For what it’s worth, here’s my two cents …
The spin we’re been given around NAMA is that it will allow the banks to start lending again. Lines of credit are crucial to the economy. Many viable businesses are finding it increasingly difficult to get short to medium term lines of credit.
If NAMA is enacted, and IF they set a reasonable price for the toxic assets*, and IF that “slaps enough lipstick on the pigs” that, internationally, are the Irish HQ’d banks, and IF they can then get lines of credit and IF they then decide to lend that to viable businesses at reasonable rates rather then emulating most other banks internationally and hoard the cash on their balance sheets or in government bonds, then maybe, just maybe, we might see some credit trickle down to the SME’s of Ireland who are foundation of our economy. And let’s not forget, there are still significant risks to the tax payer.
Personally, I think a better and more efficient way of getting credit flowing would be the following;
Establish two “semi-state”, competing, independent banks on a purely commercial footing, with a remit to lend on a short to medium term basis, at commercial rates, to viable businesses. They will not accept deposits nor lend for long term projects or speculation. This is mostly immediate capital investment and working capital through lean periods.
Recruit bankers from outside Ireland, the UK or the US to head up each bank and make it illegal for a politician to lobby the bank or it’s staff. Make funding available to the banks from the state (a slice of the money earmarked for NAMA would make good seed capital), via a bond and allow them to borrow internationally also.
Keep the State guarantees in place for the existing banks but offer them no further support. Capital would flow to the SME’s, who wound then deposit it in their existing banks account, pay their suppliers and staff, who again, put the cash in the existing banks (or under the mattress if they were a member of FF).
Yes there is still a risk to the tax payer, but the system is far more efficient and also provides built in competition. Once the economy has stabilised, the banks could repay their loans and the state could sell them off (hopefully) at a modest profit.
- A reasonable price from the point of view of the banks will be significantly in excess of current market rates.