulling down large former industrial complexes and leaving vacant lots. Brixton PLC pulled down twice as much as they built in 2008 as a result of this frankly ludicrous tax provision which encourages urban blight.

Treasury in my opinion bought into this site in 2006 when the market was fully functional with a view to using their expertese in delivering large scale renewal projects. Their timing was unlucky and until development finance materialises it will be very difficult for them to deliver on their vision for the site. I have no doubt that the challenge of being the first developer to actually acheive completion on this site was a massive motiviating factor in their decision to invest. Simple choice for government accelerate this project with grant aid or wait for the market to return which will be a lot sooner than most other parts of the UK given its location.

For the avoidance of doubt the roof wouldn't have been removed to avoid rates today; listed buildings now receive automatic full business rates relief if unoccupied. One must consider the roof was removed due to grounds of health and safety if the specific covering was not in a safe condition at a particular time or a tax provision that no longer exists.

If for regeneration if no other reason this site should be brought into play at the earliest possible time as it is in too strategic a location to not be delivering for the City.
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Re: National Asset Management Agency

Postby garethace » Sat Aug 29, 2009 12:09 pm

PVC King,

You have indeed presented a very logical and expertly explained argument above. I don't have a problem with where you are coming from. To be honest, if someone offered me a job to work on a large roll out, yuppie village project, I would pack away my scrupples and get down to work.

However, I want to point out for the record, that I have questions about the re-development model we seem to use. It suits a main contractor for sure to have a large project to work on. Sure. But I have to say it. Yvonne Farrell is right to a certain degree, in this context. What you do see in Ireland is construction rather than architecture. I would normally prefer to look at it from the construction point of view, rather than the architectural point of view. But Yvonne's comment does carry weight in relation to site such as Battersea, or sites such as Mallow in Country Cork.

But apart from that, I think the point is not that Battersea had its roof taken off. The point is that many very ordinary un-listed buildings at certain locations in London, which housed viable businesses and enterprise have been vandalised by developers who purchased the building, for its land value. Not for the factory sitting on the land, with its 300 odd workforce.

The overall point is that we have become too clever in Great Britain and Ireland. We know how to fiddle the game only too well, in order to capture those profits accruing to land. Which are taxation free and funded often by a taxpayer. Brian Lucey should be concentrating on this aspect, and the need for a proper land taxation in Ireland. Rather than focussing on this 'once off' transfer of wealth from the public to the private purse.

It is not a once off thing, it is an on-going thing. That is why minister Eamon Ryan's comment is relevant, that the economists should have spoken out, four or five years earlier. We need land taxation in order to halt these developers who speculatively buy land. We need to keep people in employment and we need to provide them with a workplace.

Rates are a taxation on the 'property'. But of course, as soon as you vandalise the 'property' and fire all of the employees, you fly underneath the radar and don't have to pay property tax. Land taxation on the other hand, would ensure that vandals cannot do what they do.

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Re: National Asset Management Agency

Postby garethace » Mon Aug 31, 2009 9:29 am

Dr. Garret Fitzgerald's Saturday article in the Irish Times.

Moreover, the present populist anti-Nama mood, currently intensified by the manifesto of the 46 economists, could all too easily lead to the Opposition overplaying its hand – and there are signs of this happening.


http://www.irishtimes.com/newspaper/opinion/2009/0829/1224253462340.html

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Re: National Asset Management Agency

Postby PVC King » Mon Aug 31, 2009 5:13 pm

As usual Garret is right.

There is a real danger of talking ourselves into a recession that we convince ourselves is so deep that there is no way out of. The article below really p****d me off, this type of piece is far from objective and has no place in a paper of record such as the FT; it is a very cheap shot.

http://www.ft.com/cms/s/b83102fe-9590-11de-90e0-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fb83102fe-9590-11de-90e0-00144feabdc0.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fuk

The reality is closer to a situation where the productive sector always competed with the best globally but that if it is taxed out of existance it will cease to exist having removed their valuable plant for Eastern Europe.

The real drag on the Irish economy is the cost of having much lower property taxes such as stamp duty, Capital Gains Tax etc flowing than our peers at present and 200,000 unemployed construction workers or almost 10% of the population. Given how heavily taxed people are elsewhere in the economy the last thing that is required is another stealth tax e.g. water or council tax which would be particularly unfair given the wedge people have forked out on stamp duty when times were better.

Put simply the over-reliance placed on property over the past decade will take a long time to work through; however at 22,500 homes per year it is clear that from a postion of over-production at 90,000 homes in 2006 the correction has been an over-reaction. What is required is a clear plan to get production of homes back to c50,000 units a year and regardless of what NAMA does with the subordinate bondholders; getting roughly half the 200,000 unployed property industry workers back to work and the other half retrained to new industires must take precedence.

It must however not be at a cost of damaging the reputation of the financial services industry which is where it is hoped a lot of the graduate jobs will be from 2011 onwards. I don't envy the Government's position on this but the result must ensure that the Irish Bank's Senior Debt is protected, the construction industry funded to recover and that confidence in Dublin as a financial services centre of excellence is retained.
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Re: National Asset Management Agency

Postby garethace » Mon Aug 31, 2009 6:21 pm

All very good points PVC King.

I only wish I had the wherewithal to continue an engagement with the issues, the development of policy and offer whatever services I could in the NAMA process. Still, I take confidence from the web streamed debate on the RTE website today, that there are a number of others able to do that on my behalf. I have sat on a chair for four hours today, simply glued to the exchange in the web streamed joint Oireachtas committee debate on NAMA. That is the level of concentration with which I can focus on these issues. Because they pertain so much to an industry I worked in for a long while. However, that industry is in the process of falling apart, and I fell out of it a while back.

Many points of interest to me, did arise during the four hour long joint Oireachtas committee debate. But in terms of Ireland returning to a production of 50k housing units per year. It was noted that zoning exists in Ireland for around a million new homes on Ireland land at the moment. That is around 50k homes on the market over the next twenty years. Any one looking at the loan book of NAMA, will have to account for the existence of all of that zoned land. It will ultimately impact on the value of some of the NAMA portfolio.

On the other hand, it was suggested that Ireland could now use NAMA as a means to regulate certain aspects of the property market. It could be ensured that an orderly release of land and property could take place. In that way, the old vested interests in the Irish property market could be neutralised. They wouldn't be able to 'corner the market' as they had done in previous years. That is one possible form of 'social gain' from NAMA, which could be bought at some expense to the commercial viability of NAMA on behalf of the taxpayer.

So it will be interesting to see how this plays out. From my own experience, I know that the ratio of land to construction values of dwellings near the LUAS line in Dublin South reached almost, but not quite ten is to one. (At the tail end of the Celtic Tiger boom) What sickens me personally, is that individuals in the architecture profession seemed to relish in that environment. It meant that no cost in terms of construction was un-justified, or no detail too expensive, because the cost of construction was small by comparison with land values.

I am reliably informed now, that the ratio of land to construction value, should be more like one is to three. That simple yard stick alone will illustrate how silly, not only home buyers and speculators had become. But also poor example it afforded to design professionals trying to establish principles by which to approach residential as a building type.

We can take a lot of encouragement from what minister Brian Lenehan said today. He suggested, that the NAMA process will enable the construction industry to work with a better model than it did in the past. That the methods of financing in the Irish construction and development industry were in fact primitive in the past. So the model by which the 50k housing units per annum are produced, will be radically different to what it was in the past. There is certainly opportunity presented there.

The old argument by the architectural profession was always that, if houses were 'worth more' that the architect could get involved and input more into the process of designing homes. Indeed many design professionals though finding it difficult to buy their own home, were very satisfied to be designing housing units that sold on the market for 500k. Even if the demand for 500k priced homes was held up by a nation of speculators. The architectural profession rejoiced in the fact they would have better design opportunities.

That was one of the criticisms I heard regularly while working for Liam Carroll. While we were in a buoyant market around 2006, Carroll was still selling product into a market which didn't display the level of improvement which designers hoped they would see. The level of improvement which would create a significant enough margin for architects to get involved in the design process for residential schemes. Carroll as a developer and possible 'client' to an architectural consultancy, wasn't making the greatly inflated margin available to them as design consultants, in order to produce new, radical and innovative residential design. The kind you see on the cover of all the best architectural magazines, I presume.

In other words, so that Irish architectural practices could get themselves on the cover of the best architectural magazines. I hope that NAMA will provide a vehicle for doing this in the future. Without the very toxic element, which required the massive margin to be there, in order to facilitate good design. During the Celtic Tiger there was an inappropriate relationship forming between 'good design' and inflated prices of residential property. One which was healthy for no party, most of all the designer. That is why I worked through the Celtic Tiger with guys such as Liam Carroll.

I always felt it was immoral of architectural profession. On the one hand, ordinary people were being squeezed to the hilt to buy a house of any description. But architects rejoiced because something deeply unsustainable and even toxic, afforded them design opportunities and employment. The prospect NAMA does allow for is the involvement of design professionals right through the process of development, in almost every aspect. But they can do so, without requiring the price of the product to shoot through the roof. That in turn will enable society to view architects as being on their side. Instead of architects being viewed at the moment, as a luxury that ordinary people cannot afford and should avoid.

The most important point I took from my viewing of the web streamed joint Oireachtas committee debate on NAMA today - was that NAMA is a cooperation with the Irish banking institutions. In order to allow the Irish banks to realise their losses as soon as possible. Rather than doing, what banks would do in the interests of their shareholders. Which is to conceal the rather large problem borrowers they may have on their books, over a period of decades.

NAMA is a way to avoid Irish banks taking the 'entrenchment' position where they cease to lend and operate in the Irish economy for a decade or more. In other words, to try and work their own way out of their losses over an extended period of time. I think, in this regard, the NAMA proposal might utilise the small size of Ireland to its advantage. In Japan by contrast, the losses of the banks were realised over a very long period of time. Which resulted in the Japanese changing their government in the elections this year for the first time.

I really wish I had time to say a lot more on this myself. I would enjoy debating and dealing with the issues. But committments elsewhere have really chewed up what is left of my time.


Brian O' Hanlon
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Re: National Asset Management Agency

Postby KerryBog2 » Mon Aug 31, 2009 9:26 pm

PVC King wrote: As usual Garret is right.

Not going to get into an argument on Garret the Good usually being right, but on this occasion he is correct.

PVC King wrote: There is a real danger of talking ourselves into a recession that we convince ourselves is so deep that there is no way out of. The article below really p****d me off, this type of piece is far from objective and has no place in a paper of record such as the FT; it is a very cheap shot. http://www.ft.com/cms/s/b83102fe-9590-11de-90e0-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fb83102fe-9590-11de-90e0-00144feabdc0.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fuk

...a real danger of talking ourselves into a recession? Er, em, did I miss something? I agree with that article. It hits the nail on the head on almost everything, and is a far cry from the BS that the Economist used to write about Oirland. Granted the comments about Quinlan and Carroll were a bit gratuitous, but they grabbed attention.

PVC King wrote: What is required is a clear plan to get production of homes back to c50,000 units a year and regardless of what NAMA does with the subordinate bondholders; getting roughly half the 200,000 unployed property industry workers back to work and the other half retrained to new industires must take precedence.

Not a hope in hell. We will not need 50k homes a year for at least a decade. Nor do we need 100k employed in the industry.

Over the six years up to 2004 employment in the construction sector had increased by 80,000 or 63.5%. By 2007, more than 206,000 were employed in the sector, accounting for 11% of total employment in the economy or 16% of total private-sector non-agricultural employment. Furthermore, in 2004, omitting the financial institutions in the Top 1000 list, building companies accounted for 147 (or 16%) of the remaining 920 companies.

Sadly too many people in the construction sector have not yet realized that it is totally screwed. I was talking to a builder at the weekend and he is confident that he will get paid by a company that, in my opinion, will be a core constituent of NAMA. The money he is owed is now more than 12 months past due. Sad, but true. I didn't spoil his few pints.
Care to comment on the merits of "pay when paid" contracts anyone?

Rs
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Re: National Asset Management Agency

Postby jimg » Mon Aug 31, 2009 10:22 pm

I'm with Kerry Bog on this. I haven't a clue where PVC gets this 50K a year figure. The population is falling this year for the first time in 15 or 20 years. The inevitable higher taxes required to service the tripling of the national debt this year alone will drive even more people out. The country has a huge stock of empty houses.

And please - "talking ourselves into a recession"? This expression sent my internal bullshit meter off the scale when it was first bandied about 2 or more years ago by the likes of Bertie. It's even more ludicrous now.

We really did make monumentally disastrous economic mistakes over the last 5 years. What is galling is that the scale of these mistakes (spiralling government spending, failure to regulate retail banks and continuing to apply stimulus to an overheated property market) are such that they swamp all the economic good that Ireland has achieved.

There is simply no avoiding the horrendous scale of what is going on. In particular It will take THREE ENTIRE YEARS of income tax take just to repay the nominal amount of borrowing this year and that is without the cost of borrowing to capitalise NAMA. I have done some rough financial models to see how long it will take before the entire income tax take will be required just to pay the interest on the national debt and it is less than 7 years. If you think an optimistic pep-talk will fix this problem, you're living in la-la land.
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Re: National Asset Management Agency

Postby garethace » Mon Aug 31, 2009 10:41 pm

I agree with KerryBog above. The attitude he described, of the man having his few pints over the weekend, is exactly the same attitude I have encountered myself. Indeed, it is so that it is impossible to hold any balanced conversation regarding the future. Guys who grew up in the Irish construction industry are in deeper trouble than we all realize. I don't know what it is going to take for many to understand, it is all over basically. It is still a deeply unpopular thing to suggest out there. Typically, in conversations I have to talk on only one side of the argument. Namely, the one which suggests it will be all okay and this is all a bad dream of some sort.

Although, minister Brian Lenehan did his best today in the joint Oireachtas hearing to illustrate that the economic commentators 30% of €90 billion of loans valuations was off the mark. Lenehan also pointed out repeatedly, that the market saw both BOI and AIB as having a viable future.

(I am only grabbing snipets here, off the top of my head. One should watch the four hours of debate and question-ing, if one wishes to get a better grasp of the debate)

Lenehan also pointed out that Ireland's taxpayer was somewhat insulated against the prospect of over paying for NAMA loans already. By the fact that we already own Anglo Irish bank, which will transfer roughly €30 billion to NAMA. So there is no risk there of over paying for the loans, since we already own the bank. Also, that 25% of BOI and AIB was available to the government in the form of warrants on the bank equity. (acquired by the Irish government at under 60 cents) Additional shares in both banks, if deemed necessary would be bought in the form of vanilla bank shares. If those were purchased by the government, there would of course be a risk of the shares losing their value and the government making a loss.

That markets would quickly ascertain the extent of BOI and AIB distressed loans after the 16th Sept, based on the amounts of government bonds issued to both of those institutions.

The main objection that Brian Lenehan had with the 'good bank' proposal by Fine Gael was a logistical one. That it would take in the region of one full year to establish such a bank. Even though, the model already exists and has been approved by the ECB elsewhere in Europe. But the importance of a recovery in the real economy was stressed by a lot of questions to the minister for Finance. That unless the real economy recovered, then an improvement in the property portfolio value was impossible. To that extent, it was suggested that a 'good bank' would be required at some stage, no matter what, in order to get funds flowing to small business.

As I said, I would love to have time and energy to describe more of the preceedings today. But it looks as if I am fresh out of resources once again, duties call etc.

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Re: National Asset Management Agency

Postby garethace » Tue Sep 01, 2009 10:13 am

Reasonably decent job of reporting done by Joe Brennan and Thomas Molloy here.

http://www.independent.ie/business/irish/dont-pay-over-the-odds-for-toxic-loans--ecb-warns-1874355.html

I have problems with how summarised a lot of the newspaper articles are. However, newspapers are in the business of selling shortened versions of events to the public, for the price of the paper I guess.

The independent article is one of the more useful 'short summaries' I have come across.

The same story is carried by the Irish Times today on it's front page.

http://www.irishtimes.com/newspaper/frontpage/2009/0901/1224253590059.html

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Re: National Asset Management Agency

Postby garethace » Tue Sep 01, 2009 10:22 am

In another piece in todays Irish Independent, I came across this line.

"The capital ratios of the two banks are more than adequate," Mr Lenihan said.


http://www.independent.ie/business/irish/no-nationalisation-of-banks-despite-writedown-on-loans-1874290.html

Minister Brian Lenehan yesterday did acknowledge the fact, that moving the loans into NAMA might adversely effect the capital ratio of the banks in the short term. Which would require the government to buy the vanilla stock market equity in those two banks, if needed. But at least, we would be getting a cleaner banking system to work with.

Personally speaking, I believe that is all well and good. What I am more interested in, is that we get down to the level of the property and land itself. That we endeavour to try and clean up some of the mess, that exists down at that basic level also. That is important in my view, for the future of the construction and development industry in Ireland. How effective or otherwise, NAMA will be in that regard is one of my chief concerns.

Along with the obvious one voiced by the opposition in yesterday's debate. What guarantee or incentive does a NAMA solution provide, that credit will begin to flow in the Irish system again. In other words, what is to stop Irish banks simply allowing their government bonds to lie idle inside of their institutions in order to bolster their capital ratio position. But there again, minister Lenehan pointed out, that even if the government bonds remained un-cashed in the Irish banks - it would still improve things. The wider markets would take heed of the fact that the Irish banks had those bonds available, and therefore, would have better confidence to invest in Irish banks.

It was also mentioned in the debate yesterday, that Irish government bonds issued by NAMA, could and will be traded on markets in the manner every other bond is.

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Re: National Asset Management Agency

Postby garethace » Tue Sep 01, 2009 1:37 pm

An article worth reading in today's Irish Times. Eoin McDermott, a chartered surveyor wrote:

Another important factor in this process will be the categorisation of property assets including undeveloped unzoned land, undeveloped zoned land (greenfield, brownfield, prime urban), undeveloped property with planning refusal, undeveloped property with planning permission, partially completed buildings, completed unoccupied buildings, completed partially occupied buildings, etc.

It is imperative that an overall strategy and action plan is put in place for the macro management of these distressed loan assets.


http://www.irishtimes.com/newspaper/opinion/2009/0901/1224253586371.html

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